Midea Group Co., Ltd.
Semi-Annual Report 2023
August 2023
Section I Important Statements, Contents and DefinitionsThe Board of Directors, the Supervisory Committee, directors, supervisors and seniormanagement of Midea Group Co., Ltd. (hereinafter referred to as the “Company”)hereby guarantee that the information presented in this report is free of anymisrepresentations, misleading statements or material omissions, and shall togetherbe wholly liable for the truthfulness, accuracy and completeness of its contents.Mr. Fang Hongbo, Chairman of the Board and CEO of the Company, Ms. Zhong Zheng,CFO and Director of Finance of the Company, and Ms. Chen Lihong, head of theaccounting department of the Company, have represented and warranted that thefinancial statements in this report are true, accurate and complete.All directors of the Company attended the Board meeting to review this report.The future plans and other forward-looking statements mentioned in this report shallnot be considered as promises of the Company to investors. Therefore, investors arekindly reminded to pay attention to possible investment risks.The Company plans not to distribute cash dividends or bonus shares or convertcapital reserves into share capital.This report has been prepared in both Chinese and English. Should there be anydiscrepancies or misunderstandings between the two versions, the Chinese versionshall prevail.
Contents
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS ...... 2
SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ...... 6
SECTION III MANAGEMENT DISCUSSION AND ANALYSIS ...... 10
SECTION IV CORPORATE GOVERNANCE ...... 105
SECTION V ENVIRONMENTAL AND SOCIAL RESPONSIBILITY ...... 118
SECTION VI SIGNIFICANT EVENTS ...... 142SECTION VII CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ..... 157SECTION VIII PREFERENCE SHARES ...... 163
SECTION IX BONDS ...... 164
SECTION X FINANCIAL REPORT ...... 167
Documents Available for Reference
1. The original of The Semi-Annual Report 2023 of Midea Group Co., Ltd. signed bythe legal representative;
2. The financial statements signed and stamped by the legal representative, the CFO& Director of Finance and the head of the accounting department;
3. The originals of all company documents and announcements that are disclosed tothe public via newspaper designated for information disclosure during the ReportingPeriod; and
4. The electronic version of The Semi-Annual Report 2023 that is released onhttp://www.cninfo.com.cn.
Definitions
| Term | Definition |
| The “Company”, “Midea”, “Midea Group” or the “Group” | Midea Group Co., Ltd. |
| Midea Holding | Midea Holding Co., Ltd. |
| TLSC | Toshiba Lifestyle Products & Services Corporation |
| KUKA | KUKA Aktiengesellschaft |
| Hiconics | Hiconics Eco-energy Technology Co., Ltd. |
| WDM | Beijing Wandong Medical Technology Co., Ltd. |
| Clou Electronics | ShenZhen Clou Electronics Co., Ltd. |
| Swisslog | Swisslog Holding AG |
| Servotronix | Servotronix Motion Control Ltd. |
| WINONE | WINONE Elevator Company Limited |
| “TTium” or “TTium Motor” | WuHan TTium Motor Technology Co., Ltd. |
| Reporting Period | 1 January 2023 to 30 June 2023 |
Section II Company Profile and Key Financial Results
1. Corporate Information
| Stock name | Midea Group | Stock code | 000333 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese | 美的集团股份有限公司 | ||
| Abbr. of the Company name in Chinese (if any) | 美的集团 | ||
| Name of the Company in English (if any) | Midea Group Co., Ltd. | ||
| Abbr. of the Company name in English (if any) | Midea Group | ||
| Legal representative | Fang Hongbo | ||
2. Contact Us
| Board Secretary | Representative for Securities Affairs | |
| Name | Jiang Peng | You Mingyang |
| Address | Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City, Guangdong Province, China | Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City, Guangdong Province, China |
| Tel. | 0757-22607708 | 0757-23274957 |
| Fax | 0757-26605456 | |
| IR@midea.com | ||
3. Other Information
3.1 Ways to Contact the Company
Changes to the registered address, office address and their zip codes, website address and emailaddress of the Company in the Reporting Period:
□Applicable ?N/A
No such changes in the Reporting Period. The said information can be found in the 2022 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 the2022 Annual Report.
3.3 Other Information
Changes to other information in the Reporting Period:
□Applicable ?N/A
4. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□Yes ?No
| H1 2023 | H1 2022 | Change (%) | |
| Operating revenue (RMB'000) | 196,988,402 | 182,661,009 | 7.84% |
| Net profit attributable to shareholders of the Company (RMB'000) | 18,232,291 | 15,995,496 | 13.98% |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses (RMB'000) | 17,651,853 | 15,691,512 | 12.49% |
| Net cash flows from operating activities (RMB'000) | 29,784,674 | 21,394,710 | 39.22% |
| Basic earnings per share (RMB/share) | 2.67 | 2.34 | 14.10% |
| Diluted earnings per share (RMB/share) | 2.66 | 2.34 | 13.68% |
| Weighted average ROE (%) | 12.14% | 12.18% | -0.04% |
| 30 June 2023 | 31 December 2022 | Change (%) | |
| Total assets (RMB'000) | 462,739,635 | 422,555,267 | 9.51% |
| Net assets attributable to shareholders of the Company (RMB'000) | 146,368,593 | 142,935,236 | 2.40% |
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.
5.3 Reasons for differences in accounting data under domestic and overseas accountingstandards
□Applicable ?N/A
6. Non-recurring Gains and Losses
?Applicable □N/A
Unit: RMB'000
| Item | Amount | Note |
| Gain or loss from disposal of non-current assets | 8,525 | |
| Except for the effective hedging activities related to the Group’s ordinary activities, gains or losses on changes in fair value arising from financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities, other non-current financial assets, and investment income from disposal of financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities, other non-current financial assets | 25,019 | |
| Others (mainly including government grants, reversal of provision for impairment of receivables tested for impairment on an individual basis, compensation income, penalty income and other non-operating income and expenses) | 639,381 | |
| Less: Corporate income tax | 85,263 | |
| Minority interests (after tax) | 7,224 | |
| Total | 580,438 | -- |
Particulars about other items that meet the definition of non-recurring gain/loss:
□Applicable ?N/A
Explain the reasons if the Company classifies an item as a recurring gain/loss item, which is enumeratedas a non-recurring gain/loss in the <Explanatory Announcement No. 1 on Information Disclosure forCompanies Offering Their Securities to the Public—Non-Recurring Profits and Losses>:
□Applicable ?N/A
Section III Management Discussion and Analysis
1. Industry Overview for the Reporting Period
1.1 Summary of the business scope
Midea is a global technology group comprising the Smart Home, Industrial Technology, BuildingTechnologies, Robotics & Automation, and Other Innovation businesses. With a business portfolio that isfocused on the coordinated development of the ToC and ToB businesses, Midea offers diversifiedproducts and services. Specifically, the Smart Home Business Group, as the main operating entity ofsmart appliances, 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 entire-house smart home appliances and service. TheIndustrial Technology Business Group, with technology as the core driver, commands key technologiesin intelligent transportation, industrial automation, green energy and consumer appliances. It operatesmany brands including GMCC, Welling, HICONICS, SUNYE, SERVOTRONIX, DORNA, MR, TOSHIBA,Motinova, etc., with its products covering high-precision core components such as compressors, motors,chips, auto parts, electronic expansion valves, variable frequency drive, servo and motion control systems,speed reducers and cooling modules. It provides green, efficient and intelligent products and technologysolutions for industrial customers across the world. The Building Technologies Division is responsible forproviding products and services in relation to buildings, as well as the relevant operations. WithiBUILDING, Midea’s digital building service platform, as the core, its business covers HVAC, elevators,energy, building control, etc. Its primary products include VRF units, large chillers, unitary units, machineroom air conditioners, escalators, passenger elevators, freight elevators, etc., as well as buildingautomation software and building weak electricity integrated solutions. Supported by “Building Equipmentand Facilities + Digital Technology + Industrial Ecosystem”, it facilitates logistics, information, feeling andenergy flows of buildings to empower buildings with digital and low-carbon technologies and buildsustainable smart space. 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 Other Innovation Business
includes new businesses arising from the transformation of Midea Group’s business models. Among them,there are Annto, which provides customers with end-to-end digital and intelligent supply chain solutions;Midea Cloud, which provides industrial software and digitalisation consulting services for intelligentmanufacturing and industrial interconnectivity through its industrial internet platform M·IoT; MideaLighting, which focuses on the R&D, production, and sales of lighting and intelligent pre-decorationelectrical products; WDM, which is committed to innovation in medical imaging technology, providinghigh-quality medical imaging products and services for clinical use; and Midea Finance, which providesusers with industrial chain finance, Midea Pay, consumer finance and other diversified financial services.With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire YourFuture” as its mission, “Embrace what’s next - Aspiration、Customer First、Innovation、Collaboration、Dedication” as its values, “High-quality Development and High-performance Operations” as itsmanagement and operation standard, Midea integrates global resources and promotes technologicalinnovation to create a better life for over 400 million users, major customers and strategic partners indifferent areas worldwide every year with satisfying products and services. In face of higher requirementsfor products and services in the digital Internet era, Midea continues to promote its strategic focus of“Technology Leadership, Direct to Users, Digitization & Intelligence Driven, and Global Impact”, so as torebuild Midea in the new era. To be specific, it strives to achieve Technology Leadership by building scaleadvantages in R&D and strengthening the efforts and investment in core and cutting-edge technologies;be Direct to Users through direct contact and interaction with users and reinventing product service andbusiness models; be Digitization & Intelligence Driven through “Comprehensive Digitalization andComprehensive Intellectualization”, as well as improving efficiency internally and focusing on usersexternally; and achieve Global Impact by seeking breakthroughs in key regions in terms of market,channel and business model dimensions and serving global users.Midea, a global operating company, has now established a global platform with around 200 subsidiaries,31 R&D centers, 40 major manufacturing bases, and more than 160,000 employees. Its business coversmore than 200 countries and regions. Overseas, Midea has 16 R&D centers and 21 major manufacturingbases in more than ten countries. And 22 currencies are used by Midea in settlement.
1.2 Position in the home appliance industry
Midea Group ranks No. 278 on the Fortune Global 500 list unveiled in August 2023, marking its eighthconsecutive year on the list. Meanwhile, Midea has also been named to the Fortune China ESG Impactlist for its high-value practices in environmental management and social contribution. In June 2023, theForbes magazine released its 2023 “Global 2000” list and Midea ranks No. 199, up 18 places from lastyear. Also, Midea Group has been named as one of the 2022 Forbes World’s Top Female FriendlyCompanies and the 2022 Forbes World’s Best Employers, among others. In March 2023, Midea Groupwas selected as one of the ESG Case Companies with Practical Reference Significance according to the“2023 ESG Inspiring Cases” results released by Forbes China. In the “2022 Forbes China SustainableDevelopment Industrial Enterprises Top 50 Selection” held in February 2023, Midea was selected as anIndustry Benchmark for Sustainable Development Industrial Enterprises by virtue of its solid performancein green manufacturing, carbon neutrality, sustainable development and ESG practices. In July 2023, theSummit Forum of Top Enterprises in China Light Industry released the 2022 list of “Top 200 Enterprisesin China Light Industry”, and Midea Group once again topped the list with an outstanding score of 98.07.In March 2023, Midea won the China Industrial Grand Prize at the Seventh China Industrial Grand PrizeCeremony jointly organized by the China Federation of Industrial Economics and 13 national industryassociations for its excellent performance in technology innovation, quality management and branding,among others. By June 2023, five of Midea’s factories had been included in the “Global LighthouseNetwork” initiated by the World Economic Forum, covering air conditioners, refrigerators, laundryappliances, microwave ovens, dishwashers, etc., which demonstrates Midea’s leading position inintelligent manufacturing and digital development among manufacturers worldwide. Meanwhile, Mideatakes the lead among domestic home appliance makers by ranking No. 39 on the 2023 Brand FinanceChina 500 list released by Brand Finance, a British brand assessment institution. Midea has been givenexcellent credit ratings by the three major international credit rating agencies, Standard & Poor’s, FitchRatings and Moody’s. The ratings are in a leading position among home appliance manufacturersworldwide as well as among Chinese non-state-owned enterprises. Particularly, Standard & Poor’s hasraised the credit rating on Midea to “A”, making it the highest-rated private manufacturer in China.In the first half of 2023, Midea has successfully retained the "Number One Engine" of ToC business onthe domestic market. According to data provider AVC, Midea ranks first in the industry with respect toboth the online and offline domestic market share for seven home appliance categories, namely,
residential air conditioners, countertop pan-microwave ovens, countertop ovens, electric radiators,induction cookers, electric kettles, and electric fans.The table below shows the offline market shares and rankings of the Company’s primary home applianceproducts (by value of retail sales) in the first half of 2023:
| Product category | Market share | Ranking |
| Residential air conditioners | 36.0% | 1 |
| Laundry appliances | 25.4% | 2 |
| Clothes dryers | 20.5% | 3 |
| Refrigerators | 15.3% | 2 |
| Rice cookers | 39.9% | 1 |
| Electric pressure cookers | 41.2% | 1 |
| Countertop pan-microwave ovens | 62.7% | 1 |
| Electric radiators | 44.7% | 1 |
| Induction cookers | 47.9% | 1 |
| Water dispensers | 27.3% | 1 |
| Electric fans | 46.5% | 1 |
| Countertop ovens | 42.1% | 1 |
| Electric kettles | 42.4% | 1 |
| Electric baking pans | 34.3% | 2 |
| Air fryers | 29.8% | 2 |
| Blenders | 29.2% | 2 |
| Water purifiers | 18.7% | 2 |
| Freezers | 13.1% | 2 |
| Electric water heaters | 20.3% | 3 |
| Gas water heaters | 10.5% | 3 |
The table below shows the online market shares and rankings of the Company’s primary home applianceproducts (by value of retail sales) in the first half of 2023:
| Product category | Market share | Ranking |
| Residential air conditioners | 35.7% | 1 |
| Laundry appliances | 38.0% | 2 |
| Clothes dryers | 42.1% | 1 |
| Refrigerators | 20.3% | 2 |
| Countertop pan-microwave ovens | 51.6% | 1 |
| Induction cookers | 53.9% | 1 |
| Dishwashers | 25.2% | 1 |
| Electric fans | 23.5% | 1 |
| Countertop ovens | 25.0% | 1 |
| Electric kettles | 24.8% | 1 |
| Water purifiers | 18.8% | 1 |
| Air fryers | 19.4% | 1 |
| Electric water heaters | 29.1% | 2 |
| Electric radiators | 19.2% | 1 |
| Rice cookers | 26.3% | 2 |
| Electric pressure cookers | 39.1% | 2 |
| Electric baking pans | 27.6% | 2 |
| Sterilizing cabinets | 19.9% | 2 |
| Gas water heaters | 15.8% | 2 |
| Freezers | 12.9% | 2 |
| Blenders | 11.9% | 3 |
| Water dispensers | 13.8% | 3 |
* Air conditioners refer to floor-standing and wall-mounted ones only.
1.3 Industry Overview
A. Home Appliance IndustryIn the first half of 2023, the domestic economy continued its recovery, presenting a year-on-year increaseof 5.5% in the GDP. Concurrently, the consumer market experienced an upturn, particularly notable in thehome appliance industry, where the rebound was swift. Nonetheless, the speed of recovery varied greatlyacross industries and sectors. The demand for home appliances and home furnishings and decorexhibited sluggish growth. Specifically, within the home appliance industry, domestic market trendscorresponded to the macroeconomic landscape, and the pace of recovery accelerated in the secondquarter. Nevertheless, there were significant performance disparities among different segments.According to the H1 2023 Report on China’s Household Electrical Appliance Industry prepared by theNational Household Appliance Industry Information Center under the guidance of the China HouseholdElectric Appliance Research Institute (CHEARI), both the exports and domestic sales of the homeappliance industry recorded growth in the first half of 2023. In numerical terms, the exports and domesticsales reached RMB296.7 billion and RMB371.1 billion, respectively, up 5.2% and 2.8% year on year.Considering the trend in the domestic home appliance industry, home appliance products are beingupgraded rapidly, with enhancements in basic features and performance. Simultaneously, theirappearance designs are increasingly embracing beauty, health-consciousness, integration, andembedded functionality. The upgraded product mix has not only boosted the sales of high-quality homeappliances but also increased the end-user market price. Meanwhile, in the medium and long run,upgrading of the industrial structure, relatively stable increase of household income, diversifiedconsumption, the national policy support for the green and smart industries, as well as continuousupgrading of the standards for home appliances will create new opportunities for growth. To stimulatehome furnishing consumption, including the demand for home appliances, the Ministry of Commerce,along with 11 other departments, issued the Measures for Boosting Home Furnishing Consumption inJuly 2023. This document emphasizes that the focus shall be given to green, intelligent, and elderly-friendly development and urges enterprises to enhance the supply quality, create new consumptionscenarios, improve consumption conditions, and optimize the consumption environment, therebyeliminating bottlenecks, difficulties, and pain points and promoting the recovery and upgrade of home
furnishing consumption.According to the data from the National Household Appliance Industry Information Center, the domesticretail sales of air conditioners were RMB90.7 billion in the first half of 2023, up by 16% year on year. Dueto the high temperature appearing earlier than before in South China and the ongoing high temperaturein the North China Plain, combined with the low sales last year, the sales of air conditioners surged, whichwere particularly notable in the entry-level markets in counties and townships with potential for growth. Interms of product structure, Midea introduced a range of emerging products, such as air machines andkitchen air conditioners, to respond to segmented demands, including rapid cooling and heating, healthyand comfortable airflow, improved air quality, as well as catering to various home scenarios. This exhibiteda differentiated approach to innovation in the air conditioning industry, consistently propelling productiteration and upgrade and increasing the average price of air conditioners in offline stores. In terms ofproduct functions, the concept of air conditioners kept expanding from the functions of cooling and heatingto fresh air, self-cleaning, dehumidification, odour removal, air purification, etc., and the comfort of productexperience has been focused on.According to the data from the National Household Appliance Industry Information Center, the domesticretail sales of laundry appliances were RMB29.6 billion in the first half of 2023, down 1.3% year on year,with the retail sales of clothes dryers reaching RMB3.4 billion, up 8.4% year on year. In terms of producttypes, the share by retail sales of front-loading products in the laundry appliance market exceeded 65%.Among the front-loading products, the growth in the sales of washing and drying machines slowed down,as the stand-alone clothes dryers and cleaner-dryer kits exhibited better drying performance, such aspreventing secondary pollution, larger drying capacity, and better wearing experience. By comparison,the share of retail sales of stand-alone clothes dryers in the total retail sales of front-loading laundryappliances and stand-alone clothes dryers went up to 11%. In terms of product capacity, large-capacityproducts were obviously replacing small-capacity ones, with laundry appliances with a capacity of 10 kgor above having dominated the market, of which the share in the offline market by retail sales hasexceeded 80%. In terms of product functions, products were further segmented, with the market of thesecond household washers continuously being expanded, such as Little Swan Mini Top-loading WashingMachine allowing sterilization through high-temperature boiling and cleaning and Midea Foldable Mini
Washing Machine that can be carried during trips.According to the data from the National Household Appliance Industry Information Center, the domesticretail sales of refrigerators were RMB43.2 billion in the first half of 2023, up slightly by 1% year on year.The product structure of refrigerators was significantly optimized. In terms of prices, the average onlineproduct price saw a year-on-year increase of 3.4%, whereas offline products witnessed a 7.4% rise. Interms of capacity and structure, the market share by retail sales of large refrigerators with a capacity ofmore than 500-L exhibited consistent and steady growth. Concurrently, side-by-side refrigerators andmulti-door refrigerators with more than four doors experienced an uptick in this regard. In terms of productfeatures, consumers' intensified willingness to pursue quality life has prompted the refrigerator market topivot towards high-end multi-dimensional design, which is mainly manifested as "anti-bacterial and fresh"and "intelligent" functionality. Additionally, technological advancements, such as the novel foamingtechnology, vacuum insulation panels, and aerogels, allowed the "zero built-in" design for refrigerators.For example, COLMO Zero Built-in Nutritional Retention Refrigerator boasts an ultra-thin 600-mm bodythat can seamlessly fit into the standard cabinet.According to the data from the National Household Appliance Industry Information Center, the domesticretail sales of kitchen appliances were RMB95.7 billion in the first half of 2023, up by 2.8% year on year.As dishwashers became more popular on the domestic market, the retail sales reached RMB5.4 billion,up 6.1% year on year. And product upgrading continued. In terms of functions, functions such as theintegration of functions of washing, sterilization, drying and storage, layered and separate washing, andautomatic recognition and program matching have become mainstream. Integrated stove sales reachedRMB13.6 billion in the domestic market, an increase of 15.8% year on year. Due to the surge in demandfor high-end kitchen appliances, in particular steamers and ovens, integrated stove products trendedtowards style diversification and function upgrading. The retail sales of water heaters reached RMB25.5billion, a year-on-year increase of 1.4%. Specifically, demand for large-capacity products remainedinelastic, with the 60-L electric storage water heaters and 16-L gas water heaters experiencing increasesto 67.3% and 53.1%, respectively, in the offline market share by retail sales. With respect to functions,aiming at enhancing showering comfort, water heaters equipped with new technologies that allow highpower, dual tanks, water flow control, silence, and sterilization, saw a substantial rise in the share of sales.
On this basis, technologies such as deep cleaning, skin beautification and care, and customizationspearheaded the current trends in product innovation. The retail sales of water purifiers amounted toRMB13.3 billion, showing a year-on-year uptick of 0.6%. Concerning product specifications, with theadvantages of shorter waiting time and suitability for more daily water purification scenarios, high-flowrate water purifiers boasting a capacity of 800 G or above witnessed growth to 36.0% and 16.7%,respectively, in online and offline retail sales. In parallel, reverse osmosis and under-sink water purifierscontinued to dominate the market, with offline market shares by retail sales both above 90%. With respectto functions, functions such as the integration of water purification and heating, faucet display, andstrontium abundance/mineralization became increasingly sought after, driving products into a new roundof upgrading.According to the data from the National Household Appliance Industry Information Center, the domesticsales of small domestic appliances were RMB57.97 billion in the first half of 2023, down 1.5% year onyear. Health-friendly cleaning appliances led the market over the past three years due to the intensifiedattribute of health-friendliness. By categories, the robot cleaner industry registered retail sales of RMB5.9billion, a year-on-year increase of 5.0%, as a result of slow innovation of production functions. Meanwhile,functions and experience of floor scrubbers have been improved as a result of the advancement oftechnology. Floor scrubbers recorded retail sales of RMB4.5 billion, up 9.5% year on year. In themeantime, product prices experienced a notable decline as the industrial chains and technologiesbecame increasingly developed, with the online average price falling below RMB2,600. Moreover, theproduct trend diverged toward single-function and all-round products that integrated the functions of floorscrubbers, vacuum cleaners, mite removal devices, and free vacuuming. Electric fans, inelasticallydemanded, maintained a steady market scale. Through consistent product optimization and upgrading,the market share of circulation fans has exceeded 30%. Meanwhile, the online market has shifted itsfocus toward intelligent products with a sense of design and suitable for outdoor scenes, whereas theoffline market has focused on high-end products that integrate multiple functions, including purificationand humidification.According to the data from the National Household Electrical Appliance Industry Information Center, theonline sales of home appliances in the first half of 2023 reached RMB208 billion, up 4.3% from last year,
while the offline sales amounted to RMB163.1 billion, up 1.1% year on year. The online scale continuedto grow, whereas the offline scale slightly recovered. However, in terms of prices, there is a gap betweenonline and offline prices, as demonstrated by products such as refrigerators, of which the gap in thisregard is up to 2.8 times. The adjustment of the structure of products in the online market is still someway off. Adhering to a new round of consumption stimulation policies, distributors and brands haveconcentrated their efforts on the submerged markets and seen high-quality home appliances as a criticalway to meet consumers' demand for a happy life. Moreover, the consistently diversified healthy andintelligent functions of home appliances have driven the transition of the domestic consumption viewabout home appliances from having home appliances to pursuing high-quality ones. In the future, thedomestic home appliance market will face both pressure and opportunities and is expected to recordslight growth in the overall sales scale of the year.B. Robotics and Automation IndustryWorld Robotics 2022 Industrial Robotics released by the International Federation of Robotics (hereinafterreferred to as "IFR") showed that there would be five trends in the robot industry in 2023, which refer tothat the performance of robots will get promoted, it will be easier to operate robots, robots will supportmore AI and digital automation technologies, the manufacturing comeback and localised production willbe more significant, and the repair and reuse of robots will be emphasised more. Currently, the domesticindustrial robot industry is transitioning from the market growth explosion phase to a new cycle featuringexisting market share capture and position securing in the segmented incremental markets. Under thiscircumstance, the demand side becomes the focal point of the industrial chain. According to thedownstream demands in the first half of 2023, the photovoltaic industry has entered a critical phase ofcapacity expansion and technological iteration, thus maintaining a high growth rate. This has made theindustry the principal driver of the growth in the industrial robot industry. Comparatively, industries suchas consumer electronics and general industry have recovered less than expected. Furthermore, theirmarket demands have exhibited negative growth. Concurrently, due to a slowdown in investment growth,the automobile and lithium battery industries have also experienced negative growth in market demands.According to the analysis and forecast of Marketing Intelligence Resource (MIR), In the first half of 2023,the output of the Chinese industrial robot market is expected to reach 135,000 units, showing a slight
year-on-year increase. By models, both collaborative robotics and vertical multi-joint robotics showed anoutput uptick, whereas other models experienced a certain decline in this regard. In 2023 H2, demandsin the downstream industries of the industrial robot market are expected to further polarize, with demandsin the photovoltaic and energy storage industries remaining booming and those in industries such asautomobiles, consumer electronics, and general industry still sluggish. The year-on-year growth rate ofthe domestic sales scale of industrial robots in 2023 is expected to be 5% or less.According to the latest statistics of IFR, in terms of industrial robotic density (the average number ofindustrial robotics per 10,000 workers), South Korea ranks No.1 in the world with 1,000 robotics, whilethe robotic density of China has increased from 49 robotics in 2015 to 322, surpassing the US for the firsttime and making the country a global top five in this respect. Since 2016, China has been the fastestgrowing and largest industrial robotics market in the world. Supported by diverse factors such as flexibledemands of the manufacturing sector, declining demographic dividend, emerging markets and thedevelopment of innovative technologies, industrial robotics will be applied to more and more areas, withgreat potential and prospects.C. Smart Building IndustryIn the smart building industry, Midea focuses on products, services and related businesses with respectto buildings. It aims to provide users with comprehensive, intelligent and sustainable building solutionsbased on the digital building platform and by facilitating the logistics, information, feeling and energy flows.The smart building ecosystem mainly includes HVAC, elevator, intelligent building (building automation)and integrated energy management. From the perspective of the industry competition pattern, domesticHVAC, elevator and building control have the same pattern and two major characteristics. The first is thehigh proportion of foreign and joint venture brands; the second is the low market concentration. Accordingto the data from HVAC, Industry Online and Changjiang Securities Research Institute, the proportion offoreign brands of commercial air conditioner in the first half of 2023 was about 45%, and the long taileffect was obvious as only four manufacturers have a share of more than 10%. For elevator, the datafrom the Business Yearbook of Elevator Industry in China and Changjiang Securities Research Instituteindicates that the proportion of foreign and joint venture brands in the elevator market is as high as 70%,while the revenue scale and market share of the top domestic brands are still low. In 2022, the four major
brands of Kone, Mitsubishi, Hitachi and OTIS's revenues exceeded RMB20 billion in China. The buildingcontrol market is also dominated by Honeywell, Siemens, Johnson Controls, Schneider and other foreignbrands. From the perspective of the market size and development prospects, according to the data fromIndustry Online, HVAC and Changjiang Securities Research Institute, the sales revenue (excluding tax)of domestic commercial air conditioner in the first half of 2023 was RMB74 billion, up 18% year on year,of which domestic sales accounted for about 90%; the compound growth rate of the industry in the firsthalves of the past three years was 22%. The application field of commercial air conditioner is mainlydivided into residential, commercial, industrial and public building. By business type, the sales of ToBbusiness accounted for more than 70%, and the revenue is expected to surpass RMB100 billion in 2023.In industrial development, the periodicity of the non-residential part of commercial air conditioner wassmaller than that of residential part, which was more related to infrastructure investment. For example,government public construction, transportation, data center, culture, education and entertainment,medicine and other downstream segmentation still maintained a good growth trend, and a long-term highgrowth rate. According to the data of National Bureau of Statistics and Changjiang Securities ResearchInstitute, in the first half of 2023, the production of domestic elevators, escalators and lifts was 745thousand sets, up approximately 13% year on year, which was mainly for domestic sales. The sector hasreturned to strong growth. Judging from the operating data of major manufacturers, the output value of asingle elevator was about RMB200,000, considering the average factory price of a single elevatorequipment and the maintenance business; the annual market size of domestic elevator equipment wasRMB250-300 billion, and the scale of the elevator industry was even larger. The data from EqualOceanIntelligence and Changjiang Securities Research Institute shows that the current market size of intelligentbuilding, which was about RMB7.1 billion in 2021, is relatively small. The equipment-based businessessuch as commercial air conditioner and elevator are "organs" in building construction, whereas buildingcontrol is the "nervous system" which controls various equipments for the high-efficiency and low-carbonoperation of buildings, and determines the overall quality of building solutions. Overall, the domesticrevenue of the smart building industry alone is nearly RMB400 billion, and the compound annual growthrate of the industry is between 5% and 10% (revenue caliber). Meanwhile, the marginal improvement ofthe real estate policy may bring stronger demand.New opportunities are ushered into the smart building industry, which are "carbon emission peak and
carbon neutrality", "digital and intelligent transformation" and "domestic replacement". With theestablishment of the dual-carbon strategy, the intelligent and low-carbon process of building constructionis expected to accelerate. Buildings account for a relatively high proportion of energy consumption andcarbon emissions in China. According to data from the Building Energy Efficiency Research Centre ofTsinghua University and the Changjiang Securities Research Institute, the carbon emissions of buildingoperation accounted for about 22% of the total domestic carbon emissions in 2019, and the proportionwill further increase for the growing newly started buildings and the decreasing inventory buildings.Therefore, as one of the major sources of carbon emissions in the whole society, the low-carbon or evenzero-carbon process in the construction field will undoubtedly be propelled. In 2021, a series of "carbonemissions peaking and carbon neutrality" policies were successively issued, such as the Opinions onImplementing the New Development Concept to Achieve Peak Carbon Emissions and Carbon Neutralityin a Complete, Accurate and Comprehensive Manner, the Opinions on Advancing the GreenDevelopment of Urban and Rural Development, the Action Plan for Peak Carbon Emissions by 2030, andthe 14th Five-Year Plan for Comprehensive Work on Energy Conservation and Emission Reduction.China’s local governments have issued their action plans for peaking carbon emissions while theministries and committees of the central government rolled out documents for the same purpose, suchas the Opinion on Fiscal Support for Peaking Carbon Emissions and Achieving Carbon Neutrality issuedby the Ministry of Finance, and the 14th Five-Year Plan for Building Energy Efficiency and Green Buildingsissued by the Ministry of Housing and Urban-Rural Development. All these policies mention buildings andconstructions, with a view to improving the building energy consumption management system, enhancingthe building energy consumption monitoring capacity, building energy saving management capacity, andbuilding energy efficiency level, and promoting the large-scale development of ultra-low energyconsumption, near-zero energy consumption, and low-carbon buildings. With stronger policy incentivesand constraints, the building energy-saving upgrading, intelligent operation, and cooperative energymanagement are bound to become the main measures for the targets in addition to the construction oflow-carbon building standards and administrative supervision. As to the market side, the electricity pricereform, "power rationing" and other measures have raised the cost and the input-output ratio in buildingenergy saving renovation, energy management, and digital operation, and thus more and more marketentities begin to positively carry out the “dual carbon” strategy and energy saving renovation. Taken as awhole, under the background of "dual carbon", the building construction, as one of the main sources of
energy consumption and carbon emissions in the whole society, accelerates the process of energyconservation and carbon reduction, and catalyzes the outbreak of demand for efficient low-carbonbuilding solutions. The demand for digital intelligent building will also increase significantly, as thedevelopment level of buildings is a key link in "smart city" and still lagging behind under the trend of digitaleconomy. At the same time, with continuous progress of communication, computing power and algorithms,the system-level control such as HVAC and elevators will move to the building-level control - the first isthe space expansion brought by changes from "control" to "service"; the second is the narrowing gap toforeign enterprises with first mover advantage. Additionally, the more positive and clear signal comesfrom the transformation and upgrading of the elevator industry driven by digital intelligence. In 2018, theGeneral Office of the State Council issued the Opinions on Strengthening the Quality and Safety ofElevators for the purpose of promoting the elevator installation on existing residences and themaintenance of old elevators. Specifically, the maintenance should press for quality, and resourcesshould be allocated on the basis of fully grasping the operation of elevators, hence the application ofinformation technology such as big data and IoT is getting more important. In 2020, the StateAdministration for Market Regulation divided the maintenance methods of different elevators accordingto the standard of "whether there is a remote monitoring system based on IoT". The domestic replacementof commercial air conditioner has undergone three processes: single unit, multi-split unit, and large chiller.The share of homegrown brands was approximately 55% in 2023, and that of the homegrown brands oflarge chillers, where the barriers are relatively high, is also increasing. The commercial air conditionerindustry has entered the stage of domestic replacement in all aspects, and thus there is a large space forfuture growth. Compared with air conditioner, the domestic replacement process of elevator is relativelyslow, but the relevant market pattern will be optimized with the gradually weakened real estate dividend,the changes in maintenance mode, and the application of IoT. In the medium and long term, there will bemore opportunities and increasing competition in the smart building industry with the market structure of"high proportion of foreign investment & low market concentration". On the one hand, the policy of "doublecarbon" is fostering the energy-saving upgrading and smart operation under the context of high proportionof carbon emissions and energy consumption by buildings. On the other hand, with the improvement ofdigital intelligence, the input-output effect of smart buildings is changing qualitatively.
2. Business Scope in the Reporting Period
In the first half of 2023, despite the gradual recovery of domestic market demand and the overall reboundof the economy, the global political and economic environment remained complex and the businessenvironment remained challenging due to fluctuations in overseas economies, currency movements andthe deterioration of geopolitical conflicts overseas. Against this backdrop, Midea Group held firm to itsoperating philosophies, effectively implemented its annual operating principle of “Stabilize Profit & DriveGrowth”, and continued to focus on its core businesses and products. As a result, Midea delivered better-than-expected operating results, with further improvements in key indicators such as profitability and cashflow, demonstrating its operational resilience and long-term, high-quality growth. For the first half of 2023,Midea achieved, on a consolidated basis, total revenue of RMB197.8 billion, up 7.69% YoY; and a netprofit attributable to its shareholders of RMB18.2 billion, up 13.98% YoY.A. Focused on users and scene-based product planning, and continuously refined the wholevalue chain leveraging Midea’s multi-category advantages and digital technologies, so as toupgrade business scenes, products and servicesIn order to carry on with the “customer-oriented” strategic reform, the Company creates more user valuein business scenes, products and services which are in direct contact with users. Based on users'yearning and pursuit for a better life, Midea pursues higher goals such as originality, sustainable sellingpoints and technology explicitness, and continues to empower itself with the tool of big data, so as toachieve the vision of "Bring Great Innovations to Life". In addition, based on user needs and consumptiontrends with respect to living rooms, balconies, kitchens, bathrooms, among others, Midea offers its ownproducts and ecosystem products. It provides users with differentiated entire-house smart solutions withthe deep integration of “smart home appliances + smart home”; and launches homegrown core terminals,such as smart central control and household smart host which deeply integrate home appliances andsmart home systems, making home life more efficient, convenient, healthy and comfortable, andimproving experience and happiness for consumers. By doing so, it aims to lead the way in the innovationof smart household appliances.For smart living room scenes:
Midea has consistently increased its investment in R&D across three areas, namely carbon neutrality, air
value, and smart home. Doing so strives to enhance the competitiveness of products. For the pre-decoration channel, Midea launched Designer "Long-lasting Aldehyde Removal" Series Residential VRF,featuring zero-consumable long-lasting aldehyde removal. Moreover, to respond to the market demandfor health and comfort, the whole new Meijia Large Cooling Capacity Breezeless Series Residential AirConditioner has been launched, featuring a smart control mode for a large cooling capacity andcomfortable wind. Concerning the entire-house air solutions, Midea Air Conditioner was the first one inthe air conditioning industry to have introduced the 1:1 Air Machine, delivering an all-around healthy airsystem that allows professional sterilization, purification, and fresh air. With a clean air delivery rate(CADR) of 400 m?/h and a fresh air flow rate of 210 m?/h, the system ensures an ideal comfort sensationat 0.3 m/s. For the North American market, Midea launched the new-generation American air duct thatpassed the Cold-Climate Heat Pump (CCHP) Technology Challenge for extreme cold resistance.Moreover, for the project of the New York City Housing Authority (NYCHA) on low-carbon heating forapartment buildings, Midea rolled out the next generation of the window low-temperature heat pump andinvented the inverter heat pump system that allowed free configuration. To create a more comfortableliving environment, Midea continued to research and apply various fan technologies. Midea achieved self-adaptive comfortable wind adjustment through research on the comfort wind control technology of windchanging with temperature. Midea realized entire-house 3D surround stereo wind of thermostatic warmair through research on dual-engine PTC control technology of staggered temperature difference.Moreover, through research on healthy airflow, Midea applied the disrotatory propeller technology in theaviation field to the fan field. Additionally, Midea spent two years developing comb-like dual fan bladeswith a leading edge imitating the wings of the long-eared owl. This invention is a breakthrough that allowshigh airflow while ensuring low noise. Specifically, it allows an air delivery distance of more than 17 mwhile achieving a maximum air speed of 270 m?/min. Furthermore, it ensures that the noise is not higherthan 56 dB.For smart balcony scenes:
Midea has launched COLMO Washer-Scrubber, the first solution in the industry that integrates thefunctions of a washing machine and a floor scrubber. Specifically, this product is equipped with a sharedwater supply and drainage pipe, demonstrating Midea's novel design in the waterway, air path, dust
collection, and circuit. Moreover, it employs the "Internationally Advanced" AI-powered Light Dry Cleaningtechnology. The hot-water-flushing floor scrubber enables potent airflow, penetration, and efficient dryingwhile boasting a cleaning ratio of the mop as high as 1.10. Additionally, the AUTO-PROTECT chlorinedioxide slow-release anti-bacterial technology is employed to enable food-level sterilization, safe andenvironmentally friendly. This product adopts AI technology to accurately judge the stain scene andachieve precision mopping through reverse torque. Furthermore, patented technologies, such as theAuto-Dos dual-chamber self-dispensing system and the Auto-Cut automatic hair-cutting technology, areused for this product. To be more specific, the Auto-Dos system allows precise dispensing of differentcleaning solutions through automatic proportioning. As for the two chambers, the left chamber is intendedfor cleaning solutions for floor and mop cleaning, enabling thorough dissolution of heavy oil and dust. Theright chamber houses an automatic cleaning station and drainage system and enables sterilization andstain removal. The Auto-Cut technology can accurately identify, suck, and cut the hair at the corner,effectively preventing hair entanglement and blockages. Also, this product is equipped with a high-definition camera, which, through large-scale modelling training on the home scene images using AItechnology, allows this product to proactively detect stains on the floor and perform deep cleaning inspecific areas. More importantly, this invention has won the Red Dot Design Award and the iF DesignAward. To respond to the green strategy, Midea made arrangements for the development of the full-life-cycle green wash and care technology for products. This move made Midea K01 8Kg Washing Machinethe first laundry appliance in China to be certified by the Life Cycle Assessment. Concurrently, this productreached the highest energy efficiency rating in Europe, attributed to a decrease of 43% in annualelectricity consumption as compared to conventional models. Moreover, the novel ultra-thin platformreduced the weight of the entire machine by 10%. The parts and components of this product were madefrom recyclable materials, and the built-in micro-plastic collection device allowed more than 90% ofchemical fibres to be collected during washing, reducing the ecological impact throughout the whole fulllife cycle by approximately 30% as compared with conventional models. To meet demands in theEuropean market, Midea launched M01 Series Highly Energy-Efficient Front-loading Washing Machine.This series boasted a large drum diameter and multi-modal washing technology, improving the cleaningratio and uniformity. Moreover, equipped with targeted washing technology that can match differentwashing temperatures and mechanical forces during washing, this model allowed targeted stain removal,accelerated dissolution using detergent, and a substantial reduction in water consumption through hot
water washing technology. With respect to TOSHIBA Zero Built-in Series Washer-Dryer, based on theultra-thin and built-in design concept, Midea optimized the parameters of the small-size condenser anddeveloped a novel ultra-thin system structure. Moreover, the minimization-based design and engineeringapplications of the thermal system allowed the product to fit into a 600-mm-deep cabinet. Furthermore,the anion odour removal clothes wash and care technology employed for the first time enabled this seriesto have the best odour removal effect in the industry and achieve a long-lasting anti-bacterial effect onclothes in the drum for eight hours. Midea Floor Scrubber launched the new-generation Dust-free FloorScrubber, GX5, integrates the functions of vacuuming, mopping, and washing, addressing pain pointssuch as hair entanglement, water residue, and insufficient cleaning. Moreover, the unique dual-layerbrush design allows synchronized scraping, combing, squeezing, and suction when rotating. For theglobal markets, Midea launched multiple new floor cleaner models, such as Eureka J9 Active Water-treadMop Floor Scrubber, Eco-friendly Cyclone Dust Collection Station Floor Cleaner E10s, and Midea BlackBox V10 and W11 Plus.For smart kitchen scenes:
COLMO EVOLUTION Tianshu Refrigerator is equipped with the industry's first AI-Door automatic dooropening and closing technology, allowing the 90-degree panoramic door opening. This series is also thefirst one in the industry to have employed the -40℃ cryogenic technology, allowing AI molecular-levelnutrient management and thus capable of significantly increasing the anthocyanin content and effectivelyinhibiting purine. TOSHIBA Large-capacity Built-in Pear Suite Refrigerator employs the self-developedvacuum insulation material in combination with the novel horizontal evaporator to ensure smalldimensions but a large capacity. Moreover, the front bottom cooling system and dual-axis free-track hingeeffectively help users maximize space efficiency. The industry's pioneering constant-humidity fruit andvegetable preservation technology and meat freshness enhancement technology are employed toaccurately provide a suitable storage environment for each type of food ingredient. This series boasts theindustry's quickest 60-minute ice-making function and is equipped with three technologies, namely the"pulse sterilization technology", "low-oxygen preservation technology", and "purine reduction technology".Aiming at delivering a more comfortable kitchen environment, Midea starts with the kitchen environmentand cooking smoke and has rolled out kitchen air conditioners and range hoods that enable efficient
smoke suction. To protect users' health, a range of products, including refrigerators, dishwashers, steamovens, and rice cookers, has been introduced to respond to users' demands for food preservation,kitchenware cleaning and sterilization, and healthy cooking. In 2023, Midea launched the "Cool Kitchen"series of kitchen air conditioners as a solution to address core pain points in Chinese kitchens. This seriesis characterized by "large cooling capacity", "cooking smoke resistance", and "easy-to-install design",effectively meeting users' demand for a comfortable and cool kitchen. Moreover, it employs a new systemdesign equipped with technologies such as the graphene thermal conductivity coating, copper pipesprayed with anti-corrosion coating, black magic box for oil filtration of the outdoor unit, and water misting,achieving advantages in new scenes, such as high heat transfer performance, corrosion resistance, andzero water discharge. Additionally, Midea Smoke-free Series Range Hood employs multiple technologies.Specifically, the MAX efficient dual air ducts are used to ensure efficient smoke suction; the FCS futurechip power engine is used to achieve the highest suction in the industry of 28 m?/min and wind pressureof 1,200 Pa; the nautilus shell-like design and the aerodynamic streamline wing-like design areincorporated to reduce the smoke discharge resistance, increase the smoke discharge velocity, andeffectively lower noise; the "patented radio frequency collaboration technology + patented inverteralgorithm" intelligent collaborative cruise technology enables automatic start-up and air volume and windpressure regulation; the unique 110℃ high-temperature steam technology is used to deliver a cleaningand sterilization rate of more than 99%, which, at the same time, has been granted the authoritative "level-1 smoke removal" certification in the industry.Midea Sink-Dishwasher XQ20 boasts a large capacity for 13 sets of tableware at a time and the Venturiresidual water removal technology, effectively addressing two pain points of simultaneous washing ofmultiple sets of tableware and bacteria and odour removal. This machine integrates a large 304 stainlesssteel sink, a Chinese-style sterilizing dishwasher, a flexible hose faucet, a cutting board, and variousstandard interfaces, allowing one-stop "washing - draining - preparation - cutting - cleaning". Furthermore,it enables rapid crushing and discharge of food waste and efficient cleaning and sterilization. Midea Built-in Smart Eye Series Steamer-Oven-Fryer-Stewer SV5 is equipped with pioneering AI visual ripenessrecognition technology to achieve automatic parameter adjustment during cooking and boasts functionssuch as remote viewing of cooking and video sharing. Midea Steamer-Oven-Fryer S6 employs theindustry's pioneering intelligent humidity and temperature control system, allowing the temperature and
humidity to be automatically regulated during baking according to the food ingredient. At the same time,the pioneering vortex jet propulsion system is used to allow humidity to be quickly removed within 180seconds while maintaining an extremely uniform temperature difference. Moreover, the first multi-winghumidity system is used to achieve a zero-negative pressure gradient design, maximize air exhaustefficiency, and deliver the industry's lowest chamber humidity. Additionally, the baking and cookingtechnology based on intelligent temperature and humidity control and the air frying technology on thesame basis are employed in combination. Midea Microwave-Steamer-Oven-Fryer G21 uses Midea's self-developed MIX fat-burning technology to combine the steam and baking technology organically and,through high-temperature fat melting, condensation defatting, and fat drainage, achieve fat stripping. Thiscontributes to an increase of 72% in fat precipitation rate. The self-developed light-sugar baking recipeand humidity control curve increase the resistant starch content by over 20% and thus substantiallyreduce the carbohydrate intake. COLMO EVOLUTION Series Rice Cooker, through Multi-StageIHtechnology in combination with pioneering staged precise control algorithm for boiling, enables uniquedual-temperature-sensor boiling point determination and staged power output through intelligent control.Furthermore, the series allows accurate boiling point control in both plains and plateaus, and the ricecooked can reach up to the 6A rating.For smart bathroom scenes:
COLMO AVANT Waterfall Electric Water Heater is equipped with multiple industry-leading technologies,including the "AI-Core instantaneous heating engine technology", "full-dimensional thermal field efficiencyenhancement technology", and "five-dimensional temperature sensing", and thus allows heating to bemore uniform and the water output hotter. Moreover, this appliance can also meet the demand for acontinuous output of 1,200-L hot water through "20-fold capacity expansion", thus ensuring a smooth 30-minute shower. Additionally, the AI power-adaptive function employed can help avoid tripping caused byoverly high power, and the patented PCC mineralization technology can provide mineralized healthywater rich in strontium. Furthermore, bacteria can be automatically killed by the AI intelligent sterilizationtechnology according to users' water habits.B. Adhered to the strategy of “Technology Leadership”, increased R&D investments, built a globalR&D platform for better R&D efficiency, established a digital R&D system for agile innovation, and
implemented the strategy of “Innovation Patentability, Patent Standardization, StandardInternationalization and Midea Standard Goes Out”Midea continued to invest in R&D. Through larger investments in this respect, it aims to achieveleadership in R&D achievements and product trends, as well as a stronger presence in the industry anda better R&D environment. The Company made innovations with respect to mechanism, and developedmore leading products through both excellent user experience and differentiated technologies, reform ofthe whole value chain of R&D using digital technology, and deep integration of big data analysis and R&D.It kept reforming its product development model according to the strategic focus of “Leading Products”.An innovative R&D model featuring a “Three-Tier Technical Committee System” and a “Four-Tier R&DSystem” from the organizational dimension and “Three Generations” from the technology dimension hasbeen put in place and constantly refined to support the fulfillment of the goal of “Being the Number Oneor the Only One” in respect of various product categories. Centering on customer needs and based ondifferent organizations and technologies, the Company carries out innovative product development,research on cutting-edge platforms, research on core components, creation of differentiated selling pointsand improvement of the basic product performance. Through group development of products across theworld, building a global product platform, as well as increasing product development efficiency by way ofgroup planning and group development, Midea is building “Technology Leadership”. As of June 2023,Midea boasts ten corporate technology centers/industrial design centers/post-doctoral research centersat the state level, 19 academicians with long-term cooperation and eight academicianworkstations/workshops, in addition to more than 60 corporate technology centers/engineeringcenters/industrial design centers/key labs at the ministerial or provincial levels. By doing so, it buildscompetitive edges with its strength in technology. Under the guidance of the strategy of “TechnologyLeadership”, the innovation platform serves as the core of its technology innovation system and isresponsible for the implementation of technology development strategies and the commercialization andapplication of technology innovation achievements, thus driving Midea’s transformation towards a globaltechnology group in a faster manner.Midea Group is committed to investing in the research of core technologies and has made significantbreakthroughs in the main tracks and in the field of new industrial technology. Through the project of
"Research and Industrialization of Key Technologies for Consumable-free Space Purification withMolecular Catalysis and Power Coordination", Midea has dug deeper into technological breakthrough inthe fields of material synthesis, catalytic technology and energy coordination, provided users withconvenient, safe, healthy and comfortable solutions for indoor air environment systems with multi-technology coordination, and achieved real consumable-free and high-efficiency indoor space purification.Through the project of "Research and Application of Key Technologies for Large Cooling Capacity InverterAir Conditioners with a Feel of Comfortable Wind", Midea has facilitated the whole-scene, full-temperatureand full-humidity realization of comfortable cooling based on large cooling capacity products without anobvious feel of wind, and satisfied users' demand for an intelligent, comfortable cooling experiencewithout an obvious feel of wind. Through the project of "Research and Application of the High-energyPhoton Pulse Sterilization Technology", Midea has adopted the quintuple sterilization synergy to achievea sterilization rate of 99.99% against the bacteria on the surface of food in refrigerators, ensure users'food safety, and fill the corresponding technological gap of the refrigerator industry. Through the projectof "Research and Application of the High Activity ORR-based Ultra-low Oxygen Catalysis Technology",Midea has created the optimal low-oxygen environment for fruits and vegetables, so as to prevent theloss of moisture and nutrients of fruits and vegetables, and maintain their freshness and taste. Throughthe project of "Research and Application of the Precise Ice Temperature Technology-coordinated Plasma-based Preservation and Purine Regulation Technology for Aquatic Products in the Home ApplianceIndustry", Midea pioneered the precise ice temperature technology-coordinated plasma-based purine-reducing preservation technology for aquatic products based on the anabolic pathways and regulationmechanisms of purines in aquatic products, which can significantly reduce the accumulation ofhypoxanthine and create a differentiated product advantage that is "nutritious and healthy". Through theproject of "Technological Research and Application for High-performance Small-sized Heat ExchangeSystem-based Dryers", Midea has achieved the successful design and engineering application of theminimization of the heat exchange system and developed a series of ultra-thin 10-kg large-capacity dryers.Through the project of "Research and Application of Key Technologies for Healthy and Pollution-freeFront-loading Washing Machines with Low Clothes Abrasion", Midea pioneered a new hole-less andindependent structure of the drum of a front-loader to avoid secondary pollution and abrasion againstclothes, which has resulted in a reduction in the abrasion rate of 25%, a benchmarked washing abilityrate of 1.13, and a sterilization rate of more than 99%. Through the project of "Key Equipment and System
Technologies of Direct Evaporative Cooling and Waste Heat Recovery for High-altitude Data Centers",Midea has achieved a significant improvement in the efficiency of evaporative cooling at high-altitudeareas and an optimal match between cooling and waste heat recovery in high-altitude data centres, andgreatly expanded the applicable range of free cooling in data centres. Through the "Research andApplication of Key Technologies for Energy-efficient R290 Rotary Compressors", Midea has achieved theimprovement of the efficiency in single R290 rotary compressors and the reduction in residual refrigerants,promoted the large-scale application of R290 products, and led the green transformation and upgradingof the industry. Through the "Research and Application of Key Technologies for Green and High-qualityThin Permanent Magnet Motors", Midea has reached an industry-leading level by effectively reducing theshaft voltage, ensured long-term reliable operation of motors that are also silent, lightweight and thin. ByJune 2023, Midea had won a total of three national science and technology awards, and more than 340provincial and ministerial science and technology awards, as well as received over 280 "InternationallyLeading/Advanced" certificates for its technologies. In terms of industrial design, Midea leads the way inuser experience and interaction upgrading with ongoing innovations. In the first half of 2023, Midea wona total of 107 industrial design awards, including 23 Red Dot Design Awards, 37 iF Design Awards, and47 IDEA Awards.Midea has strengthened the transformation of R&D achievements while carrying out the core technologyresearch. By June 2023, Midea (inclusive of TLSC) held more than 80,000 valid patents. In the first halfof 2023, Midea was granted more than 2,000 invention patents around the globe. Midea continues toimprove patent quality. It won multiple awards at the 2023 24th China Patent Awards. To be specific, the"Frame Components of the Clothing Handling Device and the Clothing Handling Device" won a SilverInvention Award, the "Stand-alone Air Conditioner (CH)" won a Silver Design Award, and eight ExcellenceAwards were received for patents including the "Control Method and Control Device of the Air Conditioner,the Air Conditioner, and the Storage Medium of the Air Conditioner", the "Rotor Core, the Rotor and theMotor", the "Control Method, Control Device, Computer Equipment and Storage Medium for RoboticMotions", the "Magnetic-bearing Compressor, the Air Conditioner and the Setting Method for theProtective Air Gap Value", the "Range Hood", the "Control Method for Defrosting Food in the MicrowaveOven and the Microwave Oven", the "Air Cylinder, the Compression Mechanism and the Compressor",and the “Smart Door Lock”.
In order to provide strong support for the fulfillment of the strategic objective of “Technology Leadership”,Midea further implements the “3+1” standardization strategy of “Innovation Patentability, PatentStandardization, Standard Internationalization and Midea Standard Goes Out”, and a two-tier (Group-business divisions) standardization management system has been put in place. Meanwhile, to ensurethe effective execution of the standardization strategy, the Group has set up a standardizationmanagement committee. With the double drivers of “standard innovation + production innovation”, Mideashifts innovation achievements to advanced technological standards. Additionally, it endeavors to play abigger part with respect to advanced technology standards of the industries, aiming to create more valuefor users, partners and industries. During the first half of 2023, Midea took part in the formulation/revisionof 81 technological standards, including three international standards, 24 national standards, 10 industrystandards, and 44 local and group standards, including “Standard for Functional Requirements ofToolchain for Artificial Intelligence Model Deployment on Edge Devices”, “Ergonomics - Accessible Design- Part 4: A Method for Estimating Minimum Legible Font Size for People at Any Age”, “Kitchen AirConditioners for Home”, “Technical Requirements for Household and Similar Tumble Washer-dryer”,“Specifications for the Fresh-nourishing Technology by Deep Freezing for Freezers”, “Standard Samplesof Induction Cookers for Thermal Efficiency (86%) Testing”, “Electric Dishwashers for Household Use-Methods for Measuring the Performance”, “Standard Samples of Reference Microwave Ovens forThermal Efficiency Testing”, “Magnetically-suspended Centrifugal Refrigerant Compressors”, and“Evaluation Requirements for the Organization of Appraisals of Energy Conservation and CarbonReduction for Household Appliance Manufacturers”. Additionally, Midea has not only become a memberin two IEEE (Institute of Electrical and Electronics Engineers) Standards Working Groups, and thesecretariat institution of the 3rd Household Appliances Standardization Technical Committee ofGuangdong Province, but also been commissioned to host the 2023 Working Meeting of the NationalGeneral Group for Artificial Intelligence Standardization. Currently, Midea has qualified as an expertinstitution in more than 100 standardization working groups of the relevant domestic and foreignorganizations.C. Deepened the channel transformation, further improved the channel efficiency and rebuilt theretail and ToB service abilities so as to achieve direct connection with customers
Being customer-oriented, Midea continues to enhance vertical efficiency and horizontal synergy efficiency,as well as accelerate retail growth and transformation. Through the reform of direct retailing, Midea hasbeen continuously promoting the "vertical efficiency improvement" of offline channels, and advancing thetransformation of new operator empowerment. By improving operators' digital drive, retail empowerment,engineering projects and other five capacities, it optimises the operation competence and consistency ofomni-category operators, and realises "One Midea" for all markets, ensuring the consistency of userservice and experience. As online and offline markets integrated at a faster speed, based on differentlevels and characteristics of different channels, as well as changes to customers' needs and ways ofspending, Midea drives the retail transformation based on user demands and experience, and keepsrefining the retail operations system, so as to achieve direct connection with retail customers.In the first half of 2023, online sales (including online sales in lower-tier markets) as a percentage ofMidea's total sales reached over 48%. In terms of e-commerce, Midea continued to push ahead with theupgrade of the product structure, product suite development, and new services such as "trade-inactivities". Additionally, Midea redoubled its efforts at channel segmentation and made arrangements forinterest-based e-commerce platforms, and finally recorded new growth. During the "18 June" sale in 2023,Midea ranked first in the industry for 11 consecutive years in terms of total sales online, up over 50%YoY, and its e-commerce GMV on Douyin exceeded RMB1 billion for the first time, ranking first in thehome appliance industry. Midea also focused on the development and improvement of new capabilities,such as self-operation, self-live-streaming, and whole-chain marketing. By strengthening content anddigital marketing and gaining an insight into the differentiated needs of different customer groups, Mideaachieved integrated quality and efficiency improvement through the "Digitization & Intelligence Driven"strategy and accomplished the upgrade-based transformation from traffic operation toward user operation.Meanwhile, by promoting omni-channel development of Midea's customer system in the e-commerceecosystem and constructing standardized supply chains and service self-operation capability, Mideaimproved the efficiency of customer operation and met the needs of customers of scenario-basedprocurement of a collection of products by giving priority to the development of multi-category ecologicalstores. Midea continued to strengthen stores' retail capabilities and, starting from self-run exclusive stores,improved their whole-chain retail experiences and helped stores carry out digital retail transformationdriven by new systems and tools. First, it upgraded the "Midea Cloud Sales+" ecosystem, developed
Midea's own retail business platform, realised full upgrade of the "Midea Cloud Sales" system, andsubstantially boosted customer experiences. As a result, the "Midea Cloud Sales" App recorded a year-on-year increase of over 400% in the daily average page views (PV), and the efficiency of direct retailwas significantly boosted. Second, it reconstructed the retail system of stores based on the "Midea CloudSales" App and the "Midea Home Delivery" mini-app to provide service support functions such as storemanagement, shopping guide, financial instruments and cloud warehouse. Third, to facilitate stores'online and offline whole-scene marketing and promotions, it provided digital marketing tools formerchants, thereby empowering stores' customer acquisition and potential customer conversion andintegrating online and offline business. Fourth, it developed a digital and intelligent platform operationssystem to improve stores' management efficiency and conducted classified product operation andhierarchical store management based on the label-based system for products and stores so that retaildata and business activities can be reviewed online and stores can carry out rapid analysis and preciseoperation. By providing retail stores with industry-leading digital platform services, Midea has completedthe all-product-category, pre-decoration, and retail transformation of more than 15,000 existing storeoutlets, and has established more than 6,000 benchmark stores of digital retail. Midea made vigorousefforts to expand into the lower-tier markets. As a result, Midea gained the largest overall share of thecore lower-tier channel platforms in the industry and has fully expanded into stores in lower-tier markets,achieving a product penetration of more than 95%. By displaying samples based on scenarios, it providedcustomers in the lower-tier market with entire-house full-set home appliance procurement experience.Focusing on user demands, Midea has been refining its product distribution. As a result, Midea hasoutperformed its peers in terms of the sales of emerging products such as residential central airconditioners, dishwashers, air fryers, and clothes dryers. Concurrently, Midea has kept delving into newconsumption potential in the lower-tier markets. With the introduction of marketing modes such ascollective procurement and vouchers, it has improved consumption quality. In this context, the averageprices of Midea's home appliance products in all categories have risen by more than 30% in the lower-tier channels. Meanwhile, by offering cleaning, trade-in and exchange instead of repair in a year services,Midea has been providing high-quality whole-chain consumer services from pre-sale stage to in-sale andpost-sale stages, and kept strengthening the consumer royalty in lower-tier channels.Midea promotes brand image enhancement, high-quality marketing activities and digital transformation,
and redefines entire-house smart appliances with the three major DNAs of "Humanising Technology","Humanising AI" and "Humanising Design". It released the world's first INFINI Suite to realise theevolution from single products to customised smart scenes containing multiple products and covering theentire house, creating active, comfortable smart home living experience that varies with users.Highlighting premium-brand product suites, Midea empowers terminals with its resources in high-endcircles, creates user experience value, and cultivates perception and sense of identity and promotes retailtransformation with long-term systematic marketing and promotion activities. High-quality thememarketing activities and tour exhibitions, such as the "Urban Oasis" program and music festivals, havebeen carried out in many cities nationwide, which strengthened the brand awareness. Midea haslaunched new products such as “Cool Kitchen Air Conditioner, Dust-free Floor Scrubber, Freshness AirMachine, Smoke-free Range Hood-Stove Suite, Light Tone Blender, and Real Taste Microwave-Steamer-Oven, and made them effectively reach users through precision marketing. Midea leverages the"Digitization & Intelligence Driven" strategy to be "Direct to Users", and initiates a series of businessmoves in user experience, user operation and user service from user needs and service scenarios.Adhering to the "Create Value for Users" principle, Midea has deepened the business transformationtoward the retail end. With user experience as a driver, it has pushed ahead with the optimisation ofproduct iteration, shopping experience, and service experience. It carries out all-around user connectionby relying on media matrices such as WeChat enterprise account, official account, mini-app, and videoaccount, as well as terminal experience contacts such as service engineers, experience consultants, andintelligent scenes, and has strengthened private domain operation and improved customer royalty. Bythe end of June 2023, the total number of registered members exceeded 160 million. Meanwhile, thedevelopment of Midea's business data analysis capability has been constantly enhanced to furthersupport digital business decision-making with the analysis of business data, marketing data and userdata. Midea continues to enhance consistent end consumer experiences. Based on the "M-Smart"platform, it integrates online and offline user services, allowing users to experience products offline andbuy products online, thus strengthening out-of-store marketing capabilities and expanding the coverageof post-sales services. By doing so, Midea ensures that consumers can achieve the same shoppingexperience at franchised stores as they do on e-commerce platforms, improves product promotion ofoffline stores and the effect of distribution and traffic direction of online stores, continues to attract offlinecustomers to visit stores, and strengthens the marketing capabilities of offline stores. In terms of user
operation, Midea improves the whole chain of user operation, focuses on service and interestimprovement, as well as user experience and customer-end service improvement, and has constructedthe whole-chain digital platform for experience. Centering on net promoter score (NPS) experienceenhancement and industrial benchmarking, it has improved customer services in all directions.Centering around three types of targets: users, customers, and engineers, Midea perseveres inreconstructing service procedures, upgrading service standards, improving its capability of offering freeinstallation services for consumers who buy a collection of products, and providing better high-end brandservices. It deepens the business model change of the user service system to provide one-stop entire-house smart home appliance service solutions for users and improve service quality and user experience.First, Midea upgraded service standards based on the peak experience principle, updated the serviceprocedure and technical process for various categories of home appliances and introduced them to thepublic through press conferences and mainstream media. It made ads of full-category service standardsand transmitted them to users through its WeChat official account, which can be automatically sent tousers when users place orders by themselves and allow users to review service standards online at anytime. Second, Midea developed the butler-type service system with differentiated service standards fordifferent user groups, and created the new whole-chain butler-type service pattern based on subdividedservice scenarios such as pre-installation, complied installation, high-end brand and special groups. Ithas provided 53,000 pre-installation users with 1+N butler-type group services, ensuring high-standardand consistent long-term scenario-based services, has provided 41,000 complied installation users with1-to-1 butler-type services, guaranteeing contract performance of one-off appointment and one-off door-to-door service, has provided 250,000 high-end brand users with exclusive customer services, meetingusers' demands in a prompt manner, and has provided 340,000 special group users with green channelservices. Third, Midea improved the service capabilities of complied installation and delivery, optimisedthe service experience of users buying a collection of products, and has upgraded more than 2,200service outlets to complied outlets, realising the full coverage of complied installation business in regionaland county markets nationwide. Engineers' service capabilities covering multiple categories have beenimproved. In the first half of 2023, more than 22,000 multi-skill engineers and more than 10,000 all-aroundengineers were trained, realising exclusive engineer services for users buying a collection of productswith service network transformation and multi-skill engineer cultivation. Fourth, Midea developed the
entire-house smart service capacity, appointed competent outlets to provide one-to-one post-salesservice support based on the distribution of entire-house smart sales outlets, selected "Golden Seed"engineers to establish the professional entire-house smart service team, and realised the full coverageof entire-house smart services step by step. Fifth, Midea improved the customer service experience ofhigh-end brands. On the one hand, it boosted its basic service capabilities, including promoting the suite-based construction of the high-end brand network, selecting high-quality service providers, establishingsuite-based outlets for high-end brands, and setting up specialised high-end brand outlets in someregions on a pilot basis. Additionally, it put forward higher standards for the authorisation of high-endbrand engineers, selected and trained engineers based on strict standards, and enhanced engineers'service willingness with an incentive mechanism. On the other, based on the authorisation andcertification mechanism, Midea has set up exclusive customer services, exclusive high-end serviceengineer teams, and exclusive service rights of high-end brands, doing so to develop differentiated high-end brand services. Besides, Midea has raised the standards for high-end brand services by shorteningthe response time limit and upgrading service tools and protective measures. It has also created stronglysensible high-end service experiences by rolling out key projects such as "361 Butler-like Service" and"High-end Private Care" and maintaining customer royalty during the whole cycle.Midea has further deepened the transformation of the ToB business model. Based on the well-developed"1+3+N" business structure of the Group, it has upgraded the business model from traditional hardwareproduct packages to scene-based solutions targeting customers in the whole industry, so as to enhancesales and brand presence in the ToB market. Meanwhile, refinements have been carried out for theexisting customer, product and business structures, thus increasing the profitability of the business valuechain. In addition to the traditional home appliance industry, Midea has unfolded coordinated marketingat the ToB end of the Building Technologies Division, the Robotics & Automation Division, and the OtherInnovation Business through industry-wide solution development and promotion. During the promotion ofthe ToB business in the first half of 2023, Midea strengthened horizontal collaboration among businessgroups (divisions). To facilitate work in information sharing, business opportunity sharing, channel sharing,and delivery collaboration, Midea developed a regular collaboration mechanism and project promotionprocedure, and also intensified the implementation and promotion of the Group's strategies, carried outin-depth operation of major customers in the Building Technologies Division, the Robotics & Automation
Division, and the Other Innovation Business, and developed a mechanism for communication withstrategic customers. As a result, particular headway was made in intelligent manufacturing and medicalservices and health. In terms of intelligent manufacturing, Midea supported localized developmentcentering on industrial robots and, based on the industrial internet platform M?IoT, helped enterprisesrealise digital and intelligent production, smart operation and maintenance and digital services. With theplatform's business integration and application innovation functions, it continued to empower differentindustries and sectors and drove the coordinated development of the whole industrial chain. The M?IoTplatform has been applied by more than 1,000 enterprises in more than 50 segmentations. Meanwhile,Midea gave priority to the development of comprehensive solutions to new energy whole-vehiclemanufacturing, continued to deepen the cooperation with major customers, and has been providingvarious products and integrated systems and services to various industrial sectors. In terms of medicalservices and health, Midea continued to further develop solutions and promote the implementation ofthese solutions to the medical technology building scenario, the surgery department scenario, theoutpatient pharmacy scenario, the inpatient ward scenario, and the logistics command scenario. Basedon the LIFE2.0 intelligent hospital framework system and joining hands with Midea Medical's medicalindustry complexes such as WDM, KUKA Healthcare, Midea Biomedical, Swisslog Healthcare and MideaBuilding Technologies, Midea realised business cooperation with key regional customers, initiatedbenchmark medical projects, and continued to promote the integration of sectors and channels of MideaMedical business, so as to realise information sharing, business opportunity sharing and channel sharingwith customers in the medical industry, promote all-around improvement of delivery quality, efficiencyand services, and help the medical industry complete intelligent hospital upgrading.Annto, a subsidiary of Midea Group, is a technological innovation-based company and is committed toproviding customers with end-to-end digital and intelligent supply chain solutions. Annto deeply fostersitself in the industrial supply chain service sector and, adhering to the "customer-centric" businessphilosophy, provides customers with end-to-end digital and intelligent supply chain solutions ranging fromproduction and logistics services from raw materials to finished products, a shared inventory system fromonline to offline channels, ToB/C integration, to integration services of warehouse distribution logisticsand integration services of delivery and installation. It helps enterprise customers promote channel reformand supply chain efficiency improvement and improve competitiveness, and keeps supporting customers'
high-quality growth and sustainable development. With the industry-leading practical experience inchannel reform of major enterprise customers such as Midea and the continuous improvement of theintelligent warehouse network system for domestic supply chains, Annto has covered thousands of brandcustomers in daily chemical, beverage, wine, food, home appliances, home furnishing and new energyindustries, with its market share and brand influence steadily enhancing. Annto continues thedevelopment of the integrated intelligent logistics platform to open up the digital chain from productionand logistics to warehousing and distribution network, transportation and end services. It has realised theeffective application of multiple self-developed digital control capabilities, significantly improved theefficiency of supplier operation, intelligent warehousing management, whole-process visible distribution,dynamic scheduling of transport capacity and whole-process control of delivery and installation. Withfurther combination of supply chain logistics business and digital and intelligent technologies, a whole-chain end-to-end intelligent logistics platform has been built. In terms of production and logistics, Anntocompleted the pre-production and logistics model reform of product sets and quality, realised directdistribution to stations, and improved lean logistics of incoming materials and reduced factory inventories.It also supported the digital transformation of suppliers and realised whole-value-chain coordination ofreplenishment/pick-up plans, label and bar code management and transport-packaging integration,lowering logistics costs and enhancing delivery quality and efficiency. In terms of the warehousing anddistribution network, Annto deepened the application of 5G and radio frequency technologies forwarehousing management, realised whole-scene mobile operations with the digital indicator systembased on production elements, enhanced its warehousing network planning capability with warehouselocating algorithm and warehousing network model planning algorithm, and provided more professionaland efficient warehousing network logistics solutions. In terms of transport capacity management, Anntohas put in place an urban distribution transport capacity scheduling platform, line operation and analysisplatform, logistics network planning platform and other platforms based on intelligent algorithms, andoptimised transport and distribution costs and distribution quality with the whole-process visible, intelligenttransport scheduling application for urban trunk line distribution. By planning vehicle routes and usingalgorithms and tools to select superior line operators, it supported the reform of urban distributiontransport capacity resources control of over 80 domestic operation centres, and matched intelligentalgorithms used for the tendering and procurement of scheduling resources to supply and demand. Interms of end services, Annto focused on online management of outlet and engineer resources, developed
the intelligent management platform and "Annto Service +" mini-app to output refined services, such asinstallation appointment, complied delivery and installation, precise appointment and integration ofdelivery and installation of large home appliances, home furnishing products and new energy chargingpiles, based on big data and mobile technologies, and to improve customer/user service experience.Production and logistics are important parts of the manufacturing supply chain under the "1+3" servicemodel. Centering on the role of an expert in advanced, lean and digital logistics in the manufacturingindustry, Annto applied its experienced "Lighthouse Factory" supply chain solution to manufacturingcustomers, and consolidated its core strengths from aspects of lean logistics and digital empowerment.In the first half of 2023, Annto developed the door-to-door parts pick-up model with HUB consolidationwarehouses in terms of transportation mode and transport capacity. It piloted the model in the YangtzeRiver Delta Region, and has established two HUB consolidation warehouses in Changzhou and Wenzhouthat provide door-to-door pick-up services for 14 parts suppliers, with the service efficiency improved by25% and the average comprehensive cost decreased by 5%. In terms of standardised and unit-basedpackaging, Annto formulated the standards for packaging of incoming parts, promoted recyclablestandard lease cartons in response to Midea's green strategy, and has provided tens of customers withrecyclable standard lease carton services. Additionally, it developed on its own the whole-life-cyclemanagement system for packaging devices for whole-process control from package design, production,investment to recycle operation, maintenance and scrapping. In terms of digital capacity building, itfocused on the improvement of digital capacity of Midea's Lighthouse Factory, created the service modelof "product set pre-service, quality pre-service and plan pre-service" for the manufacturing supply chain,and improved the full set rate of material orders of factories, management and control of quality and theturnover rate of inventories. Upstream parts suppliers were provided with label cloud service to solve theiractual pain points in production delivery and inventory management and optimize the synergistic effectbetween upstream and downstream industrial chains. In terms of warehousing capacity building, Annto,based on warehousing network planning and centering on smart parks and digital operation, developedwhole-scene and whole-chain warehousing operation solutions. Through the self-developed positiondetermination function and system's online support of integration and optimization of the full-categorywarehousing network, the warehousing network plan shortened the single average mileage by 13% andthe single average duration by 11% and lowered the single average cost by 3%. Smart parks have
extended to warehousing and distribution docking and in-warehouse operations after the arrival ofvehicles, and drove on-demand/sequential operations with the comprehensive appointment managementsystem and the line shift management system. Meanwhile, whole-process radio frequency identificationautomatic acquisition application was piloted in smart parks, covering the whole process from productionline discharge to receipt, putaway, delivery and loading. In terms of digital operation, Annto realisedwhole-process mobile operation in warehouses, as well as visible and online business management. Ithas built the "Warehouse Compass" digital platform for whole-process, real-time monitoring and analysisof warehousing operation data, driving continuous improvement of operation quality. On the trunk linedistribution side, Annto integrated line resources, built the line traffic monitoring system and line costcapacity and supported the optimization of transport capacity and structure as guided by line-basedoperation. Leveraging the transport capacity and structure model for core lines and core cities, it foundthe optimal transport capacity structure, and constructed line resource capacity. Meanwhile, it promotedonline management of single vehicles, made the whole chain visible online, and built the high-efficiencywhole-vehicle performance platform with individual transport capacity resources. It gave priority to corecities, promoted product-wise line operation on the basis of line-based operation, continued to improveoperation quality through product marketing, developed the line-based operation model, and constructedthe "zero-carriage" network composed of one-way short chains. Through technical tools andmanagement reform, Annto promoted online management of business at all links, realised in-transit/nodevisibility, official website trajectory inquiry and supplier system inquiry functions, and thus improvedcustomer experience. On the urban distribution side, Annto adjusted the transport capacity structure andrealised direct control and direct management of vehicles through line route planning, transport capacityreform and direct-control line isolation, enabling directly controlled transport capacity to carry 35% of thetotal traffic. By turning personnel scheduling into line scheduling, constructing organizational capacity,managing transport capacity process and optimizing vehicle scheduling tools, it improved its schedulingcapability and the utilization of transport capacity. Additionally, Annto further fostered the FMCG sectorand worked with 58 partners to build and share the regional distribution network. Its network, composedof about 140 operation centres, has covered more than 96% of the towns nationwide, and more than 80%of the orders can be delivered within 24 hours and more than 94% of the orders can be delivered within48 hours with ToC direct distribution, the integrated warehousing network and the integrated B/C terminalnetwork. On the end delivery and installation service side, Annto highlighted the building of terminal
capabilities, and continued to optimize the delivery and installation management platform and "Annto+"mini-app. Focusing on home appliances, home furnishing, new energy, healthy travel and life services, itprovided standardised service products, including the integration of delivery and installation of homeappliances, "three-guarantee and five-guarantee" services, new energy-related "surveying, installation,inspection, and repair" services, and life services, as well as all-around service solutions covering delivery,installation, maintenance, reverse service, survey and cleaning. As at the end of June 2023, Annto hadmore than 3,600 domestic outlets, an increase of about 40% YoY. The delivery and installationcapabilities related to home appliances were improved after service procedures, covering pre-appointment, user privacy protection, damage control, complied delivery and installation, delivery of thenew and recovery of the old and receipt at designated locations, were improved, with the punctuality ofdelivery and installation up over 99% and the percentage of complied delivery orders up to 41.5%. As theinventory management procedure of outlets was optimized, Annto was able to provide quick receipt anddelivery from stations, prompt distribution and user self-pickup services, and had its capabilities of enddelivery and installation of home furnishing goods improved in all directions.Annto is committed to creating a customer/user-centric service ecosystem, promoting whole-scene,whole-chain, online management of business and services, consolidating the foundation for operation,and improving customer service experience. It has realised online, mobile and visible management oforders from receipt to completion and provided data support, with the mobile collection rate of orders atcore nodes being 89%. Centering on customers' contractual delivery, it has implemented visiblemanagement of PDCA from problem raising to solution, deepened VOC+VOB operation and facilitatedwhole-scene, omni-channel and whole-chain services. Through the customer service window, customersenjoy more precise and more professional visible delivery, with a whole-scene customer satisfaction ofover 92%. The order access has been unified, the whole-process efficiency system, whole-processquality monitoring system, comprehensive operation early warning system and integrated ordermanagement platform have been built, realising the transformation from result-oriented management toprocess-oriented management, with a significant YoY increase in the whole-process efficiency realisationrate of orders.D. Promoted “Global Impact”, enhanced localized operations overseas and accelerated the
cooperative integration of TLSCIn the first half of 2023, numerous risks and challenges such as fluctuation of macro economy, fiercechange of exchange rate and continuing high inflation were seen in overseas home appliance markets,yet the overseas business of Midea sustained large-scale growth and stable earnings in performance,whose operating tenacity was improved. It continued to give priority to the organisations of overseasbusiness to meet the demands of front-line market, refined the development of organisations and teamsin all overseas regions, and continuously integrated localisation talents into the system ofinternationalisation and optimisation talents to ensure continuing development of overseas business.Meanwhile, Midea built up the core capability system on all fronts, involving studies on front-end users'demands, definition and development of products, channel expansion, sales and operation, user service,etc.Making continuous efforts to make breakthroughs in major markets worldwide, Midea strengthened thelocal advantage of supply chain and increased its input of new products in ASEAN market, and deployednumerous brands in response to various market demands of different countries. With rapid developmentof the business of mainstream home appliances in Middle Eastern and African markets, it realizedintroduction of numerous categories of home appliances by the advantages of local market and its ownproducts, and sped up its expansion of blank market. In Latin America, Midea's business presentedsteadfast progress and sustained continuous large-scale expansion and stable earnings despiteadversities like local high inflation and exchange fluctuation. In North America, it advanced cooperationwith major channel customers steadily and gradually improved user awareness through continuousbuilding of localised brands, whose innovative designs of core brands were recognised. Midea sped upits advancement of marketing operation system toward front-line market, resolutely facilitated thetransformation to front-end digitalisation, improved its region-based systems of organising and operatingstep by step, and enhanced the capability building and collaboration mechanism of front-endorganisations featuring effective synergy of market, products and sales; continued to optimise thevisualisation of whole-process information for fulfillment of front-end orders in all regions/countries andimproved user experience through development of continuous iteration; integrated resources of logisticsservice network and built up global logistics service platforms to realize intensified whole-process delivery
at lowest cost and highest efficiency, thus improving its capability of delivery guarantee based onoverseas logistics; continued to develop the system of sales and operation plan (S&OP) system for front-end and front-line organisations and popularized its planning system geared to application demands, thussucceeding in launching the system in the markets of Latin America, Europe and other regions andsignificantly improving its efficiency in fulfilment and delivery. Midea sped up the expansion andrefinement of its overseas channel layout and used digital tools to empower retail. In the first half of 2023,it developed more than 10,000 overseas retail outlets, whose number of retail outlets amounted to morethan 100,000. Midea strengthened the retail network in scale and depth, increased the activity of retailbusiness, improved the display of new products in retail outlets, and enhanced the interaction withcustomers and their brand awareness. In regard to the retail network, it strengthened the application ofdigital tools, thereby empowering the work in traffic acquisition, transformation and upgrade, useraccumulation and other aspects. Midea continued to improve the coverage of its management systemfor purchase, sales and inventory in retail outlets, continuously optimised and enriched applicationscenarios of the system to improve the sales efficiency of retail stores, and took advantage of module-and tool-based system operating model to speed up its iteration of retail stores' promotion tools, therebyimproving flexibility in promotional retail and convenience in retail operation. In the overseas market, itleveraged new media content-based marketing to enhance the interaction between products and users,facilitated the generation of apps based on contents from Artificial Intelligence Generated Content (AIGC)in different pilots, and optimised the contents launched at various contact points in quality and efficiency.Moreover, Midea further flattened its channels with continuous efforts and accelerated its endeavours tofacilitate the transformation of DTC retail model in North America market, thus achieving an incrementalyield as considerable as tens of millions of dollars in the first half of 2023, up approximately 60% year onyear. Staying committed to exploring overseas e-commerce business and helping independent brandsdevelop, Midea realised a year-on-year growth of e-commerce sales volume by 8% in the first half of2023, whose core products remained competitive over its counterparts. Its more than 90 products wereadded to the lists of bestsellers of various categories during the e-commerce shopping festivals innumerous countries. The share of its major categories in the e-commerce market of different countriescontinued to increase, among which its dishwashers, microwave ovens and window (unit) residential airconditioners sustained a vigorous growth momentum in the online market of U.S.A, while the sales of itsmicrowave ovens, range hoods and other categories was also seen with rapid growth in U.K. and
Germany. Meanwhile, the structure of its all categories of products continued to be optimised, and theshares of its microwave ovens, refrigerators, laundry appliances and other products in the high-endoverseas market increased gradually. Midea was engaged in continuing accumulation and improvementof its capability of e-commerce business and bolstered more accurate and efficient plans of e-commerceproducts through data-driven market analysis and demand insight to operate its value chain in a moreefficient manner. By the advantage of global e-commerce platforms and localised e-commerce platformsin different regions, it realised continuous business development facilitated by two drivers. With the rapidrise of overseas consumption market for youth, emerging interest- and content-based e-commerce isexpanding in a faster pace. Therefore, Midea continued to focus on the rapid growth of emergingoverseas e-commerce platforms. To strengthen its development of overseas self-owned brands, Mideasped up its efforts to make breakthroughs in self-owned brands worldwide, facilitated the synergy ofbrands, products and services, deepened its access to users in the front-end market, expanded product-based branding, and enhanced the brand awareness in all links of operation and service. Through theimprovement of brand value in joint efforts with world-famous football clubs, it reached more than300,000,000 fans, and in conjunction with local advertisement, it conducted 150,000,000 interactions withthese fans. By reference to North America-specific brand development model, Midea strengthened theinfluence of its brands from numerous perspectives, including offline retail experience, shopping guideteam development, social media launch and marketing of entire-house collection products, in Asia-Pacificand Middle Eastern markets. Besides, it boosted online content-based marketing inside and outside itswebsites, advanced the building of its brands' official websites, refined the brand matrix, and upgradedits content planning, visual presentation and shopping experience in all aspects. When the establishmentof marketing resource pool, it cooperated with approximately 400 world-famous key opinion leaders (KOL)or Internet celebrities, thus drawing attention from tens of millions of users. Midea kept improving theoverseas manufacturing layout and expedited the introduction of the "China-based Supply for the World+ Local Supply" model. In the first half of 2023, it continued to facilitate the building of manufacturingbases in Brazil and Mexico, while its laundry appliances production line of the manufacturing base inEgypt had been put into operation successfully. In addition, it started the Overseas Manufacturing Plants632 Project and thus realised standardised manufacturing flow and data management. Midea selectedtalents of refined manufacturing system, continued to train such talents, drew lessons from successfulpractice of domestic lighthouse factories, and carried out pilot work of automation-oriented transformation
in overseas manufacturing bases, thus improving its manufacturing efficiency and delivery capability.Meanwhile, it kept enhancing the EHS management system of overseas factories and established therisk prevention mechanism to ensure safe and stable operation of its overseas manufacturing bases andimprove its tenacity in resisting external risks. Midea continued to deepen the development of IoTproducts and application scenarios. In the first half of 2023, approximately 2,000,000 IoT products weresold in the overseas market, more than 400,000 products were activated, and continuous efforts weremade to promote the launch of the MSmartLife App of its international version in all major markets.Focusing on the whole-process contact points of user experience, it continued to expand the digitalecosystem, adhered to the continuous investment in development of users and interaction with users,and established the management system for user life cycle step by step to improve user experience.Midea refined its global service system and improved its service capability worldwide to expand the globalservice network. With its global spare parts centres being put into operation officially, it realised whole-process online operation of spare parts' storage and delivery. By accomplishing the construction ofindependent packaging system for all core parts, it broke the bottleneck in efficiency of the supply of keyspare parts and continued to shorten the delivery cycle of spare parts, delivering more than 200,000 itemsin total. Besides, it sped up its test and popularization of global post sales service system while conductingservice network training in all overseas regions to ensure consistency of the service system, and thecompleted parts of the system covered the global customer contact centres in Germany, Mexico, U.S.A,Canada and other countries. The system of customer services was launched and applied in 10 countriesto impose real-time supervision on service quality and fulfilment of data and parameters, thus improvingits service quality worldwide. Relying on Open AI and internal data analysis platforms, it could extractvalid information fed back from customers to refine its service system.In the first half of 2023, since the rise of commodity and energy price in Japan inhibited the consumptionof home appliances, the sales volume of mainstream home appliances dropped by 11% year on year,and the market competition intensified as well. Focusing on the nature of operation consistently, TLSCstayed cool-headed when handling numerous challenges of uncertainty. By taking multiple measure likeenhancing communication with key customers and strengthening retail in the market, it sustained a stablegrowth of market share for refrigerators, microwave ovens and other products. By taking such measuresas stabilizing price and improving products structure, it effectively alleviated the adversity of market scale
downturn, and further improved its profitability. By strengthening the collaboration with the Group andrelated product divisions, it significantly improved the product quality and optimised the productdevelopment flow to ensure launch of new products and supply of products, thus increasing users'confidence in it. Meanwhile, TLSC continued to boost synergies with the Group and the relevant divisionson branding, R&D and innovation, supply chain integration, quality improvement, etc., so as to build astrong product portfolio for the global market together, thereby enabling business of TLSC to expand toand cover more than 120 countries and regions.E. Stepped up the comprehensive digitalization to materialize data- and platform-basedoperations in the whole value chain, and thus to become more competitive in the digital eraWith a focus on the "Digitization & Intelligence Driven" strategy, Midea stepped up the comprehensivedigitalization to materialize data- and platform-based operations in the whole value chain, and thus tobecome more competitive in the digital era. In terms of domestic sales, Midea comprehensively improvedthe ToC business user service experience through "one-stop reservation, one-stop service, and one-stoppost-sales", and adopted measures such as "end-to-end visible orders in the whole chain " and "onlinevisible and available, delivery commitment status" to improve the delivery efficiency of ToB business.With a focus on online and offline omnichannel consumption scenarios, Midea used digital instrumentsto assist users in gaining insights and multi-dimensional operations, empowered enterprises to havewhole-value-chain contact with customers, and improved the "non-face-to-face" transaction model of theMidea Cloud Sales platform. Midea improved the efficiency of entire-house intelligent design by 90% withthe help of entire-house design, improved the accuracy of applying intelligent location selection modelsby some stores to 95%, and shortened the average store building cycle by more than five days. Takingits stores with monopoly system as its core, Midea built a “Midea Cloud Sales +” ecosystem that coveredall levels of the market. Through the building of a new service guarantee system and the empowermentof new digital instruments, Midea provided customers with industry-leading digital platform services, suchas financial instruments, post-sales reverse mechanism, cloud warehouse services, online services oflogistics, supply and delivery, improving the efficiency of inventory turnover, and store operation ofretailers. By building a digital traffic centre, and taking actively marketing traffic, accurately introducingtraffic, and creating traffic on new platforms as its core, Midea continuously provided traffic support for
offline stores and provided users with scenario-based and convenient purchasing channels. Midea alsosupported the digital transformation of direct retailing, and built a new retail store that completed the pre-installations, comprehensive upgrades and ecological transformation, and that was able to undertakeglobal and multi-touch traffic. The number of daily active users of the MSmartLife App increased by morethan five times. In terms of overseas sales, Midea focused on "Global Impact" strategic planning,deepened the development of digital capabilities of the system driven by the original equipmentmanufacturer (OEM) and own branding & manufacturing (OBM), and continued to create innovativeproducts with business digital perception capability based on user insights, to meet customer needs anduser experience. Midea achieved product planning and development driven by user insights andtechnological innovation through digital platforms, formed a business innovation mechanism for theoverseas independent brand, and promoted the building and improvement of organizational capabilitiesfor independent brand business from insights to products. Midea built an iBOS overseas sales integrationplatform based on a brand new technological architecture, achieving intelligent operation warning, riskcontrol, and automated workflow. Midea also connected the end-to-end digital engineering of overseasmarketing, and continuously optimized sales forecasting models, improving the fulfillment efficiency ofoverseas orders. Midea promoted the improvement of the overseas channel management system andoverseas e-commerce platform, and strengthened the architecture system of e-commerce and channeloperation, quickly reaching overseas clients and consumers. Focusing on overseas user serviceexperience, Midea enhanced the post-sales service experience by developing digital capabilities in globalspare parts centres, overseas post-sales operations, and global contact centres. Midea also optimizedthe digital capabilities of overseas manufacturing and completed the digital system building of overseasmanufacturing bases such as Brazilian factories. In terms of R&D, with a focus on the development of"Three Generations" R&D capabilities, Midea achieved comprehensive online management of theresearch, reserve, and development, comprehensively established an integrated knowledge portal forR&D, and built knowledge engineering and knowledge re-innovation capabilities for R&D. Mideaaccelerated the promotion of digital planning instruments and approaches, expanded the applicationscenarios of trend analysis, selling point recognition and other functions, continued to promote module-based platforms, optimized R&D knowledge management, failure mode and effect analysis (FMEA), R&Defficiency, and further deepened global platform group planning, achieving a year-on-year reduction of6% in the average product development cycle, and improving benchmark product efficiency. Midea used
digital models to scientifically predict product sales, analyse product potential, used multiple indicators tomonitor and analyse new product performance, helping improve the hit rate and ramp rate of new productplanning. Midea also developed digital planning instruments for ToB business, improving the hit rate ofToB product planning. In terms of supply chain and manufacturing, Midea promoted the transformationtoward an end-to-end integrated supply chain, and established integrated supply chain (ISC) platforms,further strengthening the value-chain synergy of research, manufacturing, supply, and sales. Mideaestablished a digital collaborative portal and built a long-term operational mechanism, achievingintegrated operation of global planning and orders. Driven by digital S&OP and whole-procedureintelligent fulfillment of orders, Midea shortened delivery time, providing customers and users with a"stable, accurate, fast, and intelligent" delivery experience. By building a risk management platform forsupply chain, Midea developed a scientific analysis logic, and formed a strict, reliable, safe, and efficientsupply system. The proportion of centralized procurement for non-raw materials increased to 45%, theonline rate of bulk commodity procurement increased to 90%, the upstream delivery cycle shortened by40%, and the inventory turnover efficiency of bulk commodity increased by 30%. Midea continued topromote the building of dark factories, established a manufacturing and operation model centred onDMS4.0 and built a benchmark model for the factories in Thailand. EHS management in parks achievedintelligent collection, analysis, early warning, and closed-loop handling of abnormal situations at allmonitoring points. M?IoT, Midea’s industrial internet platform, was successfully selected as a "Cross-industry and Cross-field Industrial Internet Platform" (dual cross platform) by the Ministry of Industry andInformation Technology in 2022. It can provide over 90 solutions covering nine key fields, including safemanufacturing, energy conservation and emission reduction, quality control, supply chain management,R&D design, production and manufacturing, operation management, warehousing and logistics, andoperation and maintenance services. Midea served over 400 large enterprises to achieve digitaltransformation and upgrading, and was recognized as a leader in the IDC MarketScape: ManufacturingVendor Assessment Report for Overall Solution of China Digital Factories.Midea continued to strengthen the building of digital base and information security, enhanced its capabilityin all-weather information security operation through "cloud and ground" collaborative defense, effectivelypreventing network attacks, and safeguarding the safe and stable operation of its business. In terms ofinfrastructure, the cloud base of Midea in Guian has started construction as planned and the overall
progress has been more than half. After completion, it can support the computing needs of Midea's digitaltransformation in the next ten years. Meanwhile, it continuously optimized the energy consumption ofdata centre, with a year-on-year decrease of over 7% in H1. Midea completed the first phase of theknowledge management platform building, achieving knowledge access and global search capabilities infive major fields. Midea also completed the first phase of the AIGC application management platformbuilding, fully integrating programs such as ChatGPT, Coplit, and Midjournal, and empowering thebusiness in batch document scanning and generation, batch image generation, video generation, live-stream scene generation, virtual digital live streaming, automatic encoding, and testing.Midea steadily promoted its data empowerment business around the "Three Generations", focused onthe practical capabilities of digital talents, and strengthened the integration of digitalization in actualbusiness processes. In the first half of 2023, Midea trained thousands of composite digital personnel,while also empowering core business scenarios to be digitalised, such as R&D, marketing, supply chain,manufacturing, and operation, promoting innovation and transformation in various fields. Midea alsoexpanded its data capabilities to overseas markets and ToB business fields. In the first half of 2023, interms of R&D, Midea utilised data methods to discover new concepts, helping to create multiple popularand innovative products. In terms of marketing, Midea supported the overall scale and efficiency ofcontent operation from three main business directions of content planning, release, and evaluation,focusing on the content operation data of interested e-commerce. Midea also introduced privacycomputing platform capabilities, supported core marketing activities, and relied on various mobile dataproducts to build a domestic offline retail value indicator system for smart homes. In terms of supply chain,Midea optimized inventory management efficiency by strengthening the digital capability of "sharedinventory system". In terms of business, Midea used digital instruments to help improve the efficiency ofbusiness data processing and significantly save labour costs. In terms of overseas market, Midea createda quasi real-time perception data base to achieve whole-chain visible orders and process nodes,continuously connected the whole chain of overseas sales, shipping, manufacturing, and inventory,providing accurate and effective analysis data for overseas business development. In terms of service,Midea connected to domestic multi-channel user voice data, built a user voice (VOC) system, and builtan automatic reach capability for Net Promoter Score (NPS) research scenarios. In terms of ToB business,Midea accurately identified effective information from massive data, assisted in discovering business
opportunities based on data analysis, and achieved visualization of partial ToB business bulk orders,enhancing ToB business competitiveness.Guided by the strategy of "Technology Leadership", Midea AI Innovation Centre deeply engaged in theresearch and application of AI technology. Midea AI Innovation Centre put continuous efforts andachieved application breakthroughs in four fields, namely smart home empowered by AI, smartmanufacturing empowered by AI, smart medical services empowered by AI, and household robots. Byapplying AI technology to empower products, Midea achieved comprehensive self-development of whole-chain voice interaction software and hardware technology, ensured independent and controllable coretechnology that can be adapted to major categories such as air conditioners and laundry appliances, thusimproving performance and user experience while achieving cost optimization. Midea continued tooptimize its independently developed instrument chain for edge deployment, Aideget, and preliminarilycompleted the RISC-V platform adaptation. It has been applied to products such as air conditioners,refrigerators, and floor cleaners, and has been launched simultaneously in Github and OpenAIcommunities, effectively promoting functional evolution. Midea launched a 360-degree industrial AI full-inspection product that empowers intelligent manufacturing, achieving multiple inspections for the firsttime. The quality inspection modelling time was reduced to two minutes, and all inspections only took fiveseconds, effectively improving quality control capabilities. Midea applied AI technology to improvedevelopment efficiency. The robot simulation scenario library has accumulated over 160,000 simulationmodels and over 60,000 task scenarios. Midea preliminarily developed capabilities for large modeltraining of robot control, online simulation verification, and related algorithm development and testing.Midea seized the trend of technological development, actively built a large voice model in the verticalfield, and promoted its application in different industry scenarios.Midea promoted the strategy of "Digitization & Intelligence Driven" and accelerated the implementationof "Comprehensive Intellectualization" to "Customize a Smarter Midea Life for You" In terms of intelligentproducts, Midea remained committed to improving the comprehensive user experience of Midea products,consolidating the entire-house basic guarantee capability, and creating a customer-oriented Midea SmartLife solutions. In 2023, the MSmartLife App continued to improve its application experience, reducingdevice abnormal offline rate by 14%, plugin white screen rate by 30%, and application cold start time by
20%. The comprehensive performance indexation reached an industry-leading level, creating a stableand smooth user experience. As at June 2023, the registered users of the MSmartLife App exceeded 50million, and the monthly active users exceeded 7.3 million. Midea accelerated the layout of the entire-house intelligence field and launched the development of distributed access devices with "1 (centralcontrol on the large screen) +N (central control on the small screen)", covering sensors, switch panels,intelligent dimmers, sensor sets, and curtain motors. Midea also improved the entire-house intelligentproduct category, connected the entire-house intelligent home appliances and home products with supergateways as the centre, continuously providing services for users. In addition, Midea actively participatedin the drafting and formulation of relevant industry standards both domestically and internationally. Inorder to promote the wider popularization and application of new technologies in the industry and enhanceindustry influence, In the first half of 2023, Midea established working groups and assumed the chairmanin the IEEE Computer Society/Artificial Intelligence Standards Committee (C/AISC) and IEEE Roboticsand Automation Society's Standing Committee for Standards Activities (RAS-SCA).F. 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 useroperationMidea continued to promote the "COLMO+TOSHIBA" dual premium brand strategy, and in the first halfof 2023, the overall retail sales of the dual premium brands increased by 22% year-on-year. COLMO iscommitted to serving 1% of the world's super individuals and creating high-end intelligent life solutionswith a full landscape. In terms of products, after nearly five years of development, COLMO's entire-househigh-end smart products has covered multiple categories such as commercial air conditioners, entire-house water, refrigerators, wine cabinets, clothes dryers, laundry appliances, nursing cabinets, kitchenappliances, and small domestic appliances. The smart screens of commercial air conditioners have beenupgraded as a new access to entire-house intelligence, fully upholding a new era of entire-houseintelligence. COLMO launched the TURING advanced customised entire-house water system, using AIintelligent technology to customize the natural high-level water ecosystem through five dimensions ofsafety, purity, skin touch, temperature sensation, and taste. Starting from different water usage scenarios,COLMO has created five major products: TURING pre-filter, central water softener, central water purifier,
water purifier-heater, and sparkling water direct drinking machine, providing a customizable entire-housewater system solution that comprehensively meets the high-end water living needs of elite users. COLMOofficially rolled out a new access to villa entire-house intelligence called "COLMO AI-powered Villa SmartScreen", which simultaneously undertook the whole dimensional upgrade of COLMO Smart Villa Expert,restructuring the industry landscape of entire-house intelligence, and solidifying the industry positioningof "Smart Villa Expert". COLMO Washer-Scrubber has integrated and upgraded washer-dryers and robotvacuum cleaners, and they are equipped with AI-powered light dry-cleaning technology, creating a newform and species in the home appliance industry. Based on a profound insight into the consumptionupgrading and life advancement needs of the elite population, COLMO launched the EVOLUTION NewImage Suite, innovatively creating three major advantages of full hidden aesthetics, advancedfunctionality, and intelligent care, covering the full range of needs in COLMO Lifestyle such as nutritionalfood, air management, advanced customised natural water use, and exquisite washing. It has a zero-distance free embedded design and powerful compound functions, which can meet the diverse needs ofthe entire family and various regions throughout the day. In terms of brand, COLMO Lifestyle Festivalteamed up with iQiyi variety show Folk 2022 as an entire-house intelligent partner, to accompany folkelites on the music stage to share their villa intelligent life. The brand's core exposure exceeded 300million. Midea strengthened the industry position of COLMO's high-end entire-house smart homeappliances through a new product launch event, and invited renowned actor Zhu Zhu as an experienceofficer of Smart Villa Expert. The COLMO Elite Life Festival combined the fashion resources and industryinfluence of W Magazine and Marie Claire to deeply integrate the cutting-edge technology of COLMO'sentire-house intelligent voice access with the pioneering concept of W Magazine, reconstructing theintelligent mind of the whole house with high-end reconstruction. Focusing on the designer circle, theTURING product suite was showcased in "Design Shenzhen" and "Design Shanghai", gathering with topluxury home brands around the world to showcase WAD "Luxury House Refined Space", andcollaborating with international brands of cabinet, home supplies, and fabrics to showcase more high-endintelligent and rational aesthetic design concepts for the whole house. COLMO Lifestyle was conceivedthrough deep interaction with the designer circle. For four consecutive years, COLMO Lifestyle has beennamed Wuxi Marathon and has deeply cooperated with the Gobi Challenge, as well as upgraded itscooperation with the Golf Challenge. Through long-term cooperation with sports challenge events,COLMO Lifestyle has gradually shaped a spirit of never giving up exploration, reaching over 50,000 elite
users. According to the data from AVC, the proportion of COLMO products in the high-end marketincreased significantly In the first half of 2023, with the water dispenser products occupying more than65% of the offline high-end market, water purifier products and floor-standing air conditionersapproximately 20%, and dishwashers more than 13%. In terms of sales channels, COLMO furtherexpanded the high-end whole-scene channel by setting up 340 smart experience pavilions across morethan 144 major cities.As a world-renowned home appliances brand with a century-old history, upholding meticulous care forpeople and life, TOSHIBA is committed to providing users with inspiring, perfect products and serviceswith the inherited Japanese craftsmanship and craftsmanship aesthetics. TOSHIBA is also committed tocreating a breakthrough star-level lifestyle for consumers, as a pioneer with a century-old historicalaccumulation. In recent years, TLSC's increasing sales in China have made it a new choice for high-endhome appliances in the country. In the first half of 2023, the overall retail sales of the TOSHIBA brand inthe domestic market exceeded RMB1.8 billion. During the "618" period, the total online retail sales ofTOSHIBA reached RMB380 million, a year-on-year increase of 92%. In the first half of 2023, TOSHIBAcontinued to make efforts in terms of products. It rolled out its first "Cozy Home" suite that covers multiplescenarios and categories. Focusing on kitchen, water, and bathroom scenarios, TOSHIBA created newsuits of high-quality living with spatial layout, residential feel, and authentic aesthetics as the coreconcepts. Specifically, Pear Refrigerator in the suite was well received on the market, with retail salesexceeding RMB100 million in the first three months. In terms of brand, with a focus on the brandproposition of "Details Matter", TOSHIBA continued to carry out circle marketing activities targetingdifferent target user groups, and accurately covering customers to facilitate the continuous flow of marketbrands. In terms of channel, TOSHIBA actively promoted retail transformation. Toshiba completed thecooperation with over 160 brand operators, built 165 star-level life pavilions of TOSHIBA brand, promotedthe realisation of a latest unified terminal image and preliminarily completed the building of the nationalretail system.WAHIN continued breaking the boundaries of traditional home appliance models. The brand insists oninnovation, embracing the Generation Z with "Trendy Designs, Practical Functions and Fun Interactions".It strengthened the slogan "Young and Daring" for branding, and positioned itself as a brand of "young,
high-tech and trendy appliances", continuing to provide users with good-looking, interesting andsurprising products with easy-to-use technology. The overall operating revenue of the brand in the firsthalf of 2023 was close to RMB6 billion. During the "618", the sales of WAHIN products reached close toRMB2.4 billion. Particularly, WAHIN air conditioning products ranked among the top three in JD.com,Tmall and Douyin, a year-on-year increase of 400% on the Douyin platform. In terms of brand, on the2023 Youth Day, WAHIN teamed up with the champion of the China Rally Championship to roll out the"New Youth Colour", featuring the social colour, e-commerce virtual store content colour, and artistcustomised trendy colour of products. The metaverse marketing model represented by virtual stores wasincluded in the "List of 2023 Metaverse Marketing Innovation Pioneers", with an overall exposure of 640million UV, attracting 116,000 followers, and increasing the number of visitors on the site by 46% year-on-year In the first half of 2023. In the spring of 2023, WAHIN entered the campus to hold the "SpringPre-sales" themed graffiti art exhibition at the School of Art Management and Education of CentralAcademy of Fine Arts. Graffiti artists were invited to create trendy home appliances on WAHIN airconditioners and refrigerator products at the exhibition. In terms of marketing, In the first half of 2023,WAHIN Air Conditioners mainly promoted structural models, such as 3-HP floor-standing, 2-HP wall-mounted and fresh air conditioners, to build the user mind of "WAHIN Magic Machine" series products.Through the matrix penetration of all-platform introduction of off-site celebrities, the search indexation of"WAHIN Air Conditioner" in Douyin and Xiaohongshu increased by more than 170% and 400%respectively year on year, with 180 million UVs of network exposure and close to one million interactions.The e-commerce search ranking of "WAHIN Air Conditioner" elevated to TOP20, which directly droveand promoted significant sales growth, achieving dual benefits of product volume and sales.G. Seized market opportunities amid domestic and international circulations, responded toChina’s goals regarding “carbon emission peak” and “carbon neutrality”, made technologicalbreakthroughs and innovations, and kept improving the ToB business landscapeMidea Industrial Technology Business Group is a co-builder in digital transformation and greensustainable development across the global pan-manufacturing sector. With the vision of "TechnologyDrives the Whole World”, it provides high-tech, reliable, and eco-friendly industrial products and solutionsin four major fields: intelligent transportation, industrial automation, green energy, and consumer
appliances. The Industrial Technology Research Institute and a strategic development organisation havebeen established in 2021 to focus on both independent development and acquisitions, build a roottechnology system with ToB characteristics, and develop modular technology for multiple industries andtechnology fields, including heat management technology, drive technology, control technology, energytechnology, chip technology, etc. In the four major areas, a complete industrial chain layout and technicalmatrix have been formed, covering information, control, drive, and execution. It continues to increaseinvestments in the development of key and cutting-edge technologies, with R&D investment exceedingRMB1 billion in 2022, and over 50% of R&D personnel having master's or doctoral degrees. At the sametime, it continues to increase the recruitment of senior experts in the industry. In the first half of 2023,Midea Industrial Technology received numerous industry awards, including a first prize of Science andTechnology Progress Award of China National Light Industry Council for the "Research and Applicationof Key Technologies for the Variable Capacitor-driven High-efficiency Miniaturized Motor System forHome Appliances", a first prize of the 2022 National Business Science and Technology Progress Awardfrom the China General Chamber of Commerce for the "Research and Industrialization of KeyTechnologies for Heavy Rare Earth-free High-efficiency Low-noise Inverter Compressors", a second prizeof the 2022 Science and Technology Progress Award of Guangdong Province from GuangdongProvincial Department of Science and Technology for the "Research and Industrialization of KeyTechnologies for the New-generation Cross-category and Low-carbon Motor Systems", and the 2023AWE Awards for Core Components for "R290 Mini-sized Double-cylinder Large-capacity InverterCompressors" and "Novel Ultra-high Power Density DC Brush-less Fans for Large Variable RefrigerantFlow (VRF) Air Conditioning Systems". Furthermore, four technologies of which the development was ledby Midea Industrial Technology (namely, "Research and Application of Key Technologies for High PowerDensity Permanent Magnetic Motors and Compressors", "Research and Application of Key Technologiesfor Energy-efficient R290 Rotary Compressors", "Research and Application of Key Technologies forGreen and High-quality Thin Permanent Magnet Motors", and "Research and Application of KeyTechnologies for Quasi-dual-stage Reciprocating Compressors and Cooling Systems") have beenrecognized by the China National Light Industry Council as "Internationally Advanced". Additionally, twosubsidiaries of Midea Industrial Technology, namely Guangdong Meizhi Precision-Manufacturing Co.,Ltd. and Guangdong Welling Motor Manufacturing Co., Ltd., were included by the Ministry of Industry andInformation Technology into the 2022 List of Green Manufacturing and recognized as national "Green
Factories".By maintaining the focus on the field of consumer appliances, Midea Industrial Technology continued toconsolidate its leading position in the industry. First, according to the H1 2023 data from ChinaIOL.com,in terms of residential air conditioner compressors, its global market share increased to 46%, continuingto rank first in the world, while it achieved breakthroughs in overseas markets for scroll compressors, andlaunched the brand new product of R290 Heat Pump Compressor in the European region, providing anew experience that is energy-efficient, safe, reliable, low-carbon and environmentally friendly, andcontributing to the sustainability of the heating, ventilating, and cooling industries. Second, in terms ofrefrigerator compressors, its global market share approached 18%, ranking second in the industry, andbreakthroughs were achieved regarding the core customer base in several overseas markets such as theUS, Brazil, and India. Third, in terms of motors, its global sales shares recorded 42% and 21% forresidential air conditioner motors and laundry appliances motors, respectively, maintaining the advantageas an industrial leader, which, coupled with the launch of a high-efficiency silent product of HouseholdFresh-air Outer Rotor Motor, provided a firm support for the expansion of new market segments. TheFoshan Xingtan Base for components of consumer appliances has been established to make a forward-looking layout in intelligent manufacturing of mechanical and electrical products. Midea hascomprehensively automated, digitalized and intellectualized the production layout, process design andproduction management, seeking to build an Industry 4.0 intelligent manufacturing demonstration basein China. The integration work on the Thai compressor company proceeded well, which has helpedsignificantly increase the overseas production capacity of refrigerator compressors. The Thai motorfactory's construction has been completed, initially establishing overseas mass production capacity forECM motors. Third, through the facilitation of scale production in the manufacturing base in India and thedelivery of its initial batch of orders by the base (which is the first self-built overseas base for A/Ccompressors) at the end of 2022, the global supply capacity for the core components continued toincrease. Additionally, Midea Industrial Technology continued to invest more in R&D of chip products andtechnologies, as 12 chip products of four major series (namely, master control, touch control, inverter,and IPM) have been put into mass production, with an internationally advanced performance regardingthe quality indicators for the same type of products. This is followed by the successful supply of theseproducts to mainstream manufacturers of household appliances, and the earning of the Best MCU of the
Year of the 2023 China IC Design Achievement Award from AspenCore for MCU MR88F001 (a mastercontrol chip product).Deepening its focus on intelligent transportation components, Midea Industrial Technology leverages itssolid core technology in the consumer electronics field to quickly develop three major product lines:
Automotive Grade thermal management, electric drive systems, and chassis execution systems. Theexisting 10 product lines of the three major systems gradually went into production, and the total salesvolume In the first half of 2023 of 150,000, representing a YoY increase of more than three times. First,in terms of technological breakthroughs, following the industrial trend of integration, the upgrading fromcomponents to modules has been implemented. Based on the solid mastery of thermal managementtechnologies for years, Midea launched the Integrated Module for Thermal Management(Comprehensively Integrated) after the introduction of the water-end integrated modules and therefrigerant integrated modules, and creatively launched the first rotor-based motor compressor of the A00series according to the demand for high cost performance of A00-grade vehicles. Second, in terms ofmarket expansion, 11 new customer-oriented designated cooperation projects were initiated with theoutput value of potential orders expected to exceed RMB3.5 billion. Furthermore, the compressorproducts have been recognized by multiple customers and have covered all model types of multiplemainstream automobile manufacturers. Meanwhile, the first customer-oriented designated cooperationproject for the Integrated Module for Thermal Management (Comprehensively Integrated) has beenconcluded, with the estimated output value of potential orders exceeding RMB300 million. Additionally,the independently developed product of the 800V Silicon Carbide High Rotation Speed MotorCompressor continues to win recognition from more new customers. Third, in terms of capacityguarantees, the monthly production capacity of compressor products has exceeded 30,000, representinga YoY increase of 1,700%. Furthermore, the construction of the factory buildings for the new energyvehicle parts manufacturing base in Anqing was completed, where the mass production of products suchas compressors and valve terminals has been achieved. Fourth, Midea Industrial Technology BusinessGroup acquired Wuhan TTium Motor in 2022, officially entering the field of two-wheeled travel andexpanding its business in the core components of two-wheeled pedelecs. Furthermore, by introducingMidea's supply-chain system and advanced experience of large-scale production, it set up modernfactories in China and Vietnam to continuously provide customers with high-quality products. Moreover,
it successfully pitched to multiple industrial leaders in Europe and concluded agreements with domesticstrategic customers In the first half of 2023. Additionally, as a measure to continue to improve the productmatrix of E-bikes, it launched new products such as large mid-drive motors and wheel hub motors in theTaipei International Cycle Show, the China International Bicycle Fair in Shanghai, and the Eurobike 2023.In the field of industrial automation, Midea Industrial Technology's two major brands, Servotronix andHiconics, provide complete solutions from the sensing to the control level for customers in the process,hybrid and discrete industries, helping industrial customers improve quality and efficiency, and achievedigital transformation and green development. As an integrated solution provider in the field of automationequipment, Servotronix focuses on the entire industrial automation chain, including software tools,equipment control, servo drives, servo motors, and encoders, and continuously provides customisedmotion control solutions for customers in various fields. In the first half of 2023, its revenue from lineardrive products reported a significant YoY increase. Meanwhile, it continued to enhance the application ofproducts and technologies in new fields, with a focus on customers from industries such as lithiumbatteries, photovoltaics, semiconductors, robots, laser processing, and consumer electronics byconducting targeted customer pitching campaigns and providing them with integrated solutions. Basedon its advantage of the advanced technological strength, it launched multiple products such as theEnhanced BDHDE AC Servo System, the CDHD2S Linear Drive, the DC304 Manipulator Control Systemfor Integrated Display and Control, the SoftMC804 Medium-sized Motion Controller, and the 3D VisionIndustrial Camera within the first half of the year. Additionally, it continued to promote reforms in marketingmanagement and enhance process management, and used digital information systems to develop thefull-value-chain closed-loop management system from business leads to payment collection, so as toimprove the ability to acquire business leads and achieve their successful conversion. Additionally, as itsindependently developed "Harmonic Reducer High Precision Long Life Design Technology Research andApplication" was certified as "Internationally Advanced", Midea Industrial Technology improved itsbusiness layout regarding the reducer products for SCARA robots, six-axis robots and collaborativerobots. While the new factory for reducers has completely put into operation and the previous bottleneckon the precision processing technology for harmonic reducers has been eliminated, independentproduction and delivery of the reducer products have been achieved.
In the field of green energy, as far as the first half of 2023 is concerned, CLOU Electronics steadilypromoted business development regarding intelligent power grids. It actively participated in the relevantprojects of the State Grid and China Southern Power Grid, as the total bids that CLOU Electronics madeto win the procurement projects of the State Grid on electric energy meters (including informationcollection about electricity consumption) for 2023 exceeded RMB240 million. The overseas order intakein the first half of the year exceeded RMB350 million, representing a significant YoY increase. Moreover,it tightly grasped opportunities from the global energy storage industries by accelerating localization inNorthern American markets, introducing leading teams from the industry, improving the ability to designenergy storage products and provide localized services, and actively conducting business expansion inthe energy storage markets of Asia, Africa and South America based on the channel advantage of foreignpower grids, so as to achieve the global layout of the energy storage business. As a result, the totaldistributed energy of the energy storage business In the first half of 2023 approached 800 MWh, including485 MWh of the distributed energy for the largest energy storage project in South America. In terms ofproducts, in the field of intelligent power grids, it has obtained the required certifications for low-voltagemeasuring switches, and actively participated in the formulation of the State Grid's technical specificationsfor measuring switches for enterprises. Furthermore, it has completed the development, and submissionfor inspection and certification, of all series of the standard products for the State Grid and China SouthernPower Grid in 2022, and the R&D of the checking device for the functional and protocol conformance ofthe integrated terminals for the State Grid, the simultaneous online checking line for multiple versions ofsingle-/three-phase electric energy meters, and the remote charging pile checking system. Meanwhile, itmade efforts to accelerate the international certification of new products, as a total of 24 series of newproducts for overseas markets have been certified by SGS (a third-party certification authority) andpassed the accelerated life test (ALT). Additionally, in the field of energy storage, the Aero product serieshave been integrated into a platform, which supports rapid deployment and installation, thereby greatlyreducing the time needed for on-site grid connection. Moreover, it launched the Aqua series (liquid-cooling product portfolio) to provide one-stop services for customers from early-stage investment to thefull-life-cycle capacity increase at the DC side. Meanwhile, it is planning for the development of thesecond-generation liquid-cooling products in order to provide integrated energy storage solutions. Interms of the supply chain and manufacturing, the resources of the supply chain were integrated to reducethe procurement costs. Meanwhile, the reduction in the bids made to win projects related to any category
of components or parts for intelligent power grids has been achieved. Furthermore, taking the advantageof large projects, the rapid cost reduction for core energy storage components has been promoted.Additionally, the cell resources were supplemented, and leading battery suppliers were employed. On theother hand, the efficiency and automated degree of production was improved by promoting the full-automation-oriented renovation of the production line for single-phase electric energy meters, andintroducing a fully-automated module production line to the energy storage base in Yichun.Midea Building Technologies, with the mission of "co-building sustainable smart space" and the vision “tobe a global leader in building technology", has transformed from a commercial air conditioning productsupplier to an integrated solution service provider for intelligent building ecosystems. Currently, MideaBuilding Technologies has six major product manufacturing bases and seven R&D centres worldwide,with a sales network covering global markets. It has formed the largest and most comprehensiveprofessional smart building product matrix and service network in China. In the domestic market,according to the data from ChinaIOL.com, Midea Commercial Air Conditioner has continued to rank firstwith respect to domestic market share In the first half of 2023. It leads the domestic brands in the VRFmarket with a market share exceeding 21%. According to Commercial Air Conditioner Market data, themarket shares of Midea's core products, such as centrifugal units and screw chillers, are the highestamong domestic brands. In the overseas market, data from ChinaIOL.com show that In the first half of2023, Midea Commercial Air Conditioner accounted for more than 27% of China's total commercial airconditioning export value, ranking first. According to the European Heat Pump Association's dataforecasts, to achieve the REPowerEU plan, the number of heat pumps in the European market willincrease from the current 17 million units to 60 million units by 2030. Midea Building Technologies iscontinuously expanding its heat pump production base in Italy, with a planned annual production capacityof 300,000 units. This production base is expected to be put into production in 2024. Upon completion,the delivery cycle of heat pump products will be shortened from five to one month, comprehensivelyenhancing Midea's competitiveness in the European market.Midea Building Technologies launched the "GREEN FOR ONE" strategy and the "Digitalization,Engineering, Procurement, Construction, and Operation (DEPCO)" model at the 2nd TRUE BuildingTechnology Summit on the theme "Make iBUILDING Come TRUE" held at the beginning of 2023.
Specifically, the "GREEN FOR ONE" strategy helps all practitioners to respond to challenges from thelow-carbon industrial transformation from four dimensions, namely products, ecosystem, services, and,the industry. The DEPCO model is a complete set of service standards and systems to effectivelyimplement "smart building" projects, which is people-oriented and operating objectives-centred. In thefirst half of 2023, Midea Building Technologies participated in domestic and overseas industry exhibitions,such as AHR EXPO, ISH Frankfurt, the China Heat Pump Exhibition (HPE), the China Refrigeration Expo,the China International Intelligent Building Exhibition, China International Medical Equipment Fair (CMEF)(Spring), the China Hospital Construction Conference and International Hospital Build and InfrastructureExposition (CHCC), the China Animal Husbandry Expo, the Entrepreneurs Summit of EnergyConservation Service Industry, the Industrial Green Development Achievements Exhibition, and theShanghai International Carbon Neutrality Expo in Technologies, Products and Achievements, todemonstrate its results in product R&D and solutions and raise its reputation and influence. Specifically,multiple core heat pump products and the light storage and heat flex integrated solution weredemonstrated, such as the R290 Air-source Heat Pump, the Carbon Neutrality-oriented Air-source HeatPump Unit, the M-Thermal Air Source Heat Pump, the Full Variable Frequency Air-source Heat PumpUnit for Cooling and Heating, the R32 Variable Frequency Air-cooled Module Unit, the Variable FrequencyDirect Heating Circulating Hot Water Unit, the Water-cooled Screw Variable Frequency High-temperatureHeat Pump Unit, the Variable Frequency Air Source Blaze Heating Unit, and the Dual Grade I SidewardVariable Frequency Blaze Unit. Meanwhile, what was demonstrated also covered the customised HVACsolutions for scenarios, such as livestock and poultry greenhouses and slaughtering, Midea'scomprehensive energy solutions for low-carbon industrial parks, the Intelligent Operation Center (IOC)Platform of Midea Building Technologies Jingzhou Factory, the "Clean Operating Department" and the"WU KONG Smart Ward Solution 2.0" for medical customers, Midea's two brand-new digital carbonreduction platforms--the "iBUILDING Product Carbon Footprint Management Platform" and the"iBUILDING Virtual Power Plant Operation and Management Platform", KONG DDC M0 and KONG NZSystems, and the three scenario solutions, namely KONG "Meeting Space", the "WU KONG Smart WardSolution", and the "HVAC High-efficiency Computer Rooms". Particularly, the integrated energy solution,based on the iBUILDING Midea Building Digital Platform, enhances the comfort of users through thebuilding load sensing and prediction technology for HVAC. Concurrently, the coupling control of energyconsumption facilities, such as PV, energy storage, heat pumps, and air conditioners, are achieved to
satisfy management requirements, such as green energy supply, dynamic power distribution, efficientpower supply, and the interaction between power supply and load, power the whole house with renewableelectricity, and create a healthy and comfortable living environment. The "Clean Operating Department"creates clean environment and spaces that are safe, intelligent, efficient, and resilient, with own products,such as HVAC, the building control system, and software platforms. The WU KONG Smart Ward Solution
2.0, based on the 1.0 solution, is a comprehensive solution that embraces the new-generation intelligentnursing call system with screen control, fully combines medical services and environment control, andincorporates solutions of medical screens, environment control, and the IoT to achieve the "integration ofmedical services and environment control". The iBUILDING Product Carbon Footprint ManagementPlatform facilitates enterprises to the real-time collection, query, and integrated authentication of data oncarbon footprint throughout the lifecycle of products. Additionally, this platform has multiple functionalmodules, such as carbon footprint modelling, carbon footprint analysis, supply chain management,carbon footprint report management, and supply chain authentication management, establishes strategiccooperation with authentication agencies, such as SGS and T?V SUD, and can generate review reportsin line with requirements of varied authentication agencies. The iBUILDING Virtual Power Plant Operationand Management Platform, based on Midea's many commercial air conditioning systems for commercialbuildings nationwide, supports the power system in peak shaving. Meanwhile, through Midea BuildingTechnologies' energy efficiency management solutions, it has accelerated the connection to the water-cooled air conditioning system, constantly expanded its adjustable load capacity, and provided new pathsand an effective model of orderly and stable power supply to other places. Furthermore, this platform canassist the government in maintaining reliable power supply to residents and enterprises, support powercompanies to achieve peak shaving and ensure the safe and stable operation of power grids, and helpusers to obtain benefits of energy conservation, emission reduction, and demand response subsidies.Moreover, Midea Building Technologies signed the Load Aggregation Platform Cooperation Agreementwith the China Electric Power Research Institute In the first half of 2023 to jointly create an air conditioningload aggregation platform, which will be promoted to all subsidiaries of State Grid Corporation of China,promote the digital reform of load management, and support the orderly and stable power supply in allregions.With respect to product development, Midea Building Technologies, in the first half of 2023, successively
launched multiple new products to consolidate its business in areas such as HVAC, building automation,and elevators. For instance, the self-developed 8kW liquid-cooled unit for energy storage and heatmanagement marks the breakthrough from zero to one of Midea Building Technologies in energy storageand heat management and features outstanding reliability and energy-saving efficiency. Meanwhile, ithas passed the Conformite Europeenne (CE) certification, the certification by Underwriter LaboratoriesInc. (UL), and the 6,000V surge test, has a super-wide range of refrigeration operation (-30°C-55°C), andmeets the IPX6 Waterproof Rating, and the corrosion classes C4 and C5. What's more, it can operate atan elevation of 4,000 meters. The new-generation VRF VC MAX with cooling function only, equipped withan efficient and powerful scroll compressor with enhanced vapor injection, satisfies refrigerationrequirements within a wide range of temperature. Atom X, specifically designed for the North Americanmarket, integrates 24V unitary units and VRF units, and combines the sideward outdoor unit and theindoor unit. It can not only reduce the installation space for the outdoor unit, but also maintain the currentinterior architectural style. Coupled with the automatic filling of refrigerants, it can be flexibly applied tothe North American market dominated by alternative scenarios. Atom T is a series of multifunctional VRFunits and products that integrate air cooling and heating and water heating functions, adopt the R32environmentally friendly refrigerant, and are developed for the European Union market. The outdoor unitsof the whole series can meet the requirements of diverse family scenarios. Additionally, the series meetsthe EU and Australian subsidy requirements for energy efficiency. The MDV Power series of lightcommercial air conditioners features fully variable frequency technology, high efficiency, and energyconservation, satisfies installation requirements through long piping and high drop height. The two optionsof indoor units can be applied in multiple commercial scenarios, such as shops, catering, leisure, andentertainment. The TR+S Pro multi-split products employ the brand-new design of dual wind wheels andfeature an annual performance factor (APF) exceeding Energy Efficiency Grade 1. Its compact body andsuper-long piping can adapt to different installation spaces. The KONG-MIO thermostat enables wirelessand intelligent control of multifunctional environmental control, air conditioning, fresh air, and floor heating.In terms of the digital and intelligent elevator brand, LINVOL, the construction of the Phase I factory ofthe Xiaotang Intelligent Manufacturing Base is completed. Additionally, the digital and intelligentpassenger elevator series, "EVIN Standard" Machine Room Less, is released. An intelligent elevatorservice system, based on the iBUILDING-based intelligent elevator management platform, offers digitaland intelligent elevator services.
As building energy consumption is increasing its proportion of the energy consumption of the wholesociety in the progress of urbanization, accelerated efforts have been made in the construction of "zero-carbon buildings" with "green energy system" as the core. In building energy management, theiBUILDING Midea Building Digital Platform conducts intelligent energy adaptation and management witha customised design based on the building's characteristics. At present, the iBUILDING smart buildingbusiness has stepped into industrial parks, medical institutions like hospitals, and public facilities. In termsof market expansion, Midea Building Technologies obtained such project orders In the first half of 2023as the National Museum of Chinese Writing, Wyndham Grand Zhaoqing Downtown, the new studio ofMedia Storm, the Cornex New Energy (Wuhan) Lithium Battery Industrial Park, the SEMCORP-JiangxiRuiergy New Material Industrial Park, the JA SOLAR Industrial Park, "Liu Chun Xing Cheng", acommercial complex in Changting County, Fujian Province, the Shunde Charity Organization Alliance,Foshan City, the Centralized Procurement Project of China Mobile for High-pressure Chiller Units, thesquare of the Yuanjiang Station of the China-Laos Railway, Xi'an TUS-Children's Hospital, CitigroupCenter, and Guangxi Vocational College of Technology and Business. Furthermore, some of its projectshave won awards, resulting in constantly improving market recognition and influence. Particularly, thethree iBUILDING smart building benchmark projects--Midea Headquarter Building, the Jingzhou Factoryof Midea Building Technologies, and the West District of Midea Industrial Park--won the 2023 Asia DesignPrize. Three awards of the 2023 Red Dot Award: Product Design and four awards of the iF Design Award2023 were granted to Midea Building Technologies' ChillerDoctor Gateway, the Cassette Indoor Unit with360° Circular Air Exhaust, the R290 Air-source Heat Pump Unit, Midea Headquarters Building IntelligentOperations Center (IOC), Midea Jingzhou Factory Intelligent Operation Center (IOC), and MideaIndustrial Park West District Intelligent Operation Center (IOC). Midea Headquarters Building, ShanghaiTongji Hospital, and Midea Smart Building Integrated Digital Management Cloud Platform iBUILDINGPortal each winning the 16th International Design Awards (IDA). The "Midea Rubik's Cube" and"iBUILDING Edge Engine" of Midea Building Technologies were granted the Expert Award and IndustryLeadership Award for Energy and Industrial Industries of EdgeX Challenge China 2022, respectively.Midea Building Technologies' "Smart Clean Space Solution" won the titles, "Preferred Solution" and"Quality Solution" of Operating Room Planning, Design and Construction of the Second "ProfessionalPromotion Project of High-quality Development of Hospitals in China--Golden Ruyi Award". LINVOLsmart elevators for villas were recognized as the "User Preferred Home Elevator Brand" at the First
National Home Elevator Summit. Additionally, West District of Midea Industrial Park was included in the"2022 Excellent Cases of Intelligent Industrial Parks", upon the selection and assessment of the "ReviewMeeting of the 2022 Excellent Cases of Intelligent Industrial Parks", led and organized by the Smart CityStandards Task Force of the National Information Security Standardization Technical Committee. In theWest District of Midea Industrial Park, the LIFE Digital Intelligent Industrial Park Solution, centering onthe iBUILDING Midea Building Digital Platform, offers comprehensive services integrating software andhardware, connects all kinds of equipment, covers intelligent travel, intelligent offices, and intelligentoperation and maintenance, and achieves digital and high-efficiency operation and maintenance as wellas personalized and intelligent offices.In regard to technological innovation and standardization, Midea Building Technologies continuouslystrengthened R&D input and made remarkable results in the first half of 2023. For example, the "KeyTechnologies and Industrialization of Wide Temperature Range Full Condition High-efficiency Multi-splitAir Conditioning Systems", led by Midea Building Technologies and jointly completed by Shanghai JiaoTong University, Xi'an Jiaotong University, and Guangdong Midea Environmental Technologies Co., Ltd.,won the First Prize of Industry-university-research Cooperation Innovation of the China Industry-university-research Cooperation Innovation and Promotion Award. Midea Building Technologies' fourproducts, namely the "MDV8 Unbounded VRF Unit", the "65kW-R32 Medium- And High-temperatureCommercial Heat Pump Unit", the "Magnetic Levitation Ice Storage Chiller Unit", and the "Smart BuildingIoT Controller", were recognized as "Innovative Products of the 2023 China Refrigeration Expo" by theOrganizing Committee of China Refrigeration Expo. Meanwhile, the "MDV8 Unbounded VRF Unit", the"High-efficiency Magnetic Levitation Inverter Centrifugal Ice Storage Dual-condition Unit", and the "High-efficiency Distributed Control System with Multiple Intelligent Agents for Computer Rooms and theIntelligent Operation and Maintenance Cloud Platform" were included in the 2022 China Association ofRefrigeration Energy-saving and Eco-friendly Product Catalog by the Chinese Association ofRefrigeration. What's more, the "Research and Application of Digital High-performance VariableFrequency Control Technology" of Midea Building Technologies was granted the Third Prize of the 2022Science and Technology Award of the Chinese Institute of Electronics. The "Research and Application ofMDV-Link Communication Technology" and the "Sealing and Heat Management of IP55 Electric ControlBox and the Application of Its Automated Manufacturing Technology" of Midea Building Technologies
won the First and Second Prizes of the 2022 Science and Technology Award of the Guangdong Hi-techEnterprise Association, respectively. The "Setting Method of the Air Gap Value for Magnetic BearingCompressors and Air Conditioners", a patent for invention of Midea Building Technologies, was grantedthe 24th China Excellence Awards for Patents. Moreover, the "Magnetic Levitation Inverter CentrifugalIce Storage Dual-condition Unit" and the "R32 All DC Inverter High-efficiency Commercial Heat Pump"won two Gold Awards and the "Air-cooled Variable Frequency Screw" won a Bronze Award at the 48thGeneva International Inventions Exhibition. With respect to industry standardization, Midea BuildingTechnologies participated in the formulation or revision of multiple national standards, industry standards,and group standards, including the national standards of the Water-source High Temperature HeatPumps Using The Vapor Compression Cycle and the Chiller (Heat Pump) Units for Energy StorageBatteries, the industry standards of the Magnetic Levitation Centrifugal Compressors with Refrigerants,the Air Conditioning Units for Enclosed Space of Communication Base Stations, and the TechnicalSpecification for Field Measurement of Energy Efficiency and Energy Saving of Multi-split Air ConditioningSystem, and the group standards of the Green Intelligent Multi-split Air Conditioning (Heat Pump) Units.Additionally, Midea Building Technologies won the title, 2023 Organization with Outstanding Contributionto Heat Pump Standardization of the China Energy Conservation Association.H. Promoted innovation in robotic product development, accelerated integration and expansionof the robotics business for the China marketKUKA, a subsidiary of Midea, is a world-renown robotics manufacturer. Relying on its industry-leadingmovement algorithm, KUKA can ensure superior movement performance of robotics products throughouttheir life cycle, and its mature design concept can continuously give birth to new products able to leadthe market. In the first half of 2023, KUKA continued to promote the innovation of various products andtechnologies. In the field of general industry, KUKA launched KR CYBERTECH series of robots, whichare suitable for processing and manufacturing scenarios from grip and handling to polish, oriented toprice sensitive markets, with multiple advantages such as lower costs, higher quality, and morecomprehensive functions, and thus easier for customers of small and medium-sized enterprises toachieve automation upgrades. Among the series, KR CYBERTECH KR 20 E robots can operate underdifferent working conditions, with a payload up to 20 kg and an operation distance up to 1820 mm. At the
International Foundry Trade Fair held in Germany in 2023 (GIFA 2023), KUKA showcased KUKAcell4_premachining manufacturing cells and KR FORTEC ultra heavy-duty robots for customisableautomation. Among them, the cell4_premachining manufacturing cells have compact modular design,can be applied in reprocessing casting scenarios such as polish and smoothing, saw cutting, milling,cleaning, and grinding, and can achieve finishing treatments of different materials, parts, and componentswith maximum flexibility and user-friendliness. The robotic manufacturing cells include KR QUANTECnano robot, library milling application, powerful motor spindle, quick tool-replacing mechanism, KUKAthree-axis positioner kp3-v2v-3, etc. KR FORTEC ultra heavy-duty robots can carry a payload up to 800kg, with the shortest cycle time of 0.36 s, can quickly and accurately manipulate large workpieces, andcan be used in such application scenarios as battery pack assembly and integrated car body die casting.At the Leading Exhibition for Smart Automation and Robotics held in Munich in 2023 (Automatica 2023),KUKA displayed its latest version of KR QUANTEC series robots. Compared with traditional products,the series of products can save energy consumption up to 60%, with a payload up to 300 kg and anoperation distance up to 3904 mm, and can be applied in many market segments such as automobile,casting, and medicine, with such advantages as excellent performance, economy, and flexibility. In thefield of human-robot collaboration, KUKA demonstrated its product mix of LBR iisy collaborative robotand the new version of operating system iiQKA.OS, and also showcased such products as KMR iisymobile collaborative robot. Among the products, LBR iisy is a sensitive, precise, and easy-to-operatecollaborative robot. Its edgeless arm design allows personnel and collaborative robots to work safely sideby side, and all joints are equipped with integrated torque sensors that can instantly detect the slightesttouch. Featuring an ergonomic product design, and being easy to operate, solid and durable, LBR iisycan carry a payload of 3-15 kg. In comparison, KMR iisy mobile collaborative robot is a mix of collaborativerobot and transport platform that are comprehensively integrated, comprising LBR iisy collaborative robotwith a payload of 11 or 15 kg, and KMP 1500P mobile platform bearing an additional load up to 200 kg.Fast, safe, and mobile, KMR iisy can be applied in various scenarios such as installation, internal logistics,and robotic service system. In the medical field, KUKA displayed at the European Robotics Forum 2023an innovative medical product application, namely "Arthritis Ultrasound Robot", which helps physiciansto quickly diagnose patients' rheumatoid arthritis through ultrasonic imaging by using KUKA's highlysensitive light-duty LBR Med medical collaborative robotics. Besides, at the International Conference onRobotics and Automation held in London in 2023 (ICRA 2023), KUKA and its partners demonstrated how
the LBR Med robotics could be applied in highly complex and sensitive medical scenarios such as braintumour biopsies, by simulating tumour biopsies in the real-time tracking models and enabling physiciansto place biopsy needles with the aid of the robotics. In addition, the extra flexible magnetic endoscopyprovided by Atlas Endoscopy can effectively overcome the defects of conventional colonoscopy such asdiscomfort, sedation-related complications, and high variability of examination results, and this techniquealso mainly applies KUKA LBR Med medical collaborative robotics to achieve operation and examination.With respect to market development, In the first half of 2023, KUKA and Siemens Healthineers furtherexpanded their cooperation in such fields as minimally invasive surgery, and in the next two years, KUKAwill provide Siemens Healthineers’ angiography system with 300 robots, of which, KUKA KR QUANTECrobots will be the core components. Since 2016, globally there have been more than 550 hospitals usingthis set of medical system. KUKA also intensified its cooperation with FAW-Volkswagen, whose Foshanplant functioning as its manufacturing base in southern China, capable of producing 300,000 sets ofbattery packs annually, has applied approximately 100 KUKA Robotics in multiple manufacturing links ofbattery pack product lines such as weld, bond, and assembly, involving KUKA's multiple series of robotproducts such as KR QUANTEC, KR FORTEC, and KR titan.KUKA continuously promotes the integration and expansion of resources in the Chinese market andintensifies organizational reform and product iteration with a focus on industrial applications and keycustomers. In terms of market, In the first half of 2023, KUKA China once again reached a record high inproduction capacity and shipping volume, gradually improved its efficiency of operations, steadily boostedits profitability, and continued to intensify its cooperation with leading customers in the new energy sector,such as BYD, Tesla, FAW-Volkswagen, NIO, and CATL, by offering integrated solutions to manufacturingof mainstream finished new energy vehicles. Meanwhile, KUKA China increased its input of resourcesfor the post sales service team, so as to continuously boost its quality of post sales service, and increasecustomer satisfaction and customer royalty. Regarding products, KUKA China unveiled its multipleproducts such as KR3 DELTA-SDR, KR20 SCARA R800/1000/1200, and KR20 R1810 Edition, and thushas further perfected its product matrix oriented to consumer electronics industry. Meanwhile, KUKAChina proactively made the overall arrangement of the technologies related to its parts and components,and have made substantive breakthroughs in manufacturing on its own the core parts and componentsof such products as KR SCARA robots and KR C5 control cabinet. In the sector of logistic automation,
KUKA China launched in the first half of the year such products as KMP 400P, KMP 600P-C-U, andUniStore, achieving market breakthroughs in such industries as chemical engineering and liquor andspirits. With respect to capacity and supply chain, in May 2023, the second phase of Midea KUKAIntelligent Manufacturing Science and Technology Park (Shunde, Guangdong) fully went into operation,with the planned annual capacity of 100,000 robots at most, and will comprehensively promote thelocalization of robot supply, and support manufacturing automation and digital transformation. Additionally,the park proactively introduced upstream suppliers in the industrial chain to improve the layout of theindustrial chain, with many enterprises in the industrial chain stationed in the park at present, coveringthe supply of the core parts and components of many models of robots. Furthermore, officially put intouse in 2023, KUKA East China Manufacturing Base (Kunshan, Suzhou) has gathered the three majorbusiness segments of KUKA industrial automation, Swisslog Logistics, and Swisslog Healthcare,extending the product range to such products as stackers of Swisslog Logistics, AGV robots, andpneumatic logistic transfer system of Swisslog Healthcare. In terms R&D, In the first half of 2023, thepatented technology independently developed by KUKA China, namely the "control method, device,computer equipment and storage media for robotics motion", had the honour to win the 24th China PatentExcellence Award. Besides, KUKA China, with its KR CYBERTECH nano ARC HW Edition arc weldingrobotics, had the honour to win the "2023 Ringier Technology Innovation Awards for Metal ProcessingIndustry". In addition, the KUKA Robotics has been successfully listed into the fifth batch of provincialindustrial design centres by the Department of Industry and Information Technology of GuangdongProvince. Furthermore, KUKA also proactively assisted Midea Group in boosting its intelligentmanufacturing. By June 2023, the robot density of Midea reached 550 units per 10,000 persons, andMidea Group will further increase its input to boost its intelligent manufacturing capacity.I. Deepened the long-term incentive and protected the interests of shareholdersIn the first half of 2023, Midea continued to encourage the core management to take responsibility for theCompany’s long-term development and growth by further enhancing its long-term incentive schemes.Midea has launched nine stock option incentive schemes, seven restricted share incentive schemes,eight global partner stock ownership schemes, five business partner stock ownership schemes and the2023 stock ownership scheme, which have helped, in a more effective manner, to align the long-term
interests of senior management and core business backbones with that of all shareholders. Midea Groupprotects its shareholders’ interests by ensuring a consistent dividend policy. It shares its growth withshareholders by putting forward cash dividend plans with a total amount of more than RMB86 billion sincethe Group’s listing in 2013. In addition to the consistent dividend payouts, the Company has carried outa string of share repurchase plans. To further stabilize the market capitalization and protect theshareholders’ interests, the Company has launched share repurchase plans for four consecutive yearssince 2019. And the repurchased shares would be used for equity incentive schemes and employee stockownership schemes.
3. Core Competitiveness Analysis
A. As one of the leaders among the global household appliance makers and a dominator in themajor appliance sectors, Midea Group provides high-quality, one-stop home solutions through itswide product range.As a home appliance and HVAC system manufacturer with a complete industrial chain andcomprehensive product offerings, Midea Group has developed a complete industrial chain combiningR&D, manufacturing and sales of core components and finished products, supported by an industry-leading R&D center and manufacturing technologies of core components (such as compressors,electrical controls, magnetrons and controllers), and ultimately based on its powerful capabilities inlogistics and services. Midea owns top brands of household appliance and HVAC in China. Its dominancein the major appliance and HVAC markets means that it can provide a wide range of competitive productsets. It also means internal synergies in brand awareness, price negotiation as a whole, customer needsresearch and R&D investments. Compatibility, coordination and interaction among household applianceshave become increasingly important since smart home is gaining popularity. With a full product line, Mideahas had a head start in providing a combined and compatible smart home platform with integrated homesolutions for customers.B. Adherence to the strategy of “Technology Leadership”, global R&D resourceintegration capabilities, a global innovation ecosystem and a scientist system, as well ascontinuing lead in R&D and technical innovation
The Group is focused on building a globally competitive R&D capability and system. It has established athree-tier technical committee system responsible for the formulation and implementation of technologystrategies. And the four-tier R&D system has been improved with an aim to build world-leading R&Dcapabilities. The interconnected technology strategies and mid- and long-term product planning serve astwo drivers of growth. Midea currently focuses on 11 technologies in a bid to make breakthroughs withkey technologies and achieve technology leadership. It has invested over RMB50 billion in R&D over thepast five years, with the investment of more than RMB12 billion in 2022. In order to deepen its globaltechnology ecosystem in a faster way, the Group has set up a total of 31 research centers in 10 countries.It has over 20,000 R&D personnel. With the “2+4+N” global R&D network, it has gained the advantageof scale in R&D across the world. Domestically, Midea Global Innovation Center in Shunde District,Foshan City and Midea Global Innovation Center in Shanghai are the cores of Midea’s R&D arm.Overseas, with Midea America Research Center, Midea Germany Research Center, Midea JapanResearch Center and Midea Italy Research Center as the cores, Midea makes use of the regionaltechnological advantages, integrates global R&D resources, and builds complementary global R&Dcapabilities. Following the strategy of “Technology Leadership”, it attracts more professional talent andbuilds an organic global R&D network.Midea’s long-term focus on building technology, marketing, design, product and open innovation systems,building a cutting-edge research system and building reserves in technology for mid/long term, hasprovided a solid foundation for the Group to maintain long-term product and technological superiority.While strengthening its global R&D network, Midea also works on constructing an open platform ofinnovative ecosystems. Through deepening the implementation of technology projects to integrate qualitytechnological resources across the world, a global innovation system has been put in place. By way ofintegrating various resources of large companies, technology companies, universities, research institutesand innovation consulting agencies, a technology ecosystem has been put in place and continuouslyexpanded, which has access to enormous resources for technological innovation. Additionally, a scientistsystem has been established with eight academician workstations/workshops and 19 academicians onmore than 200 cooperation projects. These projects cover green, energy-saving, health, intelligent,robotics and automaton technologies, among others. In terms of basic research, the Group cooperateswith domestic and foreign scientific research institutions, such as Massachusetts Institute of Technology,
University of California, Berkeley, University of Illinois at Urbana-Champaign, Stanford, Purdue University,University of Maryland, The University of Sheffield, Tsinghua University, Shanghai Jiao Tong University,Zhejiang University, the Chinese Academy of Sciences, Harbin Institute of Technology, Xi’an JiaotongUniversity, Huazhong University of Science and Technology and South China University of Technology,in order to establish joint labs for deepening technological cooperation. The Group also upgrades andmake innovations on cooperation models by carrying out strategic cooperation with tech companies suchas BASF, Honeywell, 3M, and SCHOTT to build a global innovation ecosystem through multiple channels.C. Stronger Global Impact fueled by Midea’s continual global resource allocation and investments,globally-advanced manufacturing capabilities and advantage of scaleThe success of a series of global acquisitions and new business expansion moves has further solidifiedMidea’s global operations and leading advantages in the ToB businesses. Meanwhile, the Company hasa solid foundation in the global home appliance industry, mastering core technologies of various homeappliance categories and possessing outstanding advantages in the field of core components of homeappliances. It continues to upgrade towards intelligent manufacturing on the basis of its world-leadingmass manufacturing capacity. Relying on the advanced technologies and experience of the five factoriesincluded in the “Global Lighthouse Network”, the Company leads the way in the application anddevelopment of intelligent manufacturing in the industrial end across the world, with a competitive edgeof efficient operation throughout the entire value chain. Meanwhile, supported by its diversified productcoverage, manufacturing bases in major overseas markets, expanding matrix of overseas own brands,and improving overseas channel network, the Company has been able to expand rapidly into theemerging overseas markets and is becoming a stronger competitor in those mature overseas markets.The Group is one of the biggest manufacturers in the world for many product categories, which gives itcompetitive edges in efficiency improving and cost reducing that its overseas competitors are unable toreplicate. Overseas sales of the Group accounts for more than 40% of the total sales revenue. Its productshave been exported to over 200 countries and regions, and it owns 21 overseas manufacturing basesand 24 overseas operating agencies. Midea holds firm to the strategy of “Global Impact”. Its globaloperation system has been further improved through the reform of international business entities,accelerated talent development in international entities at the front end, improved local business entities
overseas, and enhanced operational capabilities in various overseas markets. It also increasesinvestments in overseas business operations, focuses on the needs of local customers and enhancesproduct competitiveness in a bid to promote significant growth in its Own Branding & Manufacturing (OBM)business. In addition, with a deep knowledge and understanding on product characteristics and 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. A complete and broad channel network and a well-established smart supply chain systemensuring the steady growth of Midea on the domestic marketWith its continuous efforts over the years, Midea has formed a multi-channel network which has acomplete business layout and covers a wide range of areas, thus meeting the purchase needs of onlineand offline consumers for household appliances. Midea continues to improve its offline business layoutaround user needs, and has created a network layout of comprehensive household appliance stores,specialty stores of self-owned products, traditional retailers and e-commerce franchise stores. It provideseasy access to Midea's products and services for individual customers, as well as professional scenario-based solutions for corporate customers, covering the entire market from first-tier cities to townships.Particularly, Midea boasts a unique exclusive shop system in the industry with nearly 20,000 outlets,where various needs of users from new decoration to updates can be met in pre-decoration stores,flagship stores, professional stores, combo stores and other stores. Midea continuously providesindustry-leading digital platform services to retail stores. It also focuses on expanding and constructingpremium brand stores for COLMO and Toshiba. Centred around "smart suite operation" and "entire-houserenovation solutions", Midea actively cooperates with home decoration, furniture, building materials, anddesign channels, seeking to capture front-end traffic. The Company has built over 630 "home decoration+ appliances" deeply integrated brand stores. Also, it continuously promotes layered operations for pre-decoration stores, creating an integrated decoration style for home appliances and home decoration, andproviding one-stop services for users. In the first half of 2023, the retail sales on the pre-decoration marketsaw a year-on-year increase of over 100%. With exclusive stores as the core, the Company builds a“Midea Cloud Sales +” ecosystem covering markets at all tiers, establishes an exclusive store systemwith core competitiveness for various markets, as well as firmly promotes and transforms the exclusive
store service, operation, and all-product retailing capabilities, among others.Annto, a technological innovation-based provider of logistics services under Midea Group, makes full useof digital and big data technologies to refine and manage its comprehensive logistics network. Anntogathers data from all aspects of the logistics chain and leverages information technology to optimiseprocess execution, enabling seamless coordination among people, goods, vehicles, and sites. Throughintelligent management and decision-making related to orders, information, and logistics, building a smartand digital integrated logistics service platform. Annto creates a supply chain business model that hasbeen successfully validated through corporate practice while focusing on industry characteristics, deeplyexploring pain points in the entire value chain, and forming a business framework and operationmanagement system that combines software and hardware capabilities. Annto provides systematic andin-depth solutions for different industry clients. Annto concentrates its resources on urban and ruraldistribution and is able to provide fully visualized direct distribution services covering every town andvillage of the country. Relying on approximately 140 urban distribution centers nationwide, it covers morethan 99% of towns and villages across the country. It can finish the delivery to 30,739 (or over 77% of)towns and villages within 24 hours and to 37,260 (or over 94% of) towns and villages within 48 hours inthe country. Additionally, Annto strengthens the shared inventory system for online and offline channelsand the competitive edge of integrated delivery for the ToB/ToC business, refines its network of integrateddelivery and installation services, drives connectivity through the whole process from manufacturing tosale, provides quality service solutions for various orders from customers, as well as comprehensivelybetter the end user experience.E. A user experience-oriented reform of “Comprehensive Digitalization and ComprehensiveIntellectualization” that focuses on “Digitization & Intelligence Driven” to make Midea a leader inthe IoT eraMidea has put in place and will prioritize the development of the Midea Cloud Sales commercial platformsupported by unified data and technology platforms, the IoT ecosystem platform, and the IndustrialInternet platform of “M·IoT”, with an aim to become a world-leading technology group driven by digitization& intelligence. On one hand, it promotes deep integration of the digital technology and business in thewhole value chain, with the view to becoming an icon in digitalization. On the other hand, with foresight,
it plans for whole new products, services and business models centering on smart technologies, productsand scenes, so as to outcompete Internet companies. With continual investment and research in artificialintelligence (AI), silicon chip, sensor, big data, cloud computing and other new technologies, Midea hasbuilt the biggest AI team in the household appliance industry, which is committed to enabling products,machines, production processes and systems to sense, perceive, understand and judge, driven by thecombination of big data and AI, in order to reduce obstacles for man-machine interaction to the minimumand create smart appliances without any assistance in interaction. Focusing on “people and their family”,Midea builds a whole value chain of IoT. Breakthroughs have been made in user data protection, contentoperation for smart scenes, smart connection technology, the smart home ecosystem, cloud platforms,the smart voice function, the big data-based cloud housekeeper services, etc. By doing so, Midea is ableto offer complete smart home solutions for users, as well as to empower its business partners.Upon years of digital transformation characterized by “One Midea, One System, One Standard”, Mideahas successfully materialized operations driven by software and data through its value chain, connectingend to end and covering planning and R&D, Product Ordering, intelligent scheduling, flexiblemanufacturing, coordinative supply, product quality tracking, logistics, installation & post-sale services,etc. The Group’s digital platform has made come true C2M flexible manufacturing, platform-based andmodularized R&D, digitalized production techniques and simulation, intelligent logistics, digital marketing,digital customer service, etc. By way of integrating the IoT capabilities of its AI Innovation Center, SoftwareEngineering Institute, IT Department, IoT Division, Smart Home Business Group, Robotics & AutomationDivision, Building Technologies Division, Other Innovation Business and other organs, Midea hasestablished a unified IoT technology platform. Its Industrial Internet platform has been upgraded to “M·IoT
2.0”, and five of its factories have been included in the “Global Lighthouse Network” initiated by the WorldEconomic Forum, representing Midea’s powerful technology attribute and strong intelligent manufacturingcapability. These practices are swiftly applied to other Midea manufacturing bases across the world.Based on these “Lighthouse” factories and the “Lighthouse Network”, Midea brings the relevantexperience and services outside the Group to empower ecosystem partners and facilitate thetransformation of China’s manufacturing sector. It has provided the relevant products and services forover 1,000 customers in more than 50 market segments. Therefore, it is safe to say that Midea has builta solid foundation regarding Industrial Internet systems. While driving online systems and digitalization,
Midea also adopts a systematic data-based approach to governance. A whole new data platform hasbeen put in place to accumulate data assets, integrate online and offline business data as well as productand service data, and provide adequate data support for all business lines.F. Sound corporate governance mechanism and effective incentive scheme to provide a solidfoundation for Midea’s sustained and steady developmentPaying close attention to the construction of a governance framework, regarding its corporate control,centralization and decentralization systems, the Group formed a mature management system forprofessional managers. The divisional system has been in operation for many years, and its performance-oriented evaluation and incentive mechanism featuring full decentralization has become a training andgrowth platform for the Group's professional managers. The Group's primary senior management teamconsists of professional managers who have been trained and forged in the operational practices of MideaGroup, with an average length of service of over 15 years in the Group. They have rich managementexperience and practices in the relevant industries, deep understanding and insights of the relevantindustries with respect to ToC and ToB, and accurate understanding of the industry environment andcorporate operations and 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. So far, the Company has launched nineStock Option Incentive Schemes, seven Restricted Share Incentive Schemes, eight Global Partner StockOwnership Schemes, five Business Partner Stock Ownership Schemes and the 2023 Stock OwnershipScheme for key managerial and technical personnel at different levels, in addition to the exploration andpractices with respect to diversified stock ownership schemes of key innovative subordinates. As such, agovernance structure has been put in place that aligns the interests of senior management and corebusiness backbones with that of all shareholders, as well as comprises long and short-term incentivesand restrains.
4. Analysis of Main Business
OverviewSee contents under the heading “2. Business Scope in the Reporting Period” above.
YoY changes in key financial data:
Unit: RMB’000
| H1 2023 | H1 2022 | YoY Change (%) | Main reasons for change | |
| Operating revenue | 196,988,402 | 182,661,009 | 7.84% | |
| Cost of sales | 147,276,358 | 140,424,168 | 4.88% | |
| Taxes and surcharges | 1,040,376 | 798,939 | 30.22% | Increased urban maintenance and construction tax and education surcharge |
| Selling and distribution expenses | 17,133,216 | 14,698,373 | 16.57% | |
| General and administrative expenses | 5,670,400 | 4,951,069 | 14.53% | |
| Research and development expenses | 6,610,954 | 5,865,033 | 12.72% | |
| Finance costs | -1,363,661 | -1,735,418 | -21.42% | |
| Investment income | 410,154 | 607,847 | -32.52% | Decreased income from the disposal of derivative financial assets and liabilities |
| Gains/(losses) on changes in fair value | -103,703 | -749,742 | 86.17% | Changes in the fair value of equity instrument investments |
| Income tax expenses | 3,578,491 | 2,710,551 | 32.02% | Increased before-tax profit |
| Net profit attributable to minority interests | 296,525 | 126,901 | 133.67% | Increased profits of non-wholly-owned subsidiaries |
| Net cash flows from operating activities | 29,784,674 | 21,394,710 | 39.22% | Increased cash received from sales of goods or rendering of services |
| Net cash flows from investing activities | -27,046,688 | -6,562,852 | -312.12% | Increased cash paid to acquire investments |
| Net cash flows from financing activities | -6,437,928 | 5,783,043 | -211.32% | Increased cash payments for interest expenses and distribution of dividends or profits |
| Net increase in cash and cash equivalents | -3,571,173 | 20,760,688 | -117.20% | Decreased 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 2023 | H1 2022 | YoY Change (%) | |||
| Amount | As a percentage of total operating revenue (%) | Amount | As a percentage of total operating revenue (%) | ||
| Total | 196,988,402 | 100% | 182,661,009 | 100% | 7.84% |
| By business segment | |||||
| Manufacturing | 177,405,216 | 90.06% | 163,263,193 | 89.38% | 8.67% |
| By product category | |||||
| HVAC | 92,006,787 | 46.71% | 83,236,383 | 45.57% | 10.54% |
| Consumer appliances | 68,136,204 | 34.59% | 66,334,685 | 36.32% | 2.73% |
| Robotics, automation systems and other manufactured products | 17,262,225 | 8.76% | 13,692,125 | 7.50% | 26.07% |
| By geographical segment | |||||
| PRC | 116,452,278 | 59.12% | 104,822,467 | 57.39% | 11.09% |
| Outside PRC | 80,536,124 | 40.88% | 77,838,542 | 42.61% | 3.47% |
During the Reporting Period, the industrial technology revenue was RMB13.6 billion, up 12% year-on-year; the building technologies revenue was RMB14.8 billion, up 21% year-on-year; and the robotics &automation revenue was RMB15.2 billion, up 24% year-on-year.Business segments, products or geographical segments contributing over 10% of the operating revenueor profit?Applicable □N/A
Unit: RMB’000
| Operating Revenue | Cost of sales | Gross profit margin | YoY change of operating revenue (%) | YoY change of cost of sales (%) | YoY change of gross profit margin (%) | |
| By business segment | ||||||
| Manufacturing | 177,405,216 | 129,949,773 | 26.75% | 8.66% | 5.33% | 2.32% |
| By product category | ||||||
| HVAC | 92,006,787 | 70,500,436 | 23.37% | 10.54% | 7.29% | 2.32% |
| Consumer | 68,136,204 | 46,339,869 | 31.99% | 2.72% | -1.32% | 2.78% |
| appliances | ||||||
| Robotics, automation systems and other manufactured products | 17,262,225 | 13,109,468 | 24.06% | 26.07% | 22.51% | 2.22% |
| By geographical segment | ||||||
| PRC | 116,452,278 | 87,499,362 | 24.86% | 11.09% | 9.23% | 1.28% |
| Outside PRC | 80,536,124 | 59,776,996 | 25.78% | 3.47% | -0.90% | 3.28% |
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
5. Analysis of Non-Core Business
□Applicable ?N/A
6. Assets and Liabilities
6.1 Material changes of asset items
Unit: RMB’000
| 30 June 2023 | 31 December 2022 | 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 | 71,734,919 | 15.50% | 55,270,099 | 13.08% | 2.42% | |
| Accounts receivable | 36,454,972 | 7.88% | 28,237,973 | 6.68% | 1.20% | |
| Contract assets | 4,703,917 | 1.02% | 4,498,956 | 1.06% | -0.04% | |
| Inventories | 33,693,045 | 7.28% | 46,044,897 | 10.90% | -3.62% | |
| Investment properties | 1,366,242 | 0.30% | 809,936 | 0.19% | 0.11% | |
| Long-term equity investments | 4,731,210 | 1.02% | 5,188,817 | 1.23% | -0.21% | |
| Fixed assets | 28,336,765 | 6.12% | 26,082,992 | 6.17% | -0.05% | |
| Construction in progress | 5,414,509 | 1.17% | 3,843,777 | 0.91% | 0.26% | |
| Right-of-use assets | 2,687,642 | 0.58% | 2,339,878 | 0.55% | 0.03% | |
| Short-term borrowings | 19,289,107 | 4.17% | 5,169,480 | 1.22% | 2.95% | |
| Contract liabilities | 29,075,185 | 6.28% | 27,960,038 | 6.62% | -0.34% | |
| Long-term borrowings | 39,030,039 | 8.43% | 50,685,948 | 12.00% | -3.57% | |
| Lease liabilities | 1,767,894 | 0.38% | 1,507,480 | 0.36% | 0.02% |
6.2 Main assets overseas
□Applicable ?N/A
6.3 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 recorded in equity | Amount provided for impairment in the period | Purchased in the period | Sold in the period | Other changes | Closing balance |
| Financial assets | ||||||||
| 1. Financial assets held for trading (excluding derivative financial assets) | 3,284,593 | 288,323 | - | - | 5,152,835 | 776,090 | 244,340 | 8,194,001 |
| 2. Derivative financial assets | 752,451 | -43,898 | -71,970 | - | 1,335,628 | 194,374 | -16,023 | 1,761,814 |
| 3. Receivables financing | 13,526,540 | - | - | - | 1,940,394 | - | - | 15,466,934 |
| 4. Other debt investments and others | 17,626,302 | - | - | - | 20,000 | 3,138,348 | 338,405 | 14,846,359 |
| 5. Investments in other equity instruments | 41,359 | - | - | - | - | - | -67 | 41,292 |
| 6. Other non-current financial assets | 10,625,244 | -554,403 | 199,609 | - | 159,090 | 1,730,138 | 498,473 | 9,197,875 |
| Sub-total of financial assets | 45,856,489 | -309,978 | 127,639 | - | 8,607,947 | 5,838,950 | 1,065,128 | 49,508,275 |
| Investment properties | ||||||||
| Productive living assets | ||||||||
| Others | ||||||||
| Sub-total of the above | 45,856,489 | -309,978 | 127,639 | - | 8,607,947 | 5,838,950 | 1,065,128 | 49,508,275 |
| Financial liabilities | 1,895,310 | 1,158,936 | 330,405 | - | 289,770 | 307,555 | 6,609 | 3,373,475 |
Contents of other changesWhether there were any material changes on the measurement attributes of major assets of the Companyduring the Reporting Period
□ Yes ? No
6.4 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.
7. Investment Made
7.1 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 (%) |
| 87,829,148 | 60,554,514 | 45.04% |
7.2 Significant equity investment made in the Reporting Period
□Applicable ?N/A
7.3 Significant non-equity investments ongoing in the Reporting Period
□Applicable ?N/A
7.4 Financial investments
7.4.1 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 recorder in 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 | 586,342 | -11,730 | 18,406 | -11,730 | 593,018 | Financial assets held for trading | Own funds | ||
| Overseas listed stock | SOUN | SoundHound AI | 157,203 | Fair value method | 51,889 | 81,553 | 4,948 | 81,553 | 138,390 | Financial assets held for trading | Own funds | ||
| Domestically listed stock | 688165 | EFORT | 178,534 | Fair value method | 274,120 | 172,935 | -28,893 | 169,454 | 414,681 | Financial assets held for trading | Own funds | ||
| Domestically listed stock | 688322 | Orbbec | 300,000 | Fair value method | 134,670 | 153,597 | 153,597 | 288,267 | Other non-current financial assets | Own funds | |||
| Domestically listed stock | 688159 | Neoway | 31,600 | Fair value method | 29,100 | 32,225 | -21,353 | 41,728 | 49,475 | Financial assets held for trading | Raised funds |
| Domestically listed stock | 688162 | JEE | 88,180 | Fair value method | 153,353 | -6,514 | -6,514 | 146,839 | Financial assets held for trading | Raised funds | |||
| Domestically listed stock | 301135 | Real-Design | 40,000 | Fair value method | 62,101 | 15,552 | 15,552 | 77,653 | Financial assets held for trading | Raised funds | |||
| Domestically listed stock | 688097 | BOZHON | 55,000 | Fair value method | 89,746 | 9,308 | 9,308 | 99,054 | Other non-current financial assets | Raised funds | |||
| Domestically listed stock | 001283 | Highpower Technology | 20,000 | Fair value method | 38,030 | -1,458 | -1,458 | 36,572 | Other non-current financial assets | Raised funds | |||
| Total | 1,640,489 | - | 1,419,351 | 445,468 | 23,354 | - | -50,246 | 451,490 | 1,843,949 | - | - | ||
7.4.2 Derivatives investments
?Applicable □N/A
Unit: RMB’000
| Type of derivative | Initial investment amount | Gain or loss from change in fair value during the period | Cumulative fair value change recorded in equity | Purchased in the period | Sold in the period | Closing amount | Closing amount as a percentage of the Company’s closing net assets |
| Futures contracts | 85,017 | - | -67,725 | - | - | 17,292 | 0.0118% |
| Forex contracts | 352,895 | -1,320,951 | -334,650 | 70,365 | 37,722 | -1,317,003 | -0.8998% |
| Cross-currency interest rate swaps | 4,276,688 | -214,809 | 199,609 | - | - | 4,174,908 | 2.8523% |
| Total | 4,714,600 | -1,535,760 | -202,766 | 70,365 | 37,722 | 2,875,197 | 1.9644% |
| Explanation of significant changes in accounting policies and specific financial accounting principles in respect of the Company's hedges for the period as compared to the prior period | No change |
| Actual gain/loss in the period | Actual loss from derivatives investments during the Reporting Period was RMB-1,851.791 million. |
| Results of hedges | The Company's major risks during the Reporting Period included foreign exchange risk exposures and raw material price risks. Foreign exchange risks included foreign currency-denominated asset and liability exposures arising from overseas sales, raw material purchases, financing and other operations. And raw material price risks included exposures to fluctuations in spot trading market prices for bulk material purchases. These uncertainties arising from currency fluctuations were effectively hedged against by buying derivative contracts of the same amount and maturity but in opposite directions. |
| Source of derivatives investment funds | All from the Company’s own funds |
| 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 bulk 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 | The Company carried out recognition and measurement according to “Section VII Recognition of Fair Value” in the Accounting Standard No. 22 for Business Enterprises—Recognition and Measurement of Financial Instruments. Changes in the fair value of derivatives were recognized at RMB-1,738.526 million during the Reporting Period. 1. The fair value of futures contracts was determined on the basis of publicly quoted prices in the futures market. 2. The fair value of forex contracts was determined based on banks’ quoted prices for foreign exchange products. 3. The main parameter assumptions used in the analysis of the fair value of cross-currency interest rate swaps included interest rate paid, interest rate received, frequency of interest received, frequency of interest paid, USD interest rate curve, EUR interest rate curve, |
| USD/EUR exchange rate curve, etc. | |
| Litigation involved (if applicable) | N/A |
| Disclosure date of the announcement about the board’s consent for the derivative investment (if any) | 29 April 2023 |
| Disclosure date of the announcement about the general meeting’s consent for the derivative investment (if any) | 20 May 2023 |
| 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. |
7.5 Use of funds raised
□ Applicable ? N/A
No such cases in the Reporting Period.
8. Sale of Major Assets and Equity Interests
8.1 Sale of major assets
□Applicable ?N/A
No such cases in the Reporting Period.
8.2 Sale of major equity interests
□Applicable ?N/A
9. Analysis of Major Subsidiaries
?Applicable □N/AMain subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
(in RMB million)
| Company name | Company type | Business scope | Registered capital | Total assets (in RMB million) | Net assets (in RMB million) | Operating revenue (in RMB million) | Operating profit (in RMB million) | Net profit (in RMB million) |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | Subsidiary | Manufacturing of home appliances | USD158.58 million | 25,150 | 11,484 | 8,316 | 1,522 | 1,324 |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | Subsidiary | Manufacturing of residential air conditioners | RMB830 million | 12,787 | 4,608 | 8,411 | 1,463 | 1,241 |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | Subsidiary | Manufacturing of commercial air conditioners | RMB500 million | 20,158 | 3,434 | 12,029 | 1,189 | 1,039 |
| Guangzhou Hualing Refrigerating Equipment Co.,ltd. | Subsidiary | Manufacturing of residential air conditioners | RMB640 million | 13,350 | 4,803 | 8,286 | 1,131 | 974 |
Acquisition and disposal of subsidiaries during the Reporting Period?Applicable □N/AThe detailed information of major subsidiaries included in the consolidation scope in the current period isset out in Notes 5 and 6. Entities newly included in the consolidation scope in the current period throughacquisition mainly include ShenZhen CLOU Electronics Co., Ltd. and its subsidiaries (referred to as“CLOU Electronics”) (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
10. Structured Entities Controlled by the Company
?Applicable □N/AAs of the end of the Reporting Period, one structured entity was included in the Group’s consolidatedfinancial statements, which is a private-equity fund controlled by the Group. As a manager and investor
of the structured entity, the Group has relevant management power in and variable returns from the entity,and has the ability to exercise its management power to impact the returns.
11. Outlook for the Future Development of the Company
Development strategies of the CompanyMidea adheres to the strategic focus of “Technology Leadership, Direct to Users, Digitization &Intelligence Driven, and Global Impact”, focuses on “Comprehensive Digitalization and ComprehensiveIntellectualization”, and drives coordinated development of ToC and ToB businesses under the guidanceof the strategic focus. The "Second Growth Engine" has been fired up. The Company drives profitabilityimprovement through the enhancement of product strength and core technologies in the ToC end,providing strategic support for the transformation of the ToB business. Also, it continues to strengthen itsglobalisation capability, striving to transform from a China-based company to a global one. Whilemaintaining its superiority in efficiency, the Company drives growth through innovation and builds productand technological advantages. Midea are built to grow on the back of advanced governance mechanism,future-proof values, and managerial mindset growth. Midea will continuously improve the governancemechanism by empowering responsibilities, rights and obligations, clarify decentralization andauthorization, constantly refine the agent mechanism, optimize the incentive and constraint system,encourage entrepreneurship and boost organizational vitality, and establish a flat and agile organizationand optimization process. It will also adhere to the values of long-termism and altruism, truly putemployees, users, customers and partners at the center of all things, and improve the EHS governanceand ESG rating. Additionally, the Management will endeavor to achieve all-round growth both spirituallyand intellectually. Meanwhile, Midea will continue to improve the talent structure, build diverse teams thatare inclusive and collaborative, and create a simple, straightforward, flat and equal environment. In themeantime, it will constantly improve consistency management across the Group, so as to achieveconsistent operations, corporate culture and values and philosophies, which will ensure the sustainedand steady development of the Company.With strategic certainty, Midea is well prepared for uncertainties in the future. It firmly upgrades itsbusiness models. In terms of the home appliance business, the key is to achieve further growth through
business model upgrades such as DTC transformation for domestic sales and OBM transformation forexport, and to explore new approaches to continuously drive cost reduction and efficiency improvementthrough the combination of the through-value-chain, no-breakpoint, seamless, and people-never-see-people digitalisation capabilities and lean management. It is also important to insist on structuralupgrading, i.e. adjusting large structures, refining small structures, and creating new structures. The keyis to provide high-quality, differentiated products. The Company continues to invest in and improve the"Three Generations" R&D system to increase added value and profitability of products, better supporttechnological research and development and structural upgrading, and continue to invest in the future inorder to achieve stable and sustained high-quality growth. In addition, Midea insists on businessupgrading. By further increasing investment in the ToB business, continuously improving product strength,realising value chain autonomy, grasping opportunities to quickly seize market share, the Company fullyfires up the "Second Growth Engine". With the customer-oriented principle as the root of corporateinnovation and reform, the Company accelerates DTC breakthroughs. Grasping capital flow, cargo flow,information flow and other information of the whole value chain through direct contact withcustomers/users, the Company is able to deepen the implementation of an online system for policies andvisualisation of the whole order process. By doing so, it can gather retail data in real time, and acquirefirst-hand information on customer needs for its reform and innovation. Further, the Company shortensthe factory-to-user process through the development of online capabilities and the further online-offlineintegration, so that the products and services can be delivered to the users at the lowest cost and thefastest speed.Key operation points in the first half of 2023:
In the second half of 2023, based on the core strategic focus with “Technology Leadership” as the core,Midea will continue to "refocus and return" at the strategic and operational levels, and firmly promote theclosure, discontinuation, mergers and conversion of non-core businesses. Adhering to the annualoperating principle of “Stabilize Profit & Drive Growth”, it will endeavour to achieve its annual objectivesin a steady and high-quality manner. Meanwhile, further efforts will be made to promote thedecentralisation and improvement of the governance mechanism, develop an internal entrepreneurialgroup, and fully stimulate entrepreneurial spirit. Midea will strive to be the best it can be in a long season.
The Company will look at its own problems and shortcomings in a calm and rational manner, focusing on"efficiency, performance and results". It will continue to drive business breakthroughs, advance faster withinnovation, as well as explore new approaches, models, products and capabilities. On the product end,the Company will continue to strengthen the product structure adjustment, the development of newproduct categories and breakthroughs in weak product categories; on the channel end, efforts are beingmade to promote the expansion of new markets, the use of new approaches, and the development ofnew business forms such as interest-based e-commerce; and on the operation end, the Company willinsist on controlling operating risks and expenses, balancing investments and returns, driving higherprofitability and improving cash flow. Key tasks for the second half of 2023 include:
a. Based on the core strategy of “Technology Leadership”, Midea will establish a comprehensive researchorganization, increase investment in digitalization and R&D, improve talent structure, carry out the taskof technology innovation, product innovation, technological innovation, business model innovation, andprocess innovation, as well as build a mechanism that can support “Technology Leadership”. Midea willresolutely increase R&D investment, build up R&D scale advantage, and continuously lay out keytechnologies, cutting-edge technologies, basic technologies, digitalization and intellectualization. Byvirtue of the two drivers of technology strategy and product strategy, as well as innovation mechanismassurance of the three-tier technical committee and the four-tier R&D system, Midea will enhance the"Three Generations" system and pool together its R&D strength. It will continue to strengthen overseasR&D capabilities, give clear functions to overseas R&D bases, and strengthen local management ofoverseas entities. Continuous efforts will be made to strengthen localized R&D capabilities in overseasoperations, increase investment in localized R&D, and leverage the advantages of localized R&D to betterserve the local markets. Also, efforts will be made to continuously drive core technology breakthroughsin green development, energy saving, health, intelligent transformation, robotics & automation, etc. byadopting a joint innovation model, with an aim to enhance global co-innovation strength. It will activelyrespond to China’s dual-carbon strategy and carry on with its "Green Strategy", apply eco-friendly andlow-carbon technology to products by technology innovation, help to save energy and reduce emissionsin the life cycle of products, and lead the formulation of green standards in a deep manner to obtain thenational green product certification of all categories of products. To promote the rapid application ofscientific innovation through standardization, it will implement the "3+1" strategy for standardization, drive
technological standardization for innovations in green development, energy saving, intelligenttechnologies, as well as healthy, comfortable and convenient technologies, etc., and strengthen theformulation and revision of international standards. For the purpose of making breakthroughs and buildingkey technology barriers in all the product categories, and promoting innovation of global products, productstructure improvement and high-end strategy, it will continue to implement the "Three Generations"project, accelerate the application of research results, and retain the "Number One Engine" of ToCbusiness. In the ToB business, it will continue to promote the industrialisation of innovative technologies,increase the research on differentiated and innovative technologies in new businesses, improve thevertical integration of the industrial chain, and join hands with strategic partners in the development ofdigital technologies, so as to drive a second growth curve. Also, it will continuously build the scientistsystem, attract global research talent, vigorously introduce high-end talent, and constantly refine the R&Dnetwork. Based on regional technology advantages, it will continue to improve the "2+4+N" R&D network,increase the comprehensive strength of overseas R&D centers, and build an innovation mechanism forthe “Technology Leadership” strategy, so as to maintain technology leadership in a comprehensivemanner.b. Midea will keep a high-quality development direction and stick to internal, sustained and effectiveorganic growth. In the process of implementing new strategies to boost new growth areas, the key forMidea's survival in competition lies in improving operational efficiency. Therefore, Midea will optimize thedelivery cycle, enhance the inventory turnover, improve the cash cycle, and implement the sharedinventory system. Being customer-oriented, Midea will strive to be “Direct to Users” through user research,user insight, product plan transforming and user operation. Midea will promote the T+3 business modelreform and high-performance operations in the whole value chain in every link from product planning toafter-sales service, so as to increase efficiency in the whole value chain and the data-driven efficiency.Channel reform will be firmly pushed forward for the front-end market in pursuit of better profitability. Inorder to win in competition, it is important to develop high-end products to refine the product mix.Breakthroughs must be made in a faster manner regarding small appliances and upgrading of the majorappliance business must be accelerated, in addition to the promotion of products catering to newconsumption trends. Midea will plan for, establish and refine business middle platforms, especially dataand technology middle platforms. In the meantime, it will maintain overall consistency by sticking to “One
Midea, One System, One Standard”. In face of common problems such as fluctuations in exchange ratesand prices of bulk raw materials, as well as sourcing management, Midea will firmly promote its internalcoordination and sharing mechanism and keep perfecting the relevant solutions. It will also maintaineffective investments, control non-operating expenses, increase labor productivity, improve humanresource allocation efficiency, promote lean management and provide fresh impetus for continual growththrough relentless innovation.c. In the domestic market, based on the “Direct to Users” strategy, Midea will continue to deepen thereform of its organizational structure, improve retail capacity, and develop user insights and back-endcapacity. Midea will also commit itself to intelligent experience terminals and user experience as part ofefforts to connect with users' preferences. In terms of channel reform, the Company will deepen marketingchanges, simplify delivery rules, strengthen retail sales, and set up a professional team with a focus onretail capability and user operation. While organizing organizational reform, the Company willcontinuously strengthen the principle of "One Midea, One System and One Standard", give full play tocollaborative advantages, and do well in result-oriented process control to achieve constant improvementof operating efficiency. Midea, based on digital systems and tools, is investing in dedicated resources toensure the successful implementation of four core projects, namely "Grid-based Layout and High-qualityStore Establishment", "Store Classification and Grading Online with Layered Resource Matching","Product Assortment Upgrade", and "Full-Link Retail Operations". The Company aims to develop useroperation capabilities and data analysis decision-making capabilities for the retail platform, supportingretail transformation. In the online channels, Midea is promoting the construction of a customer ecosystem,focusing on cultivating all-category and multi-category customer shops, optimizing supply chain models,and strengthening the capabilities of a shared inventory system, and drop-shipping services. It is alsoaccelerating the scale expansion of premium brands and the enhancement of online content live-streaming marketing capabilities. Further, it will promote the new retail transformation of the customersystem, accelerate the integration of online and offline businesses, expand store and product coverage,stabilise the supply chain system, optimise ToC retailing tools, increase the e-commerce distributioncapabilities of the offline exclusive store system, and cultivate offline live-streaming and content-basedmarketing capabilities to enhance the sales conversion rate. With respect to marketing, Midea willempower the retail end and customers through the refinement of event operations, structured product
marketing, and standardised retail experience. With consistent online and offline branding, the Companywill strengthen the node integrated marketing capability. By integrated branding strategy, content andadvertising, it is able to strengthen the quality of content and branding effect, increase brand and productvisibility, and reach customers effectively. Meanwhile, the Company will continuously expand the base ofprivate domain users to enhance user satisfaction and royalty. In terms of user operation and service, theCompany will continue to, centering around the principle of "Create Value for Users" and the orientationof user experience, improve the iteration of product design and experience of purchase services,accelerate the establishment of a two-way channel to reach private domain users, and optimise themembership operation capability. The Company will continue to optimise service process reconstruction,enhance user participation in closed-loop confirmation rates, and strengthen user satisfaction in theservice process. Midea will continuously upgrade service standards, striving to make Midea's services anindustry benchmark, continuously enhancing the full-category service capabilities, pre-decoration servicecapabilities, and entire-house smart professional service capabilities of suite-based service outlets, andimproving the user experience of delivery, installation, product suite and entire-house smart scenarioservices. Also, it will further enhance the basic service capabilities of premium brand outlets and serviceengineers, and create differentiated service programmes for premium brands. In addition, efforts will bemade to promote service-driven sales, butler-like service, product return and exchange experienceimprovement and other reform programmes to provide customers with one-stop service experience. Withregard to the premium brands, Midea will insist on practices in four aspects. The first is to insist on beingretail-oriented, deepening the retail model, accumulating sales driving approaches, strengtheningcustomer operation, and creating multi-functional entire-house smart stores to offer immersive buyerexperience as an upgrade of the retail model. The second is to insist on building smart experience storesfor the premium brands, introducing high-quality customers, enabling a two-step home delivery servicefor customers, as well as improving service and user experience. The third is to insist on promoting entire-house solutions, deepening the solutions of "entire-house smart systems + home appliances", providingcustomers with product suite solutions, and deeply integrating home appliances and smart home systemsthrough the launch of homegrown core terminals such as smart central control and household smart host.Finally, Midea will insist on building retail organizations to provide customers with differentiated entire-house smart solutions that deeply integrate smart home appliances and smart home systems, as well ason establishing a nationwide technical service system for entire-house smart solutions to support the
whole process from smart solution design, delivery and installation, debugging, acceptance, to after-salesservice.d. In the overseas market, Midea will adhere to the front-end organisational system and regionaliseddevelopment as the core, accelerate the front-end infrastructure construction, build a front-end marketresource sharing platform, cultivate an international organisation and talent system, firmly invest in itsown brands, and focus on products, retail and channels. In terms of products, continuous efforts will bemade to build localised R&D and design capabilities at the front-end of each regional organisation,accelerate product structure optimisation and new product iteration by relying on the technologicaladvantages of core product categories and taking into account the development trends of differentproduct categories in different regional markets, and build user experience centres based on smart lifescenarios, so as to provide users with a smarter and more convenient smart home experience. At theretail end, the Company will further expand retail outlets, promote the application and iteration ofempowering tools around retail operation practices, and upgrade the infrastructure of retail outlets toprovide more convenient experience for customers. With regard to channels, actions to be taken includedeveloping professional channels in regional markets and reach more customers with professionalproducts and services, with a particular focus on the expansion of professional channels such as HVAC,built-in appliances and engineering & installation. As for service, the Company will continue to improvethe global spare parts supply and service system by continuously expanding the service coverage of theglobal spare parts centre and optimizing the supply efficiency, improve the access efficiency of the globalcall centre, connect the global call centre to social media and the brands’ official websites, and promotethe application of new technologies, so as to enhance the comprehensive service capabilities in overseasmarkets.e. Midea will continue to deepen the implementation of its dual premium brands strategy, furtherstrengthening the dual-engine power of COLMO and Toshiba brands. The COLMO brand will keepfocusing on higher-end entire-house intelligence, catering to the deep needs of elite users, leveragingthe influence of the "Smart Villa Expert" in villa entire-house intelligence, promoting comprehensive high-end smart living solutions, and leading the entire-house intelligence industry into the era of deep control.Targeting the segmented high-end market, the Toshiba brand will continue to deploy multiple categories
such as refrigerators, laundry appliances, small domestic appliances, and kitchen appliances, furtherexpanding scenarios in entire-house water usage, heating, and kitchen. Meanwhile, it will strengthenbrand consistency, promote multi-category suite-based products to provide a refined living experience,upgrade brand image and build brand mindset, and deeply focus on layer marketing to strive for a dualbreakthrough in customer base and scale. WAHIN will continue to differentiate and innovate around users,products and product accessories, build a multi-category product portfolio, and provide consumers withsmart and comfortable experience. It will maintain its focus on forward-looking young consumers,continuously target young groups through school-enterprise cooperation, explore diversified cross-fieldmodes during summer graduations and job-hunting seasons, create new shopping scenarios in e-commerce channels and on new media with more content-driven "virtual stores", and drive sales throughhigher brand visibility.f. Midea will continue to focus on driving the transformation of its core business and digital empowerment,establishing an online operating system, and building a unified "business, system, and data" system. Byoptimizing the top-level architecture, Midea will continuously strengthen the construction of its underlyingdigital capabilities. In terms of domestic marketing, the Company is set to further enhance the support ofnew product launches through digital capabilities, deepen the application of big data and algorithms, andexplore market opportunities with the help of different-industry data collision and algorithm optimisation.Also, it will empower the business team with digital tools, promote digital application, continuouslyoptimise data quality, and improve the effectiveness of data and digital tool application. Concerningoverseas marketing, Midea is poised to enhance overseas manufacturing capabilities through digital tools,continuously optimise overseas service capabilities, facilitate overseas branding and brand presenceenhancement, and at the same time strengthen overseas trade compliance and risk control through digitaltechnologies. In the ToB business, Midea will deepen business reform and data governance, improve thebusiness continuity operation mechanism, and support the launch of "ToB Salesmart", a digital marketingplatform. Regarding R&D, further efforts will be made to broaden and deepen the application of digitalplanning in various business areas, while exploring the application of AIGC in R&D to drive transformationtowards a highly collaborative R&D model. With respect to manufacturing and the supply chain, theCompany will carry on with the integrated supply chain reform campaign, strengthen the construction ofthe ISC operation and management system, promote order and production capacity visibility based on
the customer's perspective, as well as improve the overseas KD delivery efficiency and the deliverycapability of overseas factories to increase customer satisfaction. Also, it will establish planning centresand order centres to fully deepen the application of integrated supply chain systems and support theefficient operation of the value chain. More measures to be taken include promoting the continuousenrichment of the knowledge base of the knowledge management platform, capitalize on AIGC toempower knowledge Q&A, deepen the application of intelligent logistics, and realise datainterconnectivity of terminals such as access control systems and consumption terminals of Midea’sindustrial parks. Regarding big data, Midea is set to deeply explore the domestic ToC business, theoverseas ToC business and the ToB business, focus on seven major data application areas such asdomestic home appliance retailing, content marketing and global VOC, as well as accelerate businessdevelopment through intelligent decision-making, digital tools and algorithms and other means of big dataanalysis. In the meantime, it will also further develop the comprehensive digital competence of employeesand create a digital environment across the organization. In terms of digital base construction, Midea willstrengthen the shift-left measure, enhance the endogenous security capacity of the application system,and provide assurance for safe and stable business operation. Meanwhile, it will see to the on-timedelivery of the Gui'an Midea Cloud Base, create a hybrid cloud deployment architecture featuring globalcloud-ground collaboration, fully incorporate the AIGC capability, and verify the feasibility of self-builtlarge models.g. Midea aims to drive further growth in its industrial technology business, continuously expand businessboundaries, and accelerate growth. In the second half of 2023, in the field of core components forconsumer appliances, Midea will continue to enhance digitalisation and data operations, increaseinvestment in R&D resources, improve the processes and mechanisms of technology and platformresearch, optimise the product mix, and driving profitability. Also, it will make continuous breakthroughsin new products, technologies, and applications, providing customers with eco-friendly, efficient, andintelligent products and technology solutions. New valve, pump and other products are launched. Valveproducts are advancing towards mass production, while dishwasher integrated heat pumps and heatpump heat circulating pumps have entered mass production. Moreover, the Company will improveproduction efficiency and strengthen product cost advantages, bolster its global supply chain capabilities,enhance global competitiveness by fully leveraging the local advantages of the factories in India and
Thailand, aiming to establish an Industry 4.0 smart manufacturing demonstration base. Midea will createan overseas professional service platform, offering one-stop services for small and medium-sizedcustomers and specialised services for large customers, achieving breakthroughs with overseas keycustomers and increasing the global market share of its products. The Company continues to strengthenthe competitiveness of its chips for home appliances. A variety of MCU chip products such as mastercontrol, touch control, and variable frequency chips have been launched to the market, and a non-inductive FOC low-power IPM module has been developed. Relying on the advantages of the Group'sindustrial chain cluster, efforts are also made to attract other major home appliance makers. Regardingintelligent transportation, Midea will leverage its innovative advantages to achieve comprehensiveimprovements in customer base, products, and manufacturing capabilities. Meanwhile, it will continuouslyexplore markets to attract more major customers at home and abroad, as well as expand the marketcoverage of various thermal management products for different car models, so as to ensure rapid salesgrowth. More efforts will be made in terms of the development of products and technologies, includingpromoting the development of surface-mounted permanent magnet synchronous motors (SPM) andinterior permanent magnet synchronous motors (IPM), materialising mass production and delivery of flat-wire drive motors, and carrying out next-generation platform, product and technology development, inpursuit of a development path of "components-modules-systems". In addition, the Company’s efforts willcontinue to improve manufacturing capability. It will complete the production ramp-up for electric powersteering (EPS) motors, and advance the construction planning for overseas component factories toachieve a continuous increase in production capacity. In terms of industrial automation, Midea will furtherconsolidate its technological expertise in motion control, adapt to market conditions and competitivestrategies, utilise its technological advantages, carry out differentiated research and development, andprovide new products and comprehensive system solutions targeting specific needs in key sub-marketssuch as lithium batteries, photovoltaics, semiconductors, robotics, and laser processing. New high-performance rotary and linear servo drive products, encoders and automated optical inspection (AIO)products will be launched in the second half of 2023. The Company will also put a number of harmonicreducer products into production and send testing samples to a number of major customers in the roboticsindustry, which has further improved the product portfolio. Swift actions will be taken to reform themarketing model, expand new channel resources, and explore business opportunities in accordance withthe strategy of "maintain the existing customer base, seize business opportunities, and attract new
customers". The Company will strengthen the flexible manufacturing capability, improve product deliveryefficiency, improve the entire quality control system through the digitalised information system, completethe construction of the test centre, and upgrade testing means for production lines. With respect to greenenergy, CLOU Electronics will promote internal business integration, explore non-power-grid marketsbased on the power grid market, expand the new energy market, work on the overseas market andoverseas localisation, and focus on the large-scale energy storage and industrial and commercial energystorage markets in Europe. It will continue to promote localised solutions, platform-based R&D, andproduct technique optimisation, as well as to accelerate the development and certification of new productsoverseas, while leveraging Midea Group's supply chain resources to achieve synergistic integration andcontinue to promote cost reduction and efficiency gains. Also, it will increase investment to enhance theintelligent manufacturing capability, further layout of energy storage capacity, and strive to build a“Lighthouse” factory in the energy storage industry. And it will optimise the inventory managementcapability and improve the quality of operation and management.h. Media will accelerate project collaboration between the China team and overseas teams, fullyleveraging the advantages of global R&D synergy and Chinese manufacturing capabilities, in order toenhance KUKA's global operational efficiency. In terms of R&D, Midea will beef up KUKA’s localizedoperations and resource integration in China, increase investment in the development and application ofrobotics, foster R&D innovation of core components and software systems, as well as accelerate thepromotion and application of new products. In terms of marketing, Midea will take active steps to explorenew areas including new energy, general industrial manufacturing, electronics, medical care and logistics,services, etc. Meanwhile, it will strengthen resource investment in the technical service team to meetcustomer needs with fast and efficient response and competitive system solutions. Concerning operation,it will concentrate on R&D, supply chain management, high-performance operations and digitalization,among others, so as to build the core competitiveness of the robotics and industrial automation businessin a faster manner.i. Midea will adhere to the value positioning of production logistics, deeply explore the two areas of leanlogistics and digital empowerment, strengthen HUB warehouse sharing and route development, promotethe integrated model of reused packaging and transport package, link to more upstream component
suppliers with the help of digital service products, and build a digital collaboration platform for productionlogistics, so as to continuously promote the integration of the manufacturing industry and the servicesector. Also, it will continue to deepen the warehouse and distribution B/C integrated business, releasemore operational vitality through deep mechanism change, and actively explore new business models toprovide services for more customers.Risks Faced by the Company and Countermeasures:
a. Risk of macro economy fluctuationThe market demand for the Company’s consumer appliances, HVAC equipment, industrial robotics,among other products, can be easily affected by the economic situation and macro control. If the globaleconomy encounters a heavy hit and consumer demand slows down in growth, the growth of theindustries in which the Company operates, may slow down accordingly, and as a result, this may affectthe product sales of Midea Group.b. Risks in the fluctuation of production factorsThe raw materials required by Midea Group to manufacture its consumer appliances and corecomponents primarily include different grades of copper, steel, plastics and aluminum. At present, thehousehold appliance manufacturing sector belongs to a labor intensive industry. If the price of rawmaterials fluctuate largely, or there is a large fluctuation in the cost of production factors (labor, water,electricity, and land) caused by a change to the macroeconomic environment and policy change, or thecost reduction resulted from lean production and improved efficiency, as well as the sale prices of endproducts cannot offset the total effects of cost fluctuations, the Company’s business will be influenced tosome degree.c. Risk in global asset allocation and overseas market expansionInternationalization and global operations is a long-term strategic goal of the Company. The Companyhas built joint-venture manufacturing bases in many countries around the world. Progress has been madeday by day regarding the Company’s overseas operations and new business expansion. However, 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.d. Risk in foreign exchange losses caused by exchange rate fluctuationAs Midea carries on with its overseas expansion plan, its overseas sales have accounted for more than40% of the total revenues. Any sharp exchange rate fluctuation might not only bring negative effects onthe overseas operations of the Company, but could also lead to exchange losses and increase its financecosts.e. 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 2023. The trade barriers and frictions of some major markets will affect the export business in the shortrun, as well as marketing planning and investment in the medium and long run. Political and compliancerisks are rising in international trade. These can mainly be seen on compulsory safety certificates,international standards and requirements, and product quality and management systems certification,energy-saving requirements, the call for increasingly strict environmental protection requirements, as wellas with rigorous requirements for recycling household appliances waste. Trade frictions caused by anti-dumping measures implemented by some countries and regions aggravate the burden in costs andexpenses for household appliance enterprises, and have brought about new challenges to marketplanning and business expansion for enterprises.In face of the complicated and changeable environment and risks at home and abroad, Midea will strictlyfollow the Company Law, the Securities Law, the CSRC regulations and other applicable rules, keepimproving its governance structure for better compliance, and reinforce its internal control system so asto effectively prevent and control various risks and ensure its sustained, steady and healthy development.
Section IV Corporate Governance
1. Annual and Extraordinary General Meetings of Shareholders Convened during theReporting Period
1.1 General meetings of shareholders convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Convened date | Disclosure date | Resolution of the meeting |
| First Extraordinary General Meeting of Shareholders of 2023 | Extraordinary | 56.99% | 6 January 2023 | 7 January 2023 | Announcement No. 2023-001 on Resolutions of First Extraordinary General Meeting of Shareholders of 2023, disclosed on www.cninfo.com.cn |
| 2022 Annual General Meeting of Shareholders | Annual | 57.71% | 19 May 2023 | 20 May 2023 | Announcement No. 2023-026 on Resolutions of 2022 Annual General Meeting of Shareholders, 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
The Company’s directors, supervisors and senior management remained unchanged during theReporting Period. For their information, see the 2022 Annual Report.
3. Preliminary Plan for Profit Distribution and Converting Capital Reserves into ShareCapital for the Reporting Period
□ Applicable ? N/A
The Company plans not to distribute cash dividends or bonus shares or convert capital reserves intoshare capital for the first half of 2022.
4. Implementation of any Equity Incentive Scheme, Employee Stock OwnershipScheme or Other Incentive Measures for Employees
?Applicable □N/A
4.1 Equity incentive schemes
A. Overview of the Fifth Stock Option Incentive Schemea. The Proposal for the Retirement of Unexercised Stock Options in the First Grant under the Fifth StockOption Incentive Scheme upon Expiry was approved at the 16th Meeting of the Fourth Board of Directorson 20 June 2023. As such, 79,180 stock options of 21 awardees that had been unexercised upon expirywere retired.b. At the above-mentioned meeting, the Proposal for the Retirement of Unexercised Reserved StockOptions under the Fifth Stock Option Incentive Scheme upon Expiry was approved. As such, 38,500 stockoptions of four awardees that had been unexercised upon expiry were retired.c. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for the StockOption Incentive Scheme was approved. As the 2022 Annual Profit Distribution Plan had been carriedout, the exercise price for the first grant under the Fifth Stock Option Incentive Scheme was revised fromRMB50.21 to RMB47.71 per share, and the exercise price for the reserved stock options under the FifthStock Option Incentive Scheme was revised from RMB41.04 to RMB38.54 per share.d. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. It was agreed to adjust the awardees and their exercisable stock options under the Fifth StockOption Incentive Scheme due to the resignation, reassignment, substandard individual or business unitperformance, violation of the Company’s “Red Lines” or other factors of some awardees. Upon theadjustments, the number of locked-up stock options under the Fifth Stock Option Incentive Scheme was
reduced from 9,195,000 to 7,325,333.e. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theFourth Exercise Period for the First Grant under the Fifth Stock Option Incentive Scheme was approved.As the exercise conditions have been satisfied for the fourth exercise period for the first grant under theFifth Stock Option Incentive Scheme, a total of 801 awardees who are eligible for the Fifth Stock OptionIncentive Scheme have been allowed to exercise 7,325,333 stock options in the fourth exercise period(ended 6 May 2024).f. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. It was agreed to adjust the awardee list and their exercisable stock options for the reservedstock options under the Fifth Stock Option Incentive Scheme due to the resignation, substandardindividual performance, or other factors of some awardees. Upon the adjustments, the number of locked-up reserved stock options granted to them under the Fifth Stock Option Incentive Scheme was reducedfrom 1,890,000 to 1,740,000.g. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theThird Exercise Period for the Reserved Stock Options under the Fifth Stock Option Incentive Schemewas approved. As the exercise conditions have been satisfied for the third exercise period for the reservedstock options under the Fifth Stock Option Incentive Scheme, a total of 61 awardees who are eligible forthe Fifth Stock Option Incentive Scheme have been allowed to exercise 860,000 stock options in the thirdexercise period (ended 8 March 2024).During the Reporting Period, 7,111,550 shares were exercised with respect to the first grant under theFifth Stock Option Incentive Scheme.During the Reporting Period, 597,000 shares were exercised with respect to the reserved stock optionsunder the Fifth Stock Option Incentive Scheme.B. Overview of the Sixth Stock Option Incentive Scheme
a. The Proposal for the Retirement of Unexercised Stock Options under the Sixth Stock Option IncentiveScheme upon Expiry was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023.As such, 40,591 stock options of seven awardees that had been unexercised upon expiry were retired.b. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for the StockOption Incentive Scheme was approved. According to the arrangements in the 2022 Annual ProfitDistribution, the exercise price for the Sixth Stock Option Incentive Scheme was revised from RMB48.04to RMB45.54 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Sixth Stock Option Incentive Scheme was approved. It was agreed toadjust the awardee list and their exercisable stock options under the Sixth Stock Option Incentive Schemedue to the resignation, reassignment, substandard individual/business unit performance or other factorsof some awardees. Upon the adjustments, the number of locked-up stock options granted to them underthe Sixth Stock Option Incentive Scheme was reduced from 18,570,000 to 15,830,667.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theThird Exercise Period for the Sixth Stock Option Incentive Scheme was approved. As the exerciseconditions have been satisfied for the third exercise period for the Sixth Stock Option Incentive Scheme,a total of 762 awardees who are eligible for the Sixth Stock Option Incentive Scheme have been allowedto exercise 7,339,417 stock options in the third exercise period (ended 29 May 2024).During the Reporting Period, 6,729,532 shares were exercised under the Sixth Stock Option IncentiveScheme.C. Overview of the Seventh Stock Option Incentive Schemea. The Proposal for the Retirement of Unexercised Stock Options under the Seventh Stock OptionIncentive Scheme upon Expiry was approved at the 16th Meeting of the Fourth Board of Directors on 20June 2023. As such, 55,200 stock options of three awardees that had been unexercised upon expiry wereretired.
b. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for the StockOption Incentive Scheme was approved. According to the arrangements of the 2022 Annual ProfitDistribution, the exercise price for the Seventh Stock Option Incentive Scheme was revised fromRMB47.19 to RMB44.69 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Seventh Stock Option Incentive Scheme was approved. It was agreedto adjust the number of locked-up stock options granted to the awardees under the Seventh Stock OptionIncentive Scheme from 28,680,000 to 20,867,916 due to the resignation, substandard business unitperformance, substandard individual performance, reassignment or other factors of these awardees.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theThird Exercise Period for the Seventh Stock Option Incentive Scheme was approved. As the exerciseconditions have been satisfied for the third exercise period for the Seventh Stock Option IncentiveScheme, a total of 1,047 awardees who are eligible for the Seventh Stock Option Incentive Scheme havebeen allowed to exercise 20,867,916 stock options in the third exercise period (ended 4 June 2024).During the Reporting Period, 12,927,840 shares were exercised under the Seventh Stock OptionIncentive Scheme.D. Overview of the Eighth Stock Option Incentive Schemea. The Proposal for the Adjustments to the Exercise Prices for the Stock Option Incentive Schemes wasapproved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. According to thearrangements in the 2022 Annual Profit Distribution, the exercise price for the Eighth Stock OptionIncentive Scheme was revised from RMB79.74 to RMB77.24 per share.b. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Eighth Stock Option Incentive Scheme was approved. It was agreedto adjust the awardee list and their exercisable stock options under the Eighth Stock Option IncentiveScheme due to the resignation, substandard company performance, violation of the Company’s “RedLines” or other factors of some awardees. Upon the adjustments, the number of locked-up stock options
granted to them under the Eighth Stock Option Incentive Scheme was reduced from 81,740,000 to45,785,250.E. Overview of the Ninth Stock Option Incentive Schemea. The Proposal for the Adjustments to the Exercise Prices for the Stock Option Incentive Schemes wasapproved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. According to thearrangements in the 2022 Annual Profit Distribution, the exercise price for the Ninth Stock OptionIncentive Scheme was revised from RMB54.61 to RMB52.11 per share.F. 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 First Extraordinary General Meeting ofShareholders of 2023 on 6 January 2023. As such, it was agreed to repurchase and retire 218,958restricted shares that had been granted to 14 awardees but were still in lockup due to the resignation,reassignment, violation of the Company’s “Red Lines” or other factors of these awardees. The retirementof the said restricted shares was completed on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. Accordingto the 2022 Annual Profit Distribution Plan, the repurchase prices for the first grant under the 2018Restricted Share Incentive Scheme was revised from RMB21.44 to RMB18.94 per share, and therepurchase price for the reserved restricted shares under the 2018 Restricted Share Incentive Schemefrom RMB17.46 to RMB14.96 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2018 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 233,146 restricted shares that had been granted to 29 awardees but were still inlockup due to the resignation, reassignment, substandard 2022 individual/business unit performance orother factors of these awardees.
d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the FourthUnlocking Period for the First Grant under the 2018 Restricted Share Incentive Scheme was approved.A total of 172 awardees were eligible for this unlocking, with 2,566,396 restricted shares (0.0365% of theCompany’s total existing share capital) unlocked for public trading, of which 25,000 shares, 25,000 shares,25,000 shares, and 20,000 shares were unlocked for senior management Guan Jinwei, Zhang Xiaoyi,Hu Ziqiang, and Zhong Zheng, respectively.e. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the Reserved Restricted Shares under the 2018 Restricted Share Incentive Schemewas approved. A total of 18 awardees were eligible for this unlocking, with 324,167 restricted shares(0.0046% of the Company’s total existing share capital) unlocked for public trading, of which 25,000shares were unlocked for senior management Zhao Wenxin.G. 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 First Extraordinary General Meeting ofShareholders of 2023 on 6 January 2023. As such, it was agreed to repurchase and retire 431,250restricted shares that had been granted to 14 awardees but were still in lockup due to the resignation,reassignment or other factors of these awardees. The retirement of the said restricted shares wascompleted on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. Accordingto the 2022 Annual Profit Distribution Plan, the repurchase price for the granted restricted shares underthe 2019 Restricted Share Incentive Scheme was revised from RMB20.96 to RMB18.46 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2019 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 694,532 restricted shares that had been granted to 62 awardees but were still inlockup due to the resignation, reassignment, substandard 2022 individual or business unit performance
or other factors of these awardees. Also, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the 2019 Restricted Share Incentive Scheme was approved. A total of 308 awardeeswere eligible for this unlocking, with 4,897,510 restricted shares unlocked for public trading, of which30,000 shares, 25,000 shares and 25,000 shares were unlocked for senior management Wang Jinliang,Zhao Wenxin, and Guan Jinwei, respectively.H. 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 First Extraordinary General Meeting ofShareholders of 2023 on 6 January 2023. As such, it was agreed to repurchase and retire 753,209restricted shares that had been granted to 25 awardees but were still in lockup due to the resignation,reassignment, violation of the Company’s “Red Lines” or other factors of these awardees. The retirementof the said restricted shares was completed on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. As the2022 Annual Profit Distribution Plan had been carried out, the repurchase price for the restricted sharesgranted under the 2020 Restricted Share Incentive Scheme was revised from RMB21.18 to RMB18.68per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2020 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 2,939,626 restricted shares that had been granted to 316 awardees but were stillin lockup due to the resignation, reassignment, substandard 2022 individual/business unit performanceand other factors of these awardees.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the 2020 Restricted Share Incentive Scheme was approved. A total of 394 awardeeswere eligible for this unlocking, with 10,851,082 restricted shares unlocked for public trading, of which48,000 shares, 48,000 shares and 40,000 shares were unlocked for senior management Wang Jinliang,
Zhao Wenxin, and Li Guolin, respectively.I. Overview of the 2021 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2021Restricted Share Incentive Scheme was approved at the First Extraordinary General Meeting ofShareholders of 2023 on 6 January 2023. As such, it was agreed to repurchase and retire 824,500restricted shares that had been granted to 18 awardees but were still in lockup due to the resignation,reassignment or other factors of these awardees. The retirement of the said restricted shares wascompleted on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. As the2022 Annual Profit Distribution Plan had been carried out, the repurchase price for the 2021 RestrictedShare Incentive Scheme was revised from RMB38.25 to RMB35.75 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2021 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 2,576,500 restricted shares that had been granted to 112 awardees but were stillin lockup due to the resignation, reassignment, substandard 2022 company performance or other factorsof these awardees.J. Overview of the 2022 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2022Restricted Share Incentive Scheme was approved at the First Extraordinary General Meeting ofShareholders of 2023 on 6 January 2023. As such, it was agreed to repurchase and retire 270,000restricted shares that had been granted to 10 awardees but were still in lockup due to the resignation,reassignment or other factors of these awardees. The retirement of the said restricted shares wascompleted on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share Incentive
Schemes was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023. As the2022 Annual Profit Distribution Plan had been carried out, the repurchase price for the 2022 RestrictedShare Incentive Scheme was revised from RMB26.47 to RMB23.97 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2022 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 1,052,500 restricted shares that had been granted to 24 awardees but were still inlockup due to the resignation, reassignment or other factors of these awardees.K. Overview of the 2022 Restricted Share Incentive Schemea. The 2023 Restricted Share Incentive Scheme (Draft) and its Abstract was approved at the 15th Meetingof the Fourth Board of Directors on 27 April 2023. And the awardee list for the 2023 Restricted ShareIncentive Scheme (Draft) was reviewed at the Ninth Meeting of the Fourth Supervisory Committee.b. The Company convened the 2022 Annual General Meeting of Shareholders on 19 May 2023, at whichthe following proposals in relation to the 2023 Restricted Share Incentive Scheme were approved: theProposal on the 2023 Restricted Share Incentive Scheme (Draft) and its Abstract, the Proposal on theFormulation of the Implementation and Appraisal Measures for the 2023 Restricted Share IncentiveScheme, and the Proposal on the Request to the General Meeting of Shareholders for Authorizing theBoard of Directors to Handle Matters in Relation to the 2023 Restricted Share Incentive Scheme, etc.c. The Proposal for the Adjustments to the Repurchase Price and the Grant Price for the Restricted ShareIncentive Schemes was approved at the 16th Meeting of the Fourth Board of Directors on 20 June 2023.According to the 2022 Annual Profit Distribution Plan, the grant price was revised from RMB28.39 toRMB25.89 per share.d. On 14 July, the Company granted 18,325,000 restricted shares to 415 awardees with the grant pricebeing RMB25.89 per share.
4.2 Employee stock ownership schemes
?Applicable □N/A
Outstanding employee stock ownership schemes during the Reporting Period
| Scope of employees | Number of employees | Total shares held | Change | As a percentage of the Company’s total share capital | Funding source |
| Employees under the Fourth Global Partner Stock Ownership Scheme | 20 | 3,318,540 | N/A | 0.0474% | Special fund for the scheme |
| Employees under the First Business Partner Stock Ownership Scheme | 50 | 1,779,300 | N/A | 0.0254% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Fifth Global Partner Stock Ownership Scheme | 16 | 3,732,075 | N/A | 0.0533% | Special fund for the scheme |
| Employees under the Second Business Partner Stock Ownership Scheme | 45 | 1,867,845 | N/A | 0.0267% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Sixth Global Partner Stock Ownership Scheme | 17 | 3,537,663 | N/A | 0.0506% | Special fund for the scheme |
| Employees under the Third Business Partner Stock Ownership Scheme | 46 | 1,873,559 | N/A | 0.0268% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Seventh Global Partner Stock Ownership Scheme | 15 | 2,436,518 | N/A | 0.0348% | Special fund for the scheme |
| Employees under the Fourth Business Partner Stock Ownership Scheme | 44 | 1,985,611 | N/A | 0.0284% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Eighth Global Partner Stock Ownership Scheme | 15 | 3,770,433 | N/A | 0.0539% | Special fund for the scheme |
| Employees under the Fifth Business Partner | 55 | 2,826,759 | N/A | 0.0404% | Special fund for the scheme and part of the performance bonuses for |
| Stock Ownership Scheme | senior management |
Shares held by directors, supervisors and senior management under employee stock ownership schemesduring the Reporting Period
| Name | Office title | Shares held at the beginning of the Reporting Period | Shares held at the end of the Reporting Period | As a percentage of the Company’s total share capital |
| Fang Hongbo | Chairman of the Board and CEO | 7,328,039 | 2,237,754 | 0.0319% |
| Gu Yanmin | Director and Vice President | |||
| Wang Jianguo | Director and Vice President | |||
| Zhang Xiaoyi | Vice President | |||
| Hu Ziqiang | Vice President | |||
| Wang Jinliang | Vice President | |||
| Li Guolin | Vice President | |||
| Fu Yongjun | Vice President | |||
| Guan Jinwei | Vice President | |||
| Bai Lin | Vice President | |||
| Zhong Zheng | Vice President, CFO and Director of Finance | |||
| Zhao Wenxin | Chief People Officer | |||
| Jiang Peng | Board Secretary |
Change of asset management organizations during the Reporting Period
□Applicable ?N/A
Equity changes incurred by disposal of shares by holders, etc. during the Reporting Period
□Applicable ?N/A
Exercise of shareholder rights during the Reporting PeriodDuring the Reporting Period, holders under employee stock ownership schemes exercised theshareholder rights to receive the cash dividends for 2022. Other than that, they did not exercise othershareholder rights such as voting in a meeting of shareholders.Other information about employee stock ownership schemes during the Reporting Period
□Applicable ?N/A
Changes in members of the management committees for employee stock ownership schemes
□Applicable ?N/A
Financial impact of employee stock ownership schemes on the Company during the Reporting Periodand the relevant accounting treatments?Applicable □N/AAs per the Accounting Standard No. 11 for Business Enterprises—Share-based Payments, for equity-settled share-based payments in exchange for services from employee that are exercisable whenservices in the vesting period are completed or specified performance conditions are met, at everybalance sheet date during the vesting period, the services obtained in the current period are included inthe relevant costs/expenses and capital surplus at the fair value of the equity instruments at the grantdate based on the best estimate of the number of exercisable equity instruments. The expenseamortization of the Company’s share-based payment incentive schemes stood at RMB125.79 million forthe first half of 2023, which was included in the relevant expense items and capital surplus.Termination of employee stock ownership schemes during the Reporting Period?Applicable □N/ADuring the Reporting Period, the 3,318,540 shares, 3,732,075 shares, 1,779,300 shares and 1,867,845shares respectively under the Fourth and Fifth Global Partner Stock Ownership Schemes as well as theFirst and Second Business Partner Stock Ownership Schemes were sold by way of centralized biddingupon the expiry of the respective lock-up periods. According to the relevant provisions in the Fourth GlobalPartner Stock Ownership Scheme (Draft), the Fifth Global Partner Stock Ownership Scheme (Draft), theFirst Business Partner Stock Ownership Scheme (Draft), and the Second Business Partner StockOwnership Scheme (Draft), the implementation of these schemes has been completed, which will befollowed by the liquidation and distribution of assets. The proceeds to which the holders of the schemesare entitled will be distributed to the holders in proportion to the number of underlying shares vested inthe holders, less relevant taxes.
4.3 Other incentive measures for employees
□Applicable ?N/A
Section V Environmental and Social Responsibility
1. Major Environmental Issues
Whether the Company or any of its subsidiaries is declared a heavily polluting business by the environmental protection authorities? Yes □ NoPolicies and industry standards for environmental protectionThe Company has attached great importance to environmental protection. It has been strictly abiding by the Law of the People's Republic of China onEnvironmental Protection, the Law of the People's Republic of China on Water Pollution Prevention and Control, the Law of the People's Republic ofChina on Air Pollution Prevention and Control, the Law of the People's Republic of China on Noise Pollution Prevention and Control, the Law of thePeople's Republic of China on the Prevention and Control of Environmental Pollution by Solid Wastes, the Law of the People's Republic of China onEnvironmental Impact Assessment, the Regulations on Administration of Discharge Permits as well as other applicable laws, administrative rules andregulatory documents. The Company has been taking practical and effective environmental protection measures to protect the ecological environmentand fulfil its corporate responsibility.In terms of pollutant management, the Company has been in compliance with the existing pollutant discharge standards and limits, which are specifiedas follows:
With respect to wastewater management, the Company is subject to the Integrated Wastewater Discharge Standard (GB8978-1996), the Discharge
Limits of Water Pollutants (DB44/26-2001), the Discharge Standard of Water Pollutants for Electroplating (DB 44/1597-2015), and the Discharge Limitsof Water Pollutants of Guangdong Province (DB44/26-2001), among other standards.With respect to waste gas management, the Company is subject to the Integrated Emission Standard of Air Pollutants (GB16297-1996), the EmissionStandard of Air Pollutants for Boiler (GB13271-2014), the Emission Control Standard of Volatile Organic Compounds for Industrial Enterprises(DB13/2322-2016), the Emission Standard of Pollutants for Synthetic Resin Industry (GB31572-2015), the Emission Limits of Air Pollutants (DB44/27-2001), the Emission Standard of Volatile Organic Compounds for Furniture Manufacturing Operations (DB44/814-2010), and the Emission Standard ofAir Pollutants for Industrial Kiln and Furnace (GB 9078-1996), among other standards.With respect to noise management, the Company is subject to the Emission Standard for Industrial Enterprises Noise at Boundary (GB12348-2008).With respect to treatments of solid and hazardous waste, the Company has been in strict compliance with the Law on the Prevention and Control of theEnvironmental Pollution of Solid Waste, disposing of solid and hazardous waste in a compliant manner.Administrative permits in relation to environmental protectionAccording to the requirements of the applicable environmental protection laws and regulations, all construction projects of the Company fulfil theprocedures of environmental impact assessment and other administrative licensing procedures for environmental protection, and strictly implement therequirement that facilities for the prevention and control of pollution in construction projects should be designed, constructed and put into operation atthe same time as the construction projects, among other environmental protection measures. After the completion of the project construction, accordingto the requirements of the environmental impact assessment documents, the Company commissions a third-party monitoring organisation to test theproject's wastewater, waste gas, noise and other indicators, and applies for a discharge permit in accordance with the Regulations on the Administration
of Discharge Permits and other regulations and standards.During the Reporting Period, the existing discharge permits of the Company's subsidiaries were all within the validity period. During the validity periodof the discharge permits, if there are matters such as changes in the basic information of the discharge permits, implementation of revisions in pollutantdischarge standards, changes in the total pollutant discharge limits, etc., the subsidiaries of the Company shall, in accordance with the relevantrequirements, submit an application for change of the discharge permits to the local competent environmental protection authorities within a specifiedperiod of time.Industry standards for discharges and discharges of pollutants in production and operation activities
| 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 |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Western gate of the Wuhu plant | 169.5 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 17.1 | 70.898 | No |
| Ammonia-nitrogen | 5.4 mg/L | 0.48 | 2.496 | No | |||||
| BOD5 | 34.8 mg/L | 2.8 | / | No | |||||
| Petroleum | < 0.06 mg/L | 0.005 | / | No | |||||
| Total phosphorus | 0.8 mg/L | 0.06 | / | No | |||||
| Fluoride | 0.6 mg/L | 0.05 | / | No | |||||
| Soot | 15m high altitude discharge | 45 | Plants at each workshop | 4.6 mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 4.63 | / | No | |
| Sulfur dioxide | < 3 mg/m? | 0.96 | / | No | |||||
| Oxynitride | 6.3 mg/m? | 0.99 | / | No | |||||
| Particles | High altitude discharge after being treated by waste gas treatment station | 4.3 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 1.88 | / | No | |||
| Xylene | < 0.01 mg/m? | 0.0001 | / | No | |||||
| VOCs | 5.77 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 4.04 | / | No | ||||
| Wuhu Midea Smart Kitchen Appliances Manufacturing Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Western gate of the Wuhu plant (Share a wastewater treatment station with Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd.) | 169.5 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 14.83 | No | |
| Ammonia-nitrogen | 5.4 mg/L | 0.42 | No | ||||||
| BOD5 | 34.8 mg/L | 2.44 | / | No | |||||
| Petroleum | < 0.06 mg/L | 0.004 | / | No | |||||
| Total phosphorus | 0.8 mg/m? | 0.057 | / | No | |||||
| Fluoride | 0.6 mg/m? | 0.042 | / | No | |||||
| Soot | 15m high altitude discharge | 10 | Plants at each workshop | 4.9 mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 2.76 | / | No | |
| Sulfur dioxide | 6 | < 3 mg/m? | 0.46 | / | No | ||||
| Oxynitride | 6 | 13.3 mg/m? | 1.05 | / | No | ||||
| Dust | High altitude discharge after being treated by waste gas treatment station | 6 | 4.9 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 0.85 | / | No | ||
| Xylene | 2 | < 0.0015 mg/m? | 0.0002 | / | No | ||||
| VOCs | 13 | 6.4 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 4.09 | / | 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 | 59.17 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 1.634 | / | No |
| Ammonia-nitrogen | 1.365 mg/L | 0.04 | |||||||
| BOD5 | 28.17 mg/L | 0.386 | |||||||
| Total nitrogen (by N) | 35.40 mg/L | 1.246 | |||||||
| Total phosphorus (by P) | 0.032 mg/L | 0.00084 | |||||||
| Anionic surfactant | 0.313 mg/L | 0.00482 | |||||||
| Suspended matters | 11.17 mg/L | 0.304 | |||||||
| Petroleum | 0.045 mg/L | 0.0012 | |||||||
| pH value | 7.5 | / | |||||||
| NMHC | RTO equipment | 2 | 1 set at the northeastern side of 3# plant and 1 at the southwestern side of 4# plant | 0.91 mg/m? | Integrated Emission Standard of Air Pollutants GB16279-1996 Level 2 | 0.0208 | / | No | |
| Water spray + activated carbon equipment | 3 | 2 sets at 1# plant and 1 set at 2# plant | 3.27 mg/m? | 0.378 | |||||
| Two-stage activated carbon equipment | 9 | 3 at 1# plant, 2 at 2# plant, 1 at 3# plant, 2 at 4# plant and 1 cyclopentane | 9.235 mg/m? | 0.602 | |||||
| Particles | Filter cartridge dust collector | 8 | 2 at 1# plant, 3 at 2# plant, 2 at 3# plant and 1 at 4# plant | 6.28 mg/m? | 1.732 | / | 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 | 52 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 3.478 | 58.150 | No |
| Ammonia-nitrogen | The eastern side of wastewater treatment station | 0.745 mg/L | 0.05 | / | No | ||||
| Particles | High altitude discharge after being treated by cyclone + filter cartridge dust collector/High altitude discharge after being treated by water spraying + demister + activated carbon + activated carbon | 15 | Plants at each workshop | < 12 mg/m? | Table 5 of the Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572- 2015): Special Emission Limit Requirements | 1.01 | / | No | |
| NMHC | High altitude discharge after being treated by water spraying + demister + activated carbon + activated carbon/High altitude discharge after being treated by the two-stage activated carbon | Plants at each workshop | 1.80 mg/m? | 0.93 | / | No | |||
| GD Midea Air-Conditioning Equipment Co., Ltd. | COD | Discharge after being treated by wastewater treatment station | 1 | The southeastern side of 4# plant | 48 mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) | 1.078 | 9.59 | No |
| Ammonia-nitrogen | 1.082 mg/L | 0.014 | / | No | |||||
| SS | 14 mg/L | 0.211 | / | No | |||||
| Petroleum | 0.32 mg/L | 0.003 | / | No | |||||
| COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of 2# plant | 108 mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) | 1.82 | 9.59 | No | |
| SS | 47 mg/L | 0.18 | / | No | |||||
| Ammonia-nitrogen | 1.832 mg/L | 0.008 | / | No | |||||
| Petroleum | 1.99 mg/L | 0.001 | / | No | |||||
| VOCs (dusting) | 15m high altitude discharge after being treated by spray tower + activated carbon | 3 | 4# plant | 15.94 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.41 | 14 | No | |
| VOCs (Screen Printing) | 15m high altitude discharge after being treated by environmental protection equipment | 4 | 1# and 9# plants | 3.81 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.26 | No | ||
| VOCs (electronic) | 15m high altitude discharge after being treated by environmental protection equipment | 2 | 10# plants | 1.65 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 2.35 | No | ||
| NMHC (evaporator & condenser) | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2#, 5# plants | 2.52 mg/m? | Emission Limits of Air Pollutants (DB44/27- 2001) the second time period | 0.605 | No | ||
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | COD | Discharge after being treated by wastewater treatment station | 1 | The northern side of the park | 76.09 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | 1.98 | 7.5 | No |
| SS | 28.04 mg/L | 0.73 | / | No | |||||
| BOD | 31.07 mg/L | 0.81 | / | No | |||||
| Ammonia-nitrogen | 6.92 mg/L | 0.18 | 0.675 | No | |||||
| Petroleum | 2.82 mg/L | 0.073 | / | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2# plant | 6.14 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 3.78 | / | No | |
| VOCs | 8 | 2#, 3# plants | 6.17 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 3.796 | / | No | ||
| NOx | 3 | 3# plant | 1.46 mg/m? | Integrated Emission | 0.896 | 2.209 | No | ||
| SO2 | 3 | 3# plant | 0.42 mg/m? | Standard of Air Pollutants (GB16297-1996) | 0.2557 | / | 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 | 34 mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 6.7032 | 16.28 | No | |||
| Suspended matters | 19 mg/L | 4.1328 | / | No | ||||||||
| Petroleum | 0.49 mg/L | 0.108396 | / | No | ||||||||
| Total phosphorus | 0.175 mg/L | 0.0594 | / | No | ||||||||
| Total zinc | ND | 0.00648 | / | No | ||||||||
| pH value | 7.15 | / | / | No | ||||||||
| Total nitrogen | 2.83 mg/L | / | No | |||||||||
| Ammonia-nitrogen | 0.67 mg/L | Discharge Limits of Water Pollutants in Guangdong DB44/26-2001 | 0.1507284 | 2.034 | No | |||||||
| Fluoride | 0.17 mg/L | 0.036144 | / | No | ||||||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of the plant | < 20 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001)/ Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB 9078-1996) | / | No | |||||
| SO2 | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 3 L (below the detection limit) | Emission Standard of Air Pollutants for Boiler (DB44/765-2019) | 0 | 0.436 | No | ||||
| NOx | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 6 mg/m? | 2.039 | No | ||||||
| VOCs | 15m high altitude discharge after being treated by environmental protection equipment | 10 | Roof of the plant | 4.9 mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010) | 2.0046 | 4.553 | No | ||||
| Benzene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of the plant | 0.0625 mg/m? | 0.0137976 | / | No | |||||
| Total toluene and xylene | 15m high altitude discharge after being treated by environmental protection equipment | Roof of the plant | 0.35 mg/m? | 0.1310805 | / | 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 | 42 mg/L | The Discharge Standard of Water Pollutants for Electroplating of Guangdong Province DB-441597-2015, before 1 September 2012 | 2.97 | 6.046 | No |
| Suspended matters | 13 mg/L | 1.15 | / | No | |||||
| Petroleum | 0.43 mg/L | 0.036 | / | No | |||||
| Total phosphorus | 0.18 mg/L | 0.0225 | / | No | |||||
| Total zinc | 0.05 mg/L | 0.0045 | / | No | |||||
| pH value | 7.2 | / | / | No | |||||
| Total nitrogen | 3.03 mg/L | 0.497 | / | No | |||||
| Ammonia-nitrogen | 0.856 mg/L | 0.098 | 0.756 | No | |||||
| Fluoride | 0.071 mg/L | 0.024 | / | No | |||||
| Total nickel | ND | 0 | 0.024 | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 17 | Roof of main plant and metal plate workshop | 0 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001)/ Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB 9078-1996) | 0 | 8.705 | No | |
| SO2 | 15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 0 mg/m? | Emission Standard of Air Pollutants for Boiler (DB44/765-2019) | 0 | 0.799 | No | |
| NOx | 15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 5 mg/m? | 3.375 | 7.814 | No | ||
| Benzene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.342 mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010) | 0.09 | / | No | |
| Total toluene and xylene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.817 mg/m? | 0.09 | / | No | ||
| VOCs | 15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of main plant and metal plate workshop | 2.18 mg/m? | 1.66 | 5.718 | 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 | 47 mg/L | Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 3.6786 | 15.304 | No | |
| Petroleum | 0.18 mg/L | 0.0145 | / | No | ||||||
| Ammonia-nitrogen | 1.795 mg/L | 0.1408 | 1.913 | No | ||||||
| Total toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 8 | Waste gas sprayers 1 and 2 at 3# plant, outlets 1, 2 and 3 for waste gas from wave-soldering, painting and drying at 6# plant, outlets 1 and 2 for waste gas from reflow soldering at 6# plant | 0.107 mg/m? | Table 1 of the Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010): Discharge Limits for VOCs through Exhaust Funnel/for Time Period II | 0.034 | / | No | ||
| VOCs | High altitude discharge after being treated by waste gas treatment station | 1.126 mg/m? | 3.578 | 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 | 1.63 mg/m? | Table 4 of the Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.1747 | / | No | ||
| Particles | Pulse bag dust collecting | 4 | Outlets 1 and 2 of sanding waste gas at 3# plant, outlets 1 and 2 of polishing waste gas at 3# plant | 0.4101 mg/m? | Table 2 of the Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2 | 0.0734 | / | No | ||
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 2 | Oxidation wire roof of 3# plant | 3.54 mg/m? | 0.040 | 3.8231 | No | |||
| Oxynitride | Drying furnace of 3# plant | 2.26 mg/m? | 0.326 | 13.132 | No | |||||
| Cooking fume | Discharge after being treated by waste gas treatment station | 2 | South and north section canteens | 0.2 mg/m? | Emission Standard of Cooking Fume (Trial) (GB 18483-2001) | 0.046 | / | 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 | 15 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | / | No | ||
| Ammonia-nitrogen | 0.192 mg/L | / | No | |||||||
| Particles | Collected by gas trap hood + 15m high exhaust cylinder | 10 | No. 1 workshop welding soot discharge outlet for waste gas | 2.7 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) |
4.717812
4.717812
| 65.45 | No |
No. 3 workshop dischargeoutlet for the weldingwaste gas
| No. 3 workshop discharge outlet for the welding waste gas | 3.9 mg/m? | ||||
| Waste gas outlet of 1# heat-treating furnace at No. 2 workshop | 4.8 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 | 6.8 mg/m? | ||||
| Waste gas outlet for die casting at No. 2 workshop | 6.0 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | |||
| Waste gas outlet for die casting at No. 4 workshop | 5.9 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) | |||
| Waste gas outlet of 1# heat-treating furnace at No. 4 workshop | 5.5 mg/m? | ||||
| Waste gas outlet of 2# heat-treating furnace at No. 4 workshop | 3.4 mg/m? | ||||
| Waste gas outlet for electrophoresis and drying at No. 1 workshop | 6.1 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | |||
| Waste gas outlet for electrophoresis and drying at No. 3 workshop | 7.3 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | |||
| Sulfur dioxide | Collected by gas trap hood + 15m high exhaust cylinder | 6 | Outlet of 1# heat-treating furnace at No. 2 workshop | 49 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) Standard Level 2 |
17.42432
17.42432
| 112.2 | No |
Outlet of 2# heat-treatingfurnace at No. 2 workshop
| Outlet of 2# heat-treating furnace at No. 2 workshop | 40 mg/m? |
| Waste gas outlet for die casting at No. 2 workshop | 4 mg/m? |
| Outlet of 1# heat-treating furnace at No. 4 workshop | 94 mg/m? |
| Outlet of 2# heat-treating furnace at No. 4 workshop | 33 mg/m? |
| Waste gas outlet for die casting at No. 4 workshop | 57 mg/m? | ||||
| Oxynitride | Collected by gas trap hood + 15m high exhaust cylinder | 6 | Outlet of 1# heat-treating furnace at No. 2 workshop | 10 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) Standard Level 2 |
5.697417
5.697417
| 33.24 | No |
Outlet of 2# heat-treatingfurnace at No. 2 workshop
| Outlet of 2# heat-treating furnace at No. 2 workshop | 6 mg/m? | ||||
| Waste gas outlet for die casting at No. 2 workshop | 9 mg/m? | ||||
| Outlet of 1# heat-treating furnace at No. 4 workshop | 15 mg/m? | ||||
| Outlet of 2# heat-treating furnace at No. 4 workshop | 6 mg/m? | ||||
| Waste gas outlet for die casting at No. 4 workshop | 4 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 | 5.97 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/ 524-2020) |
0.555736
0.555736
| 21.6 | No |
Waste gas outlet of 1#drying furnace at No. 3workshop
| Waste gas outlet of 1# drying furnace at No. 3 workshop | 1.80 mg/m? | ||||||||
| Die casting at No. 2 workshop | 3.11 mg/m? | ||||||||
| Die casting at No. 4 workshop | 12.4 mg/m? | ||||||||
| Guangdong Welling Motor Manufacturing Co., Ltd. | Benzene | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | 0 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.00 | / | No |
| Total toluene and xylene | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | 0 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.00 | / | No | |
| Total VOCs | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | 2.47 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.468 | 17.09 | No | |
| 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 | 26 mg/L | Discharge Limits of Water Pollutants in Guangdong DB-44/26-2001 Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010)/Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010)/Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572- 2015)/Guangdong Province Emission Limits of Air Pollutants (DB44/27-2001)/Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010)/Emission Standard of Cooking Fume (on Trial) (GB 18483-2001) | 2.94 | 22.77 | No |
| Ammonia-nitrogen | 0.255 mg/L | 0.091 | 4.554 | No | |||||
| Particles | 20m high altitude discharge after being treated by waste gas treatment equipment and reaching the standard | 112 | 26 outlets at A1 plant, 47 outlets at A2 plant, 21 outlets at B2 plant, 9 outlets at C2 plant, 2 outlets at C3 plant, 1 outlet at wastewater treatment station and 6 outlets at canteen | 0.26 mg/m? | 0.48 | / | No | ||
| Sulfur dioxide | 3 mg/m? | 0.445 | 1.055 | No | |||||
| Oxynitride | 4 mg/m? | 2.64 | 10.314 | No | |||||
| Benzene | ND | 0.108 | / | No | |||||
| Total toluene and xylene | 0.34 mg/m? | 0.761 | / | No | |||||
| VOCs | 3.72 mg/m? | 6.13 | 35.051 | No | |||||
| NMHC | 3.43 mg/m? | 0.18 | / | No | |||||
| Styrene | 2.89 mg/m? | 0.327 | / | No | |||||
| Fume | 15m high altitude discharge after being treated by oil fume purification facility and reaching the standard | 0.3 mg/m? | 0.0589 | / | No | ||||
| Anhui Meizhi Precision Manufacturing Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 2 | The south side of Building 6 for night shift at the north side of the plant area | 123.5 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | 48.549 | 175.5 | No |
| Ammonia-nitrogen | 12.02 mg/L | 4.7 | 9.3 | No | |||||
| BOD | 49.68 mg/L | 19.59 | / | No | |||||
| SS | 28.33 mg/L | 11.36 | / | No | |||||
| Petroleum | 0.27 mg/L | 0.104 | / | No | |||||
| Total nickel | Outlet in the sewage station | 0.115 mg/L | 0.038 | 0.1 | No | ||||
| Total zinc | 0.187 mg/L | 0.055 | 1.25 | No | |||||
| NMHC | Collected by gas trap hood + 21m high exhaust cylinder | 3 | Outlet for molybdenum-containing waste gas | 32.03 mg/m3 | Relevant standard limit requirements in Table 1 of Shanghai Integrated Emission Standard of Air Pollutants (DB31/933-2015) | 8.0778 | / | No | |
| Collected by gas trap hood + 25m high exhaust cylinder | 7 | Outlet for waste gas from machining | 16.17 mg/m? | ||||||
| 4 | Outlet for waste gas from coating | 18 mg/m? | |||||||
| Particles | Collected by gas trap hood + 25m high exhaust cylinder | 22 | Outlet for heat treatment | 8.83 mg/m? | Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q. [2019] No. 56) | 7.03574 | / | No | |
| Outlet for waste gas from pre-coating treatment and kiln | 11.76 mg/m? | ||||||||
| Outlet for waste gas from aluminum melting | 10.6 mg/m? | ||||||||
| Collected by gas trap hood + 21m high exhaust cylinder | 8 | Outlet for the welding waste gas | 4.11 mg/m? | ||||||
| Sulfur dioxide | Collected by gas trap hood + 25m high exhaust cylinder | 22 | Outlet for heat treatment | < 3 mg/m? | Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q. [2019] No. 56) | 0.82947 | / | No | |
| Outlet for waste gas from pre-coating treatment and kiln | 4 mg/m? | ||||||||
| Outlet for waste gas from aluminum melting | < 3 mg/m? | ||||||||
| Oxynitride | Collected by gas trap hood + 25m high exhaust cylinder | 22 | Outlet for heat treatment | 17.6 mg/m? | Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q. [2019] No. 56) | 7.13597 | / | No | |
| 1# outlet for waste gas from pre-coating treatment and kiln | 15 mg/m? | ||||||||
| Outlet for waste gas from aluminum melting | 6.5 mg/m? | ||||||||
| GD Midea Environment Appliances Mfg. Co., Ltd. | VOCs | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the screen printing process of the south plant | 20 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 3.827235 | / | No |
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the screen printing process of the north plant | 22.7 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | |||||
| 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 | 12.4 mg/m? | Emission Standard of Pollutants for Synthetic Resin Industry (BG 31572-2015) | 15.1581 | / | No | |
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 3 | Metal plate dusting waste gas exhaust cylinder | 12.33 mg/m? | Emission Standard of Pollutants for Synthetic Resin Industry (BG 31572-2015) | |||||
| Dry filtering + direct combustion of natural gas + 15m high altitude discharge | 1 | Outlet for waste gas from dip coating, drying and hardening of the north plant | 7.21 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001) | |||||
| Dry filtering + RCO + 15m high altitude discharge | 1 | Outlet for waste gas from dip coating, drying and hardening of the south plant | 13.6 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001) | |||||
| Particles | Gas trap hood + water spraying + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | Metal plate dusting waste gas exhaust cylinder | 3.9 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.262 | / | No | |
| Cooking fume | Fume hood + electrostatic range hood + 15m high altitude discharge | 7 | Cooking fume outlet at canteen | 0.13 mg/m? | Emission Standard of Cooking Fume GB18483-2001 | 0.0169 | / | No | |
| Suspended matters | Oil separation and slagging - hydrolysis and acidification - contact oxidation - MBR | 1 | Domestic wastewater treatment station | 3.5 mg/L | Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant GB18918-2002 | 0.0839 | |||
| COD | 18.5 mg/L | 0.410 | / | No | |||||
| Animal and vegetable oil | 0.07 mg/L | 0.00153 | / | No | |||||
| Ammonia-nitrogen (NH3- N) | 0.156 mg/L | 0.00334 | / | No | |||||
| pH value | 6.6 | / | / | No | |||||
| Five-day BOD | 4.75 mg/L | 0.106 | / | No | |||||
| Total zinc | Coagulation and sedimentation + hydrolysis and acidification + aeration + biological tank + MBR + water reuse | 1 | Production wastewater treatment station | 0.0045 mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 0.000182 | 0.08 | No | |
| COD | 5.26 mg/L | 0.223 | 3.9191 | No | |||||
| Suspended matters | 2 mg/L | 0.081 | / | No | |||||
| pH value | 7.5 | / | / | No | |||||
| Total phosphorus (by P) | 0.02 mg/L | 0.000712 | / | No | |||||
| Ammonia-nitrogen (NH3-N) | 0.0772 mg/L | 0.00321 | 0.6279 | No | |||||
| Petroleum | 0.03 mg/L | 0.00121 | / | No | |||||
| Total aluminum | 0.17225 mg/L | 0.0086 | / | No | |||||
| Total iron | 0.08 mg/L | 0.00343 | / | No | |||||
| Hubei Midea Refrigerator Co., Ltd. | COD | Discharge to municipal domestic sewage network | 1 | Outlets for domestic sewage at the plant | 144 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 6.4514352 | 15 | No |
| Ammonia-nitrogen | 15.8 mg/L | 1.41926596 | 2.5 | No | |||||
| BOD | 28 mg/L | 3.36420336 | / | No | |||||
| SS | 10 mg/L | 0.9667196 | / | No | |||||
| Animal and vegetable oil | 1.03 mg/L | 0.09140777 | / | No | |||||
| COD | After deep treatment by | 1 | Freezer waste water outlet | 130 mg/L | Integrated Wastewater | 2.009559 | 15 | No |
| Ammonia-nitrogen | industrial waste water treatment station, discharge to municipal industrial sewage network | 0.119 mg/L | Discharge Standard (GB8978-1996) | 0.00767224 | 2.5 | No | |||
| BOD | 54.5 mg/L | 0.7825401 | / | No | |||||
| SS | 18 mg/L | 0.174942 | / | No | |||||
| Petroleum | 4.66 mg/L | 0.04102032 | / | No | |||||
| Animal and vegetable oil | 0.29 mg/L | 0.00406599 | / | No | |||||
| NMHC | After photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | First installation branch waste gas outlets | 26.57 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 9.2322 | / | No | |
| 1 | Second installation branch waste gas outlets | / | No | ||||||
| 1 | Waste gas outlets at the injection molding workshop | / | No | ||||||
| After dry filtering + photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | Waste gas outlets at the extrusion workshop | / | No | |||||
| After wet scrubber + rotating-stream-tray scrubber + demister + activated carbon, 15m high altitude discharge | 1 | Waste gas outlets at the freezer branch | / | No | |||||
| Particles | After wet scrubber + rotating-stream-tray scrubber + demister + activated carbon, 15m high altitude discharge | 3.8 mg/m? | 0.05016 | / | No | ||||
| Wuxi Little Swan Electric Co., Ltd. | COD | Discharge to municipal sewage network | 1 | Exit at the middle gate of the plant | 136.5 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 23.28 | 123.8994 | No |
| SS | 56 mg/L | 9.55 | 87.2473 | No | |||||
| Animal and vegetable oil | 2.44 mg/L | 0.41 | 10.7034 | No | |||||
| Total phosphorus | 2.11 mg/L | 0.35 | 1.0701 | No | |||||
| Total nitrogen | 24.45 mg/L | 4.17 | 11.2612 | No | |||||
| Ammonia-nitrogen | 18.75 mg/L | 3.19 | 6.6906 | No | |||||
| Particles | Water spraying + UV photocatalysis + activated carbon + filter cartridge dust collection + high altitude discharge/Two-stage activated carbon + high altitude discharge/Filter cartridge dust collection + high altitude discharge/High altitude discharge | 11 | Plants at each workshop | 0.58 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996)/ Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds DB12/524-2014/ Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572-2015)/Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 0.2 | 2.0696 | No | |
| VOCS | Water spraying + UV photocatalysis + activated carbon + filter cartridge dust collection + high altitude discharge/Zeolite + CO + high altitude discharge/Dry filtering + electrostatic oil removal + high altitude discharge/Two-stage activated carbon + high altitude discharge | Plants at each workshop | 1.51 mg/m? | 0.94 | 1.2218 | No | |||
| Sulfur dioxide | Hight altitude discharge | Natural gas for the metal plate process | ND | 0 | 0.624 | No | |||
| Oxynitride | Hight altitude discharge | Natural gas for the metal plate process | 6.5 mg/m? | 0.03 | 3.38 | No | |||
| Wuxi Filin Electronics Co., Ltd. | Particles | Bag + activated carbon + high altitude discharge/Activated carbon + high altitude discharge | 4 | Buildings A and B | 0.33 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) for particles and chemical compounds | 0.1 | 0.2859 | No |
| VOCS | Activated carbon + high altitude discharge/Bag + activated carbon + high altitude discharge | Buildings A and B | 2.77 mg/m? | Subject to Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/524-2014) | 1.0242 | 2.6389 | No | ||
| Huaian Welling Motor Manufacturing Co., Ltd. | Particles | 1#: Two-stage activated carbon; 5#: Grade 3 filtering + honeycomb zeolite + CO; 6#: Electrostatic demisting + grade 2 filtering + activated carbon; 7#: Spray tower + plasma; 8#: Grade 2 filtering + two-stage activated carbon; 9#: Bag filtering; 10#: Two-stage activated carbon. | 7 | DA007, DA008, and DA009 | 2.47 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 0.43 | 2.697 | No |
| NMHC | DA001, DA005, DA006, DA008, and DA010 | 2.58 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 0.95 | 1.3853 | No | |||
| Styrene | DA005 and DA008 | 6.38 mg/m? | Emission Standards for Odor Pollutants (GB14554-93) | 1.073 | / | No | |||
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | pH value | Discharge after being treated by wastewater treatment station and reaching the standard | 1 | West Gate 2 of 4# plant on the west side of plant areas | 7.3 | Integrated Wastewater Discharge Standard GB8978-1996 | / | / | No |
| COD | 36 mg/L | 0.969075 | 9.951 | No | |||||
| Ammonia-nitrogen | 0.529 mg/L | 0.020038 | 1.0021 | No | |||||
| Suspended matters | 18 mg/L | 0.364236 | / | No | |||||
| Petroleum | 1.1 mg/L | 0.0117746 | / | No | |||||
| Total phosphorus | 0.04 mg/L | 0.0024366 | / | No | |||||
| Fluoride | 5.37 mg/L | 0.0677961 | / | No | |||||
| Total zinc | 4.79 mg/L | 0.0484695 | / | No | |||||
| BOD5 | 9 mg/L | 0.2051322 | / | No | |||||
| Particles | Discharge after being treated by environmental protection equipment | 21 | 1# plant, 3# plant, 4# plant, 5# plant | 20 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 0.0273972 | 4.21 | No | |
| Sulfur dioxide | 16 | 0.311 mg/m? | 0.4050330 | 1.68 | No | ||||
| Oxynitride | 16 | 6 mg/m? | 1.2960330 | 7.59 | No | ||||
| Tin and its compounds | 3 | 3# plant | 4*10-4 mg/m? | 0.1139*10-3 | / | No | |||
| Acrylonitrile | 3 | 0.2 mg/m? | 0.02 | / | No | ||||
| Styrene | 3 | 0.145 mg/m? | 0.01932 | / | No | ||||
| VOCs | 10 | 1# plant | 0.311 mg/m? | 0.0446292 | / | No | |||
| Handan Midea Air-Conditioning Equipment Co., Ltd. | NMHC | 15m high altitude discharge after being treated by environmental protection equipment | 9 | 1#, 2# plants | 5.72 mg/m? | 1) NMHC: Implementation of the emission concentration limits on organic chemicals in Table 1 of Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13/2322-2016) 2) Sulfur dioxide/nitrogen oxides/particles: Implementation of the new furnace standards in Table 1 and Table 2 of Emission Standard of Air Pollutants for Industrial Kiln and Furnace (DB13/1640-2012) 3) Tin and its compounds: Implementation of the requirements of Level 2 in the Integrated Emission Standard of Air Pollutants (GB16297-1996) | 5.46 | / | No |
| Particles | 7 | 1#, 2# plants | 1.8 mg/m? | 0.55 | / | No | |||
| Oxynitride | 7 | 1#, 2# plants | 6.27 mg/m? | 1.59 | / | No | |||
| Sulfur dioxide | 7 | 1#, 2# plants | < 3 mg/m? | 0.94 | 3.241 | No | |||
| Tin and its compounds | 4 | 2# plant | < 3 × 10-6 mg/m? | 7.83 * 10-7 | / | No | |||
| COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | North side of the power house | 137 mg/L | Requirements for inflow water quality of wastewater treatment plant in Handan Economic and Technological Development Zone | 1.6 | 8.97 | No | |
| Ammonia-nitrogen | 4.53 mg/L | 0.05 | 0.7 | No | |||||
| pH | 7.2 | / | / | No | |||||
| Suspended matters | 45 mg/L | 0.52 | / | No | |||||
| Petroleum | 0.5 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | 0.0058 | / | No | ||||
| Fluoride | 6.9 mg/L | 0.08 | / | No | |||||
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | pH | Treatment by waste water treatment station and reaching the standard | 1 | West gate | 7.5 | Integrated Wastewater Discharge Standard (GB/T 8978-1996) Table 4, Level 3 | / | / | No |
| COD | 173 mg/L | 2.82 | 76.63 | No | |||||
| SS | 34 mg/L | 0.599 | / | No | |||||
| NH3-N | 23.1 mg/L | 0.389 | 5.32 | No | |||||
| Petroleum | 0.17 mg/L | 0.002 | / | No | |||||
| Fluoride | 0.76 mg/L | 0.146 | / | No | |||||
| BOD5 | 51 mg/L | 0.85 | / | No | |||||
| LAS | 0.082 mg/L | 0.001 | / | No | |||||
| Total zinc | 0.034 mg/L | 0 | / | No | |||||
| Animal and vegetable oil | 0.08 mg/L | 0.002 | / | No | |||||
| Particles | After treatment by environmental protection and treatment facilities and reaching the standard, 25m high altitude discharge | 11 | East, west, south and north corners of the plant | 5.9 mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown | 3.769 | / | No | |
| SO2 | 5 mg/m? | 0.355 | / | No | |||||
| NOX | 12 mg/m? | 0.885 | / | No | |||||
| Tin and its compounds | 0.94 mg/m? | 0.394 | / | No | |||||
| NMHC | 10.6 mg/m? | 2.747 | / | No | |||||
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | pH | Discharge to municipal wastewater treatment plant after being treated by the wastewater treatment system | 1 | General sewage discharge exit of plant areas | 7.3 | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | / | / | No |
| SS | 8.5 mg/L | 0.5786 | / | No | |||||
| COD | 61 mg/L | 4.1522 | / | No | |||||
| Ammonia-nitrogen | 6.31 mg/L | 0.4295 | / | No | |||||
| Petroleum | 2.03 mg/L | 0.1382 | / | No | |||||
| BOD5 | 24.6 mg/L | 1.6745 | / | No | |||||
| LAS | 0.0815 mg/L | 0.0055 | / | No | |||||
| Phosphate | 0.115 mg/L | 0.0078 | / | No | |||||
| Fluoride (by F-) | 2.265 mg/L | 0.1542 | / | No | |||||
| Copper | 0 mg/L | 0 | / | No | |||||
| Particles | High altitude discharge after being treated by waste gas treatment station | 5 | 2 sets for paint waste gas of 1# and 4# plants each | 11.73 mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown | 1.302 | / | No | |
| NMHC | 1.261 mg/m? | 0.135 | / | No | |||||
| Sulfuric acid mist | Lye spray towers (one is out of service, and the other one is used for occasional emergency cleaning of abnormal materials) | 2 | Acid pickling waste gas outlets for 1# and 4# plants | 1.34 mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown | 0.0016 | / | No | |
| Hydrogen chloride | 9.395 mg/m? | 0.006 | / | No | |||||
| Particles | 1 set for direct | 2 | Volatile oil drying waste | 6.25 mg/m? | Integrated Emission | 0.3060 | / | No | |
| Sulfur dioxide | discharge (already out of service) 1 set of RTO | gas outlet | 4.5 mg/m? | Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown Emission Standard of Air Pollutants for Industrial Kiln and Furnace DB 50/659-2016 Table 1/2 | 0.2100 | / | No | ||
| Oxynitride | 13.5 mg/m? | 0.6540 | / | No | |||||
| NMHC | 1.455 mg/m? | 0.0540 | / | No | |||||
| Ringelmann emittance | < 1 | / | / | No | |||||
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | Waste mineral oil, waste oil-containing liquid, waste packaging, waste activated carbon, waste lead battery, waste filter cotton, waste circuit board, etc | Treatment entrusted to third-party qualified enterprise | N/A | N/A | N/A | N/A | 78.48 | 151.523 | No |
Treatment of pollutantsDuring 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.Contingency plans for environmental accidentsAll subsidiaries have finished the compilation and approval of their contingency plans for environmental accidents. Emergency mechanisms forenvironmental pollution accidents have been established and improved, and the subsidiaries’ ability to deal with environmental pollution accidents hasbeen enhanced, so as to maintain social stability, protect the lives, health and properties of the public, protect the environment, and promote a
comprehensive, 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.Spending on environmental management and protection and payment of environmental protection taxAll 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.Environment self-monitoring plansAll the subsidiaries have formulated their own environment self-monitoring plans according to China’s relevant laws and regulations, which include: 1)Waste gas pollution source monitoring: Sampling points are set at various discharge ports of waste gas for monitoring on a quarterly basis. Majordischarge points are equipped with an online pollution discharge monitoring system for stationary pollution sources to produce and upload real-timedata to Midea Environmental Protection Online Monitoring Platform; 2) Waste water pollution source monitoring: Samples are fetched at intake andoutlet ports of waste water treatment stations to monitor changes of pollution source of waste water and up-to-standard emission of waste water afterbeing treated at the waste water treatment stations. Monitoring items include CODcr, SS and petroleum, etc. The data is uploaded to the governmentalmonitoring authority online and the government authority conducts real-time monitoring; 3) Noise monitoring: Noise monitoring points are set at noisesensitive points and on the border of factories. Noise is monitored once in spring and summer respectively and at daytime and at nighttime respectively
each time; 4) Solid waste pollution source monitoring: Hazardous waste produced from the subsidiaries is handed over to the units with qualificationsfor treatment, monitoring systems are established, and related management forms and accounts are set up.Administrative penalties received during the Reporting Period due to environmental issuesNo such cases during the Reporting Period.Other environment-related information that should be made publicNoneMeasures taken to reduce carbon emissions during the Reporting Period and the results? Applicable □ N/Aa. 21 distributed PV projects have been completed across the Company's manufacturing bases by the first half of 2023, with a total designed installedcapacity of 173MW. There are 13 such projects under construction, with a total installed capacity of 101MW. Upon completion of these projects, it isexpected that the annual power generation will be about 290,000,000 kWh, and the annual carbon emission will be reduced by about 232,000 tons ofcarbon dioxide.b. The Company has been comprehensively promoting the construction of a green manufacturing system. As of August, 14 of its factories have beenrecognized as “National-level Green Factory” and three enterprises within the Group have been recognized as “National-level Green Supply Chain”. Allmanufacturing plants kept improving their energy management systems and carried out work related to ISO 50001 (GB23331) certification. As of August,
34 plants have been certified. The certification of the energy management systems has greatly improved the energy management level of these plants.By carrying out energy saving diagnosis, these plants are able to enhance leakage identification and the closed-loop management.c. Greater efforts have been made in the research and development of green technologies, as well as the implementation of the related projects. Energysaving and emission reduction projects are promoted from the dimensions such as compressed air, waste heat recovery, combustion efficiency, powerquality and central air conditioning. The energy saving and emission reduction projects produced an income of over RMB65.34 million.
2. Fulfillment of Corporate Social Responsibility (CSR)
2.1 Exploring new models for rural revitalisation
In this May, Midea Group organised a staff visit to the First Primary School of Guansuo Street, Guanling Buyi and Miao Autonomous County, AnshunCity, Guizhou Province, to carry out public welfare activities under the theme of "Build Dreams together with Midea through Technology". At the event,Midea Group donated funds to assist in the construction of a science laboratory at the school and provided 600 science experiment kits to the localcommunity.In addition, Midea Group continued to implement the East China and West China coordination mechanism. It spent RMB1 million in QiandongnanPrefecture, Guizhou Province as awards for teachers and students, motivating them to bear in mind the original mission of education, and driving high-quality development in the local education.
2.2 Keeping to the plan of “Talent First, Education First”
In this April, Midea Group donated RMB70 million to support the introduction of the Second Affiliated Midea High School of the East China Normal
University into Beijiao, Shunde. As such, Midea has established cooperation with the East China Normal University on high-quality education fromprimary school, middle school, to high school. When the school is put into use, it will provide more than 6,000 places in the primary, middle, and highschools to meet the local demand for quality education resources and make a greater contribution to the local economic and scientific and technologicaldevelopment.
2.3 Subsequent plans
It is Midea Group’s vision to “Bring Great Innovations to Life”. The Company hopes to deliver the power of science and technology through public welfareactivities, keep to the plan of “Talent First, Education First”, adhere to the sustainable long-termism, as well as promote both rural revitalisation andtalent development, so as to play its part in creating more value for society.
Section VI Significant Events
1. Undertakings of the Company’s Actual Controller, Shareholders, Related Partiesand Acquirer, as well as the Company and Other Commitment Makers Fulfilled in theReporting Period or Overdue at the Period-end
□Applicable ?N/A
No such cases in the Reporting Period.
2. Occupation of the Company’s Capital by the Controlling Shareholder or Its RelatedParties for Non-Operating Purposes
□Applicable ?N/A
No such cases in the Reporting Period.
3. Illegal Provision of Guarantees for External Parties
□Applicable ?N/A
No such cases in the Reporting Period.
4. Engagement and Disengagement of CPA Firm
Have the semi-annual financial statements been audited by a CPA firm?
□ Yes ? No
The semi-annual financial statements are unaudited by a CPA firm.
5. Explanation of the Board of Directors and the Supervisory Committee Regardingthe "Non-standard Audit Opinion" for the Reporting Period
□Applicable ?N/A
6. Explanation of the Board of Directors Regarding the "Non-standard Audit Opinion"for Last Year
□Applicable ?N/A
7. Bankruptcy and Reorganization
□Applicable ?N/A
No such cases in the Reporting Period.
8. Litigation
Material litigation and arbitration:
□Applicable ?N/A
No such cases in the Reporting Period.Other legal matters:
□Applicable ?N/A
9. Punishments and Rectifications
□Applicable ?N/A
No such cases in the Reporting Period.
10. Credit Conditions of the Company as well as Its Controlling Shareholder andActual Controller
□Applicable ?N/A
11. Significant Related Transactions
11.1 Continuing related transactions
?Applicable □N/A
| Related transaction party | Relation | Type of the transaction | Contents of the transaction | Pricing principle | Transaction price | Transaction amount (RMB’000) | Proportion in the total amounts of transaction of the same kind | Approved transaction line (RMB’000) | Over approved line | Mode of settlement | Obtainable market price for the transaction of the same kind | Disclosure date | Index to the disclosed information |
| (%) | |||||||||||||
| Orinko Advanced Plastics Co., Ltd. | Controlled by family member of Company’s actual controller | Procurement | Procurement of goods | Market price | - | 658,784 | 0.53% | 1,900,000 | No | Payment after delivery | - | 30 April 2023 | www.cninfo.com.cn |
| Midea Real Estate Holding Limited | Controlled by Company’s actual controller | Sale | Sale of goods | Market price | - | 108,564 | 0.06% | 720,530 | No | Payment after delivery | - | 30 April 2023 | www.cninfo.com.cn |
| Details of any sales return of a large amount | Zero | ||||||||||||
| Give the actual situation in the Reporting Period (if any) where a forecast had been made for the total amounts of continuing related-party transactions by type to occur in the current period | The line for continuing related transactions between the Company and the related parties and their subsidiaries did not exceed the total amount of continuing related transactions estimated by the Company by type. | ||||||||||||
| Reason for any significant difference between the transaction price and the market reference price (if applicable) | N/A | ||||||||||||
11.2 Related transactions regarding purchase or sales of assets or equity interests
□Applicable ?N/A
No such cases in the Reporting Period.
11.3 Related transactions arising from joint investments in external parties
□Applicable ?N/A
No such cases in the Reporting Period.
11.4 Credits and liabilities with related parties
□Applicable ?N/A
No such cases in the Reporting Period.
11.5 Transactions with related finance companies
□Applicable ?N/A
The Company did not make deposits in, receive loans or credit from and was not involved in any otherfinance business with any related finance company or any of its related parties.
11.6 Transactions between finance companies controlled by the Company and related parties
□Applicable ?N/A
No related parties made deposits in, received loans or credit from or was involved in any other financebusiness with any finance company controlled by the Company.
11.7 Other significant related transactions
□Applicable ?N/A
No such cases in the Reporting Period.
12. Significant Contracts and Their Execution
12.1 Trusteeship, contracting and leasing
12.1.1 Trusteeship
□Applicable ?N/A
No such cases in the Reporting Period.
12.1.2 Contracting
□Applicable ?N/A
12.1.3 Leasing
□Applicable ?N/A
12.2 Major guarantees
?Applicable □N/A
Unit: RMB'000
| Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries) | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| No such cases | ||||||||
| Total external guarantee line approved during the Reporting Period (A1) | 0 | Total actual external guarantee amount during the Reporting Period (A2) | 0 | |||||
| Total approved external guarantee line at the end of the Reporting Period (A3) | 0 | Total actual external guarantee balance at the end of the Reporting Period (A4) | 0 | |||||
| Guarantees provided by the Company for its subsidiaries | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Midea Group Finance Co., Ltd. | 2023/4/29 | 2,000,000 | 2023/1/30 | - | Joint liability | One year | No | No |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 12,400,000 | 2023/1/6 | 2,195,880 | Joint liability | One year | No | No |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 2023/4/29 | 2,400,000 | 2023/1/6 | 740 | Joint liability | One year | No | No |
| Foshan Midea Carrier Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 350,000 | 2023/1/6 | - | Joint liability | One year | No | No |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 4,100,000 | - | Joint liability | One year | No | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 600,000 | 2023/1/6 | - | Joint liability | One year | No | No |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 2023/4/29 | 550,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Precision Molding | 2023/4/2 | 50,000 | - | Joint liability | One | No | No | |
| Technology Co., Ltd. | 9 | year | ||||||
| Handan Midea Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 500,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 850,000 | 2023/4/25 | 80 | Joint liability | One year | No | No |
| Midea Group Wuhan Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | 2023/4/29 | 170,000 | 2023/4/21 | 390 | Joint liability | One year | No | No |
| Guangdong Welling Motor Manufacturing Co., Ltd. | 2023/4/29 | 1,070,000 | 2023/1/17 | 125,370 | Joint liability | One year | No | No |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | 2023/4/29 | 130,000 | - | Joint liability | One year | No | No | |
| Huaian Welling Motor Manufacturing Co., Ltd. | 2023/4/29 | 110,000 | - | Joint liability | One year | No | No | |
| Wuhu Welling Motor Sales Co., Ltd. | 2023/4/29 | 1,900,000 | 2023/2/27 | 470,000 | Joint liability | One year | No | No |
| Hainan Welling Motor Sales Co., Ltd. | 2023/4/29 | 500,000 | - | Joint liability | One year | No | No | |
| Anhui Welling Auto Parts Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Anqing Welling Auto Parts Co., Ltd. | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| Guangdong Meizhi Compressor Limited | 2023/4/29 | 1,130,000 | 2023/1/17 | 181,780 | Joint liability | One year | No | No |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | 2023/4/29 | 515,000 | 2023/4/18 | 19,000 | Joint liability | One year | No | No |
| Anhui Meizhi Compressor Co., Ltd. | 2023/4/29 | 420,000 | - | Joint liability | One year | No | No | |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Zhejiang Meizhi Compressor Co., Ltd. | 2023/4/29 | 4,500,000 | 2023/2/23 | 570,000 | Joint liability | One year | No | No |
| Guangdong Midea Environmental Technologies Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Dorna Technology Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Guangdong Jiya Precision Machinery Technology Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No |
| MiSiliconn SemiConductor Technologies Co., Ltd. | 2023/4/29 | 60,000 | - | Joint liability | One year | No | No | |
| Servotronix Motion Technology Development (Shenzhen) Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/4/29 | 6,417,970 | 2023/1/4 | 1,643,380 | Joint liability | One year | No | No |
| Guangdong Witol Vacuum Electronic Manufacture Co., Ltd. | 2023/4/29 | 85,000 | 2023/2/24 | 340 | Joint liability | One year | No | No |
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2023/4/29 | 760,000 | 2023/1/9 | 3420 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/4/29 | 2,000,000 | - | Joint liability | One year | No | No | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 4,370,000 | 2023/1/12 | 131,250 | Joint liability | One year | No | No |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 45,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | 2023/4/29 | 160,000 | 2023/2/20 | 7350 | Joint liability | One year | No | No |
| Meitong Energy Technology (Chongqing) Co., Ltd. | 2023/4/29 | 120,000 | - | Joint liability | One year | No | No | |
| Guangdong MeiKong Intelligent Building Co., Ltd. | 2023/4/29 | 80,000 | - | Joint liability | One year | No | No | |
| Shanghai M-BMS Intelligent Construction Co., Ltd. | 2023/4/29 | 80,000 | - | Joint liability | One year | No | No | |
| Winone Elevator Company Limited | 2023/4/29 | 790,000 | 2023/1/12 | 68,930 | Joint liability | One year | No | No |
| Hubei Midea Building Technology Co., Ltd. | 2023/4/29 | 30,000 | - | Joint liability | One year | No | No | |
| Ningbo Midea United Materials Supply Co. Ltd. | 2023/4/29 | 5,040,000 | 2023/1/10 | 45,750 | Joint liability | One year | No | No |
| Guangzhou Kaizhao Commercial and Trading Co., Ltd | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 2023/4/29 | 200,000 | 2023/1/9 | - | Joint liability | One year | No | No |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2023/4/29 | 1,670,000 | 2023/1/9 | 157,110 | Joint liability | One year | No | No |
| GD Midea Environment Appliances Mfg. Co., Ltd. | 2023/4/29 | 1,400,000 | 2023/1/9 | - | Joint liability | One year | No | No |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2023/4/29 | 2,200,000 | 2023/2/23 | 475,200 | Joint liability | One year | No | No |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | 2023/4/29 | 130,000 | - | Joint liability | One year | No | No | |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 2023/4/29 | 2,500,000 | 2023/1/30 | 104,420 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2023/4/29 | 2,400,000 | 2023/1/13 | 490,770 | Joint liability | One year | No | No |
| Wuhu Midea Smart Kitchen Appliance Manufacturing Co., Ltd. | 2023/4/29 | 66,000 | 2023/2/21 | - | Joint liability | One year | No | No |
| Foshan Shunde Midea Water Dispenser Manufacturing Company Limited | 2023/4/29 | 310,000 | 2023/3/8 | 12,420 | Joint liability | One year | No | No |
| Hubei Midea Laundry Appliance Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Hefei Midea Laundry Appliance Co., Ltd. | 2023/4/29 | 1,930,000 | 2023/1/16 | 288,850 | Joint liability | One year | No | No |
| Wuxi Filin Electronics Co., Ltd. | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| Wuxi Little Swan Electric Co., Ltd. | 2023/4/29 | 4,345,000 | 2023/1/10 | 249,900 | Joint liability | One year | No | No |
| Hefei Midea Refrigerator Co., Ltd. | 2023/4/29 | 3,000,000 | 2023/1/13 | 1,338,660 | Joint liability | One year | No | No |
| Hefei Hualing Co., Ltd. | 2023/4/29 | 700,000 | 2023/1/30 | 320,250 | Joint liability | One year | No | No |
| Hubei Midea Refrigerator Co., Ltd. | 2023/4/29 | 520,000 | - | Joint liability | One year | No | No | |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 2023/4/29 | 700,000 | 2023/3/22 | 247,950 | Joint liability | One year | No | No |
| Little Swan (Jing Zhou) Sanjin Electronic Appliances Limited | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Toshiba Home Appliances Manufacturing (Nanhai) Co., Ltd | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| Midea Group E-Commerce Co., Ltd. | 2023/4/29 | 160,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2023/4/29 | 390,000 | 2023/1/1 | 1960 | Joint liability | One year | No | No |
| Reis Robotics (Kunshan) Co., Ltd. | 2023/4/29 | 200,000 | 2023/1/16 | 30,870 | Joint liability | One year | No | No |
| KUKA Systems (China) CO., Ltd. | 2023/4/29 | 400,000 | 2023/1/5 | 93,810 | Joint liability | One year | No | No |
| KUKA Robotics Manufacturing China Co., Ltd. | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics Guangdong Co., Ltd | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics (Shanghai) Co.,Ltd. | 2023/4/29 | 300,000 | 2023/1/1 | 46,760 | Joint liability | One year | No | No |
| Shanghai Swisslog Healthcare Co., Ltd. | 2023/4/29 | 65,000 | 2023/2/22 | 19,440 | Joint liability | One year | No | No |
| Guangdong Swisslog Technology Co., Ltd. | 2023/4/29 | 40,000 | - | Joint liability | One year | No | No |
| Swisslog (Shanghai) Co., Ltd. | 2023/4/29 | 80,000 | 2023/1/1 | 8790 | Joint liability | One year | No | No |
| Shanghai Swisslog Technology Co., Ltd. | 2023/4/29 | 200,000 | 2023/1/6 | 88,060 | Joint liability | One year | No | No |
| Guangdong Midea Intelligent Robotics Co., Ltd. | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea-SIIX Electronics Co., Ltd. | 2023/4/29 | 100,000 | 2023/1/1 | 60 | Joint liability | One year | No | No |
| Hefei Midea-SIIX Electronics Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Guangdong Meichuangxi Technology Co., Ltd. | 2023/4/29 | 500,000 | - | Joint liability | One year | No | No | |
| Guangdong Meicloud Technology Co., Ltd. | 2023/4/29 | 120,000 | - | Joint liability | One year | No | No | |
| Foshan Meicloud Technology Co., Ltd. | 2023/4/29 | 30,000 | - | Joint liability | One year | No | No | |
| Guangdong Yueyun Industrial Internet Innovative Technology Co., Ltd. | 2023/4/29 | 10,000 | - | Joint liability | One year | No | No | |
| Midea International Corporation Company Limited | 2023/4/29 | 15,705,000 | 2023/1/1 | 10,734,340 | Joint liability | One year | No | No |
| Midea Investment Development Company Limited | 2023/4/29 | 8,100,000 | 2023/1/1 | 3,251,610 | Joint liability | One year | No | No |
| Welling International (Hong Kong) Ltd | 2023/4/29 | 250,000 | - | Joint liability | One year | No | No | |
| Midea International Trading Company Limited | 2023/4/29 | 650,000 | - | Joint liability | One year | No | No | |
| Midea Electric Trading (Singapore) Co.,Pte. Ltd. | 2023/4/29 | 6,375,000 | - | Joint liability | One year | No | No | |
| Toshiba Lifestyle Products & Services Corporation | 2023/4/29 | 1,154,400 | 2023/1/1 | 295,140 | Joint liability | One year | No | No |
| Toshiba Thailand Co., Ltd | 2023/4/29 | 152,400 | - | Joint liability | One year | No | No | |
| Toshiba Vietnam Consumer Products Co., Ltd | 2023/4/29 | 66,190 | 2023/2/23 | - | Joint liability | One year | No | No |
| Toshiba Lifestyle Electronics Trading Co., Ltd | 2023/4/29 | 10,090 | 2023/1/1 | 910 | Joint liability | One year | No | No |
| Toshiba consumer products (THAILAND) Co.,ltd | 2023/4/29 | 243,310 | 2023/1/1 | 300,840 | Joint liability | One year | No | No |
| Thai Toshiba Electric Industries Co., Ltd | 2023/4/29 | 17,760 | 2023/1/1 | 1490 | Joint liability | One year | No | No |
| Control Component Co., Ltd | 2023/4/29 | 14,310 | 2023/1/1 | 120 | Joint liability | One year | No | No |
| Clivet S.p.A. | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No |
| Midea (Egypt) Kitchen & water heater appliances Co., Ltd | 2023/4/29 | 70,000 | - | Joint liability | One year | No | No | |
| Midea Electric Netherlands (I) B.V. | 2023/4/29 | 25,000,000 | 2023/1/1 | 23,631,300 | Joint liability | One year | No | No |
| Total guarantee line for subsidiaries approved during the Reporting Period (B1) | 138,947,430 | Total actual guarantee amount for subsidiaries during the Reporting Period (B2) | 54,109,220 | |||||
| Total approved guarantee line for subsidiaries at the end of the Reporting Period (B3) | 138,947,430 | Total actual guarantee balance for subsidiaries at the end of the Reporting Period (B4) | 47,654,690 | |||||
| Guarantees provided by subsidiaries for their 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 |
| Toshiba Sales & Services Sdn. Bhd. | 2023/4/29 | 202,500 | 2023/1/5 | 4.7 | Joint liability | One year | No | No |
| Toshiba Home Technology Corporation | 2023/4/29 | 7,630 | 2023/1/1 | 24,440 | Joint liability | One year | No | No |
| Midea America Corp. | 2023/4/29 | 400,000 | Joint liability | One year | No | No | ||
| Midea America (Canada) Corp | 2023/4/29 | 67,500 | Joint liability | One year | No | No | ||
| Midea Mexico, S. DE R.L. DE C.V. | 2023/4/29 | 168,750 | Joint liability | One year | No | No | ||
| Midea Consumer Appliances DMCC | 2023/4/29 | 33,750 | Joint liability | One year | No | No | ||
| Orient Household Appliances Ltd.(Orient) | 2023/4/29 | 202,500 | Joint liability | One year | No | No | ||
| Midea Italia S.r.l. | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Midea Europe GmbH | 2023/4/29 | 67,500 | Joint liability | One year | No | No | ||
| Midea Electrics France | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Midea Home Appliances UK Ltd | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Midea Electrics Egypt | 2023/4/29 | 175,500 | Joint liability | One year | No | No | ||
| Midea Electric Espana S.R.L. | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Concepcion Midea Inc. | 2023/4/29 | 50,000 | Joint liability | One year | No | No | ||
| Midea Scott & English Electronics Sdn. Bhd | 2023/4/29 | 120,000 | Joint liability | One year | No | No | ||
| Pt. Midea Planet Indonesia | 2023/4/29 | 102,900 | Joint liability | One year | No | No | ||
| Midea (Japan) Co., Ltd. | 2023/4/29 | 20,250 | Joint liability | One year | No | No | ||
| MC Innovation Center Co., Ltd. | 2023/4/29 | 20,250 | Joint liability | One year | No | No | ||
| Midea Electronics Australia Co Pty Ltd | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Meco Innovations Technology, LLC | 2023/4/29 | 6,700 | Joint liability | One year | No | No | ||
| Midea India Private Limited | 2023/4/29 | 33,750 | Joint liability | One year | No | No | ||
| GMCC and Welling Appliance Component (Thailand) Co., Ltd. | 2023/4/29 | 40,000 | Joint liability | One year | No | No | ||
| Wuhu Midea Annto Logistics Co., Ltd. | 2023/4/29 | 800,000 | 2023/1/5 | 12,740 | Joint liability | One year | No | No |
| Ningbo Annto Logistics Co., Ltd. | 2023/4/29 | 300,000 | - | Joint liability | One year | No | No | |
| Hainan Annto Logistics Supply Chain Management Co., Ltd. | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| Total line for guarantees provided by subsidiaries for their subsidiaries approved during the Reporting Period (C1) | 3,086,980 | Total actual guarantee amount provided by subsidiaries for their subsidiaries during the Reporting Period (C2) | 37,190 | |||||
| Total approved line for guarantees provided by subsidiaries for their subsidiaries at the end of the Reporting Period (C3) | 3,086,980 | Total actual guarantee balance provided by subsidiaries for their subsidiaries at the end of the Reporting Period (C4) | 37,190 | |||||
| Guarantees provided with the Company’s asset pool | ||||||||
| 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 |
| GD Midea Group Wuhu Air-Conditioning Equipment Co.,Ltd. | 2023/4/29 | 2,016,000 | - | Joint liability | One year | No | No | |
| GD Midea Air-Conditioning Equipment Co.,Ltd. | 2023/4/29 | 2,688,000 | 2023/2/15 | 1,827,530 | Joint liability | One year | No | No |
| Midea Group Wuhan Refrigeration Equipment Co.,Ltd. | 2023/4/29 | 672,000 | - | Joint liability | One year | No | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd | 2023/4/29 | 672,000 | - | Joint liability | One year | No | No | |
| Anhui Welling Auto Parts Co., Ltd. | 2023/4/29 | 30,240 | - | Joint liability | One year | No | No | |
| Anqing Welling Auto Parts Co., Ltd. | 2023/4/29 | 30,240 | - | Joint liability | One year | No | No | |
| Dorna Technology Co., Ltd. | 2023/4/29 | 30,240 | - | Joint liability | One year | No | No | |
| Servotronix Motion Technology Development (Shenzhen) Ltd. | 2023/4/29 | 30,240 | - | Joint liability | One year | No | No | |
| Guangdong Jiya Precision Machinery Technology Co., Ltd. | 2023/4/29 | 75,600 | - | Joint liability | One year | No | No | |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 2023/4/29 | 0 | - | Joint liability | One year | No | No | |
| MiSiliconn SemiConductor Technologies Co., Ltd. | 2023/4/29 | 30,240 | - | Joint liability | One year | No | No | |
| Wuhu Welling Motor Sales Co., Ltd. | 2023/4/29 | 756,020 | 2023/5/23 | 217,740 | Joint liability | One year | No | No |
| Zhejiang Meizhi Compressor Co., Ltd. | 2023/4/29 | 1,028,180 | 2023/4/27 | 357,750 | Joint liability | One year | No | No |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/4/29 | 1,361,000 | 2023/4/12 | 680,820 | Joint liability | One year | No | No |
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2023/4/29 | 454,000 | 2023/4/25 | 183,160 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/4/29 | 454,000 | - | Joint liability | One year | No | No | |
| Hefei Midea Laundry Appliance Co., Ltd. | 2023/4/29 | 1,361,000 | - | Joint liability | One year | No | No | |
| Wuxi Little Swan Electric Co., Ltd. | 2023/4/29 | 1,361,000 | 2023/5/15 | 350,000 | Joint liability | One year | No | No |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 2023/4/29 | 91,000 | - | Joint liability | One year | No | No | |
| Hefei Midea Refrigerator Co., Ltd. | 2023/4/29 | 1,815,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Robotics Co., Ltd. | 2023/4/29 | 30,000 | - | Joint liability | One year | No | No | |
| Reis Robotics (Kunshan) Co., Ltd. | 2023/4/29 | 30,000 | - | Joint liability | One year | No | No |
| KUKA Robotics Guangdong Co., Ltd | 2023/4/29 | 10,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics Manufacturing China Co.,Ltd | 2023/4/29 | 0 | - | Joint liability | One year | No | No | |
| KUKA Systems (China) CO., Ltd. | 2023/4/29 | 10,000 | - | Joint liability | One year | No | No | |
| Shanghai Swisslog Healthcare Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Ningbo Midea United Materials Supply Co. Ltd. | 2023/4/29 | 520,000 | 2023/6/29 | 74,940 | Joint liability | One year | No | No |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 2023/4/29 | 665,000 | 2023/4/26 | 235,130 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2023/4/29 | 907,000 | - | Joint liability | One year | No | No | |
| Midea Group E-Commerce Co., Ltd. | 2023/4/29 | 53,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2023/4/29 | 268,000 | - | Joint liability | One year | No | No | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 368,000 | - | Joint liability | One year | No | No | |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 73,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | 2023/4/29 | 49,000 | - | Joint liability | One year | No | No | |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2023/4/29 | 302,000 | - | Joint liability | One year | No | No | |
| Guangdong Meichuangxi Technology Co., Ltd. | 2023/4/29 | 15,000 | - | Joint liability | One year | No | No | |
| GD Midea Environment Appliances Mfg. Co.,Ltd. | 2023/4/29 | 363,000 | 2023/4/27 | 226,560 | Joint liability | One year | No | No |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2023/4/29 | 1,361,000 | - | Joint liability | One year | No | No | |
| Hainan Annto Logistics Supply Chain Management Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Ningbo Annto Logistics Co., Ltd. | 2023/4/29 | 100,000 | 2023/2/2 | 1270 | Joint liability | One year | No | No |
| Shenyang Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Guiyang Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Wuhan Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Nanjing Meian Logistics Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No |
| Shanghai Annto Logistics Supply Chain Technology Co., Ltd. | 2023/4/29 | 20,000 | 2023/4/25 | 90 | Joint liability | One year | No | No |
| Jingzhou Meian Warehousing and Transportation Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Qihe Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Hefei Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Tianjin Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Xuzhou Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Zhengzhou Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Chongqing Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Wuhu Midea Annto Logistics Co., Ltd. | 2023/4/29 | 160,000 | 2023/1/13 | 8,120 | Joint liability | One year | No | No |
| Total line for guarantees provided with the Company’s asset pool approved during the Reporting Period (D1) | 20,650,000 | Total actual guarantee amount provided with the Company’s asset pool during the Reporting Period (D2) | 4,163,110 | |||||
| Total approved line for guarantees provided with the Company’s asset pool at the end of the Reporting Period (D3) | 20,650,000 | Total actual guarantee balance provided with the Company’s asset pool at the end of the Reporting Period (D4) | 4,163,110 | |||||
| Total guarantee amount (total of the above-mentioned four kinds of guarantees) | ||||||||
| Total guarantee line approved during the Reporting Period (A1+B1+C1+D1) | 162,684,410 | Total actual guarantee amount during the Reporting Period (A2+B2+C2+D2) | 58,309,520 | |||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3+D3) | 162,684,410 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4+D4) | 51,854,990 | |||||
| Proportion of the total actual guarantee amount (A4+B4+C4+D4) in net assets of the Company | 35.43% | |||||||
| 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) | 47,100,910 | |||||||
| 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) | 47,100,910 |
| Joint responsibilities possibly borne for undue guarantees (if any) | N/A |
| Provision of external guarantees in breach of the prescribed procedures (if any) | N/A |
12.3 Entrusted asset management
□ Applicable ? N/A
No such cases in the Reporting Period.
12.4 Other significant contracts
□ Applicable ? N/A
No such cases in the Reporting Period.
13. Other Significant Events
□ Applicable ? N/A
14. Significant Events of Subsidiaries
? Applicable □ N/AThe designated placement of 252,467,541 shares offered to the Company by its subsidiary, CLOUElectronics, were listed on the main board of the Shenzhen Stock Exchange on 2 June 2023. Upon thesaid ownership change, the Company becomes the controlling shareholder of CLOU Electronics andholds a total of 378,514,789 shares (or 22.79%) in it.
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 | 143,615,016 | 2.05 | -5,029,313 | -5,029,313 | 138,585,703 | 1.97 | |
| 1.1 Shares held by the state | |||||||
| 1.2 Shares held by state-owned corporations | |||||||
| 1.3 Shares held by other domestic investors | 141,131,474 | 2.02 | -4,812,063 | -4,812,063 | 136,319,411 | 1.94 | |
| Among which: Shares held by domestic corporations | 2,363,601 | 0.03 | 2,363,601 | 0.03 | |||
| Shares held by domestic individuals | 138,767,873 | 1.98 | -4,812,063 | -4,812,063 | 133,955,810 | 1.91 | |
| 1.4 Shares held by foreign investors | 2,483,542 | 0.04 | -217,250 | -217,250 | 2,266,292 | 0.03 | |
| Among which: Shares held by foreign corporations | |||||||
| Shares held by foreign individuals | 2,483,542 | 0.04 | -217,250 | -217,250 | 2,266,292 | 0.03 | |
| 2. Non-restricted shares | 6,853,658,060 | 97.95 | 27,406,132 | 2,531,396 | 29,937,528 | 6,883,595,588 | 98.03 |
| 2.1 RMB common shares | 6,853,658,060 | 97.95 | 27,406,132 | 2,531,396 | 29,937,528 | 6,883,595,588 | 98.03 |
| 2.2 Domestically listed foreign shares | |||||||
| 2.3 Overseas listed foreign shares | |||||||
| 2.4 Other | |||||||
| 3. Total shares | 6,997,273,076 | 100.00 | 27,406,132 | -2,497,917 | 24,908,215 | 7,022,181,291 | 100.00 |
Reasons for the changes in shares?Applicable □N/Aa. For the reasons of certain awardees’ resignation, violation of the Company’s “Red Lines”, beingreassigned or other factors, on 18 April 2023, the Company repurchased and retired 218,958 shares of14 awardees under the 2018 Restricted Share Incentive Scheme, 431,250 shares of 14 awardees underthe 2019 Restricted Share Incentive Scheme, 753,209 shares of 25 awardees under the 2020 RestrictedShare Incentive Scheme, 824,500 shares of 18 awardees under the 2021 Restricted Share IncentiveScheme, and 270,000 shares of 10 awardees under the 2022 Restricted Share Incentive Scheme,totaling 2,497,917 restricted shares.b. The 2,566,396 restricted shares of a total of 172 eligible awardees for the fourth unlocking period ofthe first grant under the 2018 Restricted Share Incentive Scheme were unlocked on 3 July 2023, including144,750 restricted shares of foreign employees.c. In the Reporting Period, the awardees of stock options chose to exercise 27,406,132 shares, whichhave been registered into the Company’s share capital.d. In the Reporting Period, locked-up shares held by senior management increased by 35,000 shares.Approval of share changes
□Applicable ?N/A
Transfer of share ownership
□Applicable ?N/A
Progress of any share repurchase?Applicable □N/AAs of 10 March 2023, the Company cumulatively repurchased 48,558,888 shares (0.6927% of the
Company’s total share capital). With the highest trading price being RMB60.05/share and the lowestbeing RMB48.08/share, the total payment amounted to RMB2,636,704,772.26 (exclusive of transactioncosts). As such, the implementation of this share repurchase plan has been completed.Progress of any repurchased share reduction through centralized price bidding
□Applicable ?N/A
Effects of changes in shares on basic EPS, diluted EPS, net assets per share attributable to commonshareholders of the Company and other financial indexes over the last year and the last Reporting Period
□Applicable ?N/A
Other contents that the Company considers necessary or is required by the securities regulatoryauthorities to disclose
□Applicable ?√N/A
1.2 Changes in restricted shares
?Applicable □N/A
Unit: share
| Name of shareholder | Opening restricted shares | Unlocked in current period | Increased in current period | Repurchased and retired | Closing restricted shares | Reason for change | Date of unlocking |
| Awardees of the first grant of 2018 Restricted Share Incentive Scheme | 2,947,667 | 2,566,396 | 0 | 148,125 | 233,146 | Locked up according to the Scheme | 3 July 2023 |
| Zhong Zheng | 187,114 | 0 | 20,000 | 0 | 207,114 | Locked up for senior management | - |
| Zhao Wenxin | 60,000 | 20,000 | 0 | 0 | 40,000 | Locked up for senior management | - |
| Zhang Xiaoyi | 211,431 | 0 | 25,000 | 0 | 236,431 | Locked up for senior management | - |
| Wang Jinliang | 35,000 | 20,000 | 0 | 0 | 15,000 | Locked up for senior management | - |
| Jiang Peng | 139,675 | 20,000 | 0 | 0 | 119,675 | Locked up for senior management | - |
| Guan Jinwei | 234,000 | 0 | 25,000 | 0 | 259,000 | Locked up for senior management | - |
| Hu Ziqiang | 275,000 | 0 | 25,000 | 0 | 300,000 | Locked up for senior management | - |
| Total | 4,089,887 | 2,626,396 | 95,000 | 148,125 | 1,410,366 | -- | -- |
2. Issuance and Listing of Securities
□Applicable ?√N/A
3. Total Number of Shareholders and Their Shareholdings
Unit: share
| Total number of common shareholders at the period-end | 339,281 | Total number of preference shareholders with resumed voting rights at the period-end (if any) | 0 | |||||||
| 5% or greater common shareholders or top 10 common shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Total common shares held at the period-end | Increase/decrease during the Reporting Period | Number of restricted common shares held | Number of non-restricted common shares held | Shares in pledge or frozen | |||
| Status | Shares | |||||||||
| Midea Holding Co., Ltd. | Domestic non-state-owned corporation | 30.89% | 2,169,178,713 | - | 0 | 2,169,178,713 | In pledge | 100,000,000 | ||
| Hong Kong Securities Clearing Company Limited | Foreign corporation | 19.72% | 1,384,550,034 | -48,164,542 | 0 | 1,384,550,034 | ||||
| China Securities Finance Co., Ltd. | Domestic non-state- | 2.82% | 198,145,134 | - | 0 | 198,145,134 | ||||
| owned corporation | ||||||||||
| Fang Hongbo | Domestic individual | 1.67% | 116,990,492 | - | 87,742,869 | 29,247,623 | ||||
| Central Huijin Asset Management Ltd. | State-owned corporation | 1.26% | 88,260,460 | - | 0 | 88,260,460 | ||||
| Huang Jian | Domestic individual | 1.23% | 86,170,000 | 30,000 | 0 | 86,170,000 | ||||
| Canada Pension Plan Investment Board－ own funds (stock exchange) | Foreign corporation | 0.84% | 58,703,400 | -3,210,503 | 0 | 58,703,400 | ||||
| UBS AG | Foreign corporation | 0.78% | 54,464,241 | 34,297,436 | 0 | 54,464,241 | ||||
| Li Jianwei | Foreign individual | 0.66% | 46,154,545 | -110,000 | 0 | 46,154,545 | ||||
| Huang Xiaoxiang | Domestic individual | 0.54% | 37,835,332 | 0 | 0 | 37,835,332 | In pledge | 20,147,914 | ||
| Strategic investors or general corporations becoming top-ten common shareholders due to placing of new shares | 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 | 146,638,028 shares (or 2.09% 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 | 1,384,550,034 | RMB common stock | 1,384,550,034 |
| China Securities Finance Co., Ltd. | 198,145,134 | RMB common stock | 198,145,134 |
| Central Huijin Asset Management Ltd. | 88,260,460 | RMB common stock | 88,260,460 |
| Huang Jian | 86,170,000 | RMB common stock | 86,170,000 |
| Canada Pension Plan Investment Board－own funds (stock exchange) | 58,703,400 | RMB common stock | 58,703,400 |
| UBS AG | 54,464,241 | RMB common stock | 54,464,241 |
| Li Jianwei | 46,154,545 | RMB common stock | 46,154,545 |
| Huang Xiaoxiang | 37,835,332 | RMB common stock | 37,835,332 |
| Merrill Lynch International | 36,806,075 | RMB common stock | 36,806,075 |
| Related-parties or acting-in-concert parties among the top ten non-restricted common shareholders and between the top ten non-restricted common shareholders and the top ten common shareholders | N/A | ||
| Explanation on the top 10 common shareholders participating in securities margin trading (if any) (see Note 4) | The Company’s shareholder Huang Xiaoxiang holds 28,635,332 shares in the Company through his common securities account and 9,200,000 shares in the Company through his account of collateral securities for margin trading, representing a total holding of 37,835,332 shares in the Company. | ||
Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of theCompany conduct any promissory repurchase during the Reporting Period
□Yes ?No
4. Changes in Shareholdings of Directors, Supervisors and Senior Management
□Applicable ?√N/A
No changes occurred to the shareholdings of the Company’s directors, supervisors and seniormanagement during the Reporting Period. For further information, see the 2022 Annual Report.
5. Change of Controlling Shareholder or Actual Controller in the Reporting PeriodChange of the controlling shareholder during the Reporting Period
□Applicable ?√N/A
No such cases in the Reporting Period.Change of the actual controller during the Reporting Period
□Applicable ?√N/A
No such cases in the Reporting Period.
Section VIII Preference Shares
□ Applicable ? N/A
No such cases in the Reporting Period.
Section IX Bonds
1. Enterprise Bonds
□ Applicable ? N/A
No such cases in the Reporting Period.
2. Corporate Bonds
? Applicable □ N/A
2.1 General information on corporate bonds
| Bond name | Abbr. | Bond code | Date of issuance | Value date | Maturity | Outstanding balance | Interest rate | Way of principal repayment and interest payment | Place of trading |
| Midea Investment Development Company Limited 2.88% Secured Notes 2027 | MIDEAZ 2.88% 02/24/2027 | ISIN XS2432130453 | 2022-02-16 | 2022-02-24 | 2027-02-24 | USD450 million | 2.88% | Interest payable on a half-year basis, with the principal repayable in full upon maturity | The Stock Exchange of Hong Kong |
| Investor eligibility arrangements (if any) | N/A | ||||||||
| Trading system applicable | N/A | ||||||||
| Risk of termination of listing and trading (if any) and countermeasures | No such risk | ||||||||
Overdue bonds
□ Applicable ? N/A
2.2 Triggering and execution of issuer or investor option clauses and investor protection clauses
□ Applicable ? N/A
2.3 Changes in credit ratings in the Reporting Period
□ Applicable ? N/A
2.4 Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the Reporting Period, as well as the impact on the interests of bond holders
□ Applicable ? N/A
3. Debt Instruments as a Non-financial Enterprise
□ Applicable ? N/A
No such cases in the Reporting Period.
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 2023 | 31 December 2022 | Change |
| Current ratio | 111.46% | 126.54% | -15.08% |
| Debt/asset ratio | 65.80% | 64.05% | 1.76% |
| Quick ratio | 95.00% | 98.38% | -3.38% |
| H1 2023 | H1 2022 | Change | |
| Net profit before non-recurring gains and losses | 17,941,154 | 15,792,300 | 13.61% |
| EBITDA/debt ratio | 28.21% | 23.02% | 5.20% |
| Interest cover (times) | 15.49 | 22.70 | -31.76% |
| Cash-to-interest cover (times) | 38.01 | 31.11 | 22.20% |
| EBITDA-to-interest cover (times) | 17.65 | 26.45 | -33.25% |
| Loan repayment ratio (%) | 100% | 100% | 0% |
| Interest payment ratio (%) | 100% | 100% | 0% |
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.- 1 -
- 1 -
CONSOLIDATED AND COMPANY BALANCE SHEETSAS AT 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| ASSETS | Note | 30 June 2023 | 31 December 2022 | 30 June 2023 | 31 December 2022 |
| Consolidated | Consolidated | Company | Company | ||
| Current assets: | |||||
| Cash at bank and on hand | 4(1) | 71,734,919 | 55,270,099 | 29,731,163 | 28,492,401 |
| Financial assets held for trading | 4(2) | 8,194,001 | 3,284,593 | 414,681 | 274,120 |
| Derivative financial assets | 512,686 | 665,484 | - | - | |
| Notes receivable | 4(3) | 6,914,310 | 4,758,129 | - | - |
| Accounts receivable | 4(4) | 36,454,972 | 28,237,973 | - | - |
| Receivables financing | 4(6) | 15,466,934 | 13,526,540 | - | - |
| Advances to suppliers | 4(7) | 4,471,677 | 4,367,211 | 28,348 | 34,724 |
| Contract assets | 4(8) | 4,703,917 | 4,498,956 | - | - |
| Loans and advances | 4(9) | 16,752,838 | 14,138,756 | - | - |
| Other receivables | 4(5), 17(1) | 1,862,865 | 2,211,177 | 24,272,900 | 26,175,101 |
| Inventories | 4(10) | 33,693,045 | 46,044,897 | - | - |
| Current portion of non-current assets | 4(11) | 36,895,538 | 37,553,078 | 31,984,594 | 33,168,421 |
| Other current assets | 4(12) | 42,644,014 | 46,542,378 | 31,580,726 | 33,476,601 |
| Total current assets | 280,301,716 | 261,099,271 | 118,012,412 | 121,621,368 | |
| Non-current assets: | |||||
| Other debt investments | 4(13) | 6,212,062 | 11,094,259 | 3,278,230 | 7,215,301 |
| Long-term receivables | 4(14) | 621,598 | 614,598 | - | - |
| Loans and advances | 4(9) | 1,393,851 | 693,294 | - | - |
| Long-term equity investments | 4(15), 17(2) | 4,731,210 | 5,188,817 | 74,427,719 | 73,103,569 |
| Investments in other equity instruments | 41,292 | 41,359 | - | - | |
| Other non-current financial assets | 4(16) | 9,197,875 | 10,625,244 | 300,325 | 347,698 |
| Investment properties | 1,366,242 | 809,936 | 365,853 | 386,435 | |
| Fixed assets | 4(17) | 28,336,765 | 26,082,992 | 1,406,330 | 1,223,553 |
| Construction in progress | 4(18) | 5,414,509 | 3,843,777 | 538,168 | 504,757 |
| Right-of-use assets | 4(19) | 2,687,642 | 2,339,878 | 4,207 | 8,040 |
| Intangible assets | 4(20) | 18,953,786 | 16,908,915 | 645,400 | 653,320 |
| Goodwill | 4(21) | 30,925,071 | 28,548,653 | - | - |
| Long-term prepaid expenses | 4(22) | 1,613,099 | 1,579,899 | 78,183 | 85,109 |
| Deferred tax assets | 4(23) | 12,439,908 | 10,244,296 | 270,370 | 327,251 |
| Other non-current assets | 4(24) | 58,503,009 | 42,840,079 | 49,649,040 | 35,423,939 |
| Total non-current assets | 182,437,919 | 161,455,996 | 130,963,825 | 119,278,972 | |
| TOTAL ASSETS | 462,739,635 | 422,555,267 | 248,976,237 | 240,900,340 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.- 2 -
- 2 -
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)AS AT 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| LIABILITIES AND SHAREHOLDERS’ EQUITY | Note | 30 June 2023 | 31 December 2022 | 30 June 2023 | 31 December 2022 |
| Consolidated | Consolidated | Company | Company | ||
| Current liabilities： | |||||
| Short-term borrowings | 4(27) | 19,289,107 | 5,169,480 | 400,000 | - |
| Customer deposits and deposits from banks and other financial institutions | 47,551 | 77,469 | - | - | |
| Financial liabilities held for trading | 1,434,319 | 1,580,771 | - | - | |
| Derivative financial liabilities | 584,017 | 234,606 | - | - | |
| Notes payable | 4(28) | 14,236,566 | 25,572,421 | - | - |
| Accounts payable | 4(29) | 71,684,891 | 64,233,225 | - | - |
| Contract liabilities | 4(30) | 29,636,542 | 27,960,038 | - | - |
| Employee benefits payable | 4(31) | 6,160,366 | 7,152,217 | 83,773 | 173,824 |
| Taxes payable | 4(32) | 6,343,751 | 4,955,335 | 566,374 | 718,181 |
| Other payables | 4(33) | 4,941,956 | 4,322,025 | 181,629,265 | 159,953,351 |
| Current portion of non-current liabilities | 4(34) | 21,798,602 | 7,240,626 | 12,424,968 | 5,896,701 |
| Other current liabilities | 4(35) | 75,314,120 | 57,843,528 | 57,946 | 77,066 |
| Total current liabilities | 251,471,788 | 206,341,741 | 195,162,326 | 166,819,123 | |
| Non-current liabilities: | |||||
| Long-term borrowings | 4(36) | 39,030,039 | 50,685,948 | 9,000,000 | 15,619,900 |
| Debentures payable | 4(37) | 3,281,840 | 3,163,616 | - | - |
| Lease liabilities | 4(38) | 1,767,894 | 1,507,480 | - | 2,350 |
| Provisions | 650,873 | 394,977 | - | - | |
| Deferred income | 4(39) | 1,772,248 | 1,721,092 | 190,941 | 152,548 |
| Long-term employee benefits payable | 4(40) | 1,410,678 | 1,488,456 | - | - |
| Deferred tax liabilities | 4(23) | 5,081,727 | 4,647,673 | - | - |
| Other non-current liabilities | 30,033 | 680,482 | - | - | |
| Total non-current liabilities | 53,025,332 | 64,289,724 | 9,190,941 | 15,774,798 | |
| Total liabilities | 304,497,120 | 270,631,465 | 204,353,267 | 182,593,921 | |
| Shareholders' equity: | |||||
| Share capital | 4(41) | 7,022,181 | 6,997,273 | 7,022,181 | 6,997,273 |
| Capital surplus | 4(43) | 20,918,536 | 19,693,139 | 29,136,349 | 27,826,208 |
| Less: Treasury stock | 4(42) | (13,819,040) | (14,933,944) | (13,819,040) | (14,933,944) |
| Other comprehensive income | 4(44) | 125,391 | 108,289 | 11,701 | (5,679) |
| General risk reserve | 677,971 | 671,999 | - | - | |
| Special reserve | 16,721 | 16,350 | - | - | |
| Surplus reserve | 4(45) | 10,702,928 | 10,702,928 | 10,702,928 | 10,702,928 |
| Undistributed profits | 4(46) | 120,723,905 | 119,679,202 | 11,568,851 | 27,719,633 |
| Total equity attributable to shareholders of the Company | 146,368,593 | 142,935,236 | 44,622,970 | 58,306,419 | |
| Minority interests | 11,873,922 | 8,988,566 | - | - | |
| Total shareholders' equity | 158,242,515 | 151,923,802 | 44,622,970 | 58,306,419 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 462,739,635 | 422,555,267 | 248,976,237 | 240,900,340 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.- 3 -
- 3 -
CONSOLIDATED AND COMPANY INCOME STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | For the six months ended 30 June 2023 | For the six months ended 30 June 2022 | For the six months ended 30 June 2023 | For the six months ended 30 June 2022 |
| Consolidated | Consolidated | Company | Company | ||
| Total revenue | 197,795,614 | 183,663,399 | 552,756 | 824,660 | |
| Including: Operating revenue | 4(47), 17(3) | 196,988,402 | 182,661,009 | 552,756 | 824,660 |
| Interest income | 4(48) | 806,891 | 1,001,960 | - | - |
| Fee and commission income | 321 | 430 | - | - | |
| Total operating cost | (176,388,077) | (165,037,325) | 411,775 | 206,836 | |
| Including: Cost of sales | 4(47) | (147,276,358) | (140,424,168) | (20,582) | (20,820) |
| Interest costs | 4(48) | (19,681) | (33,643) | - | - |
| Fee and commission expenses | (753) | (1,518) | - | - | |
| Taxes and surcharges | 4(49) | (1,040,376) | (798,939) | (11,951) | (10,053) |
| Selling and distribution expenses | 4(50) | (17,133,216) | (14,698,373) | - | - |
| General and administrative expenses | 4(51) | (5,670,400) | (4,951,069) | (579,154) | (785,386) |
| Research and development expenses | 4(52) | (6,610,954) | (5,865,033) | - | - |
| Finance income | 4(53) | 1,363,661 | 1,735,418 | 1,023,462 | 1,023,095 |
| Including: Interest expenses | (1,525,683) | (867,954) | (1,445,938) | (1,264,787) | |
| Interest income | 3,280,782 | 2,764,267 | 2,471,387 | 2,294,576 | |
| Add: Other income | 4(59) | 772,764 | 644,525 | 23,448 | 18,782 |
| Investment income | 4(57), 17(4) | 410,154 | 607,847 | 189,439 | 272,392 |
| Including: Investment income from associates and joint ventures | 348,545 | 263,014 | 124,458 | 126,297 | |
| Gains/(Losses) on changes in fair value | 4(56) | (103,703) | (749,742) | 126,469 | (80,116) |
| Asset impairment losses | 4(54) | (189,060) | (230,679) | - | - |
| Credit impairment losses | 4(55) | (221,424) | (192,891) | 551 | (567) |
| Losses on disposal of assets | 4(58) | 8,525 | 18,962 | (65) | (280) |
| Operating profit | 22,084,793 | 18,724,096 | 1,304,373 | 1,241,707 | |
| Add: Non-operating income | 124,256 | 162,480 | 1,715 | 27,359 | |
| Less: Non-operating expenses | (101,742) | (53,628) | (333) | (247) | |
| Total profit | 22,107,307 | 18,832,948 | 1,305,755 | 1,268,819 | |
| Less: Income tax expenses | 4(60) | (3,578,491) | (2,710,551) | (274,921) | (364,840) |
| Net profit | 18,528,816 | 16,122,397 | 1,030,834 | 903,979 | |
| (1) Classified by continuity of operations | |||||
| Net profit from continuing operations | 18,528,816 | 16,122,397 | 1,030,834 | 903,979 | |
| Net profit from discontinued operations | - | - | - | - | |
| (2) Classified by ownership of the equity | |||||
| Attributable to shareholders of the Company | 18,232,291 | 15,995,496 | 1,030,834 | 903,979 | |
| Minority interests | 296,525 | 126,901 | - | - | |
| Other comprehensive income, net of tax | 36,373 | 406,142 | 17,380 | 1,021 | |
| Other comprehensive income attributable to equity owners of the Company, net of tax | 17,102 | 470,720 | 17,380 | 1,021 | |
| (1) Other comprehensive income items which will not be reclassified subsequently to profit or loss | (21,788) | 185,263 | - | - | |
| 1) Changes arising from remeasurement of defined benefit plan | (21,788) | 183,574 | - | - | |
| 2) Changes in fair value of investments in other equity instruments | - | 1,689 | - | - | |
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | 38,890 | 285,457 | 17,380 | 1,021 | |
| 1) Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | 35,908 | 47 | 17,380 | 1,021 | |
| 2) Cash flow hedging reserve | (124,535) | (613,659) | - | - | |
| 3) Differences on translation of foreign currency financial statements | 153,161 | 899,069 | - | - | |
| 4) Others | (25,644) | ||||
| Other comprehensive income attributable to minority shareholders, net of tax | 19,271 | (64,578) | - | - | |
| Total comprehensive income | 18,565,189 | 16,528,539 | 1,048,214 | 905,000 | |
| Attributable to equity owners of the Company | 18,249,393 | 16,466,216 | 1,048,214 | 905,000 | |
| Attributable to minority interests | 315,796 | 62,323 | - | - | |
| Earnings per share | |||||
| (1) Basic earnings per share | 4(61) | 2.67 | 2.34 | Not applicable | Not applicable |
| (2) Diluted earnings per share | 4(61) | 2.66 | 2.34 | 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.- 4 -
- 4 -
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | For the six months ended 30 June 2023 | For the six months ended 30 June 2022 | For the six months ended 30 June 2023 | For the six months ended 30 June 2022 |
| Consolidated | Consolidated | Company | Company | ||
| 1. Cash flows from operating activities | |||||
| Cash received from sales of goods or rendering of services | 174,235,446 | 153,366,180 | - | - | |
| Net increase in customer deposits and deposits from banks and other financial institutions | - | 20,646 | - | - | |
| Net decrease in loans and advances | - | 4,692,117 | - | - | |
| Net decrease in deposits with the Central Bank, banks and other financial institutions | - | 7,470 | - | - | |
| Net increase in borrowings from the Central Bank | - | 70,261 | - | - | |
| Cash received from interest, fee and commission | 816,416 | 1,000,789 | - | - | |
| Refund of taxes and surcharges | 4,053,564 | 5,236,807 | - | - | |
| Cash received relating to other operating activities | 4(62)(a) | 3,291,850 | 3,354,892 | 24,634,108 | 30,323,333 |
| Sub-total of cash inflows | 182,397,276 | 167,749,162 | 24,634,108 | 30,323,333 | |
| Cash paid for goods and services | (100,290,626) | (104,212,384) | - | - | |
| Net increase in loans and advances | (3,312,680) | - | - | - | |
| Net decrease in customer deposits and deposits from banks and other financial institutions | (29,918) | - | - | - | |
| Net increase in deposits with the Central Bank | (251,030) | - | - | - | |
| Cash paid for interest, fee and commission | (20,434) | (35,840) | - | - | |
| Cash paid to and on behalf of employees | (20,253,369) | (18,431,348) | (271,129) | (241,178) | |
| Payments of taxes and surcharges | (9,975,407) | (8,683,607) | (333,143) | (352,102) | |
| Cash paid relating to other operating activities | 4(62)(b) | (18,479,138) | (14,991,273) | (1,193,353) | (1,107,662) |
| Sub-total of cash outflows | (152,612,602) | (146,354,452) | (1,797,625) | (1,700,942) | |
| Net cash flows from operating activities | 4(62)(c) | 29,784,674 | 21,394,710 | 22,836,483 | 28,622,391 |
| 2. Cash flows from investing activities： | |||||
| Cash received from disposal of investments | 56,866,188 | 50,554,179 | 44,664,000 | 33,400,000 | |
| Cash received from returns on investments | 3,426,440 | 3,023,041 | 2,811,327 | 1,889,667 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 113,016 | 64,531 | - | 23 | |
| Net cash received from disposal of subsidiaries and other business units | 3,000 | 14,829 | - | 6,500 | |
| Cash received relating to other investing activities | 373,816 | 335,082 | - | - | |
| Sub-total of cash inflows | 60,782,460 | 53,991,662 | 47,475,327 | 35,296,190 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | (2,794,669) | (2,868,894) | (340,029) | (283,430) | |
| Cash paid to acquire investments | (84,960,686) | (57,309,340) | (53,052,212) | (41,670,159) | |
| Net cash paid to acquire subsidiaries and other business units | - | (376,280) | - | - | |
| Cash paid relating to other investing activities | (73,793) | - | - | - | |
| Sub-total of cash outflows | (87,829,148) | (60,554,514) | (53,392,241) | (41,953,589) | |
| Net cash flows from investing activities | (27,046,688) | (6,562,852) | (5,916,914) | (6,657,399) | |
| 3. Cash flows from financing activities： | |||||
| Cash received from capital contributions | 1,870,241 | 1,134,582 | 1,859,226 | 1,133,582 | |
| Including: Cash received from capital contributions by minority shareholders of subsidiaries | 11,015 | 1,000 | - | - | |
| Cash received from borrowings | 14,310,153 | 16,025,436 | 400,000 | 4,000,000 | |
| Cash received from issuance of medium-term debentures | - | 2,841,690 | - | - | |
| Cash received from issuance of short-term financing bonds | - | 3,999,500 | - | 3,999,500 | |
| Cash received relating to other financing activities | 282,897 | 89,498 | - | - | |
| Sub-total of cash inflows | 16,463,291 | 24,090,706 | 2,259,226 | 9,133,082 | |
| Cash repayments of borrowings | (3,772,807) | (3,916,525) | (89,900) | (89,900) | |
| Cash paid for repayment of short-term financing bonds | - | - | - | - | |
| Cash payments for interest expenses and distribution of dividends or profits | (18,167,904) | (12,537,953) | (18,760,464) | (13,313,757) | |
| Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (100,216) | (49,705) | - | - | |
| Cash payments relating to other financing activities | (960,508) | (1,853,185) | (69,822) | (1,357,933) | |
| Sub-total of cash outflows | (22,901,219) | (18,307,663) | (18,920,186) | (14,761,590) | |
| Net cash flows from financing activities | (6,437,928) | 5,783,043 | (16,660,960) | (5,628,508) | |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | 128,769 | 145,787 | - | - | |
| 5. Net increase in cash and cash equivalents | (3,571,173) | 20,760,688 | 258,609 | 16,336,484 | |
| Add: Cash and cash equivalents at the beginning of the period | 51,131,968 | 40,550,039 | 27,904,229 | 21,957,042 | |
| 6. Cash and cash equivalents at the end of the period | 4(62)(d) | 47,560,795 | 61,310,727 | 28,162,838 | 38,293,526 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.Legal representative: Fang Hongbo
Fang Hongbo
| Legal representative: Fang Hongbo Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong | |||||
| - 5 - | |||||||
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 | |||
| Balance at the end of the prior year | 6,997,273 | 19,693,139 | (14,933,944) | 108,289 | 671,999 | 16,350 | 10,702,928 | 119,679,202 | 8,988,566 | 151,923,802 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,997,273 | 19,693,139 | (14,933,944) | 108,289 | 671,999 | 16,350 | 10,702,928 | 119,679,202 | 8,988,566 | 151,923,802 |
| Movements for the current period | 24,908 | 1,225,397 | 1,114,904 | 17,102 | 5,972 | 371 | - | 1,044,703 | 2,885,356 | 6,318,713 |
| (1) Total comprehensive income | - | - | - | 17,102 | - | - | - | 18,232,291 | 315,796 | 18,565,189 |
| (2) Capital contribution and withdrawal by shareholders | 24,908 | 1,302,058 | 1,114,904 | - | - | - | - | - | 2,563,748 | 5,005,618 |
| 1). Capital contribution by shareholders | 27,406 | 1,660,427 | - | - | - | - | - | - | 17,897 | 1,705,730 |
| 2). Business combinations | - | - | - | - | - | - | - | - | 2,551,324 | 2,551,324 |
| 3). Share-based payment included in shareholders’ equity | - | 187,687 | - | - | - | - | - | - | 21,862 | 209,549 |
| 4) Others | (2,498) | (546,056) | 1,114,904 | - | - | - | - | - | (27,335) | 539,015 |
| (3) Profit distribution | - | - | - | - | 5,972 | - | - | (17,187,588) | (62,054) | (17,243,670) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | - | - | - | - | - |
| 2). Appropriation to general risk reserve | - | - | - | - | 5,972 | - | - | (5,972) | - | - |
| 3). Profit distribution to shareholders | - | - | - | - | - | - | - | (17,181,616) | (62,054) | (17,243,670) |
| 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 | - | - | - | - | - | 371 | - | - | 123 | 494 |
| 1). Appropriation in the current period | - | - | - | - | - | 1,768 | - | - | 472 | 2,240 |
| 2).Use in the current period | - | - | - | - | - | (1,397) | - | - | (349) | (1,746) |
| (6) Others | - | (76,661) | - | - | - | - | - | - | 67,743 | (8,918) |
| Balance at the end of the current period | 7,022,181 | 20,918,536 | (13,819,040) | 125,391 | 677,971 | 16,721 | 10,702,928 | 120,723,905 | 11,873,922 | 158,242,515 |
MIDEA GROUP CO., LTD.Legal representative: Fang Hongbo
Fang Hongbo
| Legal representative: Fang Hongbo Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong | |||||
| - 6 - | |||||||
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Amount in the prior year | |||||||||
| Attributable to equity owners of the Company | Minority interests | Total shareholders' equity | ||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | General risk reserve | Special reserve | Surplus reserve | Undistributed profits | |||
| Balance at the end of the prior year | 6,986,564 | 20,516,930 | (14,044,550) | (1,758,948) | 719,922 | 15,542 | 9,449,901 | 102,982,763 | 9,956,952 | 134,825,076 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,986,564 | 20,516,930 | (14,044,550) | (1,758,948) | 719,922 | 15,542 | 9,449,901 | 102,982,763 | 9,956,952 | 134,825,076 |
| Movements for the current year | 10,709 | (823,791) | (889,394) | 1,867,237 | (47,923) | 808 | 1,253,027 | 16,696,439 | (968,386) | 17,098,726 |
| (1) Total comprehensive income | - | - | - | 1,865,886 | - | - | - | 29,553,507 | 283,760 | 31,703,153 |
| (2) Capital contribution and withdrawal by shareholders | 10,709 | 680,417 | (889,394) | - | - | - | - | - | (969,698) | (1,167,966) |
| 1). Capital contribution by shareholders | 18,602 | 1,123,649 | - | - | - | - | - | - | 26,815 | 1,169,066 |
| 2). Business combinations | - | - | - | - | - | - | - | - | 89,520 | 89,520.00 |
| 3). Share-based payment included in shareholders’ equity | - | 765,914 | - | - | - | - | - | - | 45,583 | 811,497 |
| 4) Others | (7,893) | (1,209,146) | (889,394) | - | - | - | - | - | (1,131,616) | (3,238,049) |
| (3) Profit distribution | - | - | - | - | (47,923) | - | 1,253,027 | (12,857,129) | (291,638) | (11,943,663) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | - | 1,253,027 | (1,253,027) | - | - |
| 2). Appropriation to general risk reserve | - | - | - | - | (47,923) | - | - | 47,923 | - | - |
| 3). Profit distribution to shareholders | - | - | - | - | - | - | - | (11,652,025) | (291,638) | (11,943,663) |
| 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 | - | - | - | - | - | 808 | - | - | 202 | 1,010 |
| 1). Appropriation in the current period | - | - | - | - | - | 3,313 | - | - | 828 | 4,141 |
| 2). Use in the current period | - | - | - | - | - | (2,505) | - | - | (626) | (3,131) |
| (6) Others | - | (1,504,208) | - | 1,351 | - | - | - | 61 | 8,988 | (1,493,808) |
| Balance at the end of the current year | 6,997,273 | 19,693,139 | (14,933,944) | 108,289 | 671,999 | 16,350 | 10,702,928 | 119,679,202 | 8,988,566 | 151,923,802 |
| Legal representative: Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong |
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MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 | |
| Balance at the end of the prior year | 6,997,273 | 27,826,208 | (14,933,944) | (5,679) | - | 10,702,928 | 27,719,633 | 58,306,419 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,997,273 | 27,826,208 | (14,933,944) | (5,679) | - | 10,702,928 | 27,719,633 | 58,306,419 |
| Movements for the current period | 24,908 | 1,310,141 | 1,114,904 | 17,380 | - | - | (16,150,782) | (13,683,449) |
| (1) Total comprehensive income | - | - | - | 17,380 | - | - | 1,030,834 | 1,048,214 |
| (2) Capital contribution and withdrawal by shareholders | 24,908 | 1,310,189 | 1,114,904 | - | - | - | - | 2,450,001 |
| 1). Capital contribution by shareholders | 27,406 | 1,660,427 | - | - | - | - | - | 1,687,833 |
| 2). Capital contribution by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3). Share-based payment included in owners’ equity | - | 197,769 | - | - | - | - | - | 197,769 |
| 4) Others | (2,498) | (548,007) | 1,114,904 | - | - | - | - | 564,399 |
| (3) Profit distribution | - | - | - | - | - | - | (17,181,616) | (17,181,616) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | - | - | - |
| 2). Profit distribution to shareholders | - | - | - | - | - | - | (17,181,616) | (17,181,616) |
| 3) Others | - | - | - | - | - | - | - | - |
| (4) Transfer within shareholders’ equity | - | - | - | - | - | - | - | - |
| 1). Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - |
| 2). Transfer from surplus reserve to share capital | - | - | - | - | - | - | - | - |
| 3). Surplus reserve used to offset accumulated losses | - | - | - | - | - | - | - | - |
| 4) Others | - | - | - | - | - | - | - | - |
| (5) Specific reserve | - | - | - | - | - | - | - | - |
| 1). Appropriation in the current year | - | - | - | - | - | - | - | - |
| 2). Use in the current year | - | - | - | - | - | - | - | - |
| (6) Others | - | (48) | - | - | - | - | - | (48) |
| Balance at the end of the current period | 7,022,181 | 29,136,349 | (13,819,040) | 11,701 | - | 10,702,928 | 11,568,851 | 44,622,970 |
| Legal representative: Fang Hongbo Fang Hongbo | Principal in charge of accounting: Zhong Zheng Zhong Zheng | Head of accounting department: Chen Lihong Chen Lihong |
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- 8 -
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Amount in the prior year | |||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profits | Total shareholders' equity | |
| Balance at the end of the prior year | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | - | 9,449,901 | 28,094,420 | 57,584,193 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | - | 9,449,901 | 28,094,420 | 57,584,193 |
| Movements for the current year | 10,709 | 721,055 | (889,394) | 1,616 | - | 1,253,027 | (374,787) | 722,226 |
| (1) Total comprehensive income | - | - | - | 1,616 | - | - | 12,530,265 | 12,531,881 |
| (2) Capital contribution and withdrawal by shareholders | 10,709 | 704,352 | (889,394) | - | - | - | - | (174,333) |
| 1). Capital contribution by shareholders | 18,602 | 1,123,649 | - | - | - | - | - | 1,142,251 |
| 2). Capital contribution by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3). Share-based payment included in owners’ equity | - | 789,849 | - | - | - | - | - | 789,849 |
| 4) Others | (7,893) | (1,209,146) | (889,394) | - | - | - | - | (2,106,433) |
| (3) Profit distribution | - | - | - | - | - | 1,253,027 | (12,905,052) | (11,652,025) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | 1,253,027 | (1,253,027) | - |
| 2). Profit distribution to shareholders | - | - | - | - | - | - | (11,652,025) | (11,652,025) |
| 3) Others | - | - | - | - | - | - | - | - |
| (4) Transfer within shareholders’ equity | - | - | - | - | - | - | - | - |
| 1). Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - |
| 2). Transfer from surplus reserve to share capital | - | - | - | - | - | - | - | - |
| 3). Surplus reserve used to offset accumulated losses | - | - | - | - | - | - | - | - |
| 4) Others | - | - | - | - | - | - | - | - |
| (5) Specific reserve | - | - | - | - | - | - | - | - |
| 1). Appropriation in the current year | - | - | - | - | - | - | - | - |
| 2). Use in the current year | - | - | - | - | - | - | - | - |
| (6) Others | - | 16,703 | - | - | - | - | - | 16,703 |
| Balance at the end of the current year | 6,997,273 | 27,826,208 | (14,933,944) | (5,679) | - | 10,702,928 | 27,719,633 | 58,306,419 |
MIDEA GROUP CO., LTD.- 9 -
- 9 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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-conditioners, central air-conditioners, heating and ventilation systems, kitchenappliances, refrigerators, washing machines and various small appliances, robotics andautomation systems. Other services include the smart supply chain; sales, wholesale andprocessing of raw materials of household electrical appliances; and financial businessinvolving customer deposits, interbank lendings and borrowings, consumption credits,buyers’ credits and finance leases.
The Company was set up by the Council of Trade Unions of GD Midea Group Co., Ltd. andwas registered in Market Safety Supervision Bureau of Shunde District, Foshan on 7 April2000, with its headquarters located in Foshan, Guangdong. On 30 August 2012, theCompany was transformed into a limited liability company. On 29 July 2013, the Companywas approved to merge and acquire Guangdong Midea Electric Co., Ltd., which was listedon Shenzhen Stock Exchange. On 18 September 2013, the Company’s shares were listedon Shenzhen Stock Exchange.
As at 30 June 2023, the Company’s share capital was RMB 7,022,181,291, and the totalnumber of shares in issue was 7,022,181,291, of which 138,585,703 shares were restrictedtradable A shares and 6,883,595,588 shares were unrestricted tradable A shares.
The detailed information of major subsidiaries included in the consolidation scope in thecurrent year is set out in Note 5 and Note 6. Subsidiaries newly included in the consolidationscope via acquisition in the current year mainly included Shenzhen Clou Electronics Co.,Ltd. and its subsidiaries (hereinafter referred to as “Clou Electronics”), and are detailed inNote 5(1); subsidiaries newly included in the consolidation scope via establishment in thecurrent year are detailed in Note 5(2)(a); subsidiaries no longer included in the consolidationscope in the current year are detailed in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directorson 30 August 2023.
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 ofinventories (Note 2(10)), depreciation of fixed assets, amortisation of intangible assets andright-of-use assets (Note 2(13), (16), (28)), impairment of long-term assets (Note 2(18)), andrecognition and measurement of revenue (Note 2(25)).
Key judgements and critical accounting estimates and key assumptions applied by theGroup on the determination of significant accounting policies are set out in Note 2(30).
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard forBusiness Enterprises - Basic Standard, and the specific accounting standards and otherrelevant regulations issued by the Ministry of Finance on 15 February 2006 and insubsequent periods (hereinafter collectively referred to as the “Accounting Standards forBusiness Enterprises” or “CASs”) and the disclosure requirements in the Compilation Rulesfor Information Disclosure by Companies Offering Securities to the Public No. 15 - GeneralRules on Financial Reporting issued by the China Securities Regulatory Commission(“CSRC”).
MIDEA GROUP CO., LTD.- 10 -
- 10 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 2023 are incompliance with the Accounting Standards for Business Enterprises, and truly andcompletely present the consolidated and company’s financial position of the Company as at30 June 2023 and their financial performance, cash flows and other information for the sixmonths then ended.
(3) Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
(4) Functional currency
The functional currency of the Company is Renminbi (“RMB”). The subsidiaries determinetheir functional currencies based on the primary economic environment in which thebusiness is operated, mainly including EUR, JPY, USD and HKD. The financial statementsare presented in 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 ultimatecontroller from a third party in prior years, the value of its assets and liabilities (includinggoodwill generated due to the combination) are based on the carrying amount in theultimate controller’s consolidated financial statements. The difference between the carryingamount of the net assets obtained by the Group and the carrying amount of theconsideration paid for the combination is treated as an adjustment to capital surplus (sharepremium). If the capital surplus (share premium) is not sufficient to absorb the difference,the remaining balance is adjusted against retained earnings. Costs directly attributable tothe combination are included in profit or loss in the period in which they are incurred.Transaction costs associated with the issue of equity or debt securities for the businesscombination are included in the initially recognised amounts of the equity or debt securities.
(b)Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the Group in a businesscombination are measured at fair value at the acquisition date. Where the cost of thecombination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognised as goodwill; where the cost of combination is lower thanthe acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the differenceis recognised in profit or loss for the current period. Costs directly attributable to thecombination are included in profit or loss in the period in which they are incurred.Transaction costs associated with the issue of equity or debt securities for the businesscombination are included in the initially recognised amounts of the equity or debt securities.
MIDEA GROUP CO., LTD.- 11 -
- 11 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 theacquisition dates. For the equity interest held in the acquiree before the acquisition dateunder equity method, the difference between its fair value and carrying amount isrecognised as investment income for the current period; for the other comprehensiveincome under the equity method and shareholders’ equity changes other than those arisingfrom the net profit or loss, other comprehensive income and profit distribution, the relatedother comprehensive income and other shareholders' equity changes are transferred intoprofit or loss for the current period to which the acquisition dates belong, excluding thosearising from changes in the investee's remeasurements of net liability or net asset related tothe defined benefit plan, and those arising from accumulative changes in fair value ofinvestments in equity instruments not held for trading that are held by investees anddesignated as at fair value through other comprehensive income. For previously-held equityin the acquiree categorised as financial assets at fair value through profit or loss, thedifference between its fair value and carrying amount is transferred to investment incomeunder the cost method; for previously-held equity in the acquiree categorised asinvestments in equity instruments not held for trading at fair value through othercomprehensive income, its accumulative changes in fair value that are originally recognisedin other comprehensive income are directly reclassified to retained earnings. The excess ofthe sum of fair value of the previously-held equity and fair value of the consideration paid atthe acquisition date over share of fair value of identifiable net assets acquired from thesubsidiary is recognised as goodwill.
(6)Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Companyand all of its subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary that is acquired in abusiness combination involving enterprises under common control, it is included in theconsolidated financial statements from the date when it, together with the Company, comesunder common control of the ultimate controlling party. The portion of the net profits realisedbefore the combination date is presented separately in the consolidated income statement.
MIDEA GROUP CO., LTD.
- 12 -
- 12 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(6)Preparation of consolidated financial statements (Cont’d)
In preparing the consolidated financial statements, where the accounting policies and theaccounting periods of the Company and subsidiaries are inconsistent, the financialstatements of the subsidiaries are adjusted in accordance with the accounting policies andthe accounting period of the Company. For subsidiaries acquired from businesscombinations involving enterprises not under common control, the individual financialstatements of the subsidiaries are adjusted based on the fair value of the identifiable netassets at the acquisition date.
All significant intra-group balances, transactions and unrealised profits are eliminated in theconsolidated financial statements. The portion of subsidiaries’ shareholders’ equity and theportion of subsidiaries’ net profits and losses and comprehensive incomes for the period notattributable to the Company are recognised as minority interests, net profit attributed tominority interests and total comprehensive income attributed to minority interests andpresented separately in the consolidated financial statements under shareholders’ equity,net profit and total comprehensive income respectively. Where the loss for the currentperiod attributable to the minority shareholders of the subsidiaries exceeds the share of theminority interests in the opening balance of owners’ equity, the excess is deducted againstminority interests. Unrealised profits and losses resulting from the sales of assets by theCompany to its subsidiaries are fully eliminated against net profit attributable toshareholders of the parent company. Unrealised profits and losses resulting from the salesof assets by a subsidiary to the Company are eliminated and allocated between net profitattributable to shareholders of the parent company and net profit attributable to minorityinterests in accordance with the allocation proportion of the parent company in thesubsidiary. Unrealised profits and losses resulting from the sales of assets by onesubsidiary to another are eliminated and allocated between net profit attributable toshareholders of the parent company and net profit attributable to minority interests inaccordance with the allocation proportion of the parent company in the subsidiary.
If the accounting treatment of a transaction is inconsistent in the financial statements at theGroup level and at the Company or its subsidiary level, adjustment will be made from theperspective of the Group.
(7)Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn ondemand, and short-term and highly liquid investments that are readily convertible to knownamounts of cash and which are subject to an insignificant risk of changes in value.
(8)Foreign currency translation
(a)Foreign currency transactions
Foreign currency transactions are translated into functional currency using the exchangerates prevailing at the dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translatedinto functional currency using the spot exchange rates on the balance sheet date. Exchangedifferences arising from these translations are recognised in profit or loss for the currentperiod, except for those attributable to foreign currency borrowings that have been taken outspecifically for acquisition or construction of qualifying assets, which are capitalised as partof the 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 spotexchange rates at the date of the transactions. The effect of exchange rate changes oncash is presented separately in the cash flow statement.
MIDEA GROUP CO., LTD.- 13 -
- 13 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(8)Foreign currency translation (Cont’d)
(b)Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated atthe spot exchange rates on the balance sheet date. Among the equity items, the items otherthan undistributed profits are translated at the spot exchange rates of the transaction dates.The income and expense items in the income statements of overseas operations aretranslated at the spot exchange rates of the transaction dates. The differences arising fromthe above translation are recognised in other comprehensive income. The cash flows ofoverseas operations are translated at the spot exchange rates on the dates of the cashflows. The effect of exchange rate changes on cash is presented separately in the cash flowstatement.
(9)Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and afinancial liability or equity instrument of another entity. A financial asset or a financial liabilityis recognised when the Group becomes a party to the contractual provisions of theinstrument.
(a)Financial assets
(i)Classification and measurement
Based on the Group’s business model for managing the financial assets and the contractualcash flow characteristics of the financial assets, financial assets are classified as: (1)financial assets at amortised cost; (2) financial assets at fair value through othercomprehensive income; (3) financial assets at fair value through profit or loss.
The financial assets are measured at fair value at initial recognition. Related transactioncosts that are attributable to the acquisition of the financial assets are included in the initiallyrecognised amounts, except for the financial assets at fair value through profit or loss, therelated transaction costs of which are recognised directly in profit or loss for the currentperiod. Accounts receivable or notes receivable arising from sales of products or renderingof services (excluding or without regard to significant financing components) are initiallyrecognised at the consideration that is entitled to be charged by the Group as expected.
(i-1) Debt instruments
The debt instruments held by the Group refer to the instruments that meet the definition offinancial liabilities from the perspective of the issuer, and are measured in the followingthree ways:
MIDEA GROUP CO., LTD.
- 14 -
- 14 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 amortised cost:
The objective of the Group’s business model is to hold the financial assets to collect thecontractual cash flows, and the contractual cash flow characteristics are consistent with abasic lending arrangement, which gives rise on specified dates to the contractual cash flowsthat are solely payments of principal and interest on the principal amount outstanding. Theinterest income of such financial assets is recognised using the effective interest ratemethod. Such financial assets mainly comprise cash at bank and on hand, loans andadvances, notes receivable, accounts receivable, other receivables, other current assets,debt investments, long-term receivables and other non-current assets. Debt investmentsand long-term receivables that are due within one year (inclusive) as from the balance sheetdate are included in the current portion of non-current assets; debt investments withmaturities of no more than one year (inclusive) at the time of acquisition are included inother current assets.
Measured at fair value through other comprehensive income:
The objective of the Group’s business model is to hold the financial assets to both collectthe contractual cash flows and sell such financial assets, and the contractual cash flowcharacteristics are consistent with a basic lending arrangement. Such financial assets aremeasured at fair value through other comprehensive income, except for the impairmentgains or losses, foreign exchange gains and losses, and interest income calculated usingthe effective interest rate method which are recognised in profit or loss for the currentperiod. Such financial assets mainly include receivables financing and other debtinvestments. Other debt investments of the Group that are due within one year (inclusive)as from the balance sheet date are included in the current portion of non-current assets;other debt investments with maturities no more than one year (inclusive) at the time ofacquisition are included in other current assets.
Measured at fair value through profit or loss:
Debt instruments held by the Group that are not divided into those at amortised cost, orthose measured at fair value through other comprehensive income, are measured at fairvalue through profit or loss. At initial recognition, the Group designates a portion of financialassets as at fair value through profit or loss to eliminate or significantly reduce anaccounting mismatch. Financial assets that are due over one year as from the balancesheet date and are expected to be held over one year are included in other non-currentfinancial assets. Others are included in financial assets held for trading.
MIDEA GROUP CO., LTD.- 15 -
- 15 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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-2) Equity instruments
Investments in equity instruments, over which the Group has no control, joint control orsignificant influence, are measured at fair value through profit or loss under financial assetsheld for trading; investments in equity instruments expected to be held over one year asfrom the balance sheet date are included in other non-current financial assets.
In addition, at initial recognition, a portion of certain investments in equity instruments notheld for trading are designated as financial assets at fair value through othercomprehensive income under investments in other equity instruments. The relevantdividend income of such financial assets is recognised in profit or loss for the current period.
(i-3) Derivative financial instruments
The derivative financial instruments held by the Group are mainly used in controlling riskexposures. Derivative financial instruments are initially recognised at fair value on the daywhen derivatives transaction contract was signed, and subsequently measured at fair value.The derivative financial instruments are recorded as assets when they have a positive fairvalue and as liabilities when they have a negative fair value.
The method for recognising changes in fair value of the derivative financial instrumentdepends on whether the derivative financial instrument is designated as a hedginginstrument and meets the requirement for it, and if so, the nature of the item being hedged.For derivative financial instruments that are not designated as hedging instruments and failto meet requirements on hedging instruments, including those held for the purpose ofproviding hedging against specific risks in interest rate and foreign exchange but notconforming with requirements of hedge accounting, the changes in fair value are recordedin gains or losses on changes in fair value in the consolidated income statement.
Cash flow hedge
At the inception of the hedge, the Group has completed relevant hedge documents,including the relationship between hedged items and hedging instruments, and riskmanagement objectives and strategies corresponding to various hedging transactions. Atthe inception of the hedge and in subsequent periods, the Group continuously recordswhether the hedge is effectively evaluated, that is, whether the hedging instruments canlargely offset the changes in the fair value or cash flows of hedged items.
MIDEA GROUP CO., LTD.- 16 -
- 16 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 (Cont’d)
The effective portion of changes in fair value on hedging instruments is recognised in othercomprehensive income as cash flow hedging reserve, while the gains or losses related tothe ineffective portion of the hedge are recognised in profit or loss for the current period.Where the hedge is a forecast transaction which subsequently results in the recognition of anon-financial asset or liability, the amount originally recognised in other comprehensiveincome is transferred and included in the initially recognised amount of the asset or liability.For cash flow hedge beyond the foregoing scope, the amount originally recognised in othercomprehensive income is transferred and included in profit or loss for the current periodduring the same time in which the profit or loss is influenced by the hedged expected cashflow. However, if all or part of net loss recognised directly in other comprehensive incomewill not be recovered in future accounting periods, the amount not expected to be recoveredshould be transferred to profit or loss for the current period. When the Group revokes thedesignation of a hedge, a hedging instrument expires or is sold, terminated or exercised, orthe hedge no longer meets the criteria for hedge accounting, the Group will discontinue thehedge accounting treatments prospectively. Where the Group discontinues the hedgeaccounting treatment for cash flow hedging, for hedged future cash flows that will stillhappen, the accumulated gains or losses that have been recognised in othercomprehensive income are retained and subject to accounting treatment under thesubsequent treatment method of aforesaid cash flow hedging reserve; for hedged futurecash flows that the forecast transaction will never happen, the accumulated gains or lossesthat have been recognised in other comprehensive income are transferred immediately andincluded in profit or loss for the current period.
(ii)Impairment
Loss provision for financial assets at amortised cost, investments in debt instruments at fairvalue through other comprehensive income, as well as contract assets and leasereceivables is recognised on the basis of ECL.
Giving consideration to reasonable and supportable information on past events, currentconditions, forecasts of future economic conditions that is available without undue cost oreffort at the balance sheet date, and weighted by the risk of default, the Group recognisesthe ECL as the probability-weighted amount of the present value of the difference betweenthe cash flows receivable from the contract and the cash flows expected to collect.
MIDEA GROUP CO., LTD.- 17 -
- 17 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
For notes receivable, accounts receivable, receivables financing, lease receivables andcontract assets arising from sales of goods and rendering of services in the ordinary courseof operating activities, the Group recognises the lifetime ECL provision regardless ofwhether there exists a significant financing component. Since contract assets are mainlyrelated to work on the stage of completion without invoice, essentially, their credit riskcharacteristics are similar to the accounts receivable for the same kind of contracts.Therefore, the ECL rate of the contract assets is an approximation to that of accountsreceivable.
Except for the above notes receivable, accounts receivable, receivables financing, leasereceivables and contract assets, at each balance sheet date, the ECL of financialinstruments at different stages are measured respectively. 12-month ECL provision isrecognised for financial instruments in Stage 1 that have not had a significant increase incredit risk since initial recognition; lifetime ECL provision is recognised for financialinstruments in Stage 2 that have had a significant increase in credit risk yet without creditimpairment since initial recognition; and lifetime ECL provision is recognised for financialinstruments in Stage 3 that have had credit impairment since initial recognition.
For the financial instruments with lower credit risk on the balance sheet date, the Groupassumes there is no significant increase in credit risk since initial recognition. The Grouptreats them as financial instruments in Stage 1 and recognises a 12-month ECL.
For the financial instruments in Stage 1 and Stage 2, the Group calculates the interestincome by applying the effective interest rate to the book balance (before deduction of theimpairment provision). For the financial instruments in Stage 3, the interest income iscalculated by applying the effective interest rate to the amortised cost (after deduction of theimpairment provision from the book balance).
In case the ECL of an individually assessed financial asset cannot be evaluated withreasonable cost, the Group divides the receivables and contract assets into certaingroupings based on credit risk characteristics, then pursuant to which, calculates the ECL.Basis and provision method for determining groupings are as follows:
MIDEA GROUP CO., LTD.- 18 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9)Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii)Impairment (Cont’d)
| Grouping of notes receivable 1 | Bank acceptance notes grouping |
| Grouping of notes receivable 2 | Trade acceptance notes grouping |
| Grouping of accounts receivable 1 | Overseas business grouping |
| Grouping of accounts receivable 2 | Domestic business grouping |
| Grouping of contract assets 1 | Overseas business grouping |
| Grouping of contract assets 2 | Domestic business grouping |
| Grouping of other receivables 1 | Security deposit and guarantee receivables grouping |
| Grouping of other receivables 2 | Receivables from related parties grouping |
| Grouping of other receivables 3 | Other receivables grouping |
| Grouping of long-term receivables | Finance lease receivables grouping |
| Grouping of loans and advances | Loans business grouping |
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculatesthe ECL of notes receivable and receivables financing that are classified into groupingswith consideration to historical credit losses experience, current conditions and forecastsof future economic conditions.
With consideration to historical credit loss experience, current conditions and forecasts offuture economic conditions, the Group prepares the cross-reference between the numberof overdue days of accounts receivable and the lifetime ECL rate, and calculates the ECLof accounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime ECL rate,calculates the ECL of other receivables, loans and advances that are classified intogroupings with consideration to historical credit losses experience, the current conditionsand forecasts of future economic conditions.
The Group recognises the loss provision made or reversed into profit or loss for thecurrent period. For debt instruments held at fair value through other comprehensiveincome, the Group adjusts other comprehensive income while the impairment loss or gainis recognised in profit or loss for the current period.
MIDEA GROUP CO., LTD.- 19 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9)Financial instruments (Cont’d)
(a)Financial assets (Cont’d)
(iii)Derecognition of financial assets
A financial asset is derecognised when: (1) the contractual rights to the cash flows fromthe financial asset expire, (2) the financial asset has been transferred and the Grouptransfers substantially all the risks and rewards of ownership of the financial asset to thetransferee, or (3) the financial asset has been transferred and the Group has not retainedcontrol of the financial asset, although the Group neither transfers nor retains substantiallyall the risks and rewards of ownership of the financial asset.
When a financial asset is derecognised, the difference between the carrying amount andthe sum of the consideration received and the cumulative changes in fair value that arepreviously recognised directly in other comprehensive income is recognised in profit orloss for the current period, except for those as investments in other equity instruments, thedifference aforementioned is recognised in retained earnings instead.
(b)Financial liabilities
Financial liabilities are classified as financial liabilities at amortised cost and financialliabilities at fair value through profit or loss at initial recognition.
Financial liabilities of the Group mainly comprise financial liabilities at amortised cost,including notes payable, accounts payable, other payables, borrowings, debenturespayable and short-term financing bonds payable in other current liabilities, customerdeposits and deposits from banks and other financial institutions, borrowings from theCentral Bank, and long-term payables. Such financial liabilities are initially recognised atfair value, net of transaction costs incurred, and subsequently measured using theeffective interest rate method. Financial liabilities that are due within one year (inclusive)are classified as current liabilities; those with maturities over one year but are due withinone year (inclusive) as from the balance sheet date are classified as current portion ofnon-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 amountof the derecognised part of the financial liability and the consideration paid is recognised inprofit or loss for the current period.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(c)Determination of fair value of financial instruments
The fair value of a financial instrument that is traded in an active market is determined atthe quoted price in the active market. The fair value of a financial instrument that is nottraded in an active market is determined by using a valuation technique. In valuation, theGroup adopts valuation techniques applicable in the current situation and supported byadequate available data and other information, selects inputs with the same characteristicsas those of assets or liabilities considered in relevant transactions of assets or liabilities bymarket participants, and gives priority to the use of relevant observable inputs. Whenrelevant observable inputs are not available or feasible, unobservable inputs are adopted.
(10)Inventories
(a)Classification of inventories
Inventories, including finished goods, raw materials, work in progress, consignedprocessing materials and low value consumables, are measured at the lower of cost andnet realisable value.
(b)Costing of inventories
Cost is determined using the first-in, first-out method when issued. The cost of finishedgoods and work in progress comprises raw materials, direct labour and systematicallyallocated production overhead based on the normal production capacity.
(c)Basis for determining net realisable values of inventories and method for making provisionfor 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 andcondition.
On the balance sheet date, inventories are measured at the lower of cost and netrealisable value.
Net realisable value is determined based on the estimated selling price in the ordinarycourse of business, less the estimated costs to completion and estimated contractfulfilment costs and costs necessary to make the sale and related taxes and expenditures.
Provision for decline in the value of inventories is determined at the excess amount of thecost as calculated based on the classification of inventories over their net realisable value,and are recognised in profit or loss for the current period.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10)Inventories (Cont'd)
(d)Inventory system
The Group adopts the perpetual inventory system.
(e)Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost ofrelated assets or in profit or loss for the current period.
(11)Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in itssubsidiaries, and the Group’s long-term equity investments in its associates and jointventures.
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 whichthe Group has joint control together with other parties and only has rights to the net assetsof the arrangement based on legal forms, contractual terms and other facts andcircumstances. An associate is an investee that the Group has significant influence ontheir financial and operating policies.
Investments in subsidiaries are presented in the Company’s financial statements using thecost method, and are adjusted to the equity method when preparing the consolidatedfinancial statements. Investments in joint ventures and associates are accounted for usingthe equity method.
(a)Determination of investment cost
For long-term equity investments acquired through a business combination involvingenterprises under common control, the investment cost shall be the absorbing party’sshare of the carrying amount of owners’ equity of the party being absorbed at thecombination date; for long-term equity investment acquired through a businesscombination involving enterprises not under common control, the investment cost shall bethe 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 ofcarrying amount of previously-held equity investment and additional investment cost. Forpreviously-held equity investments accounted for using the equity method, the accountingtreatment of related other comprehensive income from disposal of the equity is carried outon a same basis with the investee’s direct disposal of related assets or liabilities. Owners’equity, which is recognised due to changes in investee’s owners’ equity other than thosearising from the net profit or loss, other comprehensive income and profit distribution, isaccordingly transferred into profit or loss for the period in which the investment isdisposed.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11) Long-term equity investments (Cont’d)
(a)Determination of investment cost (Cont’d)
For the investments in previously-held equity without significant influence or commoncontrol that previously recognised as financial assets at fair value through profit or loss,the difference between the fair value and carrying amount is transferred to investmentincome for the current period under cost method; for the investments previouslyrecognised as investments in equity instruments not held for trading at fair value throughother comprehensive income, the difference between the fair value and carrying amountand accumulated changes in fair value previously recognised in other comprehensiveincome are directly transferred to retained earnings.
For long-term equity investments acquired not through a business combination, the long-term equity investments acquired by payment in cash, the initial investment cost shall bethe purchase price actually paid; for long-term equity investments acquired by issuingequity securities, the initial investment cost shall be the fair value of the equity securitiesissued.
(b)Subsequent measurement and recognition methods of gains and losses
For long-term equity investments accounted for using the cost method, they are measuredat the initial investment costs, and cash dividends or profit distribution declared by theinvestees are recognised as investment income in profit or loss for 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 fairvalue of the investee’s identifiable net assets at the acquisition date, the long-term equityinvestment is measured at the initial investment cost; where the initial investment cost isless than the Group’s share of the fair value of the investee’s identifiable net assets at theacquisition date, the difference is included in profit or loss and the cost of the long-termequity investment is adjusted upwards accordingly.
For long-term equity investments accounted for using the equity method, the Grouprecognises the investment income according to its share of net profit or loss of theinvestee. The Group discontinues recognising its share of the net losses of an investeeafter the carrying amount of the long-term equity investment together with any long-terminterests that in substance form part of the investor’s net investment in the investee arereduced to zero. However, if the Group has obligations for additional losses and thecriteria with respect to recognition of provisions are satisfied, the Group continuesrecognising the investment losses and the provisions at the amount it expects toundertake. The changes of the Group’s share in investee’s owners’ equity other than thosearising from the net profit or loss, other comprehensive income and profit distribution arerecognised in capital surplus with a corresponding adjustment to the carrying amount ofthe long-term equity investment. The carrying amount of the investment is reduced by theGroup’s share of the profit distribution or cash dividends declared by the investees. Theunrealised profits or losses arising from the transactions between the Group and itsinvestees are eliminated in proportion to the Group’s equity interest in the investees,based on which the investment gain or losses are recognised. Any losses resulting fromtransactions between the Group and its investees attributable to asset impairment lossesare not eliminated.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11)Long-term equity investments (Cont’d)
(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 participatingthe investee’s activities, and the ability to utilise the power of an investee to affect itsreturns.
Joint control is the contractually agreed sharing of control over an arrangement, andrelevant economic activity can be arranged upon the unanimous approval of the Groupand other participants sharing of control rights.
Significant influence is the power to participate in the financial and operating policydecisions of the investee, but is not control or joint control over those policies.
(d)Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint ventures andassociates are reduced to the recoverable amounts when the recoverable amounts arebelow their carrying amounts (Note 2(18)).
(12)Investment properties
Investment properties, including land use rights that have already been leased out,buildings that are held for the purpose of leasing and buildings that are being constructedor developed for future use for leasing, are measured initially at cost. Subsequentexpenditures incurred in relation to an investment property are included in the cost of theinvestment property when it is probable that the associated economic benefits will flow tothe Group and their costs can be reliably measured; otherwise, the expenditures arerecognised in profit or loss for the period in which they are incurred.
The Group adopts the cost model for subsequent measurement of investment properties.Buildings and land use rights are depreciated or amortised to their estimated net residualvalues over their estimated useful lives. The estimated useful lives, the estimated netresidual values that are expressed as a percentage of cost and the annual depreciation(amortisation) rates of investment properties are as follows:
| Estimated useful lives | Estimated net residual values | Annual depreciation (amortisation) rates | |
| Buildings | 20 to 40 years | 5% to 10% | 2.25% 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 reclassifiedas fixed asset or intangible asset at the date of the transfer. When an owner-occupiedproperty is transferred out for earning rentals or for capital appreciation, the fixed asset orintangible asset is reclassified as investment properties at the date of the transfer. At thetime of transfer, the property is recognised based on the carrying amount before transfer.
MIDEA GROUP CO., LTD.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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)Investment properties (Cont’d)
The investment properties’ estimated useful lives, the estimated net residual values andthe depreciation (amortisation) methods applied are reviewed and adjusted as appropriateat each 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 isrecognised in profit or loss for the current period.
The carrying amount of an investment property is reduced to the recoverable amount if therecoverable amount is below the carrying amount.
(13)Fixed assets
(a)Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, overseas land, machinery and equipment, motorvehicles, electronic equipment and others.
Fixed assets are recognised when it is probable that the related economic benefits willflow to the Group and the cost can be reliably measured. The initial cost of purchasedfixed assets include purchase price, related taxes and expenditures that are attributable tothe assets incurred before the assets are ready for their intended use. The initial cost ofself-constructed fixed assets is determined based on Note 2(14).
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixedasset when it is probable that the associated economic benefits will flow to the Group andthe related cost can be reliably measured. The carrying amount of the replaced part isderecognised. All the other subsequent expenditures are recognised in profit or loss forthe period in which they are incurred.
(b)Depreciation method of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of theassets to their estimated net residual values over their estimated useful lives. For the fixedassets that have been provided for impairment loss, the related depreciation charge isprospectively determined based upon the adjusted carrying amounts over their remaininguseful lives.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(13)Fixed assets (Cont’d)
(b)Depreciation method of fixed assets (Cont’d)
The estimated useful lives, the estimated net residual values expressed as a percentageof cost 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 3.6% |
| Motor vehicles | 2 to 20 years | 0% to 10% | 50% to 4.5% |
| Electronic equipment and others | 2 to 20 years | 0% to 10% | 50% to 4.5% |
| Overseas land | Permanent | Not applicable | Not applicable |
The estimated useful lives and the estimated net residual values of the Group’s fixedassets and the depreciation methods applied to the assets are reviewed, and adjusted asappropriate at each year-end.
(c)The carrying amount of a fixed asset is reduced to the recoverable amount when therecoverable amount is below the carrying amount (Note 2(18)).
(d)Disposal of fixed assets
A fixed asset is derecognised on disposal or when no future economic benefits areexpected from its use or disposal. The amount of proceeds from disposals on sale,transfer, retirement or damage of a fixed asset net of its carrying amount and relatedtaxes and expenses is recognised in profit or loss for the current period.
(14)Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises constructioncosts, installation costs, borrowing costs that are eligible for capitalisation and other costsnecessary to bring the construction in progress ready for their intended use. Constructionin progress is transferred to fixed assets when the assets are ready for their intended use,and depreciation begins from the following month. The carrying amount of construction inprogress is reduced to the recoverable amount when the recoverable amount is below itscarrying amount (Note 2(18)).
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(15)Borrowing costs
The borrowing costs that are directly attributable to acquisition and construction of a fixedasset that needs a substantially long period of time for its intended use commence to becapitalised and recorded as part of the cost of the asset when expenditures for the assetand borrowing costs have been incurred, and the activities relating to the acquisition andconstruction that are necessary to prepare the asset for its intended use havecommenced. The capitalisation of borrowing costs ceases when the asset underacquisition or construction becomes ready for its intended use and the borrowing costsincurred thereafter are recognised in profit or loss for the current period. Capitalisation ofborrowing costs is suspended during periods in which the acquisition or construction of anasset is interrupted abnormally and the interruption lasts for more than 3 months, until theacquisition or construction is resumed.
For the specific borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of borrowing costs eligible for capitalisation isdetermined by actual interest expenses deducting any interest income earned fromdepositing the unused specific borrowings in the banks or any investment income arisingon the temporary investment of those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of general borrowing costs eligible forcapitalisation is determined by applying the weighted average effective interest rate ofgeneral borrowings, to the weighted average of the excess amount of cumulativeexpenditures on the asset over the amount of specific borrowings. The effective interestrate is the rate at which the future cash flows during the period of expected duration of theborrowings or applicable shorter period are discounted to the initial amount of theborrowings.
(16)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 of30 to 50 years. If the acquisition costs of the land use rights and the buildings locatedthereon cannot be reasonably allocated between the land use rights and the buildings, allof the acquisition costs are recognised as fixed assets.
(b)Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, theperiod as stipulated by contracts or the beneficial period.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(16) Intangible assets (Cont’d)
(c)Trademark rights
The trademark rights are measured at cost when acquired and are amortised over theestimated useful life of 4 to 30 years. The cost of trademark rights obtained in the businesscombinations involving enterprises not under common control is measured at fair value. Assome of the trademarks are expected to attract net cash inflows injected into the Group,management considers that these trademarks have an indefinite useful life and arepresented based upon the carrying amount after deducting the provision for impairment(Note 4(20)).
(d)Trademark use rights
The trademark use rights are measured at cost when acquired. The cost of trademark userights obtained in the business combinations involving enterprises not under commoncontrol is measured at fair value, and is amortised over the estimated useful life of 40years.
(e)Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisationmethod is performed at each year-end, with adjustment made as appropriate.
(f)Research and development (R&D)
The expenditure on an internal research and development project is classified intoexpenditure on the research phase and expenditure on the development phase based onits nature and whether there is material uncertainty that the research and developmentactivities can form an intangible asset at the end of the project.
Expenditure on the planned investigation, evaluation and selection for the research ofproduction processes or products is categorised as expenditure on the research phase,and it is recognised in profit or loss when it is incurred. Expenditure on design and test forthe final application of the development of production processes or products before massproduction is categorised as expenditure on the development phase, which is capitalisedonly if all of the following conditions are satisfied:
? The development of production processes or products has been fully justified by
technical team;? The budget on the development of production processes or products has been
approved by management;
? There is market research analysis that demonstrates the product produced by the
production process or product has the ability of marketing;
? There are sufficient technical and financial resources to support the development
of production processes or products and subsequent mass production; and? Expenditure attributable to the development of production processes or products
can be reliably measured.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(16)Intangible assets (Cont’d)
(f)Research and development (R&D) (Cont’d)
Other development expenditures that do not meet the conditions above are recognised inprofit or loss in the period in which they are incurred. Development costs previouslyrecognised as expenses are not recognised as an asset in a subsequent period.Capitalised expenditure on the development phase is presented as development costs inthe balance sheet and transferred to intangible assets at the date that the asset is readyfor its intended use.
(g)Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when therecoverable amount is below the carrying amount (Note 2(18)).
(17)Long-term prepaid expenses
Long-term prepaid expenses include the expenditure for improvements to right-of-useassets, and other expenditures that have been incurred but should be recognised asexpenses over more than one year in the current and subsequent periods. Long- termprepaid expenses are amortised on the straight-line basis over the expected beneficialperiod and are presented at actual expenditure net of accumulated amortisation.
(18)Impairment of long-term assets
Fixed assets, construction in progress, right-of-use assets, intangible assets with finiteuseful lives, investment properties measured using the cost model and long-term equityinvestments in subsidiaries, joint ventures and associates are tested for impairment if thereis any indication that the assets may be impaired at the balance sheet date. Intangibleassets not ready for their intended use, intangible assets with infinite useful lives andoverseas land are tested at least annually for impairment, irrespective of whether there isany indication that it may be impaired. If the result of the impairment test indicates that therecoverable amount of an asset is less than its carrying amount, a provision for impairmentand an impairment loss are recognised for the amount by which the asset’s carrying amountexceeds its recoverable amount. The recoverable amount is the higher of an asset’s fairvalue less costs to sell and the present value of the future cash flows expected to bederived from the asset. Provision for asset impairment is determined and recognised on theindividual asset basis. If it is not possible to estimate the recoverable amount of anindividual asset, the recoverable amount of an asset group to which the asset belongs isdetermined. An asset group is the smallest group of asset groups that is able to generateindependent cash inflows.
Goodwill that is separately presented in the financial statements is tested at least annuallyfor impairment, irrespective of whether there is any indication that it may be impaired. Inconducting the test, the carrying value of goodwill is allocated to the related asset group 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 assetgroup or a group of asset groups, including the allocated goodwill, is lower than itscarrying amount, the corresponding impairment loss is recognised. The impairment loss isfirst deducted from the carrying amount of goodwill that is allocated to the asset group orgroup of asset groups, and then deducted from the carrying amounts of other assets withinthe asset group or group of asset groups in proportion to the carrying amounts of assetsother than goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the valuerecovered in the subsequent periods.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(19)Employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Groupin exchange for service rendered by employees or for termination of employmentrelationship, which include short-term employee benefits, post-employment benefits,termination benefits and other long-term employee benefits.
(a)Short-term employee benefits
Short-term employee benefits include wages and salaries, bonus, allowances andsubsidies, staff welfare, premiums or contributions on medical insurance, work injuryinsurance, maternity insurance, housing funds, labour union funds and employeeeducation funds and short-term paid absences. The short-term employee benefits actuallyoccurred are recognised as a liability in the accounting period in which the service isrendered by the employees, with a corresponding charge to the profit or loss for thecurrent period or the cost of relevant assets. Non-monetary benefits are measured at fairvalue.
(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 obligationto pay further contributions; and defined benefit plans are post-employment benefit plansother than defined contribution plans. During the reporting period, the Group’s definedcontribution plans mainly include basic pensions and unemployment insurance, while thedefined benefit plans are Toshiba Lifestyle Products & Services Corporation (“TLSC”) andits subsidiaries (“TLSC Group”) and KUKA Aktiengesellschaft (“KUKA”) and itssubsidiaries (“KUKA Group”), etc. provide supplemental retirement benefits beyond thenational regulatory insurance system.
Basic pensions
The Group’s employees participate in the basic pension plan set up and administered bylocal authorities of Ministry of Human Resource and Social Security. Monthly payments ofpremiums on the basic pensions are calculated according to the bases and percentageprescribed by the relevant local authorities. When employees retire, the relevant localauthorities are obliged to pay the basic pensions to them. The amounts based on theabove calculations are recognised as liabilities in the accounting period in which theservice has been rendered by the employees, with a corresponding charge to the profit orloss for the current period or the cost of relevant assets.
Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans isthe present value of the defined benefit obligations less the fair value of the plan assets.The defined benefit obligation is calculated annually by independent actuaries using theprojected unit credit method at the interest rate of treasury bonds with similar obligationterm and currency. The charges related to supplementary retirement benefits (includingcurrent service costs, historical service costs and gains or losses on settlement) and netinterest are recognised in profit or loss for the current period or included in the cost of anasset, and the changes arising from remeasurement in net liabilities or net assets ofdefined benefit plans are recognised in other comprehensive income.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(19)Employee benefits (Cont’d)
(c)Termination benefits
The Group provides compensation for terminating the employment relationship withemployees before the end of the employment contracts or as an offer to encourageemployees to accept voluntary redundancy before the end of the employment contracts.The Group recognises a liability arising from compensation for termination of theemployment relationship with employees, with a corresponding charge to profit or loss forthe current period at the earlier of the following dates: 1) when the Group cannotunilaterally withdraw an employment termination plan or a curtailment proposal; 2) whenthe Group recognises costs or expenses related to a restructuring that involves thepayment of termination benefits.
Early retirement benefits
The Group offers early retirement benefits to those employees who accept early retirementarrangements. The early retirement benefits refer to the salaries and social securitycontributions to be paid to and for the employees who accept voluntary retirement beforethe normal retirement date prescribed by the State, as approved by management. TheGroup pays early retirement benefits to those early retired employees from the earlyretirement date until the normal retirement date. The Group accounts for the earlyretirement benefits in accordance with the treatment for termination benefits, in which thesalaries and social security contributions to be paid to and for the early retired employeesfrom the off-duty date to the normal retirement date are recognised as liabilities with acorresponding charge to the profit or loss for the current period. The differences arisingfrom the changes in the respective actuarial assumptions of the early retirement benefitsand the adjustments of benefit standards are recognised in profit or loss in the period inwhich they occur.
The termination benefits expected to be settled within one year since the balance sheetdate are classified as current liabilities.
(20)General risk reserve
General risk reserve is the reserve appropriated from undistributed profits to cover part ofunidentified potential losses, on the basis of the estimated potential risk value of riskassets assessed by the standardised approach, which is deducted from recognisedprovision for impairment losses on loans. Risk assets include loans and advances, long-term equity investments, deposits with banks and other financial institutions and otherreceivables of subsidiaries engaged in financial business.
(21)Dividends distribution
Cash dividend is recognised as a liability for the period in which the dividend is approvedby the shareholders’ meeting.
MIDEA GROUP CO., LTD.- 31 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(22)Provisions
Provisions for product warranties, onerous contracts, etc. are recognised when the Grouphas a present obligation, it is probable that an outflow of economic benefits will be requiredto settle the obligation, and the amount of the obligation can be measured reliably.
A provision is initially measured at the best estimate of the expenditure required to settlethe related present obligation. Factors surrounding a contingency, such as the risks,uncertainties and the time value of money, are taken into account as a whole in reachingthe best estimate of a provision. Where the effect of the time value of money is material,the best estimate is determined by discounting the related future cash outflows. Theincrease in the discounted amount of the provision arising from passage of time isrecognised 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.
(23)Share-based payment
(a)Type of share-based payment
Share-based payment is a transaction in which the entity acquires services fromemployees as consideration for equity instruments of the entity or by incurring liabilities foramounts based on the equity instruments. Equity instruments include equity instruments ofthe Company, its parent company or other accounting entities of the Group. Share-basedpayments are divided into equity-settled and cash-settled payments. The Group’s share-based payments are equity-settled payments.
Equity-settled share-based payment
The Group’s equity-settled share-based payment contains share option incentive plan,restricted share plan and employee stock ownership plan. These plans are measured atthe fair value of the equity instruments at grant date and the equity instruments aretradable or exercisable when services in vesting period are completed or specifiedperformance conditions are met. In the vesting period, the services obtained in the currentperiod are included in relevant cost and expenses at the fair value of the equityinstruments at grant date based on the best estimate of the number of tradable orexercisable equity instruments, and capital surplus is increased accordingly. If thesubsequent information indicates the number of tradable or exercisable equity instrumentsdiffers from the previous estimate, an adjustment is made and, on the exercise ordesterilisation date, the estimate is revised to equal to the number of actual vested equityinstruments.
MIDEA GROUP CO., LTD.- 32 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(23)Share-based payment (Cont’d)
(b)Determination of fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which isBlack - Scholes option pricing model.
The fair value of other equity instruments is based on the share prices, which exclude theprice that incentive objects pay, and the number of the shares on the grant date, takinginto account the effects of clause of the Group’s relevant plans.
(c)Basis for determining best estimate of tradable or exercisable equity instruments
As at each balance sheet date in the vesting period, the Group would make best estimatein accordance with the newly acquired information such as changes in the number ofemployees entitled with exercisable or tradable equity instruments, and amend theestimated number of exercisable or tradable equity instruments. On the exercise ordesterilisation date, the final number of estimated exercisable or tradable equityinstruments is consistent with the actual number of exercisable or tradable equityinstruments.
(24)Treasury stock
The Group’s treasury stock mainly comes from the repurchase of equity instruments, theissuance of restricted shares, etc.
Consideration and transaction costs paid by the Group for repurchasing equity instrumentsare deducted from owners’ equity and not recognised as financial assets. Theconsiderations paid by the Group for repurchasing equity instruments are presented astreasury stock, and the related transaction costs are recognised in owners’ equity.
On the deregistration day of shares, relevant share capital and treasury stock are reversedwith the difference included in capital surplus (share premium) based on actualderegistration results.
On the grant day of restricted shares, the Group recognises bank deposits when receivingsubscription from the employees and measures the repurchase obligation as liability. Onthe desterilisation date of restricted shares, relevant treasury stocks, liabilities and capitalsurplus recognised in the vesting period are reversed based on the actual vesting results.
(25)Revenue
The Group recognises revenue at the amount of the consideration which the Group isexpected to receive when the customer obtains control over relevant goods or services.Revenue is stated net of discounts, rebates and returns.
MIDEA GROUP CO., LTD.- 33 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Revenue (Cont’d)
When any of the following conditions is met, the Group is subject to performanceobligations within a period of time; otherwise, at a point in time:
(1)Customers obtain and consume economic benefits coming from the Group’sperformance of contract while the Group performs the contract.(2)Customers can control goods under construction during the Group’s performanceof contract.(3)Goods produced during the Group’s performance of contract are irreplaceable.During the whole contract period, the Group is entitled to collect payments forthose which have been accumulated up to now.
For a contract obligation within a period of time, the Group recognises the revenue basedon the progress of the obligation fulfilment within that period of time, except where theprogress of the obligation fulfilment cannot be determined reasonably.
Where the status of completion cannot be reasonably determined, revenue is recognisedat the amount of cost incurred if it is predicted that the cost can be compensated till theprogress of the obligation fulfilment can be reasonably determined.
For a contract obligation at a point in time, the Group recognises the revenue when acustomer is in control of the underlying goods.
(a) Sales of goods
The Group are principally engaged in the manufacturing of heating & ventilation, as well asair-conditioner (hereinafter referred to as “HVAC”) (mainly comprises residential airconditioner, central air-conditioner, heating and ventilation systems) and consumerappliances (mainly comprise kitchen appliances, refrigerators, washing machines andvarious small appliances), and robotics and automation system and sales of products andmaterials to buyers.
Revenue from domestic sales of HVAC and consumer appliances is recognised when theGroup has delivered products to the location specified in the sales contract and the buyerhas confirmed the acceptance of the products, and the delivery order is signed by bothparties. Upon confirming the acceptance, the buyer has the right to sell the products at itsdiscretion and takes the risks of any price fluctuations and obsolescence and loss of theproducts.
Revenue from overseas sales of HVAC and consumer appliances is recognised when theproducts have been declared to the customs and shipped out of the port in accordancewith the sales contract.
Revenue from sales of robotics and automation system is recognised when the Group hasdelivered products to the location specified in the sales contract and the buyer hasconfirmed the acceptance of the products, and the delivery order is signed by both parties.
MIDEA GROUP CO., LTD.- 34 -
- 34 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Revenue (Cont’d)
(a)Sales of goods (Cont’d)
Revenue from sales of materials is recognised when the buyer has confirmed theacceptance of the products, and the delivery order is signed by both parties.
The credit period granted to distributors by the Group is determined based on their creditrisk characteristics, which is consistent with industry practice, and there is no significantfinancing component. Generally, the retail customers of the Group are entitled to return theproducts within 7 days after the confirmation of receipt.
The Group provides distributors with sales discount, and the relevant revenue isrecognised at contract consideration net of the discount amount estimated.
The periods and terms of product quality warranty are provided in accordance with thelaws and regulations related to the products. The Group has not provided any additionalservices or product quality warranty, so the product quality warranty does not constitute aseparate performance obligation.
The rights to receive considerations for transferring goods to the customer (and suchrights depend on factors other than the passage of time) are recognised as contractassets. The Group’s obligation to transfer products to customers for considerationreceived or receivable is presented as contract liabilities.
(b)Rendering of services
The Group provides robotics and automation system construction services, intelligentlogistics integration solution, storage services, delivery services, installation services andtransportation services, which are recognised in a certain period of time based on thestage of completion. On the balance sheet date, the Group re-estimates the stage ofcompletion to reflect the actual status of contract performance.
When the Group recognises revenue based on the stage of completion, the amount withunconditional collection right obtained by the Group is recognised as accounts receivable,and the rest is recognised as contract assets. Meanwhile, loss provision for accountsreceivable and contract assets are recognised on the basis of ECL (Note 2(9)). If thecontract price received or receivable exceeds the amount for the completed services, theexcess portion will be recognised as contract liabilities. Contract assets and contractliabilities under the same contract are presented on a net basis.
MIDEA GROUP CO., LTD.- 35 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Revenue (Cont’d)
(b)Rendering of services (Cont’d)
Contract costs include contract performance costs and contract acquisition costs. Thecosts incurred by the Group for the rendering of services are recognised as contractperformance costs. The recognised revenue is carried forward to the cost of sales frommain operations based on the stage of completion. Incremental costs incurred by theGroup for the acquisition of contract are recognised as the costs to obtain a contract. Forthe costs to obtain a contract with the amortisation period within one year, the costs arecharged to profit or loss when incurred. For the costs to obtain a contract with theamortisation period beyond one year, the costs are charged in the current profit or loss onthe same basis as aforesaid revenue of rendering of services recognised under therelevant contract. If the carrying amount of the contract costs is higher than the remainingconsideration expected to be obtained by rendering of the service net of the estimated costto be incurred, the Group makes provision for impairment on the excess portion andrecognises it as asset impairment losses. As at the balance sheet date, based on whetherthe amortisation period of the costs to fulfil a contract is more than one year when initiallyrecognised, the amount of the Group’s costs to fulfil a contract net of related provision forasset impairment is presented as inventories or other non-current assets. For costs toobtain a contract with amortisation period beyond one year at the initial recognition, theamount net of related provision for asset impairment is presented as other non-currentassets.
(c)Interest income
Interest income from financial instruments is calculated by effective interest rate methodand recognised in profit or loss for the current period. Interest income comprises premiumsor discounts, or the amortisation based on effective rates of other difference between theinitial carrying amount and the due amount of interest-earning assets.
The effective interest rate method is a method of calculating the amortised cost of afinancial asset or liability and the interest income or interest costs based on effective rates.The effective interest rate is the rate at which the estimated future cash flows during theperiod of expected duration of the financial instruments or applicable shorter period arediscounted to the current carrying amount of the financial instruments. When calculatingthe effective interest rate, the Group estimates cash flows by considering all contractualterms of the financial instruments (e.g., early repayment options, similar options, etc.), butwithout considering future credit losses. The calculation includes all fees and interest paidor received that are an integral part of the effective interest rate, transaction costs, and allother premiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is usedfor discounting estimated future cash flow when measuring the impairment loss.
(d)Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(e)Rental income
Rental income from investment prosperities is recognised in the income statement on astraight-line basis over the lease period.
MIDEA GROUP CO., LTD.- 36 -
- 36 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25)Revenue (Cont’d)
(f)Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when theservice is provided. The Group defers the initial charge income or commitment fee incomearising from the forming or acquisition of financial assets as the adjustment to effectiveinterest rate. If the loans are not lent when the loan commitment period is expired, relatedcharges are recognised as fee and commission income.
(26)Government grants
Government grants are transfers of monetary or non-monetary assets from thegovernment to the Group at nil consideration, including refund of taxes and financialsubsidies.
A government grant is recognised when the conditions attached to it can be complied withand the government grant can be received. For a government grant in the form of transferof monetary assets, the grant is measured at the amount received or receivable. For agovernment grant in the form of transfer of non-monetary assets, it is measured at fairvalue; if the fair value is not reliably determinable, the grant is measured at nominalamount.
Government grants related to assets are grants that are acquired by the Group and usedfor acquisition, construction or forming long-term assets in other ways. Government grantsrelated to income refer to the government grants other than those related to assets.
Government grants related to assets are recorded as deferred income reasonably andsystematically amortised to profit or loss over the useful life of the related asset.
For government grants related to income, where the grant is a compensation for relatedexpenses or losses to be incurred by the Group in the subsequent periods, the grant isrecognised as deferred income, and included in profit or loss over the periods in which therelated costs are recognised; where the grant is a compensation for related expenses orlosses already incurred by the Group, the grant is recognised directly in profit or loss for thecurrent period.
The same kind of government grants are presented with the same method.
Those related to ordinary activities are recorded into operating profit while the other innon- operating income and expenses.
Loans to the Group at political preferential rate are recorded at the actual amountreceived, and the related borrowing costs are calculated based on the principal and thepolitical preferential rate. Finance discounts directly received offset related borrowingcosts.
MIDEA GROUP CO., LTD.- 37 -
- 37 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(27)Deferred tax assets and deferred tax liabilities
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 carryingamounts (temporary differences). Deferred tax asset is recognised for the deductiblelosses that can be carried forward to subsequent years for deduction of the taxable profitin accordance with the tax laws. No deferred tax liability is recognised for a temporarydifference arising from the initial recognition of goodwill. No deferred tax asset or deferredtax liability is recognised for the temporary differences resulting from the initial recognitionof assets or liabilities due to a transaction other than a business combination, whichaffects neither accounting profit nor taxable profit (or deductible losses) and whose initiallyrecognised assets and liabilities do not result in equal taxable temporary differences anddeductible temporary differences. At the balance sheet date, deferred tax assets anddeferred tax liabilities are measured at the tax rates that are expected to apply to theperiod when the asset is realised or the liability is settled.
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 inthe future against which the deductible temporary differences, deductible losses and taxcredits can be utilised.
Deferred tax liabilities are recognised for temporary differences arising from investments insubsidiaries, associates and joint ventures, except where the Group is able to control thetiming of reversal of the temporary difference, and it is probable that the temporarydifferences will not be reversed in the foreseeable future. When it is probable that thetemporary differences arising from investments in subsidiaries, associates and jointventures will be reversed in the foreseeable future and that the taxable profit will beavailable in the future against which the temporary differences can be utilised, thecorresponding deferred tax assets are recognised.
Deferred tax assets and deferred tax liabilities are offset when:
? the deferred tax assets and deferred tax liabilities are related to the same tax
payer within the Group and the same taxation authority; and,? that tax payer within the Group has a legally enforceable right to offset current tax
assets against current tax liabilities.
(28)Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of anidentified asset for a period of time in exchange for consideration.
MIDEA GROUP CO., LTD.- 38 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(28) Leases (Cont’d)
The Group as the lessee
At the lease commencement date, the Group recognises the right-of-use asset andmeasures the lease liability at the present value of the lease payments that are not paid atthat date. Lease payments include fixed payments, the exercise price of a purchase optionif the lessee is reasonably certain to exercise that option, and payments of penalties forterminating the lease if the lessee exercises an option to terminate the lease. Variablelease payments in proportion to sales are excluded from lease payments and recognisedin profit or loss as incurred. Lease liabilities that are due within one year (inclusive) as fromthe balance sheet date are included in the current portion of non-current liabilities.
Right-of-use assets of the Group comprise leased buildings, machinery and equipmentand motor vehicles. Right-of-use assets are measured initially at cost which comprises theamount of the initial measurement of lease liabilities, any lease payments made at orbefore the commencement date and any initial direct costs, less any lease incentivesreceived. If there is reasonable certainty that the Group will obtain ownership of theunderlying asset by the end of the lease term, the asset is depreciated over its remaininguseful life; otherwise the asset is depreciated over the shorter of the lease term and itsremaining useful life. The carrying amount of the right-of-use asset is reduced to therecoverable amount when the recoverable amount is below the carrying amount.
| For short-term leases with a term of 12 months or less and leases of an individual asset (when new) of low value, the Group chooses to include the lease payments in the cost of the underlying assets or in the profit or loss for the current period on a straight-line basis over the lease term, instead of recognising right-of-use assets and lease liabilities. |
| The Group accounts for a lease modification as a separate lease if both: (1) the modification increases the scope of the lease by adding the right to use one or more underlying assets; (2) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the contract. |
| For a lease modification that is not accounted for as a separate lease, the Group redetermines the lease term at the effective date of the lease modification, and remeasures the lease liability by discounting the revised lease payments using a revised discount rate, except the contract changes that may apply the practical expedient as specified by the Ministry of Finance. For a lease modification which decreases the scope of the lease or shortens the lease term, the Group correspondingly decreases the carrying amount of the right-of-use asset, and recognises in profit or loss any gain or loss relating to the partial or full termination of the lease. For other lease modifications which lead to the remeasurement of lease liabilities, the Group correspondingly adjusts the carrying amount of the right-of-use asset. |
For the qualified rent concessions agreed on existing lease contracts, the Group appliesthe practical expedient and records the undiscounted concessions in profit or loss whenthe agreement is reached to discharge the original payment obligation with correspondingadjustment of lease liabilities.
MIDEA GROUP CO., LTD.- 39 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(28)Leases (Cont’d)
The Group 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, machinery and equipment, and motor vehicles under operating leases, rental income therefrom is recognised on a straight-line basis over the lease term. Variable rental that is linked to a certain percentage of sales is recognised in rental income as incurred. |
| For the qualified rent concessions agreed on existing lease contracts, the Group applies the practical expedient to account for the concessions as variable lease payments and record the concessions in profit or loss during the waiving period. |
| Except the above contract changes that are accounted for by applying the practical expedient, for a lease modification, the Group accounts for it as a new lease from the effective date of the modification, and considers any lease payments received in advance and receivable relating to the lease before modification as receivables of the new lease. |
(b)Finance leases
At the lease commencement date, the Group recognises the lease payments receivableunder a finance lease and derecognises relevant assets. The lease payments receivableunder a finance lease are presented as long-term receivables; the lease paymentsreceivable under a finance lease due within one year (inclusive) as from the balance sheetdate are included in the current portion of non-current assets.
(29)Segment information
The Group identifies operating segments based on the internal organisation structure,management requirements and internal reporting system, and discloses segmentinformation of reportable segments which is determined on the basis of operatingsegments.
An operating segment is a component of the Group that satisfies all of the followingconditions: (1) the component is able to earn revenue and incur expenses from its ordinaryactivities; (2) whose operating results are regularly reviewed by the Group’s managementto make decisions about resources to be allocated to the segment and to assess itsperformance, and (3) for which the information on financial position, operating results andcash flows is available to the Group. Two or more operating segments that have similareconomic characteristics and satisfy certain conditions can be aggregated into one singleoperating segment.
MIDEA GROUP CO., LTD.- 40 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(30)Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgementsapplied based on historical experience and other factors, including expectations of futureevents that are believed to be reasonable.
The critical accounting estimates and key assumptions that have a significant risk ofcausing a material adjustment to the carrying amounts of assets and liabilities within thenext accounting year are outlined below:
(i) Provision for impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment. The recoverableamount of the asset group or group of asset groups that contain the apportioned goodwillis determined by the higher value between the present value of the future cash flows andthe net value that is calculated by the fair value less the disposal costs. Accountingestimate is required for the calculation of the recoverable amount. The impairment testingis performed by assessing the recoverable amount of the asset group or group of assetgroups containing the relevant goodwill, based on the present value of cash flowsforecasts. Key assumptions adopted in the impairment testing of goodwill includedestimated revenue growth rate, EBITDA margin, perpetual annual growth rate anddiscount rate, which involved critical accounting estimates and judgements.
If management revises the estimated revenue growth rate and perpetual annual growthrate that are used in the calculation of the future cash flows of asset groups or groups ofasset groups, and the revised rates are lower than the current rates, the Group wouldneed to recognise further impairment against goodwill.
If management revises the EBITDA margin that is used in the calculation of the futurecash flows of asset groups or groups of asset groups, and the revised EBITDA margin islower than the current one, the Group would need to recognise further impairment againstgoodwill.
If management revises the pre-tax discount rate applied to the discounted cash flows, andthe revised pre-tax discount rate is higher than the one currently applied, the Group wouldneed to recognise further impairment against goodwill.
MIDEA GROUP CO., LTD.- 41 -
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(30) Critical accounting estimates and judgements (Cont’d)
(i)Provision for impairment of goodwill (Cont’d)
If the actual estimated revenue growth rate, perpetual annual growth rate and EBITDAmargin are higher or the actual pre-tax discount rate is lower than management’sestimates, the impairment loss of goodwill previously provided for is not allowed to bereversed by the Group.
(ii)Income tax and deferred income tax
The Group is subject to enterprise income tax in numerous jurisdictions. There are manytransactions and events for which the ultimate tax determination is uncertain during theordinary course of business. Significant judgement is required from the Group indetermining the provision for income taxes in each of these jurisdictions. Where the finaltax outcome of these matters is different from the amounts that were initially recorded,such differences will impact the income tax and deferred tax provisions in the period inwhich such determination is made.
As stated in Note 3(1), some subsidiaries of the Group are high-tech enterprises. The“High-Tech Enterprise Certificate” is effective for three years. Upon expiration, applicationfor high-tech enterprise assessment should be submitted again to the relevant governmentauthorities. Based on the past experience of reassessment for high-tech enterprise uponexpiration and the actual condition of the subsidiaries, the Group considers that thesubsidiaries are able to obtain the qualification for high-tech enterprises in future years,and therefore a preferential tax rate of 15% is used to calculate the correspondingdeferred income tax. If some subsidiaries cannot obtain the qualification for high-techenterprise upon expiration, then the subsidiaries are subject to a statutory tax rate of 25%for the calculation of the income tax, which further influences the recognised deferred taxassets, deferred tax liabilities and income tax expenses.
Deferred tax assets are recognised for the deductible losses that can be carried forward tosubsequent years to the extent that it is probable that taxable profit will be available in thefuture against which the deductible losses can be utilised. Taxable profit that will beavailable in the future includes the taxable profit that will be realised through normaloperations and the taxable profit that will be increased upon the reversal of taxabletemporary differences incurred in prior periods. Judgements and estimates are required todetermine the time and amounts of taxable profit in the future. Any differences betweenthe reality and the estimate may result in adjustment to the carrying amount of deferred taxassets.
MIDEA GROUP CO., LTD.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
| 2 | Summary of significant accounting policies and accounting estimates (Cont’d) |
| (31) | Significant changes in accounting policies |
| The Ministry of Finance released the Circular on Issuing Interpretation No. 16 of Accounting Standards for Business Enterprises in 2022，in which the provision "On the inapplicability of exemption at initial recognition to the accounting treatment of deferred income tax related to assets and liabilities arising from individual transactions" took effect on 1 January 2023. The Ministry of Finance released the Q&A on Implementation of Accounting Standards for Business Enterprises in 2023. The financial statements for the six months ended 30 June 2023 have been prepared by the Group and the Company in accordance with the above circular and Q&A. The revisions have no significant impacts on the financial statements of the Group and the Company. |
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 input VAT of the current period) | Note (b) |
| City maintenance and construction tax | The amount of VAT paid | 1% or 5% or 7% |
| Educational surcharge | The amount of VAT paid | 3% or 5% |
| Local educational surcharge | The amount of VAT paid | 2% |
| Property tax | Price-based property is subject to a 1.2% tax rate after a 30% cut in the original price of property; rental-based property is subject to a 12% tax rate for the rental income. | 1.2% or 12% |
MIDEA GROUP CO., LTD.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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
(a-1) The following subsidiaries of the Group are subject to an enterprise income tax rate of
15% in 2023 as they qualified as high-tech enterprises and obtained the High-techEnterprise Certificate:
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Jiangsu Midea Cleaning Appliances Co., Ltd. | GR202032012131 | 2 December 2020 | 3 years |
| GD Midea Environment Appliances Mfg. Co., Ltd. | GR202244008573 | 22 December 2022 | 3 years |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | GR202144008574 | 20 December 2021 | 3 years |
| Guangdong Witol Vacuum Electronic Manufacture Co., Ltd. | GR202044001986 | 1 December 2020 | 3 years |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | GR202044003557 | 9 December 2020 | 3 years |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | GR202144012791 | 31 December 2021 | 3 years |
| Foshan Shunde Midea Electric Science and Technology Co., Ltd. | GR202244002733 | 19 December 2022 | 3 years |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | GR202144001270 | 20 December 2021 | 3 years |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | GR202234002343 | 18 October 2022 | 3 years |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | GR202134004969 | 18 September 2021 | 3 years |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | GR202244004828 | 19 December 2022 | 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. | GR202232018102 | 12 December 2022 | 3 years |
| Wuxi Filin Electronics Co., Ltd. | GR202132000964 | 3 November 2021 | 3 years |
| GD Midea Air-Conditioning Equipment Co., Ltd. | GR202044003059 | 1 December 2020 | 3 years |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | GR202013000191 | 27 September 2020 | 3 years |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | GR202042000684 | 1 December 2020 | 3 years |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | GR202044001953 | 1 December 2020 | 3 years |
| Guangdong Swisslog Technology Co., Ltd. | GR202144005648 | 20 December 2021 | 3 years |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | GR202034001383 | 17 August 2020 | 3 years |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | GR202051100347 | 9 October 2020 | 3 years |
| Guangdong Meizhi Compressor Limited | GR202044004270 | 9 December 2020 | 3 years |
| Hubei Midea Refrigerator Co., Ltd. | GR202042000745 | 1 December 2020 | 3 years |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | GR202044007232 | 9 December 2020 | 3 years |
MIDEA GROUP CO., LTD.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 Group are subject to an enterprise income tax rate of
15% in 2023 as they qualified as high-tech enterprises and obtained the High-techEnterprise Certificate (Cont’d):
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Anhui Meizhi Compressor Co., Ltd. | GR202234002700 | 18 October 2022 | 3 years |
| Foshan Shunde Midea Water Dispenser Manufacturing Co., Ltd. | GR202044004098 | 9 December 2020 | 3 years |
| Midea Welling Motor Technology (Shanghai) Co., Ltd. | GR202031001304 | 12 November 2020 | 3 years |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | GR202134003666 | 18 November 2021 | 3 years |
| Hefei Midea Laundry Appliance Co., Ltd. | GR202134003561 | 18 September 2021 | 3 years |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | GR202144010400 | 31 December 2021 | 3 years |
| Toshiba HA Manufacturing (Nanhai) Co., Ltd. | GR202144002672 | 20 December 2021 | 3 years |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | GR202144003890 | 20 December 2021 | 3 years |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | GR202134003382 | 18 September 2021 | 3 years |
| Guangdong Midea Intelligent Technologies Co., Ltd. | GR202144008039 | 20 December 2021 | 3 years |
| WINONE ELEVATOR COMPANY LIMITED | GR202144006432 | 20 December 2021 | 3 years |
| Midea Group Wuhan HVAC Equipment Co., Ltd. | GR202242004390 | 29 November 2022 | 3 years |
| Beijing Hiconics Eco-energy Frequency Conversion Technology Co., Ltd. | GR202011003365 | 21 October 2020 | 3 years |
| Changsha Sunye Electric Co., Ltd. | GR202143000846 | 18 September 2021 | 3 years |
| Beijing Huatairunda Energy Saving Co., Ltd. | GR202111004112 | 17 December 2021 | 3 years |
| Dorna Technology Co., Ltd. | GR202033006717 | 1 December 2020 | 3 years |
| Wuxi Little Swan Electric Co., Ltd. | GR202032006759 | 2 December 2020 | 3 years |
| KUKA Robotics Manufacturing China Co., Ltd. | GR202231004961 | 14 December 2022 | 3 years |
| KUKA Robotics Guangdong Co., Ltd. | GR202044003841 | 9 December 2020 | 3 years |
| Reis Robotics (Kunshan) Co., Ltd. | GR202132000238 | 3 November 2021 | 3 years |
| Midea Intelligent Lighting & Controls Technology Co., Ltd. | GR202036000935 | 14 September 2020 | 3 years |
| Beijing Wandong Medical Technology Co., Ltd. | GR202011009515 | 2 December 2020 | 3 years |
| Wanliyun Medical Information Technology (Beijing) Co., Ltd. | GR202211008024 | 30 December 2022 | 3 years |
| Guangdong Midea Environmental Technologies Co., Ltd. | GR202144004692 | 20 December 2021 | 3 years |
| MR Semiconductor Ltd. | GR202131000701 | 9 October 2021 | 3 years |
| Anhui Welling Auto Parts Corporation Limited | GR202134002578 | 18 September 2021 | 3 years |
| Meicloud Technology Co., Ltd. | GR202144008715 | 20 December 2021 | 3 years |
MIDEA GROUP CO., LTD.
- 45 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 Group are subject to an enterprise income tax rate of
15% in 2023 as they qualified as high-tech enterprises and obtained the High-techEnterprise Certificate (Cont’d):
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Wuhan TTium Motor Technology Co., Ltd. | GR202242004712 | 29 November 2022 | 3 years |
| WDM Esaote (Suzhou) Medical Technology Co., Ltd. | GR202232006635 | 18 November 2022 | 3 years |
| Western-style Electric Products Company | GR202244017262 | 22 December 2022 | 3 years |
| Hefei Hualing Co., Ltd. | GR202134000541 | 18 September 2021 | 3 years |
| Guangdong Yueyun Industrial Internet Innovation Technology Co., Ltd. | GR202244006484 | 22 December 2022 | 3 years |
| Shenzhen Midea Payment Technology Co., Ltd. | GR202244208053 | 19 December 2022 | 3 years |
| Shenzhen Clou Electronics Co., Ltd. | GR202044203594 | 11 December 2020 | 3 years |
| Shenzhen Clou Intelligent Industry Co., Ltd. | GR202144200806 | 23 December 2021 | 3 years |
| Shenzhen Hongzhi Software Co., Ltd. | GR202144200284 | 23 December 2021 | 3 years |
| Sichuan Clou New Energy and Electric Co., Ltd. | GR202051003762 | 3 December 2020 | 3 years |
| Guangdong Shunde Switch Factory Co., Ltd. | GR202044005703 | 9 December 2020 | 3 years |
| Suzhou Clou Dongzi Electric Co., Ltd. | GR202032007954 | 2 December 2020 | 3 years |
| Shenzhen Clou Precision Instruments Co., Ltd. | GR202144202249 | 23 December 2021 | 3 years |
| Clou Global Technology Co., Ltd. | GR202144206543 | 23 December 2021 | 3 years |
MIDEA GROUP CO., LTD.
- 46 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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-2) According to the Notice of the Ministry of Finance, the State Taxation Administration on
Preferential Enterprise Income Tax Policies for Hainan Free-trade Port (Cai Shui [2020] No.
31), the Company’s certain subsidiary in Hainan is subject to enterprise income tax at a rate of15% from 1 January 2020 to 31 December 2024.
(a-3) Pursuant to the Notice on Extending the Preferential Enterprise Income Tax Policies for
Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen,enterprises that meet the notice requirements are subject to a reduced enterprise income taxrate of 15%. Therefore, Midea Commercial Factoring Co., Ltd., a subsidiary of the Company,is subject to enterprise income tax at a rate of 15% from 1 January 2021 to 31 December2025.
(a-4) According to the Announcement on Continuing the Enterprise Income Tax Policies for the
Development of Western China jointly issued by the Ministry of Finance, the State TaxationAdministration and the National Development and Reform Commission on 23 April 2020,Chongqing Midea Air-Conditioning Equipment Co., Ltd., Chongqing Midea CommercialFactoring Co., Ltd., Chongqing Annto Logistics Technology Co., Ltd. and Guiyang AnntoLogistics Technology Co., Ltd., subsidiaries of the Company, are subject to enterprise incometax at a rate of 15% from 1 January 2021 to 31 December 2030.
(a-5) According to the Administration on Further Implementing the Preferential Income Tax Policies
for Small Low-Profit Enterprises (Cai Shui [2022], No. 13) and the Announcement on theMatters Concerning the Implementation of Preferential Income Tax Policies for theDevelopment of Small Low-Profit Enterprises and Individual Industrial and CommercialHouseholds (Cai Shui [2023], No. 6) jointly issued by the Ministry of Finance and the StateTaxation Administration, for Shenzhen Midea Capital Corporation Limited, GuangdongLingmei Technology Co., Ltd., Shanghai Mei'an Logistics Co., Ltd., Foshan Annto LogisticsTechnology Co., Ltd., Shenzhen Annto Intelligent Technology Co., Ltd., Tianjin Annto NetworkTechnology Co., Ltd., Jingzhou Meian Storage and Transportation Co., Ltd. and HangzhouLong-termism Tech Co., Ltd., subsidiaries of the Company and qualified as small low-profitenterprises, in 2023, EIT is based on a 20% rate applied to 25% of its annual taxable incomeamount.
MIDEA GROUP CO., LTD.
- 47 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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-6) The Company's subsidiaries in the Chinese mainland other than those mentioned in (a-1) to
(a-5) are subject to enterprise income tax at the rate of 25%.
(a-7) In August 2008, Midea Electric Trading (Singapore) Co., Pte Ltd., the Company's subsidiary,
was awarded with the Certificate of Honour for Development and Expansion (No. 587) by theSingapore Economic Development Board and is subject to the applicable preferential incometax rate of 5.5% for 2023. Lifestyle Orchestra 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-8) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax at the rate of
16.5%. Such subsidiaries include Midea International Trading Company Limited, MideaInternational Corporation Company Limited, Midea Home Appliances Investments (HongKong) Co., Limited, Century Carrier Residential Air-conditioning Equipment Co., Limited,Midea Refrigeration (Hong Kong) Limited, Welling Holding Limited, Welling International HongKong Ltd., Chairing Holding Limited, Main Power Electrical Factory Limited and MideaInvestment (Asia) Company Limited.
(a-9) 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-10) Springer Carrier Ltda., the Company's subsidiary in Brazil, is subject to Brazil enterprise
income tax at the rate of 34%.
(a-11) Some subsidiaries of TLSC, the Company's subsidiary in Japan, are subject to Japan
enterprise income tax at the rate of 34.01%.
(a-12) 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-13) KUKA Group, the Company's subsidiary in Germany, is subject to Germany enterprise income
tax at the rate of 32%.
(a-14) Servotronix Motion Control Ltd. (“SMC”), the Company's subsidiary in Israel, is subject to
Israel enterprise income tax at the rate of 23%.
(a-15) Misr Refrigeration and Air Conditioning Manufacturing Company, S.A.E., the Company's
subsidiary in Egypt, is subject to Egypt enterprise income tax at the rate of 22.5%.
MIDEA GROUP CO., LTD.
- 48 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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-16) Midea America Corp., the Company's subsidiary in the USA, is subject to the USA enterprise
income tax at the rate of 21%.
(a-17) Midea Consumer Electric (Vietnam) Co., Ltd., the Company's subsidiary in Vietnam, is subject
to Vietnam enterprise income tax at the rate of 20%.
(a-18) Midea Refrigeration Equipment (Thailand) Co., Ltd., the Company's subsidiary in Thailand, is
exempt from enterprise income tax under the investment promotion policy of the ThailandBoard of Investment.
(b)Notes to the VAT rate of the principal tax payers with different tax rates
(b-1) Pursuant to the Announcement on Relevant Policies for Deepening Value-Added Tax Reform
(Announcement [2019] No. 39) jointly issued by the Ministry of Finance, the State TaxationAdministration and the General Administration of Customs and relevant regulations, theapplicable tax rate of revenue arising from sales of goods and rendering of repairing andreplacement services of the Company’s certain subsidiaries is 13% from 1 April 2019, and thatof revenue arising from real estate leasing and transportation services of the Company’scertain subsidiaries is 9%.
(b-2) Financial services, consulting services and storage services provided by the Company and
certain subsidiaries are subject to VAT at the rate of 6%.
(b-3) Rental revenue of the Company’s certain subsidiaries is subject to easy levy of VAT at the rate
of 5%.
(b-4) Pursuant to the Announcement on Exempting Small-Scale Value-Added Tax Taxpayers from
Value-Added Tax (Cai Shui [2023] No. 1) jointly issued by the Ministry of Finance and theState Taxation Administration, certain subsidiaries of the Company engaged in the productionservice sector are eligible for a 5% additional VAT deduction based on deductible input VAT inthe current year from 1 January 2023 to 31 December 2023.
(b-5) Pursuant to the Notice on Further Supporting and Promoting the Business Start-up and
Employment of Priority Groups (Cai Shui [2019] No. 22) issued by the Ministry of Finance, theState Taxation Administration, the Ministry of Human Resources and Social Security and theState Council Leading Group Office of Poverty Alleviation and Development and theAnnouncement on Extending the Implementation Period of Certain Preferential Tax Policiesfor Poverty Alleviation (Announcement [2021] No. 18 of the Ministry of Finance, the StateTaxation Administration, the Ministry of Human Resources and Social Security and theNational Rural Revitalisation Administration) issued by the Ministry of Finance, the StateTaxation Administration, the Ministry of Human Resources and Social Security and theNational Rural Revitalisation Administration, for certain subsidiaries of the Company thatemploy the listed poverty-stricken people, since the month of signing the labour contracts ofmore than 1 year and paying the social security contributions, their VAT, city maintenance andconstruction tax, educational surcharge, local educational surcharge and enterprise incometax will be deducted in sequence and based on quota in accordance with the actual number ofemployees in 3 years, and the period of validity will be until 31 December 2025.
MIDEA GROUP CO., LTD.
- 49 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 | 3,894 | 1,645 |
| Cash at bank (a) | 40,724,931 | 28,581,529 |
| Other cash balances (b) | 2,554,672 | 1,688,278 |
| Statutory reserve with the Central Bank (c) | 579,439 | 328,409 |
| Surplus reserve with the Central Bank | 179,898 | 172,394 |
| Deposits with banks and other financial institutions (d) | 27,348,448 | 24,287,610 |
| Accrued interest | 343,637 | 210,234 |
| Total | 71,734,919 | 55,270,099 |
| Including: Total amounts deposited with banks overseas (including Hong Kong, China, Macau, China, Singapore, Japan, Italy, Brazil and Germany) | 10,318,654 | 7,133,785 |
(a)As at 30 June 2023, cash at bank included fixed deposits with the term of over 3 months butless than 1 year, amounting to RMB 20,696,376,000 (31 December 2022: RMB1,911,210,000).
(b)Other cash balances mainly include deposits for letters of guarantee, bank acceptance notesand letters of credit.
(c)Statutory reserve with the Central Bank represents the statutory reserve deposited in People’sBank of China by the financial enterprise in accordance with relevant regulations. They are notavailable for use in the Group’s daily operations.
(d)Surplus reserve with the Central Bank represents the excess over the required statutoryreserve paid by financial institutions in the Central Bank, and it is bank deposit that can bereadily drawn on demand.
(2) Financial assets held for trading
| Item | Ending balance | Opening balance |
| Structural deposits (a) | 6,090,706 | 1,606,608 |
| Investments in equity instrument held for trading (b) | 1,537,870 | 1,264,595 |
| Others | 565,425 | 413,390 |
| Total | 8,194,001 | 3,284,593 |
(a)As at 30 June 2023, structural deposits were deposits with financial institutions due within 1year, which were measured at fair value through profit or loss.
(b)As at 30 June 2023, investments in equity instrument held for trading referred to equityinvestments in listed companies, which were measured at fair value through profit or loss.
MIDEA GROUP CO., LTD.
- 50 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(3) Notes receivable
| Item | Ending balance | Opening balance |
| Bank acceptance notes | 6,783,260 | 4,705,290 |
| Trade acceptance notes | 185,261 | 114,595 |
| Less: Provision for bad debts (a) | (54,211) | (61,756) |
| Total | 6,914,310 | 4,758,129 |
(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 loss provision based on the lifetime ECLregardless of whether there exists a significant financing component. As at 30 June 2023, theGroup considered that there was no significant credit risk associated with its bank acceptancenotes and did not expect that there would be any significant losses from non-performance bythese banks.
(b)As at 30 June 2023, notes receivable endorsed or discounted but unmatured are as follows:
| Item | Derecognised | Not derecognised |
| Bank acceptance notes | 66,060 | 4,274,053 |
(4) Accounts receivable
| Item | Ending balance | Opening balance |
| Accounts receivable | 38,000,493 | 29,570,582 |
| Less: Provision for bad debts | (1,545,521) | (1,332,609) |
| Total | 36,454,972 | 28,237,973 |
(a)The ageing of accounts receivable is analysed as follows:
| Ageing | Ending balance | Opening balance |
| Within 1 year | 36,698,872 | 28,142,167 |
| 1 to 2 years | 857,602 | 1,099,842 |
| 2 to 3 years | 207,209 | 140,153 |
| 3 to 5 years | 159,151 | 101,202 |
| Over 5 years | 77,659 | 87,218 |
| Sub-total | 38,000,493 | 29,570,582 |
As at 30 June 2023, the Group had no significant overdue accounts receivable.
MIDEA GROUP CO., LTD.
- 51 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 based on the lifetime ECL.
As at 30 June 2023, accounts receivable for which the related provision for bad debts wasprovided on an individual basis are analysed as follows:
| Category | Ending balance | |||
| Book balance | Lifetime ECL rate | Provision for bad debts | Reason | |
| Domestic customers | 748,236 | 86.86% | (649,952) | The debtor encountered financial distress, etc. |
| Overseas customers | 15,504 | 100.00% | (15,504) | The debtor encountered financial distress, etc. |
| Total | 763,740 | (665,456) | ||
As at 30 June 2023, 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 | 15,256,863 | 2.71% | (413,459) |
| Overseas business grouping | 21,979,890 | 2.12% | (466,606) |
| Total | 37,236,753 | (880,065) | |
(c)For the six months ended 30 June 2023, the provision for bad debts reversed amounted toRMB 206,610,000.
For the six months ended 30 June 2023, the accounts receivable written off by the Group werearising from transactions with third parties and no accounts receivable with significant amountswere written off.
(d)As at 30 June 2023, the five largest accounts receivable aggregated by debtor are summarisedand analysed as follows:
| Item | Amount | Provision for bad debts | % of total balance |
| Total amount of the five largest accounts receivable | 2,296,018 | (57,400) | 6.04% |
(5) Other receivables
| Item | Ending balance | Opening balance |
| Other receivables | 1,904,198 | 2,249,186 |
| Less: Provision for bad debts | (41,333) | (38,009) |
| Total | 1,862,865 | 2,211,177 |
(a)Other receivables mainly include security deposit and guarantee, receivables related to shareoptions, current accounts and petty cash to staff.
The ageing of other receivables is analysed as follows:
MIDEA GROUP CO., LTD.
- 52 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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)
| Ageing | Ending balance | Opening balance |
| Within 1 year | 1,523,828 | 1,932,646 |
| 1 to 2 years | 123,417 | 137,213 |
| 2 to 3 years | 114,406 | 97,205 |
| 3 to 5 years | 85,506 | 48,616 |
| Over 5 years | 57,041 | 33,506 |
| Sub-total | 1,904,198 | 2,249,186 |
(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 2023 | 2,176,965 | 33,747 | 67,959 | - | 4,262 | 4,262 | 38,009 |
| Transfer to Stage 3 | (1,876) | (188) | - | - | 1,876 | 188 | - |
| Net (decrease)/increase in the current year | (305,692) | 5,876 | (39,066) | - | (230) | 1,367 | 7,243 |
| Including: Written-off in the current period | - | - | - | - | (230) | (230) | (230) |
| Derecognition | - | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | (4,010) | - | 91 | (3,919) | |||
| 30 June 2023 | 1,869,397 | 35,425 | 28,893 | - | 5,908 | 5,908 | 41,333 |
(i)As at 30 June 2023, other receivables for which the related provision for bad debts wasprovided on an individual basis are analysed as follows:
| Stage 1 | Book balance | 12-month ECL rate | Provision for bad debts | Reason |
| 28,893 | 0% | - | Low risk of expected losses |
| Stage 3 | Book balance | 12-month ECL rate | Provision for bad debts | Reason |
| 5,908 | 100.00% | (5,908) | The debtor encountered financial distress, etc. |
(ii)As at 30 June 2023, other receivables for which the related provision for bad debts wasprovided on the grouping basis were all at Stage 1, which are 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 and other receivables grouping | 1,869,397 | (35,425) | 1.89% | 2,176,965 | (33,747) | 1.55% |
(c)For the six months ended 30 June 2023, the provision for bad debts reversed amounted toRMB 23,567,000.
For the six months ended 30 June 2023, no other receivables with significant amounts werewritten off.
(d)As at 30 June 2023, the five largest other receivables aggregated by debtor are summarisedand analysed as follows:
| Item | Amount | Provision for bad debts | % of total balance |
| Total amount of the five largest other receivables | 179,285 | (4,865) | 9.42% |
(e)As at 30 June 2023, the Group had no significant government grants recognised at amountsreceivable.
MIDEA GROUP CO., LTD.
- 53 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(6) Receivables financing
| Item | Ending balance | Opening balance |
| Receivables financing | 15,466,934 | 13,526,540 |
The Group’s receivables financing were mainly bank acceptance notes transferred, discountedand endorsed for the purpose of daily treasury management and were qualified forderecognition.
As at 30 June 2023 and 31 December 2022, the Group measured provision for bad debtsbased on the lifetime ECL. As the credit risk characteristics of these bank acceptance noteswere similar, no provision for impairment was made individually. The Group expected thatthere was no significant credit risk associated with its bank acceptance notes and did notexpect that there would be any significant losses from non-performance by these banks.
As at 30 June 2023, the Group’s bank acceptance notes endorsed or discounted but notmatured that were presented in receivables financing are as follows:
| Item | Derecognised | Not derecognised |
| Receivables financing | 22,299,376 | - |
(7) Advances to suppliers
| Item | Ending balance | Opening balance |
| Prepayments for raw materials and others | 4,471,677 | 4,367,211 |
(a)The ageing of advances to suppliers is analysed below:
| Ageing | Ending balance | Opening balance | ||
| Amount | % of total balance | Amount | % of total balance | |
| Within 1 year | 4,346,531 | 97.20% | 4,238,120 | 97.04% |
| 1 to 2 years | 68,310 | 1.53% | 83,905 | 1.92% |
| 2 to 3 years | 19,951 | 0.45% | 17,820 | 0.41% |
| Over 3 years | 36,885 | 0.82% | 27,366 | 0.63% |
| Total | 4,471,677 | 100.00% | 4,367,211 | 100.00% |
As at 30 June 2023, advances to suppliers with ageing over 1 year with a carrying amount ofRMB 125,146,000 (31 December 2022: RMB 129,091,000) were mainly unsettledprepayments for raw materials.
As at 30 June 2023, the five largest advances to suppliers aggregated by debtor aresummarised and analysed as follows:
| Item | Amount | % of total balance |
| Total amount of the five largest advances to suppliers | 1,000,990 | 22.39% |
MIDEA GROUP CO., LTD.
- 54 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 | 4,779,910 | 4,572,177 |
| Less: Provision for impairment of contract assets | (75,993) | (73,221) |
| Total | 4,703,917 | 4,498,956 |
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 2023, contract assets for which the related provision for bad debts wasprovided on the grouping basis are analysed as follows:
| Grouping | Ending balance | ||
| Book balance | Lifetime ECL rate | Provision for bad debts | |
| Domestic business grouping | 1,371,191 | 3.00% | (41,091) |
| Overseas business grouping | 3,408,719 | 1.02% | (34,902) |
| Total | 4,779,910 | (75,993) | |
(9) Loans and advances
(a) By individual and corporation:
| Item | Ending balance | Opening balance |
| Loans and advances measured at amortised cost | ||
| Loans and advances to individuals | 1,947,940 | 1,820,952 |
| Loans and advances to corporations | 16,662,316 | 13,475,027 |
| Including: Loans | 10,391,343 | 11,138,739 |
| Note discounting | 6,270,973 | 2,336,288 |
| Sub-total | 18,610,256 | 15,295,979 |
| Less: Provision for loan losses | (463,567) | (463,929) |
| Total | 18,146,689 | 14,832,050 |
As at 30 June 2023, loans and advances over 1 year amounted to RMB 1,393,851,000 (31December 2022: RMB 693,294,000).
MIDEA GROUP CO., LTD.
- 55 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(9) Loans and advances (Cont’d)
(b) By type of collateral held:
| Item | Ending balance | Opening balance |
| Unsecured loans | 1,947,508 | 1,818,768 |
| Guaranteed loans | 512,890 | 598,437 |
| Pledged loans | 16,149,858 | 12,878,774 |
| Sub-total | 18,610,256 | 15,295,979 |
| Less: Provision for loan losses | (463,567) | (463,929) |
| Total | 18,146,689 | 14,832,050 |
(10) Inventories
(a) Inventories are summarised by category as follows:
| Item | Ending balance | Opening balance | ||||
| Book balance | Provision for decline in the value of inventories | Carrying amount | Book balance | Provision for decline in the value of inventories | Carrying amount | |
| Finished goods | 22,718,188 | (308,087) | 22,410,101 | 34,753,459 | (458,121) | 34,295,338 |
| Raw materials | 8,714,024 | (339,837) | 8,374,187 | 8,675,143 | (241,247) | 8,433,896 |
| Work in progress | 2,259,214 | - | 2,259,214 | 2,519,241 | - | 2,519,241 |
| Consigned processing materials | 385,740 | - | 385,740 | 427,838 | - | 427,838 |
| Contract fulfilment costs | 263,803 | 263,803 | 368,584 | 368,584 | ||
| Total | 34,340,969 | (647,924) | 33,693,045 | 46,744,265 | (699,368) | 46,044,897 |
(b) Analysis of provision for decline in the value of inventories is as follows:
| Item | Opening balance | Increase in provision for the current period | Decrease in reversal or write-off for the current period | Differences on translation of foreign currency financial statements | Ending balance |
| Finished goods | 458,121 | 83,915 | (249,902) | 15,953 | 308,087 |
| Raw materials | 241,247 | 108,900 | (27,508) | 17,198 | 339,837 |
| Total | 699,368 | 192,815 | (277,410) | 33,151 | 647,924 |
(c) Provision for decline in the value of inventories is as follows:
| Item | Basis of provision for decline in the value of inventories | Reason for write-off of provision for decline in the value of inventories in the current period |
| Finished goods | Stated at the lower of cost and net realisable value | Sales |
| Raw materials and others | 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 |
| Long-term receivables due within 1 year | 477,613 | 553,591 |
| Other debt investments due within 1 year | 8,481,151 | 5,875,076 |
| Current portion of other non-current assets | 27,936,774 | 31,124,411 |
| Total | 36,895,538 | 37,553,078 |
MIDEA GROUP CO., LTD.
- 56 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 |
| Fixed-income products (a) | 35,248,611 | 38,748,850 |
| Input VAT to be deducted | 3,259,529 | 3,875,519 |
| Prepaid expenses | 1,196,588 | 856,455 |
| Others | 2,939,286 | 3,061,554 |
| Total | 42,644,014 | 46,542,378 |
(a) As at 30 June 2023, fixed-income products were mainly monetary investment products which
were deposited in financial institutions with maturities of no more than 1 year at the time ofacquisition, which were subsequently measured at amortised cost.
(b) As at 30 June 2023, the Group's transferable certificates of deposit due within 1 year sincethe time of acquisition amounted to approximately RMB 153,146,000 (31 December 2022:
RMB 656,967,000), and were measured at fair value through other comprehensive income.
(c) As at 30 June 2023, the Group considered that there was no significant increase in credit
risk of fixed-income products and transferable certificates of deposit since initial recognition,and made provision for loss based on 12-month ECL. The Group considered that there wasno significant credit risk associated with them, and did not expect that there would be anysignificant losses from non-performance by these financial institutions.
(13) Other debt investments
| Item | Ending balance | Opening balance |
| Fair value through other comprehensive income | ||
| - Transferable certificates of deposit | 14,693,213 | 16,969,335 |
| Less: Other debt investments due within 1 year | (8,481,151) | (5,875,076) |
| Total | 6,212,062 | 11,094,259 |
As at 30 June 2023, the cost of the Group’s transferable certificates of deposit approximatedits fair value.
As at 30 June 2023, the Group expected that there was no significant increase in credit riskof transferable certificates of deposit since initial recognition, and made provision for lossbased on 12-month ECL. The Group considered that there was no significant credit riskassociated with transferable certificates of deposit, and did not expect that there would beany significant losses from non-performance by these banks.
(14) Long-term receivables
| Item | Ending balance | Opening balance |
| Long-term receivables | 1,108,299 | 1,176,968 |
| Less: Provision for bad debts | (9,088) | (8,779) |
| Total | 1,099,211 | 1,168,189 |
| Less: Long-term receivables due within 1 year | (477,613) | (553,591) |
| Total | 621,598 | 614,598 |
The Group’s long-term receivables are mainly presented in net amount of finance leasereceivables after offsetting the unrealised financing income.
MIDEA GROUP CO., LTD.
- 57 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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) | 4,731,210 | 5,188,817 |
| Less: Provision for impairment of long-term equity investments | - | - |
| Total | 4,731,210 | 5,188,817 |
(a) Investments in associates mainly refer to the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd., ShenZhen CEGN Co.,Ltd. and Hefei Royalstar Motor Co., Ltd.and other enterprises by the Group.
(b) For the six months ended 30 June 2023, the Group's revenue from sales to associates
accounted for approximately 1% of the operating revenue for the reporting period, and thebalance of the Group's receivable from associates at the end of the period accounted forapproximately 2% of the balance of accounts receivable. These transactions are negotiatedon normal commercial terms with reference to market prices.
(16) Other non-current financial assets
| Item | Ending balance | Opening balance |
| Measured at fair value | ||
| ——Equity investments | 6,145,336 | 6,348,556 |
| ——Others | 3,052,539 | 4,276,688 |
| Total | 9,197,875 | 10,625,244 |
(a) As at 30 June 2023, the main information of the Group’s unmatured cross-currency interest
rate swaps is set out in Note 4(37).
MIDEA GROUP CO., LTD.
- 58 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 |
| Original carrying amount | ||||||
| Opening balance | 22,049,136 | 1,335,277 | 24,331,913 | 773,893 | 6,376,643 | 54,866,862 |
| Increase in the current period | 2,133,308 | - | 1,553,598 | 102,993 | 630,300 | 4,420,199 |
| 1) Purchase | 24,728 | - | 1,111,575 | 12,362 | 476,679 | 1,625,344 |
| 2) Transfer from construction in progress | 1,009,940 | - | 74,962 | - | 45,084 | 1,129,986 |
| 3) Increase by business combinations | 1,083,399 | - | 367,061 | 90,631 | 108,537 | 1,649,628 |
| 4) Others | 15,241 | - | - | - | - | 15,241 |
| Decrease in the current period | (182,358) | (19,377) | (576,835) | (24,111) | (210,382) | (1,013,063) |
| 1) Disposal or retirement | (55,339) | - | (442,117) | (24,111) | (116,541) | (638,108) |
| 2) Others | (127,019) | (19,377) | (134,718) | - | (93,841) | (374,955) |
| Differences on translation of foreign currency financial statements | 79,996 | 6,392 | 54,428 | (1,139) | 52,117 | 191,794 |
| Ending balance | 24,080,082 | 1,322,292 | 25,363,104 | 851,636 | 6,848,678 | 58,465,792 |
| Accumulated depreciation | ||||||
| Opening balance | 9,928,550 | - | 13,686,225 | 552,718 | 4,560,855 | 28,728,348 |
| Increase in the current period | 541,003 | - | 829,076 | 17,914 | 449,754 | 1,837,747 |
| 1) Provision | 530,061 | - | 829,076 | 17,914 | 449,754 | 1,826,805 |
| 2) Others | 10,942 | - | - | - | - | 10,942 |
| Decrease in the current period | (90,833) | - | (348,496) | (13,250) | (108,198) | (560,777) |
| 1) Disposal or retirement | (34,681) | - | (330,833) | (13,250) | (77,653) | (456,417) |
| 2) Others | (56,152) | - | (17,663) | - | (30,545) | (104,360) |
| Differences on translation of foreign currency financial statements | 8,788 | - | 27,671 | (566) | 30,381 | 66,274 |
| Ending balance | 10,387,508 | - | 14,194,476 | 556,816 | 4,932,792 | 30,071,592 |
| Provision for impairment | ||||||
| Opening balance | 9,425 | 5,365 | 12,238 | 20,891 | 7,603 | 55,522 |
| Increase in the current period | - | - | 4,501 | - | - | 4,501 |
| 1) Provision | - | - | 4,501 | - | - | 4,501 |
| Decrease in the current period | - | - | (433) | - | (2,084) | (2,517) |
| 1) Disposal or retirement | - | - | (433) | - | (2,084) | (2,517) |
| Differences on translation of foreign currency financial statements | (127) | (63) | (8) | 4 | 123 | (71) |
| Ending balance | 9,298 | 5,302 | 16,298 | 20,895 | 5,642 | 57,435 |
| Carrying amount at the end of the period | 13,683,276 | 1,316,990 | 11,152,330 | 273,925 | 1,910,244 | 28,336,765 |
| Carrying amount at the beginning of the period | 12,111,161 | 1,329,912 | 10,633,450 | 200,284 | 1,808,185 | 26,082,992 |
(a) For the six months ended 30 June 2023, the depreciation of fixed assets amounted to RMB
1,826,805,000 (for the six months ended 30 June 2022: RMB 1,575,791,000) and wasincluded in the income statement in full amount.
(b) As at 30 June 2023, the Company was still in the course of obtaining the ownership
certificate for the fixed asset with a carrying amount of RMB 1,543,547,000 (31 December2022: RMB 1,359,215,000).
MIDEA GROUP CO., LTD.
- 59 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 | |
| Shanghai Global Innovation Center Project | 1,622,667 | - | 1,622,667 | 1,427,405 | - | 1,427,405 |
| Intelligent Energy Industrial Park | 1,267,264 | - | 1,267,264 | - | - | - |
| Midea Headquarters A08 Land Parcel Project | 537,888 | - | 537,888 | 357,612 | - | 357,612 |
| Thailand Factories | 371,247 | - | 371,247 | 347,207 | - | 347,207 |
| Midea Xingtan Industrial Park Project | 269,220 | - | 269,220 | 153,893 | - | 153,893 |
| Welling Auto Parts Project | 178,578 | - | 178,578 | 152,457 | - | 152,457 |
| Midea Headquarters A04 Land Parcel Project | 278 | 278 | 147,143 | 147,143 | ||
| Midea Digital Factory Project | 314,853 | 314,853 | 142,595 | 142,595 | ||
| Other projects | 888,724 | (36,210) | 852,514 | 1,149,607 | (34,142) | 1,115,465 |
| Total | 5,450,719 | (36,210) | 5,414,509 | 3,877,919 | (34,142) | 3,843,777 |
- 60 -
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress (Cont’d)
(a) Movements of significant projects of construction in progress
| Project name | Opening balance | Increase in the current period | Transfer to fixed assets | Other decreases | Translation of foreign currency financial statements | Ending balance | Source of funds |
| Shanghai Global Innovation Center Project | 1,427,405 | 195,262 | - | - | - | 1,622,667 | Self-financing |
| Intelligent Energy Industrial Park | - | 1,267,264 | - | - | - | 1,267,264 | Self-financing |
| Midea Headquarters A08 Land Parcel Project | 357,612 | 180,276 | - | - | - | 537,888 | Self-financing |
| Thailand Factories | 347,207 | 20,300 | - | - | 3,740 | 371,247 | Self-financing |
| Midea Xingtan Industrial Park Project | 153,893 | 115,327 | - | - | - | 269,220 | Self-financing |
| Welling Auto Parts Project | 152,457 | 26,121 | - | - | - | 178,578 | Self-financing |
| Midea Headquarters A04 Land Parcel Project | 147,143 | 99,075 | (245,940) | - | - | 278 | Self-financing |
| Midea Digital Factory Project | 142,595 | 172,258 | - | - | - | 314,853 | Borrowings/Self-financing |
| Other projects | 1,149,607 | 662,398 | (884,046) | (40,862) | 1,627 | 888,724 | Self-financing |
| Total | 3,877,919 | 2,738,281 | (1,129,986) | (40,862) | 5,367 | 5,450,719 |
(i)For the six months ended 30 June 2023, no significant borrowing costs were capitalised.
(ii)As at 30 June 2023, the cost of construction in progress matched the budget amount, and the projects were carried out on schedule.
MIDEA GROUP CO., LTD.- 61 -
- 61 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(19) Right-of-use assets
| Item | Buildings | Machinery and equipment | Land use rights and others | Total |
| Original carrying amount | ||||
| Opening balance | 3,542,397 | 292,273 | 121,807 | 3,956,477 |
| Increase in the current period | 1,023,709 | 72,534 | 28,079 | 1,124,322 |
| 1) New lease contracts | 1,005,456 | 45,296 | 26,187 | 1,076,939 |
| 2) Lease modifications and others | 18,253 | 27,238 | 1,892 | 47,383 |
| Decrease in the current period | (695,597) | (60,109) | (25,783) | (781,489) |
| 1) Expiration of lease contract | (444,451) | (36,388) | (11,639) | (492,478) |
| 2) Lease modifications and others | (251,146) | (23,721) | (14,144) | (289,011) |
| Differences on translation of foreign currency financial statements | 52,976 | 11,981 | 836 | 65,793 |
| Ending balance | 3,923,485 | 316,679 | 124,939 | 4,365,103 |
| Accumulated depreciation | ||||
| Opening balance | 1,391,933 | 189,696 | 34,970 | 1,616,599 |
| Increase in the current period | 500,627 | 43,053 | 15,244 | 558,924 |
| 1) Provision | 500,627 | 43,053 | 15,244 | 558,924 |
| Decrease in the current period | (460,246) | (47,175) | (14,345) | (521,766) |
| 1) Expiration of lease contract | (444,451) | (36,388) | (11,639) | (492,478) |
| 2) Lease modifications and others | (15,795) | (10,787) | (2,706) | (29,288) |
| Differences on translation of foreign currency financial statements | 16,296 | 7,490 | (82) | 23,704 |
| Ending balance | 1,448,610 | 193,064 | 35,787 | 1,677,461 |
| Carrying amount at the end of the period | 2,474,875 | 123,615 | 89,152 | 2,687,642 |
| Carrying amount at the beginning of the period | 2,150,464 | 102,577 | 86,837 | 2,339,878 |
MIDEA GROUP CO., LTD.- 62 -
- 62 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 |
| Original carrying amount | ||||||
| Opening balance | 7,623,704 | 3,232,374 | 4,894,654 | 2,188,283 | 5,841,999 | 23,781,014 |
| Increase in the current period | 602,875 | 1,055,483 | - | - | 612,854 | 2,271,212 |
| 1) Purchase | 62,870 | 2,115 | - | - | 5,329 | 70,314 |
| 2) Increase by business combinations | 538,827 | 1,053,368 | - | - | 474,111 | 2,066,306 |
| 3) Others | 1,178 | - | - | - | 133,414 | 134,592 |
| Decrease in the current period | - | (6,832) | - | - | (176,818) | (183,650) |
| 1) Disposal | - | (6,832) | - | - | (146,829) | (153,661) |
| 2) Others | - | - | - | - | (29,989) | (29,989) |
| Differences on translation of foreign currency financial statements | (806) | 85,599 | 294,619 | (94,294) | 235,347 | 520,465 |
| Ending balance | 8,225,773 | 4,366,624 | 5,189,273 | 2,093,989 | 6,513,382 | 26,389,041 |
| Accumulated amortisation | ||||||
| Opening balance | 1,278,249 | 1,172,588 | 219,885 | 383,604 | 3,589,984 | 6,644,310 |
| Increase in the current period | 77,152 | 120,574 | 35,761 | 25,307 | 251,829 | 510,623 |
| 1) Provision | 76,123 | 120,574 | 35,761 | 25,307 | 251,829 | 509,594 |
| 2) Others | 1,029 | - | - | - | - | 1,029 |
| Decrease in the current period | - | (6,381) | - | - | (146,289) | (152,670) |
| 1) Disposal | - | (6,381) | - | - | (128,080) | (134,461) |
| 2) Others | - | - | - | - | (18,209) | (18,209) |
| Differences on translation of foreign currency financial statements | 49 | 44,531 | 11,442 | (14,948) | 146,471 | 187,545 |
| Ending balance | 1,355,450 | 1,331,312 | 267,088 | 393,963 | 3,841,995 | 7,189,808 |
| Provision for impairment | ||||||
| Opening balance | - | 107,427 | - | - | 120,362 | 227,789 |
| Increase in the current period | - | - | - | - | 2,989 | 2,989 |
| 1) Provision | - | - | - | - | 2,989 | 2,989 |
| Decrease in the current period | - | - | - | - | - | - |
| 1) Disposal | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | - | 4,354 | - | - | 10,315 | 14,669 |
| Ending balance | - | 111,781 | - | - | 133,666 | 245,447 |
| Carrying amount at the end of the period | 6,870,323 | 2,923,531 | 4,922,185 | 1,700,026 | 2,537,721 | 18,953,786 |
| Carrying amount at the beginning of the period | 6,345,455 | 1,952,359 | 4,674,769 | 1,804,679 | 2,131,653 | 16,908,915 |
(a) For the six months ended 30 June 2023, the amortisation of intangible assets amounted to
RMB 509,594,000 (for the six months ended 30 June 2022: RMB 518,387,000) and wasincluded in the income statement in full amount.
(b) As at 30 June 2023, the Company had no significant intangible assets which were still in
the course of obtaining the ownership certificate (31 December 2022: the carrying amountwas RMB 33,814,900).
- 63 -MIDEA GROUP CO., LTD.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 relevant cash generating unit and cashgenerating units at the acquisition date, and the allocation is as follows:
| Name of investee | Ending balance | Opening balance |
| KUKA Group | 22,415,423 | 21,122,932 |
| TLSC Group | 2,332,497 | 2,437,914 |
| Little Swan | 1,361,306 | 1,361,306 |
| Others | 5,387,851 | 4,149,906 |
| Sub-total | 31,497,077 | 29,072,058 |
| Less: Provision for impairment | (572,006) | (523,405) |
| Total | 30,925,071 | 28,548,653 |
(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 | 8,503,051 | 1,800,470 | 6,424,498 | 1,500,622 |
| Provision for asset impairment | 4,975,452 | 1,030,122 | 3,562,556 | 753,511 |
| Employee benefits payable | 745,461 | 150,233 | 931,503 | 190,398 |
| Other current liabilities | 41,892,650 | 7,804,468 | 35,502,379 | 6,534,476 |
| Others | 17,091,205 | 3,493,678 | 14,889,531 | 3,233,559 |
| Total | 73,207,819 | 14,278,971 | 61,310,467 | 12,212,566 |
(b) Deferred tax liabilities before offsetting
| Deferred tax liabilities | Ending balance | Opening balance | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Changes in fair value | 845,422 | 207,792 | 1,043,209 | 236,440 |
| Business combinations involving enterprises not under common control | 13,708,467 | 3,351,386 | 10,898,558 | 2,921,290 |
| Others | 16,277,483 | 3,361,612 | 16,872,927 | 3,458,213 |
| Total | 30,831,372 | 6,920,790 | 28,814,694 | 6,615,943 |
- 64 -MIDEA GROUP CO., LTD.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(23) Deferred tax assets and deferred tax liabilities (Cont’d)
(c) The net balances of deferred tax assets and deferred tax liabilities after offsetting are as
follows:
| Item | Balance after offsetting at the end of the period | Balance after offsetting at the beginning of the period |
| Deferred tax assets | 12,439,908 | 10,244,296 |
| Deferred tax liabilities | 5,081,727 | 4,647,673 |
(24) Other non-current assets
| Item | Ending balance | Opening balance |
| Fixed-income products (a) | 85,282,339 | 73,157,118 |
| Less: Fixed-income products due within 1 year | (27,936,774) | (31,124,411) |
| Sub-total | 57,345,565 | 42,032,707 |
| Others | 1,157,444 | 807,372 |
| Total | 58,503,009 | 42,840,079 |
(a) As at 30 June 2023, fixed-income products were mainly monetary investment products which
were deposited in financial institutions with maturities of more than 1 year at the time ofacquisition, and were subsequently measured at amortised cost.
- 65 -
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 2023 | Increase in the current period | Decrease in the current period | Differences on translation of foreign currency financial statements and others | 30 June 2023 | |
| Reversal | Write-off | |||||
| Provision for bad debts | 1,905,082 | 465,333 | (243,909) | (19,166) | 6,380 | 2,113,720 |
| Including: Provision for bad debts of accounts receivable | 1,332,609 | 429,568 | (206,610) | (18,936) | 8,890 | 1,545,521 |
| Provision for losses of loans and advances | 463,929 | - | (1,907) | - | 1,545 | 463,567 |
| Provision for bad debts of notes receivable | 61,756 | 1,375 | (8,920) | - | - | 54,211 |
| Provision for bad debts of other receivables | 38,009 | 31,040 | (23,567) | (230) | (3,919) | 41,333 |
| Provision for bad debts of long-term receivables | 8,779 | 3,350 | (2,905) | - | (136) | 9,088 |
| Provision for decline in the value of inventories | 699,368 | 192,815 | (9,033) | (268,377) | 33,151 | 647,924 |
| Provision for impairment of fixed assets | 55,522 | 4,501 | - | (2,517) | (71) | 57,435 |
| Provision for impairment of intangible assets | 227,789 | 2,989 | - | - | 14,669 | 245,447 |
| Provision for impairment of contract assets | 73,221 | 1,624 | (3,836) | - | 4,984 | 75,993 |
| Provision for impairment of investment properties | 12,576 | - | - | - | - | 12,576 |
| Provision for impairment of construction in progress | 34,142 | - | - | - | 2,068 | 36,210 |
| Provision for impairment of goodwill | 523,405 | - | - | - | 48,601 | 572,006 |
| Total | 3,531,105 | 667,262 | (256,778) | (290,060) | 109,782 | 3,761,311 |
MIDEA GROUP CO., LTD.
- 66 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(26) Main assets with use rights restricted
As at 30 June 2023, main assets with use rights restricted are as follows:
| Item | Ending balance | Opening balance |
| Cash at bank and on hand | ||
| Including: Cash at bank (Note 4(1)) | 20,696,376 | 1,911,210 |
| Other cash balances (Note 4(1)) | 2,554,672 | 1,688,278 |
| Statutory reserve with the Central Bank (Note 4(1)) | 579,439 | 328,409 |
| Total | 23,830,487 | 3,927,897 |
(27) Short-term borrowings
| Item | Ending balance | Opening balance |
| Unsecured borrowings | 7,838,055 | 3,192,163 |
| Guaranteed borrowings | 8,154,543 | 1,399,219 |
| Pledged borrowings | 3,246,509 | 578,098 |
| Mortgage borrowings | 50,000 | - |
| Total | 19,289,107 | 5,169,480 |
As at 30 June 2023, the annual interest rate range of short-term borrowings was 1.40% to
16.01% (31 December 2022: 1.40% to 15.45%).
(28) Notes payable
| Item | Ending balance | Opening balance |
| Bank acceptance notes | 14,236,566 | 25,572,421 |
(29) Accounts payable
| Item | Ending balance | Opening balance |
| Materials cost payable | 65,767,401 | 59,880,772 |
| Others | 5,917,490 | 4,352,453 |
| Total | 71,684,891 | 64,233,225 |
As at 30 June 2023, accounts payable with ageing over 1 year with a carrying amount ofRMB 1,218,518,000 (31 December 2022: RMB 1,168,348,000) were mainly unsettledaccounts payable for materials.
(30) Contract liabilities
| Item | Ending balance | Opening balance |
| Advances on sales and services, etc. | 26,184,214 | 25,143,337 |
| Advances for construction projects | 2,890,971 | 2,816,701 |
| Total | 29,075,185 | 27,960,038 |
MIDEA GROUP CO., LTD.
- 67 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(31) Employee benefits payable
| Item | Ending balance | Opening balance |
| Short-term employee benefits payable (a) | 6,037,790 | 7,041,973 |
| Others | 122,576 | 110,244 |
| Total | 6,160,366 | 7,152,217 |
(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 | 6,539,923 | 15,255,769 | (16,393,705) | 5,401,987 |
| Staff welfare | 326,811 | 1,132,989 | (1,018,027) | 441,773 |
| Social security contributions | 79,340 | 1,111,990 | (1,093,924) | 97,406 |
| Including: Medical insurance | 78,163 | 1,071,905 | (1,054,272) | 95,796 |
| Work injury insurance | 778 | 26,877 | (26,625) | 1,030 |
| Maternity insurance | 399 | 13,208 | (13,027) | 580 |
| Housing funds | 25,687 | 352,910 | (358,741) | 19,856 |
| Labour union funds and employee education funds | 22,002 | 68,867 | (66,235) | 24,634 |
| Other short-term employee benefits | 48,210 | 375,533 | (371,609) | 52,134 |
| Sub-total | 7,041,973 | 18,298,058 | (19,302,241) | 6,037,790 |
(32) Taxes payable
| Item | Ending balance | Opening balance |
| Enterprise income tax payable | 3,525,337 | 2,813,522 |
| Unpaid VAT | 1,642,236 | 975,035 |
| Others | 1,176,178 | 1,166,778 |
| Total | 6,343,751 | 4,955,335 |
(33) Other payables
| Item | Ending balance | Opening balance |
| Other payables | 4,941,956 | 4,322,025 |
(a) Other payables are mainly restricted share repurchase obligation, deposit and security
deposit payable and reimbursed logistics expense.
(b) As at 30 June 2023, other payables with ageing over 1 year with a carrying amount of RMB
1,297,284,000 (31 December 2022: RMB 1,538,928,000) were mainly those recognised forperforming equity incentive plan and deposit and security deposit payable, which wereunsettled since related projects were uncompleted.
MIDEA GROUP CO., LTD.
- 68 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(34) Current portion of non-current liabilities
| Item | Ending balance | Opening balance |
| Current portion of long-term borrowings | 19,540,780 | 6,248,484 |
| Current portion of lease liabilities | 1,069,977 | 992,142 |
| Current portion of equity purchase payables | 662,773 | - |
| Current portion of debentures payable | 525,072 | - |
| Total | 21,798,602 | 7,240,626 |
(35) Other current liabilities
| Item | Ending balance | Opening balance |
| Accrued sale rebates | 51,625,736 | 40,041,953 |
| Others | 23,688,384 | 17,801,575 |
| Total | 75,314,120 | 57,843,528 |
(36) Long-term borrowings
| Item | Ending balance | Opening balance |
| Guaranteed, mortgage and pledged borrowings (a) | 36,784,462 | 35,073,994 |
| Unsecured borrowings | 21,786,357 | 21,860,438 |
| Total | 58,570,819 | 56,934,432 |
| Less: Current portion of guaranteed, mortgage and pledged borrowings | (6,758,395) | (10,755) |
| Current portion of unsecured borrowings | (12,782,385) | (6,237,729) |
| Total | 39,030,039 | 50,685,948 |
(a) As at 30 June 2023, bank guaranteed borrowings mainly included: (i) guaranteed borrowings
equivalent to RMB 2,134,694,000 guaranteed by the Company, interest is calculated at afixed rate with interest paid every quarter, which will be due in April 2024; (ii) guaranteedborrowings equivalent to RMB 4,581,157,000 guaranteed by the Company, interest iscalculated at a floating rate with interest paid every month, which will be due in May 2024; (iii)guaranteed borrowings equivalent to RMB 1,209,599,000 guaranteed by the Company,interest is calculated at a floating rate with interest paid every month, which will be due inJune 2025; (iv) After deducting the bank fee, guaranteed borrowings equivalent to RMB24,626,477,000 guaranteed by the Company, interest is calculated at a floating rate withinterest paid every quarter, which will be due in August 2025; and (v) guaranteed borrowingsequivalent to RMB 3,938,550,000 guaranteed by the Company, interest is calculated at afixed rate with interest paid every quarter, which will be due in May 2025.
MIDEA GROUP CO., LTD.
- 69 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(36) Long-term borrowings (Cont’d)
As at 31 December 2022, bank guaranteed borrowings mainly included: (i) guaranteedborrowings equivalent to RMB 2,011,606,000 guaranteed by the Company, interest iscalculated at a fixed rate with interest paid every quarter, which will be due in April 2024; (ii)guaranteed borrowings equivalent to RMB 4,415,556,000 guaranteed by the Company,interest is calculated at a floating rate with interest paid every month, which will be due in May2024; (iii) guaranteed borrowings equivalent to RMB 1,165,874,000 guaranteed by theCompany, interest is calculated at a floating rate with interest paid every month, which will bedue in June 2025; (iv) After deducting the bank fee, guaranteed borrowings equivalent toRMB 23,718,315,000 guaranteed by the Company, interest is calculated at a floating ratewith interest paid every quarter, which will be due in August 2025; and (v) guaranteedborrowings equivalent to RMB 3,711,450,000 guaranteed by the Company, interest iscalculated at a fixed rate with interest paid every quarter, which will be due in May 2025.
(b) As at 30 June 2023, the annual interest rate range of long-term borrowings was 0.30% to
5.99% (31 December 2022: 0.30% to 5.99%).
(c) In 2022, the Group purchased cross-currency interest rate swap to mitigate the cash flow risk
associated with the above-mentioned guaranteed borrowings ((a)(iv)) equivalent to USD3,419,058,000 of principal. Under the swap, a nominal amount of USD 3,419,058,000 wasconverted into EUR at an agreed exchange rate, and the USD floating rate (SOFR+0.55%p.a.) was converted into the agreed EUR fixed rate. The agreed swap period was scheduledto start in August 2022 and end in August 2025. The Group designated such borrowings asthe hedged item, and the change in the value of cross-currency interest rate swap (afterexcluding the foreign currency basis spread) as the hedging instrument for cash flow hedge.There was an economic relationship between the hedging instrument and the hedged item.The cross-currency interest rate swap matched the currency, amount and other major termsof financial liabilities denominated in USD.
For the six months ended 30 June 2023, the Group included the effective part of the changesin fair value of the cross-currency interest rate swap (after excluding the foreign exchangebasis spread) in “Other comprehensive income - cash flow hedges”, and transferred themfrom other comprehensive income to financial expenses in the period in which the hedgingrelationship affected profit or loss, in a bid to offset the effect of hedged item on profit or lossfor the current period. The changes in fair value of foreign currency basis spread wererecorded in “Other comprehensive income - others”, and the foreign currency basis spreadwas transferred from other comprehensive income to financial expenses in the period inwhich the hedging relationship affected profit or loss.
(37) Debentures payable
| Name of debentures | Par value | Value date | Maturity | Issuance amount | Coupon rate | Opening balance | Ending balance |
| Debentures denominated in USD (a) | 2,848,500 | 24 February 2022 | 5 years | 2,848,500 | 2.88% | 3,163,616 | 3,281,840 |
| 2022 corporate debentures (b) | 500,000 | 5 August 2022 | 2 years | 500,000 | 6.00% | - | 525,072 |
| Sub-total | 3,163,616 | 3,806,912 | |||||
| Less: Current portion of debentures payable | - | (525,072) | |||||
| Total | 3,163,616 | 3,281,840 |
(a) The Group issued 5-year USD corporate debentures guaranteed by the Company on 24
February 2022 amounting to USD 450,000,000 (equivalent to RMB 2,848,500,000) with afixed coupon rate of 2.88%, and the interest is paid semi-annually.
(b) The corporate debentures were issued in 2022 by the Company’s subsidiary, Clou
Electronics, and were expected to be redeemed within one year.
MIDEA GROUP CO., LTD.
- 70 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(38) Lease liabilities
| Item | Ending balance | Opening balance |
| Lease liabilities | 2,837,871 | 2,499,622 |
| Less: Current portion of lease liabilities | (1,069,977) | (992,142) |
| 1,767,894 | 1,507,480 |
(39) Deferred income
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Government grants | 1,721,092 | 177,068 | (125,912) | 1,772,248 |
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance | Asset related/ Income related |
| Government grants related to industrial upgrading | 1,394,882 | 140,803 | (122,622) | 1,413,063 | Asset related |
| Other government grants | 326,210 | 36,265 | (3,290) | 359,185 | Asset related/ Income related |
| 1,721,092 | 177,068 | (125,912) | 1,772,248 |
(40) Long-term employee benefits payable
| Item | Ending balance | Opening balance |
| Supplementary retirement benefits | 1,294,306 | 1,368,513 |
| Others | 116,372 | 119,943 |
| Total | 1,410,678 | 1,488,456 |
(41) Share capital
| Item | Opening balance | Movements in 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 | 143,615 | - | (2,531) | (2,498) | (5,029) | 138,586 |
| RMB-denominated ordinary shares not subject to trading restriction | 6,853,658 | 27,406 | 2,531 | - | 29,937 | 6,883,595 |
| Total | 6,997,273 | 27,406 | - | (2,498) | 24,908 | 7,022,181 |
(a) For the six months ended 30 June 2023, the share-based payment incentive plan increased
the share capital by 27,406,000 shares.
MIDEA GROUP CO., LTD.
- 71 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
(42) Treasury stock
| Item | Opening balance | Movements in the current period | Ending balance | |
| Increase in the current period | Decrease in the current period | |||
| Treasury stock used for share-based payment incentive plan | 14,933,944 | - | (1,114,904) | 13,819,040 |
| Total | 14,933,944 | - | (1,114,904) | 13,819,040 |
The restricted shares and employee stock ownership plans granted for the six months ended30 June 2023 were approximately RMB 2,089,493,000. As at 30 June 2023, treasury stockmainly comprised treasury stock of approximately RMB 8,748,331,000 used for share-basedpayment incentive plan, as well as treasury stock amounting to approximately RMB5,070,709,000 recognised by share-based payment incentive plan that has not met unlockcondition, amounting to approximately RMB 13,819,040,000 in total.
(43) Capital surplus
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Share premium (a) | 15,507,577 | 2,288,260 | (570,496) | 17,225,341 |
| Share-based payment incentive plan (b) | 2,279,108 | 558,688 | (974,394) | 1,863,402 |
| Others | 1,906,454 | 8,073 | (84,734) | 1,829,793 |
| Total | 19,693,139 | 2,855,021 | (1,629,624) | 20,918,536 |
(a) The increase in share premium arose from the exercise of share options with the amount of
approximately RMB 1,660,427,000, the unlocking of restricted shares and employee stockownership plans with the amount of approximately RMB 627,833,000; the decrease in sharepremium arose from the repurchase and cancellation of restricted shares with the amount ofapproximately RMB 153,201,000. The unlocking of restricted shares and employee stockownership plans decreased by approximately RMB 417,295,000.
(b) The increase of share-based payment incentive plan arose from expenses attributable to
shareholders' equity of the parent company in the share-based payment incentive plan withthe amount of approximately RMB 558,688,000, while the decrease arose from the transferof approximately RMB 974,394,000 to share premium due to exercise of share-basedpayment incentive plan.
(c) Others in capital surplus mainly included the impact of the Group's capital injection on
Guangdong Meicloud Technology Co., Ltd., a non-wholly-owned subsidiary of the Group.
- 72 -
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(44) Other comprehensive income
| Item | Other comprehensive income in the balance sheet | Other comprehensive income in the income statement | |||||||
| Opening balance | Attributable to the parent company after tax | Other comprehensive income transferred to retained earnings | Ending balance | Amount arising before income tax for the current period | Less: Reclassification of previous other comprehensive income to profit or loss | Less: Income tax expenses | Attributable to the parent company after tax | Attributable to minority shareholders after tax | |
| Other comprehensive income items which will not be reclassified to profit or loss | |||||||||
| Changes arising from remeasurement of defined benefit plan | 220,387 | (21,788) | - | 198,599 | (26,101) | - | 4,313 | (21,788) | - |
| Changes in fair value of investments in other equity instruments | (1,490) | - | - | (1,490) | - | - | - | - | - |
| Other comprehensive income items which will be reclassified to profit or loss | |||||||||
| Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | (71,822) | 35,908 | - | (35,914) | 36,188 | (280) | - | 35,908 | - |
| Effective portion of gains or losses on hedging instruments in a cash flow hedge (Note 4(36)) | 699,961 | (124,535) | - | 575,426 | (457,329) | 280,206 | 43,274 | (124,535) | (9,314) |
| Differences on translation of foreign currency financial statements | (808,629) | 153,161 | - | (655,468) | 181,746 | - | - | 153,161 | 28,585 |
| Others (Note 4(36)) | 69,882 | (25,644) | - | 44,238 | (28,512) | (54,156) | - | (25,644) | - |
| Total | 108,289 | 17,102 | - | 125,391 | (236,984) | 225,770 | 47,587 | 17,102 | 19,271 |
MIDEA GROUP CO., LTD.- 73 -
- 73 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(45) Surplus reserve
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Statutory surplus reserve | 10,702,928 | - | - | 10,702,928 |
(46) Undistributed profits
| Item | Current period | Same period of prior year |
| Undistributed profits at the beginning of the period | 119,679,202 | 102,982,763 |
| Add: Net profit attributable to owners of the parent company for the current period | 18,232,291 | 15,995,496 |
| Others | - | 33,631 |
| Less: Ordinary share dividends payable (a) | (17,181,616) | (11,671,286) |
| Appropriation to general risk reserve | (5,972) | - |
| Undistributed profits at the end of the period | 120,723,905 | 107,340,604 |
(a) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of Shareholders’ meeting, dated 19 May 2023,the Company distributed a cash dividend to the shareholders at RMB 2.50 per share,amounting to approximately RMB 17,188,858,000 calculated by 6,875,543,000 issued sharesless those repurchased; 2,498,000 repurchased incentive shares in the restricted sharesincentive plan were written off (Note 4(41)), and cash dividend amounting to approximatelyRMB 7,242,000 was cancelled. The actual cash dividend distributed in the current yearamounted to approximately RMB 17,181,616,000.
(47) Operating revenue and cost of sales
| Item | Current period | Same period of prior year |
| Revenue from main operations | 182,685,148 | 167,496,125 |
| Revenue from other operations | 14,303,254 | 15,164,884 |
| Sub-total | 196,988,402 | 182,661,009 |
| Item | Current period | Same period of prior year |
| Cost of sales from main operations | 134,877,274 | 127,456,627 |
| Cost of sales from other operations | 12,399,084 | 12,967,541 |
| Sub-total | 147,276,358 | 140,424,168 |
(a) Revenue and cost of sales from main operations
| Product or business category | Current period | Same period of prior year | ||
| Revenue | Cost of sales | Revenue | Cost of sales | |
| HVAC | 92,006,787 | 70,500,436 | 83,236,383 | 65,712,490 |
| Consumer appliances | 68,136,204 | 46,339,869 | 66,334,685 | 46,958,140 |
| Robotics and automation system | 16,240,463 | 12,457,600 | 13,259,483 | 10,447,185 |
| Others | 6,301,694 | 5,579,369 | 4,665,574 | 4,338,812 |
| Sub-total | 182,685,148 | 134,877,274 | 167,496,125 | 127,456,627 |
MIDEA GROUP CO., LTD.
- 74 -
- 74 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(47) Operating revenue and cost of sales (Cont’d)
(a) Revenue and cost of sales from main operations (Cont’d)
For the six months ended 30 June 2023, cost of sales from main operations was mainlymaterial costs and labour costs, which accounted for over 80% of total cost of sales from mainoperations (for the six months ended 30 June 2022: over 80%).
(b) Revenue and cost of sales from other operations
| Item | Current period | Same period of prior year | ||
| Revenue | Cost of sales | Revenue | Cost of sales | |
| Revenue from sales of materials | 12,589,004 | 11,883,071 | 13,451,028 | 12,600,574 |
| Others | 1,714,250 | 516,013 | 1,713,856 | 366,967 |
| Sub-total | 14,303,254 | 12,399,084 | 15,164,884 | 12,967,541 |
For the six months ended 30 June 2023, cost of sales from other operations was mainlymaterial costs, which accounted for over 80% of total cost of sales from other operations (forthe six months ended 30 June 2022: over 80%).
(c) For the six months ended 30 June 2023, above 90% of the total amount of the Group’s
revenue from main operations was recognised at a point in time, and the amount recognisedwithin a certain period of time mainly included revenue from main operations of robotics andautomation system segment. The Group’s revenue from other operations was recognised at apoint in time.
(48) Interest income and interest costs
The Group’s interest income and expenses arising from financial business are presented asfollows:
| Item | Current period | Same period of prior year |
| Interest income from loans and advances | 706,004 | 910,289 |
| Including: Interest income from loans and advances to corporations and individuals | 659,331 | 873,969 |
| Interest income from note discounting | 46,673 | 36,320 |
| Interest income from deposits with banks, other financial institutions and the Central Bank | 100,887 | 91,671 |
| Interest income | 806,891 | 1,001,960 |
| Interest costs | (19,681) | (33,643) |
(49) Taxes and surcharges
| Item | Current period | Same period of prior year |
| City maintenance and construction tax | 379,949 | 288,461 |
| Educational surcharge | 283,215 | 212,661 |
| Others | 377,212 | 297,817 |
| Total | 1,040,376 | 798,939 |
(50) Selling and distribution expenses
| Item | Current period | Same period of prior year |
| Selling and distribution expenses | 17,133,216 | 14,698,373 |
For the six months ended 30 June 2023, selling and distribution expenses were mainlymaintenance expenses, advertisement and promotion fee, employee benefits, E-commerceservice fee, storage service fee and property management expenses, which accounted forover 70% of total selling and distribution expenses (for the six months ended 30 June 2022:
over 70%).
MIDEA GROUP CO., LTD.- 75 -
- 75 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(51) General and administrative expenses
| Item | Current period | Same period of prior year |
| General and administrative expenses | 5,670,400 | 4,951,069 |
For the six months ended 30 June 2023, general and administrative expenses were mainlyemployee benefits, depreciation and amortisation expenses, technical maintenanceexpenses, administrative office expenses, storage service fee and property managementexpenses, which accounted for over 70% of total general and administrative expenses (forthe six months ended 30 June 2022: over 70%).
(52) R&D expenses
| Item | Current period | Same period of prior year |
| R&D expenses | 6,610,954 | 5,865,033 |
For the six months ended 30 June 2023, R&D expenses were mainly employee benefits,depreciation and amortisation expenses and trial products and material inputs expenses,which accounted for over 80% of total R&D expenses (for the six months ended 30 June2022: over 80%).
(53) Financial income
The Group's financial income, other than those arising from financial business (Note 4(48)),are presented as follows:
| Item | Current period | Same period of prior year |
| Interest expenses | (1,525,683) | (867,954) |
| Less: Interest income | 3,280,782 | 2,764,267 |
| Add: Exchange gains or losses | (384,103) | (71,019) |
| Add: Others | (7,335) | (89,876) |
| Total | 1,363,661 | 1,735,418 |
(54) Asset impairment losses
| Item | Current period | Same period of prior year |
| Losses on decline in the value of inventories (Note 4(10)) | 183,782 | 200,660 |
| Impairment losses on contract assets (Note 4(8)) | (2,212) | 23,619 |
| Impairment losses on fixed assets (Note 4(17)) | 4,501 | - |
| Impairment losses on intangible assets (Note 4(20)) | 2,989 | 6,400 |
| Total | 189,060 | 230,679 |
MIDEA GROUP CO., LTD.
- 76 -
- 76 -
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(55) Credit impairment losses
| Item | Current period | Same period of prior year |
| Losses on bad debts of accounts receivable (Note 4(4)) | 222,958 | 95,157 |
| Losses on bad debts of other receivables (Note 4(5)) | 7,473 | (8,878) |
| Impairment losses on notes receivable (Note 4(3)) | (7,545) | 60,481 |
| Impairment losses on loans and advances (Note 4(9)) | (1,907) | 38,619 |
| Losses on impairment of long-term receivables (Note 4(14)) | 445 | 7,512 |
| Total | 221,424 | 192,891 |
(56) Gains/(Losses) on changes in fair value
| Item | Current period | Same period of prior year |
| Derivative financial instruments | (170,550) | (62,667) |
| Investments in equity instruments | 6,370 | (658,058) |
| Others | 60,477 | (29,017) |
| Total | (103,703) | (749,742) |
(57) Investment income
| Item | Current period | Same period of prior year |
| Investment income from holding of financial assets held for trading | 27,261 | 107,261 |
| Investment income from disposal of derivative financial assets and liabilities | 70,165 | 257,463 |
| Investment income from associates and joint ventures | 348,545 | 263,014 |
| Others | (35,817) | (19,891) |
| Total | 410,154 | 607,847 |
There is no significant restriction on recovery of investment income of the Group.
(58) Losses on disposal of assets
| Item | Current period | Same period of prior year |
| Gains on disposal of non-current assets | 38,188 | 53,776 |
| Losses on disposal of non-current assets | (29,663) | (34,814) |
| Total | 8,525 | 18,962 |
(59) Other income
| Item | Current period | Same period of prior year | Asset related/ Income related |
| Special subsidy, etc. | 772,764 | 644,525 | Income related |
MIDEA GROUP CO., LTD.
- 77 -
- 77 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(60) Income tax expenses
| Item | Current period | Same period of prior year |
| Current income tax expenses calculated based on tax law and related regulations | 5,274,130 | 4,089,024 |
| Deferred income tax | (1,695,639) | (1,378,473) |
| Total | 3,578,491 | 2,710,551 |
The reconciliation from income tax calculated based on the applicable tax rates and totalprofit presented in the consolidated income statement to the income tax expenses is listedbelow:
| Item | Current period | Same period of prior year |
| Total profit | 22,107,307 | 18,832,948 |
| Income tax calculated at tax rate of 25% | 5,526,827 | 4,708,237 |
| Effect of different tax rates applicable to subsidiaries | (1,306,414) | (1,493,631) |
| Effect of income tax annual filing for prior periods | 82,378 | (166,848) |
| Income not subject to tax | (174,666) | (163,217) |
| Costs, expenses and losses not deductible for tax purposes | 283,154 | 276,483 |
| Utilisation of previous temporary differences or deductible losses for which no deferred tax assets were recognised in prior periods | (73,589) | (43,536) |
| Others | (759,199) | (406,937) |
| Income tax expenses | 3,578,491 | 2,710,551 |
(61) Calculation of basic and diluted earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing consolidated net profit attributable toordinary shareholders of the Company by the weighted average number of outstandingordinary shares:
| Item | Unit | Current period | Same period of prior year |
| Consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 18,232,291 | 15,995,496 |
| Less: Dividends affected by the share-based payment incentive plan | RMB’000 | (78,122) | (94,081) |
| Consolidated net profit attributable to ordinary shareholders of the parent company (net of share-based payment incentive plan) | RMB’000 | 18,154,169 | 15,901,415 |
| Weighted average number of outstanding ordinary shares | Thousand shares | 6,802,764 | 6,794,724 |
| Basic earnings per share | RMB Yuan/share | 2.67 | 2.34 |
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the parent company by the diluted weighted average number ofoutstanding ordinary shares:
| Item | Unit | Current period | Same period of prior year |
| Adjusted consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 18,163,579 | 15,995,496 |
| Weighted average number of outstanding ordinary shares | Thousand shares | 6,802,764 | 6,794,724 |
| Weighted average number of ordinary shares increased from the share-based payment incentive plan | Thousand shares | 13,202 | 35,505 |
| Weighted average number of diluted outstanding ordinary shares | Thousand shares | 6,815,966 | 6,830,229 |
| Diluted earnings per share | RMB Yuan/share | 2.66 | 2.34 |
MIDEA GROUP CO., LTD.- 78 -
- 78 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Notes to the cash flow statement
(a) Cash received relating to other operating activities
| Item | Current period | Same period of prior year |
| Non-operating income | 117,370 | 148,065 |
| Other income | 1,039,322 | 929,267 |
| Revenue from other operations | 1,639,020 | 1,637,751 |
| Financial interest income | 288,732 | 317,399 |
| Others | 207,406 | 322,410 |
| Total | 3,291,850 | 3,354,892 |
(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) | 4,104,482 | 4,113,948 |
| Selling and distribution expenses (excluding employee benefits and taxes and surcharges) | 11,919,414 | 10,355,366 |
| Others | 2,455,242 | 521,959 |
| Total | 18,479,138 | 14,991,273 |
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flows from operating activities is as follows:
MIDEA GROUP CO., LTD.- 79 -
- 79 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Notes to the cash flow statement (Cont’d)
(c) Supplementary information to the cash flow statement (Cont’d)
| Supplementary information | Current period | Same period of prior year |
| 1) Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 18,528,816 | 16,122,397 |
| Add: Asset impairment losses | 189,060 | 230,679 |
| Credit impairment losses | 221,424 | 192,891 |
| Depreciation and amortisation | 3,300,549 | 3,255,456 |
| Losses on disposal of assets | (8,525) | (18,962) |
| Losses on changes in fair value | 103,703 | 749,742 |
| Financial expenses | (1,653,898) | (1,557,613) |
| Investment income | (410,154) | (607,847) |
| Decrease in deferred tax assets | (1,561,223) | (892,692) |
| Increase in deferred tax liabilities | (99,937) | (353,888) |
| Decrease in inventories | 14,200,052 | 8,541,659 |
| Decrease in operating receivables | (13,908,092) | (5,945,656) |
| Increase in operating payables | 10,301,904 | 843,457 |
| Share-based payments and others | 580,995 | 835,087 |
| Net cash flows from operating activities | 29,784,674 | 21,394,710 |
| 2) Net increase/(decrease) in cash and cash equivalents: | ||
| Cash and cash equivalents at the end of the period | 47,560,795 | 61,310,727 |
| Less: Cash and cash equivalents at the beginning of the period | (51,131,968) | (40,550,039) |
| Net increase in cash and cash equivalents | (3,571,173) | 20,760,688 |
(d) Composition of cash and cash equivalents
| Item | Current period | Same period of prior year |
| Cash on hand | 3,894 | 2,447 |
| Cash at bank that can be readily drawn on demand | 20,028,555 | 32,996,806 |
| Deposits with the Central Bank that can be readily drawn on demand | 179,898 | 154,409 |
| Deposits with banks and other financial institutions | 27,348,448 | 28,157,065 |
| Cash and cash equivalents at the end of the period | 47,560,795 | 61,310,727 |
MIDEA GROUP CO., LTD.- 80 -
- 80 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies
| Item | 30 June 2023 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Cash at bank and on hand | |||
| USD | 1,426,630 | 7.2258 | 10,308,543 |
| JPY | 52,840,400 | 0.0501 | 2,646,987 |
| HKD | 12,745,027 | 0.9220 | 11,750,660 |
| EUR | 96,713 | 7.8771 | 761,818 |
| BRL | 67,344 | 1.4994 | 100,974 |
| VND | 393,160,000 | 0.0003 | 117,948 |
| Other currencies | Not applicable | Not applicable | 2,340,288 |
| Sub-total | 28,027,218 | ||
| Accounts receivable | |||
| USD | 1,722,042 | 7.2258 | 12,443,131 |
| JPY | 16,103,286 | 0.0501 | 806,678 |
| HKD | 71,837 | 0.9220 | 66,232 |
| EUR | 569,835 | 7.8771 | 4,488,644 |
| BRL | 991,182 | 1.4994 | 1,486,155 |
| VND | 947,770,000 | 0.0003 | 284,331 |
| Other currencies | Not applicable | Not applicable | 3,015,290 |
| Sub-total | 22,590,461 | ||
| Other receivables | |||
| USD | 47,975 | 7.2258 | 346,655 |
| JPY | 1,376,173 | 0.0501 | 68,938 |
| HKD | 28,630 | 0.9220 | 26,396 |
| EUR | 29,524 | 7.8771 | 232,563 |
| BRL | 54,990 | 1.4994 | 82,451 |
| Other currencies | Not applicable | Not applicable | 298,161 |
| Sub-total | 1,055,164 | ||
| Total | 51,672,843 | ||
MIDEA GROUP CO., LTD.- 81 -
- 81 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies (Cont’d)
| Item | 30 June 2023 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Short-term borrowings | |||
| USD | 1,366,000 | 7.2258 | 9,870,443 |
| EUR | 279,479 | 7.8771 | 2,201,484 |
| Other currencies | Not applicable | Not applicable | 2,334,186 |
| Sub-total | 14,406,113 | ||
| Accounts payable | |||
| USD | 228,110 | 7.2258 | 1,648,277 |
| JPY | 4,545,095 | 0.0501 | 227,682 |
| HKD | 19,906 | 0.9220 | 18,353 |
| EUR | 259,500 | 7.8771 | 2,044,107 |
| BRL | 56,197 | 1.4994 | 84,260 |
| Other currencies | Not applicable | Not applicable | 2,046,129 |
| Sub-total | 6,068,808 | ||
| Other payables | |||
| USD | 3,853 | 7.2258 | 27,840 |
| JPY | 5,417,036 | 0.0501 | 271,361 |
| HKD | 1,810 | 0.9220 | 1,669 |
| EUR | 615 | 7.8771 | 4,846 |
| Other currencies | Not applicable | Not applicable | 121,573 |
| Sub-total | 427,289 | ||
| Current portion of non-current liabilities | |||
| EUR | 304,783 | 7.8771 | 2,400,806 |
| USD | 684,543 | 7.2258 | 4,946,371 |
| Other currencies | Not applicable | Not applicable | 100,465 |
| Sub-total | 7,447,642 | ||
| Long-term borrowings | |||
| USD | 3,575,532 | 7.2258 | 25,836,076 |
| Other currencies | Not applicable | Not applicable | 3,941,481 |
| Sub-total | 29,777,557 | ||
| Debentures payable | |||
| USD | 454,184 | 7.2258 | 3,281,840 |
| Sub-total | 3,281,840 | ||
| Lease liabilities | |||
| EUR | 90,928 | 7.8771 | 716,250 |
| JPY | 1,234,839 | 0.0501 | 61,858 |
| Other currencies | Not applicable | Not applicable | 72,150 |
| Sub-total | 850,258 | ||
| Total | 62,259,507 | ||
- 82 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies (Cont’d)
| Item | 31 December 2022 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Cash at bank and on hand | |||
| USD | 609,434 | 6.9646 | 4,244,463 |
| JPY | 16,255,134 | 0.0524 | 851,769 |
| HKD | 1,425,846 | 0.8933 | 1,273,708 |
| EUR | 193,599 | 7.4229 | 1,437,066 |
| BRL | 42,876 | 1.3348 | 57,231 |
| VND | 368,026,667 | 0.0003 | 110,408 |
| Other currencies | Not applicable | Not applicable | 1,871,026 |
| Sub-total | 9,845,671 | ||
| Accounts receivable | |||
| USD | 1,100,260 | 6.9646 | 7,662,872 |
| JPY | 11,525,763 | 0.0524 | 603,950 |
| HKD | 36,138 | 0.8933 | 32,282 |
| EUR | 474,305 | 7.4229 | 3,520,717 |
| BRL | 1,304,874 | 1.3348 | 1,741,746 |
| VND | 1,219,460,000 | 0.0003 | 365,838 |
| Other currencies | Not applicable | Not applicable | 2,718,768 |
| Sub-total | 16,646,173 | ||
| Other receivables | |||
| USD | 50,652 | 6.9646 | 352,771 |
| JPY | 1,510,344 | 0.0524 | 79,142 |
| HKD | 3,427 | 0.8933 | 3,061 |
| EUR | 28,835 | 7.4229 | 214,039 |
| BRL | 76,722 | 1.3348 | 102,409 |
| Other currencies | Not applicable | Not applicable | 270,417 |
| Sub-total | 1,021,839 | ||
| Total | 27,513,683 | ||
MIDEA GROUP CO., LTD.- 83 -
- 83 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies (Cont’d)
| Item | 31 December 2022 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Short-term borrowings | |||
| USD | 84,705 | 6.9646 | 589,938 |
| EUR | 430,826 | 7.4229 | 3,197,982 |
| BRL | 176,101 | 1.3348 | 235,059 |
| Other currencies | Not applicable | Not applicable | 198,248 |
| Sub-total | 4,221,227 | ||
| Accounts payable | |||
| USD | 296,297 | 6.9646 | 2,063,593 |
| JPY | 6,228,492 | 0.0524 | 326,373 |
| HKD | 15,264 | 0.8933 | 13,635 |
| EUR | 268,679 | 7.4229 | 1,994,377 |
| BRL | 341,988 | 1.3348 | 456,486 |
| Other currencies | Not applicable | Not applicable | 1,714,350 |
| Sub-total | 6,568,814 | ||
| Other payables | |||
| USD | 13,402 | 6.9646 | 93,341 |
| JPY | 8,671,927 | 0.0524 | 454,409 |
| HKD | 1,863 | 0.8933 | 1,664 |
| EUR | 1,049 | 7.4229 | 7,784 |
| Other currencies | Not applicable | Not applicable | 100,053 |
| Sub-total | 657,251 | ||
| Current portion of non-current liabilities | |||
| EUR | 33,566 | 7.4229 | 249,157 |
| USD | 50,031 | 6.9646 | 348,445 |
| Other currencies | Not applicable | Not applicable | 116,437 |
| Sub-total | 714,039 | ||
| Long-term borrowings | |||
| USD | 3,405,553 | 6.9646 | 23,718,315 |
| Other currencies | Not applicable | Not applicable | 11,307,295 |
| Sub-total | 35,025,610 | ||
| Lease liabilities | |||
| EUR | 91,819 | 7.4229 | 681,561 |
| JPY | 1,649,676 | 0.0524 | 86,443 |
| Other currencies | Not applicable | Not applicable | 74,986 |
| Sub-total | 842,990 | ||
| Total | 48,029,931 | ||
MIDEA GROUP CO., LTD.- 84 -
- 84 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 Clou Electronics and its subsidiaries in May 2023.
The acquisition has no significant impact on the Group's consolidated financial statements.
(2)Changes of consolidation scope due to other reasons
(a)Increase of consolidation scope
Nil.
(b)Decrease of consolidation scope
Decrease of consolidation scope in the current period mainly includes deregistration anddisposal of subsidiaries. Details are as follows:
| Name of entity | Disposal method of the equity | Disposal time-point of the equity |
| Swisslog Technology Center Netherlands B.V. | Deregistration | January 2023 |
| Shenzhen Hekang Motor System Co., Ltd. | Change of equity | March 2023 |
| Wuhu Midea Washing Appliance Manufacturing Co., Ltd. | Change of equity | May 2023 |
| Verkauf Reis Holding GmbH | Change of equity | June 2023 |
| Verkauf KUKA lndustries GmbH & Co. KG | Change of equity | June 2023 |
- 85 -
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 incorporation | Nature of business | Shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| GD Midea Air-Conditioning Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture and sales of air conditioners | 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 conditioners | 93% | 7% | Business combinations involving enterprises not under common control |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of air conditioners | 87% | 13% | Establishment |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Manufacture and sales of air conditioners | 95% | 5% | Establishment |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of air conditioners | 90% | 10% | Establishment |
| Zhejiang Meizhi Compressor Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Manufacture of air conditioners | 100% | - | Establishment |
| Hefei Midea Refrigerator Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerators | 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 Washing Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | 75% | 25% | 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 machines | 100% | - | Establishment |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of air conditioner | 99% | 1% | Establishment |
| Guangzhou Hualing Refrigerating Equipment Co.,ltd. | Guangzhou, PRC | Guangzhou, PRC | Manufacture and sales of air conditioners | 75% | 25% | Establishment |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 100% | - | Establishment |
| Midea Electric Trading (Singapore) Co., Pte. Ltd. | Singapore | Singapore | Export trade | - | 100% | Establishment |
| Midea Group Finance Co., Ltd. | Foshan, PRC | Foshan, PRC | Financial industry | 95% | 5% | Establishment |
| Foshan Shunde Midea Household Appliances Industry Co.,Ltd. | Foshan, PRC | Foshan, PRC | Investment | 100% | - | Establishment |
| Midea International Corporation Company Limited | Hong Kong | Hong Kong | Investment holding | 100% | - | Establishment |
| Midea Electric Netherlands (I) B.V. | Netherlands | Netherlands | Investment holding | - | 100% | Establishment |
| Toshiba Consumer Marketing Corporation | Japan | Japan | Manufacture of household appliances | - | 100% | Business combinations involving enterprises not under common control |
| TLSC | Japan | Japan | Manufacture of household appliances | - | 100% | Business combinations involving enterprises not under common control |
| KUKA | Germany | Germany | Manufacture and sales of robots | - | 100% | Business combinations involving enterprises not under common control |
| Ningbo Midea United Materials Supply Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Wholesale and retail | 100% | - | Establishment |
| Annto Logistics Supply Chain Technology Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Investment holding | - | 77% | Establishment |
| Midea Capital Corporation Limited | Foshan, PRC | Foshan, PRC | Investment | 95% | 5% | Business combinations involving enterprises not under common control |
| Midea Innovation Investment Co., Ltd. | Shenzhen, PRC | Shenzhen, PRC | Investment holding | 85% | 15% | Establishment |
| Midea Group (Shanghai) Co. Ltd. | Shanghai, PRC | Shanghai, PRC | Manufacture and sales of intelligent household appliances | 90% | 10% | Establishment |
| Midea Investment Development Company Limited | British Virgin Islands | British Virgin Islands | Investment | - | 100% | Establishment |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of air conditioner | 95% | 5% | Establishment |
| Hubei Midea Refrigerator Co., Ltd. | Jingzhou, PRC | Jingzhou, PRC | Manufacture of refrigerator | 97% | 3% | Establishment |
- 86 -
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023
(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 ventures
The associates ventures of the Group have no significant influence on the Group and aresummarised as follows:
| Item | Current period | Same period of prior year |
| Aggregated carrying amount of investments | 4,731,210 | 3,769,304 |
| Aggregate of the following items in proportion | ||
| Net profit (i) | 348,545 | 263,014 |
| Other comprehensive income (i) | 36,188 | 47 |
| Total comprehensive income | 384,733 | 263,061 |
(i) The net profit and other comprehensive income have taken into account the impacts of both
the fair value of the identifiable assets and liabilities upon the acquisition of investment inassociates and joint ventures and the unification of accounting policies adopted by theassociates and joint ventures to those adopted by the Company.
(3) Structured entities not included in the consolidation scope
The Group had no significant structured entities not included in the consolidation scope.
7 Segment information
The reportable segments of the Group are the business units that provide different productsor services, or operate in different areas. Different businesses or areas require differenttechnologies and marketing strategies, the Group, therefore, separately manages theproduction and operation of each reportable segment and evaluates their operating resultsrespectively, in order to make decisions about resources to be allocated to these segmentsand to assess their performance.
The Group identified 4 reportable segments as follows:
-Heating & ventilation, as well as air-conditioner-Consumer appliances-Robotics and automation system
-Others
Inter-segment transfer prices are determined with reference to selling prices for third parties.
The assets are allocated based on the operations of the segments and the physical locationsof the assets. The liabilities are allocated based on the operations of the segments. Expensesindirectly attributable to the segments are allocated based on the proportion of eachsegment’s revenue.
Operating expenses include cost of sales, interest costs, fee and commission expenses, taxesand surcharges, selling and distribution expenses, general and administrative expenses, R&Dexpenses and financial expenses.
MIDEA GROUP CO., LTD.- 88 -
- 88 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 2023 is as follows:
| Item | Current period | |||||
| Heating & ventilation, as well as air-conditioner | Consumer appliances | Robotics and automation system | Other segments and unallocated | Offsetting | Total | |
| Revenue from external customers | 102,081,554 | 72,090,725 | 16,415,970 | 7,207,365 | - | 197,795,614 |
| Inter-segment revenue | 1,700,542 | 431,191 | 207,239 | 3,143,282 | (5,482,254) | - |
| Operating expenses | (91,806,494) | (64,098,118) | (16,569,793) | (9,179,710) | 5,266,038 | (176,388,077) |
| Segment profit | 11,975,602 | 8,423,798 | 53,416 | 1,170,937 | (216,216) | 21,407,537 |
| Other profit or loss | 699,770 | |||||
| Total profit | 22,107,307 | |||||
| Total assets | 206,653,458 | 174,772,080 | 42,413,492 | 238,278,221 | (199,377,616) | 462,739,635 |
| Total liabilities | 145,053,148 | 131,067,029 | 35,217,226 | 232,764,048 | (239,604,331) | 304,497,120 |
| Long-term equity investments in associates and joint ventures | 372,493 | 121,024 | 6,675 | 4,231,018 | - | 4,731,210 |
| Investment income from associates and joint ventures | 176,833 | 1,860 | 1,014 | 168,838 | - | 348,545 |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 2,614,762 | 1.018,190 | 445,409 | 6,309,441 | - | 10,387,802 |
| Losses on/(Reversal of) asset impairment | 127,243 | (50,654) | 102,331 | 10,140 | - | 189,060 |
| Losses on/(Reversal of) credit impairment | 109,005 | 73,334 | (14,215) | 19,570 | 33,730 | 221,424 |
| Depreciation of right-of-use assets | 48,125 | 69,121 | 118,900 | 293,897 | 28,881 | 558,924 |
| Depreciation and amortisation expenses | 1,058,084 | 923,273 | 500,692 | 259,576 | - | 2,741,625 |
MIDEA GROUP CO., LTD.- 89 -
- 89 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 2022 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 | Offsetting | Total | |
| Revenue from external customers | 93,948,227 | 70,340,259 | 13,426,372 | 5,948,541 | - | 183,663,399 |
| Inter-segment revenue | 1,657,240 | 370,055 | 190,159 | 3,832,595 | (6,050,049) | - |
| Operating expenses | (86,626,933) | (62,098,046) | (13,412,943) | (8,868,417) | 5,969,014 | (165,037,325) |
| Segment profit | 8,978,534 | 8,612,268 | 203,588 | 912,719 | (81,035) | 18,626,074 |
| Other profit or loss | 206,874 | |||||
| Total profit | 18,832,948 | |||||
| Total assets | 179,930,301 | 158,277,514 | 35,267,424 | 210,934,435 | (171,305,529) | 413,104,145 |
| Total liabilities | 127,693,219 | 115,379,530 | 25,961,405 | 203,275,449 | (199,603,928) | 272,705,675 |
| Long-term equity investments in associates and joint ventures | 276,107 | 115,248 | 36,620 | 3,341,329 | - | 3,769,304 |
| Investment income from associates and joint ventures | 92,873 | (2,111) | 665 | 171,587 | - | 263,014 |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 2,338,948 | 1,837,378 | 386,462 | 518,570 | - | 5,081,358 |
| Losses on/(Reversal of) asset impairment | 114,138 | 46,838 | 69,703 | - | - | 230,679 |
| Losses on/(Reversal of) credit impairment | 88,037 | 53,919 | (1,980) | 95,022 | (42,107) | 192,891 |
| Depreciation of right-of-use assets | 51,085 | 63,381 | 118,900 | 298,677 | - | 532,043 |
| Depreciation and amortisation expenses | 1,114,427 | 957,254 | 519,771 | 131,961 | - | 2,723,413 |
MIDEA GROUP CO., LTD.- 90 -
- 90 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 foreigncountries or geographical areas (including Germany, Japan, Hong Kong, Macau, Singaporeand Brazil) are as follows:
| Revenue from external customers | Current period | Same period of prior year |
| Domestic | 117,259,490 | 105,824,857 |
| In other countries/geographical areas | 80,536,124 | 77,838,542 |
| Total | 197,795,614 | 183,663,399 |
| Total non-current assets | Current period | Same period of prior year |
| Domestic | 41,274,102 | 32,732,170 |
| In other countries/geographical areas | 18,255,385 | 16,821,780 |
| Total | 59,529,487 | 49,553,950 |
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 incorporation | Nature of business |
| Midea Holding Co., Ltd. | Controlling shareholder | Shunde District, Foshan | Commercial |
The Company’s ultimate controlling person is Mr. He Xiangjian.
(b)Registered capital and changes in registered capital of the parent company
| Name of the parent company | Registered capital |
| Midea Holding Co., Ltd. | 330,000 |
(c)The percentages of shareholding and voting rights in the Company held by the parent company
| Name of the parent company | Ending | Opening | ||||
| Shareholding (%) | Voting rights (%) | Shareholding (%) | Voting rights (%) | |||
| Direct | Indirect | Direct | Indirect | |||
| Midea Holding Co., Ltd. | 30.89% | - | 30.89% | 31.00% | - | 31.00% |
(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.- 91 -
- 91 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(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 |
| Orinko Advanced Plastics Co., Ltd. | Controlled by direct relatives of the Company’s ultimate controlling shareholder |
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Controlled by the Company’s ultimate controlling shareholder |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | Associate of the Company |
| Guangdong Shunde Rural Commercial Bank Co., Ltd. | Associate of the Company |
(4) Information of related party transactions
The following primary related party transactions are conducted in accordance with normalcommercial terms at agreed price by reference to the market price.
(a)Purchase of goods
| Related parties | Content of related party transactions | Current period | Same period of prior year |
| Orinko Advanced Plastics Co., Ltd. | Purchase of goods | 658,784 | 697,804 |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | Purchase of goods | 158,878 | 161,191 |
| Total | 817,662 | 858,995 |
(b)Sales of goods:
| Related parties | Content of related party transactions | Current period | Same period of prior year |
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Sales of goods | 90,344 | 74,357 |
(c)Investment income and interest income of monetary products
| Related parties | Current period | Same period of prior year |
| Guangdong Shunde Rural Commercial Bank Co., Ltd. | 145,197 | 159,386 |
(5) Receivables from and payables to related parties
Receivables from related parties:
| Item | Related parties | Ending Balance | Opening balance |
| Cash at bank and on hand, other current assets and other non-current assets, etc. | Guangdong Shunde Rural Commercial Bank Co., Ltd. | 5,497,221 | 11,177,251 |
Payables to related parties:
| Item | Related parties | Ending Balance | Opening balance |
| Accounts payable | Orinko Advanced Plastics Co., Ltd. | 38,832 | 93,665 |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | 82,766 | 65,207 | |
| Total | 121,598 | 158,872 |
MIDEA GROUP CO., LTD.- 92 -
- 92 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
10 Share-based payment
(1) Share option incentive plan
(a) Movements in share options during the six months ended 30 June 2023
| Item | For the six months ended 30 June 2023 (Share in thousands) |
| Share options issued at the beginning of the year | 275,548 |
| Share options granted during the period | - |
| Share options exercised during the period | (27,406) |
| Share options lapsed during the period | (48,900) |
| Share options issued at the end of the period | 199,242 |
As at 30 June 2023, the residual contractual maturity date of the Fifth Share Option IncentivePlan is on 6 May 2024. The residual contractual maturity date of the Fifth Reserved ShareOption Incentive Plan is on 10 March 2025. The residual contractual maturity date of the SixthShare Option Incentive Plan is on 29 May 2025. The residual contractual maturity date of theSeventh Share Option Incentive Plan is on 4 June 2024. The residual contractual maturitydate of the Eighth Share Option Incentive Plan is on 3 June 2026. The residual contractualmaturity date of the Ninth Share Option Incentive Plan is on 7 June 2027.
(2) Restricted share plan
(a) Pursuant to the restricted shares incentive plan for 2023 approved at the 2022 annual
shareholders’ meeting in 2023 (the "Restricted Shares Incentive Plan for 2023"), the Companygranted 18,325,000 restricted shares with exercise price of RMB 25.89 to 415 incentiverecipients. Under the circumstance that the Company meets expected performance, 40%,30% and 30% of the total restricted shares granted will be unlocked after 1 year, 2 years and3 years respectively since 20 June 2023. The listing date for the granted restricted shares ofthis plan is 14 July 2023.
(b) Movements in restricted shares during the six months ended 30 June 2023
| Item | For the six months ended 30 June 2023 (Share in thousands) |
| Restricted shares issued at the beginning of the year | 50,211 |
| Restricted shares granted during the period | 18,325 |
| Restricted shares unlocked during the period | (18,639) |
| Restricted shares lapsed during the period | (9,994) |
| Restricted shares issued at the end of the period | 39,903 |
The Company held the 16th session of the 4th Board of Directors on 20 June 2023, at which,the Proposal of the Accomplishment of the Unlocking Conditions of the Lock-up Period for theRestricted Shares was reviewed. 2,566,396 restricted shares in 2018, which were listed fortrade on 3 July 2023, were applied for unlocking; 324,167 shares under the restricted shareincentive plan in 2018, which were listed for trade on 7 July 2023, were applied for unlocking;4,897,510 shares under the restricted share incentive plan in 2019, which were listed for tradeon 13 July 2023, were applied for unlocking; and 10,851,082 shares under the restricted shareincentive plan in 2020, which were listed for trade on 18 July 2023, were applied for unlocking.
MIDEA GROUP CO., LTD.- 93 -
- 93 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
10 Share-based payment (Cont’d)
(3) Employee stock ownership plan
Pursuant to the 2023 stock ownership plan of the Midea Group (the “2023 Stock OwnershipPlan”) approved at the shareholders' meeting for the year ended 31 December 2022 heldduring the year 2023, the Company repurchased 9,946,276 shares of Midea Group over thesecurities account for repurchase, with an average purchase price of RMB 56.79 per share.The purchase fund was the performance bonus of approximately RMB 564,849,000 accruedby the Company.
(4) For the six months ended 30 June 2023, the total expenses due to the above share-based
payment incentive plan were RMB 580,550,000. As at 30 June 2023, the balance relating tothe share-based payment incentive plan and accrued from capital surplus wasapproximately RMB 1,863,402,000.
11 Contingencies
As at 30 June 2023, the amount in tax disputes involving Brazilian subsidiary with 51%interests held by the Company was about BRL 764 million (equivalent to RMB 1,145 million)(Some cases have lasted for more than 10 years. The above amount included the principaland interest). As at 30 June 2023, relevant cases were still at court. In addition, originalshareholders of Brazilian subsidiary have agreed to compensate the Company according toverdict results of the above tax disputes. The maximum compensation amount is about BRL157 million (equivalent to RMB 235 million). With reference to judgements of third-partyattorneys, management believes that the probability of losing lawsuits and makingcompensation is small, and expects no significant risk of tax violation.
12 Commitments
The Group had no significant commitments at the balance sheet date.
13 Events after the balance sheet date
Nil.
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 other 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.
MIDEA GROUP CO., LTD.- 94 -
- 94 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont’d)
(1) Market risk
(a) Foreign exchange risk
The Group mainly operates in China, Europe, the USA, 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 the risk arisingfrom fluctuation of exchange rate.
The Group’s finance department has a professional team to manage the risk arising offluctuation of exchange rate, with approach of the natural hedge for settling currencies,signing forward foreign exchange hedging contracts and controlling the scale of foreigncurrency assets and liabilities, to minimise foreign exchange risk, and to reduce the impact ofexchange rate fluctuations on business performance.
(b) Interest rate risk
The Group's interest rate risk arises from interest bearing borrowings including long-termborrowings and debentures payable. Financial liabilities issued at floating rates expose theGroup to cash flow interest rate risk. Financial liabilities issued at fixed rates expose theGroup to fair value interest rate risk. The Group determines the relative proportions of its fixedrate and floating rate contracts depending on the prevailing market conditions. As at 30 June2023, the Group’s long-term interest bearing borrowings at floating rate were certain long-termborrowings.
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.Management makes adjustments timely with reference to the latest market conditions andmay enter into interest rate swap agreements to mitigate its exposure to interest rate risk.
(c) Other price risk
The Group's other price risk mainly arises from financial instruments measured at fair value.As at 30 June 2023, if expected price of the investments held by the Group fluctuated, theGroup's gains or losses on changes in fair value would be affected accordingly.
(2) Credit risk
Credit risk is managed on the grouping basis. The Group’s credit risk mainly arises from cashat bank, deposits with the Central Bank, deposits with banks and other financial institutions,notes receivable, accounts receivable, receivables financing, loans and advances, otherreceivables, contract assets, lease receivables, other debt investments, other current assetsand other non-current assets, and derivative financial assets at fair value through profit or lossthat are not included in the impairment assessment scope.
The Group expects that there is no significant credit risk associated with cash at bank,deposits with the Central Bank and deposits with banks and other financial institutions sincethey are deposited at state-owned banks and other medium or large size listed banks withgood reputation and high credit rating. The Group does not expect that there will be anysignificant losses from non-performance by these banks.
MIDEA GROUP CO., LTD.- 95 -
- 95 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont’d)
(2) Credit risk (Cont’d)
The Group has policies to limit the credit exposure on notes receivable, accounts receivable,contract assets, loans and advances, other receivables, lease receivables, fixed-incomeproducts in other current assets, other debt investments and fixed-income products in othernon-current assets. The Group assesses the credit quality of and sets credit limits on itscustomers by taking into account their financial position, the availability of guarantee fromthird parties, their credit history and other factors such as current market conditions. Thecredit history of the customers is regularly monitored by the Group. In respect of customerswith a poor credit history, the Group will use written payment reminders, or shorten or cancelcredit periods, to ensure the overall credit risk of the Group is limited to a controllable extent.
In addition, for loans and advances, the amount and type of collateral required depend on anassessment of the credit risk of the counterparty. The collaterals for loans mainly includereceivables and inventories. The Group monitors the market value of the collateral, requestsadditional collateral when needed according to contracts and performs and valuation forimpairment valuation assessment when applicable. As at 30 June 2023, the Group had noother significant collateral or other credit enhancements held as securities from debtors.
(3) Liquidity risk
Cash flow forecasting is performed by each subsidiary of the Group and aggregated by theGroup’s finance department in its headquarters. The Group’s finance department at itsheadquarters monitors rolling forecasts of the Group's short-term and long-term liquidityrequirements to ensure it has sufficient cash and securities that are readily convertible to cashto meet operational needs, while maintaining sufficient headroom on its undrawn committedborrowing facilities from major financial institutions so that the Group does not breachborrowing limits or covenants on any of its borrowing facilities to meet the short-term andlong-term liquidity requirements.
MIDEA GROUP CO., LTD.- 96 -
- 96 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont’d)
(3) Liquidity risk (Cont’d)
The financial liabilities of the Group at the balance sheet date are analysed by their maturitydates below at their undiscounted contractual cash flows:
| 30 June 2023 | |||||
| Item | Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total |
| Short-term borrowings (including interest) | 19,693,457 | - | - | - | 19,693,457 |
| Customer deposits and deposits from banks and other financial institutions (including interest) | 47,584 | - | - | - | 47,584 |
| Notes payable | 14,236,566 | - | - | - | 14,236,566 |
| Accounts payable | 71,684,891 | - | - | - | 71,684,891 |
| Other payables | 4,941,956 | - | - | - | 4,941,956 |
| Financial liabilities held for trading | 1,434,319 | - | - | - | 1,434,319 |
| Derivative financial liabilities | 584,017 | - | - | - | 584,017 |
| Other current liabilities | 23,688,384 | - | - | - | 23,688,384 |
| Current portion of non-current liabilities (including interest) | 21,026,155 | - | - | - | 21,026,155 |
| Long-term borrowings (including interest) | 462,911 | 9,593,819 | 28,763,693 | 155,750 | 38,976,173 |
| Debentures payable (including interest) | 93,646 | 93,646 | 3,314,041 | - | 3,501,333 |
| Lease liabilities (including interest) | - | 822,053 | 971,876 | 390,597 | 2,184,526 |
| Other non-current liabilities | - | - | 30,033 | - | 30,033 |
| Sub-total | 157,893,886 | 10,509,518 | 33,079,643 | 546,347 | 202,029,394 |
| 31 December 2022 | |||||
| Ending Balance | Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total |
| Short-term borrowings (including interest) | 5,239,105 | - | - | - | 5,239,105 |
| Customer deposits and deposits from banks and other financial institutions (including interest) | 77,523 | - | - | - | 77,523 |
| Notes payable | 25,572,421 | - | - | - | 25,572,421 |
| Accounts payable | 64,233,225 | - | - | - | 64,233,225 |
| Other payables | 4,322,025 | - | - | - | 4,322,025 |
| Financial liabilities held for trading | 1,580,771 | - | - | - | 1,580,771 |
| Derivative financial liabilities | 234,606 | - | - | - | 234,606 |
| Other current liabilities | 17,801,575 | - | - | - | 17,801,575 |
| Current portion of non-current liabilities (including interest) | 7,508,788 | - | - | - | 7,508,788 |
| Long-term borrowings (including interest) | 593,936 | 12,730,569 | 36,356,095 | - | 49,680,600 |
| Debentures payable (including interest) | 90,261 | 90,261 | 3,359,723 | - | 3,540,245 |
| Lease liabilities (including interest) | - | 659,201 | 778,483 | 312,797 | 1,750,481 |
| Other non-current liabilities | - | - | 680,482 | - | 680,482 |
| Sub-total | 127,254,236 | 13,480,031 | 41,174,783 | 312,797 | 182,221,847 |
MIDEA GROUP CO., LTD.- 97 -
- 97 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates
The level in which fair value measurement is categorised is determined by the level of the fairvalue hierarchy 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 theasset or liability, either directly or indirectly.Level 3: Unobservable inputs for the asset or liability.
| (1) | Assets and liabilities measured at fair value on a recurring basis |
As at 30 June 2023, the financial assets and liabilities measured at fair value on a recurringbasis by the above three levels are analysed below:
| Fair value at the end of the period | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Financial assets measured at fair value - | ||||
| Financial assets held for trading | 1,537,870 | 6,656,131 | - | 8,194,001 |
| Derivative financial assets | - | 512,686 | - | 512,686 |
| Receivables financing | - | 15,466,934 | - | 15,466,934 |
| Other current assets - hedging instruments and transferable certificates of deposit | - | 1,402,274 | - | 1,402,274 |
| Other debt investments | - | 14,693,213 | - | 14,693,213 |
| Investments in other equity instruments | - | - | 41,292 | 41,292 |
| Other non-current financial assets | - | 3,052,539 | 6,145,336 | 9,197,875 |
| Total assets | 1,537,870 | 41,783,777 | 6,186,628 | 49,508,275 |
| Financial liabilities measured at fair value - | ||||
| Financial liabilities held for trading | - | - | 1,434,319 | 1,434,319 |
| Derivative financial liabilities | - | 584,017 | - | 584,017 |
| Other current liabilities - hedging instruments | - | 1,355,139 | - | 1,355,139 |
| Total liabilities | - | 1,939,156 | 1,434,319 | 3,373,475 |
MIDEA GROUP CO., LTD.- 98 -
- 98 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates (Cont’d)
| (1) | Assets and liabilities measured at fair value on a recurring basis (Cont’d) |
As at 31 December 2022, the financial assets and liabilities measured at fair value on arecurring basis by the above three levels are analysed below:
| Item | Fair value at the beginning of the year | |||
| Level 1 | Level 2 | Level 3 | Total | |
| Financial assets measured at fair value - | ||||
| Financial assets held for trading | 1,264,595 | 2,019,998 | - | 3,284,593 |
| Derivative financial assets | - | 665,484 | - | 665,484 |
| Receivables financing | - | 13,526,540 | - | 13,526,540 |
| Other current assets - hedging instruments and transferable certificates of deposit | - | 743,934 | - | 743,934 |
| Other debt investments | - | 16,969,335 | - | 16,969,335 |
| Investments in other equity instruments | - | - | 41,359 | 41,359 |
| Other non-current financial assets | - | 4,276,688 | 6,348,556 | 10,625,244 |
| Total assets | 1,264,595 | 38,201,979 | 6,389,915 | 45,856,489 |
| Financial liabilities measured at fair value - | ||||
| Financial liabilities held for trading | - | 1,580,771 | 1,580,771 | |
| Derivative financial liabilities | - | 234,606 | - | 234,606 |
| Other current liabilities - hedging instruments | - | 79,933 | - | 79,933 |
| Total liabilities | - | 314,539 | 1,580,771 | 1,895,310 |
The Group takes the date on which events causing the transfers between the levels take placeas the timing specific for recognising the transfers. There was no significant transfer of fairvalue measurement level of the above financial instruments.
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 assets and liabilities are analysed below:
| Item | Investments in other equity instruments and other non-current financial assets | Financial liabilities held for trading |
| 1 January 2023 | 6,389,915 | (1,580,771) |
| Increase | 159,090 | - |
| Decrease | (160,792) | 150,903 |
| Transfer out of Level 3 | (69,044) | - |
| Total gains for the current period | ||
| Investment (loss)/income recognised in the income statement | (171,611) | (4,451) |
| Gains recognised in other comprehensive income | 39,070 | - |
| 30 June 2023 | 6,186,628 | (1,434,319) |
MIDEA GROUP CO., LTD.- 99 -
- 99 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates (Cont’d)
| (1) | Assets and liabilities measured at fair value on a recurring basis (Cont’d) |
The changes in Level 3 assets and liabilities are analysed below (Cont’d):
| Item | Investments in other equity instruments and other non-current financial assets | Financial liabilities held for trading |
| 1 January 2022 | 5,958,620 | - |
| Increase | 1,746,172 | (1,766,953) |
| Decrease | (190,586) | 99,876 |
| Transfer into Level 3 | (838,345) | - |
| Total gains for the current period | ||
| Investment income recognised in the income statement | (409,005) | 86,306 |
| Losses recognised in other comprehensive income | 123,059 | - |
| 31 December 2022 | 6,389,915 | (1,580,771) |
(a) The fair value of this part of other non-current financial assets, investments in other equity
instruments and financial liabilities held for trading is measured using discounted cash flowsapproach and market comparable companies approach. The judgement of Level 3 of the fairvalue hierarchy is based on the materiality of unobservable inputs towards calculation ofwhole fair value. Significant unobservable inputs mainly include the financial data of targetedcompany, market multiple of comparable companies and risk adjusted discount rates.
Assets and liabilities subject to Level 2 fair value measurement are mainly receivablesfinancing, structural deposits, transferable certificates of deposit and cross-currency interestrate swaps, and are evaluated by discounted cash flows approach, market approach andincome approach.
| (2) | Assets and liabilities not measured at fair value but for which the fair value is disclosed |
The Group's financial assets and financial liabilities measured at amortised cost mainlyinclude: cash at bank and on hand, deposits with the Central Bank, deposits with banks andother financial institutions, notes receivable, accounts receivable, contract assets, loans andadvances, other receivables, lease receivables, current portion of non-current assets(excluding other debt investments due within one year mentioned in Note 4(11)), other currentassets (excluding those mentioned in Note 16(1)), notes payable, accounts payable, contractliabilities, short-term borrowings, lease liabilities, long-term borrowings, debentures payable,current portion of non-current liabilities, customer deposits and deposits from banks and otherfinancial institutions, other payables and other current liabilities.
Carrying amounts of the Group’s financial assets and financial liabilities measured atamortised cost as at 30 June 2023 and 31 December 2022 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 debt-to-asset ratio (total liabilities divide total assets).
MIDEA GROUP CO., LTD.- 100 -
- 100 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
16 Capital management (Cont’d)
As at 30 June 2023 and 31 December 2022, the Group's debt-to-asset ratio is as follows:
| Item | Ending balance | Opening balance |
| Total liabilities | 304,497,120 | 270,631,465 |
| Total assets | 462,739,635 | 422,555,267 |
| Debt-to-asset ratio | 65.80% | 64.05% |
17 Notes to the Company’s financial statements
(1) Other receivables
| Item | Ending balance | Opening balance |
| Other receivables | 24,280,173 | 26,182,925 |
| Less: Provision for bad debts | (7,273) | (7,824) |
| Total | 24,272,900 | 26,175,101 |
(a) The ageing of other receivables is analysed as follows:
| Ageing | Ending balance | Opening balance |
| Within 1 year | 24,239,923 | 26,069,074 |
| 1 to 2 years | 26,230 | 110,631 |
| Over 2 years | 14,020 | 3,220 |
| Total | 24,280,173 | 26,182,925 |
(b) Provision for losses 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 2023 | 26,114,966 | 7,824 | 67,959 | - | - | - | 7,824 |
| Transfer to Stage 3 in the current year | - | - | - | - | - | - | - |
| Net increase in the current period | (1,863,686) | (551) | (39,066) | - | - | - | (551) |
| Including: Write-off in the current period | - | - | - | - | - | - | - |
| Derecognition | - | - | - | - | - | - | - |
| 30 June 2023 | 24,251,280 | 7,273 | 28,893 | - | - | - | 7,273 |
(c) As at 30 June 2023, other receivables of the Company at Stage 1 are analysed as follows:
(i)As at 30 June 2023, other receivables in Stage 1 for which the related provision for bad debts wasprovided on an individual basis are analysed as follows:
| Category | Ending balance | |||
| Book balance | 12-month ECL rates | Provision for bad debts | Reason | |
| Stage 1 | 28,893 | 0% | - | The risk of expected loss is low |
MIDEA GROUP CO., LTD.- 101 -
- 101 -
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the Company’s financial statements (Cont’d)
(1) Other receivables (Cont’d)
(c) As at 30 June 2023, other receivables of the Company at Stage 1 are analysed as follows (Cont’d):
(ii)As at 30 June 2023, other receivables for which the related provision for bad debts was provided onthe grouping basis were all at Stage 1, which are 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 and other receivables grouping | 24,251,280 | (7,273) | 0.03% | 26,114,966 | (7,824) | 0.03% |
(d) As at 30 June 2023, the five largest other receivables aggregated by debtor are analysed as follows:
| Name of entity | Nature of payment | Book balance | Ageing | % of total balance | Provision for bad debts |
| Company A | Current accounts | 21,650,000 | Within 1 year | 89.17% | (6,495) |
| Company B | Current accounts | 1,248,000 | Within 1 year | 5.14% | (374) |
| Company C | Current accounts | 478,672 | Within 1 year | 1.97% | (144) |
| Company D | Current accounts | 245,000 | Within 1 year | 1.01% | (74) |
| Company E | Current accounts | 144,998 | Within 1 year | 0.60% | (43) |
| Sub-total | 23,766,670 | 97.89% | (7,130) |
(2) Long-term equity investments
Long-term equity investments are classified as follows:
| Item | Ending balance | Opening balance |
| Subsidiaries (a) | 71,827,998 | 69,705,046 |
| Associates (b) | 2,599,721 | 3,398,523 |
| Sub-total | 74,427,719 | 73,103,569 |
| Less: Provision for impairment | - | - |
| Total | 74,427,719 | 73,103,569 |
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MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the Company’s financial statements (Cont’d)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries
| Name of investee | Opening balance | Movements in the current period | Ending Balance | Cash dividends attributable to the parent company declared in the current period | ||
| Increase in investment | Decrease in investment | Others | ||||
| Wuxi Little Swan Electric Co., Ltd. | 20,313,623 | - | - | 28,651 | 20,342,274 | - |
| Foshan Shunde Midea Household Appliances Industry Co., Ltd. | 5,950,999 | - | - | 868 | 5,951,867 | - |
| Guangdong Midea Electric Co., Ltd. | 5,001,072 | - | - | 656 | 5,001,728 | - |
| Beijing Wandong Medical Technology Co., Ltd. | 4,349,003 | - | - | - | 4,349,003 | 38,350 |
| Midea Group Finance Co., Ltd. | 3,363,479 | - | - | 832 | 3,364,311 | - |
| Midea Innovation Investment Co., Ltd. | 2,135,000 | - | - | - | 2,135,000 | - |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 1,987,281 | - | - | 49,309 | 2,036,590 | - |
| Guangdong Midea Microwave Oven Manufacturing Co., Ltd. | 1,880,041 | - | - | - | 1,880,041 | - |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 1,860,540 | - | - | 536 | 1,861,076 | - |
| Shenzhen Clou Electronics Co., Ltd. | - | 828,094 | - | 832,614 | 1,660,708 | - |
| Guangdong Meizhi Compressor Co., Ltd. | 1,418,863 | - | - | 13,008 | 1,431,871 | - |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 1,201,861 | - | - | 19,231 | 1,221,092 | - |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 1,083,420 | - | - | 2,012 | 1,085,432 | - |
| Hainan Midea Building Technology Co., Ltd. | 921,500 | - | - | - | 921,500 | - |
| Midea Group (Shanghai) Co. Ltd. | 920,427 | - | - | 6,096 | 926,523 | - |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 899,435 | - | - | 26,520 | 925,955 | - |
| Hubei Midea Refrigerator Co., Ltd. | 885,138 | - | - | 6,154 | 891,292 | - |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 834,812 | - | - | 1,959 | 836,771 | - |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 776,756 | - | - | 2,601 | 779,357 | - |
| Guangdong Midea Building Technology Co., Ltd. | 769,430 | - | - | - | 769,430 | - |
| Wuhu Xinhe Technology Co., Ltd. | 742,684 | - | - | - | 742,684 | - |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | 625,877 | - | - | 6,689 | 632,566 | - |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 595,045 | - | - | 15,304 | 610,349 | - |
| Hefei Midea Refrigerator Co., Ltd. | 556,199 | - | - | 3,660 | 559,859 | - |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 533,343 | - | - | 4,140 | 537,483 | - |
| Ningbo Midea United Materials Supply Co., Ltd. | 503,420 | - | - | 1,204 | 504,624 | - |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 500,000 | - | - | - | 500,000 | - |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 481,769 | - | - | - | 481,769 | - |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 444,415 | - | - | 1,657 | 446,072 | - |
| GD Midea Environment Appliances Mfg. Co., Ltd. | 417,382 | - | - | 4,634 | 422,016 | - |
| Anhui Meizhi Compressor Co., Ltd. | 391,518 | - | - | 4,857 | 396,375 | - |
| Others | 7,360,714 | 1,119 | (9,000) | 269,547 | 7,622,380 | 18,000 |
| Total | 69,705,046 | 829,213 | (9,000) | 1,302,739 | 71,827,998 | 56,350 |
- 103 -
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the Company’s financial statements (Cont’d)
(2) Long-term equity investments (Cont’d)
(b) Associates
Investments in associates mainly refer to the investments in Guangdong Shunde RuralCommercial Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other enterprises by theCompany.
(3) Operating revenue
Operating revenue mainly comprises other operating revenue including the trademark royaltyincome, rental income and management fee income, obtained by the Company from thesubsidiaries.
(4) Investment income
| Item | Current period | Same period of prior year |
| Income from long-term equity investments under cost method | 56,350 | 52,799 |
| Investment income from holding of financial assets held for trading | 7,389 | 95,277 |
| Income from long-term equity investments under equity method | 124,458 | 126,297 |
| Others | 1,242 | (1,981) |
| Total | 189,439 | 272,392 |
There is no significant restriction on repatriation of the Company's investment income.
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1 Details of non-recurring profit or loss
| Item | Current period | Same period of prior year |
| Profit or loss from disposals of non-current assets, including the write-off portion for which provision for asset impairment has been made | (169,544) | 22,156 |
| Except for the effective hedging activities related to the Company’s ordinary activities, gains or losses on changes in fair value arising from financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities and 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 and other non-current financial assets | 25,019 | (434,341) |
| Others (mainly including government grants, , reversal of provision for impairment of receivables tested for impairment on an individual basis, compensation income, penalty income and other non-operating income and expenses) | 817,450 | 772,377 |
| Sub-total | 672,925 | 360,192 |
| Less: Effect of enterprise income tax | (85,263) | (30,095) |
| Effect of minority interests (after tax) | (7,224) | (26,113) |
| Net non-recurring profit or loss attributable to equity owners of the Company | 580,438 | 303,984 |
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 theCompilation Rules for Information Disclosure of Companies Offering Securities to the PublicNo. 9 - Calculation and Disclosure of Return on Net Asset and Earnings per Share (revised in2010) issued by CSRC and relevant requirements of accounting standards are as follows:
| Item | Weighted average return on net assets | Earnings per share (RMB/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 | 12.14% | 12.18% | 2.67 | 2.34 | 2.66 | 2.34 |
| Net profit attributable to ordinary shareholders of the Company, net of non-recurring profit or loss | 11.76% | 11.95% | 2.58 | 2.30 | 2.58 | 2.30 |
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 √ Not applicable
(2) Differences in the net profit and net assets disclosed in the financial reports prepared under
CAS and foreign accounting standards
□ Applicable √ Not applicable