Midea Group Co., Ltd.
Semi-Annual Report 2021
August 2021
Section I Important Statements, Contents and DefinitionsThe Board of Directors, the Supervisory Committee, directors, supervisors andsenior management of Midea Group Co., Ltd. (hereinafter referred to as the“Company”) hereby guarantee that the information presented in this report is free ofany misrepresentations, misleading statements or material omissions, and shalltogether be wholly liable for the truthfulness, accuracy and completeness of itscontents.Mr. Fang Hongbo, Chairman of the Board and CEO of the Company, Ms. ZhongZheng, 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 some forward-looking statements mentioned in this report shallnot be considered as virtual promises of the Company to investors. Therefore,investors are kindly reminded to pay attention to possible investment risks.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 ...... 10
SECTION IV CORPORATE GOVERNANCE ...... 80
SECTION V ENVIRONMENTAL AND SOCIAL RESPONSIBILITY ...... 92
SECTION VI SIGNIFICANT EVENTS ...... 126SECTION VII CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ..... 140SECTION VIII PREFERENCE SHARES ...... 149
SECTION IX BONDS ...... 150
SECTION X FINANCIAL REPORT ...... 153
Documents Available for Reference
1. The original of The Semi-Annual Report 2021 of Midea Group Co., Ltd. signed bythe legal representative;
2. The financial statements signed and stamped by the legal representative, theDirector 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 2021 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. |
| Swisslog | Swisslog Holding AG |
| Servotronix | Servotronix Motion Control Ltd. |
| WINONE | WINONE Elevator Company Limited |
| Reporting Period | 1 January 2021 to 30 June 2021 |
Section II Company Profile and Key Financial Results
1. Corporate Information
| Stock abbreviation | 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 | 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
| Company 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 2020 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 the2020 Annual Report.
4. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□Yes √No
| H1 2021 | H1 2020 | Change (%) | |
| Operating revenue (RMB'000) | 173,809,565 | 139,067,022 | 24.98% |
| Net profit attributable to shareholders of the Company (RMB'000) | 15,009,046 | 13,928,295 | 7.76% |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses (RMB'000) | 14,636,511 | 13,457,044 | 8.76% |
| Net cash flows from operating activities (RMB'000) | 20,176,410 | 18,405,491 | 9.62% |
| Basic earnings per share (RMB/share) | 2.17 | 2.01 | 7.96% |
| Diluted earnings per share (RMB/share) | 2.16 | 2.01 | 7.46% |
| Weighted average ROE (%) | 12.63% | 13.03% | -0.40% |
| 30 June 2021 | 31 December 2020 | Change (%) | |
| Total assets (RMB'000) | 380,211,202 | 360,382,603 | 5.50% |
| Net assets attributable to shareholders of the Company (RMB'000) | 113,240,409 | 117,516,260 | -3.64% |
Total share capital of the Company on the last trading session before disclosure:
| Total share capital of the Company on the last trading session before disclosure (share) | 6,981,308,571 |
| Fully diluted earnings per share based on the latest share capital above (RMB/share) | 2.15 |
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 Profits and Losses
√Applicable □N/A
Unit: RMB'000
| Item | Amount | Note |
| Gain or loss from disposal of non-current assets | -17,085 | |
| 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 | -101,719 | |
| Other non-operating income and expenses except above-mentioned items | 544,913 | |
| Less: Corporate income tax | 64,272 | |
| Minority interests (after tax) | -10,698 | |
| Total | 372,535 | -- |
Explain the reasons if the Company classifies an item as a recurring profit/loss item, which is defined as
a non-recurring profit/loss according to the definition in the <Explanatory Announcement No. 1 onInformation Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Profits andLosses>, or is enumerated as a non-recurring profit/loss in the said explanatory announcement
□Applicable √N/A
No such cases for the Reporting Period.
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 Electromechanical Business Group, the HVAC & Building Technologies Division, theRobotics & Automation Division, and the Digital Innovation Business. Midea offers diversified productsand services. Specifically, the Smart Home Business Group, as the main operating entity of smartappliances, smart home and related peripheral industries and ecological chains, undertakes theconstruction of intelligent scenarios for end users, user operations and data value discovery, and iscommitted to providing the best experience of whole-house smart home appliances and service. TheElectromechanical Business Group is capable of carrying out professional R&D, production, and sales ofhigh-precision core components such as compressors, motors, chips, industrial control, and coolingmodules. It operates many brands including GMCC, Welling, MR, TOSHIBA, HICONICS, SUNYE,DORNA, SERVOTRONIX, etc., with its products widely used in home appliances, 3C products, newenergy vehicles and industrial automation, among others. The HVAC & Building Technologies Division isdedicated to providing energy, HVAC, elevator, control and other products, solution packages andservices for buildings and public facilities. Meanwhile, it actively explores new business models andforms, with an aim to become a leading manufacturer with the related key technologies andmanufacturing capability. The Robotics & Automation Division primarily focuses on providing solutions ofindustrial robotics, automatic logistics systems, and transmission systems for future factory-related fields,as well as solutions for health care, entertainment, new consumption, etc. The Digital InnovationBusiness primarily includes new business arising from the business model transformation of MideaGroup 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 ofenterprises. The Digital Innovation Business also comprises Beijing Wandong 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 higherrequirements for products and services in the digital Internet era, Midea has upgraded its strategic focusto “Technology Leadership, Direct to Users, Digitization & Intelligence Driven, and Global Impact” in2020, so as to rebuild Midea in the new era.Midea, a global operating company, has now established a global platform with around 200 subsidiaries,28 R&D centers, 32 major manufacturing bases, and approximately 160,000 employees. Its businesscovers more than 200 countries and regions. Overseas, Midea has 18 R&D centers and 17 majormanufacturing bases in more than ten countries, with around 30,000 employees. 22 currencies are usedby Midea in settlement. In addition, Midea is the majority shareholder of KUKA, a Germany-based world-leading company in robotics and automation, with a stake of approximately 95%.
1.2 Position in home appliance industry
Midea ranks No. 183 on the 19th Forbes Global 2000 list released in May 2021, moving up 46 placescompared to last year. In addition, it ranks No. 288 on the Fortune Global 500 list unveiled in August2021, moving up 19 places from the year before and marking its sixth year on the list. Meanwhile, Mideatakes the lead among domestic home appliance makers by ranking No. 33 on the 2021 Brand FinanceTech 100 list released by Brand Finance, a British brand assessment institution. Also, Midea ranks No.33 on the 2020 BrandZ? Top 100 Most Valuable Chinese Brands list, with its brand value up 26%.Midea has been given excellent credit ratings by the three major international credit rating agencies,Standard & Poor’s, Fitch Ratings and Moody’s. The ratings are in a leading position among homeappliance manufacturers worldwide as well as among Chinese non-state-owned enterprises.According to data provider AVC, Midea’s major home appliances all took up a larger share in thedomestic market in the first half of 2021. Its residential air-conditioners, in particular, saw a much bigger
share in all channels (37.6% online and 36.5% offline, second to none in the industry).The table below shows the offline market shares and rankings of the Company’s primary homeappliance products (by retail sales) in the first half of 2021:
| Product category | Market share | Ranking |
| Residential air conditioners | 36.5% | 1 |
| Laundry appliances | 27.7% | 2 |
| Refrigerators | 14.7% | 2 |
| Rice cookers | 42.2% | 1 |
| Electric pressure cookers | 44.2% | 1 |
| Electric radiators | 43.1% | 1 |
| Induction cookers | 46.8% | 1 |
| Electric fans | 39.8% | 1 |
| Electric kettles | 37.3% | 1 |
| Water dispensers | 42.5% | 1 |
| Food processors | 31.2% | 2 |
| Water purifiers | 21.5% | 2 |
| Microwave ovens | 43.3% | 2 |
| Electric water heaters | 17.5% | 3 |
| Range hoods | 7.2% | 4 |
The table below shows the online market shares and rankings of the Company’s primary homeappliance products (by retail sales) in the first half of 2021:
| Product category | Market share | Ranking |
| Residential air conditioners | 37.6% | 1 |
| Laundry appliances | 35.5% | 2 |
| Refrigerators | 18.8% | 2 |
| Product category | Market share | Ranking |
| Microwave ovens | 50.8% | 1 |
| Electric pressure cookers | 41.2% | 1 |
| Rice cookers | 31.2% | 1 |
| Induction cookers | 44.3% | 1 |
| Dishwashers | 31.7% | 1 |
| Electric kettles | 29.2% | 1 |
| Electric fans | 23.7% | 1 |
| Garment steamers | 27.2% | 1 |
| Electric radiators | 19.9% | 1 |
| Water purifiers | 17.8% | 1 |
| Electric water heaters | 32.8% | 2 |
| Gas water heaters | 20.4% | 2 |
| Food processors | 15.5% | 2 |
| Sterilizing cabinets | 20.0 % | 2 |
| Gas stoves | 13.7% | 3 |
| Water dispensers | 14.9% | 3 |
| Range hoods | 15.3% | 3 |
| Air-source heat pump water heaters | 13.0% | 3 |
| Air purifiers | 5.3% | 3 |
1.3 Industry Overview
A. Home Appliance IndustryThe first half of 2021 saw a strong rebound of China’s economy, which became increasingly stable withan upturn. The home appliance industry overcame adverse factors such as the price upsurge of rawmaterials and the chip shortage in the manufacturing industry. The overall development of the industrymaintained a positive and healthy trend, with continued strong growth in exports and further recovery in
the domestic market. According to the statistics published by the China Household Electric ApplianceResearch Institute (CHEARI) and the National Household Electrical Appliance Industry InformationCenter, in the first half of 2021, the domestic retail sales of home appliances was RMB380.53 billion, up
13.1% year-on-year; and the exports of home appliances reached RMB308.81 billion, up 35.8%year-on-year. Currently, the world is still in a grave and complex situation due to the pandemic, withunprecedented challenges for economic development. Nevertheless, in the medium and long run,upgrading of the industrial structure, stable increase of household income, diversified consumption, thenational policy support for the green and smart industries, as well as upgrading of the standards forhome appliances will create new opportunities and growth points. According to the 2021 Semi-AnnualReport of China’s Household Electrical Appliance Industry published by CHEARI and the NationalHousehold Electrical Appliance Industry Information Center together, from the perspective of industrytrend, first, the home appliance industry presents horizontal cross-border development with theintegration of home decoration, home furnishing and home appliances. Home appliance manufacturersexpand their business horizontally in cooperation with distribution channels, advancing towards astrategic direction of home appliances + home furnishing. Whole-house customization and whole-houserenovation have been incorporated into their line of business. Second, home appliance manufacturersdisplay vertical development within themselves by diversifying product categories and specifications.The elements such as capturing lifestyle trends, tapping into user needs, addressing pain points,promoting product innovation and providing quality living will shape the development of new products.Third, the product is always the cornerstone. User experience can be enhanced from the dimensions ofsafety, ease of use and wellness, which contribute to product competitiveness. Although China's whitegoods market has entered a matured stage, home appliances aimed at improved quality of life still havegreat potential for development.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of air conditioners was RMB93.5 billion in the first half of 2021, up 1.4%year-on-year. In terms of product performance, the functions of air conditioners have been expandedfrom cooling and heating to self-cleaning, humidity, air cleanness and freshness, etc. Particularly, themarket share of air conditioners which are capable of self-cleaning registered a significant expansion(now 91% in the domestic offline market). In addition, the implementation of the new energy efficiency
standards, a rise in raw material prices, and the pandemic further boosted the market prices of airconditioners. High-end products embraced a larger market share. Variable frequency air conditioners ofEnergy Efficiency Class 1 took up an over-50% market share by unit sales (51.4% online and 68.7%offline). Meanwhile, the average price of air conditioners rose 12.7% in the domestic online marketcompared to last year.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of laundry appliances was RMB35.7 billion in the first half of 2021, up 19.4%year-on-year. In the upgrade of the laundry appliance market, in terms of the product types, the marketshare of front-loading products keeps growing stably. The market share (by retail sales) increased to
66.2% online and 81.5% offline, with the average prices witnessing a substantial rise in both the onlineand offline markets, making such products the mainstream of the market. Specifically, the market shareby retail sales of front-loading washer-dryers also increased to 29%. Compared with top-loading washingmachines, front-loading products are of a higher price but consume less energy, deliver greatercleanness, and cause less tear and wear, which represent an inevitable trend of consumption upgrading.Washing capacity continued to be upgraded, with large-capacity products increasingly replacingsmall-capacity ones. The offline unit sales of 10kg washers occupied a 56.1% market share, with ayear-on-year increase of over 10%. Meanwhile, mid- and high-end products saw a much bigger share inthe offline market. To give an example, products with a unit price of over RMB5,500 took up a marketshare of 54.4%. Because the drying function brings the advantages of saving time, being convenient,non-ironing, and saving space, the retail sales of clothes dryers in the domestic market were RMB2.74billion in the first half of 2021, a surge of 171.4% year-on-year. Meanwhile, the growth momentum ofdomestic brands was strong, and the offline market share of domestic brands increased to 45.9%.Specifically, the heat pump dryer is rapidly occupying the market, with its online and offline marketshares by unit sales reaching 71.3% and 97.7% respectively.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of refrigerators were RMB47.79 billion in the first half of 2021, up 17.3%year-on-year. The market share concentration of the leading brands in the domestic refrigerator markethas been further enhanced in the first half of the year. Due to the impacts of rising raw material prices
and structural upgrading, the average price of refrigerators has surged remarkably, with the averageprice for online and offline markets rising by 16.3% and 12.3%, respectively. As seen from the change ofmulti-door refrigerator market share, especially those with more than four doors, have become theabsolute mainstream in the offline market. Consumer's intensified willingness to pursue quality life hasprompted the refrigerator market to pivot towards high-end multi-dimensional design, which is mainlymanifested as "good looking", "capacious", "fresh", and "intelligent". In other words, better appearancedesign and material, larger capacity and structure, improved storage and preservation technology, andsmarter application. The offline market share of refrigerators with more than 400L capacity in the first halfof 2021 has approached 60% by unit sales.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of kitchen appliances was RMB81.8 billion in the first half of 2021, up 25.5%year-on-year. The market continues to see product upgrading. The offline market share of range hoodswith a fan that rotates over 20m?/min of air has drastically increased to 34.5%, up nearly 12%year-on-year. The market share of gas stoves offering over 5kw fire has increased to 24.6%, up 12.1%year-on-year. The penetration rate of dishwasher products with more than 12 place settings capacity hasreached 64.4%, nearly 10% higher than the same period of the last year. The water heater industry hasresumed growth to RMB25.6 billion, an increase of 17.3% year-on-year, while raw material pricefluctuations drive up the average price of products. From the analysis of the product end, large capacityproducts are still the mainstream for development, with the offline market share by retail sales for 60L(capacity) electric water heater and 16L (water output) gas water heater reaching 62.0% and 56.5%,respectively. Comfort features are becoming the standard for products, with a trend towards small size,intelligence, quietness and healthy shower. For example, the offline market share by retail sales of gaswater heaters with the zero cold water function has amounted to 35.1%. Integrated stove sales reachedRMB10.1 billion in the domestic market, an increase of 55.8% year-on-year. Due to the surge in demandfor high-end kitchen appliances, in particular steamers and ovens as a result of the pandemic, integratedstove products have evolved rapidly. The all-in-one models with kitchen hood, stove, steamer and ovenhave developed dramatically, accounting for nearly half of online and offline market share, therebyrepresenting the largest growth in the segment. Driven by the upgrading of product structure, high-endproducts in the dual-line market have expanded at a significant pace. In terms of the changes in the
proportion of retail sales in the integrated stove market by price band, the share of products worth overRMB12,000 in the online market reached 23%, while the share of products worth over RMB13,000 in theoffline market was close to 30%. Smart products and product suites are expected to lead the way in thedevelopment of integrated kitchen appliances, for instance, intelligent voice control function will be builtin to deliver a more convenient handling experience. Integration of different cooking methods such assautéing, stir-frying, stewing, baking and steaming enables 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 RMB55.6 billion in the first half of 2021, up 4.4%year-on-year, of which the online sales took up a percentage of 73.1%. In all categories, the sales oftraditional products did not see a promising growth in the first half of the year, while the market ofemerging and health-friendly small domestic appliances told a different story. The diversified andindividualized consumer needs have resulted in rapid growth for these products, driving the emergenceof more niche products. The sales of health-friendly vacuum cleaners were outstanding due to thepandemic. In the first half of 2021, the domestic sales of vacuum cleaners were RMB12.6 billion, up 16.2%year-on-year. By categories, the online and offline market shares by retail sales of robot cleaners rose to
52.4% and 24.1% respectively. Also, their average market price increased considerably, with the onlineprice up nearly 40% year-on-year. As the needs for house cleaning continue to grow, multiple newcleaning appliances such as scrubbers and steam mops have emerged. Thanks to the advancement ofnew scrubber technology and more human-friendly design, such as roller brush that can self-clean inreal time, lighter body weight, and less noise, floor scrubber sales have reached RMB2.15 billion in thefirst half of 2021, a surge of 1336.1% year-on-year.According to the data from the National Household Electrical Appliance Industry Information Center, theonline retail sales of home appliances in China amounted to RMB185.11 billion in the first half of 2021,up 21.5% year-on- year, accounting for a market share of 48.6%; while the offline retail sales amountedto RMB195.42 billion, up 6.1% year-on-year, accounting for 51.4%. Online sales channel of homeappliances in the past decade or so has made its way from scratch to expansion. The 2020 pandemichas once again pushed it to a new height, but now with the general resumption of offline shopping, theonline channel has ushered in a period of relative stability. In terms of sales, the sales structure of each
channel in the domestic market remains well optimized, with high-end, healthy and intelligent homeappliances gaining a prominent presence. According to the data from the National Household ElectricalAppliance Industry Information Center, in the first half of 2021, both online and offline market sales ofmedium- and high-end products, such as self-cleaning air conditioners, cross four-door refrigerators,washer dryers, gas water heaters with zero cold water and robot cleaners, have further improved.B. Robotics and Industrial Automation IndustryAccording to MIR, the shipment of industrial robotics was 132,320 units in China in the first half of 2021,representing an increase of 83.3% year-on-year. The first half of 2021 has seen a boom. This isattributed to the low base under the impact of last year's pandemic, as well as the continued shipment oforders of the second half of last year in the first half of this year, China continuing to undertake overseasmanufacturing orders due to the continuing pandemic overseas, and the fact that the pandemic hasprompted manufacturers to promote the strategy of "robot assembling line". In view of the industryoutlook, the overseas pandemic has triggered the return of the electronics industry, and the domesticelectronics industry has seen robust investment; the carbon emission peak and carbon neutrality targetswill promote the rapid development of robotics in lithium, photovoltaic and other industries; theapplication of robots has further expanded in general industries, where metal processing, logistics, foodand beverage, construction machinery, furniture and other segments continue to broaden; meanwhile, innon-industrial scenarios, such as electricity, education, retail, health care, catering and other fields, theapplication of robots has also continued to extend and emerged as a new growth driver. Product-wise, inthe first half of 2021, SCARA robot sales reached 37,062 units, up 73.4% year-on-year, mainly due to theflourishing demand from downstream industries, with the continuous increase in investment in consumerelectronics, lithium-ion, photovoltaic and other industries fueling the demand for robots; the market sizeof six-axis robotics below 20kg reached 50,544 units, up nearly 90% year-on-year. This is due to therapid development of downstream industries, which led to the accelerated growth in major models. Thebelow-12kg models continued to maintain their dominance in the consumer electronics and metalprocessing industries. Due to the evident recovery of the automotive industry and the expansion ofapplications in more segments of general industries, sales of six-axis robotics above 20kg reached33,876 units, up 77.6% year-on-year. Sales of collaborative robotics reached 7,401 units, with a
year-on-year whopping growth of 178.4%. This is not only because of the low base caused by the severeimpact of the pandemic in last year, but also because the market has seen a continued release ofdemand for collaborative robotics as collaborative robotics perfectly aligned with the transformationneeds of manufacturing enterprises for intelligent manufacturing, human-machine collaboration andflexible manufacturing. In the context of the upgrading of cell phones and tablets in the consumerelectronics industry, together with the increased relevant demand, sales of delta robotics totaled 3,437units, up 41.4% year-on-year.In the first half of 2021, in terms of policy support, the Ministry of Industry and Information Technology,the Ministry of Science and Technology, the Ministry of Finance, the Ministry of Commerce, theState-owned Assets Supervision and Administration Commission and the Securities RegulatoryCommission jointly issued the Guiding Opinions on Accelerating the Cultivation and Development ofHigh-Quality Enterprises in the Manufacturing Industry, which proposed the implementation of intelligentmanufacturing projects, digital transformation initiatives in manufacturing industry and 5G applicationinnovation campaigns in guiding the high-profile, intelligent and green development of high-qualityenterprises. The Ministry of Industry and Information Technology has also released the Industrial Internetof Things Innovation and Development Action Plan (2021-2023), the 14th Five-Year IntelligentManufacturing Development Plan, and other intelligent manufacturing-related support policies tosubstantially accelerate the rapid growth of intelligent manufacturing. Additionally, local governmentshave unveiled a string of policies to drive the development of the industrial robotics and automationindustry. To name just a few, the 14th Five-Year Plan for the High-Quality Development of ManufacturingIndustry in Guangdong Province, the 14th Five-Year Plan for the Development of AdvancedManufacturing Industry in Shanghai, and the 14th Five-Year Plan for the Construction of GlobalAdvanced Manufacturing Base in Zhejiang Province.According to the latest statistics of IFR, in terms of industrial robotic density (the average number ofindustrial robotics per 10,000 workers), Singapore continues to rank No.1 in the world with 918 robotics,while the robotic density of China has surpassed France for the first time and has risen to 187, up 33%compared with that in 2018 and far beyond the global average of 113, indicating great potential andprospects. Supported by diverse factors such as flexible demands of the manufacturing sector, declining
demographic dividend, emerging markets and the development of innovative technologies, industrialrobotics will be applied to more and more areas.
1.4 Analysis of the Company’s Main Business
The first half of 2021 saw a variety of uncertainties. The COVID-19 pandemic remained a seriousproblem for the world, the political and economic environment became more complicated both at homeand abroad, and the prices of bulk raw materials such as copper and steel surged to a high level. Assuch, Midea encountered a more complex external environment compared to last year. However, itdelivered expected operating results in spite of the profit pressure caused by sharp fluctuations in rawmaterial costs and the appreciation of the RMB, manifesting its resilience. Midea adhered to the strategicfocus with “Technology Leadership” as the core, promoted development both in the ToB and ToCbusiness, as well as carried out transformation in both the domestic and overseas operations. Withinnovation, breakthroughs and planning as the keynote, it made clear the five business divisions,promoted the implementation of the strategic focus, as well as delivered breakthroughs regardingmanagement systems, the organizational structure and mechanisms. For H1 2021, Midea achieved, ona consolidated basis, total revenue of RMB174.8 billion, up 25.14% YoY; and a net profit attributable toshareholders of the Company of RMB15 billion, up 7.76% YoY.A. Focused on users and scene-based product planning, and continuously refined the wholevalue chain, so as to upgrade 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, builds a customer-oriented organization and digital experience management system, as well as continuously promotesexperience refinement in the whole value chain. In terms of business scenes, offline stores are reshapedbased on the new retail technology and user analysis. This, together with refined shopping paths andimproving online consultation on e-commerce platforms, help sufficiently satisfy user demand for userscene-based interactions, shopping convenience and individualized shopping guide. Meanwhile, withrespect to user operation, the customer groups under the membership system in all distribution channelsoffer an opportunity for users to share, which can trigger fission expansion of the customer base. As for
service experience, with the help of Internet tools, Midea goes beyond the traditional model to build a“Service + Internet” platform, in addition to continuous investments in service certainty, value-addedservices and active service. In terms of product development, an information experience platform is putin place to understand life styles and potential demand of customers in different scenes. Throughinvolving customers in the whole R&D process and profound R&D and technological accumulation, theCompany is able to solve experience bottlenecks and pain points in the industry. Based on customers’life styles, it creates diverse user scenes with its smart products to offer customers better-than-expectedproduct innovation. Meanwhile, in terms of manufacturing, by means of digital service, as well asplatform-based and modularized R&D and production, Midea takes the lead to explore the C2M modelfor its home appliance products, offering single product customization and product suite customizationfor the whole house for consumers with home decoration needs. These measures to improve productexperience through improving user experience are part of Midea’s efforts to deliver better experiencethroughout the product life cycle. In terms of industrial design, Midea leads the way in user experienceand interaction upgrading with ongoing innovations. In the first half of 2021, Midea won a total of 62industrial design awards, including 23 Red Dot Design Awards and 39 iF Design Awards.For smart living room scenes:
In terms of residential air conditioners, Midea, as a prominent innovator who always stays at the forefrontof the industry, has never stopped exploring product innovation based on user needs, scenarios andecosystems. Midea iColor Exclusive Custom Air Conditioner features "Color Panel" with innovativemulti-color woven fabric. Based on the big data analysis of users' needs, it provides a variety ofappearance and function modules. Users are able to order different module combinations at theiroptions. The products are produced and distributed from the back end, tailor-made to meet the needs ofdifferentiation and personalization. Midea Voice-Enabled Air Conditioner for Kids, designed for children'sbedroom scenes, incorporates Disney character elements, allowing voice wake up and dialect control. Atthe same time, it provides access to professional and extensive learning and entertainment resources.Equipped with a new generation of intelligent angel eyes, it captures real-time user's body andenvironmental radiation temperatures. By virtue of independently developed cooling and heating sensingmodel system, it automatically adjusts room temperature in real time according to body temperature.
With the breezeless function, turbulent soft wind microhole matrix technology converts strong airflow intocomfortable soft wind. Featuring a variable frequency micro compressor stacked with innovative doubleturbo centrifugal air ducts, Midea CarryCool Smart Portable Air Conditioner offers creative andconvenient solutions for partially cooling scenarios. As small as a dinner plate, it occupies only 0.043m?.Installation free and tail-less design allows plug-and-play. China Zun Artistic Floor-Standing AirConditioner and Freshness Artistic Floor-Standing Air Conditioner are the masterpieces of Midea's airconditioners with combination of aesthetics, comfort and health. China Zun Air Conditioner is poweredby innovative technologies including S+ breezeless, new generation of dual hybrid fresh air andintelligent central voice system. Freshness Air Conditioner integrates three dimensions of technologywith full domain features for breezeless, fresh air and voice system. COLMO Evolution Air Conditionerand "Ark" Dehumidifier are empowered by AI algorithms, which enable precise microclimate adjustmentand control of air. Infused with Huawei's HarmonyOS system, the industry's first seven air conditionermodels were launched in the first half of the year, offering various experiences such as one-touchconnectivity, minimal interaction and direct services. In an effort to enhance overseas market penetrationof residential air conditioners, Midea has been not only committed to expanding the market of windowunits, dehumidifiers and portable air conditioners, but also actively leading the industry to contribute toenvironmental protection. Following the Outstanding Contribution Award from the United NationsIndustrial Development Organization in 2020, Midea has upgraded its R290 split unit product in 2021and won the "Der Blaue Engel" certification from Germany twice in a row. At present, the Der BlaueEngel-certified R290 split unit model has been officially launched in the EU and beyond.Midea introduced the Smart SPI Circulation Fan. Strong airflow can effectively enhance the indoor airexchange rate, and at the same time efficiently remove bacteria by adopting the SPI technology tocapture airborne bacteria with a sterilization rate of 99.93%. It can support 4 types of control, namelyfinger touch control, mobile phone Wi-Fi, voice and infrared remote control. Its memory function allowsfor 120° left and right air flow, 90° up and down air flow. Multiple angles of oscillation enablethree-dimensional indoor air circulation. The innovative detachable structure allows easy cleaning.The three brands, Midea, Toshiba and Eureka, have preliminarily positioned their product range in themarket in the first half of 2021. At the beginning of 2021, Midea's rechargeable handheld flagship
product named Z7 Complete, achieved mass production, with the outstanding performance in terms ofsuction power and battery duration. The price of the product was elevated to the industry's high-endproduct price band, achieving a breakthrough in the high-end market. In the first half of the year, newfloor scrubber products were quickly launched to fill in the product gap. For the online market, bothMidea and Eureka ranked among the top five brands in the industry. For the offline market, they rankedsecond, with 3.2 times increase in market share. Drawing on the traditional sweeping and moppingintegrated model, Midea launched the dust collection device S8+ for the high-end market. It comes withadvanced features, including innovative dual air duct self-circulation technology, active titaniumelectrolytic water for bacteria removal, AI self-learning navigation and obstacle avoidance, whole homeconnected environment monitoring and human-machine interaction super experience. It soon tookcenter stage in the market.For smart balcony scenes:
COLMO Star Atlas Series Heat Pump Washer and Dryer Suite, fitted with AI light dry cleaning, positionsitself as private dry cleaning care butler. To address the pain points like shrinkage and deformation ofpremium clothes, as well as the time-consuming and inconvenient traditional dry cleaners, Midea hasintroduced the industry-leading light dry-cleaning technology, which can match the professional drycleaning and achieve all-round clean care at home. It was built in with a newly upgraded steamgenerator to produce nano-grade soft steam that can penetrate the fabric fibers, while wrapping odormolecules, removing dust mites and bacteria. Thoroughly functioning as a sterilizer and odor purifier, itachieves a 99.99% bacteria removal rate. Light dry cleaning comes with a steam capacity of up to20ml/min, with a more penetrating effect and a crease removal level of up to 3.5. When used with drycleaning detergent, it can also remove special stains such as oil and grease from the surface of clothes,achieving a breakthrough from water washing to waterless washing. With SPA-like steaming care, it canrestore the original color of fabrics, and provide customized light dry cleaning programs for 18 types offabrics. It also boasts AI super sensor, AI washing and drying inter linkage, precise drying and instantstop, visualized auto drop. The product technology won the highest award for intelligent science andtechnology in China - "Wu Wen Jun AI Science & Technology Award", and the Woolmark Green Label.Toshiba X9 Heat Pump Washer-dryer, designed to address the pain point of lint cleaning, introduces
five-dimensional lint cleaning technology, including exhaust duct flushing, water supply line deepwashing, automatic bucket cleaning, independent lint collector and thread lint filter. It also inhibits dirtfrom adhering to the cylinder wall/pipe, and reaches difficult to access places to make cleaning morethorough, with the effects of anti-allergy and being skin-friendly without residue. It is equipped with aheat pump with gentle drying function, which can be used for low temperature "fluffy drying" with onetouch. Stable ultra-low temperature drying below 50℃, it only consumes 30% of the energy of anordinary washer dryer. A variable frequency fan delivers 4.6m?/min of airflow to remove creases withoutironing. Nano-grade germ removal and deep cleaning of stubborn stains: the ultra fine bubble (UFB)generator produces negatively charged bubbles that adsorb oil and detergent active ingredients,promoting the penetration of detergent into the fabric and inhibiting the reattachment of dirt; silver ionkills germs, with a 99.9% sterilization rate and 48-hour long-lasting anti-bacteria protection againstexternal germs; when the laundry is off center during spinning, the washing machine can automaticallybe rebalanced by the unique liquid balance ring design; with NSDD direct drive motor and exclusive oilpressure shock absorber, quiet washing becomes possible. Harnessing intelligent five-dimensionalsensor that gauges the load from material, weight, temperature, water quality and degree of dirtiness, itsmartly figures out the precise amount of detergent that should be put into the washer dryer.For smart kitchen scenes:
Midea has launched a new offering of range hood, stove and dishwasher products to create a corespace for kitchen scenes. COLMO Qiongyi S72 Range Hood is the industry's first dual-drivecross-border product. The lower side panel can be lifted and lowered, or opened and closed. The airoutlet is as low as 300mm, closer to the smoke source to quickly absorb and prevent cooking smokefrom escaping. The upper air outlet panel opens and closes at 76°. Complemented by a 152° dome wingdesign, it can increase the extraction area, extract smoke in depth and prevent it from escaping. At thesame time, the product is equipped with radar smoke capture technology, so that users can focus oncooking. The active noise reduction function reduces the average noise by 12dB, and the innovativedesign of the pure flat control panel is simple to operate. Midea Xinjingxi X Series Range Hoods, with abreakthrough dual air ducts design, can achieve double suction from top side, up to 25m?/min powerfulsuction. Intelligent hood and stove interaction easily eliminate cooking smoke. With a design of 370mm
in depth and almost at the same level with the cabinets, it solves the head bump trouble of traditionalEuropean-style hoods. Moreover, the size of the whole appliance is reduced by more than 30%compared to traditional side kitchen hood, saving cooking space. X3S product hit the top ten within thecategory in the first month of its launch. Midea Shengxiang 2.0 Volcano Stove Q83 can achieve theindustry's largest fire power of 5.2kW, with a breakthrough 70% of the ultra-high energy efficiency. Thespeed and concentration of aroma are further enhanced. Midea Temperature Controllable Stove XQ1S,as a gas stove that does not need manual fire adjustment, offers the best cooking temperature to matchthe ingredients and taste according to different cooking recipes, achieving precise temperature controland solving the pain point of inaccurate control and repeated adjustment of fire.Midea Chinese-style Sterilization Dishwasher P60 applies core variable frequency technology to achievehurricane wash with five rotating spray arms. Strong zone target wash function is available for Chinesestyle cooking with heavy grease. The variable frequency technology not only achieves 44dB super quieteffect, but also provides layered washing function for a small amount of tableware to reduce energyconsumption for eco-friendly purpose. With a four-star disinfection effect, it can ensure the safety andcleanliness of tableware. COLMO Enjoy Aesthetics Dishwasher B5 adopts UV glass brushing processwith moon rock gray classic appearance. Equipped with X-wash disrotatory spray arm, it can not onlyflush the front and back of the tableware to enhance the washing rate and shorten the washing time, butalso activate the strengthened washing of the lower layer with one key, which makes the washing moreefficient and energy-saving. With 15 place settings capacity and first-class water efficiency performance,it has been certified as four-star disinfection by the China Household Electric Appliance ResearchInstitute. The preservation technology of week-long ionic freshness has been accredited by VDE ofGermany. With a 99.99% germ killing rate, it creates a benchmark for tableware cleanliness and care. Inaddition to intelligent Internet access, cross-border loaded with HarmonyOS, it realizes one-touchconnection, delivering intelligent interactive and convenient experience.COLMO I2000 High-flux Under-sink Water Purifier applies a number of innovative technologies. Theindustry leading two-dimensional self-purifying system, specifically slow flow stripping and deep spinpurification, extends the life of the RO filter to ten years. Featuring full time zero staleness technology, itflushes the filter fully automatically to ensure that every cup of water is fresh and good; upgraded PR
front filter adopts organ type structure design, with eight times higher dirt-holding capacity; thethird-generation pull-out filter replacement method realizes simpler replacement in two-steps. Theproduct won the industry and market recognition, and was granted the "Water Purifier Value ProductAward" and the "Red Star Design Award".COLMO Turing Series Refrigerators have pioneered the industry's automatic door opening and closingtechnology to deliver true convenience and intelligence. It supports offline voice door opening andclosing, refrigerator control and other functions. With more interactive intelligence functions and servicesonline, it can realize the intelligent connectivity of entire home appliances through the authorization ofthe MSmartLife App as the voice access. Microcrystal function is upgraded again to provide the optimalpreservation solution for all types of fresh food, meanwhile, effectively inhibit the purine content in freshseafood. Space ecosystem compartment can smartly recognize and adjust the moisture level ofingredients. Midea's first American-style refrigerator BCD-615WKGPZM is equipped with the originalmetal texture soft close handle. Combined with the traditional Chinese mortise and tenon technology, itachieves the perfect integration of classical aesthetics and contemporary design. PST + technologyhelps achieve rapid odor purification within 19 minutes with a bacteria removal rate of up to 99.9%. Thepanel adopts carbon ion crystal diamond process and high-temperature sintered brushed texture,reflecting rich layers with skin-friendly touch. It also offers stain and fingerprint resistance, and theinternal pasta space can also effectively avoid pasta from drying out and cracking when stored via theunique microporous spoiler technology. Toshiba Mist Refrigerator conveys freshness with "MistFreshness" technology. Toshiba patented technology UNIT moisture permeable film, is a moisturepermeable airtight porous polymer fiber material, which allows moisture to penetrate and keeps airtightat the same time. It prevents the cold wind from blowing directly on fruits and vegetables, delivering thedelicate water vapor that reaches directly to the cells of fruits and vegetables. By creating a constantmoisturizing environment suitable for fruit and vegetable storage, it realizes seven days freshness offruits and vegetables, with three quick-freezing modes - direct placement of hot items, vegetablefreezing and vegetable drying. The three modes of low-temperature chilling, fast micro-freezing andoriginal defrosting accurately match the storage environment required by the food, and maintain the besttaste and nutrients. In addition, iTouch allows light tap to open the door. Midea’s first HarmonyOSrefrigerator BCD-603WKGPZM(Q) was fully launched in tandem with Huawei in Huawei Mall in June
2021. This refrigerator, equipped with HarmonyOS operating system, can realize non App secondnetwork access by "tapping" the cell phone on the refrigerator, and recognize the freshness of theingredients in the compartment, which quickly generates a large number of recipes depending on theingredients in the refrigerator. One-click appointment of post-sales service is also available. In theoverseas OBM market, Midea rolled out UR-BCD622WE-ST refrigerator for the high-end market in NorthAmerica. As the first generation of refrigerator product with ice maker that breaks through the patenttechnology barriers of overseas manufacturers, Midea carries out independent research anddevelopment in the technology of ice making. 20 invention patents have been applied for, and the RedDot Design Award was won at IFA in Germany in 2021. Midea UR-BCD745WE-DT is currently thelargest capacity refrigerator product across the globe, with a capacity of up to 750L. As the first side byside refrigerator developed for the U.S. market, the ice maker's chilled water system is comprehensivelyupgraded. With fast ice making speed and high ice storage capacity, Midea exclusive innovativetechnology enables the ice motor to produce whole ice in forward rotation and crush ice in reverserotation. Multiple patent applications have been filed with respect to this product.Midea Intelligent Blender M1, with access to cloud-based big data, can customize scientific and reliablerecipes according to ingredients, seasonal weather, personal preferences. It is smartly developed withwater separation technology, which inactivates enzymes before making pulp, making the taste moreintense and healthier. One touch completes the process of cleaning, drainage, and high temperaturedrying without hands. It is packed with three innovative light sound structures - intelligent frequency lightsound motor, spiral light sound duct and airtight light sound. Midea Fiber V Rice Cooker, powered byMidea's fiber lifting technology, can optimize the temperature control system and cooking program afterrepeated debugging. It can precisely control the gelatinization of rice and reduce the loss of resistantstarch, increasing the total dietary fiber content of rice by 25% after fiber-lifting cooking.Toshiba Oxygen-free Steam - Nourishing Series Steamer-Oven, a new product fitted with the industry'sfirst laminar flow sedimentation oxygen exhaust system, can discharge the oxygen within 65 seconds,with oxygen level down to 0.28%. It effectively ensures that the retention rate of nutrients reaches morethan 90%, realizing the effect of oxygen control, anti-oxidation, and healthy nourishment, while carryingToshiba's unique AI automatic baking technology to provide users with a wise and convenient gourmet
cooking experience. Midea Jizhi Oven adopts graphite near-infrared heating technology. It combines lowthermal inertia heating technology, high penetration narrow technology and coating directional radiationtechnology to achieve 0.2 second for the baking tube to heat up, and 30 seconds for the cavity to heat upto 180℃, which greatly improves the baking efficiency. At the same time, near-infrared short-waveheating can effectively raise the rates of water locking and defatting of food.For smart bathroom scenes:
Midea F6032-U+(HE) Electric Water Heater features a 60-liter U-shaped design, with compact look andhigh capacity, breaking the industry bottleneck to achieve 10 times the hot water output and multi-pointsimultaneous water for the needs of the whole family. One touch activates intelligent self-test sterilization,making regular high-temperature sterilization possible, with a sterilization rate of up to 99%. Equippedwith intelligent cloud butler, it can learn to remember the user's bathing habits, and adjust watertemperature according to the user's bathing pattern. Energy efficient and power saving, it is fitted withmagnetic net scale inhibition valve, with a scale inhibition rate of up to 90% for better water quality.Midea Shuangxi Series HT7S Gas Water Heater is the industry's first zero cold water product withpatented dual pressurization technology, which achieves 120% increase in pressure under low waterpressure and 80% increase in pressure under normal water pressure. It effectively mitigates theproblems of low water pressure on high floors, small bathing water flow, simultaneous use of water indouble bathrooms, thus greatly improving the user's bathing experience. The appearance features aunique gradient accent color of dawn glory and a 3D curved glass anti-collision design with a large tripledisplay smart control screen, which has received wide recognition in the market.B. Adhered to the strategy of “Technology Leadership”, increased R&D investments andefficiency, built a global R&D platform, and implemented the strategy of “Innovation Patentability,Patent Standardization, Standard Internationalization 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, product trends, industry influence and R&D environment. TheCompany made innovations with respect to mechanism, and developed more leading products throughboth excellent user experience and differentiated technologies, reform of the whole value chain of R&D
using digital technology, and deep integration of big data technology and R&D. It kept reforming itsproduct development model according to the strategic focus of “Leading Products”. An innovative R&Dmodel featuring a “Four-Tier R&D System” from the organizational dimension and “Three Generations”from the technology dimension has been put in place and constantly refined to support the fulfillment ofthe goal of “Being the Number One or the Only One” in respect of various product categories. Centeringon customer needs and based on different organizations and technologies, the Company carries outinnovative product development, research on cutting-edge platforms, research on core components,creation of differentiated selling points and improvement of the basic product performance. Throughgroup development of products across the world and building of a global product platform, Midea isbuilding “Technology Leadership”. As of June 2021, Midea boasts eight corporate technology orindustrial design centers at the state level, in addition to nearly 40 enterprise technology, engineering ordesign centers at the ministerial or provincial levels.In the first half of 2021, adhering to the strategic focus of “Technology Leadership”, Midea hasstrengthened the transformation of R&D achievements while carrying out the core technology research.By June 2021, Midea (inclusive of TLSC) held more than 66,000 valid patents. In the first half of the year,Midea filed applications for over 5,000 patents around the globe, and was granted more than 2,000invention patents, of which over 500 were granted overseas. Midea continues to improve patent qualityby incorporating intellectual property risk control into the whole R&D process. It won multiple awards atthe 2021 22nd China Patent Awards, including a Silver Invention Award for its “Air Conditioner with aCoverable Air Outlet”, Silver Design Awards for “Electric Kettle” and “Wireless Rechargeable HandheldDust Mite Vacuum Cleaner”, in addition to 25 Excellence Awards for technologies such as the“Air-conditioning System with Enhanced Vapor Injection”. Meanwhile, closely following the strategy of“Technology Leadership”, Midea are applying for thousands of patents regarding the breezelesstechnology for air conditioners, separate space capsules for laundry appliances, efficient electroniccontrol, new efficient variable-frequency compressor, smart home, dishwashers and other keytechnologies.Midea has been promoting the standardization strategy over the years. By carrying out “One Midea, OneSystem, One Standard”, Midea keeps consolidating its standardization base. With the double drivers of
“standard innovation + production innovation”, Midea shifts innovation achievements and patents tostandards for advanced enterprises. Additionally, it plays an active part in the cooperation withstandardization committees at all levels across China, upgrading its enterprise standards to groupstandards, industry standards and even national standards. It is also active in the formulation andrevision of international standards, contributing to the standardization of industrial technologies. As ofJune 2021, Midea Group took part in the formulation/revision of 1,062 standards, including 33international standards, 383 national standards, 256 industry standards, and 390 group standards. Since2018, Midea has been recognized as an “Enterprise Standard Leader” for three consecutive years withits primary product categories, with 29 times of recognition for its 17 products including air conditioners,refrigerators, washing machines, clothes driers, maglev centrifugal chiller, heat-pump water heaters,microwave ovens, vacuum cleaners, rice cookers, electric fans, electric grills, reverse osmosis waterpurifiers, range hoods, integrated stoves, gas-fired heating and hot water combi-boiler, single-tankclosed water heater, domestic gas instantaneous water heater, etc.In the first half of 2021, regarding smart home, Midea has participated in the formulation of InternationalStandard entitled Requirements for Evaluating Intelligent Household Appliances, and National Standardentitled Technical Specification of Intelligent Power Module for Household Appliances. In respect ofHVAC and buildings, Midea advocates the industry should improve the quality of multi-split models andtakes the lead in formulating the first reliability improvement standard for the multi-split industry. In termsof key product performance, Midea took part in the formulation of the national standards entitledErgonomics of Thermal Environment - Assessment of Thermal Environment in Transportation - Part 3:
Human Evaluation of Thermal Environment Comfort, Ergonomics of Thermal Environment - Assessmentand Management of Human Cold and Heat Stress, Test Methods for Noise of Household and SimilarAppliances: Special Requirements for Fans, Measurement Methods for Electromagnetic Fields ofHousehold Appliances and Similar Apparatus with Respect to Human Exposure, Standard Tableware forTesting the Energy and Water Efficiency of Dishwashers, Energy Efficiency Limiting Values and Gradesfor Electric Ovens for Household and Similar Purposes, Safety of Household and Similar AppliancesSpecial Requirements for Commercial Microwave Ovens, Standard Samples of Bricks for EnergyEfficiency Testing of Built-in Electric Ovens for Household and Similar Purposes, Test Methods for Noisefrom Household and Similar Appliances: Special Requirements for Vacuum Cleaners, Surface Cleaning
Apparatus Part 1: General Requirements for Test Materials and Equipment, Surface Cleaning ApparatusPart 3: Performance Test Method for Wet Carpet Cleaning Apparatus; In terms of core components,Midea participated in the formulation of the national standard entitled Special Requirements for ElectricDoor Locks of Electric Automatic Controllers for Household and Similar Purposes, Totally Enclosed TypeMotor for Room Air Conditioner-Compressor, industry standard entitled Electric Automatic ControllerHumidity Sensor, Aluminum Lining Panel Assembly for Household Refrigeration Appliances, Standardfor Domestic Heat Pumps Dryers. In terms of green health, Midea participated in the formulation of theindustry standard entitled Evaluation and Technical Specifications for Green Design Products: Room AirConditioner, Technical Specifications for Green-Design Product Assessment: Refrigerator, TechnicalSpecifications for Green-Design Product Assessment: Electric Rice Cooker, Technical Specifications forGreen-Design Product Assessment: Fan, Technical Specifications for Green-Design ProductAssessment: Blender, Technical Specifications for Green-Design Product Assessment: Vacuum Cleaner,Technical Specifications for Green-Design Product Assessment: Home Microwave Oven, TechnicalSpecifications for Green-Design Product Assessment: Multi-split Air Conditioning (Heat Pump) andSimilar Units, Technical Specifications for Green-Design Product Assessment: Air-Source Heat PumpCold and Hot Water Unit, Technical Specifications for Green-Design Product Assessment: HighTemperature Heat Pump Unit, Technical Specifications for Green-Design Product Assessment: AirConditioning for Computer and Data Processing Room, Technical Specifications for Green-DesignProduct Assessment: Compressor for Room Air Conditioner, Technical Specifications for Green-DesignProduct Assessment: Robot Vacuum. In terms of international standards, Midea participated in therevision of IEC 60456 organized by IEC/TC59/SC59D, and the performance standard proposal ofIEC/59L NP 63XXX electric rice cooker has been formally filed, while the standard proposal of IEC60335-2-15 on electric pressure cooker has entered the formal standard manuscript inquiry (CDV) stage.The five microwave oven performance standards for IEC 60705 have also entered the Working Draft(WD) stage; the two national standards proposed by Midea, named Over-the-Air (OTA) TechnicalRequirements for Electric Automatic Controller for Household and Similar Purposes, and General SafetyTechnical Requirements for Intelligent Voice Controllers, have also been approved. The project of "NewSliding Vane High Efficiency Compressor Technology Research, Performance Evaluation andApplication" and the project of "Key Technology and Industrialization of Intelligent and Energy EfficientKitchen Washing Equipment" submitted by Midea were honored with the “2020 China National Light
Industry Council Technology Progress Award (First Prize)”. Midea Refrigerator won the first AnhuiProvincial Standard Innovation Contribution Award. The two group standards of China HouseholdElectrical Appliances Association (CHEAA), namely General Requirements and Evaluation Criteria forElectric Rice Cooker Liners, and Electric Stir-Fryers for Household and Similar Purposes, which Mideaparticipated in formulating, were certified as “Internationally Advanced”.C. Deepened the channel transformation, further improved the channel efficiency and rebuilt theretail and ToB service abilities so as to achieve direct connection with customersMidea is resolute in enhancing vertical efficiency and horizontal synergy efficiency, accelerating retailgrowth and retail transformation by focusing on user needs. Through the reform of direct retailing, Mideahas been continuously promoting the "vertical efficiency improvement" of offline channels. More than 90%of the retailers of offline franchise system can place orders directly to Midea for procurement,preliminarily achieving the goal of shifting from distributors to operators. By a series of business modeltransformation, Midea has optimized the inventory level of all channels and reduced theinventory-to-sales ratio by 20%; the change of organizational structure has spurred the integration of thedomestic sales business of related product divisions. The cross-category synergy at the terminal saleslevel has been continuously promoted to effectively support the "horizontal synergy efficiencyenhancement" from the organizational structure, so as to realize the "One Midea" for all users andensure the consistency of user service and experience.In the first six months of 2021, online sales as a percentage of Midea’s total sales remained over 45%,and online and offline markets integrated at a faster speed. Based on different levels and characteristicsof different channels, as well as changes to customers’ needs and ways of spending, Midea drives theretail transformation based on user demands and experience, and keeps refining the retail operationssystem, so as to achieve direct connection with retail customers. This mainly involves the followingaspects. Firstly, being customer experience-oriented, it provides just the shopping experience wanted bycustomers by putting in place an exclusive store network covering all channels. To be specific, itpossesses more than 560 smart stores for users with house decoration demands in cities andprefectures across the country, over 2,550 Midea flagship stores in districts and counties, as well as over8,320 Midea multi-category stores in towns and villages. Second, in the retail link, Midea builds an
immersive 3D model room for entire home appliances focused on home decoration users, providing aroaming shopping experience to achieve accurate recommendations and exclusive intelligent shoppingguide. At the same time, focused on the improvement of the product suite purchase, it builds the servicechain and exclusive rights and interests system for home decoration product suite purchase, drivingtransformation to integrated services for home decoration + home appliances, and providing homedecoration users with time-saving, cost-effective and worry-free comprehensive solutions. Third, newbusiness and new track are actively sought in live streaming, short video and other channels to generatenew increments. The operation strategy is to shift from traffic to users and from channel sales to contentmarketing, building a three-dimensional content matrix of brands, experts and users, while developingexclusive product lines with the help of multi-dimensional data to drive and optimize productdevelopment. Fourth, post-sales service and logistics experience are well optimized, including integrateddelivery and installation, two deliveries in one day, home delivery and home pickup service for returnedgoods. Digitalization of the supply chain and optimization of supply and demand efficiency are beingpursued.Midea leverages the “Digitization & Intelligence Driven” strategy to be “Direct to Users”, and initiates aseries of business moves in user experience, user operation and user service from user needs andservice scenarios. Based on the underlying data capabilities for user demand insights, Midea can betterserve users through user life cycle management, membership and private domain operations toenhance user stickiness and loyalty. Firstly, Midea focuses on "user experience" and improves the userexperience of the whole value chain under the guidance of the Net Promoter Score (NPS), with theoverall NPS value increasing by 12% compared to last year. In addition, Midea strengthens useroperation in daily operation, promotes the establishment of membership system and private domaintraffic, and deeply promotes the intelligence and IoT of products. By the end of June 2021, thecumulative number of registered members exceeded 80 million, and the MSmartLife App has served 37million families. Furthermore, Midea reinforces the building of data platform and commercial dataanalysis. Analysis of user consumption behavior data serves as a strong support for businessdecision-making.Midea deepens and promotes the business model change and the digital and intelligent transformation
of the user service system to provide one-stop whole-home smart home appliance service solutions forusers. First, Midea reconstructs the service process from the user's perspective, and redesigns theservice blueprint by covering 18 core scenarios and solving 214 service pain points. Second, weaccelerate the construction of intelligent interaction. In the first half of the year, voice robots have beenlaunched in nearly 200 cities in China, while online remote video real-time interaction functions beingdeveloped to effectively reach users. Third, we comprehensively build smart home service capability bycreating the industry's leading smart home service platform. Nearly 600 fully intelligent home stores havebeen authorized and more than 3,000 technical experts have been certified for scene services. Fourth,we deepen the change of engineer operation mode by assigning orders online based on big dataintelligence to realize the direct connection of engineers. In the first half of 2021, direct allocation ofnearly 16 million work orders across all categories was fulfilled. Last but not least, we continue tointroduce new technologies and tools to empower engineers’ services by comprehensively building anindependent learning platform for engineers. A total of 47 online new courses have been developed andmore than 11,000 engineers have gained multi-category service competence. The introduction of AIintelligent image recognition technology fully safeguards the quality of installation. Fourth generation ofair conditioning intelligent variable frequency detector was also independently developed to helpengineers to improve service efficiency.Transformation of the ToB business model has been further deepened. Based on the Group's fivebusiness segments, the business model has been upgraded from product hardware sales to “solution +hardware + service + operation sales” targeting customers in the whole industry. Product and businessstructure has been further optimized to improve overall profitability. In terms of organizational efficiencyimprovement, Midea is market oriented. By optimizing the organizational structure and reforming thesalary and incentive mechanism, it carries out comprehensive reform on organization, personnel,assessment, incentive and expense, in order to activate organization and improve efficiency. In terms ofbusiness model reform, through comprehensive sorting of existing markets, industries and customers, ittakes the initiative to adapt to the development and changing trends of each industry, allocatesorganizational resources based on market demand, improves professional marketability for differentindustries, strengthens the building of service provider system, deeply optimizes supply chain, andbuilds a LTC-based whole-process value chain. In terms of sales business expansion, the expansion of
new businesses, new industries, new customers and new categories serves as a breakthrough toachieve business growth and enhance the competitiveness of the ToB business. ToB business achievedover 60% year-over-year shipment growth in the first half of 2021. In addition to the traditional homeappliance industry, Midea has further enhanced cross-category horizontal synergy and resourceintegration capabilities through industry-wide solution development and promotion. Coordinatedmarketing in the ToB business of the HVAC & Building Technologies Division, the Robotics & AutomationDivision, and the Digital Innovation Business have gradually unfolded. Meanwhile, in the vertical sector,by taking the traditional real estate, industry, agriculture, commerce and construction business as theaccess point, it continues to expand the cooperative product categories and seize the incrementalopportunities in the existing market, to achieve growth breakthroughs.Under the background of Midea Group promoting the T+3 business model deep reform, Annto furtherpromoted the logistics reform. Upon completing the implementation of the unified warehousing anddistribution strategy, Annto focuses on two new approaches--intercity shuttles and urban long-term-cooperation vehicles to boost delivery efficiency, thus improving the circulation efficiency of the saleschannels. Meanwhile, it comprehensively improves B2C logistics. Through big data analysis and datamodeling and based on user needs, Annto refines and integrates its warehouse network across thecountry. By setting up pre-warehouses, the unified warehousing and distribution model has beenexpanded to retail stores for better connection with users. Overall planning of channel inventories andunified operation of warehousing and distribution provide support for higher channel efficiency as well ascomprehensive standardization and digitalization of user services. Meanwhile, Annto strengthens thecultivation and expansion of end outlets, which enables it to provide accurate and efficientdelivery-installation integrated service for users. In this way, products can be delivered directly to usersin the retail link, thus significantly improving user experience. In terms of external business expansion,Annto 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. With anonline and offline shared inventory system, ToB/C order integration and end-to-end integration solutions,Annto can provide corporate customers with solutions ranging from logistics services from raw materialsto finished products, a shared inventory system from online to offline channels, to integration services of
warehouse distribution logistics and integration services of ToC delivery and installation. At present, thenumber of corporate clients has reached thousands, spanning many industries across home appliances,consumer electronics, food and beverage, maternal and infant, and household necessities andchemicals. Adhering to the business philosophy of building and sharing with customers, Annto providesstrong support for corporate customers in promoting channel efficiency and sales growth.D. Promoted “Global Impact”, enhanced localized operations overseas and accelerated thecooperative integration of TLSCMidea further promoted its global business layout to solidify its global competency. It formulated a globalsupply cooperative mechanism, strengthened localized operations overseas, optimized the percentageof local supply, and promoted product globalization and regionalization. Its overseas business spansmore than 200 countries and regions in North America, South America, Europe, Asia, Africa andOceania. Meanwhile, guided by the market and focusing on users, Midea builds a global user researchnetwork with foresight. And more resources have been provided for research centers in the U.S.,Germany, Italy, Brazil, India and Singapore. In order to improve the operating efficiency of core overseasbusiness, Midea exerted great efforts to build the intelligent overseas commercial system, constantlydeepened its data-based business decision-making capability, and created a digital platform to facilitatemobile operations overseas. 23 overseas branches were covered. A total of 45 key indicators wereincluded, such as sales, finance, supply chain, products, retail, and e-commerce. Furthermore, real-timeonline business, data transparency and sharing, and early risk warning became available.In the first half of 2021, Midea made headway towards the Global Impact strategy that has focused onthe United States, Brazil, Germany, Japan and ASEAN, and set up a special fund for overseas brandconstruction. It not only clarified specific plans for user segmentation, product maps, brand matrices andlocalization infrastructure construction in strategic markets, but also invested more resources in userinsight, branding, product innovation and organizational consolidation to ensure the implementation ofthe relevant strategies. It kept improving the distribution of overseas channels, being customer-orientedand promoting the transformation of overseas channels into retail terminals, with a total of more than18,000 new overseas retail outlets added to provide strong support for subsequent sales growth.Empowering channels through digital tools, it enhanced the efficiency and ability to improve channel
operations. Multiple product suites and key single products were released online for the overseasmarkets, and more than 500 joint promotions were held across regions and markets in multiplecategories, which effectively enhanced customer stickiness in the post-pandemic era. It accelerated theexpansion of cross-border e-commerce business, with a focus on the American and European markets,extended new channels and new categories, and adopted multiple business models and multiple tracksin parallel. After moving into all major global e-commerce platforms, it achieved 150% sales growthduring the Amazon Prime Day promotion, and won more than 50 Best Seller items across all majorglobal platforms. Overseas community marketing and user growth projects were fully launched. ByLeveraging content operation and digital marketing development, it was able to reach consumers directlyand drive sustainable growth of overseas e-commerce business. Own branding was strengthenedoverseas. It expedited the pace of global breakthrough of its own brand by launching a special project forbranding in North America. It strengthened its own brand penetration in key markets in multipledimensions, including offline terminal retail experience, guide team development, social media campaignand whole-home product suite marketing. Through global sponsorship projects and regional sponsorshipprojects, it effectively reached over 300 million overseas target users, which greatly increased theexposure of its brands. It also built a digital marketing talent team to help overseas companies carry outlocalized marketing. Overseas platform building was improved to promote overseas user growth projects.A digital 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; the overseasmanufacturing layout was further improved. To accelerate the strategy of “China-Based Supply for theWorld + Local Supply”, it built a new refrigerator and laundry appliance project in Egypt to cover theMiddle East and Africa. A new manufacturing base was launched in Brazil to cover several keycategories. The manufacturing network in Southeast Asia has been optimized in Thailand. In addition,the domestic refined manufacturing system was introduced and promoted in the overseas manufacturingbases, with a 26% increase in manufacturing efficiency and an improvement in global production anddelivery capacity; global logistics and service system was enhanced. On the one hand, it deepenedcooperation with global strategic partners, and created a new mode of international logistics cooperationto effectively ensure the supply of logistics resources during drastic market changes. On the other hand,
it improved the global service capability by expanding the global service system to Indonesia, Malaysia,Thailand, Singapore and other key markets, which boosted the service efficiency and user experienceconsiderably. The cloud call center platform was rolled out in many countries successively, and theglobal spare parts center was built to ensure timely supply of post-sales parts. The unified barcode of thewhole value chain of production, logistics, sales and post-sales service ensured effective producttraceability and circulation efficiency. Digital intelligence supported the development of overseasbusiness, by pushing forward the online and automation of the whole business process, covering thefront-end optimization of business and financial processes, and the new product launch process, as wellas the back-end consolidation of the online management of inventory and post-sales, in order to bettervisualize the whole process. Based on the diversified channel structure and business characteristics ofoverseas markets, it developed an overseas channel collaborative platform to realize online businessprocessing for customers of different channels and improve overseas channel manageability.In the first half of 2021, the COVID-19 pandemic has remained a serious impediment to the Japanesemarket. The operation was further affected by rising raw material costs and exchange rate fluctuations.TLSC continued to deepen the synergy with the Group's product divisions in the value chain to ensurethe supply of products despite the pandemic and tight sea freight resources, while safeguarding thesafety of employees. Measures such as price adjustments through the launch of new products andenhanced sales activities, improved product mix, increased retail market share and tightly controllednon-operating expenses, so as to address the impact of rising product costs and other factors andensure the accomplishment of the operating objectives. The retail sales of the Japanese home appliancemarket were basically unchanged year-on-year, while TLSC grew by 10% year-on-year. Its market shareof six major product categories combined has increased to over 12%, with the respective market shareof air conditioners, refrigerators, laundry appliances, microwave ovens and rice cookers continuouslygrowing. Organizational structure and business model are transformed to adapt to market changes.Online sales team is further strengthened with the proportion of online sales consistently increasing.Domestic sales, post-sale organization system and network distribution are integrated and optimized toenhance organizational efficiency and vitality. TLSC continued to boost synergies with the Group and therelevant divisions on branding, R&D and innovation, supply chain integration, quality improvement, etc.,so as to build a strong product portfolio for the global market together. By June 2021, the business of
TLSC has covered more than 70 countries and regions.E. Stepped up the comprehensive digitalization and industrial internet programs to materializedata- and platform-based operations in the whole value chain, and thus to become morecompetitive in the digital eraFocusing on “Digitization & Intelligence Driven”, Midea achieves changes in the format of products,drives hardware sales through software sales and intensifies contents and services; and achieveschanges in business methodology, promotes reforms in research, production and sales, and fostersdisruptive changes in existing business models through an Internet mindset and Internet tools. Withrespect to R&D, Midea sticks to the strategy of “Three Generations”, focuses on “Direct to Users”, aswell as builds digital capabilities such as user access, mid- and long-term trend analysis, and evaluationby users, so as to build an R&D capability that is customer-oriented. Meanwhile, a global productplatform has been put in place, which features the shift from single product development to platformdevelopment to support C2M customization. Midea has established its digital R&D platform, includingGPM, MPLM and other industrial software platforms, continually improving capabilities with respect toplatform-based operation and modularization. In addition, the Company further standardized its partsand accessories and cut sourcing costs. Meanwhile, the supply chain and manufacturing link saw theintroduction of smart sourcing through algorithms. As a result, sourcing efficiency and the responsespeed were improved. The Midea Public Cloud platform was launched to assist the digital transformationof upstream suppliers, and optimize suppliers’ inventory management. Also, Midea promoted theself-developed MRP system and smart scheduling, as well as refined the multi- factory coordinativeproduction plan and the value flow procurement plan. Additionally, digital quality management waspropelled to extend to the suppliers and the market end. The quality cloud allows for more standardizedand transparent control of the supply chain process and of finished products. Relying on M.IoT, Mideacontinued to promote digitalization in respect of safety, environment and energy. It has materialized EHSvisualized management and smart early warning systems in factories by such smart means as mobilesolutions and Internet access solutions for equipment. In the warehousing and distribution link, the wholeprocess was barcoded and made paperless via "one code", while the end-to-end information flow wasconnected via "one-piece flow" to realize scene informatization of logistics planning, factory entry
appointments, complete management, warehousing, direct delivery, etc. JIT incoming materials, JITproduction and JIT shipment were all realized via "a shared inventory system"; automaticwarehousing-in and finished products' offline direct delivery were all realized via radio frequencyidentification (RFID); iterative upgrading was achieved via IoT, ultra-wide bandwidth (UWB), 5G, blockchain, big data, intelligent hardware, and other technical applications to improve efficiency and shortendelivery time. In the marketing link, Midea adhered to the customer-oriented principle and focused onbuilding the Midea Cloud Sales platform. Smart order execution, unified warehousing and distribution,shared inventory, one- stop delivery, integrated delivery and installation services, big data-basedintelligent analysis, etc. are now available. As such, Midea has further boosted the order executionefficiency in channels, the retail end and the supply chain, as well as improved online and digitaloperations in all channels. Through the “online streaming + cloud-based order placing” model of MideaCloud Sales, distributors can learn about Midea’s marketing policies and the selling points of its productsin an timely manner before placing an order online. Midea promoted the "Hawk Eye" project with MideaHome Delivery, and empowered tens of thousands of offline retail outlets through the activities ofbuilding digital capabilities such as "live-streaming drives e-commerce sales, and shares inventory", thusproviding abundant support for the retail end. Meanwhile, the membership system jointly establishedwith retail stores can attract more users, encourage them to take part in member activities, improvebuying experience, and boost user royalty. In regard with after-sales services, reform was carried out.The direct-management and direct-payment transformation has been carried out for more than 9,000service centers and 13,000 engineers to strengthen the control of after- sales services and enhance thedispatching efficiency. Further, standardization and transparency regarding service charges werereinforced for better service quality and user satisfaction. During the operation and management process,in-depth exploration is made in the best digital practice of talent development, and the establishment oftalent analysis models, talent label systems and the talent portrait system is accelerated to lay a solidfoundation for the intelligent application of human resources. Besides, aimed at standardizing themanagement procedure and improving operating efficiency and service quality, we have madecontinuous efforts to improve the employee management system. By upgrading the mobile infrastructure,mobile applications are promoted in marketing, supply chain, big data, sharing, etc. More smart scenesare created, and office efficiency and the capability of comprehensive digitalization is enhanced. Withrespect to overseas operations, with the “International 632 Project” as the core, Midea continues with the
digital transformation of its overseas business. The global order processing mechanism was launched toconnect overseas marketing and manufacturing in an effective and automatic manner. To support theimplementation of the strategy of “Global Impact”, multiple key programs have been launched, includingoverseas e-commerce platforms, empowerment of overseas channels and retail stores, the T+3 systemfor overseas operations, the global capital platform, integrated global services, etc. Further, automationwas promoted in overseas marketing as a way to increase efficiency in the whole value chain, and boostglobal competitiveness under the new circumstances. Additionally, in response to China’s goals withrespect to “carbon emission peak” and “carbon neutrality”, Midea has beefed up energy saving andemission reduction by relying on its strategy of “Digitization & Intelligence Driven”. On one hand, M.IoTconnects each key node of energy use in manufacturing and production planning system to enabletransparent, visual and controllable energy efficiency management. Also, digital technologies areadopted to upgrade energy management in the manufacturing process. So far, the digital transformationof energy efficiency management has been applied to nearly 20 factories, reducing energy consumptionfor production of a single product by 15% as well as supporting upstream and downstream companiesand external customers in carbon emission reduction. On the other hand, scene-based innovation andapplication extension in smart home featuring low energy consumption can help save energy and reduceemissions in the link of product use.Midea further promotes the business application of AI by fully covering the business scenes of intelligentR&D, intelligent manufacturing, intelligent offices, intelligent appliances, and intelligent industrial parksbased on AI open platforms. In terms of intelligent R&D, Midea identified the differences betweendrawings and supplied materials with AI, and assisted in comparison of precision and capturedpixel-level differences beyond human eye's limitation. As a result, the workload of manual comparisonwas reduced by 30% and product quality was improved. In the aspect of intelligent manufacturing, Mideaused intelligent prediction for AI scheduling to improve the efficiency of the production line. In respect ofproduct quality control, Midea applied the self-developed AI development kit which helped to establish AIquality inspection station. Such a station carried out inspections of PCB, appearance, outer cartons,ink-jet printing, spare parts and labels. Meanwhile, with the application of AI inspection to trace qualitydata, product quality was significantly improved. In terms of intelligent office, OCR technologycontributed to the internal bill identification which was then realized in 23 scenes. In this way, Midea
improved its efficiency of office automation. As for post-sales service, AI intelligent technology wasimplanted into image censoring to replace manual labor. With AI image censoring, the manual samplinginspection was replaced by AI general inspection for post-sales scenes. By doing so, Midea ensuredpost-sales quality and improved customer satisfaction. In addition, to improve the experience ofconvenience and security, AI technologies such as facial recognition, key post recognition and parksecurity were adopted.By building a group-level data platform which integrates big data governance, application and analysis,Midea formed a data circulation and decision-making system, a core of the Group's big data. Moreover,Midea improved the efficiency of data circulation by enhancing data services performance, ensured datasecurity by establishing a system of data security, and enriched knowledge of users and products bycomprehensively analyzing data resources. Various forms of data applications are collected in the databank, and an application closed-loop operation environment is provided to promote the development ofthe data application ecosystem. In terms of data governance, Midea built a system with the data platformas the core to improve user experience, and explored precision marketing and services based onterminal user portraits. It also built a system for big data-based business analysis and interdisciplinarydata drive, empowered each business sector with big data technology and improved business efficiency.Besides, through the business planning with intelligent data and the one-stop application of big data,with the data platform to do business online and synchronize business data online, Midea strengthenedthe ability to analyze diversified data and the ecosystem of data application.Midea fully promotes the application of cloud computing to support its strategy of comprehensivedigitalization. Midea’s technology platform adopted the micro-service architecture plus cloud-nativetechnologies, and fully exploited industrial and marketing scenes to support the ecological constructionof Midea Cloud Sales, Industrial Internet, IoT and third-party developers. The technology platform wasjointly developed by multiple internal units of the Midea Group. It was built, incubated and operated inline with the standards of “light front-end”, “big middle platform” and “back-end resource sharing”. In thisway, Midea gained rich experience and digital innovation ability. At present, a total of 25 PaaScomponents has been developed, five types of one-stop technical solutions have been provided, and173 IT systems have been empowered, an increase of nearly two times compared with the same period
last year. The total amount of API requests of PaaS components has exceeded two billion times, ayear-on-year increase of more than 10 times, and 94% of IT systems have been covered. The totalnumber of micro services included in online management of service governance is close to 600.F. Promoted the strategy of “Digitization & Intelligence Driven” and accelerated theimplementation of “Comprehensive Intellectualization” to “Customize a Smarter Midea Life forYou”In the first half of 2021, with the goal of “Providing the Best Overall User Experience”, M.IoT carried out aseries of changes to user research, smart scene planning, the IoT products and technology, ecosystemcooperation, IoT operation and more to continuously improve smart experience for users and provideexcellent services for smart life. And a business value chain of Midea Smart Home, which is based onthe life cycle of user experience and is customer- oriented, has been put in place in this way, providingusers with all-scene experience services and more quality ecosystem value-added services to create apan MSmartLife APP ecosystem that focuses on “Customize a Smarter Midea Life for You”. Mideaprovides an overall intelligent solution for customers in five spaces, nine fields and ten intelligentsubsystems. Customers can find solutions to meet their needs (regardless of the whole house remodelor partial renewal). Midea also has in-depth cooperation with over 100 ecological partners to enhancethe comprehensive services of customers' clothing, food, housing and transportation, and builds amulti-entrance and cross-scene smart life platform to provide a new and diversified experience forinteractive operation. As of June 2021, over 100 categories of products are connected to the Midea IoTDevelopers’ Platform, nearly 200,000,000 smart scene executions have been carried out, and thenumber of newly connected smart devices was more than twice the figure of the same period of last year.The MSmartLife App has been providing services for over 37,000,000 families. In addition, theMSmartLife App now supports Thai and Vietnamese languages to back up the intelligence-baseddevelopment of key overseas countries.The MSmartLife App has launched the Air Conditioner Energy-saving Cloud Housekeeper, which canconduct intelligent analysis based on users' preferences, external environment and other factors, andsuggest setting temperature for maximum energy saving. Also, Smart Refrigerator AI Fresh-keepingCloud Housekeeper has been launched to further iterate the algorithm of keeping food storage fresh,
and to make adjustments in view of the users' preferences and ambient temperature, thus realizingprecise temperature and humidity control. Smart Cloud Housekeeper points to the four frequent themescenes of "air", "water", "diet" and "cleaning", steadily optimizes user experience and achieves theenergy-saving goal. It adds the reminder function, and pushes timely information to users for appliancefailure and service status updates, as well as generates reports with appliance operation based on dataanalysis. All these functions help energy-saving control, and can save up to 40% electricity. As of June2021, the number of active users of Midea Smart Cloud Housekeeper had increased by more than 260%year-on-year.M.IoT continues to turn a new page to meet the needs of customers. As of June 2021, Midea has 102types of HarmonyOS-based household appliances with a leap from single product cooperation towhole-house intelligence and interconnection, thus providing customers with whole-house intelligentscene solutions. Midea appliances are also connected to IFTTT's overseas platform with a pilot schemetargeting residential air conditioners and dehumidifiers. Media is able to interconnect with more than 600brands around the world, and to realize the data linkage of multi-equipment, cross-brand, cross-platformand diversified services, as well as to empower overseas users with smart functions and scenes.Moreover, Midea launches over 100 products to multiple online channels at home and abroad, and addsweather services, cooking skills and other services.Safeguarding user privacy and data security is the top priority for intellectualization. In January 2021,M.IoT cloud platform and MSmartLife App passed the assessment for classified protection of informationsystem security. In June, Midea became the first enterprise in the industry to obtain the IT SecurityEAL4+ certificate, which is evident of M-Smart’s industry-leading level of data security. In May 2021,M.IoT issued the White Paper on Distribution Network Technology of "One Touch Smart Link" Appliancewhich redefines the standard of "link". Midea's household appliances are equipped with the "AutomaticDiscovery" and "One Touch Smart Link" functions, which realizes user insensitive distribution networkand improves user experience. Besides, Midea's products can also communicate with the underlyingcommunication protocol of OPPO mobile phones, and the success rate of distribution network increasesby 35%.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 useroperationSince 2018, Midea Group has launched a number of new brands, including COLMO targeting high-endconsumers, BUGU targeting online consumers, WAHIN targeting young consumers. Always upholdingthe brand philosophy of “Technology Serve the Nature of Life and Design Maximize the Value ofRationalism”, COLMO is committed to providing AI-powered home appliances with premium quality andthe self-learning capability for high-end consumers. In the first half of 2021, in terms of products,COLMO released the TURING whole-house product suite, including 12 products such as air conditioner,refrigerator, washing machine, range hood and stove, gas water heater and steamer oven for variousscenes. COLMO features four product suites of BLANC, TURING, EVOLUTION and AVANT, coveringthe whole-house scenes which center on four scenes: living room, wash and care, kitchen, andbathroom. COLMO provides users with whole scenes of AI-powered high-end smart life. In addition,COLMO won the 2021 iF Award for eight products of the Turing suite, such as refrigerator, water purifier,range hood, dishwasher, gas stove and gas water heater. In respect of branding, COLMO took "RationalAesthetics and COLMO Lifestyle" as the core information, spread the brand concept and strengthenedthe brand spirit. The whole suite of TURING was on the market. In the first half of 2021, COLMOcooperated with architect Ma Qingyun and his father Ma Boqian to shoot a micro documentary "Less IsMore", which opened a dialogue on rational aesthetic lifestyle. Besides, COLMO and Director MengJinghui jointly opened the second COLMO Elite Life Festival, and created a concept blockbuster"COLMO Lifestyle Theatre", which shows what the COLMO Lifestyle is about with "rational aesthetics"from avant-garde drama. In terms of marketing, COLMO has provided services to more than 220,000users around the world, with certain scene solutions enjoying a prominent high-end market share as itsteadily gains the position of benchmark for high-end household appliances. According to the monitoringdata of All View Cloud, the market share of COLMO's floor-standing and wall-mounted air conditioner,water purifier, washing machine and dishwasher in the offline high-price segment from January to Mayincreased significantly. Especially, the offline market share of floor-standing air conditioners exceeds 30%with a unit price of over RMB15,000. As for channels, COLMO has built more than 300 experience hallsand 15 experience pavilions. At present, nearly 7,000 stores and outlets have been arranged in thedomestic market.
In the six months ended 30 June 2021, BUGU recorded a year-on-year surge of 48% in operatingrevenue. BUGU, as a brand targeting online consumers, endeavored to make breakthroughs andinnovation in marketing and business models and perfected the product model featuring “Hot-sellingProducts and Constant Efforts for Product Category”. Following the portable juicer, it continued to launchhot-selling appliances such as meat grinder and air fryer. By doing so, it gave full play to themulti-category synergistic advantages and achieved steady structural growth, while meeting thepersonalized demands of new-generation Internet users. In terms of products, based on the marketanalysis of Generation Z, BUGU released a new product suite—"It's not Me", with the concept of fashiondesign and a vivid inflectional language, to provide young people with cool small appliances to expresstheir attitude. BUGU also improved the products for mother and baby care, and developed two-in-onebaby food processor, milk modulator and other products around the concept of "cool care". Facing theboom of "pets' economy" brought by PET consumption, following the launch of smart voice pet feeder,BUGU exhibited pet water dispenser, hair clipper and other nursing appliances in The One Pet Show. Onthe user side, BUGU persists in taking the joint creation with users as its core strategy. The number of itsusers has exceeded 2.6 million, up 63% year-on-year. Through the joint creation platform—the “BUGUResearch Institute”, users can take part in the whole product process from conceptual design to publictesting. So far, “BUGU Research Institute” has launched its fourth program with nearly 400 usersparticipating in joint product creation with BUGU in a deep manner. In respect of sales, BUGU focusedon ten categories, including milk modulator, countertop dishwasher, juicer, meat grinder, small cookingpot and electric kettle, which entered the top 30 of the industry in the daily traffic of T-mall flagship store.The products hit the shelves in Suning T-mall flagship store, T-mall Supermarket and MSmartLifeflagship store. During the "618" promotion, the electric kettle ranked first in the subdivided industry ofT-mall Supermarket and doubled its growth. BUGU also opened official flagship stores in Douyin andKuaishou and cooperated with anchors. Several rooms for live-streaming were built to seizeopportunities in the booming live-streaming industry.In the first half of 2021, WAHIN continued to attract the attention of Generation Z with “Trendy Designs,Practical Functions and Fun Interactions”, and made full efforts to promote various categories such asair conditioner, laundry appliance, refrigerator, kitchen appliances and small domestic appliances withinnovative design and smarter user experience. The overall revenue was close to RMB3.5 billion and
exceeded the total revenue of 2020, a year-on-year increase of over 150%. WAHIN focused on youngcircles such as anime and the trending culture and got a good result during the "618" promotion. In thefirst half of 2021, the sales of WAHIN air conditioner reached RMB2.3 billion, an increase of over 600%year-on-year. With virtual characters "WAHIN Girl" being the spokesman and a slogan of "It's your turn,young man", WAHIN deepened the brand marketing towards young generation and spread the brand indifferent cultural circles. WAHIN upgraded the digital remote controller and turned a new page of digitalremote control in the air conditioning industry. During the "618" promotion, "WAHIN Girl" same series ofair conditioners was launched, the brand exposure exceeded 120 million UV, and nearly 200,000 sets ofthis series were sold. The sales of WAHIN refrigerators exceeded RMB380 million, up 84% year-on-year.WAHIN launched the "bright blue" series of products with a unified visual design language, thus bringingalong fast growth. It also aroused the interest of targeted customers by displaying scenes. Besides,WAHIN conducted promotion and interactive activities for 93L refrigerators in Little Red Book. During the"618" promotion, the short video of WAHIN refrigerator flagship store entered the Top-5 list of T-mallbrand short videos. In the first half of 2021, the overall sales of WAHIN kitchen appliances reachedRMB600 million, with a year-on-year increase of 50%. During the "618" promotion, WAHIN KitchenAppliance launched the WAHIN-dimension smart appliance suite, covering kitchen and bathroomappliances such as electric water heater, gas water heater, range hood stove, dishwasher and waterpurifier. With the fashionable color matching of orange and blue as well as the new experience of smartinteraction, WAHIN kitchen appliance led the trend of household appliances. Sales of various categorieswere outstanding during the "618" promotion. In addition, WAHIN Vie6 8-set Dishwasher ranked first inthe network sales of SKU. WAHIN small domestic appliances broke the shackles of the traditional modeland carried the trending value. It positioned itself as "small appliances of interest" and was committed tobecoming a "new species" that appeals to young and fashionable consumers. WANHIN centered onusers' needs, provided customized services to different circles, and launched innovative productscovering different scenes such as personalized care, cooking, etc. Considering that Generation Z isglued to the Internet, WAHIN lifestyle appliances focused on e-commerce in the early stage, andreached to young groups via marketing by live-streaming and short videos.H. Seized market opportunities amid domestic and international circulations, responded toChina’s goals regarding “carbon emission peak” and “carbon neutrality”, made technological
breakthroughs and innovations, and kept improving the ToB business landscapeThe Electromechanical Business Group of Midea is engaged in the production of core components andaccessories and precision manufacturing-related industries. And it is committed to becoming aworld-leading and innovation-driven enterprise of core components and accessories. Currently, it hasestablished a business layout consisting of four major business segments, namely, home appliances,new energy vehicles, industrial control, and 3C products, and eight major product companies. Besides, itkeeps expanding and improving its capacities. The Foshan Xingtan Base was newly established tomake a forward-looking layout in intelligent manufacturing of mechanical and electrical products. With itsself-developed technology of software and hardware products such as Industrial Internet of Things (IIOT)and robot automation, Midea combined advanced technologies such as 5G, AI, AR, big data, SCADAand cloud platform to comprehensively automate, digitize and intellectualize the production layout,process design and production management, seeking to build an Industry 4.0 intelligent manufacturingdemonstration base in China and a world-class “Lighthouse Network” factory. The factory automationproject of air conditioning compressor won the title of Foshan Industrial Internet of Things (IIOT)demonstration benchmark. Hitachi Compressor (Thailand) Ltd. (HCTL) was acquired and the integrationwork was steadily improved. It will significantly increase the production capacity of refrigeratorcompressor and further improve the global supply of core components. With respect to marketexpansion, the Electromechanical Business Group made constant efforts for household appliances andconsolidated its leading position in the industry. According to online industry data, in the first half of 2021,the unit sales of residential air conditioner compressor grew by 29% year-on-year and accounted for 42%of the global sales. The unit sales of refrigerator compressor increased by 37% and represented 15% ofthe global sales, thus ranking at the forefront of the industry. The unit sales of motor for residential airconditioner and washing machine accounted for 42% and 19% of the global figures respectively. Inaddition, the Electromechanical Business Group developed chips for household appliances. Its productswere related to MCU, power, power supply, and the IoT, and steadily expanded to industrial andautomotive fields. With regard to new businesses, the Electromechanical Business Group put moreresources to core components of new energy vehicles, developed core components of two-wheeledelectric vehicles, such as motor, controller, etc. In May 2021, the three major product lines of Midea’sdrive system, thermal management system and auxiliary/automatic driving system were put into
operation, and officially released five auto parts of the three major product lines, that is, the drive motor,electric water pump, electric oil pump, electric compressor and EPS motor. Midea MCU master chip wasofficially mass produced. In the first half of this year, the cumulative output exceeded 800,000.Meanwhile, Midea expanded the relationships with internal and external customers. As a leadingenterprise in the domestic industry of high-voltage frequency converter, the revenue of HiconicsEco-energy Technology Co., Ltd. increased by 25% year-on-year. The revenue of its high-endmanufacturing business increased steadily. Particularly, the low-voltage frequency converter businessachieved rapid growth. As a front runner in the motion control sector, the revenue of Servotronix grew byover 80% year-on-year. Servotronix launched linear drive CDLB single-axis robots, achieved alocalization rate of more than 50% of the parts and led the race in performance, further stabilizing itsleading position in the subdivided industry. In terms of technological innovation, in the first half of 2021,the three R&D projects of "Research and Industrialization of Key Technology for New High-efficiencyInverter Compressors", "Research and Application of Pressure Difference Start Technology for RotaryCompressors" and "Research and Industrialization of Key Technology for New Generation VariableFrequency Motor System for Household Appliances" of the Electromechanical Business Group passedscience and technology appraisal held by China National Light Industry Council and was recognized as“Internationally Advanced”. As a leading manufacturer of core components in the household applianceindustry, technologies of the Electromechanical Business Group's products won many industry awards.For example, the relevant patented product technologies won six Excellence Awards at the 22nd ChinaPatent Awards. The project of "New Sliding Vane High Efficiency Compressor Technology Research,Performance Evaluation and Application" won the “2020 China National Light Industry CouncilTechnology Progress Award (First Prize)”. "Ultra-efficient Variable Frequency Rotary Compressors" and"New Generation of BLDC Motor and its Smart Controller for Front-loading Washing Machines" wereboth awarded the 2021 AWE Core Chip Award. "New Generation of BLDC Motor for Ultra-efficient AirConditioners" and "Rotary Compressors with Pressure Difference Start Technology" won the Gold SpikeAward of China Household Electrical Appliance Industry Chain Conference. "Rotary Compressors withPressure Difference Start Technology", "40 High-efficient and Wide-range Variable Frequency ScrollCompressor" and "BLDC Motor for Ultra-efficient Commercial Air Conditioners" respectively won theInnovative Product Awards of 2021 China Refrigeration Expo. And “R410A Jet Inverter Heat PumpCompressors” was awarded the Innovative Product Award of 2021 China Heat Pump Exhibition. In
addition, "8HP Variable Frequency Enhanced Vapor Injection (EVI) Rotary Compressors" won HAPE2021 Innovation Award.Midea HVAC & Building Technologies Division is committed to creating a smart ecological circle forurban buildings, providing smart ecological integrated solutions for different industries, and turningtraditional buildings into a perceptible and warm "life". And it is at the forefront of the industry in terms ofmarket performance, technology R&D, product innovation and product services. In terms of marketperformance, according to the data monitored by industry online and Electromechanical Information ofCommercial Air Conditioner Market, Midea's domestic market share of commercial air conditionercontinued to rank first in the first half of 2021. In respect of technological R&D, Midea established theBuilding Technology Research Institute in 2021 to realize the perfect combination of humanity andbuildings with digital technology, as well as to create a smart building. Midea also launched the 19thMDV competition, and released "Building Energy Solutions under the Background of Carbon Neutrality"and "Building the Next Generation of Smart Buildings with Three Major Neural Systems of MideaControl" which contribute to the development of carbon neutrality and smart buildings. At the same time,Midea carried out industry-university-research collaborations with research institutions such as collegesand universities. In the first half of 2021, Midea and Shanghai Jiao Tong University (SJTU) jointlyestablished a research center for carbon neutral technology. Many awards were won for the relevanttechnological achievements. For example, Midea's project of "Research and Industrialized Application ofHigh-efficient and Energy-saving Key Technology for Wide-temperature-range Heat Recovery Multi-splitSystems" (jointly applied with SJTU) won the first prize of Science and Technology Award of GuangdongMechanical Engineering Society, and the first prize of Science and Technology Award GuangdongMachinery Industry Association. The project "Technology and Industrialization of Ultra-low-temperatureHigh-efficient Energy-saving Air Source Heat Pump" (jointly developed with SJTU) won theIndustry-University-Research Cooperation Innovation Achievement Award of ChinaIndustry-University-Research Collaboration Association. The relevant patented product technologieswon six Excellence Awards at the 22nd China Patent Awards. GD Midea Heating & VentilatingEquipment Co., Ltd. and WINONE Elevator Company Limited were recognized as Guangdong IndustrialDesign center. These honors and awards attest to Midea's technological R&D strength in the HVAC &building technologies. As for product innovation, Midea's three major products of HVAC & building
technologies -- "Air C+ Duct Type Air Conditioner Indoor Units", "Sinan Series Magnetic VariableFrequency Centrifugal Chillers" and "Three Pipe Heat Recovery Multi-split System" -- won the InnovativeProduct Award at 2021 China Refrigeration Expo. "Air C+ Duct Type Air Conditioner Indoor Units" adoptsadvanced technologies like humidity intelligent control and constant air volume to solve the problemssuch as small commercial space for installation, air conditioning noise, high energy consumption anddifficulty to clean. "Sinan Series Magnetic Variable Frequency Centrifugal Chillers" keeps abreast of theinternational leading level in key indicators such as energy efficiency and comfortability via theapplication of many technologies in Midea, for example, aerospace pneumatic technology, magneticlevitation bearing technology, micro-channel refrigerant-based cooling variable frequency technology,high-efficient permanent magnet synchronous motor technology and full falling film evaporationtechnology. "Three Pipe Heat Recovery Multi-split System" achieves more than 20% energy-savingeffect through key technologies such as intelligent wide-temperature-range heat recovery. Moreover, inreliance upon the advanced industrial system of Midea Group, Winone developed a freight elevator witha maximum load of 50 tons. Supported by international advanced technology and reliable drive system,this freight elevator runs at 0.5m/s with a travel height of 100m. Winone also independently designedand built the 32-meter heavy-duty escalators test tower for public transport. The project now has beenput into use. The escalator in this project has a maximum height of 25m and an inclination angle of 30degrees. It has a proven, safe and reliable technology and fully complies with Chinese rail transportationstandards, with numerous technical parameters higher than European standard. As a heavy-dutyescalator, it can perfectly handle extremely dense passenger traffic. In terms of product services, as aleading domestic solution provider of overall building solutions, Midea has also been committed toimproving the standards toward the offerings of products and services. The first VRF, MDVS, multi-splitreliability improvement standard proposed by Midea was fully affirmed by experts. Midea is committed toproviding customers with overall solutions. For instance, in the "miracle of human engineering"Sichuan-Tibet Railway project, Midea built an overall solution covering HVAC, elevator and automaticcontrol system for Lalin section which provides efficient, reliable and intelligent technology andequipment guarantee for the construction of important national transportation hubs. As for the SuzhouMetro Line 6 project, a solution of ultra-efficient intelligent environmental control systems was providedfor 31 stations along the line to protect urban traffic pipelines. In the Solar Decathlon Competition 2021(China), Midea assisted the Tsinghua University team with green and smart technologies to create a
smart, energy-saving, green and livable environment for herdsmen. In addition, Midea won theLong-term Cooperation Award for 10 Years of Vanke Group, the Innovative Product Award and theIndustry Influential Brand Award at 2021 China Heat Pump Cogeneration Summit.I. Promoted innovation in robotic product development, accelerated integration and expansion ofthe robotics business for the China marketKUKA, a subsidiary of Midea, is the first robotic manufacturer in the world to introduce sensitivelightweight robots into the production plant, as well as the first manufacturer with a product rangecovering collaborative robots, mobile robots and industrial heavy-duty robots. In the first half of 2021,KUKA launched a series of new products. In terms of control system, KUKA presented its new operatingsystem iiQKA.OS at Hannover Fair. With this system, robot use will be greatly simplified and be as easyas cellphone use. The iiQKA.OS system is intended to serve as the basis for an entire ecosystem whichprovides access to robot accessories, programs and apps, etc. For food and medical industry, KUKAreleased the "KR DELTA robot" -- the first delta robotics-- with a parallel kinematics. The new robotobtains excellent performance at a much lower cost. Its arms can reach up to 1,200mm and the robothas a payload capacity of 6kg. As the latest product in KUKA lightweight robot portfolio, this robot ismade entirely of stainless steel and can perform pick-and-place applications towards food and medicine.In respect of digital simulation, KUKA made public a new version of smart simulation software KUKA.Sim
4.0. The software is featured by a new level of simplicity, planning reliability and cost efficiency. It notonly streamlines the workflow and saves time for customers, but also demonstrates its functions inmultiple scenes. With regard to medical care, a Munich therapy center uses a medical product with anintegrated KUKA robot, that is, The CyberKnife system of Accuray, as a high-precision instrument intumor treatment. This product is an alternative to conventional radiotherapy and a breakthrough of KUKArobot in the medical field. As for new businesses, KUKA's Swisslog creates automation systems thatbring scalability, flexibility and lower costs to vertical farming, allowing them to be installed andmaintained in a wide range of pre-existing and purpose-built spaces. These systems help broaden theapplicability of growing crops and bring food production closer to consumers in densely populated urbanareas.According to the IFR, the sales of global industrial robots is expected to resume growth in 2021. Apart
from being affected by 2020 low base, there are several reasons behind the estimation: robots canimprove the capacity elasticity of the manufacturing industry; governments will invest more inmanufacturing technologies; and the pandemic leads to the comeback of the manufacturing industry. Inthe automotive field, in the first half of 2021, KUKA entered into a new cooperation framework agreementwith the Daimler Group to extend the long-term partnership. The orders cover robots, production lines,KUKA robot controllers and other products, such as KR FORTEC heavy-duty robots and the new KRQUANTEC generation. KUKA also received orders from another global automobile manufacturer, with atotal of tens of millions of euros. In the future, KUKA will join the body components of a premium SUVusing a patented process of pierce riveting technology. In the general industrial field, the new orderKUKA received from BACA System involved 100 KR 210 QUANTEC robots. For seven consecutiveyears, KUKA has been supporting BACA System with innovative robot solutions in the stone cuttingindustry and a total number of over 450 KUKA robots. In terms of logistics automation, in May 2021,Swisslog under KUKA announced that the ZKW Group, the specialist for innovative, premium lightingsystems and electronics, will use Swisslog automation to help increase manufacturing. With centerpieceof the installation being Tornado miniload cranes, Swisslog is expected to provide automation systemswhich cover QuickMove conveyor systems and SynQ management software. Throughout the pandemic,Swisslog has continued to support businesses with project realization for critical supply chains. It won 21AutoStore orders with a total value of over EUR60 million in the first half of the year. These orders camefrom customers in different industries including Norwegian third party logistics provider Bring, Italianimporter Andreas STIHL SpA, and German toy retailer ROFU. In the field of vocational education, KUKAprovided a total of 31 robots cell for Advanced Manufacturing Training Centre of Excellence establishedby Louth & Meath Education and Training Board (Ireland). The robot cells cover customized six-axisrobots with vision system, welding robots, milling robots and collaborative robots. The total valueamounts to millions of euros. Besides, in June 2021, KUKA won the 2020 Stellantis First SupplierAwards for its timely, efficient and high-quality products and services provided. Stellantis was formed inJanuary by the merger of Fiat Chrysler Automobiles (FCA) and Peugeot Citroen Group (PSA).KUKA further accelerated integration and expansion of the robotics business in China, promotedtransformation of the domestic marketing, and centered on applications and key customers. In the firsthalf of 2021, the number of new business opportunities of KUKA China grew by nearly 50% year-on-year,
while the proportion of new customer orders increased to 15%. As it leads the race in the automotivefield, KUKA had a significant growth in the proportion of orders and shipment regarding electronics,machinery, arc welding and laser industries, with the orders increasing by over 80% year-on-year. Interms of market sales in the first half of 2021, in addition to the traditional passenger car market, KUKAChina explored new customers in the heavy-duty truck market and won the bid for the heavy truckflexible welding project of Jinan Intelligent Network Linked. In the electronic field, it cooperated withSunrise Instruments to establish an intelligent grinding laboratory, focused on algorithm, trajectory-freevision program and grinding tool development, thus expanding the application in aerospace, rail transitand other fields. As for construction machinery, KUKA won orders from Sany Heavy Industry, Zoomlionand Shantui. In respect of logistics and warehousing, it dealt with orders for the reconstruction of coldstorage warehouse of Livzon Pharmaceutical Group, omni-channel central warehouse of ANTA FILA. Inthis way, KUKA expanded its footprint in the domestic mid-end and high-end market. In the medical field,it built a partnership with Guowen International Hospital (Changchun) and made the first attempt at theEPC project for private hospital with direct selling. Moreover, KUKA China made the first breakthrough ofdigital business in industrial services. With regard to product R&D, KUKA built a Chinese R&D team,which has brought forward six new products, accounting for nearly 10% of the overall orders in the firsthalf of the year. The R&D and testing laboratory in Shunde, Guangdong has been officially put into use.This laboratory develops independent testing capabilities such as reducer comprehensive performancetest, motor parameter test and EMI test, and sets up robot testing stations as part of efforts to improvethe product performance with these technologies. KUKA China continued to invest more in R&D. Itssubordinate R&D institutions were recognized as Guangdong Intellectual Property DemonstrationEnterprise, Shanghai Songjiang District Enterprise Technology Center, Foshan Engineering TechnologyCenter, etc. As KUKA China makes a full commitment to developing new products and optimizing thebrand-product matrix, it develops core parts and carries out basic technology research throughcooperation with Midea Corporate Research Center and other institutions, seeking to promote the R&Dmodel of “Three Generations”. In terms of manufacturing, affected by the epidemic, all walks of lifeincreased investment in industrial robots and automation which witnessed an explosive growth of thedomestic market. In the first half of the year, KUKA China's plant in Shunde initiated the phase IIconstruction to meet the needs of business development, and gradually advanced its ancillary industrialchain to shorten the product delivery cycle and to achieve operational efficiency in value chains. In
addition, KUKA has been playing an active part in raising Midea Group’s intelligent manufacturing level.By July 2021, the robot density of Midea is over 320 units per 10,000 persons. And this number isexpected to reach 530 by 2023.J. Deepened the long-term incentive and protected the interests of shareholdersIn 2021, 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 eight stock option incentive schemes, five restricted share incentive schemes, seven globalpartner stock ownership schemes and four 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 nearly RMB58billion since Group listing in 2013. In addition to the consistent dividend payouts, the Company hascarried out a string of share repurchase plans. Subsequent to a share repurchase of RMB4 billion in2018, to further stabilize the market capitalization and protect the shareholders’ interests, the Companyhas launched share repurchase plans for three consecutive years since 2019. And the repurchasedshares would be used for equity incentive schemes and/or employee stock ownership schemes. From 1January 2021 to 30 August 2021, Midea has used approximately RMB13.6 billion for share repurchases.
2. Core Competitiveness Analysis and Development Strategies for H2 2021
2.1 Core Competitiveness of Midea
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 throughits wide product range.As a white goods and HVAC enterprise with a whole industrial chain and full product line, Midea Group
has developed a complete industrial chain combining R&D, manufacturing and sales of corecomponents and finished products, supported by an industry-leading R&D center and manufacturingtechnologies of core components (such as compressors, electrical controls, magnetrons and controllers),and ultimately based on its powerful capabilities in logistics and services. Midea owns top brands ofhousehold appliance and HVAC in China. Its dominance in the major appliance and HVAC marketsmeans that it can provide a wide range of competitive product sets. It also means internal synergies inbrand awareness, price negotiation as a whole, customer needs research and R&D investments.Compatibility, coordination and interaction among household appliances have become increasinglyimportant since smart home is gaining popularity. With a full product line, Midea has had a head start inproviding a combined and compatible smart home platform with integrated home solutions forcustomers.B. Global R&D resource integration capabilities, adherence to the strategy of“Technology Leadership”, as well as continuing lead in R&D and technical innovationThe Group is focused on building a competitive, multi-layered global R&D system centering on userexperience and product functions, which represents world-class R&D input and strength. With nearlyRMB45 billion invested in R&D over the past five years, the Group has set up a total of 28 researchcenters in 11 countries to gradually build up a “2+4+N” global R&D network and gain the advantage ofscale in this respect. Domestically, Midea Global Innovation Center in Shunde District, Foshan City andMidea Global Innovation Center in Shanghai are the cores of Midea’s R&D arm. Overseas, with MideaAmerica Research Center, Midea Germany Research Center, Midea Japan Research Center and MideaMilan Design Center as the cores, Midea makes use of the regional technological advantages,integrates global R&D resources, and builds these facilities into complementary regional R&D centers.Following the strategy of “Technology Leadership”, it attracts more professional talent and builds anorganic global R&D network. It has over 16,000 R&D employees and over 500 foreign senior experts.While establishing its own research centers around the world, Midea also works on constructing an openplatform of innovative ecosystems. The Group cooperates with domestic and foreign scientific researchinstitutions, such as Massachusetts Institute of Technology, University of California, Berkeley, Universityof Illinois at Urbana-Champaign, Stanford University, Purdue University, University of Maryland, The
University of Sheffield, Polytechnic University of Milan, Tsinghua University, Shanghai Jiao TongUniversity, Zhejiang University, the Chinese Academy of Sciences, Harbin Institute of Technology, Xi’anJiaotong University, Huazhong University of Science and Technology and South China University ofTechnology, in order to establish joint labs for deepening technological cooperation. The Group alsocarries out strategic cooperation with tech giants such as BASF and Honeywell to build a globalinnovation ecosystem. The Group’s long-term focus on building technology, marketing, design, productand open innovation systems, building a cutting-edge research system and building reserves intechnology for mid/long term, has provided a solid foundation for the Group to maintain technicalsuperiority across the globe.C. Stronger Global Impact fueled by Midea’s continual global resource allocation andinvestments, 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 17 overseas manufacturing bases and 24 overseas operatingagencies. Midea’s global operations system has been further improved through the reform ofinternational business organizations towards diverse business models. It also increases investments inoverseas business operations, focuses on the needs of local customers and enhances productcompetitiveness 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 productdemands in overseas market, Midea is promoting worldwide branding and expansion through globalcollaboration and cooperation. In this way, the global competitiveness of Midea is increasing steadily.D. Broad channel networks and a well-established smart supply chain system ensuring the
steady growth of Midea’s domestic salesWith 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 100,000. Midea hascreated a network layout of comprehensive household appliance stores, co-branded stores of homedecoration business, specialty stores of self-owned products, traditional retailers and e-commercefranchise stores. It provides easy access to Midea's products and services, covering the entire marketfrom first-tier cities to townships. Particularly, Midea boasts more than 10,000 specialty store outlets,where various needs of users from new decoration to updates can be met in home decoration stores,flagship stores, multi-category stores and community stores. In 2021, Midea set up entity forpre-decoration, doing so to integrate household appliances and ensure the consistency of userexperience. It also focuses on "smart home" and "whole-house decoration solutions", as well aspromotes deep cooperation with appliances and home decoration, furnishing, design, etc. As of today, ithas strategic cooperation with domestic leading home decoration brands, and has launched over 100co-branded stores of home decoration companies. In the first half of 2021, Midea's online salesexceeded RMB52 billion, an increase of over 20% year-on-year. It remains the best-selling householdappliance manufacturer on major e-commerce channels such as JD, T-mall and Suning for nineconsecutive years. Besides, in Pinduoduo, Douyin, Kuaishou and other emerging channels, Midea haswitnessed a rapid growth of sales and users.Making full use of the digital technology, Annto Logistics Technology Co., Ltd. (Annto), a subsidiary ofMidea, refines its nationwide logistics network through the big data technology to build a smart anddigital distribution platform. Annto concentrates its resources on urban distribution and is able to providefully visualized direct distribution services covering every town and village of the country. Relying on the140 urban distribution centers nationwide, it covers more than 99% of towns and villages across thecountry. It can finish the delivery to 21,418 (or 53% of) towns and villages within 24 hours and to 39,560(or 91% of) towns and villages within 48 hours in the country. Additionally, Annto focuses on a sharedinventory system for online and offline channels and the competitive edge of integrated delivery for theToB/C business, refines its network of integrated delivery and installation services, drives connectivity
through the whole process from manufacturing to sale, provides quality service solutions for variousorders from customers, as well as comprehensively 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 bydigitization & intelligence. On one hand, it promotes deep integration of the digital technology andbusiness in the whole 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 smarttechnologies, products and scenes, so as to outcompete Internet companies. With continual investmentand research in artificial intelligence (AI), silicon chip, sensor, big data, cloud computing and other newtechnologies, Midea has built the biggest AI team in the household appliance industry, which iscommitted to enabling products, machines, production processes and systems to sense, perceive,understand and judge, driven by the combination of big data and AI, in order to reduce obstacles forman-machine interaction to the minimum and create smart appliances without any assistance ininteraction. Focusing on “people and their family”, Midea builds a whole value chain of IoT.Breakthroughs have been made in user data protection, content operation for smart scenes, smartconnection technology, the smart home ecosystem, cloud platforms, the smart voice function, the bigdata-based cloud housekeeper services, etc. By doing so, Midea is able to offer complete smart homesolutions 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,Software Engineering Institute, IT Department, IoT Division, Smart Home Business Group, Robotics &Automation Division, HVAC & Building Technologies Division, Digital Innovation Business and otherorgans, Midea has established a unified IoT technology platform. Its Industrial Internet platform has beenupgraded to “M.IoT 2.0”, including two “Lighthouse Network” factories, which are swiftly applied to otherMidea manufacturing bases across the world and provide products and services for around 300customers in more than 40 market segments. Therefore, it is safe to say that Midea has built a solidfoundation regarding Industrial Internet systems. While driving online systems and digitalization, Mideaalso adopts a systematic data-based approach to governance. A whole new data platform has been putin place to accumulate data assets and achieve integration of online and offline business data, as well asproduct and service data. Further, the “User One_ID” system has been refined to provide adequate datasupport 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 itsperformance- oriented evaluation and incentive mechanism featuring full decentralization has become atraining and growth platform for the Group's professional managers. The Group's primary seniormanagement team consists of professional managers who have been trained and forged in theoperational practices of Midea Group. They have been working for Midea on average for more than 15years, all with rich professional and industrial experience, deep understanding and insights of the globalhome appliance industry and related industries, and accurate understanding of the industry environmentand corporate operations management. The Company's advantages in such systems and mechanismshave laid a solid foundation for the efficient and effective business operations, as well as the promising,stable and sustainable future development of the Company. At present, the Company has launchedeight Stock Option Incentive Schemes, five Restricted Share Incentive Schemes, seven Global PartnerStock Ownership Schemes and four Business Partner Stock Ownership Schemes for key managerial
and technical personnel, in addition to the exploration and practices with respect to diversified stockownership schemes of key innovative subordinates. As such, a governance structure has been put inplace that aligns the interests of senior management and core business backbones with that of allshareholders, as well as comprises long and short-term incentives and restrains.
2.2 Development Strategies for H2 2021
A. Development strategies of the CompanyMidea adheres to the strategic focus of “Technology Leadership, Direct to Users, Digitization &Intelligence Driven, and Global Impact” and focuses on “Comprehensive Digitalization andComprehensive Intellectualization”. Guided by the strategic focus and underpinned by advancedcorporate governance, up-to-date values and philosophies, as well as mindset growth of themanagement. It integrates global resources, follows the customer-oriented principle, and builds keytechnology barriers by way of technological innovation and quality improvement, so as to achieve globalleadership with respect to principal product categories and new business breakthroughs, as well as tomaintain 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 solidfoundation in this regard and enhance global impact through promoting its own branded products. It willpromote efficiency driven growth by improving management, manufacturing and asset efficiency tocreate more cost efficiency. Additionally, it will strengthen its ToB business to build new businessplatform and growth points. It aims to create a better life for over 400 million users, major customers andstrategic partners in different areas worldwide every year with satisfying products and services.B. Key operation points in H2 2021In the second half of 2021, based on the core strategic focus with “Technology Leadership” as the core,
Midea will promote development both in the ToB and ToC business, as well as carry out transformation inboth the domestic and overseas operations. With innovation, breakthroughs and planning as the keynote,it will drive growth in the five business divisions, promote the implementation of the four strategic focus,as well as ensure enough breakthroughs regarding management systems, the organizational structureand mechanisms, aiming to establish an agile front-end, shared platform and digital back-end. Specificpriority tasks are set out below:
a. Midea will firmly increase R&D investment and build up the R&D scale advantage in key technologies,cutting-edge technologies, basic technologies, digitalization and intellectualization in particular. Drivenby technology as the fundamental approach, it will make breakthroughs and build key technologybarriers in all the product categories. Also, it will see to the full implementation of the customer-orientedprinciple with respect to all the products, services and business models. By way of “ComprehensiveDigitalization and Comprehensive Intellectualization”, increasing efficiency internally and developingcustomers externally, as well as deepening the R&D model of “Three Generations”, Midea isimplementing the strategy of “Being the Number One or the Only One”. Meanwhile, efforts will be madein bringing in top talent, promoting a distributed working system and talent diversity at home and abroad,strengthening the global R&D network, refining the global R&D system, and building up an R&D-centricand innovation- driven model, with a purpose of maintaining technology leadership in a comprehensivemanner.b. Midea will keep a high-quality development direction and stick to internal, sustained and effectiveorganic growth. It will promote the T+3 business model reform and high-performance operations in thewhole value chain in every link from product planning to after-sales service, so as to increase efficiencyin the whole value chain and the data-driven efficiency. Channel reform will be firmly pushed forward forthe front-end market in pursuit of better profitability. In order to win in competition, it is important todevelop high-end products to refine the product mix. Breakthroughs must be made in a faster mannerregarding small and major appliances, in addition to the promotion of products catering to newconsumption trends. Newly established business entities will explore corporation-based development,actively carry out innovation and embrace new models and approaches, as well as strengthenbreakthroughs with respect to new models, business, product categories and application areas. Midea
will plan for, establish and refine business middle platforms, especially data and technology middleplatforms. In the meantime, it will maintain overall consistency by sticking to “One Midea, One System,One Standard”. In face of common problems such as fluctuations in exchange rates and prices of bulkraw materials, as well as sourcing management, Midea will firmly promote its internal coordination andsharing mechanism and keep perfecting the relevant solutions. It will also maintain effective investments,control non-operating expenses, increase labor productivity, improve human resource allocationefficiency, promote lean management and provide fresh impetus for continual growth through relentlessinnovation.c. In the domestic market, based on the “Direct to Users” strategy, Midea will promote direct marketingby way of internal cultivation and introduction from the outside, reshape the domestic marketing systemand model, and empower the retail end to be “Direct to Users”. It will continue to deepen the reform of itsorganizational structure, improve retail capacity, and develop user insights and back-end capacity. Mideawill also commit itself to intelligent experience terminals and user experience as part of efforts to connectwith users' preferences. Moreover, Midea will enhance the basic systems to set up a unified businesslanguage and rules, strengthen "One Midea, One System, One Standard", make use of the advantagesof synergies, reinforce the result-oriented process control and improve operating efficiency. Followingthe customer-oriented principle, it will also streamline shipping rules, as well as focus on retail capabilityimprovement and user operation. Meanwhile, Midea will optimize the supply chain to meet terminaldemand and increase the efficiency of circulation. It will also make more efforts to enhance deliverycapabilities and improve its integrated delivery and installation service capabilities in the ToC business.Besides, Midea will continue to improve the business system and the digital analysis capability tomaterialize real-time visualized management of mobile data and smart early warning. In terms ofchannel strategy, Midea will advance intelligent experience terminals and other channels, promote thedevelopment of new models and forms of business such as community stores, improve the customeracquisition capacity as well as strengthen the profit model. Meanwhile, Midea will continue to identifyhigh-potential market opportunities for home decoration stores, flagship stores and multi-category stores.It will strengthen the coverage of intelligent scenes in terminal outlets, and build an intelligent terminalnetwork, thus improving user experience. Moreover, Midea will adjust its marketing strategy and layoutof products in Pinduoduo, Douyin and Kuaishou and Red apps. As for self-owned channels, it will adopt
a customized strategy to promote the cooperation of cross-brand online shopping malls. In respect ofproducts, Midea will center on a structure upgrade, improve the efficiency of matching potentialcustomers, and drive sales growth with new marketing and playing methods. It will also gain insights intousers' needs with the collected data, rely on the smart scene laboratory to improve the operation ofsmart scenes, and strengthen the integration of online and offline channels. Meanwhile, Midea will carryout independent planning of new brands and improve its multi-brand matrix. With regard to users, Mideawill continue to uphold the principle of "Create Value for Users" and optimize product iteration, purchaseexperience and service experience based on user experience. Moreover, it will attract more membersand provide more member privilege services as well as accelerate the operation of private domain traffic.In addition, Midea will invest more in intelligent devices to optimize user experience and improve userloyalty, and strengthen the capacity-building of data platform and business intelligence (BI). In terms ofservices, Midea will upgrade the system of service engineer operation based on the business model ofthe direct retail and the smart home, tie the service quality, engineer income to operation rules. Besides,for the purpose of providing users with one-stop service, it will promote scene service and suitecustomization for the whole house, and deepen the transformation of services such as one-engineerwith multi-functions, intelligent service, scene-based refurnishing, and door-to-door service.d. Midea will continue to expand overseas markets, consolidate the foundation for such an expansion,and further develop distribution channels. In 2021, Midea is scheduled to launch over 30, 000 outlets. Itwill lead retail transformation, build capacity-building for direct retail and empower channels with digitaltools. Midea will also build channel management system, promote the business reform of channelmanagement, and improve channel transparency and efficiency. Besides, it will exploit overseasstrategic markets with the centerpiece of product innovation, promote the “Direct to Users” businessmodel. Meanwhile, Midea will increase the investment towards strategic resources, improve local R&Dcapacity and user insights as well as local manufacturing capacity of strategic markets. Midea willpromote cross-border e-commerce business, focus on major brands and encourage multi-trackdevelopment to seize the subdivided markets. It will also strengthen social media operation, build userinteraction systems, explore new businesses such as overseas social e-commerce and D2C. Meanwhile,it will deepen channel expansion, develop an online distribution strategy, and establish a globaldistribution system. Moreover, Midea will analyze the operation of overseas users, optimize the
organizational structure, iterate digital tools and solutions, and strengthen the business sceneconfiguration. It will also improve the return rate of marketing with data analysis, provide overseas usergrowth with the launch of related projects, and steadily improve user loyalty and activity. To improveglobal services, Midea will promote iService 3.0 post-sales service system, further apply digitaltechnologies to overseas services, empower overseas branches to improve service quality. It will alsocommit itself to the layout for logistics performance network, warehousing and distribution network, userservice network, spare parts network and call center. In addition, Midea will drive digitalization andintellectualization in overseas operations, deepen digitization & intelligence driven decision-making,promote the sorting and reconstruction of end-to-end business scenarios regarding export, as part ofefforts to improve the accuracy, consistency and transparency of information and data.In the second half of 2021, TLSC will continue to take prevention and control measures, educate staff oncrisis perception and risk awareness, build closer ties with key customers and all units of the Group, andactively prepare for and respond to risks. TLSC will continue to increase revenue and reduceexpenditure, adjust product structure and prices, and strictly control outgoings and expenses. It will alsodeepen organizational reform and improve business efficiency. Moreover, TLSC will coordinate with theGroup and relevant business units, enable information exchange between sales and manufacturing. Ontop of that, it will improve product quality, and ensure the normal listing of new products and enoughsupply in peak season. Besides, TLSC will promote brand compliance and improve brand image.e. In light of different needs from different consumer groups, Midea will carry out long-term planning,improve its multi-brand matrix, and refine its high-end brand portfolio. The cultivation of COLMO, thebrand targeting high-end consumers, is an important strategy of the Group. It will continue to explorenew approaches in R&D and marketing, refine its product mix, and keep innovating. In the second half ofthe year, it is to enhance whole-house smart products, expand its channel network, and upgrade thescene-based and smart experience at the retail end. BUGU, the brand targeting online consumers, willintegrate internal and external resources to provide individualized experience for users, and establishall-scene ecosystem cooperation with external manufacturers to create innovative marketing andbusiness models. Meanwhile, consistency towards customers will be promoted. Beingcustomer-oriented, Midea will give play to its multi-category synergistic advantages, provide product
suites for customers based on scenes, and provide customized and integrated home solutions with fullcategories of the household appliances.f. Midea will boost its competitiveness in the digital era by implementing the strategy of “Digitization &Intelligence Driven”. It will strengthen the building of Midea as a digitalized enterprise, improve the digitaloperational methods and systems, support the integration of every link of Midea’s value chain by digitalmeans, and create value by optimizing key operating indicators such as cost, efficiency and revenuethrough digitalization. Effort will also be made to refine the Midea Cloud Sales platform, promote digitalreform in marketing, as well as further build and optimize digitalized Industrial Internet factories. And itwill strengthen digital support for the “Global Impact” strategy. Measures to be taken include enhancingthe data platform and data governance to promote data-driven improvement in operations.Midea will focus on building a multi-device scene platform in families, serve customers with homesettings, and seek to provide a better smart life experience around the scene, technology, ecosystem,products and whole-house intelligence. First, Midea will center on high-frequency scenes, provideintegrated, convenient and intelligent scene 2.0 solutions, upgrade algorithms of the Smart CloudHousekeeper, improve the comprehensive voice-enabled experience of MSmartLife app. It will also buildsmart scenes of International MSmartLife and International TLSC to materialize cross-brand andcross-category device interaction scenes. Second, Midea will continue to upgrade software andhardware technologies, build an open platform, launch M.IoT "Scene Configuration Platform", releasenew intelligent module hardware. Besides, it will develop global multi-center and multi-cloud deploymentcapabilities, and improve comprehensive performance of the platform. Third, Midea will promote externalecosystem cooperation (including the cooperation with HarmonyOS), make joint effort with partners toprovide more diversified intelligent experience, deepen the strategic cooperation with China ElectricPower Research Institute, and take active measures to line up with the carbon neutrality strategy. Inaddition, driven by intelligent scenes and technologies, in reliance upon the advantages of Midea Cloud,MSmartLife App, content platform, intelligent module and voice-enabled AI platform, Midea will firmlyembrace its partners and build a partnership for mutual empowerment, seeking to create an openecosystem.g. Midea will beef up KUKA’s localized operations in China, increase investment in the development and
application 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 explorenew areas including general industrial manufacturing, electronics, medical care and logistics, services,etc. Concerning operation, it will concentrate on R&D, supply chain management, high-performanceoperations and digitalization, among others, so as to build the core competitiveness of the robotics andindustrial automation business in a faster manner.
3. Analysis of Main Business
See contents under the heading “1. Business Scope in the Reporting Period” above.YoY changes in key financial data:
Unit: RMB’000
| H1 2021 | H1 2020 | YoY Change (%) | Main reasons for change | |
| Operating revenue | 173,809,565 | 139,067,022 | 24.98% | |
| Interest income | 1,037,174 | 652,099 | 59.05% | Changes in the operations of Midea Group Finance Co., Ltd. |
| Cost of sales | 133,436,369 | 103,523,657 | 28.89% | |
| Selling and distribution expenses | 16,241,154 | 12,631,101 | 28.58% | |
| General and administrative expenses | 4,251,893 | 4,102,149 | 3.65% | |
| Finance costs | -2,321,726 | -851,927 | 172.53% | Increase in interest income and exchange gains |
| Income tax expenses | 2,407,939 | 2,329,061 | 3.39% | |
| Research and development expenses | 5,314,637 | 4,410,737 | 20.49% | |
| Gains/(losses) on changes in fair value | -801,944 | 247,700 | -423.76% | Changes in the fair value of financial assets |
| Asset impairment losses | -178,230 | -133,419 | 33.59% | Increase in inventory valuation losses |
| Credit impairment losses | -154,460 | -461,998 | -66.57% | Decrease in losses on uncollectible accounts receivable |
| Losses on disposal of assets | -17,833 | -11,070 | 61.09% | Decrease in gains on disposal of non-current assets |
| Non-operating expenses | 176,544 | 108,692 | 62.43% | Increase in other income |
| Minority interests | 207,399 | 138,715 | 49.51% | Increase in profits of non-wholly-owned subsidiaries |
| Net cash flows from operating activities | 20,176,410 | 18,405,491 | 9.62% | |
| Net cash flows from investing activities | 9,137,053 | -24,944,355 | -136.63% | Increase in cash received from disposal of investments |
| Net cash flows from financing activities | -16,559,579 | 7,033,151 | -335.45% | Increase in cash payments relating to other financing activities |
| Net increase in cash and cash equivalents | 12,520,109 | 570,541 | 2094.43% | Increase in net cash flows from investing activities |
Major changes to the profit structure or sources of the Company in the Reporting Period:
□Applicable √ N/A
No such cases in the Reporting Period.Breakdown of operating revenue:
Unit: RMB’000
| H1 2021 | H1 2020 | YoY Change (%) | |||
| Amount | As a percentage of total operating revenue (%) | Amount | As a percentage of total operating revenue (%) | ||
| Total | 173,809,565 | 100% | 139,067,022 | 100% | 24.98% |
| By business segment | |||||
| Manufacturing | 154,065,437 | 88.64% | 126,588,566 | 91.03% | 21.71% |
| By product category | |||||
| HVAC | 76,408,470 | 43.96% | 64,030,471 | 46.04% | 19.33% |
| Consumer appliances | 64,964,319 | 37.38% | 53,034,680 | 38.14% | 22.49% |
| Robotics, automation systems and other manufactured products | 12,692,648 | 7.30% | 9,523,415 | 6.85% | 33.28% |
| By geographical segment | |||||
| PRC | 99,850,129 | 57.45% | 77,233,142 | 55.54% | 29.28% |
| Outside PRC | 73,959,436 | 42.55% | 61,833,880 | 44.46% | 19.61% |
Business segments, products or geographical segments contributing over 10% of the operating revenueor profit
√Applicable □N/A
Unit: RMB’000
| Operating | Cost of sales | Gross profit | YoY change of | YoY change of | YoY change of |
| revenue | margin | operating revenue (%) | cost of sales (%) | gross profit margin (%) | ||
| By business segment | ||||||
| Manufacturing | 154,065,437 | 115,989,338 | 24.71% | 21.71% | 25.37% | -2.20% |
| By product category | ||||||
| HVAC | 76,408,470 | 60,476,097 | 20.85% | 19.33% | 24.60% | -3.35% |
| Consumer appliances | 64,964,319 | 45,732,392 | 29.60% | 22.49% | 26.08% | -2.00% |
| Robotics, automation systems and other manufactured products | 12,692,648 | 9,780,849 | 22.94% | 33.28% | 26.79% | 3.94% |
| By geographical segment | ||||||
| PRC | 99,850,129 | 75,921,640 | 23.96% | 29.28% | 30.70% | -0.82% |
| Outside PRC | 73,959,436 | 57,514,729 | 22.23% | 19.61% | 26.59% | -4.29% |
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
Operating revenue in the segment of robotics, automation systems and other manufactured productsincreased 33.28% YoY, primarily driven by an increase in the business size of subsidiary KUKA as aresult of the worldwide economic recovery, the higher investment in industrial automation bydownstream customers, and KUKA’s efficiency reform.
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 2021 | 31 December 2020 | Change in percentage (%) | Explanation about any material change | |||
| Amount | As a percentage of total assets (%) | Amount | As a percentage of total assets (%) | |||
| Cash at bank and on hand | 63,426,726 | 16.68% | 81,210,482 | 22.53% | -5.85% | |
| Accounts receivable | 27,591,834 | 7.26% | 22,978,363 | 6.38% | 0.88% | |
| Inventories | 34,499,525 | 9.07% | 31,076,529 | 8.62% | 0.45% | |
| Investment properties | 899,282 | 0.24% | 405,559 | 0.11% | 0.12% | |
| Long-term equity investments | 3,016,023 | 0.79% | 2,901,337 | 0.81% | -0.02% | |
| Fixed assets | 22,554,094 | 5.93% | 22,239,214 | 6.17% | -0.24% | |
| Construction in progress | 1,586,983 | 0.42% | 1,477,302 | 0.41% | 0.01% | |
| Right-of-use assets | 2,142,567 | 0.56% | - | - | - | |
| Short-term borrowings | 11,946,120 | 3.14% | 9,943,929 | 2.76% | 0.38% | |
| Contract liabilities | 20,334,320 | 5.35% | 18,400,922 | 5.11% | 0.24% | |
| Long-term borrowings | 49,389,407 | 12.99% | 42,827,287 | 11.88% | 1.11% | |
| Lease liabilities | 1,430,257 | 0.38% | - | - | - | |
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 asset held for trading (excluding derivative financial assets) | 31,600,450 | -715,334 | 1,554,137 | 24,021,419 | -39,489 | 8,378,345 | ||
| 2. Derivative financial assets | 1,188,428 | -68,794 | -436,761 | 45,101 | 44,681 | -5,445 | 677,848 | |
| 3. Other debt investments | 35,358,011 | 3,895,395 | 7,579,333 | 484,565 | 32,158,638 | |||
| 4. Other investments in equity instruments | 46,651 | 95 | 111 | 46,857 | ||||
| Sub-total of financial assets | 68,193,540 | -784,128 | -436,666 | 5,494,633 | 31,645,433 | 439,742 | 41,261,688 | |
| Investment properties | ||||||||
| Productive living assets | ||||||||
| Others | ||||||||
| Sub-total of the above | 68,193,540 | -784,128 | -436,666 | 5,494,633 | 31,645,433 | 439,742 | 41,261,688 | |
| Financial liabilities | 180,736 | 77,393 | -18,974 | 627 | 239,782 | |||
Note: “Other changes” in the table above are mainly caused by foreign currency translation.Whether there were any material changes on the measurement attributes of major assets of theCompany during 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 (%) |
| 70,538,082 | 85,512,588 | -17.51% |
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 | 1,676,547 | -309,991 | -18,586 | - | - | -309,991 | 1,347,970 | Financial asset held for trading | Own funds |
| Overseas | DNK | Danke | 172,190 | Fair value | 35,126 | -34,821 | -305 | - | - | -34,821 | - | Financia | Own fund |
| listed stock | method | l asset held for trading | s | ||||||||||
| Domestically listed stock | 688018 | Espressif Systems | 13,998 | Fair value method | 128,032 | -100,815 | - | - | -150,665 | 36,840 | 14,207 | Financial asset held for trading | Own funds |
| Domestically listed stock | 688165 | EFORT | 178,534 | Fair value method | 475,260 | -73,336 | - | - | - | -73,336 | 401,924 | Financial asset held for trading | Own funds |
| Total | 1,134,694 | -- | 2,314,965 | -518,963 | -18,891 | - | -150,665 | -381,308 | 1,764,101 | - | -- | ||
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 (if any) | Closing investment amount | Closing investment amount as a percentage of the Company’s closing net assets | Actual gain/loss in Reporting Period |
| Futur | No | No | Futur | 105 | 01/01/2 | 31/12/ | 105 | - | - | - | -111,294 | -0.0983% | 24,571 |
| es company | es contracts | 021 | 2021 | ||||||||||
| Bank | No | No | FX derivatives | 1,007,587 | 01/01/2021 | 31/12/2021 | 1,007,587 | 45,101 | 44,681 | - | 549,360 | 0.4851% | 868,272 |
| Total | 1,007,692 | -- | -- | 1,007,692 | 45,101 | 44,681 | - | 438,066 | 0.3868% | 892,843 | |||
| 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) | 30/04/2021 | ||||||||||||
| 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 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. Gain from futures contracts during the Reporting Period was RMB24,571 million. 2. Gain from FX derivatives during the Reporting Period was RMB868.272 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 | No change |
| Company's derivatives for the Reporting Period as compared to the previous Reporting Period | |
| 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. |
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/A
Main 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 | 19,193 | 7,198 | 8,282 | 926 | 812 |
| Wuxi Little Swan Electric Co., Ltd. | Subsidiary | Manufacturing of laundry appliances | RMB100 million | 17,862 | 5,046 | 11,033 | 1,264 | 1,203 |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Subsidiary | Manufacturing of home appliances | USD42 million | 16,149 | 8,005 | 4,643 | 482 | 405 |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Subsidiary | Manufacturing of water heaters | RMB60 million | 16,067 | 1,903 | 7,485 | 795 | 723 |
Acquisition and disposal of subsidiaries during the Reporting Period
√Applicable □N/A
The 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 include Hitachi Compressor（Thailand）Ltd., Beijing Wandong Medical Technology Co., Ltd.and its subsidiaries (please refer to Note 5(1), while details of those through incorporation can be foundin Note 5(2)(a). The detailed information of subsidiaries no longer included in the consolidation scope inthe current period is set out in Note 5(2)(b).Particulars about major subsidiariesN/A
9. Structured Bodies Controlled by the Company
□Applicable √N/A
10. Risks Faced by the Company and Countermeasures
A. Risk associated with the COVID-19 outbreakThe fluctuations and repeated outbreaks of the COVID-19 pandemic may impact the demand,production and sales of the Company’s products and services. Pandemic control measures, such aslockdown, social distancing, and travel restrictions, reduce customer mobility. Other consequencesinclude limited production and operations in some regions, the shutdown of retail outlets, suspendedcustomer operations, and increased logistics costs. All these factors bring about uncertainties andchallenges to the normal functioning of the Company and the market environment.B. Risk of macro economy fluctuation
The market demand for the Company’s consumer appliances, HVAC equipment, industrial robotics,among other products, can be easily affected by the economic situation and macro control. If the globaleconomy encounters a heavy hit and consumer demand slows down in growth, the growth of theindustries in which the Company operates, may slow down accordingly, and as a result, this may affectthe product sales of Midea Group.C. Risks in the fluctuation of production factorsThe raw materials required by Midea Group to manufacture its consumer appliances and corecomponents primarily include different grades of copper, steel, aluminum, and plastics. At present, thehousehold appliance manufacturing sector belongs to a labor intensive industry. If the price of rawmaterials fluctuate largely, or there is a large fluctuation in the cost of production factors (labor, water,electricity, and land) caused by a change to the macroeconomic environment and policy change, or thecost reduction resulted from lean production and improved efficiency, as well as the sale prices of endproducts cannot offset the total effects of cost fluctuations, the Company’s business will be influenced tosome degree.D. Risk in global asset allocation and overseas market expansionInternationalization and global operations is a long-term strategic goal of the Company. The Companyhas built joint-venture manufacturing bases in many countries around the world. Progress has beenmade day by day regarding the Company’s overseas operations and new business expansion. However,its efforts 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 itsfinance costs.
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 the second half of 2021. The trade barriers and frictions of some major markets will affect the exportbusiness in the short run, as well as marketing planning and investment in the medium and long run.Political and compliance risks are rising in international trade. These can mainly be seen on compulsorysafety certificates, international standards and requirements, and product quality and managementsystems certification, energy-saving requirements, the call for increasingly strict environmentalprotection requirements, as well as with rigorous requirements for recycling household appliances waste.Trade frictions caused by anti- dumping measures implemented by some countries and regionsaggravate the burden in costs and expenses for household appliance enterprises, and have broughtabout new challenges to market planning 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 healthydevelopment.
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 2021 | Extraordinary | 55.60% | 25 January 2021 | 26 January 2021 | Announcement No. 2021-007 on Resolutions of First Extraordinary General Meeting of Shareholders of 2021, disclosed on www.cninfo.com.cn |
| 2020 Annual General Meeting of Shareholders | Annual | 53.44% | 21 May 2021 | 22 May 2021 | Announcement No. 2021-045 on Resolutions of 2020 Annual General Meeting of Shareholders, disclosed on www.cninfo.com.cn |
| Second Extraordinary General Meeting of Shareholders of 2021 | Extraordinary | 57.75% | 25 June 2021 | 26 June 2021 | Announcement No. 2020-076 on Resolutions of Second Extraordinary General Meeting of Shareholders of 2021, 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 | Office title | Type of change | Date | Reason |
| Xiao Mingguang | Vice President | Dismissed | 30 April 2021 | Job change |
| Liu Min | Vice President | Former | 1 June 2021 | Personal reason |
| Cai Weiding | Chief Financial Officer | Appointed | 20 April 2021 | Senior management appointment |
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 2021.
4. Implementation of any Equity Incentive Scheme, Employee Stock OwnershipScheme or Other Incentive Measures for Employees
√Applicable □N/A
A. Overview of the Third Stock Option Incentive Schemea. The Company convened the 34th Meeting of the 3rd Board of Directors on 4 June 2021, at which theProposal for the Adjustment to the Exercise Price for the Third Stock Option Incentive Scheme wasapproved. As the 2020 Annual Profit Distribution had been carried out, the exercise price for the ThirdStock Option Incentive Scheme was revised from RMB16.26 to RMB14.69 per share.During the Reporting Period, 10,522,746 shares were exercised under the Third Stock Option IncentiveScheme.B. Overview of the Fourth Stock Option Incentive SchemeDuring the Reporting Period, 7,616,624 shares were exercised under the Fourth Stock Option IncentiveScheme.
C. Overview of the Fifth Stock Option Incentive Schemea. The Company convened the 32nd Meeting of the 3rd Board of Directors on 28 April 2021, at which theProposal for the Adjustments to the Incentive Recipients and Their Exercisable Stock Options for theFifth Stock Option Incentive Scheme was approved. It was agreed to adjust the incentive recipients andtheir exercisable stock options with respect to the reserved stock options under the Fifth Stock OptionIncentive Scheme due to the resignation, low individual or business division performance appraisals orother factors of some incentive recipients. Upon the adjustments, the number of locked-up reservedstock options granted to them was reduced from 5,340,000 to 4,270,250.The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period for theReserved Stock Options of the Fifth Stock Option Incentive Scheme was also approved. A total of 74incentive recipients who are eligible for the Fifth Stock Option Incentive Scheme have been allowed toexercise 1,000,250 stock options in the first exercise period (ended 10 March 2022).b. The Company convened the 34th Meeting of the 3rd Board of Directors, at which the Proposal for theRetirement of Unexercised Stock Options in the First Grant under the Fifth Stock Option IncentiveScheme upon Expiry was approved. As the first exercise period for the first grant under the Fifth StockOption Incentive Scheme expired on 6 May 2021, the Board of Directors of the Company agreed to retirethe 5,000 stock options that had been previously granted to Votadoro Giusepp but were unexercisedupon expiry.c. The Proposal for the Adjustment to the Exercise Price for the Fifth Stock Option Incentive Schemewas also approved. As the 2020 Annual Profit Distribution had been carried out, the exercise price forthe first grant was revised from RMB53.45 to RMB51.88 per share, and the exercise price for thereserved stock options from RMB44.28 to RMB42.71 per share.d. The Proposal for the Adjustments to the Incentive Recipients and Their Exercisable Stock Options forthe First Grant of the Fifth Stock Option Incentive Scheme was also approved. It was agreed to adjustthe incentive recipients and their exercisable stock options under the Fifth Stock Option IncentiveScheme due to the resignation, being reassigned, low individual or business division performance
appraisals or other factors of some incentive recipients. Upon the adjustments, the number of locked-upstock options granted to them in the first grant of the Fifth Stock Option Incentive Scheme was reducedfrom 31,860,000 to 29,267,000.e. The Proposal for Matters Related to the Stock Option Exercise for the Second Exercise Period of theFirst Grant of the Fifth Stock Option Incentive Scheme was also approved. A total of 1,015 incentiverecipients who are eligible for the Fifth Stock Option Incentive Scheme have been allowed to exercise8,931,000 stock options in the second exercise period (ended 6 May 2022).During the Reporting Period, 2,507,611 shares were exercised with respect to the first grant under theFifth Stock Option Incentive Scheme.During the Reporting Period, 95,588 shares were exercised with respect to the reserved stock optionsunder the Fifth Stock Option Incentive Scheme.D. Overview of the Sixth Stock Option Incentive Schemea. The Company convened the 34th Meeting of the 3rd Board of Directors, at which the Proposal for theAdjustment to the Exercise Price for the Sixth Stock Option Incentive Scheme was approved. As the2020 Annual Profit Distribution had been carried out, the exercise price for the Sixth Stock OptionIncentive Scheme was revised from RMB51.28 to RMB49.71 per share.b. The Proposal for the Adjustments to the Incentive Recipients and Their Exercisable Stock Options forthe Sixth Stock Option Incentive Scheme was also approved. It was agreed to adjust the incentiverecipients and their exercisable stock options under the Sixth Stock Option Incentive Scheme due to theresignation, low business division performance appraisals, low individual performance appraisals, beingreassigned or other factors of some incentive recipients. Upon the adjustments, the number of locked-upstock options granted to them was reduced from 46,540,000 to 38,963,250.c. The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period of theSixth Stock Option Incentive Scheme was also approved. A total of 965 incentive recipients who areeligible for the Sixth Stock Option Incentive Scheme have been allowed to exercise 8,708,250 stock
options in the first exercise period (ended 27 May 2022).E. Overview of the Seventh Stock Option Incentive Schemea. The Company convened the 34th Meeting of the 3rd Board of Directors, at which the Proposal for theAdjustment to the Exercise Price for the Seventh Stock Option Incentive Scheme was approved. As the2020 Annual Profit Distribution had been carried out, the exercise price for the Seventh Stock OptionIncentive Scheme was revised from RMB50.43 to RMB48.86 per share.b. The Proposal for the Adjustments to the Incentive Recipients and Their Exercisable Stock Options forthe Seventh Stock Option Incentive Scheme was also approved. It was agreed to adjust the incentiverecipients and their exercisable stock options under the Seventh Stock Option Incentive Scheme due tothe resignation, low business division performance appraisals, low individual performance appraisals,being reassigned or other factors of some incentive recipients. Upon the adjustments, the number oflocked-up stock options granted to them was reduced from 65,020,000 to 59,663,000.c. The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period of theSeventh Stock Option Incentive Scheme was also approved. A total of 1,309 incentive recipients whoare eligible for the Seventh Stock Option Incentive Scheme have been allowed to exercise 10,223,000stock options in the first exercise period (ended 3 June 2022).F. Overview of the Eighth Stock Option Incentive Schemea. The Proposal on the Eighth Stock Option Incentive Scheme (Draft) and its Abstract was approved atthe 32rd Meeting of the 3rd Board of Directors and the 2020 Annual General Meeting of Shareholders,and the incentive recipient list for the Eighth Stock Option Incentive Scheme (Draft) was reviewed at the21st Meeting of the 3rd Supervisory Committee.b. On 14 July 2021, the Company granted 81,740,000 stock options to 1,885 incentive recipients withthe exercise price being RMB81.41 per share.G. Overview of the 2017 Restricted Share Incentive Scheme
a. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017Restricted Share Incentive Scheme was approved at the 28th Meeting of the 3rd Board of Directors. Assuch, it was agreed to repurchase and retire 32,917 restricted shares that had been granted to 2personnel but were still in lockup, for the reasons of their resignation, being reassigned or other factors.The said retirement of shares was completed on 24 May 2021.b. The Proposal on the Satisfaction of the Conditions for the Third Unlocking Period for the ReservedRestricted Shares of the 2017 Restricted Share Incentive Scheme was also approved. A total of 39personnel were eligible for this unlocking, with 1,292,083 restricted shares (0.02% of the Company’stotal existing share capital) unlocked and allowed for public trading on 8 February 2021, of which seniormanagement Xiao Mingguang unlocked 50,000 shares.H. Overview of the 2018 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018Restricted Share Incentive Scheme was approved at the 28th Meeting of the 3rd Board of Directors. Assuch, it was agreed to repurchase and retire 1,009,501 restricted shares that had been granted to 22personnel but were still in lockup, for the reasons of their resignation, being reassigned, violation of the“Red Lines” of the Company or other factors. The said retirement of shares was completed on 24 May2021.b. The Company convened the 32nd Meeting of the 3rd Board of Directors, at which the Proposal on theSatisfaction of the Conditions for the First Unlocking Period for the Reserved Restricted Shares of the2018 Restricted Share Incentive Scheme was approved. A total of 24 personnel were eligible for thisunlocking, with 403,249 restricted shares (0.0057% of the Company’s total existing share capital)unlocked and allowed for public trading on 4 June 2021.c. The Company convened the 34th Meeting of the 3rd Board of Directors, at which the Proposal for theAdjustment to the Repurchase Price for the 2018 Restricted Share Incentive Scheme was approved. Asthe 2020 Annual Profit Distribution had been carried out, the repurchase price for the first grant wasrevised from RMB24.68 to RMB23.11 per share, and the repurchase price for the reserved restricted
shares from RMB20.70 to RMB19.13 per share.d. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018Restricted Share Incentive Scheme was also approved. As such, it was agreed to repurchase and retire761,121 restricted shares that had been granted to 67 personnel but were still in lockup, for the reasonsof their resignation, being reassigned, low individual or business division performance appraisals for2020 or other factors.e. The Proposal on the Satisfaction of the Conditions for the Second Unlocking Period for the First Grantof the 2018 Restricted Share Incentive Scheme was also approved. A total of 209 personnel wereeligible for this unlocking, with 3,043,254 restricted shares (0.0432% of the Company’s total existingshare capital) unlocked and allowed for public trading on 30 June 2021, of which senior management HuZiqiang, Zhang Xiaoyi and Zhong Zheng unlocked 25,000, 25,000 and 20,000 shares, respectively.I. Overview of the 2019 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2019Restricted Share Incentive Scheme was approved at the 28th Meeting of the 3rd Board of Directors. Assuch, it was agreed to repurchase and retire 1,043,958 restricted shares that had been granted to 15personnel but were still in lockup, for the reasons of their resignation, being reassigned, violation of the“Red Lines” of the Company or other factors. The said retirement of shares was completed on 24 May2021.b. The Company convened the 34th Meeting of the 3rd Board of Directors, at which the Proposal for theAdjustment to the Repurchase Price for the 2019 Restricted Share Incentive Scheme was approved. Asthe 2020 Annual Profit Distribution had been carried out, the repurchase price was revised fromRMB24.20 to RMB22.63 per share.c. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2019Restricted Share Incentive Scheme was also approved. As such, it was agreed to repurchase and retire941,788 restricted shares that had been granted to 92 personnel but were still in lockup, for the reasonsof their resignation, being reassigned, low individual or business division performance appraisals for
2020, violation of the “Red Lines” of the Company or other factors.d. The Proposal on the Satisfaction of the Conditions for the First Unlocking Period of the 2019Restricted Share Incentive Scheme was also approved. A total of 363 personnel were eligible for thisunlocking, with 5,654,629 restricted shares (0.0802% of the Company’s total existing share capital)unlocked and allowed for public trading on 13 July 2021, of which senior management Wang Jinliangunlocked 30,000 shares.J. Overview of the 2020 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2020Restricted Share Incentive Scheme was approved at the 28th Meeting of the 3rd Board of Directors. Assuch, it was agreed to repurchase and retire 440,374 restricted shares that had been granted to 11personnel but were still in lockup, for the reasons of their resignation, being reassigned, violation of the“Red Lines” of the Company or other factors. The said retirement of shares was completed on 24 May2021.b. The Company convened the 34th Meeting of the 3rd Board of Directors, at which the Proposal for theAdjustment to the Repurchase Price for the 2020 Restricted Share Incentive Scheme was approved. Asthe 2020 Annual Profit Distribution had been carried out, the repurchase price was revised fromRMB24.42 to RMB22.85 per share.c. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2020Restricted Share Incentive Scheme was also approved. As such, it was agreed to repurchase and retire1,643,164 restricted shares that had been granted to 263 personnel but were still in lockup, for thereasons of their resignation, being reassigned, low individual or business division performanceappraisals for 2020, violation of the “Red Lines” of the Company or other factors.d. The Proposal on the Satisfaction of the Conditions for the First Unlocking Period of the 2020Restricted Share Incentive Scheme was also approved. A total of 487 personnel were eligible for thisunlocking, with 5,488,962 restricted shares (0.0778% of the Company’s total existing share capital)unlocked and allowed for public trading on 20 July 2021, of which senior management Wang Jinliang
and Li Guolin unlocked 24,000 and 20,000 shares, respectively.K. Overview of the 2021 Restricted Share Incentive Schemea. The Proposal on the 2021 Restricted Share Incentive Scheme (Draft) and its Abstract was approvedat the 32rd Meeting of the 3rd Board of Directors and the 2020 Annual General Meeting of Shareholders,and the incentive recipient list for the 2021 Restricted Share Incentive Scheme (Draft) was reviewed atthe 21st Meeting of the 3rd Supervisory Committee.b. On 16 July 2021, the Company granted 9,940,000 restricted shares to 139 incentive recipients withthe grant price being RMB39.92 per share, of which senior management Wang Jinliang, Li Guolin andJiang Peng were granted 100,000, 100,000 and 80,000 shares, respectively.L. Overview of the Third Global Partner Stock Ownership Schemea. The Proposal on the Extended Duration of the Third Global Partner Stock Ownership Scheme wasapproved at the 30th Meeting of the 3rd Board of Directors on 22 February 2021. As proposed by theadministrative committee of this scheme, the Board agreed to extend the duration of this scheme fromfour years to five years, i.e. to 29 March 2022.As of the end of the Reporting Period, a total of 2,846,445 shares were held under the Third GlobalPartner Stock Ownership Scheme, representing 0.0404% of the Company’s total share capital.M. Overview of the Fourth Global Partner Stock Ownership Schemea. Under the Fourth Global Partner Stock Ownership Scheme, a total of 1,552,970 shares had beenvested in the Company’s incumbent senior management (Fang Hongbo, Yin Bitong, Wang Jianguo, GuYanmin, and Li Guolin), and a total of 677,742 shares had been vested in other incentive recipients,totaling 2,230,712 shares. The remaining unvested 1,087,828 shares and the corresponding dividends(if any) had been taken back by the administrative committee of this scheme for no compensation, andwould be sold at a proper timing before this scheme expired. The earnings on the sale would belong tothe Company.
As of the end of the Reporting Period, a total of 3,318,540 shares were held under the Fourth GlobalPartner Stock Ownership Scheme, representing 0.0470% of the Company’s total share capital.N. Overview of the First Business Partner Stock Ownership Schemea. Under the First Business Partner Stock Ownership Scheme, a total of 98,190 shares had been vestedin the Company’s incumbent senior management (Hu Ziqiang, Zhang Xiaoyi and Jiang Peng), and a totalof 863,057 shares had been vested in other incentive recipients, totaling 961,247 shares. The remainingunvested 818,053 shares and the corresponding dividends (if any) had been taken back by theadministrative committee of this scheme for no compensation, and would be sold at a proper timingbefore this scheme expired. The earnings on the sale would belong to the Company.As of the end of the Reporting Period, a total of 1,779,300 shares were held under the First BusinessPartner Stock Ownership Scheme, representing 0.0252% of the Company’s total share capital.O. Overview of the Fifth Global Partner Stock Ownership SchemeAs of the end of the Reporting Period, a total of 3,732,075 shares were held under the Fifth GlobalPartner Stock Ownership Scheme, representing 0.0529% of the Company’s total share capital.P. Overview of the Second Business Partner Stock Ownership SchemeAs of the end of the Reporting Period, a total of 1,867,845 shares were held under the Second BusinessPartner Stock Ownership Scheme, representing 0.0265% of the Company’s total share capital.Q. Overview of the Sixth Global Partner Stock Ownership Schemea. The Company’s 2020 annual performance requirement for the Sixth Global Partner Stock OwnershipScheme has been met. A total of 3,172,561 shares were to be granted (2,058,993 shares for seniormanagement Fang Hongbo, Yin Bitong, Gu Yanmin, Wang Jianguo and Zhang Xiaoyi, and the other1,113,568 shares for other core management personnel).b. According to the business division, business entity and individual performance appraisals for 2020,
the first 40% installment of shares under the Sixth Global Partner Stock Ownership Scheme had beenvested. A total of 760,569 shares had been vested in the Company’s incumbent senior management(Fang Hongbo, Yin Bitong, Gu Yanmin, Wang Jianguo and Zhang Xiaoyi), and a total of 376,557 shareshad been vested in other incentive recipients, totaling 1,137,126 shares.As of the end of the Reporting Period, a total of 3,537,663 shares were held under the Sixth GlobalPartner Stock Ownership Scheme, representing 0.0503% of the Company’s total share capital.R. Overview of the Third Business Partner Stock Ownership Schemea. The Company’s 2020 annual performance requirement for the Third Business Partner StockOwnership Scheme has been met. A total of 1,819,677 shares were to be granted (199,514 shares forsenior management Wang Jinliang, Jiang Peng, Zhong Zheng and Li Guolin, and the other 1,620,163shares for other core management personnel).b. According to the business division, business entity and individual performance appraisals for 2020,the first 20% installment of shares under the Third Business Partner Stock Ownership Scheme had beenvested. A total of 39,903 shares had been vested in the Company’s incumbent senior management(Wang Jinliang, Jiang Peng, Zhong Zheng and Li Guolin), and a total of 268,877 shares had been vestedin other incentive recipients, totaling 308,779 shares.As of the end of the Reporting Period, a total of 1,873,559 shares were held under the Third BusinessPartner Stock Ownership Scheme, representing 0.0266% of the Company’s total share capital.S. Overview of the Seventh Global Partner Stock Ownership Schemea. The Seventh Global Partner Stock Ownership Scheme was approved at the 32nd Meeting of the 3rdBoard of Directors and the 2020 Annual General Meeting of Shareholders. The Company opened thesecurities account No. 0899282686 of “Midea Group Co., Ltd.— the Seventh Global Partner StockOwnership Scheme” for the management of the shares under this scheme.b. The Seventh Global Partner Stock Ownership Scheme was funded by the Company’s special fund of
RMB201.50 million. With an average price of RMB82.70/share for transferring the shares in the specialaccount for repurchased shares to the securities account of the Seventh Global Partner StockOwnership Scheme, 2,436,518 shares were transferred from the special account for repurchasedshares to the securities account of the Seventh Global Partner Stock Ownership Scheme in anon-transaction transfer on 4 August 2021.As of the date of this Report, a total of 2,436,518 shares were held under the Seventh Global PartnerStock Ownership Scheme, representing 0.0345% of the Company’s total share capital.T. Overview of the Fourth Business Partner Stock Ownership Schemea. The Fourth Business Partner Stock Ownership Scheme was approved at the 32nd Meeting of the 3rdBoard of Directors and the 2020 Annual General Meeting of Shareholders. The Company opened thesecurities account No. 0899282688 of “Midea Group Co., Ltd.— the Fourth Business Partner StockOwnership Scheme” for the management of the shares under this scheme.b. The Fourth Business Partner Stock Ownership Scheme was funded by the Company’s special fundand part of the performance bonuses for senior management of RMB164.21 million. With an average priceof RMB82.70/share for transferring the shares in the special account for repurchased shares to thesecurities account of the Fourth Business Partner Stock Ownership Scheme, 1,985,611 shares weretransferred from the special account for repurchased shares to the securities account of the FourthBusiness Partner Stock Ownership Scheme in a non-transaction transfer on 12 August 2021.As of the date of this Report, a total of 1,985,611 shares were held under the Fourth Business PartnerStock Ownership Scheme, representing 0.0282% of the Company’s total share capital.
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 | 70 mg/L | The Discharge Limits of Water Pollutants in Guangdong (DB44/26- 2001) chart 4 type 2 pollutant (time period 2) third-level | 0.126 | 0.288 | No |
| Ammonia nitrogen | 1.85 mg/L | 0.0033 | 0.0576 | No | |||||
| SS | 7 mg/L | 0.0126 | / | No | |||||
| BOD | 17.2 mg/L | 0.0310 | / | No | |||||
| Petroleum | 1.18 mg/L | 0.0021 | / | 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 | 0.001 mg/m3 | Table 1 of Emission Standard of Volatile Organic Compounds for Furniture Manufacturing in Guangdong (DB44/814-2010) Discharge Limits for VOCs through Exhaust Funnel/for Time Period II | 0.01 | / | No | |
| Toluene and xylene | 2.13 mg/ m3 | 0.09 | / | No | |||||
| VOCs | 3.96 mg/ m3 | 0.167 | / | No | |||||
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. (the Range Hood and Stove Park) | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The northeastern side of 2# plant in the Third Industrial Zone | 52 mg/ L | The Discharge Standard of Water Pollutants for Electroplating in Guangdong (DB441597- 2015) Table 1 Emission limits for water pollutants from existing project | 0.7848 | 2.41 | No |
| Ammonia nitrogen | 0.315 mg/ L | 0.0048 | 0.45 | No | |||||
| SS | 8 mg/ L | 0.1207 | / | No | |||||
| Petroleum | 1.1 mg/ L | 0.0166 | / | No | |||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 1 | The eastern sides of 2# plant in the Third Industrial Zone | 0.01 mg/ m3 | Table 2 of Emission Standard of Volatile Organic Compounds for Printing Industry in Guangdong (DB44/815-2010) Discharge Limits for VOCs through Exhaust Funnel/Scree Printing Discharge Limits for Time Period II | 0.01 | / | No | |
| Toluene and xylene | 0.13 mg/ m3 | 0.0343 | / | No | |||||
| VOCS | 1.39 mg/ m3 | 0.2522 | / | No | |||||
| Soot | 1 | The northern sides of 2# plant in the Third Industrial Zone | 7.5 mg/ m3 | For sulfur dioxide and nitrogen oxide, Table 2 of the Guangdong Province Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2; for soot, Table 2 of Emission Limits of Air Pollutants from Industrial Furnaces (GB9078-1996): Heating Furnace/Level 2 | 0.035 | / | No | ||
| Sulfur dioxide | 3 mg/ m3 | 0.0145 | 0.114 | No | |||||
| Nitrogen oxide | 28 mg/ m3 | 0.1312 | 0.726 | No | |||||
| Wuhu Midea Kitchen & | COD | Discharge after being | 1 | Western gate of | 161 mg/L | Integrated wastewater | 36.68 | / | No |
| Bath Appliances Mfg. Co., Ltd. | Ammonia nitrogen | treated by wastewater treatment system and reaching the standard | the Wuhu plant | 7.42 mg/ L | discharge standard (GB8978-1996) | 1.37 | / | No | |
| BOD5 | 25 mg/ L | 6.11 | / | No | |||||
| Petroleum | 5.77 mg/ L | 1.41 | / | No | |||||
| Total phosphorus | 0.70 mg/m? | 0.17 | / | No | |||||
| Fluoride | 1.44 mg/m? | 0.35 | / | No | |||||
| Soot | 15m high altitude discharge | 45 | Plants at each workshop | <20 mg/m? | Emission standard of air pollutants for boiler (GB13271-2014) | 0.0010 | / | No | |
| Sulfur dioxide | <50 mg/m? | 0.80 | / | No | |||||
| Nitrogen oxide | <150 mg/m? | 1.19 | / | No | |||||
| Soot | High altitude discharge after being treated by waste gas treatment station | <50 mg/m? | Integrated emission standards for atmospheric pollutants (GB16297-1996) | 7.25 | / | No | |||
| Xylene | <10 mg/m? | Not detected | / | No | |||||
| VOCs | <20 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 0.41 | / | 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 | 40 mg/ L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) third-level | 3.89 | / | No |
| Ammonia nitrogen | 0.083 mg/ L | 0.0807 | / | No | |||||
| NMHC | RTO equipment | 1 | 1 set at the northeastern side of 3# plant | 5.71 mg/m? | Integrated Emission Standards for Atmospheric Pollutants GB16297-1996 second-level | 0.286 | / | No | |
| Condensation + degreasing + filtering+ activated carbon + catalytic combustion equipment | 1 | 1 set at the southwestern side of 4# plant | 4.91 mg/m? | 0.633 | |||||
| Water spraying + activated carbon equipment | 3 | 2 sets at 1# plant and 1 set at 2# plant | 6.82 mg/m? | 0.226 | |||||
| UV + activated carbon equipment | 1 | 1 set at the eastern side of 2# plant | 4.71 mg/m? | 0.198 | |||||
| Particles | Filter cartridge dust collector | 3 | 2 at 2# plant and 1 at 4# plant | <30 mg/m? | 4.9 | / | 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 | 35 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) third-level | 5.19 | 58.150 | No |
| Ammonia nitrogen | The eastern side of wastewater treatment station | 1.5 mg/L | 0.58 | / | No | ||||
| Particles | 15m high altitude discharge after being treated by cyclone + filter cartridge dust collector | 2 | 1 outlet at 2# plant, 1 outlet 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 | 0.18 | / | No |
| Particles | 15m high altitude discharge after being treated by water spraying + dedusting+ UV photolysis + activated carbon | 1 | 1 outlet at 3# plant | <20 mg/m? | 1.07 | / | No | |
| NMHC | 1.46 mg/m? | 0.11 | / | No | ||||
| NMHC | 15m high altitude discharge after being treated by waste gas treatment station | 3 | 1 outlet at 2# plant | 2.25 mg/m? | 0.13 | / | No | |
| NMHC | 15m high altitude discharge after being treated by waste gas treatment station | 6 | Six pieces of Plant No. 6 | 1.11 mg/m? | 0.18 | / | No | |
| NMHC | 15m high altitude discharge after being treated by low-temperature plasma | 2 | 1 outlet at 1# plant, 1 outlet at 5# plant | 2.215 mg/m? | 0.16 | / | No |
| NMHC | 15m high altitude discharge after being treated by photocatalyst and activated carbon | 1 | 1 outlet at 3# plant | 4.3 mg/m? | 0.20 | / | No | ||
| GD Midea Air-Conditioning Equipment Co., Ltd. | COD | Discharge after being treated by wastewater treatment station | 1 | The southeastern side of 4# plant | 89 mg/L | The Discharge Standard of Water Pollutants for Electroplating (DB441597- 2015) chart 2 PRD standard | 3.46 | 9.59 | No |
| Ammonia nitrogen | 1.75 mg/L | 0.8 | 1.510 | No | |||||
| SS | 19 mg/L | 1.78 | / | No | |||||
| Petroleum | 3.63 mg/L | 0.34 | / | No | |||||
| COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of 2# plan | 79 mg/L | The Discharge Limits of Water Pollutants (DB44/26-2001) | 1.4 | 9.59 | No | |
| SS | 51 mg/L | 0.8 | / | No | |||||
| Ammonia nitrogen | 3.9 mg/L | 1.22 | / | No | |||||
| Petroleum | 6.22 mg/L | 1.94 | / | No | |||||
| VOCs (dusting) | 15m high altitude discharge after being treated by spray tower + activated carbon | 3 | 4# plant | 11 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 1.03 | / | No | |
| VOCs (Screen Printing) | 15m high altitude discharge after being treated by environmental protection equipment | 4 | 1#, 5#, 9#, 11# plants | 1.79 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.112 | No | ||
| VOCs (electronic) | 15m high altitude discharge after being treated by environmental protection equipment | 2 | 10# plants | 26.7 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.92 | No | ||
| NMHC (evaporator & condenser) | 15m high altitude discharge after being treated by environmental protection equipment | 6 | 2#, 5# plants | 30 mg/m? | Emission Limits of Air Pollutants (DB44/27- 2001) the second time period | 7.5 | / | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | COD | Discharge after being treated by wastewater treatment station | 1 | The northern side of the park | 35 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 third-level | 11.66 | / | No |
| SS | 50 mg/L | 12.7 | / | No | |||||
| BOD | 9 mg/L | 2.3 | / | No | |||||
| Ammonia nitrogen | 35 mg/L | 9.6 | / | No | |||||
| Petroleum | 0.5 mg/L | 0.1 | / | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2# plant | <20 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 1.52 | / | No | |
| VOCs | 8 | 2#, 3# plants | 19 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 14.9 | / | No | ||
| NOX | 3 | 3# plant | 17 mg/m? | Integrated Emission Standards | 1.22 | / | No | ||
| SO2 | 3 | 3# plant | 8 mg/m? | for Atmospheric Pollutants (GB16297-1996) | 0.45 | / | 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 | 19.38 mg/L | The discharge limits of water pollutants in Guangdong DB-44/26- 2001 the second time period first-level | 3.644 | 16.28 | No |
| Ammonia nitrogen | 0.43 mg/L | 0.105 | 2.034 | No | |||||
| 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 | 36 mg/L | The discharge standard of water pollutants for electroplating DB-441597- 2015, before 1 September 2012 | 3.398 | 6.046 | No |
| Ammonia nitrogen | 0.276 mg/L | 0.026 | 0.756 | No | |||||
| 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 | 35 mg/L | The Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 2.413 | 15.304 | No |
| Petroleum | 0.09 mg/L | 0.006 | / | No | |||||
| Ammonia nitrogen | 6.73 mg/L | 0.468 | 1.913 | No | |||||
| Toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 7 | Waste gas sprayers 1 and 2 at 3# plant, outlets 1, 2 and 3 | 0.32 mg/m? | Table 1 of the Discharge Standard of Volatile Organic Chemical Compounds in the Furniture Making Industry | 0.2909 | / | No | |
| VOCs | High altitude discharge after being treated by waste gas treatment station | 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 | 6.03 mg/m? | (DB44/814-2010):Discharge Limits for VOCs through Exhaust Funnel/for Time Period II | 5.486 | 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 | 1.8 mg/m? | Table 4 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.58 | / | 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 | 12.51 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 | 1.7358 | / | No |
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 2 | Oxidation wire roof of 3# plant | 3 mg/m? | 0.0083 | 3.8231 | No | |
| Nitrogen oxide | Drying furnace of 3# plan | 3 mg/m? | 0.3305 | 13.132 | No |
| Cooking fume | Discharge after being treated by waste gas treatment station | 2 | South and north section canteens | 1.25 mg/m? | Emission Standard of Cooking Fume (Trial) (GB 18483-2001) | 0.3332 | / | 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 | 34 | The Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 1.262 | 4.8 | No |
| Petroleum | 0.06 | 0.0022 | / | No | |||||
| ss | 9 | 0.3411 | / | No | |||||
| Ammonia nitrogen | 6.587 | 0.2456 | 0.96 | No | |||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 1 | Spraying waste gas outlet at 1# plant | 0.04 mg/m? | Table 1 of the Discharge Standard of Volatile Organic Chemical Compounds in the Furniture Making Industry (DB44/814-2010):Discharge Limits for VOCs through Exhaust Funnel/for Time Period II | 0.00148 | / | No | |
| Toluene | High altitude discharge after being treated by waste gas treatment station | 0.39 mg/m? | 0.015 | / | No | ||||
| Xylene | High altitude discharge after being treated by waste gas treatment station | 3.17 mg/m? | 0.14025 | / | No | ||||
| Toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 3.61 mg/m? | 0.157045 | / | No | ||||
| VOCs | High altitude discharge after being treated by waste gas treatment station | 22.03 mg/m? | 0.2886 | 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 | 1.335 mg/m? | Table 4 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.05124 | 0.104 | No |
| Particles | Pulse bag dust collecting | 7 | Sanding waste gas outlet at 1# plant, polishing waste gas outlet at 1# plant | 10 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) | 0.01708 | / | No |
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 1 | Drying furnace of 1# plan | <3 mg/m? | 0.01485 | 0.028 | No | |
| Nitrogen oxide | High altitude discharge after being treated by waste gas treatment station | <3 mg/m? | 0.0708 | 0.131 | No |
| Cooking fume | Discharge after being treated by waste gas treatment station | 1 | Canteen of 1# plan | 0.75 mg/m? | Emission Standard of Cooking Fume (Trial) (GB 18483-2001) | 0.01275 | / | 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 | 17 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and integrated wastewater discharge standard (GB8978-1996) third-level | 3.46 | / | No |
| Ammonia nitrogen | 0.297 mg/L | 0.11 | / | No | |||||
| Particles | Collected by gas trap hood+15m high exhaust cylinder | 13 | No. 1 workshop welding soot discharge outlet for waste gas | <20 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 4.902 | 65.45 | No | |
| No. 3 workshop discharge outlet for the welding waste gas | <20 mg/m? | ||||||||
| Waste gas outlet of 1# heat-treating furnace at No. 2 workshop | <20 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 | <20 mg/m? | |
| Waste gas outlet for die casting at No. 2 workshop | <20 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) |
| Waste gas outlet for die casting at No. 4 workshop | <20 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 | <20 mg/m? | |
| Waste gas outlet of 2# heat-treating furnace at No. 4 workshop | <20 mg/m? | |
| Waste gas outlet for electrophoresis and drying at No. 1 workshop | <20 mg/m? | Integrated emission standards for atmospheric pollutants (GB16297-1996) |
| Waste gas outlet for electrophoresis and drying at No. 3 workshop | <20 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | ||||||
| Waste gas outlet of 1#-3# furnaces | <20 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 | 1.5 mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 2.82 | 112.2 | No |
| Outlet of 1# heat-treating furnace at No. 2 workshop | <3 mg/m? | Air Pollutant Emission Standards (GB16297-1996) Standard Level II | ||||||
| Outlet of 2# heat-treating furnace at No. 2 workshop | <3 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 | <3 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 | <3 mg/m? | |||||||
| Nitrogen oxide | Collected by gas trap hood+15m high exhaust cylinder | 9 | Waste gas outlet of 1#-3# furnaces | 36 mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 3.69 | 33.24 | No |
| Outlet of 1# heat-treating furnace at No. 2 workshop | <3 mg/m? | Air Pollutant Emission Standards (GB16297-1996) Standard Level II | ||||||
| Outlet of 2# heat-treating furnace at No. 2 workshop | <3 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 | <3 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 | <3 mg/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 | 1.35 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/ 524-2020) | 0.187 | 21.6 | No | |
| Waste gas outlet of 1# drying furnace at No. 3 workshop | 0.985 mg/m? | ||||||||
| Die casting at No. 2 workshop | 0.323 mg/m? | ||||||||
| Die casting at No. 4 workshop | 0.52 mg/m? | ||||||||
| 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 | 63 mg/L | The Discharge Limits Of Water Pollutants in Guangdong (DB-44/26- 201) | 10.55 | 22.77 | No |
| Ammonia nitrogen | 2.86 mg/L | 0.321 | 4.554 | No | |||||
| Particles | 20m High altitude discharge | 116 | 26 outlets at A1 plant, 50 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 7 outlets at canteen | 15.2 mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB-9078- 1996)/ The Emission Limit of Gas Pollutants in Guangdong (DB-44/27- 2007) | 9.90 | / | No | |
| Sulfur dioxide | 17 mg/m? | 0.00 | 1.055 | No | |||||
| Nitrogen oxide | 18 mg/m? | 1.93 | 10.314 | No | |||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 0.167 mg/m? | 0.02 | / | No | ||||
| Toluene and xylene | 7.2 mg/m? | 0.72 | / | No | |||||
| VOCs | 42 mg/m? | 16.38 | / | No | |||||
| NMHC | 4.32 mg/m? | 0.73 | / | No | |||||
| Styrene | 0.69 mg/m? | 0.07 | / | No | |||||
| Cooking fume | 1.35 mg/m? | 0.08 | / | No | |||||
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | Benzene | Activated carbon + UV photolysis + catalytic combustion | 1 | Waste gas outlet near 2# plant | 0 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.00 | / | No |
| Toluene and xylene | Activated carbon + UV photolysis + catalytic combustion | 1 | Waste gas outlet near 2# plant | 2.21 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.31 | / | No | |
| VOCs | Activated carbon + UV photolysis + catalytic combustion | 1 | Waste gas outlet near 2# plant | 18.11 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 2.70 | 17.83 | 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 | 21.5 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 4.8 | 23 | No |
| VOCs | Collected by gas trap hood+15m high exhaust cylinder | 7 | Waste gas outlets 1-7 of the die casting workshop | 2.75 mg/m? | Emission Standard of Air Pollutants for Industrial Kiln And Furnace (GB9078- 1996) | 0.85 | 3.388 | No | |
| VOCs | Activated carbon + UV photolysis | 2 | Exhaust funnels 1 and 2 for dip coating | 26.1 mg/m? | Hebei Province Standard DB13/2322-2016 The Concentration Limits at Emission Reference Point for Coating Operations | 2.9 | 31 | No | |
| COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | General wastewater outlet | 80 mg/m? | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 third-level | 1.2096 | / | No | |
| Ammonia nitrogen | 20 mg/m? | 0.2592 | / | No | |||||
| BOD | 12.3 mg/m? | 1.0368 | / | No | |||||
| SS | 59 mg/m? | 0.864 | / | No | |||||
| Petroleum | 0.95 mg/m? | 0.0864 | / | 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 | 400 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 third-level | 116.08 | / | No |
| Ammonia nitrogen | 17.46 mg/L | 5.1 | / | No | |||||
| BOD | 134.7 mg/L | 38.98 | / | No | |||||
| SS | 34 mg/L | 10.10 | / | No | |||||
| Petroleum | 4.75 mg/L | 1.4 | / | No | |||||
| Particles | Collected by gas trap hood +21m high exhaust cylinder | 9 | 1-8# welding waste gas outlets | 0.168 mg/m? | Integrated emission standards for atmospheric pollutants GB16297-1996, chart 2, level 2 | 1.4 | / | No | |
| 9#-10# welding waste gas outlets | 9.45 mg/m? | ||||||||
| 2# outlet of stator + rotor heat-treating furnace | 20.2 mg/m? | Emission standard of air pollutants for industrial kiln and furnace GB9078-1996, chart 2, level 2 | 1.14 | No | |||||
| 3# outlet of 2# stator heat- treating furnace | 8.7 mg/m? | ||||||||
| 1# outlet of stator + rotor heat-treating furnace | 17.6 mg/m? | ||||||||
| Outlet at the head of 3# stator furnace | 4.5 mg/m? | ||||||||
| Outlets at the head of 2# stator furnace and 4# rotor furnace | 14.7 mg/m? | |||||||
| Outlets at the tail of 3# and 4# stator furnaces and comprehensive outlet for 4 aluminum melting furnaces | 19.67 mg/m? | |||||||
| Waste gas outlet of aluminum melting furnace | 1.54 mg/m? | |||||||
| Sulfur dioxide | Collected by gas trap hood +21m high exhaust cylinder | 2 | 1# outlet of heat-treating furnace | 5.6 mg/m? | Emission standard of air pollutants for industrial kiln and furnace GB9078-1996, chart 2, level 2 | 1.198 | / | No |
| 2# outlet of heat-treating furnace | 4.5 mg/m? | |||||||
| Nitrogen oxide | Collected by gas trap hood +21m high exhaust cylinder | 3 | 2# outlet of stator + rotor heat-treating furnace | 11 mg/m? | 10.59 | / | No |
| 3# outlet of 2# stator heat- treating furnace | 15.2 mg/m? | ||||||||
| 1# outlet of stator + rotor heat-treating furnace | 12.1 mg/m? | ||||||||
| VOCs | Direct-fired waste gas incinerator+21m high exhaust cylinder | 2 | 1# outlet for waste gas from drying | 12 mg/m? | Chart 1 of Hebei Province Standard—Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13/2322- 2016) | 2.101 | / | No | |
| 9-10# outlets for waste gas from drying | 25.3 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 | 1.70 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.033562 | / | No |
| Dry filtering + natural gas direct combustion + 15m high altitude discharge | 1 | Outlet for waste gas from dip coating, drying and hardening | 18.7 mg/m? | Emission Standards for Odor Pollutants (GB14554- 93) | 1.12324 | 3.42 | No | ||
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the manual welding process | 20.2 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.1923 | / | No | |
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 3 | During the wave soldering process (paste printing and wave reflow) | 2.77 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.034 | / | 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 | 2.26 mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572-2015) | 1.0236 | / | No |
| Particles | Gas trap hood + water spraying + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | Outlet for waste gas from dusting, electrophoresis and hardening | 22 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 3.17239 | / | No |
| Cooking fume | Water wash hood + electrostatic range hood + 15m high altitude discharge | 7 | Cooking fume outlet at canteen | 0.43 mg/m? | Emission Standard of Cooking Fume (GB 18483-2001) | 0.09482 | / | No |
| Suspended solids | Oil separation and | 1 | Domestic | 21 mg/L | Pollutants in urban wastewater | 0.001512 |
| COD | slagging - hydrolysis and acidification - contact oxidation - precipitation - disinfection | wastewater treatment station | 70 mg/L | treatment plants Emission standard GB18918-2002 | 5.04 | / | No | ||
| Animal and vegetable oil | 0.18 mg/L | 0.01296 | / | No | |||||
| Ammonia nitrogen (NH3- N) | 1.08 mg/L | 0.07776 | 2.16 | No | |||||
| PH value | 7.27 mg/L | 0.52344 | / | No | |||||
| Five-day BOD | 28 mg/L | 2.016 | / | No | |||||
| Total zinc | Coagulation and sedimentation + hydrolysis and acidification + aeration + biological tank + MBR + water reuse | 1 | Domestic wastewater treatment station | 0.000744 mg/L | The discharge standard of water pollutants for electroplating (DB44/1597-2015) | 0.0004 | / | No | |
| COD | 5.9 mg/L | 3.35 | / | No | |||||
| Suspended solids | 23 mg/L | 0.013 | / | No | |||||
| PH value | 7.22 mg/L | 4.06 | / | No | |||||
| Total phosphorus (in P) | 0.032 mg/L | 0.018 | / | No | |||||
| Total aluminum | 0.0194 mg/L | 0.011 | / | No | |||||
| Ammonia nitrogen (NH3-N) | 0.441 mg/L | 0.25 | 1.724 | No | |||||
| Total ferrum Petroleum | 0.00144 mg/L | 0.00081 | / | No | |||||
| 0.39 mg/L | 0.22 | / | No | ||||||
| Hubei Midea Refrigerator | COD | Domestic sewage in | 1 | Domestic | 55.9 mg/L | Integrated Wastewater | 5.87 | 15 | No |
| Co., Ltd. | Ammonia nitrogen | the plant is discharged to the municipal sewage system after being treated by the septic tank | sewage outlets at the plant | 7.76 mg/L | Discharge Standard (GB8978-1996) | 0.81 | 2.5 | No | |
| BOD | 24.4 mg/L | 2.56 | / | No | |||||
| SS | 103.9 mg/L | 10.9 | / | No | |||||
| Animal and vegetable oil | 1.58 mg/L | 0.16 | / | No | |||||
| COD | Freezer spaying waste water is discharged to the municipal sewage system after floatation + acidification + aerobic sludge digestion + filtration and other processes | 1 | Waste water outlets at the freezer branch plant | 93.5 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 1.65 | 15 | No | |
| Ammonia nitrogen | 4.03 mg/L | 0.07 | 2.5 | No | |||||
| BOD | 23.9 mg/L | 0.42 | / | No | |||||
| SS | 90 mg/L | 1.59 | / | No | |||||
| Animal and vegetable oil | 0.83 mg/L | 0.01 | / | No | |||||
| Petroleum | 2.01 mg/L | 0.03 | / | No | |||||
| NMHC | 15m discharge after light and oxygen purification + activated carbon adsorption | 1 | First installation branch waste gas outlets | 1.14 mg/m? | Integrated Emission Standards For Atmospheric Pollutants (GB16297-1996) | 0.13 | / | No | |
| 1 | Second installation branch waste gas outlets | 0.81 mg/m? | 0.08 | / | No | ||||
| 1 | Injection molding workshop waste gas outlets | 1.57 mg/m? | 0.18 | / | No |
| NMHC | 15m high altitude discharge after dry filtration +light and oxygen purification + activated carbon | 1 | Extrusion workshop waste gas outlets | 1.50 mg/m? | 0.15 | / | No | ||
| NMHC | 15m high altitude emission | 8 | Cold cabinet branch waste gas outlets | 1.02 mg/m? | 0.06 | / | No | ||
| Particles | 1 | <20 mg/m? | 0.02 | / | No | ||||
| Wuxi Little Swan Electric Co., Ltd. | COD | Discharge to the municipal sewage system | 1 | Exit at the middle gate of the plant | 98 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 30.5886 | 123.8994 | No |
| SS | 50 mg/L | 11.6494 | 87.2473 | No | |||||
| Animal and vegetable oil | 8.49 mg/L | 0.7525 | 10.7034 | No | |||||
| Total phosphorus | 1.02 mg/L | 0.3031 | 1.0701 | No | |||||
| Total nitrogen | 19.2 mg/L | 3.4424 | 11.2612 | No | |||||
| Ammonia nitrogen | 10.6 mg/L | 2.419 | 6.6906 | No | |||||
| Particles | High altitude discharge after treatment | 11 | Buildings A, C, and D | ND | Integrated Emission Standards for Atmospheric Pollutants (GB16297- 1996)/ Tianjin Emission Control Standard for Industrial | 0.1854 | 2.0696 | No | |
| VOCS | Direct discharge | 2.57 mg/m? | 0.6308 | 1.2218 | No | ||||
| Sulfur dioxide | ND | 0.0492 | 0.624 | No | |||||
| Nitrogen oxide | 35 mg/m? | Enterprises Volatile Organic Compounds (DB12/524- 2014)/ Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572-2015)/ Emission standard of air pollutants for boiler (GB13271-2014) | 0.4829 | 3.38 | No | ||||
| Huaian Welling Motor Manufacturing Co., Ltd. | Particles | Gas trap hood + cotton filter + activated carbon + 15m high exhaust cylinder | 2 | 5# waste gas outlet: outside the inductor dip coating room 8# waste gas outlet: outside the reactor dip coating room | 1.8 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297- 1996) | 0.1 | 0.97 | No |
| NMHC | 1.46 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297- 1996) | 0.1 | 0.3078 | No | ||||
| Styrene | 0.017 mg/m? | Emission Standards for Odor Pollutants (GB14554- 93) | 0.001 | 0.032 | No | ||||
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | PH value | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | West of the plant | 7.26-7.31 | Integrated Wastewater Discharge Standard GB8978-1996 | / | / | No |
| Suspended solids | 34 mg/L | / | / | No | |||||
| Five-day COD | 33.8 mg/L | / | / | No | |||||
| COD | 142 mg/L | 7.3 | 19.60 | No | |||||
| Petroleum | 2.52 mg/L | / | / | No | |||||
| Ammonia nitrogen | 0.885 mg/L | 0.007 | 1.764 | No | |||||
| Fluoride | 5.09 mg/L | / | / | No | |||||
| Total zinc | 1.66 mg/L | / | / | No | |||||
| Particles | 1. Water spraying + low-temperature plasma; direct-fired TO furnace 2. Frame filtration + activated carbon 3. Frame filtration + Level 2 spraying + UV photolysis + carbon absorption 4. Activated carbon 5. RTO regenerative combustion | 4 | Northwestern corner of 1# plant; central 1# plan | 0.654 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 2.95 | 6.09 | No | |
| Sulfur dioxide | 3 | Northeastern corner of 3# plant | 0.168 mg/m? | 0.76 | 1.56 | No | |||
| Nitrogen oxide | 1 | West Gate 2 of 4# plant | 0.268 mg/m? | 1.56 | 5.9 | No | |||
| VOCs | 2 | West Gate 2 of 5# plant, West Gate 1 of 5# plant | 0.193 mg/m? | 1.04 | 11.44 | No | |||
| Toshiba HA Manufacturing (Nanhai) Co., Ltd. | COD | Discharge to municipal sewage network | 1 | Gate No.2 Exit of plant areas | 9 mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) of Guangdong Province Time Period 2, Level 3 | 1.114 | / | No |
| SS | 1 mg/L | 0.124 | / | No | |||||
| Animal and vegetable oil | 0.29 mg/L | 0.036 | / | No | |||||
| Ammonia nitrogen | 0.3 mg/L | 0.037 | / | No | |||||
| Particles | High altitude | 1 | Power building | 0.1 mg/m? | Emission Standard of Air | 0.0005 | / | No | |
| SO2 | discharge | <3 mg/m? | Pollutants for Boiler in Guangdong (DB44765-2019) | / | 0.4224 | No | |||
| NOx | 57 mg/m? | 0.277 | 1.9758 | No | |||||
| VOCS | UV photolysis + activated carbon | 6 | Part Molding General assembly rework room Blister extruder | 72.38 mg/m? | Synthetic Resin Pollutants Emission Standards (GB31572-2015)/Guangdong Air Pollutant Emission Limits (DB44/27-2001) | 6.875 | 13.0845 | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | Anionic surfactants | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | General sewage discharge exit of plant areas | 0.81mg/L | GB/T4754-2011 Discharge standards of chemical park water pollutants DB50/457-2012 Discharge standards of chemical park water pollutants | 0.02 | 0.4936 | No |
| COD | 147 mg/L | 3.645 | 12.3809 | No | |||||
| Suspended solids | 7 mg/L | 0.173 | 9.8857 | No | |||||
| PH value | / | / | / | No | |||||
| Ammonia-nitrogen (NH3-N) | 5.9 mg/L | 0.146 | / | No | |||||
| Five-day BOD | 57 mg/L | 1.4134 | 7.4389 | No | |||||
| Toluene | High altitude discharge after being treated by waste gas treatment station | 4 | No. 1 and No.4 workshops of plant | 0.281 mg/m3 | |||||
| 0.006429 | 8.7048 | No | ||||
| Benzene | 0.147 mg/m3 | 0.0042 | 1.404 | No | ||
| NMHC | 4.96 mg/m3 | 0.32164 | 28.08 | No | ||
| Xylene | 1.22 mg/m3 | 0.08221 | 2.808 | No | ||
| Particles | 17.3 mg/m3 | 0.5055 | 2.2464 | No |
| DB50-418-2016 Integrated emission standards for atmospheric pollutants | 4 |
The construction of pollution prevention facilities and their operationDuring the Reporting Period, all subsidiaries have strictly abided by the laws and regulations related to environment protection, and no majorenvironmental pollution incidents occurred. All subsidiaries have set up reliable waste water and gas treatment systems. Through regular monitoring,supervision and inspection mechanisms, as well as third-party testing, it is ensured that the discharge of waste water, waste gas and solid waste duringthe production and operation process meets the national and local laws and regulations. There is no excessive discharge by any subsidiary, which is incompliance with the relevant requirements of the environment administrations.The environmental effect evaluation of construction projects and other administrative permits in relation to environmental protectionAll subsidiaries strictly observe the laws and regulations governing environmental protection, and all construction projects are in compliance with theenvironmental effect requirements and other rules, with no misdeeds during the Reporting Period. Once a construction project is finished, a third-partytesting institution is hired to examine indexes including waste water, waste gas and noise, and the compilation and approval of the environmental effectevaluation report is finished in time.Contingency plans for environmental accidentsAll subsidiaries have finished the compilation and approval of their contingency plans for environmental accidents. Emergency mechanisms forenvironmental pollution accidents have been established and improved, and the subsidiaries’ ability to deal with environmental pollution accidents has
been 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; 2) Wastewater pollution source monitoring: Samples are fetched at intake and outlet ports of waste water treatment stations to monitor changes of pollutionsource of waste water and up-to-standard emission of waste water after being treated at the waste water treatment stations. Monitoring items includeCODcr, SS and petroleum, etc. The data is uploaded to the governmental monitoring authority online and the government authority conducts real-timemonitoring; 3) Noise monitoring: Noise monitoring points are set at noise sensitive points and on the border of factories. Noise is monitored once inspring and summer respectively and at daytime and at nighttime respectively each time; 4) Solid waste pollution source monitoring: Hazardous wasteproduced from the subsidiaries is handed over to the units with qualifications for treatment, monitoring systems are established, and relatedmanagement forms and accounts are set up.Other environment-related informationAs a member of the social family and a responsible enterprise, Midea Group has been strengthening its own environmental management capabilitiesand levels, preventing or mitigating the unfavorable environmental impacts brought about by its own activities, and enhancing the beneficial
environmental impacts on society in line with the policy and principles of sustainable development and responsibility for a long time through buildingand improving its environmental management system, adopting a systematic and scientific management approach. By integrating environmentalmanagement into the enterprise's operating activity procedure, strategic direction and decision making procedure, Midea Group has used tools andmethods to identify the environmental risks and opportunities in the process of business development, and fully implemented the PDCA-based model ofplanning, process implementation and monitoring, and continuous improvement to achieve good environmental performance.A. The Group established an online library of laws and regulation, updated and identified relevant environmental laws and regulations regularly.Subsidiaries of the Group conducted annual compliance evaluations of newly introduced environmental laws and regulations and prepared correctivemeasures for non-compliance and followed up to close the loop.B. The Group organizes the identification and update of environmental factors at least once a year and identifies the impact on the environment in dailyoperating activities. It prepares special preventive and control measures around major environmental factors. In addition, it matches resources annuallyto ensure that major environmental factors are under control and establishes special control measures for pollutant emissions such as waste water,waste gas, solid waste and noise.C. The Group established unified environmental management standard and clarified the daily management standards for waste water, waste gas, solidwaste and noise.D. The Group conducts unannounced inspections quarterly. Divisions conduct quarterly environmental internal audits. Plants conduct annual internalaudits in system and management accreditation to make sure that the plants correct non-conformities and ensure continuous improvement.In recent years, Midea Group has made a series of achievements in controlling pollutant emissions by introducing lots of new equipment, new
processes, new materials and new technologies and focusing on building green factories.a. The Suzhou plant of the Microwave & Cleaning Appliances Division replaced motor insulation paint with environmentally friendly paint. VOCsemissions reduced by more than 83%.b. The subsidiary responsible for environment appliances manufacturing of the Small Domestic Appliance Division adopted advanced wastewatertreatment process. The COD index was controlled within 5 mg/L after wastewater treatment. And the wastewater was recycled by 50%. So thedischarge of pollutants was reduced and water resources were saved at the same time.c. The Electromechanical Business Group controlled VOCs emission at 10-20 mg/m? after RTO treatment of motor air washing and dipping paint wastegas. And the waste heat was utilized to reduce energy consumption.On one hand, the Group developed an environmental protection information management platform to collect and process environmental protection dataaccording to the Group's strategy of "Comprehensive Digitalization and Comprehensive Intellectualization", and to control the environmental protectionoperation data of subordinate units quickly and accurately. On the other hand, the Group developed its own exhaust gas online monitoring system toachieve rapid perception and control, real-time monitoring and surveillance, advance warning and pre-control, linkage disposal and control, systemassessment and self-control.The Company paid attention to system construction and honor. And all the subordinate units have obtained ISO14001:2015 environmentalmanagement system certification. The Chongqing plant of the Residential Air Conditioner Division (RAC) has obtained the honor of "Waste-free CityCell Construction" in Nanan District in 2021. The Hefei Plant of the Laundry Appliance Division won the "Advanced Unit of Environmental ManagementInnovation in Ecological and Environmental Protection Work in Hefei High-tech Zone in 2018. It was awarded as an excellent enterprise in Hefei
High-tech Zone in 2018. And it won the "Quality Improvement and Efficiency Award - Skillful Environmental Protection Award". In 2020, it got theenterprise environmental credit rating result as an enterprise with good environmental protection in High-tech Zone. Also in 2020, it won theComprehensive Benefit Award - Environmental Protection Encouragement Award in the annual excellent enterprise recognition in High-tech Zone.Midea Group actively responded to the national "14th Five-Year Plan" and insisted on green management. It implemented environment-friendly andenergy-saving development strategies toward the target of widely forming a green production and life style by 2030 and steadily reduce carbonemissions after reaching the peak. The Group built a whole-process green industry chain from five aspects: green products, green procurement, greenmanufacturing, green logistics and green recycling. During the process, the comprehensive energy consumption per RMB10,000 gross output valuewas reduced from 0.0139 in 2017 to 0.0117 in 2020. The CO2 emission per unit output value was reduced from 0.0496 in 2017 to 0.0415 in 2020. Andthe clean energy ratio increased from 4.75% to 5.46%.In July 2021, the Company set up a "Green Strategy" team to reduce environmental impact from every aspect of the Group's business, connectingresearch and development, procurement, manufacturing, logistics, sales and services layer through layer by layer control from the six perspectives ofgreen products, green procurement, green manufacturing, green logistics, green recycling and green services, The Group actively responded to thenational "carbon peak" goal and "carbon neutrality" vision.
2. Social Responsibility
2.1 Overview of the public welfare activities in the first half of 2021
Support for the development of education. In the first half of 2021, Midea Group donated RMB50 millionto East China Normal University to help introduce the high-end education brand to Beijiao Town, anddonated another RMB20 million to the Teacher & Student Awarding Fund of Shunde School of EastChina Normal University to support the construction and development of the school and encourage theexcellent teachers who are dedicated to teaching and educating people and motivate the excellentstudents who are motivated and have good character. The donations passed the baton of love andpromoted the development of education.Efforts to prevent and control the epidemic. In May 2021, Midea Group took the initiative to donate 500evaporative cool fans and 80 mobile air conditioners to Foshan, Guangzhou, etc. due to the hot weatherto provide a more comfortable environment for the medical staff and citizens who continue to struggle inthe front line of epidemic prevention and control. The Group will continue to support the epidemicprevention and control work.
2.2 Follow-up work plan
Next, Midea Group will continue to fulfill its corporate social responsibility and actively participate incharitable public welfare activities such as helping the poor, students, doctors, the disabled, employment,and disaster relief in accordance with the relevant requirements of the Party and the government. TheGroup will help promote, consolidate and expand the results of poverty eradication and effectivelyintegrate rural revitalization strategy. In addition, it will actively support the work of epidemic preventionand control and make due contribution to winning the battle of epidemic prevention and control.
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 |
| Guangdong Yinghe Enterprise Management Co., Ltd. | Controlled by family member of Company’s actual controller | Procurement | Procurement of goods | Market price | - | 807,027 | 0.71% | 1,800,000 | No | Payment after delivery | - | 30 April 2021 | www.cninfo.com.cn |
| Orinko Advanced Plastics Co., Ltd. | Controlled by family member of Company’s actual controller | Procurement | Procurement of goods | Market price | - | 671,628 | 0.59% | 1,700,000 | No | Payment after delivery | - | 30 April 2021 | www.cninfo.com.cn |
| Midea Real Estate Holding Limited | Controlled by Company’s actual controller | Sale | Sale of goods | Market price | 93,907 | 0.05% | 471,000 | No | Payment after delivery | - | 30 April 2021 | 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, or finance companies controlled by theCompany
□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, finance company controlled by the Company or anyother related parties.
11.6 Other significant related transactions
√Applicable □N/A
The Proposal for Related Transactions with Shunde Rural Commercial Bank in 2021 was approved atthe 32rd Meeting of the 3rd Board of Directors held on 28 April 2021 and later at the 2020 AnnualGeneral Meeting of Shareholders held on 21 May 2021.In 2021, the deposit balance of the Company in Shunde Rural Commercial Bank shall not exceedRMB10 billion and neither shall the credit balance provided by the bank to the Company exceed RMB7billion. Meanwhile, the total amount of notes discounted by the Company (mainly through Midea GroupFinance) for the bank and loans from the former to the latter shall not exceed RMB2 billion in the year. Inaddition, financings obtained by Midea suppliers from Shunde Rural Commercial Bank viaibcp.midea.com shall not exceed RMB200 million in the year.
Index to the announcement about the said related transactions disclosed
| Title of announcement | Disclosure date | Disclosure website |
| Announcement on Related Transactions with Rural Commercial Bank in 2021 | 11 May 2021 | www.cninfo.com.cn |
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
No such cases in the Reporting Period.
12.1.3 Leasing
□Applicable √N/A
No such cases in the Reporting Period.
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 | 0 | |||||
| the Reporting Period (A2) | |||||||||
| 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. | 2021-4-30 | 8,400,000 | - | Joint liability | One year | No | No | ||
| GD Midea Air-Conditioning Equipment Co.,Ltd. | 2021-4-30 | 17,440,000 | 2021-01-15 | 3,947,060 | Joint liability | One year | No | No | |
| Guangzhou Hualing Refrigerating Equipment Co.,ltd. | 2021-4-30 | 1,160,000 | 2021-01-01 | 400,000 | Joint liability | One year | No | No | |
| Foshan Midea Carrier Air-Conditioning Equipment Co., Ltd. | 2021-4-30 | 360,000 | - | Joint liability | One year | No | No | ||
| GD Midea Group Wuhu Air-Conditioning Equipment Co.,Ltd. | 2021-4-30 | 500,000 | - | Joint liability | One year | No | No | ||
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 2021-4-30 | 690,000 | - | Joint liability | One year | No | No | ||
| Guangdong Midea Precision Molding Technology Co., Ltd. | 2021-4-30 | 65,000 | - | Joint liability | One year | No | No | ||
| Midea Group Wuhan Refrigeration Equipment Co.,Ltd. | 2021-4-30 | 72,000 | - | Joint liability | One year | No | No | ||
| Hainan Midea United Materials Supply Co. Ltd. | 2021-4-30 | 200,000 | - | Joint liability | One year | No | No | ||
| Handan Midea Air-Conditioning Equipment Co.,Ltd. | 2021-4-30 | 110,000 | - | Joint liability | One year | No | No | ||
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 2021-4-30 | 200,000 | - | Joint liability | One year | No | No | ||
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2021-4-30 | 7,225,000 | 2021-01-29 | 3,507,900 | Joint liability | One year | No | No | |
| Guangdong Witol Vacuum Electronic Manufacture Co.,Ltd | 2021-4-30 | 100,000 | 2021-01-26 | 7,890 | Joint liability | One year | No | No | |
| Wuhu Midea Kitchen Appliances | 2021-4-30 | 2,020,000 | - | Joint liability | One | No | No | ||
| Manufacturing Co., Ltd. | year | |||||||
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2021-4-30 | 640,000 | 2021-01-04 | 25,890 | Joint liability | One year | No | No |
| Maytech Technology Co., LTD. | 2021-4-30 | 75,000 | 2021-05-21 | 5,910 | Joint liability | One year | No | No |
| Hainan Meizhi Canghai E-commerce Service Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | |
| Hainan Meizhi Hangjian Electric Appliance Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2021-4-30 | 2,000,000 | 2021-01-08 | 124,880 | Joint liability | One year | No | No |
| Guangdong Midea-SIIX Electronics Co., Ltd. | 2021-4-30 | 10,000 | 2021-01-19 | 40 | Joint liability | One year | No | No |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 2021-4-30 | 345,000 | 2021-03-30 | 1,160 | Joint liability | One year | No | No |
| Hefei Midea-SIIX Electronics Co.,Ltd. | 2021-4-30 | 123,000 | 2021-01-01 | 20 | Joint liability | One year | No | No |
| Hefei M&B Air Conditioning Equipment Co., Ltd. | 2021-4-30 | 31,500 | - | Joint liability | One year | No | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | 2021-4-30 | 30,000 | 2021-01-14 | 5,400 | Joint liability | One year | No | No |
| Meitong Energy Technology (Chongqing) Co., Ltd. | 2021-4-30 | 50,000 | - | Joint liability | One year | No | No | |
| Guangdong MeiKong Intelligent Building Co., Ltd. | 2021-4-30 | 60,000 | - | Joint liability | One year | No | No | |
| Shanghai M-BMS Intelligent Construction Co., Ltd. | 2021-4-30 | 60,000 | - | Joint liability | One year | No | No | |
| Winone Elevator Company Limited | 2021-4-30 | 500,000 | 2021-01-08 | 38,730 | Joint liability | One year | No | No |
| Guangdong Meizhi Compressor Limited | 2021-4-30 | 230,000 | 2021-01-08 | 21,700 | Joint liability | One year | No | No |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd | 2021-4-30 | 80,000 | 2021-01-01 | 250 | Joint liability | One year | No | No |
| Guangdong Welling Motor Manufacturing Co., Ltd. | 2021-4-30 | 210,000 | 2021-01-05 | 15,620 | Joint liability | One year | No | No |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | 2021-4-30 | 320,000 | 2021-01-08 | 21,850 | Joint liability | One year | No | No |
| Guangdong Midea Environmental Technologies Co., Ltd. | 2021-4-30 | 20,000 | 2021-01-01 | 620 | Joint liability | One year | No | No |
| Huaian Welling Motor Manufacturing Co., Ltd. | 2021-4-30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | |
| Zhejiang Meizhi Compressor Co., Ltd. | 2021-4-30 | 3,500,000 | - | Joint liability | One year | No | No | |
| Anhui Meizhi Compressor Co., Ltd. | 2021-4-30 | 80,000 | 2021-06-28 | - | Joint liability | One year | No | No |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 2021-4-30 | 270,000 | - | Joint liability | One year | No | No | |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | 2021-4-30 | 10,000 | - | Joint liability | One year | No | No | |
| Wuhu Welling Motor Sales Co., Ltd. | 2021-4-30 | 500,000 | - | Joint liability | One year | No | No | |
| Anhui Welling Auto Parts Co. , Ltd. | 2021-4-30 | 40,000 | - | Joint liability | One year | No | No | |
| Dorna Technology Co., Ltd. | 2021-4-30 | 25,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 2021-4-30 | 50,000 | - | Joint liability | One year | No | No | |
| Ningbo Midea United Materials Supply Co. Ltd. | 2021-4-30 | 1,000,000 | 2021-01-28 | 249,260 | Joint liability | One year | No | No |
| Guangzhou Kaizhao Commercial and Trading Co.,Ltd | 2021-4-30 | 60,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 2021-4-30 | 185,000 | 2021-02-10 | 5,890 | Joint liability | One year | No | No |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2021-4-30 | 565,000 | 2021-01-11 | 525,870 | Joint liability | One year | No | No |
| GD Midea Environment Appliances Mfg. Co.,Ltd. | 2021-4-30 | 400,000 | 2021-01-14 | 25,120 | Joint liability | One year | No | No |
| Guangdong Midea Cuchen Company Ltd. | 2021-4-30 | 6,000 | - | Joint liability | One year | No | No | |
| GD Midea Caffitaly Coffee Machine Manufacturing Co., Ltd. | 2021-4-30 | 10,000 | - | Joint liability | One year | No | No | |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2021-4-30 | 3,000,000 | 2021-01-21 | 880,000 | Joint liability | One year | No | No |
| Foshan Shunde Midea Washing | 2021-4-30 | 2,350,000 | 2021-01-06 | 298,880 | Joint liability | One | No | No |
| Appliances Manufacturing Co., Ltd. | year | |||||||
| Guangdong Midea Kitchen & Bath Appliances Manufacturing Co., Ltd. | 2021-4-30 | 400,000 | - | Joint liability | One year | No | No | |
| Foshan Shunde Midea Water Dispenser Manufacturing Company Limited | 2021-4-30 | 855,000 | 2021-01-28 | 17,520 | Joint liability | One year | No | No |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | 2021-4-30 | 230,000 | 2021-01-28 | 36,460 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2021-4-30 | 1,800,000 | 2021-01-26 | 16,730 | Joint liability | One year | No | No |
| Wuxi Little Swan Electric Co., Ltd. | 2021-4-30 | 2,600,000 | 2021-01-05 | 1,522,720 | Joint liability | One year | No | No |
| Hefei Midea Laundry Appliance Co., Ltd. | 2021-4-30 | 780,000 | - | Joint liability | One year | No | No | |
| Wuxi Filin Electronics Co., Ltd. | 2021-4-30 | 50,000 | - | Joint liability | One year | No | No | |
| Hubei Midea Laundry Appliance Co., Ltd. | 2021-4-30 | 100,000 | - | Joint liability | One year | No | No | |
| Hainan Midea Refrigerator & Washer Sales Co., Ltd. | 2021-4-30 | 100,000 | - | Joint liability | One year | No | No | |
| Hefei Hualing Co., Ltd. | 2021-4-30 | 1,850,000 | 2021-04-26 | 49,370 | Joint liability | One year | No | No |
| Hubei Midea Refrigerator Co., Ltd. | 2021-4-30 | 230,000 | 2021-01-01 | 18,580 | Joint liability | One year | No | No |
| Hefei Midea Refrigerator Co., Ltd. | 2021-4-30 | 400,000 | - | Joint liability | One year | No | No | |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 2021-4-30 | 1,345,000 | - | Joint liability | One year | No | No | |
| Little Swan (Jing Zhou) Sanjin Electronic Appliances Limited | 2021-4-30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Robotics Co., Ltd. | 2021-4-30 | 50,000 | - | Joint liability | One year | No | No | |
| Servotronix Motion Technology Development (Shenzhen) Ltd. | 2021-4-30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea Group E-Commerce Co., Ltd. | 2021-4-30 | 100,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2021-4-30 | 41,200 | 2021-01-11 | 1,310 | Joint liability | One year | No | No |
| Reis Robotics (Kunshan) Co., Ltd. | 2021-4-30 | 63,000 | 2021-01-28 | 13,920 | Joint liability | One | No | No |
| year | ||||||||
| KUKA Systems (China) CO., Ltd. | 2021-4-30 | 325,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics Manufacturing China Co.,Ltd | 2021-4-30 | 50,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics Guangdong Co., Ltd | 2021-4-30 | 100,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics (Shanghai) Co.,Ltd. | 2021-4-30 | 315,000 | - | Joint liability | One year | No | No | |
| Shanghai Swisslog Healthcare Co., Ltd. | 2021-4-30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Swisslog Technology Co., Ltd. | 2021-4-30 | 50,000 | - | Joint liability | One year | No | No | |
| Swisslog (Shanghai) Co., Ltd. | 2021-4-30 | 230,000 | 2021-01-06 | 60,910 | Joint liability | One year | No | No |
| Shanghai Swisslog Logistics Automation Co. Ltd. | 2021-4-30 | 80,000 | 2021-01-14 | - | Joint liability | One year | No | No |
| Annto Logistics Technology Co., Ltd. | 2021-4-30 | 900,000 | 2021-3-11 | - | Joint liability | One year | No | No |
| Midea International Corporation Company Limited | 2021-4-30 | 12,330,000 | 2021-04-23 | 7,803,910 | Joint liability | One year | No | No |
| Midea International Trading Company Limited | 2021-4-30 | 2,222,430 | 2021-01-21 | 127,950 | Joint liability | One year | No | No |
| Welling International Hong Kong Ltd | 2021-4-30 | 182,000 | - | Joint liability | One year | No | No | |
| Midea Electric Trading (Singapore) Co.,Pte. Ltd. | 2021-4-30 | 4,000,000 | 2021-01-05 | 234,780 | Joint liability | One year | No | No |
| Orient Household Appliances Ltd.(Orient) | 2021-4-30 | 120,000 | - | Joint liability | One year | No | No | |
| Midea Consumer Electric Vietnam | 2021-4-30 | 112,000 | - | Joint liability | One year | No | No | |
| Concepcion Midea Inc. | 2021-4-30 | 112,000 | - | Joint liability | One year | No | No | |
| Midea Italia S.R.L. | 2021-4-30 | 140,000 | - | Joint liability | One year | No | No | |
| Midea Scott & English Electronics Sdn. Bhd. | 2021-4-30 | 206,500 | - | Joint liability | One year | No | No | |
| Midea Mexico, S. De R.L. De C.V. | 2021-4-30 | 180,000 | - | Joint liability | One year | No | No |
| Midea Electric Trading (Thailand) Co.,Ltd. | 2021-4-30 | 105,000 | - | Joint liability | One year | No | No | |
| Midea America Corp | 2021-4-30 | 669,000 | - | Joint liability | One year | No | No | |
| Pt. Midea Planet Indonesia | 2021-4-30 | 56,000 | - | Joint liability | One year | No | No | |
| Midea Electrics Egypt | 2021-4-30 | 175,000 | - | Joint liability | One year | No | No | |
| Midea Europe Gmbh | 2021-4-30 | 70,000 | - | Joint liability | One year | No | No | |
| Midea America (Canada) Corp | 2021-4-30 | 70,000 | - | Joint liability | One year | No | No | |
| Toshiba Lifestyle Products & Services Corporation | 2021-4-30 | 2,667,450 | 2021-01-05 | 325,710 | Joint liability | One year | No | No |
| Midea Electric Netherlands (I) B.V. | 2021-4-30 | 31,446,110 | 2021-01-01 | 28,856,400 | Joint liability | One year | No | No |
| Clivet Spa | 2021-4-30 | 90,000 | - | Joint liability | One year | No | No | |
| Servotronix Motion Control Ltd. | 2021-4-30 | 940 | - | Joint liability | One year | No | No | |
| Midea Austria Gmbh | 2021-4-30 | 5,700 | - | Joint liability | One year | No | No | |
| Midea (Egypt) Kitchen & Water Heater Appliances Co., Ltd. | 2021-4-30 | 70,000 | - | Joint liability | One year | No | No | |
| Total guarantee line for subsidiaries approved during the Reporting Period (B1) | 123,551,830 | Total actual guarantee amount for subsidiaries during the Reporting Period (B2) | 53,664,280 | |||||
| Total approved guarantee line for subsidiaries at the end of the Reporting Period (B3) | 123,551,830 | Total actual guarantee balance for subsidiaries at the end of the Reporting Period (B4) | 49,196,210 | |||||
| Guarantees between 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 |
| Wuhu Midea Annto Logistics Co., Ltd. | 2021-4-30 | 1,500,000 | 2021-06-22 | 306,720 | Joint liability | One year | No | No | |
| Ningbo Annto Logistics Co., Ltd. | 2021-4-30 | 800,000 | 2021-03-22 | 30,000 | Joint liability | One year | No | No | |
| Nanjing Meian Logistics Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | ||
| Shenyang Annto Logistics Technology Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | ||
| Wuhan Annto Logistics Technology Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | ||
| Tianjin Annto Logistics Technology Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | ||
| Xuzhou Annto Logistics Technology Co., Ltd. | 2021-4-30 | 20,000 | - | Joint liability | One year | No | No | ||
| Total line for guarantees between subsidiaries approved during the Reporting Period (C1) | 2,400,000 | Total actual guarantee amount between subsidiaries during the Reporting Period (C2) | 409,470 | ||||||
| Total approved line for guarantees between subsidiaries at the end of the Reporting Period (C3) | 2,400,000 | Total actual guarantee balance between subsidiaries at the end of the Reporting Period (C4) | 336,720 | ||||||
| Total guarantee amount (total of the above-mentioned three kinds of guarantees) | |||||||||
| Total guarantee line approved during the Reporting Period (A1+B1+C1) | 125,951,830 | Total actual guarantee amount during the Reporting Period (A2+B2+C2) | 54,073,750 | ||||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 125,951,830 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 49,532,930 | ||||||
| Proportion of the total actual guarantee amount (A4+B4+C4) in net assets of the Company | 43.74% | ||||||||
| 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) | 36,437,950 | ||||||||
| 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) | 36,437,950 | ||||||||
| 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 Significant continuing contracts
□ Applicable √ N/A
12.5 Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
13. Other Significant Events
√ Applicable □ N/A
On 2 February 2021, Midea Group, Jiangsu Yuyue Science &Technology Development Co., Ltd.(hereinafter, “Yuyue Technology”) and Wu Guangming signed the Share Transfer Agreement (I).According to the agreement, Yuyue Technology and Wu Guangming would transfer their holdings of130,294,312 non-restricted public shares in Beijing Wandong Medical Technology Co., Ltd. (hereinafter,“WDM”) (or 24.09% of WDM’s total share capital) to Midea Group for a total consideration ofRMB1,902,296,955 (equivalent to RMB14.6/share).On the same day, Midea Group and Yu Rong signed the Share Transfer Agreement (II). According to theagreement, Yu Rong would transfer his holdings of 27,040,810 non-restricted public shares in WDM (or5% of WDM’s total share capital) to Midea Group for a total consideration of RMB394,795,826(equivalent to RMB14.6/share).The said shares were transferred on 6 May 2021. As such, Midea Group now holds 157,335,122 shares
in WDM (or 29.09% of WDM’s total share capital), which makes it the controlling shareholder of WDM.
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 | 182,862,631 | 2.60 | -22,039,086 | -22,039,086 | 160,823,545 | 2.28 | |
| 1.1 Shares held by the state | |||||||
| 1.2 Shares held by state-owned corporations | |||||||
| 1.3 Shares held by other domestic investors | 179,785,131 | 2.56 | -21,817,836 | -21,817,836 | 157,967,295 | 2.55 | |
| Among which: Shares held by domestic corporations | 2,363,601 | 0.03 | 0 | 2,363,601 | 0.03 | ||
| Shares held by domestic individuals | 177,421,530 | 2.52 | -21,817,836 | -21,817,836 | 155,603,694 | 2.52 | |
| 1.4 Shares held by foreign investors | 3,077,500 | 0.04 | -221,250 | -221,250 | 2,856,250 | 0.04 | |
| Among which: Shares held by foreign corporations | |||||||
| Shares held by foreign individuals | 3,077,500 | 0.04 | -221,250 | -221,250 | 2,856,250 | 0.04 | |
| 2. Non-restricted shares | 6,847,113,368 | 97.40 | 20,698,929 | 19,512,336 | 40,211,265 | 6,887,324,633 | 97.72 |
| 2.1 RMB common | 6,847,113,368 | 97.40 | 20,698,929 | 19,512,336 | 40,211,265 | 6,887,324,633 | 97.72 |
| shares | |||||||
| 2.2 Domestically listed foreign shares | |||||||
| 2.3 Overseas listed foreign shares | |||||||
| 2.4 Other | |||||||
| 3. Total shares | 7,029,975,999 | 100.00 | 20,698,929 | -2,526,750 | 18,172,179 | 7,048,148,178 | 100.00 |
Reasons for the changes in shares
√Applicable □N/A
a. The 1,292,083 restricted shares of a total of 39 eligible employees for the third unlocking period of thereserved restricted shares under the 2017 Restricted Share Incentive Scheme were unlocked from 8February 2021, including 60,000 restricted shares of foreign employees.b. The 403,249 restricted shares of a total of 24 eligible employees for the first unlocking period of thereserved restricted shares under the 2018 Restricted Share Incentive Scheme were unlocked from 4June 2021.c. The 3,043,254 restricted shares of a total of 209 eligible employees for the second unlocking period ofthe first grant under the 2018 Restricted Share Incentive Scheme were unlocked from 30 June 2021,including 182,250 restricted shares of foreign employees.d. For the reasons of certain incentive recipients’ resignation, violation of the Company’s “Red Lines”,being reassigned or other factors, on 24 May 2021, the Company repurchased and retired 32,917shares of 2 incentive recipients under the 2017 Restricted Share Incentive Scheme, 1,009,501 shares of22 incentive recipients under the 2018 Restricted Share Incentive Scheme, 1,043,958 shares of 15incentive recipients under the 2019 Restricted Share Incentive Scheme, and 440,374 shares of 11incentive recipients under the 2020 Restricted Share Incentive Scheme, totaling 2,526,750 restrictedshares (including 4,000 restricted shares of foreign employees).e. In H1 2021, the incentive recipients of stock options chose to exercise 20,698,929 shares, which havebeen registered into the Company’s share capital.
f. In H1 2021, locked-up shares held by senior management decreased by 14,773,750 shares.Approval of share changes
□ Applicable √ N/A
Transfer of share ownership
□ Applicable √ N/A
Progress of any share repurchase
√ Applicable □ N/A
a. The Proposal on the Plan for the Repurchase of Some Public Shares was approved at the 29thMeeting of the 3rd Board of Directors on 23 February 2021. As such, the Company was agreed torepurchase, with its own funds, no less than 50,000,000 shares and no more than 100,000,000 sharesby way of centralized bidding at a price not exceeding RMB140/share within 12 months starting from theapproval of the repurchase plan by the Board of Directors. The Report on the Repurchase of SomePublic Shares was disclosed on 25 February 2021 (for further information, see the relevantannouncements disclosed by the Company on http://www.cninfo.com.cn/ and the newspapersdesignated by the Company for its information disclosure dated 24 February and 25 February 2021).During the period from 25 February to 2 April 2021, the Company repurchased a total of 99,999,931shares (1.4189% of the Company’s total share capital as of 31 March 2021). With the highest tradingprice being RMB95.68/share and the lowest being RMB80.29/share, the total payment amounted toRMB8,664,107,576.69. With the repurchased shares close to the upper limit of the share repurchaseplan of 100,000,000 shares, the implementation of this share repurchase plan has been completed (forfurther information, see the relevant announcements disclosed by the Company onhttp://www.cninfo.com.cn/ dated 3 April 2021).b. The Proposal on the Plan for the Repurchase of Some Public Shares was approved at the 33rdMeeting of the 3rd Board of Directors on 9 May 2021 and later at the 2020 Annual General Meeting ofShareholders on 21 May 2021. As such, the Company was agreed to repurchase, by way of centralizedbidding, shares for retirement and reducing the registered capital, with its own funds of no less thanRMB2.5 billion and no more than RMB5 billion and at a price not exceeding RMB100/share within 12
months starting from the approval of the repurchase plan by the general meeting of shareholders. TheReport on the Repurchase of Some Public Shares was disclosed on 1 June 2021 (for further information,see the relevant announcements disclosed by the Company on http://www.cninfo.com.cn/ and thenewspapers designated by the Company for its information disclosure dated 10 and 22 May 2021).During the period from 3 June to 13 August 2021, the Company repurchased a total of 71,976,243shares (1.0205% of the Company’s total share capital as of 12 August 2021). With the highest tradingprice being RMB79.15/share and the lowest being RMB61.43/share, the total payment amounted toRMB4,999,995,937.03 (exclusive of transaction costs). With the repurchased shares close to the upperlimit of the share repurchase plan, the implementation of this share repurchase plan has been completed(for further information, see the relevant announcements disclosed by the Company onhttp://www.cninfo.com.cn/ dated 14 August 2021).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 ReportingPeriod
□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 |
| Incentive recipients of reserved | 1,325,000 | 1,292,083 | 0 | 32,917 | 0 | Lockup according to the Scheme | 8 February 2021 |
| restricted shares under 2017 Restricted Share Incentive Scheme | |||||||
| Incentive recipients of the first grant of 2018 Restricted Share Incentive Scheme | 11,232,375 | 3,043,254 | 0 | 777,417 | 7,411,704 | Lockup according to the Scheme | 30 June 2021 |
| Incentive recipients of reserved restricted shares under 2018 Restricted Share Incentive Scheme | 1,970,000 | 403,249 | 0 | 232,084 | 1,334,667 | Lockup according to the Scheme | 4 June 2021 |
| Incentive recipients of 2019 Restricted Share Incentive Scheme | 26,309,000 | 0 | 0 | 1,043,958 | 25,265,042 | Lockup according to the Scheme | 13 July 2021 |
| Incentive recipients of 2020 Restricted Share Incentive Scheme | 33,245,000 | 0 | 0 | 440,374 | 32,804,626 | Lockup according to the Scheme | 20 July 2021 |
| Fang Hongbo | 102,742,869 | 15,000,000 | 0 | 0 | 87,742,869 | Lockup for senior management position | - |
| Zhang Xiaoyi | 424,931 | 87,500 | 0 | 0 | 337,431 | Lockup for senior management position | - |
| Jiang Peng | 343,950 | 75,000 | 0 | 0 | 268,950 | Lockup for senior management position | - |
| Xiao Mingguang | 220,000 | 0 | 295,000 | 0 | 515,000 | Locked-up shares of a former senior executive | - |
| Zhong Zheng | 98,364 | 0 | 68,750 | 0 | 167,114 | Lockup for senior management position | - |
| Hu Ziqiang | 225,000 | 0 | 25,000 | 0 | 250,000 | Lockup for senior management position | - |
| Total | 178,136,489 | 19,901,086 | 388,750 | 2,526,750 | 156,097,403 | -- | -- |
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 end of the Reporting Period | 520,532 | 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 | Pledged or frozen shares | ||
| Status | Shares | ||||||||
| Midea Holding Co., Ltd. | Domestic non-state-owned corporation | 30.75% | 2,169,178,713 | 0 | 0 | 2,212,046,613 | Pledged | 100,000,000 | |
| Hong Kong Securities Clearing Company Limited | Foreign corporation | 16.89% | 1,191,374,162 | 133,651,525 | 0 | 1,212,996,966 | |||
| China Securities Finance Co., Ltd. | Domestic non-state-owned corporation | 2.81% | 198,145,134 | 0 | 0 | 198,145,134 | |||
| Fang Hongbo | Domestic individual | 1.66% | 116,990,492 | 0 | 87,742,869 | 29,247,623 | |||
| Canada Pension Plan Investment Board－ own funds (stock exchange) | Foreign corporation | 1.47% | 103,913,897 | 0 | 0 | 103,913,897 | |||
| Central Huijin Asset Management Ltd. | State-owned corporation | 1.28% | 90,169,354 | 0 | 0 | 90,169,354 | |||||
| Huang Jian | Domestic individual | 1.22% | 86,140,000 | -1,890,000 | 0 | 86,140,000 | |||||
| Li Jianwei | Foreign individual | 0.71% | 50,100,000 | -200,000 | 0 | 50,100,000 | |||||
| Merrill Lynch International | Foreign corporation | 0.58% | 40,723,280 | -235,316 | 0 | 40,723,280 | |||||
| Huang Xiaoxiang | Domestic individual | 0.56% | 39,257,832 | -350,000 | 0 | 39,257,832 | Pledged | 14,779,556 | |||
| 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 | 172,348,912 shares (or 2.44% 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 | 1,191,374,162 | RMB common stock | 1,191,374,162 | ||||||||
| China Securities Finance Co., Ltd. | 198,145,134 | RMB common stock | 198,145,134 | ||||||||
| Canada Pension Plan Investment Board－ own funds | 103,913,897 | RMB common stock | 103,913,897 | ||||||||
| (stock exchange) | |||
| Central Huijin Asset Management Ltd. | 90,169,354 | RMB common stock | 90,169,354 |
| Huang Jian | 86,140,000 | RMB common stock | 86,140,000 |
| Li Jianwei | 50,100,000 | RMB common stock | 50,100,000 |
| Merrill Lynch International | 40,723,280 | RMB common stock | 40,723,280 |
| Huang Xiaoxiang | 39,257,832 | RMB common stock | 39,257,832 |
| Yuan Liqun | 37,633,882 | RMB common stock | 37,633,882 |
| 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 | He Xiangjian is the controlling shareholder of Midea Holding Co., Ltd., which makes them parties acting in concert. | ||
| Explanation on the top 10 common shareholders participating in securities margin trading | The Company’s shareholder Huang Xiaoxiang holds 28,679,832 shares in the Company through his common securities account and 10,578,000 shares in the Company through his account of collateral securities for margin trading, representing a total holding of 39,257,832 shares in the Company. The Company’s shareholder Yuan Liqun holds 705,000 shares in the Company through her common securities account and 36,928,882 shares in the Company through her account of collateral securities for margin trading, representing a total holding of 37,633,882 shares in the Company. | ||
Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of theCompany conduct any promissory repurchase during the Reporting Period
□Yes √No
No such cases in the Reporting Period.
4. Changes in Shareholdings of Directors, Supervisors and Senior Management
√ Applicable □ N/A
| Name | Office title | Incumbent/ Former | Shares held at the year-begin (share) | Shares increased at the Reporting Period (share) | Shares decreased at the Reporting | Shares held at the period-end (share) | Granted restricted shares at the year-begin (share) | Restricted shares granted in the Reporting Period | Granted restricted shares at the period-end (share) |
| Period (share) | (share) | ||||||||
| Li Guolin | Vice President | Incumbent | 265,000 | 35,700 | 0 | 300,700 | 100,000 | 0 | 100,000 |
| Xiao Mingguang | Vice President | Former | 460,000 | 105,000 | 0 | 565,000 | 125,000 | 0 | 50,000 |
| Zhong Zheng | Director of Finance | Incumbent | 211,152 | 65,000 | 0 | 276,152 | 60,000 | 0 | 40,000 |
| Total | -- | -- | 936,152 | 205,700 | 0 | 1,141,852 | 285,000 | 0 | 190,000 |
5. Change of Controlling Shareholder or Actual Controller in the Reporting Period
Change 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
No such cases in the Reporting Period.
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. (High Growth Debt Instrument) (Tranche 1, 2021) | 21 Midea SCP001 (High Growth Debt Instrument) | 012101283.IB | 2021-03-31 | 2021-03-30 | 2021-09-24 | RMB3 billion | 2.7200% | 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 otherrepayment-ensuring measures in the Reporting Period, as well as the impact on the interests ofdebt instrument 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 2021 | 31 December 2020 | Change |
| Current ratio | 132.03% | 131.23% | 0.80% |
| Debt/asset ratio | 67.53% | 65.53% | 2.00% |
| Quick ratio | 110.88% | 110.26% | 0.62% |
| H1 2021 | H1 2020 | Change | |
| Net profit before non-recurring gains and losses | 148,546,080 | 134,380,590 | 10.54% |
| Debt/EBITDA ratio | 21.64% | 21.62% | 0.07% |
| Interest cover (times) | 26.85 | 26.73 | 0.46% |
| Cash-to-interest cover (times) | 33.31 | 37.88 | -12.07% |
| EBITDA-to-interest cover (times) | 31.18 | 30.65 | 1.72% |
| Debt 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| ASSETS | Note | 30 June 2021 | 31 December 2020 | 30 June 2021 | 31 December 2020 |
| Consolidated | Consolidated | Company | Company | ||
| Current assets | |||||
| Cash at bank and on hand | 4(1) | 63,426,726 | 81,210,482 | 31,071,492 | 49,240,180 |
| Financial assets held for trading | 4(2) | 4,223,668 | 28,239,601 | 401,924 | 16,614,658 |
| Derivative financial assets | 289,883 | 420,494 | - | - | |
| Notes receivable | 4(3) | 5,852,283 | 5,304,510 | - | - |
| Accounts receivable | 4(4) | 27,591,834 | 22,978,363 | - | - |
| Receivables financing | 4(6) | 15,394,251 | 13,901,856 | - | - |
| Advances to suppliers | 4(7) | 3,519,045 | 2,763,710 | 83,398 | 45,306 |
| Contract assets | 4(8) | 4,354,173 | 3,236,848 | - | - |
| Loans and advances | 4(9) | 18,488,600 | 16,469,069 | - | - |
| Other receivables | 4(5), 17(1) | 2,451,771 | 2,973,945 | 34,227,559 | 28,318,670 |
| Inventories | 4(10) | 34,499,525 | 31,076,529 | - | - |
| Current portion of non-current assets | 4(11) | 7,619,835 | - | 7,008,174 | - |
| Other current assets | 4(12) | 71,928,285 | 33,079,918 | 63,274,892 | 20,533,745 |
| Total current assets | 259,639,879 | 241,655,325 | 136,067,439 | 114,752,559 | |
| Non-current assets | |||||
| Other debt investments | 4(13) | 16,764,387 | 21,456,155 | 14,946,193 | 20,064,155 |
| Long-term receivables | 4(14) | 1,112,523 | 981,623 | - | - |
| Loans and advances | 4(9) | 980,144 | 1,113,501 | - | - |
| Long-term equity investments | 4(15), 17(2) | 3,016,023 | 2,901,337 | 62,040,698 | 54,991,161 |
| Investments in other equity instruments | 46,857 | 46,651 | - | - | |
| Other non-current financial assets | 4(16) | 4,154,677 | 3,360,849 | 691,283 | 80,937 |
| Investment properties | 899,282 | 405,559 | 455,379 | 476,839 | |
| Fixed assets | 4(17) | 22,554,094 | 22,239,214 | 673,173 | 749,835 |
| Construction in progress | 4(18) | 1,586,983 | 1,477,302 | 312,311 | 204,304 |
| Right-of-use assets | 4(19) | 2,142,567 | 15,746 | ||
| Intangible assets | 4(20) | 17,837,150 | 15,422,393 | 677,078 | 684,997 |
| Goodwill | 4(21) | 29,331,780 | 29,557,218 | - | - |
| Long-term prepaid expenses | 4(22) | 1,276,388 | 1,300,962 | 81,568 | 97,078 |
| Deferred tax assets | 4(23) | 7,636,799 | 7,208,635 | 286,975 | 287,360 |
| Other non-current assets | 4(24) | 11,231,669 | 11,255,879 | 10,444,331 | 10,141,031 |
| Total non-current assets | 120,571,323 | 118,727,278 | 90,624,735 | 87,777,697 | |
| TOTAL ASSETS | 380,211,202 | 360,382,603 | 226,692,174 | 202,530,256 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)AS AT 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| LIABILITIES AND SHAREHOLDERS’ EQUITY | Note | 30 June 2021 | 31 December 2020 | 30 June 2021 | 31 December 2020 |
| Consolidated | Consolidated | Company | Company | ||
| Current liabilities | |||||
| Short-term borrowings | 4(27) | 11,946,120 | 9,943,929 | - | 799,314 |
| Customer deposits and deposits from banks and other financial institutions | 19,144 | 87,535 | - | - | |
| Derivative financial liabilities | 123,021 | 161,225 | - | - | |
| Notes payable | 4(28) | 31,022,593 | 28,249,939 | - | - |
| Accounts payable | 4(29) | 64,464,041 | 53,930,261 | - | - |
| Contract liabilities | 4(30) | 20,334,320 | 18,400,922 | - | - |
| Employee benefits payable | 4(31) | 5,556,839 | 6,954,822 | 557,954 | 562,954 |
| Taxes payable | 4(32) | 4,748,242 | 5,758,058 | 734,455 | 1,326,219 |
| Other payables | 4(33) | 4,780,388 | 4,501,391 | 161,366,629 | 123,120,354 |
| Current portion of non-current liabilities | 4(34) | 1,458,314 | 6,310,181 | 9,988 | 4,000,000 |
| Other current liabilities | 4(35) | 52,196,841 | 49,852,239 | 3,023,255 | 3,048,794 |
| Total current liabilities | 196,649,863 | 184,150,502 | 165,692,281 | 132,857,635 | |
| Non-current liabilities | |||||
| Long-term borrowings | 4(36) | 49,389,407 | 42,827,287 | 12,600,000 | 5,800,000 |
| Lease liabilities | 4(37) | 1,430,257 | 5,835 | ||
| Long-term payables | - | 13,260 | - | - | |
| Provisions | 384,416 | 298,110 | - | - | |
| Deferred income | 1,042,276 | 779,729 | - | - | |
| Long-term employee benefits payable | 4(38) | 1,787,793 | 2,159,675 | - | - |
| Deferred tax liabilities | 4(23) | 5,382,413 | 5,223,954 | 58,383 | 67,792 |
| Other non-current liabilities | 4(39) | 689,991 | 692,986 | - | - |
| Total non-current liabilities | 60,106,553 | 51,995,001 | 12,664,218 | 5,867,792 | |
| Total liabilities | 256,756,416 | 236,145,503 | 178,356,499 | 138,725,427 | |
| Shareholders’ equity | |||||
| Share capital | 4(40) | 7,048,148 | 7,029,976 | 7,048,148 | 7,029,976 |
| Capital surplus | 4(42) | 23,622,222 | 22,488,105 | 30,319,522 | 29,123,547 |
| Less: Treasury stock | 4(41) | (15,223,611) | (6,094,347) | (15,223,611) | (6,094,347) |
| Other comprehensive income | 4(43) | (1,796,656) | (1,549,003) | 2,917 | (16,009) |
| General risk reserve | 587,984 | 587,984 | - | - | |
| Special reserve | 14,141 | 12,730 | - | ||
| Surplus reserve | 4(44) | 7,966,362 | 7,966,362 | 7,966,362 | 7,966,362 |
| Undistributed profits | 4(45) | 91,021,819 | 87,074,453 | 18,222,337 | 25,795,300 |
| Total equity attributable to shareholders of the Company | 113,240,409 | 117,516,260 | 48,335,675 | 63,804,829 | |
| Minority interests | 10,214,377 | 6,720,840 | - | - | |
| Total shareholders’ equity | 123,454,786 | 124,237,100 | 48,335,675 | 63,804,829 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 380,211,202 | 360,382,603 | 226,692,174 | 202,530,256 |
| 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | For the six months ended 30 June 2021 | For the six months ended 30 June 2020 | For the six months ended 30 June 2021 | For the six months ended 30 June 2020 | ||
| Consolidated | Consolidated | Company | Company | ||||
| Total revenue | 174,846,895 | 139,719,278 | 940,047 | 899,031 | |||
| Including: Operating revenue | 4(46), 17(3) | 173,809,565 | 139,067,022 | 940,047 | 899,031 | ||
| Interest income | 4(47) | 1,037,174 | 652,099 | - | - | ||
| Fee and commission income | 156 | 157 | - | - | |||
| Total operating cost | (157,800,033) | (124,653,986) | 564,220 | 385,840 | |||
| Including: Cost of sales | 4(46) | (133,436,369) | (103,523,657) | (21,460) | (21,392) | ||
| Interest costs | 4(47) | (41,149) | (78,092) | - | - | ||
| Fee and commission expenses | (3,400) | (5,332) | - | - | |||
| Taxes and surcharges | 4(48) | (833,157) | (754,845) | (23,317) | (21,822) | ||
| Selling and distribution expenses | 4(49) | (16,241,154) | (12,631,101) | - | - | ||
| General and administrative expenses | 4(50) | (4,251,893) | (4,102,149) | (461,254) | (244,510) | ||
| Research and development expenses | 4(51) | (5,314,637) | (4,410,737) | - | - | ||
| Financial income | 4(52) | 2,321,726 | 851,927 | 1,070,251 | 673,564 | ||
| Including: Interest expenses | (681,864) | (637,348) | (1,091,508) | (879,011) | |||
| Interest income | 2,501,014 | 1,674,669 | 2,034,935 | 1,555,529 | |||
| Add: | Other income | 4(58) | 578,265 | 580,359 | 96,380 | 123,400 | |
| Investment income | 4(56), 17(4) | 1,080,896 | 1,088,547 | 2,233,559 | 6,211,279 | ||
| Including: Investment income from associates and joint ventures | 309,013 | 261,136 | 142,640 | 134,639 | |||
| Including: Profits or losses arising from derecognition of financial assets measured at amortised costs | - | - | - | - | |||
| Gains/(Losses) on changes in fair value | 4(55) | (801,944) | 247,700 | (250,070) | 199,470 | ||
| Asset impairment losses | 4(53) | (178,230) | (133,419) | - | - | ||
| Credit impairment losses | 4(54) | (154,460) | (461,998) | (1,081) | (6,808) | ||
| Losses on disposal of assets | 4(57) | (17,833) | (11,070) | (964) | 140 | ||
| Operating profit | 17,553,556 | 16,375,411 | 3,582,091 | 7,812,352 | |||
| Add: | Non-operating income | 176,544 | 108,692 | 26,929 | 9,490 | ||
| Less: Non-operating expenses | (105,716) | (88,032) | (48,764) | (71,527) | |||
| Total profit | 17,624,384 | 16,396,071 | 3,560,256 | 7,750,315 | |||
| Less: Income tax expenses | 4(59) | (2,407,939) | (2,329,061) | (71,539) | (115,433) | ||
| Net profit | 15,216,445 | 14,067,010 | 3,488,717 | 7,634,882 | |||
| (1) Classified by continuity of operations | |||||||
| Net profit from continuing operations | 15,216,445 | 14,067,010 | 3,488,717 | 7,634,882 | |||
| Net profit from discontinued operations | - | - | - | - | |||
| (2) Classified by ownership of the equity | |||||||
| Attributable to shareholders of the Company | 15,009,046 | 13,928,295 | 3,488,717 | 7,634,882 | |||
| Minority interests | 207,399 | 138,715 | - | - | |||
| Other comprehensive income, net of tax | (225,356) | (510,722) | 18,926 | (7,410) | |||
| Other comprehensive income attributable to equity owners of the Company, net of tax | (247,653) | (295,974) | 18,926 | (7,410) | |||
| (1) Other comprehensive income items which will not be reclassified subsequently to profit or loss | 121,268 | (55,359) | - | - | |||
| 1) Changes arising from remeasurement of defined benefit plan | 120,835 | (55,359) | - | - | |||
| 2) Changes in fair value of investments in other equity instruments | 433 | - | - | - | |||
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | (368,921) | (240,615) | 18,926 | (7,410) | |||
| 1) Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | 24,624 | (8,721) | 18,926 | (7,410) | |||
| 2) Cash flow hedging reserve | (359,040) | 79,279 | - | - | |||
| 3) Differences on translation of foreign currency financial statements | (34,505) | (311,173) | - | - | |||
| Other comprehensive income attributable to minority shareholders, net of tax | 22,297 | (214,748) | - | - | |||
| Total comprehensive income | 14,991,089 | 13,556,288 | 3,507,643 | 7,627,472 | |||
| Attributable to equity owners of the Company | 14,761,393 | 13,632,321 | 3,507,643 | 7,627,472 | |||
| Attributable to minority interests | 229,696 | (76,033) | - | - | |||
| Earnings per share: | |||||||
| (1) Basic earnings per share | 4(60) | 2.17 | 2.01 | Not applicable | Not applicable | ||
| (2) Diluted earnings per share | 4(60) | 2.16 | 2.01 | 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | For the six months ended 30 June 2021 | For the six months ended 30 June 2020 | For the six months ended 30 June 2021 | For the six months ended 30 June 2020 |
| Consolidated | Consolidated | Company | Company | ||
| 1. Cash flows from operating activities | |||||
| Cash received from sales of goods or rendering of services | 151,628,820 | 117,528,304 | - | - | |
| Net increase in customer deposits and deposits from banks and other financial institutions | - | 458 | - | - | |
| Net decrease in deposits with the Central Bank, banks and other financial institutions | 1,167,441 | 57,283 | - | - | |
| Cash received from interest, fee and commission | 973,445 | 675,825 | - | - | |
| Refund of taxes and surcharges | 4,567,109 | 3,212,805 | - | - | |
| Cash received relating to other operating activities | 4(61)(a) | 3,795,388 | 2,306,941 | 39,536,448 | 22,962,990 |
| Sub-total of cash inflows | 162,132,203 | 123,781,616 | 39,536,448 | 22,962,990 | |
| Cash paid for goods and services | (99,315,226) | (67,151,645) | - | - | |
| Net increase in loans and advances | (1,947,468) | (1,827,796) | - | - | |
| Net decrease in customer deposits and deposits from banks and other financial institutions | (68,391) | - | - | - | |
| Cash paid for interest, fee and commission | (45,029) | (84,445) | - | - | |
| Cash paid to and on behalf of employees | (17,098,011) | (14,977,605) | (10,281) | (14,713) | |
| Payments of taxes and surcharges | (7,493,467) | (6,423,500) | (419,819) | (286,463) | |
| Cash paid relating to other operating activities | 4(61)(b) | (15,988,201) | (14,911,134) | (6,307,651) | (1,259,268) |
| Sub-total of cash outflows | (141,955,793) | (105,376,125) | (6,737,751) | (1,560,444) | |
| Net cash flows from operating activities | 4(61)(c) | 20,176,410 | 18,405,491 | 32,798,697 | 21,402,546 |
| 2. Cash flows from investing activities | |||||
| Cash received from disposal of investments | 76,492,455 | 57,675,750 | 42,246,499 | 42,310,300 | |
| Cash received from returns on investments | 3,033,825 | 2,872,302 | 3,122,815 | 7,820,383 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 79,031 | 12,502 | 2 | 255 | |
| Net cash received from disposal of subsidiaries and other business units | 69,824 | 7,679 | - | - | |
| Cash received relating to other investing activities | - | - | - | - | |
| Sub-total of cash inflows | 79,675,135 | 60,568,233 | 45,369,316 | 50,130,938 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | (3,447,518) | (2,060,864) | (167,543) | (96,957) | |
| Cash paid to acquire investments | (65,061,652) | (82,911,329) | (57,395,753) | (65,660,000) | |
| Net cash paid to acquire subsidiaries and other business units | (2,028,912) | (540,395) | - | - | |
| Cash paid relating to other investing activities | - | - | - | - | |
| Sub-total of cash outflows | (70,538,082) | (85,512,588) | (57,563,296) | (65,756,957) | |
| Net cash flows from investing activities | 9,137,053 | (24,944,355) | (12,193,980) | (15,626,019) | |
| 3. Cash flows from financing activities | |||||
| Cash received from capital contributions | 881,832 | 1,509,026 | 859,332 | 1,509,026 | |
| Including: Cash received from capital contributions by minority shareholders of subsidiaries | 22,500 | - | - | - | |
| Cash received from borrowings | 11,292,776 | 9,934,879 | 6,800,000 | 799,314 | |
| Cash received from issuance of short-term financing bonds | 2,999,629 | 9,998,771 | 2,999,629 | 9,998,771 | |
| Cash received relating to other financing activities | 24,948 | 5,500 | - | - | |
| Sub-total of cash inflows | 15,199,185 | 21,448,176 | 10,658,961 | 12,307,111 | |
| Cash repayments of borrowings | (6,893,639) | (1,539,392) | (4,799,314) | (350,064) | |
| 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 | (11,889,373) | (11,853,774) | (12,234,993) | (11,932,163) | |
| Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (128,450) | (162,955) | - | - | |
| Cash payments relating to other financing activities | (9,975,752) | (1,021,859) | (9,512,267) | (936,777) | |
| Sub-total of cash outflows | (31,758,764) | (14,415,025) | (29,546,574) | (13,219,004) | |
| Net cash flows from financing activities | (16,559,579) | 7,033,151 | (18,887,613) | (911,893) | |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | (233,775) | 76,254 | - | - | |
| 5. Net increase in cash and cash equivalents | 12,520,109 | 570,541 | 1,717,104 | 4,864,634 | |
| Add: Cash and cash equivalents at the beginning of the period | 23,548,508 | 30,441,760 | 16,595,063 | 12,408,650 | |
| 6. Cash and cash equivalents at the end of the period | 4(61)(d) | 36,068,617 | 31,012,301 | 18,312,167 | 17,273,284 |
| 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| 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 | |||
| Ending balance of 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 period | 18,172 | 1,134,117 | (9,129,264) | (247,653) | - | 1,411 | - | 3,947,366 | 3,493,537 | (782,314) |
| (1) Total comprehensive income | - | - | - | (247,653) | - | - | - | 15,009,046 | 229,696 | 14,991,089 |
| (2) Capital contribution and withdrawal by shareholders | 18,172 | 1,180,220 | (9,129,264) | - | - | - | - | - | 3,298,041 | (4,632,831) |
| 1) Capital contribution by shareholders | 20,699 | 666,744 | - | - | - | - | - | - | - | 687,443 |
| 2) Business combinations | - | - | - | - | - | - | - | - | 3,147,807 | 3,147,807 |
| 3) Share-based payments included in shareholders’ equity | - | 613,685 | - | - | - | - | - | - | 31,756 | 645,441 |
| 4) Others | (2,527) | (100,209) | (9,129,264) | - | - | - | - | - | 118,478 | (9,113,522) |
| (3) Profit distribution | - | - | - | - | - | - | - | (11,061,680) | (47,833) | (11,109,513) |
| 1) Appropriation to surplus reserve | - | - | - | - | - | - | - | - | - | - |
| 2) Appropriation to general risk reserve | - | - | - | - | - | - | - | - | - | - |
| 3) Profit distribution to shareholders | - | - | - | - | - | - | - | (11,061,680) | (47,833) | (11,109,513) |
| 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 | - | - | - | - | - | 1,411 | - | - | 353 | 1,764 |
| 1) Appropriation in the current period | - | - | - | - | - | 1,422 | - | - | 356 | 1,778 |
| 2) Utilisation in the current period | - | - | - | - | - | (11) | - | - | (3) | (14) |
| (6) Others | - | (46,103) | - | - | - | - | - | - | 13,280 | (32,823) |
| Ending balance of the current period | 7,048,148 | 23,622,222 | (15,223,611) | (1,796,656) | 587,984 | 14,141 | 7,966,362 | 91,021,819 | 10,214,377 | 123,454,786 |
| 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’ EQUITY (CONT’D)FOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Amount in 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 | |||
| Ending balance of prior year | 6,971,900 | 19,640,313 | (3,759,732) | (711,554) | 366,947 | - | 6,447,658 | 72,713,631 | 5,826,934 | 107,496,097 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,971,900 | 19,640,313 | (3,759,732) | (711,554) | 366,947 | 6,447,658 | 72,713,631 | 5,826,934 | 107,496,097 | |
| Movements for the current year | 58,076 | 2,847,792 | (2,334,615) | (837,449) | 221,037 | 12,730 | 1,518,704 | 14,360,822 | 893,906 | 16,741,003 |
| (1) Total comprehensive income | - | - | - | (837,449) | - | - | - | 27,222,969 | (56,787) | 26,328,733 |
| (2) Capital contribution and withdrawal by shareholders | 58,076 | 2,472,429 | (2,334,615) | - | - | 13,618 | - | - | 1,291,135 | 1,500,643 |
| 1) Capital contribution by shareholders | 63,801 | 2,157,530 | - | - | - | - | - | 89,465 | 2,310,796 | |
| 2) Business combinations | - | - | - | - | - | 13,618 | - | - | 1,663,792 | 1,677,410.00 |
| 3) Share-based payments included in shareholders’ equity | - | 508,256 | - | - | - | - | - | - | 55,314 | 563,570 |
| 4) Others | (5,725) | (193,357) | (2,334,615) | - | - | - | - | - | (517,436) | (3,051,133) |
| (3) Profit distribution | - | - | - | - | 221,037 | - | 1,518,704 | (12,862,147) | (417,486) | (11,539,892) |
| 1) Appropriation to surplus reserve | - | - | - | - | - | - | 1,518,704 | (1,518,704) | - | - |
| 2) Appropriation to general risk reserve | - | - | - | - | 221,037 | - | - | (221,037) | - | - |
| 3) Profit distribution to shareholders | - | - | - | - | - | - | - | (11,122,406) | (417,486) | (11,539,892) |
| 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 | - | - | - | - | - | (888) | - | - | (222) | (1,110) |
| 1) Appropriation in the current period | - | - | - | - | - | 165 | - | - | 41 | 206 |
| 2) Utilisation in the current period | - | - | - | - | - | (1,053) | - | - | (263) | (1,316) |
| (6) Others | - | 375,363 | - | - | - | - | - | - | 77,266 | 452,629 |
| Ending balance 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 |
| 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| 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 | |
| Ending balance of 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 period | 18,172 | 1,195,975 | (9,129,264) | 18,926 | - | - | (7,572,963) | (15,469,154) |
| (1) Total comprehensive income | - | - | - | 18,926 | - | - | 3,488,717 | 3,507,643 |
| (2) Capital contribution and withdrawal by shareholders | 18,172 | 1,195,682 | (9,129,264) | - | - | - | - | (7,915,410) |
| 1) Capital contribution by shareholders | 20,699 | 666,744 | - | - | - | - | - | 687,443 |
| 2) Capital contribution by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3) Share-based payments included in shareholders’ equity | - | 629,147 | - | - | - | - | - | 629,147 |
| 4) Others | (2,527) | (100,209) | (9,129,264) | - | - | - | - | (9,232,000) |
| (3) Profit distribution | - | - | - | - | - | - | (11,061,680) | (11,061,680) |
| 1) Appropriation to surplus reserve | - | - | - | - | - | - | - | - |
| 2) Profit distribution to shareholders | - | - | - | - | - | - | (11,061,680) | (11,061,680) |
| 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) Utilisation in the current year | - | - | - | - | - | - | - | - |
| (6) Others | - | 293 | - | - | - | - | - | 293 |
| Ending balance of the current period | 7,048,148 | 30,319,522 | (15,223,611) | 2,917 | - | 7,966,362 | 18,222,337 | 48,335,675 |
| 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’ EQUITY (CONT’D)FOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Amount in prior year | |||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profits | Total shareholders’ equity | |
| Ending balance of prior year | 6,971,900 | 26,592,959 | (3,759,732) | 1,735 | - | 6,447,658 | 23,249,372 | 59,503,892 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,971,900 | 26,592,959 | (3,759,732) | 1,735 | - | 6,447,658 | 23,249,372 | 59,503,892 |
| Movements for the current year | 58,076 | 2,530,588 | (2,334,615) | (17,744) | - | 1,518,704 | 2,545,928 | 4,300,937 |
| (1) Total comprehensive income | - | - | - | (17,744) | - | - | 15,187,038 | 15,169,294 |
| (2) Capital contribution and withdrawal by shareholders | 58,076 | 2,530,340 | (2,334,615) | - | - | - | - | 253,801 |
| 1) Capital contribution by shareholders | 63,801 | 2,157,530 | - | - | - | - | - | 2,221,331 |
| 2) Capital contribution by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3) Share-based payments included in owners’ equity | - | 566,167 | - | - | - | - | 566,167 | |
| 4) Others | (5,725) | (193,357) | (2,334,615) | - | - | - | - | (2,533,697) |
| (3) Profit distribution | - | - | - | - | - | 1,518,704 | (12,641,110) | (11,122,406) |
| 1) Appropriation to surplus reserve | - | - | - | - | - | 1,518,704 | (1,518,704) | - |
| 2) Profit distribution to shareholders | - | - | - | - | - | - | (11,122,406) | (11,122,406) |
| 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) Utilisation in the current year | - | - | - | - | - | - | - | - |
| (6) Others | - | 248 | - | - | - | - | - | 248 |
| Ending balance of the current year | 7,029,976 | 29,123,547 | (6,094,347) | (16,009) | - | 7,966,362 | 25,795,300 | 63,804,829 |
| 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 2021(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 businessinvolving customer deposits, interbank lendings and borrowings, consumption credits, buyer’scredits and finance leases.
The Company was set up by the Council of Trade Unions of GD Midea Group Co., and wasregistered in Market Safety Supervision Bureau of Shunde District, Foshan on 7 April 2000,with its headquarters located in Foshan, Guangdong. On 30 August 2012, the 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 2021, the Company’s share capital is RMB 7,048,148,178, and the total numberof shares in issue is 7,048,148,178, of which 160,823,545 shares are restricted tradable Ashares and 6,887,324,633 shares are unrestricted tradable A shares.
The detailed information of major subsidiaries included in the consolidation scope in thecurrent year is set out in Notes 5 and 6. Subsidiaries newly included in the consolidation scopevia acquisition in the current year mainly include Hitachi Compressor (Thailand) Ltd., andBeijing Wandong Medical Technology Co., Ltd. and its subsidiaries (“Wandong Medical”), andare detailed in Note 5(1); subsidiaries newly included in the consolidation scope viaestablishment in the current year are detailed in Note 5(2)(a); subsidiaries no longer includedin the consolidation scope in the current year are detailed in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directors on30 August 2021.
2 Summary of significant accounting policies and accounting estimates
The Group determines specific accounting policies and accounting estimates based on thefeatures of production and operation, mainly including the measurement of expected creditloss (ECL) on receivables and contract assets (Note 2(9(a))), valuation method of inventory(Note 2(11)), depreciation of fixed assets and amortisation of intangible assets (Note 2(14),
(17)), impairment of long-term assets (Note 2(19)) and recognition of revenue (Note 2(26)).
Key judgements and critical accounting estimates and key assumptions applied by the Groupon the determination of significant accounting policies are set out in Note 2(31).
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard forBusiness Enterprises - Basic Standard, and the specific accounting standards and otherrelevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequentperiods (hereinafter collectively referred to as the “Accounting Standards for BusinessEnterprises” or “CASs”) and the disclosure requirements in the Preparation Convention ofInformation Disclosure by Companies Offering Securities to the Public No. 15 - General Ruleson Financial Reporting issued by the China Securities Regulatory Commission (“CSRC”).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 2021 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 2021and their financial performance, cash flows and other information for the six months thenended.
(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 presentedin RMB.
(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 goodwillgenerated due to the combination) are based on the carrying amount in the ultimate controller’sconsolidated financial statements. The difference between the carrying amount of the netassets obtained by the Group and the carrying amount of the consideration paid for thecombination is treated as an adjustment to capital surplus (share premium). If the capitalsurplus (share premium) is not sufficient to absorb the difference, the remaining balance isadjusted against retained earnings. Costs directly attributable to the combination are includedin profit or loss in the period in which they are incurred. Transaction costs associated with theissue of equity or debt securities for the business combination are included in the initiallyrecognised amounts of the equity or debt securities.
(b) Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the Group in a businesscombination are measured at fair value at the acquisition date. Where the cost of thecombination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognised as goodwill; where the cost of combination is lower thanthe acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference isrecognised in profit or loss for the current period. Costs directly attributable to the combinationare included in profit or loss in the period in which they are incurred. Transaction costsassociated with the issue of equity or debt securities for the business combination are includedin the initially recognised amounts of the equity or debt securities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 commoncontrol, previously-held equity in the acquiree is remeasured at its fair value at the acquisitiondates in the consolidated financial statements, and the difference between its fair value andcarrying amount is included in investment income for the current period. Where thepreviously-held equity in the acquiree involves other comprehensive income under equitymethod and owners’ equity changes other than those arising from the net profit or loss, othercomprehensive income and profit distribution, the related other comprehensive income andother owners’ equity changes are transferred into income for the current period to which theacquisition dates belong, excluding those arising from changes in the investee’sremeasurements of net liability or net asset related to the defined benefit plan. The excess ofthe sum of fair value of the previously-held equity and fair value of the consideration paid at theacquisition dates over share of fair value of identifiable net assets acquired from the subsidiaryis recognised as goodwill.
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company andall of its subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and arede-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 subsidiariesare adjusted based on the fair value of the identifiable net assets at the acquisition date.
All significant intra-group balances, transactions and unrealised profits are eliminated in theconsolidated financial statements. The portion of subsidiaries’ shareholders’ equity and theportion of subsidiaries’ net profits and losses and comprehensive incomes for the period notattributable to the Company are recognised as minority interests, net profit attributed tominority interests and total comprehensive income attributed to minority interests andpresented separately in the consolidated financial statements under shareholders’ equity, netprofit and total comprehensive income respectively. Where the loss for the current periodattributable to the minority shareholders of the subsidiaries exceeds the share of the minorityinterests in the opening balance of owners’ equity, the excess is deducted against minorityinterests. Unrealised profits and losses resulting from the sale of assets by the Company to itssubsidiaries are fully eliminated against net profit attributable to shareholders of the parentcompany. Unrealised profits and losses resulting from the sale of assets by a subsidiary to theCompany are eliminated and allocated between net profit attributable to shareholders of theparent company and net profit attributable to minority interests in accordance with theallocation proportion of the parent company in the subsidiary. Unrealised profits and lossesresulting from the sale of assets by one subsidiary to another are eliminated and allocatedbetween net profit attributable to shareholders of the parent company and net profit attributableto minority interests in accordance with the allocation proportion of the parent company in thesubsidiary. If the accounting treatment of a transaction is inconsistent in the financialstatements at the Group level and at the Company or its subsidiary level, adjustment will bemade from the perspective of the Group.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 translatedinto functional currency using the spot exchange rates on the balance sheet date. Exchangedifferences arising from these translations are recognised in profit or loss for the current period,except for those attributable to foreign currency borrowings that have been taken outspecifically for acquisition or construction of qualifying assets, which are capitalised as part ofthe cost of those assets. Non-monetary items denominated in foreign currencies that aremeasured at historical costs are translated at the balance sheet date using the spot exchangerates at the date of the transactions. The effect of exchange rate changes on cash is presentedseparately in the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated 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 business model for managing the financial assets and the contractual cash flowcharacteristics of the financial assets, financial assets are classified as: (1) financial assets atamortised 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 2021(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, therelated transaction costs of which are recognised directly in profit or loss for the current period.Accounts receivable or notes receivable arising from sales of products or rendering of services(excluding or without regard to significant financing components) are initially recognised at theconsideration that is entitled to be charged by the Group as expected.
(i-1) Debt instruments
The debt instruments held by the Group refer to the instruments that meet the definition offinancial liabilities from the perspective of the issuer, and are measured in the following threeways:
Measured at amortised cost:
The objective of the Group’s business model is to hold the financial assets to collect thecontractual cash flows, and the contractual cash flow characteristics are consistent with 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. Suchfinancial assets mainly comprise cash at bank and on hand, loans and advances, notesreceivable, accounts receivable, other receivables, debt investments and long-termreceivables, etc. Debt investments and long-term receivables that are due within one year(inclusive) as from the balance sheet date are included in the current portion of non-currentassets; debt investments with maturities of no more than one year (inclusive) at the time ofacquisition are included in other current assets.
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 gainsor losses, foreign exchange gains and losses, and interest income calculated using theeffective interest method which are recognised in profit or loss for the current period. Suchfinancial assets mainly include receivables financing, other debt investments, etc. Other debtinvestments of the Group that are due within one year (inclusive) as from the balance sheetdate are included in the current portion of non-current assets; other debt investments withmaturities no more than one year (inclusive) at the time of acquisition are included in othercurrent assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 valuethrough profit or loss. At initial recognition, the Group designates a portion of financial assets asat fair value through profit or loss to eliminate or significantly reduce an accounting mismatch.Financial assets that are due over one year as from the balance sheet date and are expectedto be held over one year are included in other non-current financial assets. Others are includedin financial assets held for trading.
(i-2) Equity instruments
Investments in equity instruments, over which the Group has no control, joint control orsignificant influence, are measured at fair value through profit or loss under financial assetsheld for trading; investments in equity instruments expected to be held over one year as fromthe balance sheet date are included in other non-current financial assets.
In addition, a portion of certain investments in equity instruments not held for trading aredesignated as financial assets at fair value through other comprehensive income under otherinvestments in equity instruments. The relevant dividend income of such financial assets isrecognised 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 the fair value is positive andas liabilities when the fair value is negative.
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 andmeets the requirement for it, and if so, the nature of the item being hedged. For derivativefinancial instruments that are not designated as hedging instruments and fail to meetrequirements on hedging instruments, including those held for the purpose of providinghedging against specific risks in interest rate and foreign exchange but not conforming withrequirements of hedge accounting, the changes in fair value are recorded in gains or lossesarising from changes in fair value in the consolidated income statement.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 isrecognised in profit or loss for the current period. Where the hedge is a forecast transactionwhich subsequently results in the recognition of a non-financial asset or liability, the amountoriginally recognised in other comprehensive income is transferred and included in the initiallyrecognised amount of the asset or liability. For cash flow hedge beyond the foregoing scope,the amount originally recognised in other comprehensive income is transferred and included inprofit or loss for the current period during the same time in which the profit or loss is influencedby the hedged expected cash flow. However, if all or part of net loss recognised directly in othercomprehensive income will not be recovered in future accounting periods, the amount notexpected to be recovered should be transferred to profit or loss for the current period. Whenthe Group revokes the designation of a hedge, a hedging instrument expires or is sold,terminated or exercised, or the hedge no longer meets the criteria for hedge accounting, theGroup will discontinue the hedge accounting treatments prospectively. Where the Groupdiscontinues the hedge accounting treatment for cash flow hedging, for hedged future cashflows that will still happen, the accumulated gains or losses that have been recognised in othercomprehensive income are retained and subject to accounting treatment under the subsequenttreatment method of aforesaid cash flow hedging reserve; for hedged future cash flows that theforecast transaction will never happen, the accumulated gains or losses that have beenrecognised in other comprehensive income are transferred immediately and included in profitor loss for the current period.
(ii) Impairment
Loss provision for financial assets at amortised cost, investments in debt instruments at fairvalue through other comprehensive income, as well as contract assets and 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
As at each balance sheet date, the ECL of financial instruments at different stages aremeasured respectively. 12-month ECL provision is recognised for financial instruments inStage 1 that have not had a significant increase in credit risk since initial recognition; lifetimeECL provision is recognised for financial instruments in Stage 2 that have had a significantincrease in credit risk yet without credit impairment since initial recognition; and lifetime ECLprovision is recognised for financial instruments in Stage 3 that have had credit impairmentsince initial recognition.
For the financial instruments with lower credit risk on the balance sheet date, the Groupassumes there is no significant increase in credit risk since initial recognition and recognisesthe 12-month ECL provision.
For the financial instruments in Stage 1, Stage 2 and with lower credit risk, the Groupcalculates the interest income by applying the effective interest rate to the gross carryingamount (before deduction of the impairment provision). For the financial instruments in Stage3, the interest income is calculated by applying the effective interest rate to the amortised cost(after deduction of the impairment provision from the gross carrying amount).
For notes receivable, accounts receivable, receivables financing and contract assets arisingfrom sales of goods and rendering of services in the ordinary course of operating activities, theGroup recognises the lifetime ECL provision regardless of whether there exists a significantfinancing component. Since contract assets are related to work in progress without invoice,essentially, their risk characteristics are the same as the accounts receivable of similarcontracts. Therefore, the Group believes that the ECL rate of accounts receivable is anapproximation to that of contract assets.
In case the ECL of an individually assessed financial asset cannot be evaluated withreasonable cost, the Group divides the receivables and contract assets into certain groupingsbased on credit risk characteristics, then pursuant to which, calculates the ECL. Basis andprovision method for determining groupings are as follows:
| Notes receivable - Bank acceptance notes | Bank credit risk grouping |
| Notes receivable - Trade acceptance notes | Domestic/overseas business grouping |
| Accounts receivable | Domestic/overseas business grouping |
| Contract assets | Domestic/overseas business grouping |
| Other receivables | Security deposit/guarantee payables grouping |
| Long-term receivables | Finance lease payable grouping |
| Loans and advances | Loans business grouping |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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)
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculates theECL of notes receivable and receivables financing that are classified into groupings withconsideration to historical credit losses experience, current conditions and forecasts of futureeconomic conditions.
With consideration to historical credit loss experience, current conditions and forecasts offuture economic conditions, the Group prepares the cross-reference between the number ofoverdue days of accounts receivable and the lifetime ECL rate, and calculates the ECL ofaccounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime ECL rate,calculates the ECL of other receivables, loans and advances, and long-term receivables thatare classified into groupings with consideration to historical credit losses experience, thecurrent conditions and forecasts of future economic conditions.
The Group recognises the loss provision made or reversed into profit or loss for the currentperiod. For debt instruments held at fair value through other comprehensive income, 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 thefinancial asset, although the Group neither transfers nor retains substantially all the risks andrewards of ownership 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.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 (Cont’d)
Financial liabilities of the Group mainly comprise financial liabilities at amortised cost, includingnotes payable, accounts payable, other payables, borrowings and short-term financing bondspayable in other current liabilities, customer deposits and deposits from banks and otherfinancial institutions, borrowings from the Central Bank, long-term payables, etc. Such financialliabilities are initially recognised at fair value, net of transaction costs incurred, andsubsequently measured using the effective interest method. Financial liabilities that are duewithin one year (inclusive) are classified as current liabilities; those with maturities over oneyear but are due within one year (inclusive) as from the balance sheet date are classified ascurrent portion of non-current liabilities. Others are classified as non-current liabilities.
A financial liability is derecognised or partly derecognised when the underlying presentobligation is discharged or partly discharged. The difference between the carrying amount ofthe derecognised part of the financial liability and the consideration paid is recognised in profitor loss 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) Receivables
Receivables comprise accounts receivable, other receivables, notes receivable, long-termreceivables, loans and advances, etc. Accounts receivable arising from sale of goods orrendering of services are initially recognised at fair value of the contractual payments from thebuyers or service recipients, and subsequently measured at amortised cost less provision forimpairment using the effective interest method. Provision for impairment of receivables are setout in Note 2(9)(a).
(11) 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11) Inventories (Cont’d)
(b) Costing of inventories
Cost is determined using the first-in, first-out method when issued. The cost of goods in stockand work in progress comprises raw materials, direct labour and systematically allocatedproduction overhead based on the normal production capacity.
(c) Basis for determining net realisable values of inventories and method for making provision for
decline in the value of inventories
Inventories are initially measured at cost. The cost of inventories comprises purchase cost,processing cost and other expenditures to bring the inventories to current site and condition.
On the balance sheet date, inventories are measured at the lower of cost and net realisablevalue.
Net realisable value is determined based on the estimated selling price in the ordinary courseof business, 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 method of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of relatedassets or in profit or loss for the current period.
(12) Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in itssubsidiaries, and the Group’s long-term equity investments in its associates and 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. Anassociates is an investee that the Group has significant influence on their financial andoperating policies.
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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(a) Determination of investment cost
For long-term equity investments acquired through a business combination: for long-termequity investments acquired through a business combination involving enterprises undercommon control, the investment cost shall be the absorbing the party’s share of the carryingamount of owners’ equity of the party being absorbed in the consolidated financial statementsof the ultimate controlling party at the combination date; for long-term equity investmentacquired through a business combination involving enterprises not under common control, theinvestment cost shall be the combination cost.
For business combinations achieved by stages involving enterprises not under commoncontrol, the initial investment cost accounted for using the cost method is the sum of carryingamount of previously-held equity investment and additional investment cost. Forpreviously-held equity accounted for using the equity method, the accounting treatment ofrelated other comprehensive income from disposal of the equity is carried out on a same basiswith the investee’s direct disposal of related assets or liabilities. Owners’ equity, which isrecognised due to changes in investee’s owners’ equity other than those arising from the netprofit or loss, other comprehensive income and profit distribution, is accordingly transferred intoprofit or loss for the period 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 forusing the 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 thepurchase price actually paid; for long-term equity investments acquired by issuing equitysecurities, the initial investment cost shall be the fair value of the equity securities issued.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(b) Subsequent measurement and recognition methods of gains and losses
Long-term equity investments accounted for using the cost method are measured at the initialinvestment cost, and cash dividends or profit distribution declared by the investees arerecognised 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 theGroup’s share of the fair value of the investee’s identifiable net assets at the acquisition date,the difference is included in profit or loss and the cost of the long-term equity investment isadjusted upwards 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 formpart of the investor’s net investment in the investee are reduced to zero. However, if the Grouphas obligations for additional losses and the criteria with respect to recognition of provisionsunder the accounting standards on contingencies are satisfied, the Group continuesrecognising the investment losses and the provisions. The changes of the Group’s share ininvestee’s owner’s equity other than those arising from the net profit or loss, othercomprehensive income and profit distribution are recognised in capital surplus with acorresponding adjustment to the carrying amount of the long-term equity investment. Thecarrying amount of the investment is reduced by the Group’s share of the profit distribution orcash dividends declared by the investees. The unrealised profits or losses arising from thetransactions between the Group and its investees are eliminated in proportion to the Group’sequity interest in the investees, based on which the investment gain or losses are recognised.Any losses resulting from transactions between the Group and its investees attributable toasset 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 making the decisions on financial andoperating policies of the investee, but is not control or joint control over making those policies.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(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(19)).
(13) Investment properties
Investment properties, including land use rights that have already been leased out, buildingsthat are held for the purpose of leasing and buildings that are being constructed or developedfor future 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 residualvalues over their estimated useful lives. The estimated useful lives, the estimated net residualvalues that are expressed as a percentage of cost and the annual depreciation (amortisation)rates of investment properties are as follows:
| Estimated useful lives | Estimated net residual values | Annual depreciation (amortisation) rates | |
| Buildings | 20 to 40 years | 5% | 2.38% to 4.75% |
| Land use rights | 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 estimated useful lives, the estimated net residual values of the investment properties andthe depreciation (amortisation) methods applied are reviewed and adjusted as appropriate ateach year-end.
An investment property is derecognised on disposal or when the investment property ispermanently withdrawn from use and no future economic benefits are expected from itsdisposal. The net amount of proceeds from sale, transfer, retirement or damage of aninvestment property after its carrying amount and related taxes and expenses is recognised inprofit or loss for the current period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(14) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, overseas land, machinery and equipment, motor vehicles,electronic equipment and others.
Fixed assets are recognised when it is probable that the related economic benefits will 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(15).
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed assetwhen it is probable that the associated economic benefits will flow to the Group and the relatedcost can be reliably measured. The carrying amount of the replaced part is derecognised. Allthe other subsequent expenditures are recognised in profit or loss for the period in which theyare incurred.
(b) Depreciation method for 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 ofcost and the annual depreciation rates of the Group’s fixed assets are as follows:
| Categories | Estimated useful lives | Estimated net residual values | Annual depreciation rates |
| Buildings | 15 to 50 years | 0% to 10% | 6.7% to 1.8% |
| Machinery and equipment | 2 to 25 years | 0% to 10% | 50% to 3.8% |
| 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 assetsand the depreciation methods applied to the assets are reviewed, and adjusted as appropriateat each year-end.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(14) Fixed assets (Cont’d)
(c) The carrying amount of a fixed asset is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(19)).
(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 isrecognised in profit or loss for the current period.
(15) 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 depreciation ischarged starting from the following month. The carrying amount of construction in progress isreduced to the recoverable amount when the recoverable amount is below its carrying amount(Note 2(19)).
(16) 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 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(16) Borrowing costs (Cont’d)
For the specific borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of borrowing costs eligible for capitalisation isdetermined by actual interest expenses deducting any interest income earned from depositingthe unused specific borrowings in the banks or any investment income arising on the temporaryinvestment of those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of general borrowing costs eligible for capitalisation isdetermined by applying the weighted average effective interest rate of general borrowings, tothe weighted average of the excess amount of cumulative expenditures on the asset over theamount of specific borrowings. The effective interest rate is the rate at which the future cashflows during the period of expected duration of the borrowings or applicable shorter period arediscounted to the initial amount of the borrowings.
(17) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademarkrights, trademark use rights and others, are measured at cost.
(a) Land use rights
Land use rights are amortised on the straight-line basis over their approved use period 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 acquisitioncosts are recognised as fixed assets.
(b) Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, the period asstipulated by contracts or the beneficial period.
(c) Trademark rights
The trademark rights is measured at cost when acquired and is 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 uponthe carrying amount after deducting the provision for impairment (Note 4(20)).
(d) Trademark use rights
The trademark use rights is 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 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(17) Intangible assets (Cont’d)
(e) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisation methodis performed at each year-end, with adjustment made as appropriate.
(f) Research and development
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 ofproduction processes or products is categorised as expenditure on the research phase, and itis recognised in profit or loss when it is incurred. Expenditure on design and test for the finalapplication of the development of production processes or products before mass production iscategorised as expenditure on the development phase, which is capitalised only if all of thefollowing conditions are 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 beenapproved by 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 of
production processes or products and subsequent mass production; and? Expenditure attributable to the development of production processes or products canbe reliably 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 andtransferred to 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(19)).
(18) Long-term prepaid expenses
Long-term prepaid expenses include the expenditure for improvements to fixed assets heldunder operating leases, and other expenditures that have been incurred but should berecognised as expenses over more than one year in the current and subsequent periods.Long-term prepaid expenses are amortised on the straight-line basis over the expectedbeneficial period and are presented at actual expenditure net of accumulated amortisation.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(19) Impairment of long-term assets
Fixed assets, construction in progress, right-of-use assets, intangible assets with finite usefullives, investment properties measured using the cost model and long-term equity investmentsin subsidiaries, 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 land with permanent ownership aretested at least annually for impairment, irrespective of whether there is any indication that itmay be impaired. If the result of the impairment test indicates that the recoverable amount ofan asset is less than its carrying amount, a provision for impairment and an impairment lossare recognised for the amount by which the asset’s carrying amount exceeds its recoverableamount. The recoverable amount is the higher of an asset’s fair value less costs to sell and thepresent value of the future cash flows expected to be derived from the asset. Provision forasset impairment is determined and recognised on the individual asset basis. If it is notpossible to estimate the recoverable amount of an individual asset, the recoverable amount ofa group of assets to which the asset belongs is determined. A group of assets is the smallestgroup of assets that is able to generate 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. Inconducting the test, the carrying value of goodwill is allocated to the related asset group orgroups of asset groups which are expected to benefit from the synergies of the businesscombination. If the result of the test indicates that the recoverable amount of an asset group ora group of asset groups, including the allocated goodwill, is lower than its carrying amount, thecorresponding impairment loss is recognised. The impairment loss is first deducted from thecarrying amount of goodwill that is allocated to the asset group or group of asset groups, andthen deducted from the carrying amounts of other assets within the asset group or group ofasset groups in proportion to the carrying amounts of assets other than goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the valuerecovered in the subsequent periods.
(20) Employee benefits
Employee benefits 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 benefitsand other long-term employee benefits.
(a) Short-term employee benefits
Short-term employee benefits include wages or salaries, bonus, allowances and subsidies,staff welfare, premiums or contributions on medical insurance, work injury insurance, maternityinsurance, housing funds, labour union funds, 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 acorresponding charge to the profit or loss for the current period or the cost of relevant assets.Non-monetary benefits are measured at fair value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(20) Employee benefits (Cont’d)
(b) Post-employment benefits
The Group classifies post-employment benefit plans as either defined contribution plans ordefined benefit plans. Defined contribution plans are post-employment benefit plans underwhich the Group pays fixed contributions into a separate fund and will have no obligation topay further contributions; and defined benefit plans are post-employment benefit plans otherthan defined contribution plans. During the reporting period, the Group’s defined contributionplans mainly include basic pensions and unemployment insurance, while the defined benefitplans are Wandong Medical, Toshiba Lifestyle Products & Services Corporation (“TLSC”), andKUKA Aktiengesellschaft (“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 the bases and percentage prescribed 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 on 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. Thedefined benefit obligation is calculated annually by independent actuaries using the projectedunit credit method at the interest rate of treasury bonds with similar obligation term andcurrency. Service costs related to supplementary retirement benefits (including current servicecosts, historical service costs and gains or losses on settlement) and net interest arerecognised in profit or loss for the current period or included in the cost of asset, and thechanges arising from remeasurement in net liabilities or net assets of defined benefit plans arerecognised in other comprehensive income.
(c) Termination benefits
The Group provides compensation for terminating the employment relationship withemployees before the end of the employment contracts or as an offer to encourage employeesto accept voluntary redundancy before the end of the employment contracts. The Grouprecognises a liability arising from compensation for termination of the employment relationshipwith employees, with a corresponding charge to profit or loss for the current period at theearlier of the following dates: 1) when the Group cannot unilaterally withdraw an employmenttermination plan or a curtailment proposal; 2) when the Group recognises costs or expensesrelated to a restructuring that involves the payment of termination benefits.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(20) Employee benefits (Cont’d)
(c) Termination benefits (Cont’d)
Early retirement benefits
The Group offers early retirement benefits to those employees who accept early retirementarrangements. The early retirement benefits refer to the salaries and social securitycontributions to be paid to and for the employees who accept voluntary retirement before thenormal retirement date prescribed by the State, as approved by management. The Group paysearly retirement benefits to those early retired employees from the early retirement date untilthe normal retirement date. The Group accounts for the early retirement benefits in accordancewith the treatment for termination benefits, in which the salaries and social securitycontributions to be paid to and for the early retired employees from the off-duty date to thenormal retirement date are recognised as liabilities with a corresponding charge to the profit orloss for the current period. The differences arising from the changes in the respective actuarialassumptions of the early retirement benefits and the adjustments of benefit standards arerecognised in profit or loss in the period in which they occur.
The termination benefits expected to be settled within one year since the balance sheet dateare classified as current liabilities.
(21) General risk reserve
General risk reserve is the reserve appropriated from undistributed profits to cover part ofunidentified potential losses, on the basis of the estimated potential risk value of risk assetsassessed by the standardised approach, which is deducted from recognised provision forimpairment losses on loans. Risk assets include loans and advances, long-term equityinvestments, deposits with banks and other financial institutions and other receivables ofsubsidiaries engaged in financial business.
(22) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved bythe shareholders’ meeting.
(23) Provisions
Provisions for product warranties, onerous contracts and etc. are recognised when the Grouphas a present obligation, it is probable that an outflow of economic benefits will be required tosettle the 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 2021(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) 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 estimateof a 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 toreflect the current best estimate.
The provisions expected to be settled within one year since the balance sheet date areclassified as current liabilities.
(24) Share-based payments
(a) Types of share-based payments
A share-based payment is a transaction in which the Group grants equity instruments orassumes liabilities that are determined based on the price of equity instruments, in exchangefor services rendered by employees. Equity instruments include equity instruments of theCompany, its parent company or other accounting entities of the Group. Share-basedpayments are divided into equity-settled and cash-settled payments. The Group’s share-basedpayments are equity-settled payments.
Equity-settled share-based payments
The Group’s equity-settled share-based payments contain share option incentive plan,restricted share plan and employee stock ownership plan. These plans are measured at thefair value of the equity instruments at grant date and the equity instruments are exercisable orunlockable when services in vesting period are completed or specified performance conditionsare met. In the vesting period, the services obtained in the current period are included inrelevant cost and expenses at the fair value of the equity instruments at grant date based onthe best estimate of the number of exercisable or unlockable equity instruments, and capitalsurplus is increased accordingly. If the subsequent information indicates the number ofexercisable or unlockable equity instruments differs from the previous estimate, an adjustmentis made and, on the exercise or desterilisation date, the estimate is revised to equal to thenumber of actual vested equity instruments.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(24) Share-based payments (Cont’d)
(b) Determination of fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which isBlack - Scholes option pricing model.
The fair value of other equity instruments are based on the share prices, which excluded theprice that incentive objects pay, and the number of the shares on the grant date, taking intoaccount the effects of clause 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.
(25) 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 deregistrationresults.
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 theday of release of restricted shares, relevant treasury stocks, liabilities and capital surplusrecognised in the vesting period are reversed based on the actual vesting results.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue
Revenue is the gross inflow of economic benefit arising from the ordinary course of theGroup’s activities, which will lead to an increase in shareholders’ equity and are irrelevant tocapital contributions by shareholders.
Revenue for the Group’s performance of contract obligations in a contract is recognised whena customer 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 berecognised at the amount of cost incurred if it is predicted that the cost can be compensated tillthe progress of the obligation fulfilment can be reasonably determined.
For a contract obligation at a point in time, the Group shall recognise the revenue when acustomer is in control of the underlying goods.
(a) Sales of products
The Group are principally engaged in the manufacturing and sales of heating & ventilation, aswell as air-conditioner (hereinafter referred to as “HVAC”) (mainly comprises residential airconditioner, central air-conditioner, heating and ventilation systems, etc.) and consumerappliances (mainly comprises 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 theGroup has delivered products to the location specified in the sales contract and the buyer hasconfirmed the acceptance of the products, and the delivery order is signed by both parties.Upon confirming the acceptance, the buyer has the right to sell the products at its discretionand takes the risks of any price fluctuations and obsolescence and loss of the products.
Revenue from overseas sales of HVAC and consumer appliances is recognised when thegoods have been declared to the customs and shipped out of the port in accordance with thesales contract.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont’d)
(a) Sales of products (Cont’d)
Revenue from 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 productswithin 7 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 lawsand regulations 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 receivableand contract assets are recognised on the basis of ECL (Note 2(9)). If the contract pricereceived or receivable exceeds the amount for the completed service, the excess portion willbe recognised as contract liabilities. Contract assets and contract liabilities under the samecontract are presented 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 performancecosts. The recognised revenue is carried forward to the cost of sales from main operationsbased on the stage of completion. Incremental costs incurred by the Group for the acquisitionof contract are recognised as the costs to obtain a contract. For the costs to obtain a contractwith the amortisation period within one year, the costs are charged to profit or loss whenincurred. For the costs to obtain a contract with the amortisation period beyond one year, thecosts are charged in the current profit or loss on the same basis as aforesaid revenue ofrendering of services recognised under the relevant contract. If the carrying amount of thecontract costs is higher than the remaining consideration expected to be obtained by renderingof the service net of the estimated cost to be incurred, the Group makes provision forimpairment on the excess portion and recognises it as asset impairment losses. As at thebalance sheet date, based on whether the amortisation period of the costs to fulfil a contract ismore than one year when initially recognised, the amount of the Group’s costs to fulfil acontract net of related provision for asset impairment is presented as inventories or othernon-current assets. For costs to obtain a contract with amortisation period beyond one year atthe initial recognition, the amount net of related provision for asset impairment is presented asother non-current assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont’d)
(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 effectiveinterest rate is the rate at which the estimated future cash flows during the period of expectedduration of the financial instruments or applicable shorter period are discounted to the currentcarrying amount of the financial instruments. When calculating the effective interest rate, theGroup estimates cash flows by considering all contractual terms of the financial instrument (e.g.early repayment 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 theeffective interest 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 astraight-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 theservice is provided. The Group defers the initial charge income or commitment fee incomearising from the forming or acquisition of financial assets as the adjustment to effective interestrate. If the loans are not lent when the loan commitment period is expired, related charges arerecognised as fee and commission income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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) Government grants
Government grants refer to the monetary or non-monetary assets obtained by the Group fromthe government, including tax return, financial subsidy, etc.
A government grant is recognised when the conditions attached to it can be complied with andthe government grant can be received. If a government grant is a monetary asset, it will bemeasured at the amount received or receivable. If a government grant is a non-monetary asset,it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will bemeasured at its nominal amount.
Government grants related to assets refer to government grants which are obtained by theGroup for the purposes of purchase, construction or acquisition of the long-term assets.Government grants related to income refer to the government grants other than those related toassets.
Government grants related to assets are recorded as deferred income and recognised in profitor loss on a reasonable and systemic basis over the useful lives of the assets.
For government grants related to income, where the grant is a compensation for relatedexpenses or losses to be incurred by the Group in the subsequent periods, the grant isrecognised as deferred income, and included in profit or loss over the periods in which therelated costs are recognised; where the grant is a compensation for related expenses or lossesalready incurred by the Group, the grant is recognised directly in profit or loss for the currentperiod.
The Group applies the presentation method consistently to the similar government grants in thefinancial statements.
Government grants that are related to ordinary activities are included in operating profit,otherwise, they are recorded in non-operating income or expenses.
For the policy loans with favourable interest rates, the Group records the loans at the actualamounts and calculates the interests by loan principals and the favourable interest rates. Theinterest subsidies directly received from government are recorded as a reduction of interestexpenses.
(28) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities are calculated and recognised based on thedifferences arising between the tax bases of assets and liabilities and their carrying amounts(temporary differences). Deferred 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 anddeferred tax liabilities are measured at the tax rates that are expected to apply to the periodwhen the asset is realised or the liability is settled.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(28) Deferred tax assets and deferred tax liabilities (Cont’d)
Deferred tax assets are only recognised for deductible temporary differences, deductiblelosses and tax credits to the extent that it is probable that taxable profit will be available in thefuture against which the deductible temporary differences, deductible losses and tax creditscan be utilised.
Deferred tax liabilities are recognised for temporary differences arising from investments insubsidiaries, associates and joint ventures, except where the Group is able to control thetiming of reversal of the temporary difference, and it is probable that the temporary differencewill not reverse in the foreseeable future. When it is probable that the temporary differencesarising from investments in subsidiaries, associates and joint ventures will be reversed in theforeseeable future and that the taxable profit will be available in the future against which thetemporary differences can be utilised, the corresponding deferred tax assets are recognised.
Deferred tax assets and liabilities are offset when:
? the deferred tax assets and liabilities are related to the same tax payer within the Groupand the same taxation authority; and,? that tax payer within the Group has a legally enforceable right to offset current tax assetsagainst current tax liabilities.
(29) 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 commencement date, the Group shall recognise the right-of-use assets and measurethe lease liability at the present value of the lease payments that are not paid at that date.Lease payments include fixed payments, the exercise price of a purchase option if the lesseeis reasonably certain to exercise that option, and payments of penalties for terminating thelease if the lessee exercises an option to terminate the lease. Variable lease payments inproportion to sales are excluded from lease payments and recognised in profit or loss asincurred. Lease liabilities that are due within one year (inclusive) as from the balance sheetdate are included in the current portion of non-current liabilities.
Right-of-use assets of the Group comprise leased buildings, machinery and equipment, etc.Right-of-use assets are measured initially at cost which comprises the amount of the initialmeasurement of lease liabilities, any lease payments made at or before the commencementdate and any initial direct costs, less any lease incentives received. If there is reasonablecertainty that the Group will obtain ownership of the underlying asset by the end of the leaseterm, the asset is depreciated over its remaining useful life; otherwise the asset is depreciatedover the shorter of the lease term and its remaining useful life. The carrying amount of theright-of-use asset is reduced to the recoverable amount when the recoverable amount is belowthe 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 may, instead of recognising right-of-use assets and leaseliabilities, include the lease payments in the cost of the underlying assets or in the profit or lossfor the current period on a straight-line basis over the lease term.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(29) Leases (Cont’d)
The Group shall account for a lease modification as a separate lease if both: (1) themodification increases the scope of the lease by adding the right to use one or more underlyingassets; (2) the consideration for the lease increases by an amount commensurate with thestand-alone price for the increase in scope and any appropriate adjustments to thatstand-alone price to reflect the circumstances of the contract.
For a lease modification that is not accounted for as a separate lease, the Group shallredetermine the lease term at the effective date of the lease modification, and remeasure thelease liability by discounting the revised lease payments using a revised discount rate, exceptthat the contract changes directly resulting from COVID-19 are accounted for by applying thepractical expedient. For a lease modification which decreases the scope of the lease orshortens the lease term, the Group correspondingly decreases the carrying amount of theright-of-use asset, and recognises in profit or loss any gain or loss relating to the partial or fulltermination of the lease. For other leases which lead to the remeasurement of lease liabilities,the Group correspondingly adjusts the carrying amount of the right-of-use asset.
For the rental waivers as a result of COVID-19 and for the period ended 30 June 2021 only, theGroup applies the practical expedient and records the undiscounted waivers in profit or losswhen the agreement is reached to dismiss the original payment obligation with correspondingadjustment 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 afinance lease.
(a) Operating leases
Where the Group leases out self-owned buildings under operating leases, rental incometherefrom is recognised on a straight-line basis over the lease term. Variable rental that islinked to a certain percentage of sales is recognised in rental income as incurred.
For the rental waivers as a result of COVID-19 and for the period ended 30 June 2021 only, theGroup applies the practical expedient, accounts for the waivers as variable lease paymentsand records the waivers 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 newlease.
(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 afinance lease are presented as long-term receivables; the lease payments receivable under afinance lease due within one year (inclusive) as from the balance sheet date are included in thecurrent portion of non-current assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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) Segment information
The Group identifies operating segments based on the internal organisation structure,management requirements and internal reporting system, and discloses segment informationof reportable segments which is determined on the basis of operating segments.
An operating segment is a component of the Group that satisfies all of the following conditions:
(1) the component is able to earn revenues 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) forwhich the information on financial position, operating results and cash flows is available to theGroup. Two or more operating segments that have similar economic characteristics and satisfycertain conditions can be aggregated into one single operating segment.
(31) 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 thatare believed 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 sets 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 recoverableamount of the asset group and asset groups containing the relevant goodwill, based on thepresent value of cash flows forecasts. Key assumptions adopted in the impairment testing ofgoodwill included expected revenue growth rates, EBITDA margins, perpetual annual growthrates, discount rates, etc. which involved critical accounting estimates and judgement.
(ii) Income tax
The Group is subject to enterprise income tax in numerous jurisdictions. There are manytransactions and events for which the ultimate tax determination is uncertain during theordinary course of business. Significant judgement is required from the Group in determiningthe provision for income taxes in each of these jurisdictions. Where the final tax outcome ofthese matters is different from the amounts that were initially recorded, such differences willimpact the income tax and deferred tax provisions in the period in which such determination ismade.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(32) Significant changes in accounting policies
The Ministry of Finance released the revised Accounting Standard for Business Enterprises No.21 - Lease (hereinafter referred to “new lease standard”) in 2018 and released the Circular onthe Amendment to the Formats of Corporate Financial Statements for the Year of 2019 (CaiKuai [2019] No. 6) in 2019. The Group has prepared the financial statements for the yearended 31 December 2021 in accordance with the above standard and circular, and impacts onthe Group’s and the Company’s financial statements are as follows:
The Group and the Company initially adopted the new lease standard on 1 January 2021.According to relevant regulations, the Group and the Company would not reassess thecontracts that have already existed prior to the date of initial application. The Group and theCompany recognised the cumulative effect of the standard as an adjustment to the openingbalance of retained earnings in 2021 and relevant line items in the financial statements. Thecomparatives for the year ended 31 December 2020 were not restated.
(i) The nature and the reasons of the changes in accounting policies
For operating leases that have already existed prior to the initial application of the new leasestandard, the Group and the Company adopted different transition approaches based on theremaining lease term: If the remaining lease term is more than 12 months, the Group and theCompany recognised lease liabilities based on the remaining lease payments and theincremental borrowing rate as at 1 January 2021. Right-of-use assets are measured at theamount equivalent to lease liabilities and adjusted as necessary depending on prepaid rent.The Group and the Company applied the practical expedient for leases with a remaining termof 12 months or less, under which the right-of-use assets and lease liabilities were notrecognised. There was no significant impact on the financial statements.
For finance leases prior to the date of initial application, the Company, at the initial applicationdate, measures the right-of-use assets and lease liabilities respectively based on the originalcarrying amounts of assets under finance lease and the finance lease payable. Due to theimplementation of the new standard on leases, the Group and the Company reclassify fixedassets held under finance leases originally recognised in fixed assets to right-of-use assets,and reclassify payables for finance lease originally recognised in long-term payables to leaseliabilities.
| The line items affected | The amounts affected | |
| 1 January 2021 | ||
| The Group | The Company | |
| Fixed assets | (26,348) | - |
| Right-of-use assets | 2,155,516 | 10,340 |
| Current portion of non-current liabilities | 629,002 | 7,693 |
| Lease liabilities | 1,513,426 | 2,647 |
| Long-term payables | (13,260) | - |
As at 1 January 2021, when measuring lease liabilities, the Group and the Company adoptedthe same discount rate for lease contracts with similar characteristics, and the weightedaverage of incremental borrowing rates adopted was 1.01% - 13.21%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(32) Significant changes in accounting policies (Cont’d)
As at 1 January 2021, the Group and the Company reconciled the outstanding minimumoperating lease payments calculated under the old lease standard to lease liabilities under thenew lease standard as follows:
| The Group | The Company | |
| Future minimum operating lease payments as at 31 December 2020 | 2,523,731 | 10,653 |
| Present value of the above minimum operating lease payments discounted using the incremental borrowing rate | 2,253,525 | 10,340 |
| Add: Finance lease payable as at 31 December 2020 | 20,943 | - |
| Less: Payments for short-term leases (including leases with a remaining lease term of less than 12 months) and leases of low-value assets | (124,357) | - |
| Lease liabilities recognised as at 1 January 2021 (including current portion of non-current liabilities) | 2,150,111 | 10,340 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 2021 as they qualified as high-tech enterprises and obtained the High-tech EnterpriseCertificate:
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Jiangsu Midea Cleaning Appliances Co., Ltd. | GR202032012131 | 2 December 2020 | 3 years |
| GD Midea Environment Appliances Mfg. Co., Ltd. | GR201944000430 | 2 December 2019 | 3 years |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | GR201844000250 | 28 November 2018 | 3 years |
| Guangdong Witol Vacuum Electronic Manufacture Co., Ltd | GR202044001986 | 1 December 2020 | 3 years |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | GR202044003557 | 9 December 2020 | 3 years |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | GR201844010373 | 28 November 2018 | 3 years |
| Guangdong Midea Precision Molding Technology Co., Ltd. | GR201944004780 | 2 December 2019 | 3 years |
| Foshan Shunde Midea Electric Science and Technology Co., Ltd. | GR201944000317 | 2 December 2019 | 3 years |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | GR201844008219 | 28 November 2018 | 3 years |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | GR201934001163 | 9 September 2019 | 3 years |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | GR201834000890 | 24 July 2018 | 3 years |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | GR201944009238 | 2 December 2019 | 3 years |
| Guangdong Welling Motor Manufacturing Co., Ltd. | GR202044006087 | 9 December 2020 | 3 years |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | GR202044005425 | 9 December 2020 | 3 years |
| Huaian Welling Motor Manufacturing Co., Ltd. | GR201932010033 | 6 December 2019 | 3 years |
| Annto Logistics Technology Co., Ltd. | GR201834001306 | 24 July 2018 | 3 years |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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
2021 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate(Cont’d):
Name of taxpayer
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Wuxi Filin Electronics Co., Ltd. | GR201832001053 | 24 October 2018 | 3 years |
| Wuxi Little Swan General Appliance Co., Ltd. | GR201832001100 | 24 October 2018 | 3 years |
| GD Midea Air-Conditioning Equipment Co., Ltd. | GR202044003059 | 1 December 2020 | 3 years |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | GR202013000191 | 27 September 2020 | 3 years |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | GR202042000684 | 1 December 2020 | 3 years |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | GR202044001953 | 1 December 2020 | 3 years |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | GR202034001383 | 17 August 2020 | 3 years |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | GR202051100347 | 9 October 2020 | 3 years |
| Guangdong Meizhi Compressor Limited | GR202044004270 | 9 December 2020 | 3 years |
| Hubei Midea Refrigerator Co., Ltd. | GR202042000745 | 1 December 2020 | 3 years |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | GR202044007232 | 9 December 2020 | 3 years |
| Anhui Meizhi Compressor Co., Ltd. | GR201934000046 | 9 September 2019 | 3 years |
| Foshan Shunde Midea Water Dispenser Manufacturing Company Limited | GR202044004098 | 9 December 2020 | 3 years |
| Midea Welling Motor Technology (Shanghai) Co., Ltd. | GR202031001304 | 12 November 2020 | 3 years |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | GR201834001144 | 24 July 2018 | 3 years |
| Hefei Midea Laundry Appliance Co., Ltd. | GR201834000882 | 24 July 2018 | 3 years |
| Hefei Hualing Co., Ltd. | GR201834000552 | 24 July 2018 | 3 years |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | GR201844007089 | 28 November 2018 | 3 years |
| Toshiba HA Manufacturing (Nanhai) Co., Ltd. | GR201844007107 | 28 November 2018 | 3 years |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | GR201844006181 | 28 November 2018 | 3 years |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | GR201834000818 | 24 July 2018 | 3 years |
| Guangdong Midea Intelligent Technologies Co., Ltd. | GR201844003941 | 28 November 2018 | 3 years |
| WINONE ELEVATOR COMPANY LIMITED | GR201844000152 | 28 November 2018 | 3 years |
| Hiconics Eco-energy Technology Co., Ltd. | GR201811002361 | 10 September 2018 | 3 years |
| Beijing Hiconics Eco-energy Frequency Conversion Technology Co., Ltd. | GR202011003365 | 21 October 2020 | 3 years |
| Hiconics Drive Technology (Wuhan) Co., Ltd. | GR201842000036 | 15 November 2018 | 3 years |
| Wuhan Hiconics Electric Drive Technology Co., Ltd. | GR202042001428 | 1 December 2020 | 3 years |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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
2021 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate(Cont’d):
Name of taxpayer
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Wuhan Hiconics Power Technology Co., Ltd. | GR201942001459 | 15 November 2019 | 3 years |
| Wuhan Hiconics Intelligent Electric Co., Ltd. | GR202042001512 | 1 December 2020 | 3 years |
| Changsha Sunye Electric Co., Ltd. | GR201843000432 | 17 October 2018 | 3 years |
| Beijing Huatairunda Energy Saving Co., Ltd. | GF201811003128 | 10 September 2018 | 3 years |
| Dorna Technology Co., Ltd. | GR202033006717 | 1 December 2020 | 3 years |
| Wuxi Little Swan Electric Co., Ltd. | GR202032006759 | 2 December 2020 | 3 years |
| KUKA Robotics Manufacturing China Co., Ltd. | GR201931001602 | 28 October 2019 | 3 years |
| KUKA Robotics Guangdong Co., Ltd. | GR202044003841 | 9 December 2020 | 3 years |
| Midea Intelligent Lighting & Controls Technology Co., Ltd. | GR202036000935 | 14 September 2020 | 3 years |
| Beijing Wandong Medical Technology Co., Ltd. | GR202011009515 | 2 December 2020 | 3 years |
| Wanliyun Medical Information Technology (Beijing) Co., Ltd. | GR201911005106 | 2 December 2019 | 3 years |
(a-2) According to the Ministry of Finance, the State Taxation Administration on the Notice of
Enterprise Income Tax Preferential Policy for Hainan Free-trade Enterprise, Financial Tax (2020)(No.31), the Company’s subsidiary in Hainan was subject to enterprise income tax at a rate of15% from 1 Jan 2020 to 31 Dec 2024.
(a-3) On 24 March 2016, Luanping Huitong Photovoltaic Power Co., Ltd., a subsidiary of the
Company, obtained the Record Form for Enterprise Income Tax Preference issued by theLuanping County Office of the State Taxation Administration. According to Announcement of theState 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 is subject to the preferential policy of enterprise incometax reduction of 50% from 2019 to 2021. On 28 November 2017, Luanping Huitong PhotovoltaicPower Co., Ltd., a subsidiary of the Company, obtained the Record Form for Enterprise IncomeTax Preference issued by the Luanping County Office of the State Taxation Administration.According to Item 2 of Article 27 in the Enterprise Income Tax Law of the People’s Republic ofChina, Order of the President of the People’s Republic of China (No. 63), Phase II Project of theCompany was subject to the preferential policy of enterprise income tax exemption from 2017 to2019, and is subject to the preferential policy of enterprise income tax reduction of 50% from2020 to 2022.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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-4) The application on exemption and reduction of enterprise income tax for the Development of
Western China raised by Chongqing Midea Air-Conditioning Equipment Co., Ltd., the Company’ssubsidiary, was approved by the State Administration of Taxation of Chongqing Economical andTechnological Development Zone on 3 June 2014. And according to the Announcement onContinuing the Enterprise Income Tax Policies for the Development of Western China jointlyissued by the Ministry of Finance, the State Taxation Administration and the NationalDevelopment and Reform Commission on 23 April 2020, the company was subject to enterpriseincome tax at a rate of 15% in 2021.
(a-5) The Company’s subsidiaries in Mainland China other than those mentioned in (a-1) and (a-4) are
subject to enterprise income tax at the rate of 25%.
(a-6) 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 subject to the applicable preferential income taxrate of 5.5% for 2021. 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-7) 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., and Midea Investment (Asia) Company Limited.
(a-8) 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-9) Springer Carrier Ltda., the Company’s subsidiary in Brazil, is subject to Brazil enterprise income
tax at the rate of 34%.
(a-10) 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-11) 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-12) KUKA Group, the Company’s subsidiary in Germany, is subject to Germany enterprise income
tax at the rate of 32%.
(a-13) Servotronix Motion Control Ltd. (“SMC”), the Company’s subsidiary in Israel, is subject to Israel
enterprise income tax at the rate of 23%.
(a-13) Misr Refrigeration and Air Conditioning Manufacturing Company, S.A.E., the Company’s
subsidiary in Egypt, is subject to Egyptian enterprise income tax at the rate of 22.5%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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
(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, while itwas 16% before then.
(b-2) Pursuant to the Announcement on Relevant Policies for Deepening Value-added Tax Reform
(Announcement [2019] No. 39) jointly issued by the Ministry of Finance, the State TaxationAdministration and the General Administration of Customs and relevant regulations, theapplicable tax rate of revenue arising from rendering of real estate leasing and transportationservices of the Company’s certain subsidiaries is 9% from 1 April 2019, while it was 10% beforethen.
(b-3) Financial services, consulting services and storage services provided by the Company and
certain subsidiaries are subject to VAT at the rate of 6%.
(b-4) Rental revenue of the Company’s certain subsidiaries is subject to easy levy of VAT at the rate
of 5%.
(b-5) 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, certain subsidiaries of theCompany engaged in the production service sector, are eligible for a 10% additional VATdeduction based on deductible input VAT in the current period from 1 April 2019 to 31December 2021.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 | 2,811 | 2,538 |
| Cash at bank (a) | 38,776,642 | 51,253,132 |
| Other cash balances (b) | 950,475 | 688,481 |
| Statutory reserve deposits with the Central Bank (c) | 540,204 | 1,707,645 |
| Surplus reserve with the Central Bank | 104,174 | 344,860 |
| Deposits with banks and other financial institutions (d) | 22,643,800 | 26,515,276 |
| Accrued interest | 408,620 | 698,550 |
| Total | 63,426,726 | 81,210,482 |
| Including: Total amounts deposited with banks overseas (including Hong Kong, China, Macau, China, Singapore, Japan, Italy, Brazil, Germany, etc.) | 7,674,709 | 7,014,620 |
(a) As at 30 June 2021, cash at bank included fixed deposits with the term of over 3 months,
amounting to RMB 19,814,537,000 (31 December 2020: RMB 37,067,298,000).
(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 6% and 5% for eligible RMB deposits and foreign currency deposits, respectively,and are not available for use in the Group’s daily operations.
(d) As at 30 June 2021, deposits with banks and other financial institutions included fixed deposits
with the term of over 3 months, amounting to RMB 6,000,000,000 (31 December 2020: RMB17,500,000,000).
(2) Financial assets held for trading
| Item | Ending balance | Opening balance |
| Structural deposits (a) | 1,737,119 | 25,626,631 |
| Investments in equity instrument held for trading (b) | 1,764,101 | 2,314,965 |
| Others | 722,448 | 298,005 |
| 4,223,668 | 28,239,601 |
(a) As at 30 June 2021, 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 2021, 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 2021(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 | 5,710,733 | 5,086,749 |
| Trade acceptance notes | 148,597 | 218,108 |
| Less: Provision for bad debts | (7,047) | (347) |
| Total | 5,852,283 | 5,304,510 |
(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 2021, 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.
(4) Accounts receivable
| Item | Ending balance | Opening balance |
| Accounts receivable | 28,468,544 | 23,854,936 |
| Less: Provision for bad debts | (876,710) | (876,573) |
| Total | 27,591,834 | 22,978,363 |
(a) The ageing of accounts receivable is analysed as follows:
| Ageing | Ending balance | Opening balance |
| Within 1 year | 27,675,691 | 23,015,280 |
| 1 to 2 years | 453,431 | 580,644 |
| 2 to 3 years | 175,123 | 159,427 |
| 3 to 5 years | 127,743 | 87,938 |
| Over 5 years | 36,556 | 11,647 |
| Sub-total | 28,468,544 | 23,854,936 |
As at 30 June 2021, the Group had no significant overdue accounts receivable.
(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 2021, 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 business grouping | 10,840 | 100.00% | (10,840) | The debtor encountered financial distress, etc. |
| Overseas business grouping | 1,559 | 100.00% | (1,559) | The debtor encountered financial distress, etc. |
| Total | 12,399 | (12,399) | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 foraccounts receivable according to the lifetime ECL. (Cont’d):
As at 30 June 2021, accounts receivable for which the related provision for bad debts wasprovided on the grouping basis are analysed as follows:
| Category | Ending balance | ||
| Book balance | Provision for bad debts | ||
| Amount | Lifetime ECL rate | Amount | |
| Domestic business grouping | 12,644,497 | 2.97% | (375,512) |
| Overseas business grouping | 15,811,648 | 3.09% | (488,799) |
| Total | 28,456,145 | (864,311) | |
(c) The provision for bad debts reversed during the six months ended 30 June 2021 amounted to
RMB 147,147,000.
For the six months ended 30 June 2021, the accounts receivable written off by the Group werearising from transactions with third parties and no accounts receivable with significant amountswere written off.
As at 30 June 2021, the five largest accounts receivable aggregated by debtor weresummarised and analysed as follows:
| Item | Amount | Provision for bad debts | % of total balance |
| Total amount of the five largest accounts receivable | 3,156,994 | (78,925) | 11.09% |
(5) Other receivables
| Item | Ending balance | Opening balance |
| Other receivables | 2,525,075 | 3,026,970 |
| Less: Provision for bad debts | (73,304) | (53,025) |
| Total | 2,451,771 | 2,973,945 |
(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 | 2,227,541 | 2,708,730 |
| 1 to 2 years | 212,451 | 222,785 |
| 2 to 3 years | 45,401 | 50,457 |
| 3 to 5 years | 28,590 | 30,867 |
| Over 5 years | 11,092 | 14,131 |
| Sub-total | 2,525,075 | 3,026,970 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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)
(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 2021 | 2,983,653 | 47,449 | 37,741 | - | 5,576 | 5,576 | 53,025 |
| Transfer to Stage 3 | - | - | - | - | - | - | - |
| Net (decrease)/increase in the current year | (558,997) | 20,450 | 57,204 | - | (102) | (102) | 20,348 |
| Including: Write-off in the current period | - | - | - | - | (102) | (102) | (102) |
| Derecognition | - | - | - | - | - | - | |
| Differences on translation of foreign currency financial statements | (69) | - | - | (69) | |||
| 30 June 2021 | 2,424,656 | 67,830 | 94,945 | - | 5,474 | 5,474 | 73,304 |
(c) As at 30 June 2021, other receivables of the Group at Stage 1 and Stage 3 were analysed as
follows:
(i) As at 30 June 2021, 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 |
| 94,945 | 0% | - | Relatively low bad debt risks |
| Stage 3 | Book balance | ECL rate in the following 12 months | Provision for bad debts | Reason |
| 5,474 | 100.00% | (5,474) | The debtor encountered financial distress, etc. |
(ii) As at 30 June 2021, 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 | 2,424,656 | (67,830) | 2.80% | 2,983,653 | (47,449) | 1.59% |
(iii) For the six months ended 30 June 2021, the provision for bad debts reversed amounted to
RMB 8,295,000.
For the six months ended 30 June 2021, no other receivables with significant amounts werewritten off.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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)
(d) As at 30 June 2021, 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 | 441,250 | (16,511) | 17.47% |
(e) As at 30 June 2021, the Group had no significant government grants recognised at amounts
receivable.
(6) Receivables financing
| Item | Ending balance | Opening balance |
| Receivables financing | 15,394,251 | 13,901,856 |
The Group’s receivables financing were mainly accounts receivable and bank acceptancenotes transferred, discounted and endorsed for the purpose of daily treasury management andwere qualified for derecognition.
No provision for bank acceptance notes was individually provided. As at 30 June 2021, theGroup measured provision for bad debts based on the lifetime ECL and expected that therewas no significant credit risk associated with its bank acceptance notes and did not expect thatthere would be any significant losses from non-performance by these banks.
As at 30 June 2021, the Group’s notes receivable and accounts receivable transferred,endorsed or discounted but not matured presented in receivables financing were as follows:
| Item | Derecognised | Not derecognised |
| Receivables financing | 21,987,321 | 3,362,422 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(7) Advances to suppliers
| Item | Ending balance | Opening balance |
| Prepayments for raw materials and others | 3,519,045 | 2,763,710 |
(a) The ageing of advances to suppliers was analysed below:
| Ageing | Ending balance | Opening balance | ||
| Amount | % of total balance | Amount | % of total balance | |
| Within 1 year | 3,346,558 | 95.10% | 2,562,904 | 92.73% |
| 1 to 2 years | 141,871 | 4.03% | 163,765 | 5.93% |
| 2 to 3 years | 13,611 | 0.39% | 17,579 | 0.64% |
| Over 3 years | 17,005 | 0.48% | 19,462 | 0.70% |
| Total | 3,519,045 | 100.00% | 2,763,710 | 100.00% |
As at 30 June 2021, advances to suppliers over 1 year with a carrying amount of RMB172,487,000 (31 December 2020: RMB 200,806,000) were mainly unsettled prepayments forraw materials.
As at 30 June 2021, the five largest advances to suppliers aggregated by debtors wereanalysed as follows:
| Item | Amount | % of total balance |
| Total amount of the five largest advances to suppliers | 705,529 | 20.05% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(8) Contract assets
| Item | Ending balance | Opening balance |
| Contract assets | 4,401,261 | 3,289,783 |
| Less: Provision for impairment of contract assets | (47,088) | (52,935) |
| Total | 4,354,173 | 3,236,848 |
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 2021, theGroup’s contract assets were not overdue, and the provision for impairment was made on thegrouping basis.
As at 30 June 2021, 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 | 1,008,533 | 3.56% | (35,884) |
| Overseas business grouping | 3,392,728 | 0.33% | (11,204) |
| Total | 4,401,261 | (47,088) | |
(9) Loans and advances to customers
(a) By individual and corporation:
| Item | Ending balance | Opening balance |
| Loans and advances measured at amortised cost | ||
| Loans and advances to individuals | 2,123,382 | 2,235,275 |
| Loans and advances to corporations | 17,725,662 | 15,660,149 |
| Including: Loans | 13,474,854 | 10,133,447 |
| Discount bills | 4,250,808 | 5,526,702 |
| Sub-total | 19,849,044 | 17,895,424 |
| Less: Provision for bad debts | (380,300) | (312,854) |
| Total | 19,468,744 | 17,582,570 |
As at 30 June 2021, loans and advances over 1 year amounted to RMB 980,144,000 (31December 2020: RMB 1,113,501,000).
(b) By type of collateral held:
| Item | Ending balance | Opening balance |
| Unsecured loans | 2,115,109 | 1,645,282 |
| Guaranteed loans | 615,116 | 885,659 |
| Pledged loans | 17,118,819 | 15,364,483 |
| Sub-total | 19,849,044 | 17,895,424 |
| Less: Provision for bad debts | (380,300) | (312,854) |
| Total | 19,468,744 | 17,582,570 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(10) Inventories
(a) Inventories are summarised by categories 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 | |
| Goods in stock | 22,866,092 | (478,260) | 22,387,832 | 21,718,749 | (372,474) | 21,346,275 |
| Raw materials | 9,962,047 | (93,775) | 9,868,272 | 7,402,034 | (70,221) | 7,331,813 |
| Work in progress | 1,726,813 | - | 1,726,813 | 1,875,881 | - | 1,875,881 |
| Consigned processing materials, etc. | 516,608 | - | 516,608 | 522,560 | - | 522,560 |
| Total | 35,071,560 | (572,035) | 34,499,525 | 31,519,224 | (442,695) | 31,076,529 |
(b) Provision for decline in the value of inventories is analysed as below:
| 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 |
| Goods in stock | 372,474 | 145,785 | (22,672) | (17,327) | 478,260 |
| Raw materials | 70,221 | 35,896 | (8,563) | (3,779) | 93,775 |
| Total | 442,695 | 181,681 | (31,235) | (21,106) | 572,035 |
(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 write-off of provision for decline in the value of inventories for current period |
| Goods in stock | 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 |
(11) Current portion of non-current assets
| Item | Ending balance | Opening balance |
| Current portion of long-term receivables | 418,458 | - |
| Less: Provision for bad debts | (9,007) | |
| Sub-total | 409,451 | |
| Current portion of other debt investments | 7,210,384 | - |
| Total | 7,619,835 | - |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(12) Other current assets
| Item | Ending balance | Opening balance |
| Monetary investment products (a) | 64,832,531 | 25,542,595 |
| Input VAT to be deducted | 4,274,260 | 4,336,260 |
| Prepaid expenses | 804,576 | 786,140 |
| Others | 2,016,918 | 2,414,923 |
| Total | 71,928,285 | 33,079,918 |
(a) Monetary investment products were fixed income products with financial institutions due within
1 year, which were mainly measured at amortised cost.
(13) Other debt investments
| Item | Ending balance | Opening balance |
| Fair value through other comprehensive income | ||
| - Transferable certificate of deposit | 16,764,387 | 21,456,155 |
| Less: Provision for impairment of other debt investments | - | - |
| Total | 16,764,387 | 21,456,155 |
As at 30 June 2021, the cost of the Group’s transferable certificate of deposit approximated itsfair value.
As at 30 June 2021, the Group expected that there has no significant increase in credit risk oftransferable certificate of deposit since initial recognition and made provision for loss based on12-month ECL. The Group considered that there was no significant credit risk associated withtransferable certificate of deposit and did not expect that there would be any significant lossesfrom non-performance by these banks.
(14) Long-term receivables
| Item | Ending balance | Opening balance |
| Long-term receivables | 1,112,523 | 981,623 |
| Less: Provision for bad debts | - | - |
| Total | 1,112,523 | 981,623 |
The Group’s long-term receivables are presented in net amount of finance lease receivablesafter offsetting the unrealised financing income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(15) Long-term equity investments
Long-term equity investments are classified as follows:
| Item | Ending balance | Opening balance |
| Investments in associates (a) | 3,016,023 | 2,901,337 |
| Less: Provision for impairment of long-term equity investments | - | - |
| Total | 3,016,023 | 2,901,337 |
(a) Investments in associates mainly refer to the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies by theGroup.
(16) Other non-current financial assets
| Item | Ending balance | Opening balance |
| Measured at fair value | ||
| - Equity of unlisted companies, etc. | 4,154,677 | 3,360,849 |
| Less: Provision for impairment of other non-current assets | - | - |
| Total | 4,154,677 | 3,360,849 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 | ||||||
| Ending balance of prior year | 19,012,262 | 1,394,439 | 20,891,842 | 812,751 | 5,003,386 | 47,114,680 |
| Changes in accounting policies | - | - | (97,510) | - | - | (97,510) |
| Opening balance | 19,012,262 | 1,394,439 | 20,794,332 | 812,751 | 5,003,386 | 47,017,170 |
| Increase in the current period | 1,231,525 | 29,364 | 881,734 | 15,181 | 259,360 | 2,417,164 |
| 1) Purchase | 35,040 | - | 741,196 | 10,912 | 220,699 | 1,007,847 |
| 2) Transfer from construction in progress | 370,249 | - | 45,574 | 1,916 | 25,839 | 443,578 |
| 3) Increase by business combinations | 778,995 | 29,364 | 94,964 | 2,353 | 12,822 | 918,498 |
| 4) Others | 47,241 | - | - | - | - | 47,241 |
| Decrease in the current period | (36,598) | (11,628) | (210,944) | (54,167) | (106,614) | (419,951) |
| 1) Disposal or retirement | (6,202) | - | (172,443) | (18,041) | (105,381) | (302,067) |
| 2) Others | (30,396) | (11,628) | (38,501) | (36,126) | (1,233) | (117,884) |
| Differences on translation of foreign currency financial statements | (165,650) | (41,164) | (141,029) | (750) | (41,071) | (389,664) |
| Ending balance | 20,041,539 | 1,371,011 | 21,324,093 | 773,015 | 5,115,061 | 48,624,719 |
| Accumulated depreciation | ||||||
| Ending balance of prior year | 8,179,081 | - | 12,462,365 | 560,134 | 3,585,113 | 24,786,693 |
| Changes in accounting policies | - | - | (71,162) | - | - | (71,162) |
| Opening balance | 8,179,081 | - | 12,391,203 | 560,134 | 3,585,113 | 24,715,531 |
| Increase in the current period | 479,771 | - | 747,551 | 44,654 | 359,755 | 1,631,731 |
| 1) Provision | 455,869 | - | 747,551 | 44,654 | 359,755 | 1,607,829 |
| 2) Others | 23,902 | - | - | - | - | 23,902 |
| Decrease in the current period | (15,322) | - | (149,345) | (12,206) | (90,810) | (267,683) |
| 1) Disposal or retirement | (5,188) | - | (145,577) | (8,347) | (90,586) | (249,698) |
| 2) Others | (10,134) | - | (3,768) | (3,859) | (224) | (17,985) |
| Differences on translation of foreign currency financial statements | (19,288) | - | (60,203) | (314) | (15,752) | (95,557) |
| Ending balance | 8,624,242 | - | 12,929,206 | 592,268 | 3,838,306 | 25,984,022 |
| Provision for impairment | ||||||
| Ending balance of prior year | 7,331 | 5,892 | 33,601 | 33,171 | 8,778 | 88,773 |
| Changes in accounting policies | - | - | - | - | - | - |
| Opening balance | 7,331 | 5,892 | 33,601 | 33,171 | 8,778 | 88,773 |
| Increase in the current period | - | - | - | - | - | - |
| 1) Provision | - | - | - | - | - | - |
| Decrease in the current period | - | - | (766) | (31) | - | (797) |
| 1) Disposal or retirement | - | - | (766) | (31) | - | (797) |
| Differences on translation of foreign currency financial statements | (204) | (457) | (50) | (21) | (641) | (1,373) |
| Ending balance | 7,127 | 5,435 | 32,785 | 33,119 | 8,137 | 86,603 |
| Carrying amount at the end of the period | 11,410,170 | 1,365,576 | 8,362,102 | 147,628 | 1,268,618 | 22,554,094 |
| Carrying amount at the end of prior year | 10,825,850 | 1,388,547 | 8,395,876 | 219,446 | 1,409,495 | 22,239,214 |
| Changes in accounting policies | - | - | (26,348) | - | - | (26,348) |
| Carrying amount at the beginning of the period | 10,825,850 | 1,388,547 | 8,369,528 | 219,446 | 1,409,495 | 22,212,866 |
(a) For the six months ended 30 June 2021, the depreciation of fixed assets amounted to RMB
1,607,829,000 (for the six months ended 30 June 2020: RMB 1,652,587,000) and was includedin the income statement in full amount.
(b) As at 30 June 2021, the Company was still in the course of obtaining the ownership certificate
for the fixed asset with a carrying amount of RMB 258,054,000 (31 December 2020: RMB123,789,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 | |
| Midea Headquarters A04 Land Parcel Project | 271,163 | - | 271,163 | 197,540 | - | 197,540 |
| Indian Science Park | 157,401 | - | 157,401 | 364,554 | - | 364,554 |
| Other projects | 1,205,653 | (47,234) | 1,158,419 | 964,524 | (49,316) | 915,208 |
| Total | 1,634,217 | (47,234) | 1,586,983 | 1,526,618 | (49,316) | 1,477,302 |
(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 |
| Midea Headquarters A04 Land Parcel Project | 197,540 | 73,623 | - | - | - | 271,163 | Self-financing |
| Indian Science Park | 364,554 | 12,557 | (213,623) | - | (6,087) | 157,401 | Self-financing |
| Other projects | 964,524 | 516,435 | (229,955) | (22,822) | (22,529) | 1,205,653 | Self-financing |
| Total | 1,526,618 | 602,615 | (443,578) | (22,822) | (28,616) | 1,634,217 |
(i) For the six months ended 30 June 2021, the Group had no borrowing costs eligible for capitalisation.
(ii) As at 30 June 2021, 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 2021(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 | Motor vehicles | Electronic equipment and others | Total |
| Cost | |||||
| Opening balance | 1,983,934 | 193,960 | 10,868 | 37,916 | 2,226,678 |
| Increase in the current period | 427,342 | 25,957 | 634 | 10,345 | 464,278 |
| 1) New lease contracts | 424,537 | 25,957 | 634 | 10,345 | 461,473 |
| 2) Increase by business combinations | 2,805 | - | - | - | 2,805 |
| Decrease in the current period | (36,953) | (3,705) | (60) | (172) | (40,890) |
| 1) Changes in leases | (36,953) | (3,705) | (60) | (172) | (40,890) |
| Differences on translation of foreign currency financial statements | (37,470) | (11,458) | (443) | (1,608) | (50,979) |
| Ending balance | 2,336,853 | 204,754 | 10,999 | 46,481 | 2,599,087 |
| Accumulated depreciation | |||||
| Opening balance | - | 71,162 | - | - | 71,162 |
| Increase in the current period | 353,623 | 36,819 | 1,823 | 10,110 | 402,375 |
| 1) Provision | 353,623 | 36,819 | 1,823 | 10,110 | 402,375 |
| Decrease in the current period | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | (9,868) | (6,659) | (22) | (468) | (17,017) |
| Ending balance | 343,755 | 101,322 | 1,801 | 9,642 | 456,520 |
| Provision for impairment | |||||
| Opening balance | - | - | - | - | - |
| Increase in the current period | - | - | - | - | - |
| Decrease in the current period | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | - | - | - | - | - |
| Ending balance | - | - | - | - | - |
| Carrying amount at the end of the period | 1,993,098 | 103,432 | 9,198 | 36,839 | 2,142,567 |
| Carrying amount at the beginning of the period | 1,983,934 | 122,798 | 10,868 | 37,916 | 2,155,516 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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 | 4,827,841 | 2,191,179 | 5,259,116 | 2,646,807 | 5,481,621 | 20,406,564 |
| Increase in the current period | 2,146,015 | 1,050,177 | - | - | 349,962 | 3,546,154 |
| 1) Purchase | 2,139,916 | - | - | - | 160,455 | 2,300,371 |
| 2) Increase by business combinations | - | 1,047,967 | - | - | 168,392 | 1,216,359 |
| 3) Others | 6,099 | 2,210 | - | - | 21,115 | 29,424 |
| Decrease in the current period | - | (980) | - | - | (13,723) | (14,703) |
| 1) Disposal | - | (980) | - | - | (13,723) | (14,703) |
| Differences on translation of foreign currency financial statements | (1,688) | (74,961) | (208,967) | (201,777) | (192,318) | (679,711) |
| Ending balance | 6,972,168 | 3,165,415 | 5,050,149 | 2,445,030 | 5,625,542 | 23,258,304 |
| Accumulated amortisation | ||||||
| Opening balance | 1,000,511 | 775,427 | 113,266 | 329,992 | 2,571,447 | 4,790,643 |
| Increase in the current period | 69,359 | 75,161 | 31,187 | 30,059 | 376,329 | 582,095 |
| 1) Provision | 66,553 | 75,161 | 31,187 | 30,059 | 376,329 | 579,289 |
| 2) Transfer from investment properties and others | 2,806 | - | - | - | - | 2,806 |
| Decrease in the current period | - | (980) | - | - | (4,608) | (5,588) |
| 1) Disposal | - | (980) | - | - | (4,608) | (5,588) |
| Differences on translation of foreign currency financial statements | 9 | (29,922) | (373) | (23,775) | (81,176) | (135,237) |
| Ending balance | 1,069,879 | 819,686 | 144,080 | 336,276 | 2,861,992 | 5,231,913 |
| Provision for impairment | ||||||
| Opening balance | - | 114,609 | - | - | 78,919 | 193,528 |
| Increase in the current period | - | - | - | - | - | - |
| 1) Provision | - | - | - | - | - | - |
| Decrease in the current period | - | - | - | - | - | - |
| 1) Disposal | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | - | (910) | - | - | (3,377) | (4,287) |
| Ending balance | - | 113,699 | - | - | 75,542 | 189,241 |
| Carrying amount at the end of the period | 5,902,289 | 2,232,030 | 4,906,069 | 2,108,754 | 2,688,008 | 17,837,150 |
| Carrying amount at the beginning of the period | 3,827,330 | 1,301,143 | 5,145,850 | 2,316,815 | 2,831,255 | 15,422,393 |
(a) For the six months ended 30 June 2021, the amortisation of intangible assets amounted to RMB579,289,000 (for the six months ended 30 June 2020: RMB 504,713,000) and was included in theincome statement in full amount.
(b) As at 30 June 2021, the Group had no certificates of land use rights that were still in process.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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 the acquisitiondate, and the allocation is as follows:
| Name of investee | Ending balance | Opening balance |
| KUKA Group | 21,872,190 | 22,836,294 |
| TLSC Group | 2,720,588 | 2,944,486 |
| Little Swan | 1,361,306 | 1,361,306 |
| Others | 3,889,088 | 2,931,654 |
| Sub-total | 29,843,172 | 30,073,740 |
| Less: Provision for impairment | (511,392) | (516,522) |
| Total | 29,331,780 | 29,557,218 |
(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 | 3,255,750 | 746,580 | 2,825,364 | 693,098 |
| Provision for asset impairment | 2,329,160 | 486,333 | 2,023,621 | 409,576 |
| Employee benefits payable | 1,726,895 | 426,630 | 1,821,805 | 426,845 |
| Other current liabilities | 31,817,561 | 5,581,528 | 29,914,787 | 5,305,009 |
| Others | 6,197,421 | 1,695,467 | 6,615,646 | 1,700,311 |
| Total | 45,326,787 | 8,936,538 | 43,201,223 | 8,534,839 |
(b) Deferred tax liabilities before offsetting
| Item | Ending balance | Opening balance | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Changes in fair value | 1,028,870 | 169,555 | 1,495,449 | 205,628 |
| Business combinations involving enterprises not under common control | 12,384,192 | 3,459,430 | 11,673,627 | 3,415,470 |
| Others | 12,265,757 | 3,053,167 | 11,296,707 | 2,929,060 |
| Total | 25,678,819 | 6,682,152 | 24,465,783 | 6,550,158 |
(c) The net balances of deferred tax assets and deferred tax liabilities after offsetting are as follows:
| Item | Balance after offsetting at the end of the period | Balance after offsetting at the beginning of the period |
| Deferred tax assets | 7,636,799 | 7,208,635 |
| Deferred tax liabilities | 5,382,413 | 5,223,954 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(24) Other non-current assets
| Item | Ending balance | Opening balance |
| Monetary investment products (a) | 10,436,128 | 10,128,172 |
| Others | 795,541 | 1,127,707 |
| Total | 11,231,669 | 11,255,879 |
(a) As at 30 June 2021, monetary investment products were fixed income products with financial
institutions due over 1 year, which were mainly measured at amortised cost.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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 2021 | Increase in the current period | Decrease in the current period | Differences on translation of foreign currency financial statements | 30 June 2021 | |
| Reversal | Write-off | |||||
| Provision for bad debts | 1,242,799 | 310,305 | (155,845) | (45,140) | (5,751) | 1,346,368 |
| Including: Provision for bad debts of accounts receivable | 876,573 | 197,941 | (147,147) | (45,038) | (5,619) | 876,710 |
| Provision for losses on loans and advances | 312,854 | 67,577 | (131) | - | - | 380,300 |
| Provision for bad debts of notes receivable | 347 | 6,972 | (272) | - | - | 7,047 |
| Provision for bad debts of other receivables | 53,025 | 28,745 | (8,295) | (102) | (69) | 73,304 |
| Provision for bad debts of long-term receivables | - | 9,070 | - | - | (63) | 9,007 |
| Provision for decline in the value of inventories | 442,695 | 181,681 | (2,639) | (28,596) | (21,106) | 572,035 |
| Provision for impairment of fixed assets | 88,773 | - | - | (797) | (1,373) | 86,603 |
| Provision for impairment of intangible assets | 193,528 | - | - | - | (4,287) | 189,241 |
| Provision for impairment of contract assets | 52,935 | 401 | (1,213) | - | (5,035) | 47,088 |
| Provision for impairment of investment properties | 12,576 | - | - | - | - | 12,576 |
| Provision for impairment of construction in progress | 49,316 | - | - | - | (2,082) | 47,234 |
| Provision for impairment of goodwill | 516,522 | - | - | - | (5,130) | 511,392 |
| Total | 2,599,144 | 492,387 | (159,697) | (74,533) | (44,764) | 2,812,537 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 2021, assets with use rights restricted were as follows:
| Item | Ending balance | Opening balance |
| Cash at bank and on hand | ||
| Including: Cash at bank (Note 4(1)) | 19,814,537 | 37,067,298 |
| Other cash balances (Note 4(1)) | 594,748 | 688,481 |
| Statutory reserves with the Central Bank (Note 4(1)) | 540,204 | 1,707,645 |
| Deposits with banks and other financial institutions (Note 4(1)) | 6,000,000 | 17,500,000 |
| Total | 26,949,489 | 56,963,424 |
(27) Short-term borrowings
| Item | Ending balance | Opening balance |
| Unsecured borrowings | 3,432,579 | 2,281,509 |
| Guaranteed borrowings | 7,288,828 | 7,402,260 |
| Pledged borrowings | 1,224,713 | 192,569 |
| Mortgage borrowings | - | 67,591 |
| Total | 11,946,120 | 9,943,929 |
As at 30 June 2021, the annual interest rate range of short-term borrowings was 0.90% to 5.65%(31 December 2020: 0.90% to 9.40%).
(28) Notes payable
| Item | Ending balance | Opening balance |
| Bank acceptance notes | 31,022,281 | 28,233,818 |
| Trade acceptance notes | 312 | 16,121 |
| Total | 31,022,593 | 28,249,939 |
(29) Accounts payable
| Item | Ending balance | Opening balance |
| Materials cost payable | 59,672,519 | 49,451,076 |
| Others | 4,791,522 | 4,479,185 |
| Total | 64,464,041 | 53,930,261 |
As 30 June 2021, accounts payable with ageing over 1 year with a carrying amount of RMB1,130,980,000 (31 December 2020: RMB 985,248,000) were mainly unsettled accounts payablefor materials.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(30) Contract liabilities
| Item | Ending balance | Opening balance |
| Advances for construction projects | 2,129,364 | 1,889,487 |
| Advances on sales and services | 18,204,956 | 16,511,435 |
| Total | 20,334,320 | 18,400,922 |
(31) Employee benefits payable
| Item | Ending balance | Opening balance |
| Short-term employee benefits payable (a) | 5,361,752 | 6,666,830 |
| Others | 195,087 | 287,992 |
| Total | 5,556,839 | 6,954,822 |
(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 | 6,181,736 | 13,325,527 | (14,555,259) | 4,952,004 |
| Staff welfare | 341,810 | 854,741 | (936,112) | 260,439 |
| Social security contributions | 73,818 | 833,012 | (838,751) | 68,079 |
| Including: Medical insurance | 71,639 | 782,987 | (789,233) | 65,393 |
| Work injury insurance | 1,056 | 15,264 | (14,940) | 1,380 |
| Maternity insurance | 1,123 | 34,761 | (34,578) | 1,306 |
| Housing funds | 23,537 | 245,955 | (242,295) | 27,197 |
| Labour union funds and employee education funds | 17,513 | 56,717 | (49,872) | 24,358 |
| Other short-term employee benefits | 28,416 | 43,358 | (42,099) | 29,675 |
| Sub-total | 6,666,830 | 15,359,310 | (16,664,388) | 5,361,752 |
(32) Taxes payable
| Item | Ending balance | Opening balance |
| Enterprise income tax payable | 2,587,760 | 3,121,236 |
| Unpaid VAT | 999,510 | 1,013,378 |
| Others | 1,160,972 | 1,623,444 |
| Total | 4,748,242 | 5,758,058 |
(33) Other payables
| Item | Ending balance | Opening balance |
| Other payables | 4,780,388 | 4,501,391 |
(a) Other payables are mainly restricted share repurchase obligation, deposit and security deposit
payable, reimbursed logistics expense, manufacturing equipment expense, dividend payable, etc.
(b) As at 30 June 2021, other payables with ageing over 1 year with a carrying amount of RMB1,159,998,000 (31 December 2020: RMB 1,392,059,000) 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 2021(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 | Ending balance of prior year |
| Current portion of long-term borrowings | 673,131 | 6,284,643 | 6,284,643 |
| Current portion of lease liabilities | 776,014 | 636,685 | |
| Current portion of long-term payables | 9,169 | 17,855 | 25,538 |
| Total | 1,458,314 | 6,939,183 | 6,310,181 |
(35) Other current liabilities
| Item | Ending balance | Opening balance |
| Accrued sale rebates | 33,670,248 | 31,192,652 |
| Short-term financing bonds payable (a) | 3,020,791 | 3,030,785 |
| Others | 15,505,802 | 15,628,802 |
| Total | 52,196,841 | 49,852,239 |
(a) As at 30 June 2021, short-term financing bonds payable represented super short-term financingbonds with a total face value of RMB 3,000,000,000 issued by the Company, with a term of 178days, and a coupon rate of 2.72%.
(36) Long-term borrowings
| Item | Ending balance | Opening balance |
| Mortgage borrowings (a) | 28,404,608 | 29,673,661 |
| Guaranteed borrowings (b) | 7,309,299 | 7,785,898 |
| Unsecured borrowings | 14,329,909 | 11,633,434 |
| Pledged borrowings | 18,722 | 18,937 |
| Total | 50,062,538 | 49,111,930 |
| Less: Current portion of mortgage borrowings | (77,168) | (48,962) |
| Current portion of guaranteed borrowings | - | (2,174,775) |
| Current portion of unsecured borrowings | (589,722) | (4,054,593) |
| Current portion of pledged borrowings | (6,241) | (6,313) |
| Total | 49,389,407 | 42,827,287 |
(a) As at 30 June 2021, bank mortgage borrowings were mainly mortgage borrowings with a cost ofEUR 3,684,357,000, equivalent to RMB 28,318,702,000 (31 December 2020: a cost of EUR3,691,857,000, equivalent to RMB 29,627,150,000) and were pledged by 81.04% equity of KUKAGroup, which was acquired by the subsidiary of the Company. Interest is paid on a semi-annualbasis, and the borrowings are due in August 2022.
(b) As at 30 June 2021, bank guaranteed borrowings mainly included: (i) guaranteed borrowings witha cost of EUR 271,000,000, equivalent to RMB 2,082,960,000 (31 December 2020: a cost of EUR271,000,000, equivalent to RMB 2,174,775,000) guaranteed by the Company, with interest paidevery 3 months, which will be due in April 2024; (ii) guaranteed borrowings with a cost of JPY69,460,000,000, equivalent to RMB 4,058,409,000 (31 December 2020: a cost of JPY69,460,000,000, equivalent to RMB 4,392,373,000) guaranteed by the Company, with interestpaid on a monthly basis, which will be due in May 2024.
(c) As at 30 June 2021, the annual interest rate range of long-term borrowings was 0.49% to 5.85%(31 December 2020: 0.49% to 6.08%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(37) Lease liabilities
| Item | Ending balance | Opening balance |
| Lease liabilities | 2,206,271 | 2,150,111 |
| Less: Current portion of lease liabilities | (776,014) | (636,685) |
| 1,430,257 | 1,513,426 |
(38) Long-term employee benefits payable
| Item | Ending balance | Opening balance |
| Supplementary retirement benefits | 1,600,309 | 2,014,651 |
| Others | 187,484 | 145,024 |
| Total | 1,787,793 | 2,159,675 |
(39) Other non-current liabilities
Other non-current liabilities are mainly equity purchase payables.
(40) 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 | 182,863 | 9,940 | (29,453) | (2,527) | (22,040) | 160,823 |
| RMB-denominated ordinary shares not subject to trading restriction | 6,847,113 | 10,759 | 29,453 | - | 40,212 | 6,887,325 |
| Total | 7,029,976 | 20,699 | - | (2,527) | 18,172 | 7,048,148 |
(a) For the six months ended 30 June 2021, the share-based payment incentive plan increased the
share capital by 20,699,000 shares.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(41) 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 | 6,094,347 | 8,665,148 | (317,261) | 14,442,234 |
| Repurchased shares that have not yet been written off | - | 781,377 | - | 781,377 |
| Total | 6,094,347 | 9,446,525 | (317,261) | 15,223,611 |
For the six months ended 30 June 2021, the Group’s repurchased treasury stock amounted toRMB 9,446,525,000. As at 30 June 2021, treasury stock mainly comprised treasury stock of RMB10,028,492,000 used for share-based payment incentive plan, and restricted shares amounting toRMB 4,413,742,000 that have not met unlock condition, and repurchased shares amounting toRMB 781,377,000 that were recognised in accordance with the Proposal on the Scheme for theRepurchase of Certain Social Public Shares approved at the 33rd meeting of the third Board ofDirectors and the 2020 annual shareholders’ meeting held on 9 May 2021 and 21 May 2021respectively, amounting to RMB 15,223,611,000 in total.
(42) Capital surplus
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Share premium (a) | 18,185,028 | 787,034 | (100,209) | 18,871,853 |
| Share-based payment incentive plan (b) | 1,414,842 | 781,398 | (288,003) | 1,908,237 |
| Others | 2,888,235 | 31,351 | (77,454) | 2,842,132 |
| Total | 22,488,105 | 1,599,783 | (465,666) | 23,622,222 |
(a) The increase in share premium arose from the exercise of share options with the amount of RMB666,744,000, and the unlocking of restricted shares with the amount of RMB 120,290,000; thedecrease in share premium arose from the repurchase of restricted shares with the amount ofRMB 100,209,000.
(b) The increase of share-based payment incentive plan arose from expenses attributable toshareholders' equity of the parent company in the share-based payment incentive plan with theamount of RMB 781,398,000, while the decrease arose from the transfer of RMB 288,003,000 toshare premium due to exercise of share-based payment incentive plan.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(43) Other comprehensive income
| Item | Other comprehensive income in the balance sheet | Other comprehensive income in the income statement | ||||||
| 1 January 2021 | Attributable to the parent company after tax | 30 June 2021 | 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 subsequently to profit or loss | ||||||||
| Changes arising from remeasurement of defined benefit plan | 19,210 | 120,835 | 140,045 | 155,645 | - | (27,806) | 120,835 | 7,004 |
| Changes in fair value of investments in other equity instruments | 493 | 433 | 926 | 565 | - | (66) | 433 | 66 |
| Other comprehensive income items which will be reclassified subsequently to profit or loss | ||||||||
| Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | (86,181) | 24,624 | (61,557) | 24,624 | - | - | 24,624 | - |
| Effective portion of gains or losses on hedging instruments in a cash flow hedge | 311,341 | (359,040) | (47,699) | (69,350) | (348,437) | 43,519 | (359,040) | (15,228) |
| Differences on translation of foreign currency financial statements | (1,793,866) | (34,505) | (1,828,371) | (4,050) | - | - | (34,505) | 30,455 |
| Total | (1,549,003) | (247,653) | (1,796,656) | 107,434 | (348,437) | 15,647 | (247,653) | 22,297 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(44) Surplus reserve
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Statutory surplus reserve | 7,966,362 | - | - | 7,966,362 |
(45) Undistributed profits
| Item | Current period | Same period of prior year |
| Undistributed profits at the beginning of the year | 87,074,453 | 72,713,631 |
| Add: Net profit attributable to owners of the parent company for the current period | 15,009,046 | 13,928,295 |
| Less: Ordinary share dividends payable | (11,061,680) | (11,122,406) |
| Appropriation to general risk reserve | - | - |
| Undistributed profits at the end of the period | 91,021,819 | 75,519,520 |
(a) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of Shareholders’ meeting, dated 21 May 2021, theCompany distributed a cash dividend to the shareholders at RMB 1.60 per share, amounting toapproximately RMB 11,066,392,000 calculated by 6,913,968,359 issued shares less thoserepurchased; 2,527,000 repurchased incentive shares in the restricted shares incentive plan werewritten off (Note 4(40)), and cash dividend amounting to RMB 4,712,000 was cancelled. Theactual cash dividend distributed in the current year amounted to RMB 11,061,680,000.
(46) Revenue and cost of sales
| Item | Current period | Same period of prior year |
| Revenue from main operations | 157,035,631 | 128,394,989 |
| Revenue from other operations | 16,773,934 | 10,672,033 |
| Sub-total | 173,809,565 | 139,067,022 |
| Item | Current period | Same period of prior year |
| Cost of sales from main operations | 118,713,346 | 94,233,389 |
| Cost of sales from other operations | 14,723,023 | 9,290,268 |
| Sub-total | 133,436,369 | 103,523,657 |
(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 | |
| Heating & ventilation, as well as air-conditioner | 76,408,470 | 60,476,097 | 64,030,471 | 48,535,087 |
| Consumer appliances | 64,964,319 | 45,732,392 | 53,034,680 | 36,271,844 |
| Robotics and automation system | 12,589,884 | 9,729,927 | 9,523,415 | 7,714,140 |
| Others | 3,072,958 | 2,774,930 | 1,806,423 | 1,712,318 |
| Sub-total | 157,035,631 | 118,713,346 | 128,394,989 | 94,233,389 |
For the six months ended 30 June 2021, 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 2020: over 80%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(46) Revenue and cost of sales(Cont’d)
(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 | 15,044,049 | 14,407,177 | 9,418,740 | 8,902,097 |
| Others | 1,729,885 | 315,846 | 1,253,293 | 388,171 |
| Sub-total | 16,773,934 | 14,723,023 | 10,672,033 | 9,290,268 |
For the six months ended 30 June 2021, 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 2020: over 80%).
(c) For the six months ended 30 June 2021, among the Group’s revenue from main operations, theamount recognised at a point in time accounted for above 90% and the amount recognised withina certain period of time mainly included revenue from main operations of robotics and automationsystem segment. The Group’s revenue from other operations was recognised at a point in time.
(47) Interest income and interest expenses
Interest income and expenses arising from the normal course of financial business of the Groupare presented as follows:
| Item | Current period | Same period of prior year |
| Interest income from loans and advances | 857,905 | 582,039 |
| Including: Interest income from loans and advances to corporations and individuals | 809,354 | 526,175 |
| Interest income from note discounting | 48,551 | 55,864 |
| Interest income from deposits with banks, other financial institutions and the Central Bank | 179,269 | 70,060 |
| Interest income | 1,037,174 | 652,099 |
| Interest expenses | (41,149) | (78,092) |
(48) Taxes and surcharges
| Item | Current period | Same period of prior year |
| City maintenance and construction tax | 336,013 | 320,145 |
| Educational surcharge | 248,069 | 235,154 |
| Others | 249,075 | 199,546 |
| Total | 833,157 | 754,845 |
(49) Selling and distribution expenses
| Item | Current period | Same period of prior year |
| Selling and distribution expenses | 16,241,154 | 12,631,101 |
For the six months ended 30 June 2021, selling and distribution expenses were mainlymaintenance expenses, advertisement and promotion fee, transportation and storage fee,employee benefits and rental expenses, which accounted for over 70% of total selling anddistribution expenses (for the six months ended 30 June 2020: over 70%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(50) General and administrative expenses
| Item | Current period | Same period of prior year |
| General and administrative expenses | 4,251,893 | 4,102,149 |
For the six months ended 30 June 2021, general and administrative expenses were mainlyemployee benefits, depreciation and amortisation expenses, technical maintenance expenses,and administrative office expenses, which accounted for over 70% of total general andadministrative expenses (for the six months ended 30 June 2020: over 70%).
(51) R&D expenses
| Item | Current period | Same period of prior year |
| R&D expenses | 5,314,637 | 4,410,737 |
For the six months ended 30 June 2021, 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 2020: over80%).
(52) Financial income
The Group’s financial income, other than those arising from financial business (Note 4(47)), arepresented as follows:
| Item | Current period | Same period of prior year |
| Interest expenses | (681,864) | (637,348) |
| Less: Interest income | 2,501,014 | 1,674,669 |
| Add: Exchange gains or losses | 616,849 | (97,209) |
| Add: Others | (114,273) | (88,185) |
| Total | 2,321,726 | 851,927 |
(53) Asset impairment losses
| Item | Current period | Same period of prior year |
| Losses on decline in the value of inventories (Note 4(10)) | 179,042 | 132,274 |
| Impairment losses on contract assets (Note 4(8)) | (812) | |
| Impairment losses on fixed assets (Note 4(17)) | - | 1,145 |
| Total | 178,230 | 133,419 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(54) Credit impairment losses
| Item | Current period | Same period of prior year |
| Losses on bad debts of accounts receivable (Note 4(4)) | 50,794 | 321,266 |
| Losses on bad debts of other receivables (Note 4(5)) | 20,450 | 41,998 |
| Impairment losses on notes receivable (Note 4(3)) | 6,700 | - |
| Impairment losses on contract assets (Note 4(8)) | 50,131 | |
| Impairment losses on loans and advances (Note 4(9)) | 67,446 | 48,603 |
| Impairment losses on long-term receivables (Note 4(11)) | 9,070 | - |
| Total | 154,460 | 461,998 |
(55) Gains/(Losses) on changes in fair value
| Item | Current period | Same period of prior year |
| Derivative financial assets and liabilities | (86,610) | (144,928) |
| Other financial assets | (715,334) | 392,628 |
| Total | (801,944) | 247,700 |
(56) Investment income
| Item | Current period | Same period of prior year |
| Investment income from holding of financial assets held for trading | 505,877 | 745,038 |
| Investment income from disposal of financial assets held for trading | 137,681 | - |
| Investment income from disposal of derivative financial assets and liabilities | 222,211 | 147,205 |
| Investment income from associates and joint ventures | 309,013 | 261,136 |
| Others | (93,886) | (64,832) |
| Total | 1,080,896 | 1,088,547 |
There is no significant restriction on repatriation of investment income of the Group.
(57) Losses on disposal of assets
| Item | Current period | Same period of prior year |
| Gains on disposal of non-current assets | 2,388 | 14,319 |
| Losses on disposal of non-current assets | (20,221) | (25,389) |
| Total | (17,833) | (11,070) |
(58) Other income
| Item | Current period | Same period of prior year | Assets related/ Income related |
| Special subsidy, etc. | 578,265 | 580,359 | Income related |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(59) Income tax expenses
| Item | Current period | Same period of prior year |
| Current income tax expenses according to tax laws and other regulations | 2,677,644 | 2,714,255 |
| Deferred income tax expenses | (269,705) | (385,194) |
| Total | 2,407,939 | 2,329,061 |
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 | 17,624,384 | 16,396,071 |
| Income tax calculated at tax rate of 25% | 4,406,096 | 4,099,018 |
| Effect of different tax rates applicable to subsidiaries | (1,462,481) | (1,379,513) |
| Effect of income tax annual filing for prior periods | 40,903 | (49,614) |
| Income not subject to tax | (149,474) | (130,465) |
| Costs, expenses and losses not deductible for tax purposes | 193,728 | 167,828 |
| Utilisation of previous temporary differences or deductible losses for which no deferred tax assets were recognised in prior periods | (57,946) | (27,277) |
| Others | (562,887) | (350,916) |
| Income tax expenses | 2,407,939 | 2,329,061 |
(60) 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 | 15,009,046 | 13,928,295 |
| Less: Dividends payable to restricted shares | RMB’000 | (104,901) | (64,930) |
| Consolidated net profit attributable to ordinary shareholders of the parent company (excluding dividends payable to restricted shares) | RMB’000 | 14,904,145 | 13,863,365 |
| Weighted average number of outstanding ordinary shares | Thousands shares | 6,878,509 | 6,896,105 |
| Basic earnings per share | Yuan/share | 2.17 | 2.01 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(60) Calculation of basic and diluted earnings per share (Cont’d)
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to ordinaryshareholders of the parent company by the diluted weighted average number of outstandingordinary shares:
| Item | Unit | Current period | Same period of prior year |
| Consolidated net profit attributable to ordinary shareholders of the Company | RMB’000 | 15,009,046 | 13,928,295 |
| Weighted average number of outstanding ordinary shares | Thousands shares | 6,878,509 | 6,896,105 |
| Weighted average number of ordinary shares increased from share options | Thousands shares | 72,495 | 30,868 |
| Weighted average number of diluted outstanding ordinary shares | Thousands shares | 6,951,004 | 6,926,973 |
| Diluted earnings per share | Yuan/share | 2.16 | 2.01 |
(61) 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 | 145,631 | 107,900 |
| Other income | 747,933 | 595,782 |
| Revenue from other operations | 1,686,486 | 1,170,031 |
| Financial interest income | 508,692 | 6,819 |
| Others | 706,646 | 426,409 |
| Total | 3,795,388 | 2,306,941 |
(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) | 4,401,999 | 4,500,046 |
| Selling and distribution expenses (excluding employee benefits and taxes and surcharges) | 11,330,954 | 9,442,152 |
| Others | 255,248 | 968,936 |
| Total | 15,988,201 | 14,911,134 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(61) Notes to the cash flow statement (Cont’d)
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flows from operating activities is as follows:
| Supplementary Information | Current period | Same period of prior year |
| 1) Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 15,216,445 | 14,067,010 |
| Add: Asset impairment losses | 178,230 | 133,419 |
| Credit impairment losses | 154,460 | 461,998 |
| Depreciation and amortisation | 2,954,858 | 2,503,345 |
| Net loss on disposal of non-current assets | 17,867 | 11,117 |
| Losses on changes in fair value | 801,944 | (247,700) |
| Financial expenses | (1,046,382) | (920,100) |
| Investment income | (1,080,896) | (1,088,547) |
| Decrease in deferred tax assets | (289,035) | (498,512) |
| Increase in deferred tax liabilities | (202,799) | 117,269 |
| Decrease in inventories | (3,582,020) | 8,082,466 |
| Decrease in operating receivables | (8,694,721) | (7,527,241) |
| Increase in operating payables | 14,935,305 | 2,852,407 |
| Share-based payments and others | 813,154 | 458,560 |
| Net cash flows from operating activities | 20,176,410 | 18,405,491 |
| 2) Net increase/(decrease) in cash and cash equivalents: | ||
| Cash and cash equivalents at the end of the period | 36,068,617 | 31,012,301 |
| Less: Cash and cash equivalents at the beginning of the period | (23,548,508) | (30,441,760) |
| Net increase/(decrease) in cash and cash equivalents | 12,520,109 | 570,541 |
(d) Composition of cash and cash equivalents
| Item | Current period | Same period of prior year |
| Cash on hand | 2,811 | 2,490 |
| Cash at bank that can be readily drawn on demand | 18,962,105 | 10,630,979 |
| Other cash balances that can be readily drawn on demand | 355,727 | 145,200 |
| Deposits with the Central Bank that can be readily drawn on demand | 104,174 | 470,326 |
| Deposits with banks and other financial institutions | 16,643,800 | 19,763,306 |
| Cash and cash equivalents at the end of the period | 36,068,617 | 31,012,301 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Monetary items denominated in foreign currencies
| Item | 30 June 2021 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Cash at bank and on hand | |||
| USD | 737,641 | 6.4601 | 4,765,235 |
| JPY | 11,197,808 | 0.0584 | 653,952 |
| HKD | 2,392,765 | 0.8321 | 1,991,020 |
| EUR | 112,800 | 7.6862 | 867,003 |
| BRL | 116,783 | 1.2936 | 151,070 |
| VND | 543,110,000 | 0.0003 | 162,933 |
| Other currencies | Not applicable | Not applicable | 1,718,687 |
| Sub-total | 10,309,900 | ||
| Accounts receivable | |||
| USD | 1,449,830 | 6.4601 | 9,366,047 |
| JPY | 15,253,459 | 0.0584 | 890,802 |
| HKD | 66,738 | 0.8321 | 55,533 |
| EUR | 420,716 | 7.6862 | 3,233,707 |
| BRL | 634,130 | 1.2936 | 820,311 |
| VND | 1,397,903,333 | 0.0003 | 419,371 |
| Other currencies | Not applicable | Not applicable | 2,106,597 |
| Sub-total | 16,892,368 | ||
| Other receivables | |||
| USD | 97,330 | 6.4601 | 628,762 |
| JPY | 2,932,723 | 0.0584 | 171,271 |
| HKD | 1,990 | 0.8321 | 1,656 |
| EUR | 40,421 | 7.6862 | 310,684 |
| BRL | 71,792 | 1.2936 | 92,870 |
| Other currencies | Not applicable | Not applicable | 306,459 |
| Sub-total | 1,511,702 | ||
| Total | 28,713,970 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Monetary items denominated in foreign currencies (Cont’d)
| Item | 30 June 2021 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Short-term borrowings | |||
| USD | 280,000 | 6.4601 | 1,808,828 |
| EUR | 151,632 | 7.6862 | 1,165,474 |
| BRL | 49,428 | 1.2936 | 63,940 |
| Other currencies | Not applicable | Not applicable | 123,171 |
| Sub-total | 3,161,413 | ||
| Accounts payable | |||
| USD | 433,039 | 6.4601 | 2,797,475 |
| JPY | 4,853,784 | 0.0584 | 283,461 |
| HKD | 27,158 | 0.8321 | 22,598 |
| EUR | 191,954 | 7.6862 | 1,475,397 |
| BRL | 61,634 | 1.2936 | 79,730 |
| Other currencies | Not applicable | Not applicable | 1,920,108 |
| Sub-total | 6,578,769 | ||
| Other payables | |||
| USD | 41,980 | 6.4601 | 271,195 |
| JPY | 7,750,651 | 0.0584 | 452,638 |
| HKD | 7,206 | 0.8321 | 5,996 |
| EUR | 2,587 | 7.6862 | 19,884 |
| Other currencies | Not applicable | Not applicable | 200,090 |
| Sub-total | 949,803 | ||
| Current portion of non-current liabilities | |||
| EUR | 34,317 | 7.6862 | 263,767 |
| USD | 91,287 | 6.4601 | 589,723 |
| Other currencies | Not applicable | Not applicable | 96,295 |
| Sub-total | 949,785 | ||
| Long-term borrowings | |||
| USD | 49,956 | 6.4601 | 322,721 |
| EUR | 4,211,336 | 7.6862 | 32,369,171 |
| JPY | 69,460,000 | 0.0584 | 4,058,409 |
| Other currencies | Not applicable | Not applicable | 24,109 |
| Sub-total | 36,774,410 | ||
| Lease liabilities | |||
| EUR | 97,186 | 7.6862 | 746,991 |
| JPY | 1,145,223 | 0.0584 | 66,881 |
| Other currencies | Not applicable | Not applicable | 72,883 |
| Sub-total | 886,755 | ||
| Total | 49,300,935 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Monetary items denominated in foreign currencies (Cont’d)
| Item | 31 December 2020 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Cash at bank and on hand | |||
| USD | 606,052 | 6.5249 | 3,954,427 |
| JPY | 12,604,953 | 0.0632 | 796,633 |
| HKD | 2,415,846 | 0.8416 | 2,033,176 |
| EUR | 118,549 | 8.0250 | 951,354 |
| BRL | 285,067 | 1.2556 | 357,930 |
| VND | 508,313,333 | 0.0003 | 152,494 |
| Other currencies | Not applicable | Not applicable | 1,422,214 |
| Sub-total | 9,668,228 | ||
| Accounts receivable | |||
| USD | 1,275,071 | 6.5249 | 8,319,713 |
| JPY | 12,798,608 | 0.0632 | 808,872 |
| HKD | 11,535 | 0.8416 | 9,708 |
| EUR | 361,026 | 8.0250 | 2,897,230 |
| BRL | 677,500 | 1.2556 | 850,669 |
| VND | 2,435,706,667 | 0.0003 | 730,712 |
| Other currencies | Not applicable | Not applicable | 2,034,429 |
| Sub-total | 15,651,333 | ||
| Other receivables | |||
| USD | 144,189 | 6.5249 | 940,820 |
| JPY | 1,329,367 | 0.0632 | 84,016 |
| HKD | 10,903 | 0.8416 | 9,176 |
| EUR | 55,540 | 8.0250 | 445,707 |
| BRL | 179,288 | 1.2556 | 225,114 |
| Other currencies | Not applicable | Not applicable | 253,468 |
| Sub-total | 1,958,301 | ||
| Total | 27,277,862 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Monetary items denominated in foreign currencies (Cont’d)
| Item | 31 December 2020 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Short-term borrowings | |||
| USD | 280,000 | 6.5249 | 1,826,972 |
| BRL | 105,884 | 1.2556 | 132,948 |
| EUR | 154,489 | 8.0250 | 1,239,777 |
| Other currencies | Not applicable | Not applicable | 122,280 |
| Sub-total | 3,321,977 | ||
| Accounts payable | |||
| USD | 280,661 | 6.5249 | 1,831,288 |
| JPY | 5,637,532 | 0.0632 | 356,292 |
| HKD | 14,244 | 0.8416 | 11,988 |
| EUR | 156,419 | 8.0250 | 1,255,266 |
| BRL | 222,265 | 1.2556 | 279,076 |
| Other currencies | Not applicable | Not applicable | 1,656,574 |
| Sub-total | 5,390,484 | ||
| Other payables | |||
| USD | 12,737 | 6.5249 | 83,109 |
| JPY | 7,245,791 | 0.0632 | 457,934 |
| HKD | 7,272 | 0.8416 | 6,120 |
| EUR | 1,182 | 8.0250 | 9,485 |
| Other currencies | Not applicable | Not applicable | 173,688 |
| Sub-total | 730,336 | ||
| Current portion of non-current liabilities | |||
| USD | 3,769 | 6.5249 | 24,593 |
| EUR | 276,000 | 8.0250 | 2,214,900 |
| Other currencies | Not applicable | Not applicable | 22,833 |
| Sub-total | 2,262,326 | ||
| Long-term borrowings | |||
| USD | 140,061 | 6.5249 | 913,886 |
| EUR | 3,944,261 | 8.0250 | 31,652,691 |
| JPY | 69,460,000 | 0.0632 | 4,392,373 |
| Other currencies | Not applicable | Not applicable | 3,039 |
| Sub-total | 36,961,989 | ||
| Total | 48,667,112 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 Hitachi Compressor (Thailand) Ltd.， in March 2021, and the acquisition hasno significant impact on the Group’s overall financial position.
The Group acquired Wandong Medical in May 2021, and the acquisition has no significant impacton the Group’s overall financial position.
(2) Changes of consolidation scope due to other reasons
(a) Increase of consolidation scope
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Hainan Midea International Logistics Technology Co., Ltd.in January 2021, 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 Hainan Midea Household Kitchen AppliancesManufacturing Co., Ltd. in January 2021, 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 Hainan Midea HVAC Equipment Co., Ltd. in January2021, 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 Hainan Maty Canghai E-commerce Service Co., Ltd. inJanuary 2021, 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 Hainan Maty Hangjian Electric Appliance Co., Ltd. inJanuary 2021, 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 Hainan Zhiwei Electric Appliance Co., Ltd. in January2021, 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 MiSiliconn SemiConductor Technologies Co., Ltd. inJanuary 2021, 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 Shanghai Xiongqi Technology Co., Ltd. in January 2021,holding 95% and 5% of the shares respectively.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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)
Guangdong Welling Motor Manufacturing Co., Ltd., a wholly-owned subsidiary of the Company,established Hainan Weiling Motor Sales Co., Ltd. in January 2021, holding 100% of the shares.
Midea Electrics Netherlands B.V., a wholly-owned subsidiary of the Company, established MecoInnovations Technology, LLC in January 2021, holding 100% of the shares.
Wuhu Annto Investment Co., Ltd. and Foshan Annto Logistics Technology Co., Ltd., theCompany’s wholly-owned subsidiaries, established Hainan Annto Supply Chain Management Co.,Ltd. in January 2021, holding 99% and 1% of the shares respectively.
Wuxi Little Swan Electric Co., Ltd. and Foshan Midea Air-conditioning Industry Investment Co.,Ltd., the Company's wholly-owned subsidiaries, established Hainan Midea Ice Washing Sales Co.,Ltd. in January 2021, 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 Midea (Beijing) Technology Group Co., Ltd. in February2021, 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 Midea (Hainan) Cross Border E-commerce Co., Ltd. inFebruary 2021, 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 Midea Investment Co., Ltd. in February 2021, holding 90%and 10% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Wuhu Midea Intelligent Kitchen Appliances ManufacturingCo., Ltd. in February 2021, holding 95% and 5% of the shares respectively.
Foshan Shunde Midea Household Appliances Industry Co., Ltd., and Foshan Shunde ShunshengInvestment Development Co., Ltd., wholly-owned subsidiaries of the Company, establishedGuangdong Midea Supply Chain Finance Co., Ltd. in March 2021, holding 85% and 15% of theshares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Handan Midea Intelligent Kitchen AppliancesManufacturing Co., Ltd. in March 2021, 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 Hefei Midea Biomedical Co., Ltd. in March 2021, holding95% and 5% of the shares respectively.
Midea Group (Shanghai) Co., Ltd., a wholly-owned subsidiary of the Company, establishedZhejiang Meiqin Maternal and Infant Products Co., Ltd. in March 2021, holding 100% of theshares.
Midea Group (Shanghai) Co., Ltd., a wholly-owned subsidiary of the Company, establishedZhejiang Meixin Pet Technology Co., Ltd. in March 2021, holding 100% of the shares.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 Midea (Hangzhou) E-commerce Co., Ltd. in April 2021,holding 95% and 5% of the shares respectively.
Guangdong Midea Cloud Technology Co., Ltd., the Company’s subsidiary, established WuhanMidea Cloud Technology Co., Ltd. in April 2021, holding 100% of the shares.
Foshan Shunde Midea Household Appliances Industry Co., Ltd., and Foshan MideaAir-conditioning Industry Investment Co., Ltd., the Company’s wholly-owned subsidiaries,established Tianjin Midea Leasing Co., Ltd. in May 2021, holding 95% and 5% of the sharesrespectively.
Swisslog Malaysia Sdn Bhd and Swisslog Singapore Pte Ltd., a wholly-owned subsidiary of theCompany, established PT Swisslog Logistics Automation in May 2021, holding 99% and 1% of theshares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Hubei Midea Commercial Refrigeration Equipment Co.,Ltd. in June 2021, holding 95% and 5% of the shares respectively.
(b) Decrease of consolidation scope
Decrease of consolidation scope in the current year mainly includes deregistration of subsidiaries.Details are as follows:
| Name of entity | Disposal method of the equity | Disposal time-point of the equity |
| Reis Espa?a S.L. | Deregistration | January 2021 |
| Jiangsu Little Swan Marketing Co., Ltd. | Deregistration | March 2021 |
| Wuxi Little Swan Import and Export Co., Ltd. | Deregistration | June 2021 |
| Toshiba HA Manufacturing (Shenzhen) Co., Ltd. | Deregistration | June 2021 |
| Hiconics (Tianjin) Co., Ltd. | Change of equity | January 2021 |
| Beijing Ruihe New Energy Technology Co., Ltd. | Change of equity | January 2021 |
| Wuhan Hiconics Intelligent Electric Co., Ltd. | Change of equity | March 2021 |
| Guangzhou Changde Technology Co., Ltd. | Change of equity | March 2021 |
| Wuhan Hiconics Power Technology Co., Ltd. | Change of equity | April 2021 |
| Zhengzhou Changde Technology Co., Ltd. | Change of equity | June 2021 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
6 Interests in other entities
(1) Interests in subsidiaries
(a) Composition of significant subsidiaries
| Subsidiaries | Major business location | Place of registration | Nature of business | Shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| GD Midea Air-Conditioning Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture and sales of air conditioner | 73% | 7% | Business combinations involving enterprises not under common control |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture and sales of air conditioner | 73% | 7% | Business combinations involving enterprises not under common control |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | Wuhan, PRC | Wuhan, PRC | Manufacture of air conditioner | 73% | 7% | Establishment |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of air conditioner | 87% | 13% | Establishment |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Manufacture and sales of air conditioner | 95% | 5% | Establishment |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of air conditioner | 90% | 10% | Establishment |
| Zhejiang Meizhi Compressor Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Manufacture of air conditioner | 100% | - | Establishment |
| Hefei Midea Refrigerator Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerator | 75% | 25% | Business combinations involving enterprises not under common control |
| Hefei Hualing Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerator | 75% | 25% | Business combinations involving enterprises not under common control |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 90% | 10% | Business combinations involving enterprises under common control |
| Wuxi Little Swan Electric Co., Ltd. | Wuxi, PRC | Wuxi, PRC | Manufacture of washing machine | 100% | - | Establishment |
| Midea Electric Trading (Singapore) Co., Pte. Ltd. | Singapore | Singapore | Export trade | - | 100% | Establishment |
| Midea Group Finance Co., Ltd. | Foshan, PRC | Foshan, PRC | Finance | 95% | 5% | Establishment |
| Midea Microfinance Loan Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Petty loan | 5% | 95% | Business combinations involving enterprises not under common control |
| Mecca International (BVI) Limited | British Virgin Islands | British Virgin Islands | Investment holding | - | 100% | Establishment |
| Midea International Corporation Company Limited | Hong Kong | Hong Kong | Investment holding | 100% | - | Establishment |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 100% | - | Establishment |
| Midea Electric Netherlands (I) B. V. | Netherlands | Netherlands | Investment holding | - | 100% | Establishment |
| Toshiba Consumer Marketing Corporation | Japan | Japan | Manufacture of home appliances | - | 100% | Business combinations involving enterprises not under common control |
| TLSC | Japan | Japan | Manufacture of home appliances | - | 100% | Business combinations involving enterprises not under common control |
| KUKA | Germany | Germany | Manufacture and sales of robots | - | 95% | Business combinations involving enterprises not under common control |
| Ningbo Midea United Materials Supply Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Wholesale and retail | 100% | - | Establishment |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
| Chongqing Midea Commercial Factoring Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Factoring | - | 100% | Establishment |
| Tianjin Midea Commercial Factoring Co., Ltd. | Tianjin, PRC | Tianjin, PRC | Factoring | - | 100% | Establishment |
| Midea Innovation Investment Co., Ltd. | Shenzhen, PRC | Shenzhen, PRC | Investment holding | 85% | 15% | Establishment |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 | 3,016,023 | 2,998,466 |
| Aggregate of the following items in proportion | ||
| Net profit (i) | 309,013 | 261,136 |
| Other comprehensive income (i) | 24,624 | (8,721) |
| Total comprehensive income | 333,637 | 252,415 |
(i) The net profit and other comprehensive income have taken into account the impacts of both thefair value of the identifiable assets and liabilities upon the acquisition of investment in associatesand the unification of accounting policies adopted by the associates to those adopted by theCompany.
7 Segment information
The reportable segments of the Group are the business units that provide different products orservice, or operate in the different areas. Different businesses or areas require differenttechnologies and marketing strategies, the Group, therefore, separately manages the productionand operation of each reportable segment and evaluates their operating results respectively, inorder to make decisions about resources to be allocated to these segments and to assess theirperformance.
The Group identified 4 reportable segments as follows:
- Heating & ventilation, as well as air-conditioner- Consumer appliances- Robotics and automation system- Others
Inter-segment transfer prices are determined by reference to selling prices for third parties.
The assets are allocated based on the operations of the segments and the physical locations ofthe assets. The liabilities are allocated based on the operations of the segments. Expensesindirectly attributable to each segment are allocated to the segments based on the proportion ofeach segment’s revenue.
Operating expenses include cost of sales, interest expenses, fee and commission expenses,taxes and surcharges, selling and distribution expenses, general and administrative expenses,R&D expenses and financial expenses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 2021 is as follows:
| Item | Current period | |||||
| Heating & ventilation, as well as air-conditioner | Consumer appliances | Robotics and automation system | Other segments and unallocated | Elimination | 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 and amortisation | 1,023,443 | 845,366 | 654,824 | 431,225 | - | 2,954,858 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 2020 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 | Elimination | Total | |
| Revenue from external customers | 72,226,513 | 55,444,326 | 9,566,800 | 2,481,639 | - | 139,719,278 |
| Inter-segment revenue | 1,106,271 | 131,504 | 69,473 | 3,854,479 | (5,161,727) | - |
| Operating expenses | (65,461,208) | (48,664,573) | (10,395,446) | (5,299,952) | 5,167,193 | (124,653,986) |
| Segment profit | 7,871,576 | 6,911,257 | (759,173) | 1,036,166 | 5,466 | 15,065,292 |
| Other profit or loss | 1,330,779 | |||||
| Total profit | 16,396,071 | |||||
| Total assets | 136,165,971 | 119,403,019 | 35,643,752 | 160,618,342 | (117,168,420) | 334,662,664 |
| Total liabilities | 95,110,168 | 86,527,001 | 25,342,328 | 142,206,904 | (126,885,838) | 222,300,563 |
| Long-term equity investments in associates and joint ventures | 348,022 | 101,184 | 83,959 | 2,465,301 | - | 2,998,466 |
| Investment income from associates and joint ventures | 83,347 | 3,413 | (11,786) | 186,162 | - | 261,136 |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 1,009,325 | 822,837 | 1,615,944 | 150,978 | - | 3,599,084 |
| Losses on/(Reversal of) asset impairment | 30,949 | 82,862 | 18,861 | 747 | - | 133,419 |
| Losses on/(Reversal of) credit impairment | 165,412 | 54,730 | 79,298 | 186,826 | (24,268) | 461,998 |
| Depreciation and amortisation | 880,664 | 818,324 | 514,688 | 289,669 | - | 2,503,345 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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 | 100,887,459 | 77,885,398 |
| In other countries/geographical areas | 73,959,436 | 61,833,880 |
| Total | 174,846,895 | 139,719,278 |
| Total non-current assets | Current period | Same period of prior year |
| Domestic | 39,689,984 | 23,375,157 |
| In other countries/geographical areas | 17,838,149 | 18,283,578 |
| Total | 57,528,133 | 41,658,735 |
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 parentcompany
| 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. | 30.75% | - | 30.75% | 30.86% | - | 30.86% |
(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 2021(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 Wellkey Electrician Material Co., Ltd. | Controlled by direct relatives of the Company’s ultimate controlling shareholder in the past 12 months |
| Anhui Wellkey Electrician Material Co., Ltd. | Controlled by direct relatives of the Company’s ultimate controlling shareholder in the past 12 months |
| 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 with related parties are conducted inaccordance with normal commercial terms or relevant agreements.
(a) Purchase of goods:
| Related parties | Nature of related party transactions | Pricing policies of related party transactions | Current period | Same period of prior year |
| Orinko New Material Co., Ltd. | Purchase of goods | Agreed price | 671,628 | 518,566 |
| Guangdong Wellkey Electrician Material Co., Ltd. | Purchase of goods | Agreed price | 527,342 | 380,731 |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | Purchase of goods | Agreed price | 180,676 | 132,510 |
| Anhui Wellkey Electrician Material Co., Ltd. | Purchase of goods | Agreed price | 279,685 | 125,375 |
| Total | 1,659,331 | 1,157,182 |
(b) Sales of goods:
| Related parties | Nature of related party transactions | Pricing policies of related party transactions | Current period | Same period of prior year |
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Sales of goods | Agreed price | 93,907 | 74,206 |
(c) Investment income and interest income:
| Related parties | Current period | Same period of prior year |
| Guangdong Shunde Rural Commercial Bank Co., Ltd. | 100,448 | 61,222 |
(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,and other debt investments | Guangdong Shunde Rural Commercial Bank Co., Ltd. | 6,285,872 | 3,653,592 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 (Cont’d)
Payables to related parties:
| Item | Related parties | Ending balance | Opening balance |
| Accounts payable | Guangdong Wellkey Electrician Material Co., Ltd. | 219,567 | 133,290 |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | 76,597 | 62,837 | |
| Orinko New Material Co., Ltd. | 148,094 | 218,888 | |
| Anhui Wellkey Electrician Material Co., Ltd. | 105,118 | 53,889 | |
| Sub-total | 549,376 | 468,904 | |
| Notes payable | Guangdong Wellkey Electrician Material Co., Ltd. | 44,685 | 52,246 |
| Total | 594,061 | 521,150 |
10 Share-based payment
(1) Share option incentive plan
(a) Pursuant to the eighth share option incentive plan (the “Eighth Share Option Incentive Plan”)
approved at the 2020 annual shareholders’ meeting in 2021, the Company granted 82,260,000share options with exercise price of RMB 81.41 to 1,897 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 4 June2021.
Determination method for fair value of share options at the grant date
| Exercise price of options: | RMB 81.41 |
| Effective period of options: | 5 years |
| Current price of underlying shares: | RMB 77.73 |
| Estimated fluctuation rate of share price: | 35.78% |
| Estimated dividend rate: | 2.42% |
| Risk-free interest rate within effective period of options: | 2.34% |
The fair value of the Eighth Share Option Incentive Plan calculated pursuant to the aboveparameters is: RMB 1,457,678,000.
(b) Movements in share options during the six months ended 30 June 2021
| Item | For the six months ended 30 June 2021 (Share in thousands) | For the six months ended 30 June 2020 (Share in thousands) |
| Share options issued at the beginning of the year | 168,231 | 182,905 |
| Share options granted during the period | 82,260 | - |
| Share options exercised during the period | (20,699) | (41,353) |
| Share options lapsed during the period | (17,284) | (16,051) |
| Share options issued at the end of the period | 212,508 | 125,501 |
As at 30 June 2021, the residual contractual maturity date of the Fifth Share Option IncentivePlan is 6 May 2024. The residual contractual maturity date of the Fifth Reserved Share OptionIncentive Plan is 10 March 2025. The residual contractual maturity date of the Sixth ShareOption Incentive Plan is 29 May 2025. The residual contractual maturity date of the SeventhShare Option Incentive Plan is 4 June 2024. The residual contractual maturity date of theEighth Share Option Incentive Plan is 4 June 2026.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
10 Share-based payment (Cont’d)
(2) Restricted share plan
(a) Pursuant to the restricted shares incentive plan for 2021 approved at the 2020 annual
shareholders’ meeting in 2021 (the “Restricted Shares Incentive Plan for 2021”), the Companygranted 9,940,000 restricted shares with exercise price of RMB 39.92 to 139 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 4 June 2021.
(b) Movements in restricted shares during the six months ended 30 June 2021
| Item | For the six months ended 30 June 2021 (Share in thousands) | For the six months ended 30 June 2020 (Share in thousands) |
| Restricted shares issued at the beginning of the year | 74,082 | 57,139 |
| Restricted shares granted during the period | 9,940 | - |
| Restricted shares unlocked during the period | (4,739) | (10,577) |
| Restricted shares lapsed during the period | (2,527) | (3,507) |
| Restricted shares issued at the end of the period | 76,756 | 43,055 |
(3) For the six months ended 30 June 2021, the total expenses due to the above share-based
payment incentive plan were RMB 813,154,000. As at 30 June 2021, the balance relating tothe share-based payment incentive plan and accrued from capital surplus was RMB1,908,237,000.
11 Contingencies
As at 30 June 2021, the amount in tax disputes involving Brazilian subsidiary with 51%interests held by the Company is about BRL 670 million (equivalent to RMB 867 million) (Somecases have lasted for more than 10 years. The above amount includes the principal andinterest). As at 30 June 2021, relevant cases are still at court. Original shareholders of Braziliansubsidiary have agreed to compensate the Company according to verdict results of the abovetax disputes. The maximum compensation amount is about BRL 157 million (equivalent toRMB 203 million). With reference to judgements of third-party attorneys, management believesthat the probability of losing lawsuits and making compensation is small, and expects nosignificant risk of tax violation.
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 2021
(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.Pursuant to the risk management objective, the Group has made risk management policies toidentify and analyse the risks it is exposed to and set appropriate risk resistant level anddesign relevant internal control procedures to monitor the Group’s risk level. The Groupreviews regularly these risk management policies and relevant internal control systems toadapt to changes in market condition or its operating activities.
(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 manageforeign exchange risk, with approach of the natural hedge for settling currencies, signingforward foreign exchange hedging contracts and controlling the scale of foreign currencyassets and liabilities, to minimise foreign exchange risk, and to reduce the impact of exchangerate fluctuations on business performance.
(b) Interest rate risk
The Group's interest rate risk arises from interest bearing borrowings including long-termborrowings and debentures payable. Financial liabilities issued at floating rates expose theGroup to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the Groupto fair value interest rate risk. The Group determines the relative proportions of its fixed rateand floating rate contracts depending on the prevailing market conditions. As at 30 June 2021,the Group’s long-term interest bearing borrowings at floating rates amounted to RMB904,330,000 (31 December 2020: RMB 933,886,000) (Note 4(36)).
The Group’s finance department at its headquarters continuously monitors the interest rateposition of the Group. Increases in interest rates will increase the cost of new borrowing andthe interest costs with respect to the Group’s outstanding floating rate borrowings, andtherefore could have a material adverse effect on the Group’s financial performance. TheGroup makes adjustments timely with reference to the latest market conditions and may enterinto interest rate 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 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Con’d)
(1) Market risk (Con’d)
(c) Other price risk
The Group's other price risk arises mainly from financial assets held for trading (Note 4(2)),and other non-current financial assets (Note 4(16)) measured at fair value. As at 30 June 2021,if expected price of the investments held by the Group fluctuated, the Group's gains or losseson 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, accountsreceivable, receivables financing, loans and advances, other receivables, contract assets,other debt investments and derivative financial assets at fair value through profit or loss thatare not included in the impairment assessment scope. As at the balance sheet date, thecarrying amount of the Group’s financial assets represented the maximum exposure of theGroup and no 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 credithistory and other factors such as current market conditions. The credit history of the customersis regularly monitored by the Group. In respect of customers with a poor credit history, theGroup will use written payment reminders, or shorten or cancel credit periods, to ensure theoverall credit 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. Cash flow forecasting is performed by eachsubsidiary of the Group and aggregated by the Group’s finance department in its headquarters.The Group’s finance department at its headquarters monitors rolling forecasts of the Group'sshort-term and long-term liquidity requirements to ensure it has sufficient cash and securitiesthat are readily convertible to cash to meet operational needs, while maintaining sufficientheadroom on its undrawn committed borrowing facilities from major financial institutions sothat the Group does not breach borrowing limits or covenants on any of its borrowing facilitiesto meet the short-term and long-term liquidity requirements. As at 30 June 2021, monetaryassets held by the Group, including cash at bank and on hand, notes receivable, notesdiscount assets included in loans and advances, notes receivable included in receivablesfinancing, wealth management funds and structural deposits included in financial assets heldfor trading and monetary investments included in other current assets amounted to RMB154,477,672,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Con’d)
(3) Liquidity risk (Con’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 2021 | |||||
| Item | Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total |
| Short-term borrowings (including interest) | 12,015,419 | - | - | - | 12,015,419 |
| Customer deposits and deposits from banks and other financial institutions (including interest) | 19,158 | - | - | - | 19,158 |
| Notes payable | 31,022,593 | - | - | - | 31,022,593 |
| Accounts payable | 64,464,041 | - | - | - | 64,464,041 |
| Other payables | 4,780,388 | - | - | - | 4,780,388 |
| Derivative financial liabilities | 123,021 | - | - | - | 123,021 |
| Other current liabilities (including interest) | 18,546,602 | - | - | - | 18,546,602 |
| Current portion of non-current liabilities (including interest) | 1,540,439 | - | - | - | 1,540,439 |
| Long-term borrowings (including interest) | 638,154 | 29,674,879 | 20,458,280 | - | 50,771,313 |
| Lease liabilities (including interest) | - | 569,398 | 708,638 | 274,365 | 1,552,401 |
| Other non-current liabilities | - | - | 689,991 | - | 689,991 |
| Sub-total | 133,149,815 | 30,244,277 | 21,856,909 | 274,365 | 185,525,366 |
| 31 December 2020 | |||||
| Ending balance | Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total |
| Short-term borrowings (including interest) | 10,033,656 | - | - | - | 10,033,656 |
| Customer deposits and deposits from banks and other financial institutions (including interest) | 87,596 | - | - | - | 87,596 |
| Notes payable | 28,249,939 | - | - | - | 28,249,939 |
| Accounts payable | 53,930,261 | - | - | - | 53,930,261 |
| Other payables | 4,501,391 | - | - | - | 4,501,391 |
| Derivative financial liabilities | 161,225 | - | - | - | 161,225 |
| Other current liabilities (including interest) | 18,661,350 | - | - | - | 18,661,350 |
| Current portion of non-current liabilities (including interest) | 6,355,016 | - | - | - | 6,355,016 |
| Long-term borrowings (including interest) | 557,805 | 31,435,123 | 12,002,785 | - | 43,995,713 |
| Long-term payables | - | 8,870 | 4,390 | - | 13,260 |
| Other non-current liabilities | - | - | 692,986 | - | 692,986 |
| Sub-total | 122,538,239 | 31,443,993 | 12,700,161 | - | 166,682,393 |
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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 |
As at 30 June 2021, the assets and liabilities measured at fair value on a recurring basis by theabove three levels are analysed below:
| Item | 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 | 1,764,101 | 2,019,751 | 439,816 | 4,223,668 |
| Derivative financial assets | - | 289,883 | - | 289,883 |
| Receivables financing | - | 15,394,251 | - | 15,394,251 |
| Other current assets - hedging instruments | - | 387,965 | - | 387,965 |
| Other debt investments | - | 16,764,387 | - | 16,764,387 |
| Other equity investments | - | - | 46,857 | 46,857 |
| Other non-current financial assets | - | - | 4,154,677 | 4,154,677 |
| Total assets | 1,764,101 | 34,856,237 | 4,641,350 | 41,261,688 |
| Financial liabilities measured at fair value - | ||||
| Derivative financial liabilities | - | 123,021 | - | 123,021 |
| Other current liabilities - hedging instruments | - | 116,761 | - | 116,761 |
| Total liabilities | - | 239,782 | - | 239,782 |
As at 31 December 2020, the assets and liabilities measured at fair value on a recurring basisby 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 | 2,324,965 | 25,914,636 | - | 28,239,601 |
| Derivative financial assets | - | 420,494 | - | 420,494 |
| Receivables financing | - | 13,901,856 | - | 13,901,856 |
| Other current assets - hedging instruments | - | 767,934 | - | 767,934 |
| Other debt investments | - | 21,456,155 | - | 21,456,155 |
| Other equity investments | - | - | 46,651 | 46,651 |
| Other non-current financial assets | - | - | 3,360,849 | 3,360,849 |
| Total assets | 2,324,965 | 62,461,075 | 3,407,500 | 68,193,540 |
| Financial liabilities measured at fair value - | ||||
| Derivative financial liabilities | - | 161,225 | - | 161,225 |
| Other current liabilities - hedging instruments | - | 19,511 | - | 19,511 |
| Total liabilities | - | 180,736 | - | 180,736 |
The Group takes the date on which events causing the transfers between the levels take placeas the timing specific for recognising the transfers.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 |
There was no significant transfer of fair value measurement level of the above financialinstruments among the three levels.
The fair value of financial instruments traded in an active market is determined at the quotedmarket price; and the fair value of those not traded in an active market is determined by theGroup using valuation technique. The valuation models used mainly comprise discounted cashflow model and market comparable corporate model. Inputs of valuation technique mainlycomprise risk-free interest rate, 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 are analysed below:
| Item | Amount |
| 1 January 2021 | 3,407,500 |
| Increase | 1,365,472 |
| Decrease | (250,680) |
| Transfer into Level 3 | 28,665 |
| Total gains for the current period | |
| Investment income recognised in the income statement | 111,089 |
| Losses recognised in other comprehensive income | (20,696) |
| 30 June 2021 | 4,641,350 |
| Item | Amount |
| 1 January 2020 | 1,750,107 |
| Increase | 1,872,884 |
| Decrease | (63,570) |
| Transfer into Level 3 | (226,060) |
| Total gains for the current period | |
| Investment income recognised in the income statement | 181,583 |
| Losses recognised in other comprehensive income | (107,444) |
| 31 December 2020 | 3,407,500 |
(a) The fair value of this part of other non-current financial assets is measured using discountedcash flows approach. The judgement of Level 3 of the fair value hierarchy is based on themateriality of unobservable inputs towards calculation of whole fair value. Significantunobservable inputs mainly include the financial data of targeted company and risk adjusteddiscount rates.
Assets and liabilities subject to Level 2 fair value measurement are mainly structural deposits,receivables financing and forward exchange contracts and are evaluated by market approachand income approach.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates (Cont’d)
| (2) | Assets and liabilities not measured at fair value but disclosed |
The Group's financial assets and financial liabilities measured at amortised cost 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, current portion of non-current liabilities, customer deposits and deposits frombanks 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 2021 and 31 December 2020 approximated to their fair value.
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 ofdividends paid to shareholders, refund capital to shareholders, issue new shares or sell assetsto reduce debts.
The Group is not subject to external mandatory capital requirements, and monitors capitalstructure on the basis of gearing ratio (total liabilities divide total assets).
As at 30 June 2021 and 31 December 2020, the Group's gearing ratio was as follows:
| Item | Ending balance | Opening balance |
| Total liabilities | 256,756,416 | 236,145,503 |
| Total assets | 380,211,202 | 360,382,603 |
| Gearing ratio | 67.53% | 65.53% |
17 Notes to the parent company’s financial statements
(1) Other receivables
| Item | Ending balance | Opening balance |
| Other receivables | 34,242,238 | 28,332,268 |
| Less: Provision for bad debts | (14,679) | (13,598) |
| Total | 34,227,559 | 28,318,670 |
(a) Other receivables are analysed by ageing as follows:
| Ageing | Ending balance | Opening balance |
| Within 1 year | 34,005,159 | 28,205,960 |
| 1 to 2 years | 235,955 | 125,127 |
| Over 2 years | 1,124 | 1,181 |
| Total | 34,242,238 | 28,332,268 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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 | |||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | Lifetime ECL (Credit impaired) | Sub-total | ||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | Book balance | Provision for bad debts | Provision for bad debts | |
| 1 January 2021 | 423,516 | 13,540 | 27,908,694 | - | 58 | 58 | 13,598 |
| Transfer to Stage 3 in the current year | - | - | - | - | - | - | - |
| Net increase in the current period | (147,768) | 1,139 | 6,057,796 | - | (58) | (58) | 1,081 |
| Including: Write-off in the current period | - | - | - | - | (58) | (58) | (58) |
| Derecognition | - | - | - | - | - | - | - |
| 30 June 2021 | 275,748 | 14,679 | 33,966,490 | - | - | - | 14,679 |
As at 30 June 2021, the Company did not have other receivables at Stage 2.
(c) As at 30 June 2021, other receivables of the Company at Stage 1 and Stage 3 were analysed
as follows:
(i) As at 30 June 2021, other receivables for which the related provision for bad debts was
provided on the individual basis were analysed as follows:
| Item | Ending balance | |||
| Book balance | 12-month ECL rate | Provision for bad debts | Reason | |
| Stage 1 | 33,966,490 | 0% | - | Relatively low expected loss risk |
(ii) As at 30 June 2021, 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 | 275,748 | (14,679) | 5.32% | 423,516 | (13,540) | 3.20% |
(d) As at 30 June 2021, the five largest other receivables aggregated by debtors were analysed as
follows:
| Name of entity | Nature | Book balance | Ageing | % of total balance | Provision for bad debts |
| Company A | Current accounts | 4,001,000 | Within 1 year | 11.68% | - |
| Company B | Current accounts | 3,454,000 | Within 1 year | 10.09% | - |
| Company C | Current accounts | 2,143,890 | Within 1 year | 6.26% | - |
| Company D | Current accounts | 1,231,000 | Within 1 year | 3.59% | - |
| Company E | Current accounts | 960,000 | Within 1 year | 2.80% | - |
| Sub-total | 11,789,890 | 34.42% | - |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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) | 60,300,750 | 53,320,578 |
| Associates (b) | 1,739,948 | 1,670,583 |
| Sub-total | 62,040,698 | 54,991,161 |
| Less: Provision for impairment | - | - |
| Total | 62,040,698 | 54,991,161 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021(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
(a) Subsidiaries
| Name of investee | Opening balance | Movements for the current period | Ending balance | Cash dividends declared to the parent company in the current period | ||
| Increase in investment | Decrease in investment | Others | ||||
| Wuxi Little Swan Electric Co., Ltd. | 20,194,240 | - | - | 36,071 | 20,230,311 | 1,120,685 |
| Guangdong Midea Electric Co., Ltd. | 5,000,000 | - | - | - | 5,000,000 | - |
| Midea Group Finance Co., Ltd. | 3,360,577 | - | - | 1,774 | 3,362,351 | - |
| Foshan Shunde Midea Household Appliances Industry Co., Ltd. | 2,949,000 | - | - | - | 2,949,000 | - |
| Beijing Wandong Medical Technology Co., Ltd. | - | 2,237,093 | - | - | 2,237,093 | - |
| Guangdong Midea Microwave Oven Manufacturing Co., Ltd. | 1,880,041 | - | - | - | 1,880,041 | - |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 1,792,170 | - | - | 58,559 | 1,850,729 | - |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 1,146,142 | - | - | 12,024 | 1,158,166 | - |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 1,076,253 | - | - | 1,933 | 1,078,186 | - |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 1,053,484 | - | - | 1,991 | 1,055,475 | - |
| Midea Group (Shanghai) Co., Ltd. | 903,368 | - | - | 3,254 | 906,623 | - |
| Hubei Midea Refrigerator Co., Ltd. | 855,003 | - | - | 8,615 | 863,618 | - |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 827,603 | - | - | 1,768 | 829,372 | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 780,128 | - | - | 34,148 | 814,276 | - |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 764,440 | - | - | 4,205 | 768,645 | - |
| Annto Logistics Technology Co., Ltd. | 742,684 | - | - | - | 742,685 | |
| Hefei Midea Refrigerator Co., Ltd. | 532,048 | - | - | 6,975 | 539,023 | - |
| Ningbo Midea United Materials Supply Co., Ltd. | 497,867 | - | - | 1,827 | 499,694 | 662,907 |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 352,061 | - | - | - | 352,061 | - |
| Hefei Hualing Co., Ltd. | 265,630 | - | - | 19,168 | 284,798 | - |
| Midea International Corporation Company Limited | 176,974 | - | - | - | 176,974 | - |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 172,612 | - | - | 8,691 | 181,303 | - |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 110,327 | - | - | 3,016 | 113,343 | - |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 83,953 | - | - | 1,881 | 85,834 | - |
| Zhejiang Meizhi Compressor Co., Ltd. | 66,280 | - | - | 167 | 66,447 | - |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 56,223 | - | - | - | 56,223 | - |
| Others | 7,681,470 | 4,174,510 | - | 362,502 | 12,218,479 | 56,461 |
| Total | 53,320,578 | 6,411,603 | - | 568,569 | 60,300,750 | 1,840,053 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2021
(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
(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 |
| Investment income from long-term equity investments under cost method | 1,840,053 | 5,686,153 |
| Investment income from holding of financial assets held for trading | 250,866 | 390,487 |
| Investment income from long-term equity investment under equity method | 142,640 | 134,639 |
| Total | 2,233,559 | 6,211,279 |
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 | (17,085) | (11,070) |
| Except for the effective hedging activities related to the Company’s ordinary activities, gains or losses on changes in fair value of 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. | (101,719) | 240,361 |
| Others (mainly including government grants, compensation income, penalty income and other non-operating income and expenses) | 544,913 | 422,455 |
| Sub-total | 426,109 | 651,746 |
| Less: Effect of enterprise income tax (decrease in income tax expressed with “-”) | (64,272) | (90,684) |
| Effect of minority interests (after tax) | 10,698 | (89,811) |
| Net non-recurring profit or loss attributable to shareholders of the parent company | 372,535 | 471,251 |
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 notdirectly relevant to ordinary activities, or that is relevant to ordinary activities, but isextraordinary and not expected to recur frequently that would have an influence on users offinancial statements making economic decisions on the financial performance and profitabilityof 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 (Yuan/share) | ||||
| 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 | 12.63% | 13.03% | 2.17 | 2.01 | 2.16 | 2.01 |
| Net profit attributable to ordinary shareholders of the Company, net of non-recurring profit or loss | 12.31% | 12.59% | 2.11 | 1.94 | 2.10 | 1.94 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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 Reporting Standards (IFRS)
□Applicable √N/A
No such differences for the Reporting Period.
(2) Differences in the net prosfit and net assets disclosed in the financial reports prepared under
CAS and foreign accounting standards
□Applicable √N/A
No such differences for the Reporting Period.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
31 August 2021