Annual ReportMidea Group Co., Ltd.Stock code: 000333April 2023
Letter to Shareholders
The year 2022 was an unforgettable year, one in which we continued to look toward andenvision the future but also had to persevere through many uncertainties and hardships inreality. Although it might seem that we have remained in place, each of us has in factcompleted a long journey of growth in our mindsets. In the end, what we now have is thecourage to be tenacious and maintain everlasting hope. We would like to express our fulland sincerest gratitude to all Mideans. Your perseverance in forging ahead has made youdedicated contributors to the future of Midea. We would also like to thank our shareholdersfor accompanying Midea on our growth journey. Despite market fluctuations andeverything else we have gone through, your understanding and trust have been and willcontinue to be critical to boosting our confidence as we continue our value growth journey.In 2022, Midea mainly adhered to the business principles of “Generate Income & DriveProfit”. In keeping with its strategy of “refocusing” on and “returning” to the basics, Mideaworked hard to improve its profitability, achieve robust operations, and make new strides interms of its strategic layout. Midea rose to No. 245 on the 2022 Fortune Global 500 list andNo. 36 on the 2022 Brand Finance Tech 100 list. The Company was also selected as oneof the ESG case companies with practical reference significance according to the “ESGInspiring Cases” results released by Forbes China. By early 2023, five of Midea’s factorieshad been included in the “Global Lighthouse Network” initiated by the World EconomicForum, demonstrating Midea’s leading position in intelligent manufacturing and digitaldevelopment among manufacturers worldwide.In this bustling age of uncertainty, industries have undergone tremendous changes. Giventhis context, no business can maintain rapid growth forever, because the nature of theworld is that industries, the economy, technologies, and even globalization itself arecyclical. Nevertheless, a few companies can still achieve sustained growth and earningsand create value. How to build Midea into one of those “few companies”? This is one ofthe core issues that must be resolved. To this end, we must bid farewell to the past and
push ahead with transformation and innovation going forward in order to build theCompany’s strengths for whatever the next round of competition may bring. In order tomake this happen, this is the only option we can choose now.We need to first experience life's ups and downs before we can understand the simpletruth. As the writer Albert Camus once said, “Whenever it seemed to me that I felt a deepsense of the world, it was its simplicity that always moved me.” Successful businessesunderstand the basic principles of corporate organization, while decaying businesses allhave distinct causes that are responsible for this decay. The most basic principle, law, andtruth are what keeps driving the world. Therefore, when running a business, we mustreturn to the basics and continue to uphold these basic principles. More specifically, wemust maintain our cash flows and product capabilities and continue to accumulatetechnology; this is the law and orientation to which we must adhere. Additionally, the secretto the success of any company lies in such basic principles as “corporate culture andvalues”, “corporate governance structure”, “entrepreneurship”, “a value-creating businessmodel”, “being capable of persistent learning and introspection”, and “being capable ofcreating a second growth curve”. To evolve into a great enterprise that stands out from ourpeers, we must not only possess these basic principles, but also hold fast to them.When facing this era of tremendous changes, long-term development is no longer anoption, but an intrinsic competence that must be built up on an ongoing basis. Strategiestell us what we should do to ensure that we have a tomorrow; they do not necessarily tellus what we will actually end up doing in the future. Therefore, Midea must be cautiouslyopen-minded, always be prepared for the worst-case scenario, and stay alert to potentialchallenges. A coordinated emphasis will be placed on breakthroughs in our ToC and ToBbusinesses. We will strive to boost the strength of our products and core technologies inour ToC business while stabilizing and improving our profitability to provide strategicsupport for the transformation of our ToB business. Additionally, the transformation ofMidea from a Chinese business into an international one will be advanced by expeditingthe layout and growth of the Company’s overseas business, developing the capabilities of
global industrial chains, and continually enhancing the impact of our brands. We will alsoextend Midea’s advantages in efficiency to products, technologies, and innovation, andcontinue to consolidate and develop Midea’s capabilities over the long term in terms ofsustainable development.Midea’s business principle for 2023 is “Stabilize Profit & Drive Growth”. “Drive Profit”means going outside our comfort zone and rising to meet the challenge of unknowns anduncertainties. This requires Midea to keep pace with the times and dare to take risks thatarise from the exploration of new markets, product categories, mechanisms, and growthopportunities, and seek out new paths, new growth drivers, and new methodologies. “DriveProfit” does not necessarily refer to organic or natural growth. It is both an option and acommitment, one that urges Midea to seek out a new intrinsic motivation:
Entrepreneurship. To this end, Midea must curb any tendency towards institutionalization,fully delegate power, and find and inspire talent with the elements of entrepreneurship. Bydoing so, the density of Midea’s entrepreneurship will take shape and become stronger.Concurrently, internal entrepreneurial groups can be formed, and that will help Mideaachieve even more breakthroughs. During the three decades starting from theestablishment of Midea through all the hardships it endured and overcame to achieve itslisting, Midea has evolved into a great company that engages in more than just oneproduct, one market, or one industry. Behind this significant progress lies the power ofperseverance and conviction. Midea’s most invaluable assets include sharing the fruitsand gains of its efforts, sharing a sense of achievement and impact, and sharing dreamsand visions, as well as its advanced governance mechanism, its future-proof values, andits entrepreneurial spirit.As time goes by, some businesses decay while others prosper. No matter what, there arealways businesses that remain unshakable and become stronger, even as many of theirpeers fall. Likewise, even as some existing industries decay, new ones will emerge.Despite the many hardships and challenges, the current era is still the best-ever in termsof the number of opportunities. “Ever Onwards, Look to the Stars.” We cannot speak of the
ocean to a frog that lives in a well, as it is a creature of a narrower sphere. We also cannotspeak of ice to a summer insect, as it is a creature of a single season. What we can do,however, is stay calm and composed, even when confronted with all the changes andchallenges of this era. We can also push ahead with Midea’s growth, upward and onward,by stabilizing our principal business, creating a second growth curve, and fearlessly goingglobal to achieve our “Global Impact”.Ever Onwards, I hope I possess the courage that you do! As always, we look forward tosharing and witnessing Midea’s transformation and its every breakthrough with all of you.
Board of Directors, Midea Group
April 2023
Section I Important Statements, Contents and Definitions
The Board of Directors, the Supervisory Committee, directors, supervisors and seniormanagement of Midea Group Co., Ltd. (hereinafter referred to as the “Company”) herebyguarantee that the information presented in this report is free of any misrepresentations,misleading statements or material omissions, and shall together be wholly liable for thetruthfulness, accuracy and completeness of its contents.Mr. Fang Hongbo, Chairman of the Board and CEO of the Company, Ms. Zhong Zheng, VicePresident, CFO and Director of Finance of the Company, and Ms. Chen Lihong, head of theaccounting department (equivalent to accounting manager) of the Company, have representedand warranted that the financial 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 shall not beconsidered as promises of the Company to investors. Therefore, investors are kindly remindedto pay attention to possible investment risks.The Board has considered and approved the following dividend payout plan: based on the6,875,060,728 shares at the disclosure date of this report (the total share capital of 7,021,698,756shares minus the repurchased 146,638,028 shares in the repurchased share account at thatdate), it is proposed that the Company should distribute a cash dividend of RMB25 (taxinclusive) per 10 shares to all the shareholders and should not carry out any bonus issue orconvert capital surplus into share capital. When implementing the profit distribution plan, ifthere is a change in the total share capital that enjoys the right to share in the profit distribution,the total share capital that enjoys the right to share in the profit distribution on the equityregistration date of the implementation of the distribution plan shall be used as the base, andthe total amount of dividends shall be adjusted according to the principle that the dividend pershare remains unchanged.This report has been prepared in both Chinese and English. Should there be any discrepanciesor misunderstandings between the two versions, the Chinese version shall prevail.
Contents
LETTER TO SHAREHOLDERS ...... 2
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS ...... 6
SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ...... 10
SECTION III MANAGEMENT DISCUSSION AND ANALYSIS ...... 14
SECTION IV CORPORATE GOVERNANCE ...... 122
SECTION V ENVIRONMENTAL AND SOCIAL RESPONSIBILITY ...... 160
SECTION VI SIGNIFICANT EVENTS ...... 183SECTION VII CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ..... 200SECTION VIII PREFERENCE SHARES ...... 209
SECTION IX BONDS ...... 210
SECTION X FINANCIAL REPORT ...... 217
Documents Available for Reference
1. The original of The 2022 Annual Report of Midea Group Co., Ltd. signed by thelegal 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 original of the auditor’s report with the seal of the accounting firm, andsigned and stamped by CPAs;
4. The originals of all company documents and announcements that are disclosedto the public via newspaper designated for information disclosure during theReporting Period; and
5. The electronic version of The 2022 Annual Report 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. |
| KUKA | KUKA Aktiengesellschaft |
| TLSC | Toshiba Lifestyle Products & Services Corporation |
| Hiconics | Hiconics Eco-energy Technology Co., Ltd. |
| WDM | Beijing Wandong Medical Technology Co., Ltd. |
| Swisslog | Swisslog Holding AG |
| Servotronix | Servotronix Motion Control Ltd. |
| WINONE | WINONE Elevator Company Limited |
| Reporting Period | 1 January 2022 to 31 December 2022 |
Section II Company Profile and Key Financial Results
1. Corporate Information
| Stock name | Midea Group | Stock code | 000333 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese | 美的集团股份有限公司 | ||
| Abbr. of the Company name in Chinese | 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 | ||
| Registered address | Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City, Guangdong Province, China | ||
| Postal code | 528311 | ||
| Past changes of registered address | N/A | ||
| Business address | Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City, Guangdong Province, China | ||
| Postal code | 528311 | ||
| Company website | http://www.midea.com | ||
| IR@midea.com | |||
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 | 0757-26605456 |
| IR@midea.com | IR@midea.com |
3. Information Disclosure and Place Where this Report Is Kept
| Stock exchange website where this Report is disclosed | The website of the Shenzhen Stock Exchange (http://www.szse.cn) |
| Media and website where this Report is disclosed | China Securities Journal, Securities Times and Shanghai Securities News, as well as http://www.cninfo.com.cn |
| Place where this Report is kept | Company Investor Relations Department |
4. Company Registration and Alteration
| Unified social credit code | 91440606722473344C |
| Changes in main business activities since the Company was listed (if any) | None |
| Changes of controlling shareholder of the Company (if any) | None |
5. Other Relevant Information
Accounting firm engaged by the Company
| Name of the accounting firm | PricewaterhouseCoopers Zhong Tian LLP |
| Business address of the accounting firm | 11/F., PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road, Huangpu District, Shanghai 200021, PRC |
| Name of accountants writing signatures | Yao Wenping and Wu Fangfang |
Sponsor engaged by the Company to continuously perform its supervisory function during theReporting Period
□Applicable √N/A
Financial advisor engaged by the Company to continuously perform its supervisory function duringthe Reporting Period
□Applicable √N/A
6. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□ Yes √ No
| 2022 | 2021 | 2022-over-2021 change (%) | 2020 | |
| Operating revenue (RMB'000) | 343,917,531 | 341,233,208 | 0.79% | 284,221,249 |
| Net profit attributable to shareholders of the Company (RMB'000) | 29,553,507 | 28,573,650 | 3.43% | 27,222,969 |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses (RMB'000) | 28,607,973 | 25,929,086 | 10.33% | 24,614,653 |
| Net cash flows from operating activities (RMB'000) | 34,657,828 | 35,091,704 | -1.24% | 29,557,117 |
| Basic earnings per share (RMB/share) | 4.34 | 4.17 | 4.08% | 3.93 |
| Diluted earnings per share (RMB/share) | 4.33 | 4.14 | 4.59% | 3.90 |
| Weighted average ROE (%) | 22.21% | 24.09% | -1.88% | 24.95% |
| 31 December 2022 | 31 December 2021 | Change of 31 December 2022 over 31 December | 31 December 2020 |
| 2021 | ||||
| Total assets (RMB'000) | 422,555,267 | 387,946,104 | 8.92% | 360,382,603 |
| Net assets attributable to shareholders of the Company (RMB'000) | 142,935,236 | 124,868,124 | 14.47% | 117,516,260 |
Indicate whether the lower of the net profit before and after non-recurring gains and losses wasnegative for the last three accounting years, and the latest auditor’s report indicated that there wasuncertainty about the Company’s ability to continue as a going concern.
□ Yes √ No
Indicate whether the lower of the net profit before and after non-recurring gains and losses wasnegative.
□ Yes √ No
7. Differences in Accounting Data under Domestic and Overseas AccountingStandards
7.1 Differences in the net profit and net assets disclosed in the financial reports preparedunder China Accounting Standards (CAS) and International Financial Reporting Standards(IFRS)
□Applicable √N/A
No such differences for the Reporting Period.
7.2 Differences in the net profit and net assets disclosed in the financial reports preparedunder CAS and foreign accounting standards
□Applicable √N/A
No such differences for the Reporting Period.
8. Key Financial Results by Quarter
RMB'000
| Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | |
| Operating revenue | 90,381,167 | 92,279,842 | 87,705,744 | 73,550,778 |
| Net profit attributable to shareholders of the Company | 7,177,925 | 8,817,571 | 8,474,425 | 5,083,586 |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses | 6,993,023 | 8,698,489 | 8,374,107 | 4,542,354 |
| Net cash flows from operating activities | 7,978,986 | 13,415,724 | 8,077,642 | 5,185,476 |
Whether there are any material differences between the financial indicators above or theirsummations and those which have been disclosed in the Company’s quarterly or semi-annual reports
□Yes √No
9. Non-recurring Gains and Losses
√Applicable □N/A
RMB'000
| Item | 2022 | 2021 | 2020 | Note |
| Gain or loss from disposal of non-current assets | -59,854 | 77,527 | -52,424 | |
| Except for effectively hedging business related to normal business operations of the Company, gain or loss arising from the change in the fair value of financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities, and other non-current financial assets, as well as investment income or loss produced from the disposal of the aforesaid financial assets and liabilities | -604,446 | 995,824 | 2,204,165 | |
| Other non-operating income and expenses except above-mentioned items | 1,777,103 | 2,352,849 | 1,378,105 | |
| Less: Corporate income tax | 103,624 | 668,578 | 765,871 | |
| Minority interests (after tax) | 63,645 | 113,058 | 155,659 | |
| Total | 945,534 | 2,644,564 | 2,608,316 | -- |
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 isenumerated as a non-recurring gain/loss in the <Explanatory Announcement No. 1 on InformationDisclosure for Companies Offering Their Securities to the Public—Non-Recurring Gains 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 portfoliothat is focused on the coordinated development of the ToC and ToB businesses, Midea offersdiversified products and services. Specifically, the Smart Home Business Group, as the mainoperating entity of smart appliances, smart home and related peripheral industries and ecologicalchains, undertakes the construction of intelligent scenarios for end users, user operations and datavalue discovery, and is committed to providing the best experience of entire-house smart homeappliances and service. The Industrial Technology Business Group, with technology as the core driver,commands key technologies in intelligent transportation, industrial automation, green energy andconsumer appliances. It operates many brands including GMCC, Welling, HICONICS, SUNYE,SERVOTRONIX, DORNA, MR, MSCT, TOSHIBA, etc., with its products covering high-precision corecomponents such as compressors, motors, chips, auto parts, electronic expansion valves, variablefrequency drive, servo and motion control systems, speed reducers and cooling modules. It providesgreen, efficient and intelligent products and technology solutions for industrial customers across theworld. The Building Technologies Division is responsible for providing products and services inrelation to buildings, as well as the relevant operations. With iBUILDING, Midea’s digital buildingservice platform, as the core, its business covers HVAC, elevators, energy, building control, etc. Itsprimary products include VRF units, large chillers, unitary units, machine room air conditioners,escalators, passenger elevators, freight elevators, etc., as well as building automation software andbuilding weak electricity integrated solutions. Supported by “Building Equipment and Facilities +Digital Technology + Industrial Ecosystem”, it facilitates logistics, information, feeling and energy flowsof buildings to empower buildings with digital and low-carbon technologies and build sustainablesmart space. The Robotics & Automation Division primarily focuses on providing solutions of industrialrobotics, automatic logistics systems, and transmission systems for future factory-related fields, as
well as solutions for health care, entertainment, new consumption, etc. The Other InnovationBusiness includes new business arising from the business model transformation of Midea Group suchas intelligent supply chains and Industrial Internet, which can provide software services, unmannedretail solutions, and production services, among others, for the digital transformation of enterprises.The Digital Innovation Business also comprises Beijing Wandong Medical Technology Co., Ltd. (WDM)that is engaged in medical imaging devices and related services.With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire YourFuture” as its mission, “Embrace what’s next - Aspiration、Customer First、Innovation、Collaboration、Dedication” as its values, “High-quality Development and High-performance Operations” as itsmanagement and operation standard, Midea integrates global resources and promotes technologicalinnovation to create a better life for over 400 million users, major customers and strategic partners indifferent areas worldwide every year with satisfying products and services. In face of higherrequirements for products and services in the digital Internet era, Midea continues to promote itsstrategic focus of “Technology Leadership, Direct to Users, Digitization & Intelligence Driven, andGlobal Impact”, so as to rebuild Midea in the new era. To be specific, it strives to achieve TechnologyLeadership by building scale advantages in R&D and strengthening the efforts and investment in coreand cutting-edge technologies; be Direct to Users through direct contact and interaction with usersand reinventing product service and business models; be Digitization & Intelligence Driven through“Comprehensive Digitalization and Comprehensive Intellectualization”, as well as improving efficiencyinternally and focusing on users externally; and achieve Global Impact by seeking breakthroughs inkey 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 200subsidiaries, 35 R&D centers, 35 major manufacturing bases, and more than 160,000 employees. Itsbusiness covers more than 200 countries and regions. Overseas, Midea has 20 R&D centers and 18major manufacturing bases in more than ten countries, with around 30,000 employees. 22 currenciesare used by Midea in settlement. In addition, Midea took, in 2022, full ownership of KUKA, aGermany-based world-leading provider of robotics and automation solutions.
1.2 Position in the home appliance industry
Midea ranks No. 245 on the Fortune Global 500 list unveiled in August 2022, moving up 43 placesfrom the year before and marking its seventh year on the list. In July 2022, the Fortune China 500 listwas released and Midea ranks No. 35, moving up four places compared with the previous year. InAugust 2022, Forbes China and the China Electronics Chamber of Commerce jointly released the listof “China Digital 100”, and Midea was in sixth place for its comprehensive strength in the area ofdigital economy. In the “2022 Forbes China Sustainable Development Industrial Enterprises Top 50Selection” held in February 2023, Midea was selected as an Industry Benchmark for SustainableDevelopment Industrial Enterprises by virtue of its solid performance in green manufacturing, carbonneutrality, sustainable development and ESG practices. In March 2023, the Company was alsoselected as one of the ESG case companies with practical reference significance according to the“2023 ESG Inspiring Cases” results released by Forbes China. In March 2023, Midea won the ChinaIndustrial Grand Prize at the Seventh China Industrial Grand Prize Ceremony jointly organized by theChina Federation of Industrial Economics and 13 national industry associations for its excellentperformance in technology innovation, quality management and branding, among others. In August2022, Midea Group topped the list of “Top 200 Enterprises of China’s Light Industry in 2021” at CLIESummit 2022 organized by the China National Light Industry Council. By early 2023, five of Midea’sfactories had been included in the “Global Lighthouse Network” initiated by the World EconomicForum, covering air conditioners, refrigerators, laundry appliances, microwave ovens, dishwashers,etc., which demonstrates Midea’s leading position in intelligent manufacturing and digitaldevelopment among manufacturers worldwide. Meanwhile, Midea takes the lead among domestichome appliance makers by ranking No. 36 on the 2022 Brand Finance Tech 100 list released byBrand Finance, a British brand assessment institution. Also, Midea ranks No. 35 on the 2022 KantarBrandZ Top 100 Most Valuable Chinese Brands list. Midea has been given excellent credit ratings bythe three major international credit rating agencies, Standard & Poor’s, Fitch Ratings and Moody’s.The ratings are in a leading position among home appliance manufacturers worldwide as well asamong Chinese non-state-owned enterprises. Particularly, Standard & Poor’s has raised the creditrating on Midea to “A”, making it the highest-rated private manufacturer in China.In 2022, Midea has successfully retained the "Number One Engine" of ToC business on the domesticmarket. According to data provider AVC, Midea ranks first in the industry with respect to both the
online and offline domestic market share for six home appliance categories, namely, residential airconditioners, countertop pan-microwave ovens, countertop ovens, electric radiators, inductioncookers, and electric kettles.The table below shows the offline market shares and rankings of the Company’s primary homeappliance products (by retail sales) in 2022:
| Product category | Market share | Ranking |
| Residential air conditioners | 33.7% | 1 |
| Laundry appliances | 25.1% | 2 |
| Clothes dryers | 23.1% | 2 |
| Refrigerators | 13.5% | 2 |
| Rice cookers | 40.2% | 1 |
| Countertop pan-microwave ovens | 55.2% | 1 |
| Electric radiators | 50.8% | 1 |
| Induction cookers | 46.6% | 1 |
| Water dispensers | 40.0% | 1 |
| Electric fans | 39.8% | 1 |
| Countertop electric ovens | 37.1% | 1 |
| Electric kettles | 37.0% | 1 |
| Electric baking pans | 36.7% | 1 |
| Air fryers | 34.7% | 1 |
| Electric pressure cookers | 39.0% | 2 |
| Blenders | 29.9% | 2 |
| Water purifiers | 18.1% | 2 |
| Freezers | 12.3% | 2 |
| Electric water heaters | 17.3% | 3 |
The table below shows the online market shares and rankings of the Company’s primary homeappliance products (by retail sales) in 2022:
| Product category | Market share | Ranking |
| Residential air conditioners | 33.6% | 1 |
| Laundry appliances | 34.6% | 2 |
| Clothes dryers | 35.6% | 1 |
| Refrigerators | 17.9% | 2 |
| Induction cookers | 49.7% | 1 |
| Countertop pan-microwave ovens | 46.5% | 1 |
| Electric kettles | 25.3% | 1 |
| Countertop electric ovens | 23.0% | 1 |
| Electric radiators | 22.2% | 1 |
| Water purifiers | 18.7% | 1 |
| Electric pressure cookers | 37.2% | 2 |
| Electric water heaters | 31.4% | 2 |
| Rice cookers | 25.8% | 2 |
| Electric baking pans | 21.4% | 2 |
| Electric fans | 20.4% | 2 |
| Freezers | 12.6% | 2 |
| Air fryers | 13.6% | 3 |
| Water dispensers | 13.0% | 3 |
| Blenders | 11.3% | 3 |
1.3 Industry Overview
A. Home Appliance IndustryIn 2022, the domestic economy bumped along under multiple pressures, and the domestic GDPgrowth slowed down to 3%. The decline in home appliance consumption was closely related tomacroeconomic development. On the one hand, personal income was directly hit. On the other,consumer confidence significantly dropped, especially in offline consumption. These factors inhibitedpeople's willingness to consume, leading to a setback in the consumption of consumer durables.Concurrently, the support of the real estate sector for the home appliance industry was draining.
Nevertheless, as policies at the end of 2022 were optimised, consumption, business activities, andsocial mobility recovered better than expected after a brief absence of consumption scenes.According to the 2022 Annual Report on China’s Household Electrical Appliance Industry prepared bythe National Household Appliance Industry Information Center under the guidance of the ChinaHousehold Electric Appliance Research Institute (CHEARI), the exports and domestic sales of thehome appliance industry showed a decline in 2022. Specifically, the exports and domestic salesreached RMB568.16 billion and RMB730.72 billion, reducing by 10.9% and 9.5% year on year,respectively. Although the overall growth of the sales of home appliances plummeted, theconsumption upgrading in 2022 did not slow down. The market competition got increasingly fierce,driving the improvement of the market structure. As a result, high quality and performance becamethe common pursuit of enterprises and consumers. 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. In July 2022,the Ministry of Commerce and 12 other authorities issued the Notice on Several Measures toPromote Consumption of Green and Smart Household Appliances, proposing nine policy measures topromote consumption of green and smart home appliances, which mainly cover four aspects: First, tocarry out nationwide household appliance trade-in; second, to promote the use of green and smarthome appliances in rural areas; third, to strengthen the whole chain of service and guarantee; andfourth, to consolidate infrastructure support.According to the data from the National Household Appliance Industry Information Center, thedomestic retail sales of air conditioners were RMB141.1 billion in 2022, down by 8.7% year on year.In terms of the product structure, the market share of high-end products kept rising, with the onlinemarket share by retail sales of Energy Efficiency Grade 1 products exceeding 65% and the totalmarket share by retail sales of 3-HP floor-standing and 1.5-HP wall-mounted air conditioner unitssurpassing 70% in 2022. In terms of product functions, the concept of air conditioners kept expandingfrom the functions of cooling and heating to fresh air, self-cleaning, dehumidification, odour removal,air purification, etc. As the comfort of product experience has been focused on, the fresh air functionproducts have developed rapidly, with their market shares (by retail sales) reaching 8.8% and 13.4%,
respectively, in 2022.According to the data from the National Household Appliance Industry Information Center, thedomestic retail sales of laundry appliances were RMB62.4 billion in 2022, down 12.6% year on year,with the retail sales of clothes dryers reaching RMB8.3 billion, up 12.3% year on year. In the upgradeof the laundry appliance market, in terms of the product types, the market share of front-loadingproducts keeps growing stably, with the clothes dryer market absolutely dominated by the heat pumpdryers, of which the offline market share by retail sales was increased to 99.6%. In terms of productcapacity, large-capacity products were obviously replacing small-capacity ones. The online marketshare by retail sales of front-loading washers with a capacity of more than 10 kg reached 36.6%, andthat of clothes dryers with a capacity of more than 10 kg was nearly 60%. In terms of productfunctions, the intelligent wash and care function of high-end washers represented by COLMO wasplaced under the spotlight of the market.According to the data from the National Household Appliance Industry Information Center, thedomestic retail sales of refrigerators were RMB91.7 billion in 2022, down by 8.2% year on year. Theproduct structure of refrigerators was significantly optimised. In terms of capacity, the offline marketshare by retail sales of large refrigerators with a capacity of more than 500 L reached nearly 50%. Interms of product structure, the offline market shares by retail sales of side-by-side refrigerators andmulti-door refrigerators with more than four doors totaled nearly 70%. Consumer's intensifiedwillingness to pursue quality life has prompted the refrigerator market to pivot towards high-end multi-dimensional design, which is mainly manifested as "anti-bacterial and fresh", "ultra-thin and built-in",and "intelligent".According to the data from the National Household Appliance Industry Information Center, thedomestic retail sales of kitchen appliances were RMB183.1 billion in 2022, down 9.5% year on year.As dishwashers became more popular on the domestic market, the retail sales reached RMB10.2billion, up 7.6%% year on year. And product upgrading continued. In terms of functions, functionssuch as the integration of functions of washing, sterilisation, drying and storage, layered and separatewashing, and automatic recognition and program matching have become mainstream. With respect tomodels and specifications, the offline market share by retail sales of built-in products approximated
85%, and the online market share by retail sales of dishwashers with 13 place settings capacitysoared to 37.7%. Integrated stove sales reached RMB25.2 billion in the domestic market, an increaseof 2.8% year on year. Due to the surge in demand for high-end kitchen appliances, in particularsteamers and ovens, integrated stove products trended towards style diversification and functionupgrading. In terms of specifications, the all-in-one models with a kitchen hood, stove, steamer andoven have developed rapidly, with an online market share by retail sales rising to 53.6%. In terms ofthe exhaust air volume, the online market share by retail sales of integrated stove products with anexhaust air volume of at least 18m3/min reached nearly 70%. In terms of the heat load, the onlinemarket share by retail sales of integrated stove products with a heat load of more than 4.5 kwsurpassed 90%. These statistics indicate that there is still great development potential for integratedkitchen appliances in the future.According to the data from the National Household Appliance Industry Information Center, thedomestic sales of small domestic appliances were RMB131.1 billion in 2022, down 6.4% year on year.With respect to the market performance of all categories, traditional products such as rice cookers,blenders and electric fans saw a decline in domestic sales while the sales of health-friendly cleaningappliances were relatively strong over the past three years. By categories, the robot cleaner industryregistered a slowdown in growth as a result of slow innovation of production functions. In 2022, theretail sales of robot cleaners were RMB12.1 billion, up 1.2% year on year. Meanwhile, functions andexperience of floor scrubbers have been improved as a result of the advancement of technology,represented by the application of new technologies such as roller brush and mop self-drying,sterilisation through electrolysed water, push-and-pull. Floor scrubbers recorded retail sales ofRMB10 billion in 2022, up 75.3% year on year. In the meantime, competition is increasingly fierce. In2022, more than 160 floor-scrubber brands competed in the online market, and the average onlineretail price of floor scrubbers also fell by 9.3% year on year. Additionally, as air fryers meetconsumers' demand for healthy diets, they developed rapidly over the past three years, thanks tovigorous promotion on social media platforms. In 2022, the retail sales of air fryers were RMB5.6billion, up 58.1% year on year.According to the data from the National Household Electrical Appliance Industry Information Center,
the online retail sales accounted for 57.8% of the total retail sales of home appliances in China during2022, up 6% from last year, while the share of the offline retail sales fell to 42.2%. From theperspective of the development trend of the domestic household appliance industry: First, thephenomena of brand concentration and new brand rise coexist, where the concentration of largehousehold appliance brands increase, and brands in the field of kitchen appliances and smallhousehold appliances still have opportunities and develop rapidly. Second, the product upgrade is stillcontinuing, mainly focusing on the four development trends of high-end, innovation, integration, andproduct suites. In particular, the proportion of "high-value" products such as air conditioners with theFirst-class Energy Efficiency, refrigerators with a capacity of over 500L and clothes dryers with acapacity of over 10 kg increased significantly in online channels. Third, a variety of channels andscenes jointly promote the progress of the industry. On the one hand, in addition to the traditionaloffline and online channels and platforms, emerging channels such as Pinduoduo, Douyin, andKuaishou are rapidly rising and changing the channel landscape. During the "618" period in 2022, thetotal transaction amount of livestreaming marketing reached RMB144.5 billion, accounting for around20% of the online transaction amount. On the other hand, new applications and scenes tapped basedon insight into new user needs are increasing, expanding from diet, personal care, cleaning, andsleep to health care, pets, fitness, mother and infant products, security, and more scenes.B. Robotics and Industrial Automation IndustryWorld Robotics 2022 Industrial Robotics released by the International Federation of Robotics(hereinafter referred to as "IFR") showed that there would be five trends in the robot industry in 2023,which refer to that the performance of robots will get promoted, it will be easier to operate robots,robots will support more AI and digital automation technologies, the manufacturing comeback andlocalised production will be more significant, and the repair and reuse of robots will be emphasisedmore. Global industrial robot installations rebounded strongly in 2021, with IFR indicating asubstantial increase of 31% in global robot installations, amounting to 517,000 units. By regions,Americas achieved an increase of 30.8% year on year, Europe achieved an increase of 23.5% yearon year, and Asia achieved an increase of 37.5% year on year, which China's industrial robotinstallations numbering 268,195 units, up 51% year on year, 50% higher than the total installations of
the world in the same period. IFR also predicted that the annual new installations of industrial robotsworldwide would exceed 690,000 units in 2025.In 2022, uncertainties in domestic and external environments were mounting, and the instability of theglobal supply chains was worsened by external factors such as geopolitical conflicts overseas.Nevertheless, with the constantly optimised policies in H2 and the introduction of economic stimuluspolicies introduced one after another, the industrial robot industry "recorded growth despite itsunsatisfactory beginning". According to the data released by the National Bureau of Statistics, thedomestic production volume of industrial robotics stood at 443,100 units in 2022, up more than 20%year on year. According to the statistical analysis of MIR, in 2022, the shipments and market share ofsix-axis robots above 20 kg grew by nearly 30% and to 34%, respectively, due to the increasingnumber of robots applied in new energy vehicles, related parts and components, and power batteries.The shipments of collaborative robots increased by 26.5% year on year, as a result of the excellentperformance of automotive parts and components, automotive electronic, medical, metal, andsemiconductor products in the industrial market. Additionally, driven by the demand in such emergingindustries as lithium batteries, PV power, and medical services, the shipments of SCARA robots roseby 3.9% year on year. Concurrently, the prices of the raw materials of commodities climbed, and theexports shrank, resulting in a decline in the demand for machine processing and welding. Given thisreason, coupled with the sluggish consumption of electronics, the shipments of six-axis robots below20 kg dropped by 3.9% year on year. Furthermore, the sluggish consumption caused the shipmentsof delta robotics in the food & beverage and household necessities industries to fall by 2.8% year onyear. Meanwhile, non-manufacturing industries, such as new retail, health, food & beverage, andeducation were also influenced by the macro-environment, thus having a lower demand for robots.Nevertheless, robots were in demand in the power, inspection, and medical service industries.Moreover, MIR predicts that the demand in the downstream industries of the industrial robot market inChina will be further differentiated in 2023, with new energy vehicles and emerging industriesmaintaining high demand for robots. Therefore, the year-on-year growth of sales is predicted to bemore than 12%.According to the latest statistics of IFR, in terms of industrial robotic density (the average number of
industrial robotics per 10,000 workers), South Korea ranks No.1 in the world with 1,000 robotics,while the robotic density of China has increased from 49 robotics in 2015 to 322, surpassing the USfor the first time and making the country a global top five in this respect. Since 2016, China has beenthe fastest growing and largest industrial robotics market in the world. Supported by diverse factorssuch as flexible demands of the manufacturing sector, declining demographic dividend, emergingmarkets and the development of innovative technologies, industrial robotics will be applied to moreand more areas, with great potential and prospects.C. Smart Building IndustryIn the smart building industry, Midea focuses on products, services and related businesses withrespect to buildings. It aims to provide users with comprehensive, intelligent and sustainable buildingsolutions based on the digital building platform and by facilitating the logistics, information, feeling andenergy flows. The smart building ecosystem mainly includes HVAC, elevator, intelligent building(building automation) and integrated energy management. From the perspective of the industrycompetition pattern, domestic HVAC, elevator and building control have the same pattern and twomajor characteristics. The first is the high proportion of foreign and joint venture brands; the second isthe low market concentration. According to the data from HVAC, Industry Online and ChangjiangSecurities Research Institute, the proportion of foreign brands of commercial air conditioner in 2022was about 45%, and the long tail effect was obvious as only four manufacturers have a share of morethan 10%. For elevator, the data from the Business Yearbook of Elevator Industry in China andChangjiang Securities Research Institute indicates that the proportion of foreign and joint venturebrands in the elevator market is as high as 70%, while the revenue scale and market share of the topdomestic brands are still low. In 2022, the four major brands of Kone, Mitsubishi, Hitachi and OTIS'srevenues exceeded RMB20 billion in China. The building control market is also dominated byHoneywell, Siemens, Johnson Controls, Schneider and other foreign brands. From the perspective ofthe market size and development prospects, according to the data from Industry Online, HVAC andChangjiang Securities Research Institute, the sales revenue (excluding tax) of domestic commercialair conditioner in 2022 was RMB128.6 billion, up 4% year on year, of which domestic sales accountedfor about 90%; the compound growth rate of the industry in the past three years was 9%. The
application field of commercial air conditioner is mainly divided into residential, commercial, industrialand public building. By business type, the sales of ToB business accounted for more than 70%, andthe revenue scale was nearly RMB100 billion. In industrial development, the periodicity of the non-residential part of commercial air conditioner was smaller than that of residential part, which wasmore related to infrastructure investment. For example, government public construction,transportation, data center, culture, education and entertainment, medicine and other downstreamsegmentation still maintained a good growth trend, and a long-term high growth rate. According to thedata of National Bureau of Statistics and Changjiang Securities Research Institute, in 2022, theproduction of domestic elevators, escalators and lifts was 1.45 million sets, down 7% year on year,which was mainly for domestic sales. The sector has maintained a solid expansion trend over thepast three years, despite the short-term impacts of policy adjustments and the property market.Judging from the operating data of major manufacturers, the output value of a single elevator wasabout RMB200,000, considering the average factory price of a single elevator equipment and themaintenance business; the annual market size of domestic elevator equipment was RMB250-300billion, and the scale of the elevator industry was even larger. The data from EqualOcean Intelligenceand Changjiang Securities Research Institute shows that the current market size of intelligent building,which was about RMB7.1 billion in 2021, is relatively small. The equipment-based businesses suchas 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-carbon operation of buildings, and determines the overall quality of building solutions. Overall, thedomestic revenue of the smart building industry alone is nearly RMB400 billion, and the compoundannual growth rate of the industry is between 5% and 10% (revenue caliber). Meanwhile, with theimprovement of the macro environment and policy optimization, the real estate industry is picking up,which may bring stronger demand.New opportunities are ushered into the smart building industry, which are "carbon emission peak andcarbon neutrality", "digital and intelligent transformation" and "domestic replacement". With theestablishment of the dual-carbon strategy, the intelligent and low-carbon process of buildingconstruction is expected to accelerate. According to the "2022 China Urban and Rural ConstructionCarbon Emissions Research Report" published by the China Association of Building Energy Efficiency,
the carbon emissions of building operation accounted for about 22% of the total domestic carbonemissions in 2020, and the proportion will further increase for the growing newly started buildings andthe decreasing inventory buildings. Therefore, as one of the major sources of carbon emissions in thewhole society, the low-carbon or even zero-carbon process in the construction field will undoubtedlybe propelled. In 2021, a series of "carbon emissions peaking and carbon neutrality" policies weresuccessively issued, such as the Opinions on Implementing the New Development Concept toAchieve Peak Carbon Emissions and Carbon Neutrality in a Complete, Accurate and ComprehensiveManner, the Opinions on Advancing the Green Development of Urban and Rural Development, theAction Plan for Peak Carbon Emissions by 2030, and the 14th Five-Year Plan for ComprehensiveWork on Energy Conservation and Emission Reduction. China’s local governments have issued theiraction plans for peaking carbon emissions while the ministries and committees of the centralgovernment rolled out documents for the same purpose, such as the Opinion on Fiscal Support forPeaking Carbon Emissions and Achieving Carbon Neutrality issued by the Ministry of Finance, andthe 14th Five-Year Plan for Building Energy Efficiency and Green Buildings issued by the Ministry ofHousing and Urban-Rural Development. All these policies mention buildings and constructions, with aview to improving the building energy consumption management system, enhancing the buildingenergy consumption monitoring capacity, building energy saving management capacity, and buildingenergy efficiency level, and promoting the large-scale development of ultra-low energy consumption,near-zero energy consumption, and low-carbon buildings. With stronger policy incentives andconstraints, the building energy-saving upgrading, intelligent operation, and cooperative energymanagement are bound to become the main measures for the targets in addition to the constructionof low-carbon building standards and administrative supervision. As to the market side, the electricityprice reform, "power rationing" and other measures have raised the cost and the input-output ratio inbuilding energy saving renovation, energy management, and digital operation, and thus more andmore market entities begin to positively carry out the “dual carbon” strategy and energy savingrenovation. Taken as a whole, under the background of "dual carbon", the building construction, asone of the main sources of energy consumption and carbon emissions in the whole society,accelerates the process of energy conservation and carbon reduction, and catalyzes the outbreak ofdemand for efficient low-carbon building solutions. The demand for digital intelligent building will alsoincrease significantly, as the development level of buildings is a key link in "smart city" and still
lagging behind under the trend of digital economy. At the same time, with continuous progress ofcommunication, computing power and algorithms, the system-level control such as HVAC andelevators will move to the building-level control - the first is the space expansion brought by changesfrom "control" to "service"; the second is the narrowing gap to foreign enterprises with first moveradvantage. Additionally, the more positive and clear signal comes from the transformation andupgrading of the elevator industry driven by digital intelligence. In 2018, the General Office of theState Council issued the Opinions on Strengthening the Quality and Safety of Elevators for thepurpose of promoting the elevator installation on existing residences and the maintenance of oldelevators. Specifically, the maintenance should press for quality, and resources should be allocatedon the basis of fully grasping the operation of elevators, hence the application of informationtechnology such as big data and IoT is getting more important. In 2020, the State Administration forMarket Regulation divided the maintenance methods of different elevators according to the standardof "whether there is a remote monitoring system based on IoT". The domestic replacement ofcommercial air conditioner has undergone three processes: single unit, multi-split unit, and largechiller. The share of homegrown brands has risen to 55% in 2022, and that of the homegrown brandsof large chillers, where the barriers are relatively high, is also increasing. The commercial airconditioner industry has entered the stage of domestic replacement in all aspects, and thus there is alarge space for future growth. Compared with air conditioner, the domestic replacement process ofelevator is relatively slow, but the relevant market pattern will be optimized with the graduallyweakened real estate dividend, the changes in maintenance mode, and the application of IoT. In themedium and long term, there will be more competition opportunities in the smart building industry withthe market structure of "high proportion of foreign investment & low market concentration". On theone hand, the policy of "double carbon" is fostering the energy-saving upgrading and smart operationunder the context of high proportion of carbon emissions and energy consumption by buildings. Onthe other hand, with the improvement of digital intelligence, the input-output effect of smart buildingsis changing qualitatively, and the optimization of competition pattern is underway.
2. Business Scope in the Reporting Period
The business environment remained harsh in 2022. Affected by macro factors and overseas
geopolitical conflicts, the political and economic environment became more complicated both at homeand abroad. Meanwhile, due to supply chain disruptions, the prices of bulk raw materials such ascopper and aluminum remained at high levels. In face of these hardships and challenges, Mideaadhered to the profit-oriented annual operational principle of “Generate Income & Drive Profit”. At thevery beginning of 2022, it made swift plan adjustments to concentrate on the core businesses andproducts and return to the basics of business. Upon relentless efforts, remarkable results wereachieved. Midea delivered expected operating results, with substantial improvement in key indicatorssuch as profitability and cash flow. Meanwhile, the strategic plans have been further implemented andnew steps have been taken in the strategic layout, reflecting the good corporate genes of Midea. For2022, Midea achieved, on a consolidated basis, total revenue of RMB345.7 billion, up 0.68%YoY; and a net profit attributable to shareholders of the Company of RMB29.6 billion, up 3.43%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 uservalue in business scenes, products and services which are in direct contact with users. Based onusers' yearning and pursuit for a better life, Midea pursues higher goals such as originality,sustainable selling points and technology explicitness, and continues to empower itself with the tool ofbig data, so as to achieve the vision of "Bring Great Innovations to Life". In addition, based on userneeds and consumption trends with respect to living rooms, balconies, kitchens, bathrooms, amongothers, Midea offers its own products and ecosystem products. Household service is comprehensivelydeepened by using IoT technology, so as to provide intelligent comprehensive solutions for the wholehouse, making home life more efficient, convenient, healthy and comfortable, and improvingexperience and happiness for consumers. By doing so, it aims to lead the way in the innovation ofsmart household appliances. In terms of industrial design, Midea leads the way in user experienceand interaction upgrading with ongoing innovations. In 2022, Midea won a total of 132 industrialdesign awards, including 35 Red Dot Design Awards, 58 iF Design Awards, 28 IDEA Awards, and 11
G-mark Awards.For smart living room scenes:
Midea Air Conditioner has been pursuing low-carbon development. To this end, it has been workingon the development of next-generation cooling technology and staying focused on the arrangementsfor next-generation cooling technology in the low-GWP environmentally friendly refrigerant field,including R290, R454B, CO2, and H2O. In 2022, the world's first R290 new Energy Efficiency Grade1 air conditioner was produced by Midea. The product's annual performance factor ("APF") reached
5.29, 5.8% higher than Energy Efficiency Grade 1 of the new national standards, earning the productthe first health and hygiene certificate for R290 products. With a rotatory global air duct design, theproduct enables the air duct to rotate 180 degrees, removing the limitations on the airflow angle oftraditional air conditioners. Additionally, Midea took the lead in developing and producing a newefficient product using R454B, a new environmental refrigerant. The product was the world's firstproduct to be certified by the Air-Conditioning, Heating, and Refrigeration Institute ("AHRI") and thefirst Chinese R454B refrigerant product to pass the international safety certification of UnderwritersLaboratories Inc. ("UL"). Midea developed and released the first CO2-based and H2O-basedresidential air conditioner prototypes in the residential air conditioner industry. It replaced traditionalrefrigerants with CO2 and H2O to achieve fluorine-free refrigeration, thereby seeking out an ultimatesolution using environmentally friendly refrigerants. COLMO AVANT Air Conditioner took the lead inusing the Cyclone technology applicable to the carrier propulsion system, enabling soft, comfortableair exhaust and sufficient cool air output. With this product, users can enjoy a comfortable breeze"anytime and anywhere". Additionally, the innovative AI-powered full-stack air algorithm was used forthis product series, combining the top structure hardware and advanced AI-powered intelligent controltechnology, delivering a comfortable feeling to users far beyond the industry standard. Concurrently,the voice recognition technology with a strong sense of technology used in the series could setdistinct mode and operational parameters for different family members, thereby enabling users to"activate their exclusive mode with their voice". Additionally, Midea was the first air conditionerbusiness to define AI as the core of its products. COLMO AI-powered Villa Commercial AirConditioner and entire-house high-end smart standards have been unveiled, in which the innovative
AI-powered smart system that integrated 135 air, body, and equipment sensors was applied, enablingusers to understand the air and equipment statuses instantly. With the intelligent central controlinteractive centre and the built-in algorithm for automatically regulating the global air, entire-househigh-end smart solutions are provided for customers. Moreover, the 3 + 1 temperature and humidityprecise control system integrated the dual-coil three-pipe control and central humidification system,achieving the ±0.3℃ temperature control and 1% humidity regulation, thereby providing whole-spaceand whole-scene comfortable air. The Ideal Home III Multi-split Commercial Air Conditioner was rolledout. Its four leading performance indicators enable the product to work at an ambient temperature of -20℃. Additionally, compared with the traditional enhanced vapour injection technology, thecontinuous enthalpy injection technology enables the product to have a better heating performance.Moreover, the product can quickly cool the air at an ambient temperature of 58℃. Concurrently,refrigerant heat dissipation technology is employed to ensure that the product can run properly evenon hot days. Additionally, a new indoor side air duct has been developed to achieve double noisereduction and lower the sound of the product when working to no higher than 20 dB. What's more, theenergy efficiency that is far better than Energy Efficiency Grade 1 can maximise the operationalefficiency of core components, and the product's APF value is 15% higher than the national EnergyEfficiency Grade 1. These features have made the product a "benchmark with strong cooling andheating performance". In 2022, Toshiba-branded flagship air conditioner "Daqingkuai" was launchedin Japan. Focusing on the core needs for "comfort", "cleaning", and "energy conservation", Toshibadeveloped such pioneer technological features in Japan as "automatic wind blow and peopleavoidance" and "separate breezeless". Moreover, core technologies, such as the innovative fin-shaped high-density irregular pipe diameter integrated heat exchanger, efficient inverter electriccontrol and ultra-efficient rotary compressor, enable the product to possess world-leading energy-saving performance.To create a more comfortable living environment, Midea continued to research and apply various fantechnologies. Midea achieved self-adaptive comfortable wind adjustment through research on thecomfort wind control technology of wind changing with temperature. Midea realized entire-house 3Dsurround stereo wind of thermostatic warm air through research on dual-engine PTC controltechnology of staggered temperature difference. Midea also achieved multi-angle positioning blowing
and intelligent obstacle avoidance through research on contactless detection control positioningtechnology of oscillating stepping motors. Midea Micro-electrolysis Water Washing Air Cooling TowerFan uses innovative micro-electrolysis sterilization to electrolyze tap water into sterilized water with asterilization efficiency of 99.9%. The tower fan uses a water curtain waterfall to flush and clean the airin depth and is equipped with an air-conditioner-level cross flow turbine to offer healthy, fresh andclean wind. The detachable and washable tower fan applies the industry's original patentedtechnology to achieve a full-machine washable design and one-click detachment. The air duct system,if not powered on, can be flushed out with water, providing users with clean wind.In 2022, Midea swiftly adjusted the product structure of floor scrubbers, and gradually established acomplete product portfolio of floor scrubbers under the two brands of Eureka and Midea. Its new high-end flagship floor scrubber meet consumers' demand for floor cleaning with its functional integrationof suction, dragging, and washing, further optimizing the product performance and user experience.The handle sensor offers two-way forward and backward boost to reduce the burden of cleaning. Theforward and reverse rotation control technology for the integrated self-cleaning roller brush improvesthe self-cleaning effect and fully cleans hidden corners with no residue of stains from the water jet.The integrated roller brush drying technology prevents long-time moisture which breeds bacteria. The"flat lying" design with a tilt angle of up to 170° allows cleaning deep to the bottom of furniture,preventing sewage backflow. The integrated electrolytic water sterilization technology, with asterilization efficiency of 99.9%. The close-to-edge dead-angle-free design and unique detachableroller brush design constitute the pioneer truly close-to-edge and dead-angle-free design in theindustry, cleaning any dead angle with a single push. The application of intelligent technology allowshuman-computer interaction, so water volume, suction power, and other parameters can be adjustedas needed. In 2022, Midea released the first intelligent robot W11, Midea Small White Box, M9, P8,A8, A8+, and other products successively, adhering to the innovative design principle of focusing onuser experience. These products integrate the innovative functions of automatic water refill and brushlift, dual duct dust collection, base station self-cleaning, automatic rag washing, rag drying, bacterialinhibition and deodorization, and other new cleaning technology to provide users with a bettercleaning experience. These products are equipped with the industry's leading power managementunit to achieve accurate and intelligent charge and discharge control and enhance the service life and
safety of the battery. In the overseas markets, Midea rolled out several vacuum and mop robots underself-owned brands with such innovative core technologies as automatic obstacle avoidance driven by3D LIDAR and dual nanometre band line laser. Additionally, based on the cleaning habits and painpoints of North American users, Midea launched Innova Upright Vacuum Cleaner NEU700, a high-end product designed to optimise the structure of upright vacuum cleaner products. The product isequipped with innovative functions, such as the anti-tangle floor brush, fully sealed design, electricpet grooming brush, and silent design.For smart balcony scenes:
To meet the demand for "healthy washing and drying", the Light Dry Cleaning 2.0 steam caretechnology offers the industry's pioneer special program for ten types of odor elimination, it achievesA-class rapid odor elimination in five minutes and low temperature bacteria removal of no more than60°C with a bacteria removal rate of 99.9%, winning the China Aerospace Science andTechnology|ASES Certification. "Key Technology and Industrialization of Double-Driven, Dewateringand Double-Drum Washing Machine with Large Capacity", "Key Technology and Industrial Applicationof Long-Acting Plasma for Deodorization and Sterilization" and "Application and Industrialization ofNew Special Effect Technology of Electrode Catalytic Coating for Use in Washing Machines" includedin Light Dry Cleaning Technology 2.0 have also been certified as "Internationally Advanced" by theChina National Light Industry Council. The original TM technology uses the industry's smallest dualengine system of two-appliance coordination and electric auxiliary heating to meet the demand forfast drying and whole-machine lean design and achieve product suite cost optimization. Theindustry's pioneer hole-free inner drum washing machine technology introduces a new water inlet torinse clothes with running water in a dynamic manner and prevent dirt from flowing back. In addition,the formation of water film effect reduces friction between the clothing and the drum wall, minimizingthe rate of clothing wear and tear. Meanwhile, the independent chamber water storage not onlyreduces the water use between the inner and outer drums but also meets the consumers' demandsfor intimate underwear washing. Additionally, the cycle spray technology and fast cleaning 2.0technology achieve the full utilisation of detergent and can shorten laundry time by up to 30%. Tominimise the thickness of the case of the built-in washing machine, Midea developed the first 440-mm
ultra-slim platform in the industry, which can be completely embedded into most home cabinets. Interms of functions, although the platform is quite slim and can be fully embedded into the 600-mm-wide cabinets, it ensures that the washing machine still has a capacity of 10 kg and is capable ofwashing and drying clothes. Moreover, washers with a drum diameter of 535 mm have a betterwashing performance, and dryers with a drum diameter of 580mm can unfold and fluff up clothes. Thewashing machine in COLMO Interstellar Station Dry Cleaning Care Suite applies the OCDC DCfrequency conversion motor and is equipped with the function of cleaning and delicate, soft care offibre and luxurious fabrics, such as wool, certified by the international green woolmark. Additionally,with the aerospace-level cold-brewed silver disinfection and water purification technology, thewashing machine can fully disinfect clothes. Through sterilisation and cleaning using hot runningwater and steam, Candida albicans and the H1N1 virus can be removed, achieving a disinfection rateof 99.99%. Moreover, the "Pickup Prompt" program with a miniature snap-action switch is designed tointelligently remind users to pick up clothes after they are cleaned. Concerning COLMO InterstellarStation Clothes Dryer, it enables multiple innovative functions in the industry and has passed theinternational blue woolmark certification for drying. With the mainstream low-temperature soft dryingtechnology and dual-inverter soft drying technology, the dryer can precisely recognise clothes ofdistinct fabrics and provide delicate care for 99 luxurious fabrics. It also enables 12-min quick dryingand 5-min quick odour removal. Facilitated by the advanced technology, AI-powered Light DryCleaning 2.0, the nano-grade saturated steam generated through the steam generator can penetratethe fabric fibres and to the greatest extent, retain the toughness of the fibres and separate the fibresfrom other materials, thereby achieving effective dust removal and crease smoothing. Furthermore,the dual-inverter system enables active noise reduction at the source, and the air duct and rear coverare optimised, achieving silent night drying (55 dB). Compared with the products at the same level inthe industry, COLMO Interstellar Station Dry Cleaning Care Suite applies the slimmest body design,enabling it to be fully incorporated into most home scenes and spaces. Meanwhile, the ergonomicdesign employed makes it easy for users to pick up clothes. Little Swan Lingyun Tiancheng Washer-Dryer, with its advanced integrated design, can be perfectly incorporated into the home scene. Itsdetergent drawer-free design helps users use the machine more conveniently and efficiently. Besides,users can control the machine through the unbounded intelligent display. Moreover, with five uniquewater flow modes, the machine can wash clothes while avoiding deformation, and thoroughly remove
stains. In terms of the drying function, the machine can dry clothes evenly in 20 minutes, and itsautomatic forward and reverse rotation can shake out clothes. Concurrently, the machine'smicroelectromechanical system enables precise clothes drying through intelligent control.Furthermore, the quick multi-dimensional bacterial removal function can remove the odours ofdampness, mould, hot pot, tobacco, and alcohol. The independent built-in steam generation devicecan generate wet, hot steam, which can penetrate the fibres of clothes and requires. With this feature,clothes needn't be ironed. What's more, the rubbing and softening functions of the machine canprevent clothes from swelling and smooth creases, thus maintaining clothes' smoothness and style.Midea Vigor Series Washer-Dryer Suite is equipped with hole-free inner drum technology to preventsewage laundry and reduce clothing wear and tear and achieves efficient cleaning of clothes whilemaintaining the original quality of clothing. This product is the industry's first to be awarded themedical-grade laundry certification. The cycle spray technology and fast cleaning 2.0 technologyachieve the full utilisation of detergent and can shorten laundry time by up to 30%. Moreover, it isequipped with multi-functional Vigor Rods: The blue rod can steadily and constantly release silverions in the high oxidation state in cold water environment without electricity or heating; the red rodscale inhibition module can adjust the concentration of calcium and magnesium ions and maintain thesoftness and colour of clothing. Vigor Series Clothes Dryer is the first medical-grade fungus dryer andcan remove more than 99% of bacteria, fungi, and viruses. It is an expert at protecting the health ofunderwear. The product is also equipped with anti-bacterial drying technology, and its hybrid dryingsystem enables the intelligent precise control of heat, time, and temperature, thus avoiding fibredamage caused by high temperature. Additionally, while drying clothes, the machine can removemites instantly and penetrate fibre gaps for full anti-bacterial mite removal, through its built-in high-frequency short-wave ultraviolet lamp, thereby achieving healthy drying and caring. Toshiba T16 Top-loading Fully Automatic Washing Machine oriented toward the ASEAN market is equipped with theindustry's first EX-dot detergent input technology and employs the innovative "small backpack"detergent loading design. It is also equipped with a manually pressing detergent input system. TheEX-dot technology can load 1 L detergent and 1 L softener at most, meeting users' demand forconvenient, visualised, and quantifiable input. Toshiba XP2 Series Japanese-style Washer-Dryer forthe Japanese market employs heat pump drying technology. It can precisely control and regulatetemperature and maintain the looseness and smoothness of clothes. The product's fast drying
function at high air volume enables 7 kg of clothes to be dried within 96 minutes. Equipped with theUFB-EX cleaning technology, the product washes clothes by making two types of fine bubblespenetrate fibres through the double microbubble generator, thereby effectively keeping clothes cleanand bright. Additionally, with ultraviolet irradiation and warm air sterilisation functions, the product cansterilise clothes in all respects. Furthermore, the direct-drive motor and six-dimensional lint filtrationsystem enable the product to work efficiently and keep the drum clean.For smart kitchen scenes:
The "rapid purification technology" of Midea Refrigerator has been awarded the certification of first-class purification and healthy preservation, creating a secure storage environment. Specifically, thetechnology of high concentration AC silent ion field generation can significantly increase thedischarge area and active particle concentration while effectively reducing the short circuit risk arisingfrom high voltage discharge in the low temperature and high humidity environment in the refrigerator.The high odor affinity nano-catalysis technology enhances the catalyst's affinity to odor moleculesand its own stability. The ionomer induced high current-carrying migration catalysis technologyensures that the catalytic efficiency basically does not decay, meeting the long-cycle use demand ofrefrigerators. The "light quantum nutrition enhancement technology" of Midea Refrigerator is anutrition enhancement technology for fruits and vegetables. Specifically, the 450 nm high-energy bluelight can induce the high level of expression of anthocyanin genes, increasing anthocyanin content bymore than 220%. The intelligent sensing moisture control technology achieves the upgrade frompassive freshness storage to active freshness locking, accurately identifying the type of foodingredients and matching it with the best storage humidity, so as to ensure the first-class seven-dayfreshness of fruits and vegetables. The three-layer waterproof design and super scale surface areaheat dissipation significantly increase the waterproof performance. Through the construction of thepolymeric three-dimensional self-similar network and the innovation of the non-agglomeratednanoparticle modification technology, Midea has developed an anti-bacterial coating with nanohydrophobic and oleophobic properties featuring high mechanical stability and high adhesion. As aresult, it has boosted the industrialisation of anti-bacterial and easy-to-clean products with a broaderdisinfection scope and a bacteria removal rate of 99% and developed hydrophobic, oleophobic, and
easy-to-clean panels, thereby safeguarding consumers' health on all fronts. With the introduction ofChina's carbon peak and neutrality policy and the upgraded European new energy efficiency directive,inverter refrigerators with a capacity of less than 300 L, accounting for a low percentage in therefrigerator market, has huge potential for energy-saving improvement. Therefore, Midea developedmini, micro, and nano inverter platforms based on the capacity of each type of case. As for theinverter boards of small refrigerators, highly integrated IC control chips and potting and heatdissipation technologies are employed. Additionally, the compressor is equipped with a 12-slot 8-polepermanent-magnet synchronous motor for the purpose of higher efficiency and better size. With thecompression-control integrated design, the inverter control system will have a smaller size and costless. COLMO Zero Built-in Series Refrigerator applies the bottom front-migratory heat dissipationsystem, so that no heat dissipation space needs to be set aside on both sides and the back of therefrigerators. Additionally, the innovative seagull wing pivot hinge enables the refrigerator doors to beopened at right angles. By minimizing the overall thickness and the size of the compressor, as well ascentering the compressor, the 600-mm ultra-slim case is developed, which requires only 2mm to beset aside on both sides, fully demonstrating the spatial build-in aesthetics and enabling therefrigerator to be incorporated into the home. Concerning refrigerator doors, the industry's first quick-disassembly panel design is adopted. Concurrently, Midea also provides instant panel customisationservices in order to perfectly match various spatial decoration styles and help users maintain theirdiversified and novel spatial styles. Furthermore, the series is equipped with a hidden focusing handle,which is designed to identify the user's intention to open the door and achieve a large plane viewwithout any segment difference. As a butler in charge of a family's health and nutrition, the seriesadopts a "temperature + humidity + air + light + cleaning" five-dimensional technology combo tocreate an ecological environment featuring constant temperature and humidity and low oxygen,thereby keeping fruits and vegetables fresh for a longer time and increase the nutritional content.Toshiba Zhiwei Series Refrigerator, equipped with star cuisine freshness technology, preciselymatches the ecological storage environment required for meat and seafood ingredients with the threemodes of quick micro-freezing, quick chilling, and original flavour defrosting. It is also equipped withToshiba's patented UNIT moisture-permeable film, achieving the effect of moisture-permeability andair-impermeability, which prevents cold air from blowing directly on fruits and vegetables, deliversdelicate water vapor that directly reaches the cells of fruits and vegetables, creates a constant
moisture environment suitable for fruit and vegetable storage, and guarantees the freshness of fruitsand vegetables for seven days. The industry's pioneer Toshiba patented "iTouch" technology, is usedto solve the pain point of the kitchen scene where both hands are occupied and inconvenient to openthe door. It has the 60-minute rapid ice making function. In addition, special clean water filters cold airto avoid taint of odor, ice making parts are treated by antibacterial treatment, and the built-in waterfilter ensures the cleanliness of the ice. The height design of the middle fruit and vegetable chamberfits Asian consumers' body shape, so it is comfortable to use. With a small volume and a largecapacity, the inner wall of the refrigerator is made of an imported vacuum insulation material, thethickness of which is only 1/3 of ordinary insulation materials, and the dual frequency conversiontechnology is used to achieve ultra-low energy consumption.Midea Smoke-free Range Hood ZA8 adopts the eagle wing-shaped wide-area negative pressurechamber design, which enables 155° ultra-wide angle fast smoke suction and can fully preventcooking smoke, grease and odors from spreading and escaping. The innovative 40-cm low smokesuction design is employed to remove cooking smoke, grease and odors as closer to the source aspossible. Additionally, the built-in FCS future chip power engine, a strong intelligent control algorithmchip equipped with an intelligent inverter cruise system, enables the 26m?/min suction and 1,100 Paair pressure, thus effectively preventing the backflow of cooking smoke, grease and odors betweenhigh and low floors during the peak period of cooking. Moreover, the quasi-aviation payload fairingdesign enables direct suction and exhaust by reducing wind resistance and promoting smoke suction.With the help of smoke removal technologies, the regional PM2.5 concentration is lower than 40ug/m?, beyond the grade-1 smoke removal standards of the authority and bringing users a novelexperience of healthy kitchens. Wireless radio-frequency technology can be used to facilitate themanagement of cookers. With it, cookers needn't be attended in scenes that will keep users waitingfor a constant length of time, such as steaming, and users will be reminded after the process iscomplete. Additionally, the kitchen hood will automatically issue a prompt in the event of an overlyhigh cooking temperature, thereby protecting users from getting hurt. Furthermore, equipped with theinverter high-pressure automatic cleaning technology, the kitchen hood can be automatically cleanedby removing the oil on the impeller through the strengthened 300,000 Pa pressure and shaking off itthrough high-speed rotation. Inspired by the aerospace industry, Midea has used a space colour
scheme, a minimalist appearance, and a starry unbounded comprehensive colour screen for theproduct.COLMO G35 Dishwasher, equipped with AI Natural Cleaning 2.0 technology, facilitates dishwashing.Specifically, the AI Dosing System has been invented to satisfy the requirements for simplicity andconvenience, materials conservation, and environmental protection. In terms of the sensing process,the micro-spectral turbidity sensing system can monitor water quality and stains in real time.Additionally, the fuzzy algorithm is employed to intelligently identify how dirty the dishes are and thenautomatically select the corresponding washing mode. Then, the corresponding detergent volume willbe determined based on the accurate measurement by AI of the stains. With the help of the dual-sensing accurate input function, the detergent is intelligently input based on the scenes. A detergentinput can satisfy the need for 14 to 28 rounds of long-term use. The X-wash disrotatory bionic sprayarm system enables the same effect as meticulous manual washing. More specifically, the doublearms spray high-pressure water in reverse rotation in order to achieve full coverage. They enablewater to fully penetrate the dishes and decompose tea and oil stains, greatly boosting the washingefficiency. The IPS+ intelligent cleaning technology, with high-voltage ionisation and precious metalcatalyst technology, is employed to generate 1 million per second high-energy active ions andconduct efficient bacterial and odour removal on the cleaned dishes. It also enables ion preservationfor 168 hours, thereby keeping dishes clean, dry and odourless. Equipped with the I-Brain intelligentdrying system as well as dynamic hybrid air technology, zero-pressure drying system, and intelligentadaptive power matching hot air system, the product enables "active drying and storagemanagement" and long-term anti-bacterial storage.Always focusing on users' pain points in installation and use, COLMO Star Atlas Water Purifier X1500adopts modular design based on the global platform development concept. The thickness is only 105mm, easily meeting the demands of under-sink space installation in various scenes. The product isthe industry's first to be equipped with an intelligent front solenoid valve, sensing water quality andtemperature in real time and effectively solving the problem that in the winter the water stored in themachine easily freezes and damages the filter cartridge. The pioneer dual-membrane fine filtrationsystem has a larger contact area with water, greatly enhancing the flow and water-saving efficiency.
Moreover, the product implements the green concept and is the first to adopt a recyclable metal body,greatly reducing environmental pollution. The product has won the "Valuable Product" award of thewater purification industry in 2022, the "Industry Contribution Award” for the water purifier category in2022, and the iF Award 2022. COLMO EVOLUTION Water Purifier-Dispenser T1500 demonstratesthe exploration of a new, intelligent water-catching experience. The industry's first ultra-real interactivedesign enables users to catch water through gesture sensing. Additionally, the temperature regulationand precise control valve equipped with a built-in precise algorithm enable water temperature andvolume to be precisely controlled. Moreover, the innovative quick water replenishment systemensures that the hot water flow speed reaches 1.5 L/min.Midea Xunwei Pro Series G3E Microwave-Steamer-Oven-Fryer Combo has been upgraded to anefficient and energy-saving inverter microwave oven. The upgraded product is characterised by itsthin-wall hot-air structure, smaller dimensions, lighter weight, more efficient third-generationmagnetron, and more compact internal structure. In terms of the steaming function, Midea's uniquesuperheated steaming function can retain more anthocyanins in food. In terms of the oven function,the combination of upper and lower baking tubes and the hot air mode enables the baking effect ofprofessional ovens. Additionally, based on the needs of young users, Midea has developed an oil-freeair frying function for the product. Equipped with the patented graphene baking tube independentlydeveloped by Midea that enables the temperature to rise to 1300℃ within 0.2 seconds as well as the3D circulation of hot air, the machine can bring out the food's flavour as much as possible. To meetusers' needs for "low-fat and low-salt healthy diets" and "internal heat avoidance", Midea hasdeveloped the no-fat, low-salt, and low-calorie baking technology and the lighter internal feat curve,helping users keep their bodies in good shape and stay healthy. Midea has developed "light-oil, light-salt, light-internal heat, and light-sugar" healthy diet modes. Its no-fat and low-salt technology canremove the fat and salt in food, while its low-sugar baking mode ensures the taste of the baked foodand reduces the amount of sugar used. Besides, light-fire cooking can effectively inhibit theproduction of heterocyclic amines in the roast. Furthermore, the built-in 44 + N auto menu includes amap of local food from 18 places and more than 200 customised cloud recipes. Midea Built-inMicrowave-Steamer-Oven-Fryer Combo R6, equipped with the industry's first full-field dual colourscreen function, integrates the functions of microwave, steaming, oven, and frying, substantially
shortening the cooking. With the help of the intelligent algorithm, the microwave function isincorporated into the pure steaming and oven functions. With the efficient inverter microwave system,the machine can precisely control fire at different stages. Concurrently, the microwave steaming modecan help retain the freshness and nutrition of the food. Based on users' need for healthy diets, Mideahas developed calorie-burning cooking technology and a unique light internal heat low-sugaralgorithm. Additionally, the three built-in no-fat, light-sugar, and light-internal heat intelligent calorie-burning cooking recipes enable "intelligent + customised" healthy diets. Moreover, the one-piecesnowflake enamel inner tank characterised by its high-temperature resistance, scratch resistance,and no blind angles for cleaning is fully applied, enabling oil stains to be removed in just one wipe. Inorder to resolve users' pain points in the storage of frying and baking machines, Midea launched the"Ultra-thin Electric Grill", which is equipped with the industry's latest film heating technology andadopts high-efficiency HP insulation materials. The thickness of the whole machine is only 62 mm,which reduces the thickness by 40% in comparison with traditional products. The heating plateadopting film heating technology makes heating more uniform and more efficient and can achieve awhole-machine heating power of more than 2,200 W, increasing the preheating speed by 50%.Graphene composite is added to the food-safe coating of the baking tray to achieve better thermalconductivity. The upper and lower baking trays of the product are free to disassemble and wash andeasy to clean and can also be put into the dishwasher for automatic cleaning. Based on an in-depthinsight into user needs, Midea launched a series of innovative rice cooker products, such as RedFlame Premium Aroma, Live Rice Fresh Aroma, Wind-blown Rice Aroma, Watery Pleasant Aroma,and Rapid Aroma. When the rice leaves the rice field for the table, it experiences a long period ofstorage and multiple shipments and can be easily oxidised and lose the original rice aroma.Specifically, the original second-generation rice grain activation technology of the Wind-blown RiceAroma cooker can solve the pain point of "stale rice".COLMO Multi-split Kitchen Air Conditioner responds to the core needs of users with the anti-oily-fumedesign of the indoor unit. Specifically, the Premium Golden Fin of the evaporator reduces theaccumulation of grease and oil, and the return air panel equipped with dual filters realizes seven-layerfiltration. It also has a smart self-cleaning function through the indoor unit evaporator and a steplessspeed control air supply function. In addition, the indoor unit is as slim as 200 mm, easy to install and
space-saving.For smart bathroom scenes:
To meet users' urgent needs for "constant temperature" and "silence" of gas water heaters, MideaGas Water Heater rolled out the "Coldness-free" and "Level-1 Silence" series of products. MideaColdness-free Gas Water Heater is equipped with an anti-disturbance thermostatic system as well asthree innovative core technologies (intelligent start/stop thermostatic valve, ADRC2.0 anti-disturbancethermostatic algorithm, and 3D V-shape fire row) and seven special technologies (segmented burningtechnology, top drive enhanced fan, quick-burning dual-spark technology, high-sensitivity water flowsensor, dual solenoid gas proportional valve, ultra-precision dual-temperature probe, and thermostaticmixing valve). It effectively resolves the issue of water temperature fluctuation in disturbance scenes,enabling water temperature not to fluctuate when the machine starts or stops working and users notto feel cold when taking a shower. With a precise water control valve core and large-small dual ductdesign, the intelligent star/stop thermostatic valve enables a quick switch to a single duct and waterflow regulation when the water heater is stopped and resumes working during the shower, effectivelyreducing the cold water mixed. The ADRC2.0 anti-disturbance thermostatic algorithm dynamicallydetects the actual water pressure and flow changes in real time and accurately regulates the water-gas ratio in full consideration of the disturbance of the water environment. The 3D V-shape fire rowenables a larger burning area and more thorough burning, achieving precise and stable fire control.Additionally, the product has passed the Graded Evaluation Norms for Whole-process ConstantTemperature of Domestic Gas Water Heaters issued by the China Association for Quality Inspectionand obtained the certification for grade-1 intelligent constant temperature of the CHEARI (Beijing)Certification & Testing. Midea New-generation Silent Gas Water Heater is equipped with a dual-gillrespiratory silent system that enables in-depth noise reduction in six dimensions. Additionally, itminimises the noise of gas water heaters at the noise sources, on the transmission path, and from thenoise barrier using such technologies as spoiler noise-reduction cover, labyrinth-type sound-deadening cabin, direct current inverter low-noise fan, tempered soundproof glass, waterway silencer,vibration-damping sound-deadening cotton, and integrated seal structure. As a result, the operatingnoise is lowered to 40 dB. The gas water heater has been awarded the Silence Grade 1 certificate by
the Certification Center of Light Industry Council Co., Ltd. (CCLC). Besides, innovative technologiessuch as AI precise temperature control, energy-saving zero cold water, and inverter booster pumphave been used to bring users a comfortable shower experience. Midea Water-cooled Low-nitrogenGas Water Heater, equipped with the world's first three-point injection and four-pipe cooling water-cooled low-nitrogen burning technology, meets the European requirement for energy conservationand environmental protection. It transcends the technological barriers created by rival Europeanproducts. Additionally, it is China's first water-cooled gas water heater with independent propertyexported to Europe, as well as the world's first low-nitrogen gas water heater that meets therequirement for multi-gas source energy conservation and environmental protection. Moreover, theproduct is equipped with hundreds of patented technologies. Midea Fully Premixed Gas Water Heateris equipped with the world's first integrated stainless steel condensing heat exchange technology.Through fully premixed burning, the product enables low nitrogen and carbon emissions and ischaracterised by its environmental protection and high energy efficiency. The dual-channel large andsmall venturi premix technology developed by Midea enables a wide heat load regulation range andstable burning. Besides, it has a wide scope of application. The product is China's first fully premixedgas water heater certified by the Canadian Standards Association (CAS). It is equipped with hundredsof patented technologies and has won the gold medal at the 2022 International Exhibition ofInventions of Geneva. Toshiba Yunjian Series Gas Water Heater applies a new lean, small-volumestructure platform, which reduces the volume of the product by 20%, thereby facilitating theinstallation. It has won the iF Design Award and the Red Dot Design Award. It has adopted aninnovative harmonised interactive design, with the key area using a 150° curved concave design thatcan fit the curvature of the finger and 1.5-mm simulated Braille dots. Additionally, an indicator isdesigned for the key area to facilitate regulation in a dim environment. Concurrently, the real voicefeedback function is added to the keys to achieve precise temperature regulation and remind users ofthe high temperature and the completion of the zero cold water preheating. The industry-leading 3Dwhole-area temperature control technology, coupled with the three-point temperature measurementfor the entire pipeline and patented Toshiba temperature control algorithm, enables the continuousflow of water with less than ±0.5°C temperature difference. If users turn off the water and then turn iton, the fastest pulse ignition will be completed in 1.5 seconds. Through four silencing technologies,including the flying saucer-shaped body, shark-gill bionic respiratory mouth, micro-hole sound-
deadening cotton, and direct current inverter fan, the noise can be lowered below 45 dB. Moreover,the temperature control chip imported from Japan and the thickened corrosion-resistant oxygen-freecopper water tank to enhance reliability and durability are used for the product to enhance itsreliability and durability. Midea "Huoshuixin" Electric Water Heater is an innovative combination of thetraditional electric water heater and the filter cartridge technology. Additionally, Midea put forward the"Cartridge Ensures High-quality Shower Water" idea for the first time for the product. To achieve high-quality shower water in the "showering, caring, nourishment, and fostering" dimensions, Midea hasselected a transparent and visualised filter cup. Besides, it has developed full-time water freshnessinspection and intelligent cruise skin cleaning functions, enabling a sterilisation rate of 99.99%.Moreover, the product is equipped with a stainless-steel filter, which can effectively filter waterimpurities and achieve micron-level filtration and water purification-level protection. Concurrently, it isequipped with patented living water technology that enables active cleaning. The PCC ore activationtechnology is employed to provide natural strontium-rich shower water and prevent skin from ageing.Additionally, the third-generation chlorine removal technology, non-toxic, non-harmful, and non-allergenic, can remove chlorine within 0.2 seconds, earning the product a number of industry awards.B. Adhered to the strategy of “Technology Leadership”, increased R&D investments, built aglobal R&D platform for better R&D efficiency, established a digital R&D system for agileinnovation, and implemented the strategy of “Innovation Patentability, Patent Standardization,Standard Internationalization and Midea Standard Goes Out”Midea continued to invest in R&D. Through larger investments in this respect, it aims to achieveleadership in R&D achievements and product trends, as well as a stronger presence in the industryand a better R&D environment. The Company made innovations with respect to mechanism, anddeveloped more leading products through both excellent user experience and differentiatedtechnologies, reform of the whole value chain of R&D using digital technology, and deep integration ofbig data analysis and R&D. It kept reforming its product development model according to the strategicfocus of “Leading Products”. An innovative R&D model featuring a “Three-Tier Technical CommitteeSystem” and a “Four-Tier R&D System” from the organizational dimension and “Three Generations”from the technology dimension has been put in place and constantly refined to support the fulfillment
of the goal of “Being the Number One or the Only One” in respect of various product categories.Centering on customer needs and based on different organizations and technologies, the Companycarries out innovative product development, research on cutting-edge platforms, research on corecomponents, creation of differentiated selling points and improvement of the basic productperformance. Through group development of products across the world, building a global productplatform, as well as increasing product development efficiency by way of group planning and groupdevelopment, Midea is building “Technology Leadership”. As of the end of 2022, Midea boasts tencorporate technology centers/industrial design centers/post-doctoral research centers at the statelevel, 19 academicians with long-term cooperation and eight academician workstations/workshops, inaddition to more than 60 corporate technology centers/engineering centers/industrial designcenters/key labs at the ministerial or provincial levels. By doing so, it builds competitive edges with itsstrength in technology. Under the guidance of the strategy of “Technology Leadership”, the innovationplatform serves as the core of its technology innovation system and is responsible for theimplementation of technology development strategies and the commercialization and application oftechnology innovation achievements, thus driving Midea’s transformation towards a global technologygroup 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. In the project of"Research on the Application of Precision Washing System based on AI Vision and Electric SprayArms in Household Dishwashers", Midea invented the precision washing technology based on multi-task image intelligent recognition and realized a truly intelligent and fully automatic mode to meet thedemands of Chinese families for the cleanness and hygiene, convenience and efficiency, andprecision washing of dishwasher. In the project of "Key Technology and Application of Multi-GradeHigh-Efficiency Heat Energy Supply of Air Source Heat Pumps", an innovative breakthrough of keytechnology of air source heat pump water heaters is made to solve the problem that conventional airsource heat pumps cannot operate reliably in the cold areas in the north and to ensure the highefficiency and low-carbon supply of industrial steam, which leads the technical progress and industrialdevelopment of air source heat pump heating, achieves pollution and carbon reduction, energysaving, and efficiency increase, and produces significant economic and social benefits. In the project
of "Research and Application of Key Technology of Low-noise Heavy-rare-earth-free PermanentMagnet Motors for Compressors", the multiplicative noise of compressors is reduced through theelectromagnetic force of the motor body, and its "double pioneer" technology makes householdappliances quieter and more environment-friendly and significantly improves the noise of airconditioning system. In addition, the dependence of permanent magnet motors on heavy rare earthmaterials is effectively relieved through the comprehensive optimization of the magnetic circuitstructure of the stator and rotor. Through the "Magnetic Levitation Inverter Centrifugal Ice StorageDual-condition Unit" project, Midea removed bottlenecks in conventional technologies and developedsuch innovative technologies as the centrifugal compressor wide-range adaptive anti-surge controltechnology, multi-condition wide-area energy efficiency improvement technology, and high-reliabilitymaglev compressor drive and control technology. By doing so, it achieved double high efficiency in airconditioning and ice storage conditions. Through the "Supersonic Cold Air Power Spray Technology"project, Midea achieved major technological breakthroughs by focusing on the supercritical-rate cold-spraying efficient deposition technology and the flake-bridging low-potential metal mix anti-corrosioncoating. Additionally, it developed long-life, high-binding force, and high-corrosion resistancemagnetic conductive coating for cooking utensils, achieving efficient electromagnetic heating of non-magnetic utensils. Midea also independently developed new aluminum-containing austenitic heat-resistant stainless steel, solving the problem that the core parts and components of cold sprayequipment are prone to cracking and damage in high-temperature and high-pressure coupledenvironment. Meanwhile, Midea has taken the initiative in building the first large automated cold sprayassembly line in the home appliance industry. Through the "Key Technology for Low-carbon, EfficientHeat Exchangers" project, Midea developed the topology-optimised small-diameter inner groovedtube large corrugated fin heat exchanger technology based on its self-developed 3D and 1D coupledheat exchanger simulation platform. The technology can inhibit the increase in the flow pressure dropin the tube and boost the heat exchange capacity per unit volume on the air side of the heatexchanger while improving heat exchange efficiency. Additionally, by strengthening the heatexchanging capacity in frosting conditions through the optimised corrugated structure, the technologyreduces the materials consumption and improves the energy efficiency of system operation. By theend of 2022, Midea had won a total of three national science and technology awards, and more than340 provincial and ministerial science and technology awards, as well as received over 280
"Internationally Leading/Advanced" certificates for its technologies.Midea has strengthened the transformation of R&D achievements while carrying out the coretechnology research. By the end of 2022, Midea (inclusive of TLSC) held more than 80,000 validpatents. In 2022, Midea was granted more than 4,000 invention patents around the globe. Mideacontinues to improve patent quality. It won multiple awards at the 2022 23rd China Patent Awards. Tobe specific, the "Dishwasher" and the "Control Method, Controller, and Refrigerator of MeatSubcooling Preservation" won two Silver Invention Awards, the "Window Air Conditioner" won a SilverDesign Award, and the "Compressor and the Heat Exchange System with it", "RecommendationMethod, System, and Big Data Server of the Air Conditioner and Its Operation Parameters" and otherpatents won six Excellence Awards. In addition, Midea received more than 20 provincial patentawards in 2022.In order to provide strong support for the fulfillment of the strategic objective of “TechnologyLeadership”, Midea further implements the “3+1” standardization strategy of “Innovation Patentability,Patent Standardization, Standard Internationalization and Midea Standard Goes Out”, and a two-tier(Group-business divisions) standardization management system has been put in place. Meanwhile, toensure the effective execution of the standardization strategy, the Group has set up a standardizationmanagement committee. With the double drivers of “standard innovation + production innovation”,Midea shifts innovation achievements to advanced technological standards. Additionally, it endeavorsto play a bigger part with respect to advanced technology standards of the industries, aiming to createmore value for users, partners and industries. During 2022, Midea took part in the formulation/revisionof 314 technological standards, including 11 international standards, 65 national standards, 22industry standards, and 216 local and group standards, including "Technical Requirements forTemperature Controllers for Air Conditioning Systems for Household and Similar Purposes","Domestic Electric Dishwashers-Methods for Measuring Performance", "Minimum Allowable Values ofEnergy Efficiency and Energy Efficiency Grades for Electric Ovens for Household and SimilarPurposes", "A.C. Ventilating Fans and Regulators for Household and Similar Purposes-Methods forMeasuring Performance", "Medical-grade Washing Machines", "Systems and Software Engineering --Software Product Quality Requirements and Evaluation (SQuaRE) -- Common Industry Format (CIF)
for Usability: User Requirements Specification", "Method of Measurement and Rating of AirConditioning System with Thermal Storage", "Wiring Harnesses for Household Appliances","Minimum Allowable Values of Energy Efficiency and Energy Efficiency Grades for Electric PressureCooker", "Cleaning Robots for Household and Similar Purposes", "Technical Requirements forArtificial Intelligence-based Household Central Air Conditioner", "Evaluation of the Lifecycles of HomeAppliances-Part 10: Electric Washing Machines for Household and Similar Purposes", "EvaluationMethods and Technical Requirements for the Refrigerators with Healthy Purification Functions","Methods for Testing the Heating Uniformity Grade of Household Induction Cooker", "TechnicalSpecifications for Energy Storage System for Phase-change Water Heater", "Microwave, Steaming,and Baking Integrated Machine for Household and Similar Purposes", "Evaluation of the Lifecycles ofHome Appliances-Part 3: Special Requirements for Electric Motors-Compressors", "Evaluation ofCarbon Emission Grading in the Operation Phase of Civil Buildings", "Household Robots-IntelligentGrading and Evaluation", "Technical Requirements for Low-carbon and Efficient Refrigerator HeatExchangers", and "Accounting and Reporting Requirements for Greenhouse Gas Emissions ofRefrigerant-containing Electrical Appliance Manufacturers". In terms of recognition and honorsreceived for standardization, Midea won the 2022 China Standard Innovation Contribution Award, andthe Standard Innovation Organization Award at the Third Science and Technology Awards organizedby the China Society for the Promotion of Science and Technology Commercialization. In addition, ithas been recognized as an “Enterprise Standard Leader” for five consecutive years, and a groupstandard, for which Midea served as the main contributor, has been selected by the Ministry ofIndustry and Information Technology as one of the 100 group standard application demonstrationprojects.C. Deepened the channel transformation, further improved the channel efficiency and rebuiltthe retail and ToB service abilities so as to achieve direct connection with customersBeing customer-oriented, Midea continues to enhance vertical efficiency and horizontal synergyefficiency, as well as accelerate retail growth and retail transformation. Through the reform of directretailing, Midea has been continuously promoting the "vertical efficiency improvement" of offlinechannels, with the shift from distributors to operators completed and the retail operation capability
greatly improved. Meanwhile, organizational reform has provided effective support for the "horizontalsynergy efficiency enhancement". The operation center is made the “main battlefield”, with deepcoordination among all product categories. Horizontal synergy efficiency has been greatly improved inchannel expansion, scenario-based transformation at the retail end, etc. Midea has realized "OneMidea" for all markets, ensuring the consistency of user service and experience. In 2022, online salesas a percentage of Midea's total sales reached over 48%. In terms of e-commerce, Midea continuedto push ahead with the upgrade of the product structure, product suite development, and newservices such as "green home appliances". Additionally, Midea redoubled its efforts at channelsegmentation and made arrangements for content platforms, and finally recorded new growth.Concurrently, the construction of Midea's platform for e-commercial business was advanced. Mideafocused on the development and improvement of new capabilities, such as self-operation, self-live-streaming, and whole-chain marketing. By strengthening content and digital marketing and gaining aninsight into the differentiated needs of different customer groups, Midea achieved integrated qualityand efficiency improvement through the "Digitization & Intelligence Driven" strategy and accomplishedthe upgrade-based transformation from traffic operation toward user operation. As online and offlinemarkets integrated at a faster speed, based on different levels and characteristics of differentchannels, as well as changes to customers' needs and ways of spending, Midea drives the retailtransformation based on user demands and experience, and keeps refining the retail operationssystem, so as to achieve direct connection with retail customers. To be specific, first, to strengthenstores' retail capabilities and improve their whole-chain retail experiences, Midea helped stores carryout digital retail transformation driven by new systems and tools. Specifically, the "Midea CloudSales+" ecosystem was upgraded and transformed to develop Midea's own retail business platform,thereby achieving the physical transformation of the operations centre and full upgrade of the "MideaCloud Sales" system. Additionally, customer experiences were substantially boosted. As a result, the"Midea Cloud Sales" App recorded a year-on-year increase of over 300% in the daily average pageviews (PV), and the efficiency of direct retail was significantly boosted. Meanwhile, the retail system ofstores was reconstructed based on the "Midea Cloud Sales" App and the "Midea Home Delivery"mini-app, and the cloud warehouse services were formally launched. Moreover, to facilitate stores'online and offline whole-scene marketing and promotions, Midea provided digital marketing tools formerchants, thereby empowering stores' customer acquisition and potential customer conversion.
Midea also developed a digital and intelligent platform operations system to improve stores'management efficiency. It conducted classified product operation and hierarchical store managementbased on the label-based system for products and stores. By doing so, retail data and businessactivities can be reviewed online, enabling rapid analysis and precise operation of stores. Second,vigorous efforts were made to expand into the sinking markets. As a result, Midea gained the largestoverall share of the core sinking channel platforms in the industry. Midea has fully expanded intostores in lower-tier markets, achieving a product penetration of more than 90%. At the same time,Midea has fully entered the booths of core stores. It has constantly upgraded retail store standards inorder to deliver quick, professional services to consumers in the lower-tier markets. Focusing on userdemands, Midea has been refining its product distribution. As a result, Midea has outperformed itspeers in terms of the sales of emerging products such as household central air conditioners,dishwashers, air fryers, and clothes dryers. Concurrently, Midea has kept delving into newconsumption potential in the lower-tier markets. With the introduction of consumption policies forgreen home appliances and trade-in activities, marketing modes such as vouchers are leveraged toimprove consumption quality. In this context, the average prices of Midea's home appliance productsin all categories have risen by more than 30% in the lower-tier channels. Third, centering onconsumer experiences in retail, Midea carried out green home appliance campaigns with entire-house appliances trade-in and subsidies for buying eco-friendly intelligent home appliances at thecore by fully leveraging its strengths in entire-house appliances. Midea also organised qualitymarketing activities by focusing on product experiences and brand volume, user traffic, and retailsales. Additionally, Midea has carried out several tour exhibitions in markets at different tiersnationwide for products such as "AI-powered Villa Commercial Air Conditioner", "AI-powered LightDry Cleaning Washer-Dryer Suite", "Microcrystalline Ultra-thin Zero Built-in Refrigerator", and "FreshAir Fryer". Moreover, with active services as a breakthrough, Midea has unblocked the user operationchain that covers public and private domains as well as membership, doing so to optimise theconsumer experience and perception. Fourth, to achieve consistent consumer experiences, Mideahas integrated the online capabilities of "Midea Mall", "MSmartLife", and "Midea Service" and rolledout "M-Smart", a retail platform that integrates Midea's online and offline capabilities designed tostrengthen offline franchise stores' distribution capabilities on e-commerce platforms and out-of-storemarketing capabilities and expand the coverage of after-sales services. By doing so, Midea ensures
that consumers can achieve the same shopping experience at franchised stores as they do on e-commerce platforms. Additionally, Midea expedited the optimisation of the layout of retail outlets of"M-Smart". By securing intelligent product shelves and establishing the "M-Smart" online store, Mideahas provided consistent shopping services and strengthened the marketing capabilities of offlinestores. Fifth, Midea leverages the "Digitization & Intelligence Driven" strategy to be "Direct to Users",and initiates a series of business moves in user experience, user operation and user service fromuser needs and service scenarios. Adhering to the "Create Value for Users" principle, Midea hasdeepened the business transformation toward the retail end. Additionally, Midea has carried out all-around user connection by relying on media matrices such as WeChat enterprise account, officialaccount, mini-app, and video account, as well as terminal experience contacts such as serviceengineers, experience consultants, and intelligent scenes. Also, Midea has pushed ahead with theoptimisation of product iteration, shopping experience, and service experience with user experienceas a driver. Concurrently, it has strengthened private domain operation and improved customer royalty.By the end of 2022, the total number of registered members exceeded 140 million, and the NetPromoter Score (Net Promoter Score) rose by 6% than that in the same period of 2021. Meanwhile,the development of Midea's business data analysis capability has been constantly refined. Analysis ofuser consumption behaviour data serves as a strong support for business decision-making.Centering around three types of targets: users, customers, and engineers, Midea perseveres inreconstructing service procedures, upgrading service standards, and improving its capability ofoffering free installation services for consumers that buy a collection of products. Additionally, itdeepens the business model change of the user service system to provide one-stop entire-housesmart home appliance service solutions for users and improve service quality and user experience.First, Midea reconstructed user experience procedures from the users' perspective. It has achieved auser confirmation rate of 90% through users' participation in the service process and closed-loopresult confirmation. Additionally, professional service reports have been directly sent to users toenhance users' perception of the whole service procedure. Concurrently, Midea emphasises quicksatisfaction with user demands. It has achieved a 24-hour completion rate of 88%. Midea hasreconstructed the return and replacement procedure experience. Replacement instead of repair hasbeen fully implemented for small domestic appliances and partly piloted for major domestic
appliances. The return and replacement time has been shortened to three days through onlineidentification/no identification or the simultaneous delivery of the new appliance and recovery of theold one. Second, Midea accelerated the construction of active service capabilities, transformed frompassive waiting to active service for users, and built the active service platform. Thirty-three activeservice scenes were launched, with more than 5 million active service times, more than 1.5 millionprivate domain users, and a year-on-year increase of 12.9% in the re-purchase rate. Third, Mideabuilt a whole-chain closed-loop system for the voice of customers (VOC) and launched the user voiceintelligent analysis platform to achieve rapid discovery, exploration, distribution, closed-loopmanagement, and monitoring of all-channel problems. Fourth, Midea improved the customer serviceexperience of high-end brands. On the one hand, it boosted its basic service capabilities, includingpromoting the suite-based construction of the high-end brand network, selecting high-quality serviceproviders, establishing suite-based outlets for high-end brands, and setting up specialised high-endbrand outlets in some regions on a pilot basis. Additionally, it formulated and optimised the manual onwhole-procedure services of high-end brands and carried out training and certification for authorisedengineers of high-end brands, thereby raising the requirements for engineer authorisation. So far,specialised engineers for high-end brands have numbered more than 1,100. On the other, based onthe authorisation and certification mechanism, Midea has set up exclusive customer services,exclusive high-end service engineer teams, and exclusive service rights of high-end brands, doing soto develop differentiated high-end brand services. Besides, Midea has raised the standards for high-end brand services by shortening the response time limit and upgrading service tools and protectivemeasures. It has also created high-end service experiences by rolling out service surprises for specialfestivals, designing personalised service rituals, and continuously maintaining customer royalty. Fifth,Midea carried out green recycling business, cooperated with qualified dismantling enterprises,deployed the two modes of self-owned channel recycling and external cooperation for the marketrecycling end, and built the "Internet +" recycling platform. Additionally, it completed the launch of thegreen recycling system, enabling a closed loop of reporting by users online, automatic distributionand transfer in the work order system, and monitoring of recycling information.Transformation of the ToB business model has been further deepened. The business model has beenupgraded from traditional hardware product packages to scene-based solutions targeting customers
in the whole industry, so as to enhance sales and brand presence on the ToB market. Meanwhile,refinements have been carried out for the existing customer, product and business structures, thusincreasing the profitability of the business value chain. In addition to the traditional home applianceindustry, Midea has unfolded coordinated marketing in the ToB business of the Building TechnologiesDivision, the Robotics & Automation Division, and the Other Innovation Business through industry-wide solution development and promotion. During the promotion of the ToB business in 2022, Mideastrengthened horizontal collaboration among business groups (divisions). To facilitate work ininformation sharing, business opportunity sharing, channel sharing, and delivery collaboration, Mideadeveloped a regular collaboration mechanism and project promotion procedure. As a result, particularheadway was made in intelligent manufacturing and medical services and health. In intelligentmanufacturing, Midea Industrial Internet Platform (M·IoT) was selected by the Ministry of Industry andInformation Technology among the "New Cross-industry and Cross-field Industrial Internet Platformsin 2022". Integrating Midea's eight matrices, including KUKA, Midea Cloud, Annto, and Midea Finance,M·IoT has demonstrated Midea's industrial cloud ecosystem. To empower the digital transformation ofthe whole industrial chain, M·IoT has been empowering different industries and fields throughindustrial solutions, software, and network by relying on the all-in-one feature of "manufacturing know-how, software and hardware". So far, M·IoT has been applied by more than 400 large enterprises inmore than 40 segmentations. In medical services and health, Midea has established partnership withapproximately 6,000 hospitals. Midea Medical unveiled the brand mission of "Respect Every Secondin Life" in July 2022 and five hospital scenario solutions, covering the medical technology buildingscenario, the surgery department scenario, the outpatient pharmacy scenario, the inpatient wardscenario, and the logistics command scenario. To be specific, the medical technology buildingscenario, through the integration of technologies of WDM and Midea Biomedical, provides imagingexamination and diagnosis of all parts of the body as well as the intelligent cold chain monitoringsystem and intelligent laboratory management system. The surgery department scenario, through theintegration of technologies of KUKA Robotics, Swisslog Healthcare, WDM, Midea Biomedical, andBuilding Technologies, provides environment and behaviour management for interventionalprocedures, such as cardiac interventional therapy, and particle radiotherapy, supply distributiontracing and inventory management, and intelligent lighting application. The inpatient ward scenario,through the technological collaboration of Swisslog Healthcare, Midea Biomedical, and Building
Technologies, provides integrated ward management, integrated in-hospital logistics management,intelligent infusion and reminder, and other system applications, thereby developing spatial solutionsfor intelligent wards. Through the collaboration between Swisslog Healthcare and Midea Biomedicalunder Midea, the outpatient pharmacy scenario demonstrates Midea's exploration of hospitalpharmacy and logistics automation and provides integrated solutions in this regard. The logisticscommand scenario achieves dual drivers through clinical medical technologies and constructionoperation and maintenance. It provides systematic solutions that cover the whole constructionprocess of the hospital and establishes the LIFE20 intelligent hospital framework system. With thetop-down top-level design and planning of Midea Building Technologies Division's iBUILDINGplatform, the scenario completes the whole-chain development of system integration, data insight,auxiliary decision-making, and action closed-loop, thereby helping the medical industry completeintelligent hospital upgrading.Annto, a subsidiary of Midea Group, is a technological innovation-based provider of supply chain(logistics) service. It is committed to providing customers with end-to-end digital and intelligent supplychain solutions. In terms of internal support and services, under the background of Midea Grouppromoting the T+3 business model deep reform, Annto further promoted the logistics reform andimproved B2C logistics capacity. Through big data analysis and data modeling and based on userneeds, Annto refines and integrates its warehouse network and expands the unified warehousing anddistribution model to retail stores. Overall planning of channel inventories and unified operation ofwarehousing and distribution boost channel efficiency and provide support for comprehensivestandardization and digitalization of user services. Annto refines the integrated delivery andinstallation service network and connects the links from manufacturing to consumption, providingsupport for the achievement of Midea’s “Direct to Users” strategy. Annto has established an integratedand smart logistics platform for the whole process of production logistics, warehousing, urbandistribution, delivery and installation. It also cooperated with Sino-US Global Logistics Institute ofShanghai Jiao Tong University to establish the Joint Research Center for Smart Logistics and SupplyChain, generating achievements in route planning for delivery vehicles, scheduling and controlling ofdigital manufacturing logistics and other fields. In 2022, Annto completed the deepening andapplication of urban delivery capacity scheduling algorithm and corresponding scheduling system in
65 operation centers nationwide and launched research and application projects on core warehouseoperation capabilities such as storage network optimization and warehouse storage and sortingefficiency optimization, in order to form practical results such as solutions, key algorithms, anddecision support tools. The service network of Annto of warehousing, trunk line transportation,distribution, delivery, and installation has realized the whole-procedure visualized direct distribution todistricts, counties, and towns, and the service capacity has been continuously upgraded. Relying onthe end-to-end supply chain, Annto has been able to connect the entire chain of orders from front-endfactory logistics of production and sales to back-end logistics of warehousing, distribution andinstallation, so as to efficiently and transparently manage the entire lifecycle of orders, improvedelivery efficiency and user satisfaction, and effectively consolidate the operational foundationthrough project implementation. In terms of warehouse network layout, Annto has laid out largelogistics distribution centers and thousands of distributed mini warehouses in more than 140 citiesacross China, realized real-time inventory sharing and allocation, and effectively reduced inventorycosts and capital occupation through unified warehouse and unified distribution. In terms ofwarehouse management, Annto realized intelligent unmanned warehouse management throughintelligent equipment and advanced technology in high-standard automated warehouses forexpensive consumer goods, reduced sorting operation, and improved sorting efficiency throughprocedure optimization and information system function enhancement. Annto optimized the layoutthrough online big data analysis and scientific algorithms and achieved a 500,000 square metersaving in warehousing space. Also, it optimized the integration services of terminal warehousing anddistribution and of delivery and installation through inventory sharing and intelligent replenishment. Interms of intelligence, Annto focused on "smart parks" to realize the whole-procedure intelligentmanagement system for parks, promote the improvement of the operational capacity of self-builtparks, and create integrated products of smart parks. In terms of production logistics, Annto realizedthe functions of factory logistics planning collaboration, wave-based sorting, JIT delivery, inventorysharing and visualization, intelligent replenishment, etc. through the whole-procedure digitalconstruction of Vendor Managed Inventory (VMI), which increased the human efficiency of the VMIintelligent warehouse by 50%, the surface efficiency by 46%, and the inventory reconciliationefficiency by 45%. In terms of trunk line urban distribution, Annto realized direct inter-city deliverythrough the LCL trunk line network, and achieved optimal timing configuration through route planning.
Meanwhile, it strengthened the cultivation and expansion of terminal outlets, built a "schedulingcenter" platform based on the whole procedure of order-scheduling-capacity-operation-system, brokethe management boundary between the project system and shipping capacity resources, integratedline resources, and built the operation capacity of domestic trunk line network, thus improving userexperience comprehensively. In terms of end services, Annto has placed great emphasis onstandardised service products, including the integration of delivery and installation of homeappliances, "three-guarantee and five-guarantee" services, and new energy-related services, basedon the development of retail-end capabilities and relying on the intelligent management platform, inorder to support corporate customers in reaching users. In terms of capacity optimisation, Annto hasdeepened the construction of online freight platform capacity, realised online capacity and costtransparency through digital construction, accumulated valuable capacity resources and cost data,and realised the integration of logistics, capital flow, information flow, contract flow, and bill flow.Additionally, in terms of the delivery and installation of home appliances, Annto optimized theintegrated delivery and installation and rebuilt the main procedure of the after-sales platform in 2022and realized the digitalization of order and engineer management. The per capita order receivingefficiency of engineers increased by 34% year-on-year, and Annto effectively supported businessmodels such as complied delivery and installation and delivery of the new and recovery of the old,with more than 3,000 delivery and installation outlets and a team of more than 32,000 professionalengineers, covering more than 2,700 districts and counties in China. In terms of home appliancedelivery and installation capabilities, Annto has been capable of providing services such as quickentry and exit, prompt delivery, and self-collection by users by refining the procedures andmechanism for inventory management of outlets. In terms of new energy service capabilities, Anntohas mainly provided services such as "surveying, installation, inspection, and repair" for midstreammanufacturers and constructors of power charging equipment and downstream equipment operatorsand original equipment manufacturers of new energy equipment.In terms of external business expansion, adhering to the business philosophy of building and sharingwith customers, Annto provides strong support for corporate customers in promoting channelefficiency and sales growth. In 2022, Annto focused on industry customers and depth, and relied onthe "1+3" service model, i.e., "whole chain" + "a shared inventory system, integration of delivery and
installation, production and logistics" to help customers develop core operation foundation andproduct operation capabilities. By developing an intelligent logistics platform that integrates the wholechain, including production logistics, warehousing, trunk line logistics, urban distribution, and deliveryand installation, Annto has provided customers with quality products and digital solutions, therebyhelping customers promote channel transformation and supply chain efficiency optimisation Annto'sintegrated supply chain services serve two aspects. They can provide system and operationalservices for enterprises in the logistics environment and facilitate enterprises' transformation andupgrading and achieve business transformation in product flow. By supporting enterprises' whole-chain value boost through intelligent logistics, Annto has achieved a steady increase in market shareyear by year. Annto can provide integrated supply chain services covering the whole chain of "parts-finished products-stores-users" and help customers to solve problems such as rising fulfillment costscaused by diversified channels and fragmented orders "through a shared inventory system" and toestablish a whole-value-chain monitoring system for operation indicators, continuously optimize costs,strengthen risk control capabilities, and provide effective data support for enterprises' operationdecisions. "Integrated delivery and installation" can help customers to better reach users and improveservice experience. "Production and logistics" means transforming Midea's years of experience inlean manufacturing into the "Lighthouse Factory Supply Chain Solution" and to realize the output ofsystematic solutions based on customer needs and industrial characteristics. Based on Midea'sindustry-leading experience of channel transformation and sound smart supply chain systems andnetworks, Annto has provided services to thousands of enterprises, with clients spanning manyindustries across home appliances, consumer electronics, food and beverage, maternal and infant,and household necessities and chemicals.D. Promoted “Global Impact”, enhanced localized operations overseas and accelerated thecooperative integration of TLSCMidea further promoted its global business layout to solidify its global competency. It formulated aglobal supply cooperative mechanism, strengthened the global manufacturing network and localizedoperations overseas, optimized the global logistics and service system, and promoted productglobalization and regionalization. Its overseas business spans more than 200 countries and regions in
North America, South America, Europe, Asia, Africa and Oceania. Meanwhile, guided by the marketand focusing on users, Midea builds a global user research network with foresight. Midea hasestablished an organization for local consumer and market observation, built a digital marketingecosystem, implemented product lifecycle management based on the changing trends of user needsand consumption habits around the world, built user touch points throughout the entire chain, andcontinuously optimized and matched the retail operation system for the user-growth market. Mideahas reconstructed the overseas sales operation system, continuously deepened the user-orienteddigital transformation, and established end-to-end procurement as well as execution processes, tools,operation mechanisms and information connection for sales orders to achieve online and visualoverseas planning and order execution. Midea exerted great efforts to build the intelligent overseascommercial system, constantly deepened its data-based business decision-making capability, andcreated a digital platform to facilitate mobile operations overseas. 23 overseas branches werecovered. A total of 45 key indicators were included, such as sales, finance, supply chain, products,and e-commerce. Furthermore, real-time online business, data transparency and sharing, and earlyrisk warning have become available for better operating efficiency in the key part of the overseasbusiness.In 2022, Midea made headway towards the Global Impact strategy that has focused on the UnitedStates, Brazil, Germany, Japan and ASEAN, and initiated a special campaign for overseas branding.It not only clarified specific plans for user segmentation, product maps, brand matrices andlocalization infrastructure construction in strategic markets, but also invested more resources in userinsight, branding, product innovation and organizational consolidation to ensure the implementation ofthe relevant strategies. Being customer-oriented, Midea promoted the transformation of overseaschannels towards the retail end, and kept expanding and improving the distribution of overseaschannels. In 2022, Midea had more than 3,000 new partners in this respect, and significantlyimproved its profitability at the retail end. Besides, it constantly promoted the flattening of channels,directly contacted more than 1,200 small business customers through streamlining channel hierarchyon a pilot basis in Vietnam, and recorded an annual revenue of tens of millions of US dollars throughrolling out the pilot DTC retail model in Brazil and Egypt. Additionally, it promoted digital reform toimprove channel efficiency and data transparency, rolled out the pilot digital channel management
mode in ASEAN region, and launched in batches the overseas "Midea Cloud Sales" platform inASEAN market, which has been adopted by thousands of small business customers, therebyeffectively optimizing store management. Midea made continuous efforts for the overseas e-commence business, and recorded a year-on-year increase of 14% in e-commerce sales revenue in2022. While steadily improving the fine operation capability and resource allocation efficiency, Mideabuilt a self-developed e-commerce data analysis system to realise the digital upgrade of e-commercebusiness, gain insight into the development trend of products, and precipitate portrait data about corecustomers, thereby analysing and controlling operating efficiency and profit more quickly, morecomprehensively and more conveniently. Besides, Midea continuously promoted the optimisation ofproduct structure, and increased the average price of products under its own brands by more than 20%on the online channel in 2022. Particularly, Midea's microwave oven products made a breakthrough inthe high-end market, becoming a model for product upgrade in overseas market. In addition, Mideamade sustained efforts to maintain the dominant market position and channel vitality of its coreproduct categories. Over 60 products made their way onto the top 10 best seller lists on e-commerceplatforms in the US, Germany, UK, Italy and Japan. Specifically, in the online market of the US, themarket share of Midea's microwave ovens and window air conditioners respectively exceeded 50%and 25%, and the sales revenue of such product categories as range hoods, refrigerators and laundryappliances also achieved a significant growth. Moreover, Midea actively fostered the ToC capabilityfor self-operation of e-commerce. The Amazon business operated by Midea itself as a seller in the USgrew tens of times in sales during 2022. Meanwhile, Midea has been actively exploring new channelsand new models in the US, Japan, Australia, Singapore and other countries, and has settled in morethan ten new platforms such as Otto, Rakuten, Wayfair and Microsoft. Midea strengthened overseasown branding, expedited the pace of "Global Impact" of its own brands by launching a special projectfor branding in North America, and enhanced the penetration of its own brands in key markets inmultiple dimensions, including offline retail experience, guide team development, social mediacampaign and entire-house product suite marketing. Besides, Midea intensified efforts on onlinecontent marketing inside and outside relevant websites, promoted the building of Amazon flagshipstores and official brand websites, gradually formed a brand flagship store matrix of three majorbrands and seven major websites, comprehensively upgraded content planning, visual presentationand shopping experience, established a marketing resource pool, newly cooperated with nearly 400
international famous chefs and Internet celebrities, and attracted the attention of 22 million users.Based on the expansion of diversified interactive sales scenes and the layout of diversified livebroadcast modes, Midea managed to hold more than 1,500 live broadcasts with tens of millions ofuser interactions throughout the year. Additionally, Midea worked to, through sponsoring andcooperating with well-known foreign football clubs and sports events, especially the Manchester CityFootball Club in the US, the New York City Football Club in the UK, the Corinthians Football Team inBrazil, and the FF Championship, enhance the exposure of Midea brand, and expand the localisedmarketing of Midea brand in local markets, thereby improving the global visibility of Midea brand.Midea has created a mechanism for co-creating smart scenes overseas. By setting up the positionsof IoT Product Manager and Engineer in the markets of key countries, it has localised the connectivitytesting of new IoT products. As of the end of 2022, the shipment of IoT products in overseas marketshad surpassed 1.8 million units, among which more than 570,000 units had been activated.Additionally, Midea had completed the construction of the international MSmartLife App as a globallyunified platform for online support services, built a service team for the global application market suchas App Store and Googleplay and for "in-app feedback" applications, and completed the localisationof the webpage of frequently asked questions (FAQ) for the markets of five core countries. Based onincreasing resource investment, a digital ecosystem of user growth was constructed with the sixmajor touch points of user co-creation, user services, brand official website, social media, overseas e-commerce and the MSmartLife App, and the best modes of overseas user data storage, contentiteration and operation were explored. In addition, Midea promoted user growth projects worldwide,established a global digital marketing management system, improved overseas private domain trafficoperation and overseas digital marketing through marketing communication and promotion, consumertouch point and user life cycle data management, and significantly improved such indicators as userconversion rate and customer acquisition of the after-sales system, thereby effectively supporting thesustained growth of sales. In 2022, Midea contacted a total of 1.9 billion people through overseassocial media and interacted with 37 million users, with its official website being visited more than 9million times. In the future, Midea will, based on the digital building of retail marketing, additionallycover 20 countries and seven languages to increase retail efficiency and improve user experience.Midea kept improving the overseas manufacturing layout and expedited the introduction of the"China-based Supply for the World + Local Supply" model. In 2022, the manufacturing base in Egypt
and the new air conditioning base in Thailand were completed and put into operation, furtherimproving the overseas capacity layout of major household appliance products. Meanwhile, effortswere stepped up to promote the construction of the manufacturing bases base in Brazil and Mexico toeffectively cover the American market. In addition, the domestic refined manufacturing system waspromoted in overseas manufacturing bases, and overseas talent development was enhanced withrespect to lean management, driving improvement in global manufacturing efficiency and deliverycapacity. The constantly refined EHS management system provides firm assurance for the safe andstable operation of overseas manufacturing bases. Global logistics and warehousing capacity wereenhanced. On the one hand, Midea deepened cooperation with global strategic partners, and createda new mode of international logistics cooperation to effectively ensure the supply of logisticsresources during drastic market changes. On the other hand, it built an agile and efficient globalspare parts supply chain system, set up a global spare parts centre, constantly optimised the deliveryefficiency of spare parts, established a global sales operation system, improved the performanceorganisation capacity, promoted the transformation toward global professional operation, achievedonline and visual implementation of overseas plans and orders, and refined and improved servicesfrom the four dimensions of spare parts delivery, customer contact, service network and servicetechnology engineering to improve the overall service quality. Midea improved its global servicesystem and global service capacity, optimised service networks of iService system (an overseas after-sales system) and cloud call centre platform, and master data management of global outlets andservice projects, realised interface sharing between call centre and after-sales service system, andgreatly improved the accuracy and efficiency of service. Meanwhile, it additionally incorporated suchfunctions as speech analysis, semantic recognition and access to social media by intelligent voicerobots in an effort to construct a fast-response and proactive global service system. In 2022, theintroduction of Amazon Connect, a global, omnichannel cloud contact centre, into Midea enabled theCompany to achieve the iterative upgrade of its global contact centre and directly reach the endcustomers worldwide, thereby achieving the whole-procedure closed-loop management ranging fromuser reaching to service completion, and dramatically improving service efficiency and userexperience, while significantly reducing operating cost and improving voice call quality through thecloud-based transformation of the call centre. Amazon cloud security tool was adopted to satisfy thecompliance requirements of all relevant countries for data security management. By the end of 2002,
Midea had launched the cloud call system in the six countries and regions such as Italy, Singapore,Hong Kong, Malaysia, Germany and Mexico.In 2022, the rising cost of raw materials and the depreciation of the Japanese yen continuouslyaffected the operations in the Japanese market. Meanwhile, the difficulty in cross-border personnelflow and the continuous fluctuation of the supply chain arising from the impact of relevant macrofactors, kept all links of the business value chain under pressure. TLSC continued to deepen thesynergy with the Group's product divisions in the value chain to ensure the supply of products.Measures such as price adjustments through the faster launch of new products and enhanced salesactivities, improved product mix, increased retail market share and tightly controlled non-operatingexpenses, so as to address the impact of product costs, currency fluctuations and other factors andensure the accomplishment of the operating objectives. During 2022, the retail sales of the Japanesehome appliance market grew 3% compared to 2021, while that of TLSC grew 15%. Its market shareof six major product categories combined has increased to over 14%, with the respective marketshare of air conditioners, refrigerators, laundry appliances, microwave ovens and rice cookerscontinuously growing. The organisational structure has been optimised and adjusted according to thedifferent user scenarios, and the whole process of the business model has also been optimised andupgraded to improve organisational efficiency and market response speed, while the after-salessystem has been further strengthened to improve user experience. TLSC continued to boostsynergies with the Group and the relevant divisions on branding, R&D and innovation, supply chainintegration, quality improvement, etc., so as to build a strong product portfolio for the global markettogether. By 2022, the business of TLSC has covered more than 120 countries and regions.E. Stepped up the comprehensive digitalization to materialize data- and platform-basedoperations in the whole value chain, and thus to become more competitive in the digital eraFocusing on the “Digitization & Intelligence Driven” strategy, Midea achieves changes in the format ofproducts, drives hardware sales through software sales and intensifies contents and services; andachieves changes in business methodology, promotes reforms in research, production and sales, andfosters disruptive changes in existing business models through an Internet mindset and Internet tools.Midea has promoted business digitization and established a data business system. After years of
digital practice, focusing on the development trend of industrial digitalization and the characteristics ofindustrial digitalization, Midea has established its SMART data business system. With processchanges throughout the whole chain of data business, data governance to ensure data specificationand availability, high-value data assets constructed relying on the public layer, data products and dataapplications have been created with data technology.In terms of domestic sales, Midea adhered to the "Direct to Users" and "Digitization & IntelligenceDriven" strategies and the "customer-oriented" principle, and worked to improve the efficiency of theomnichannel value chain with data-driven measures. Specifically, Midea launched the Midea CloudSales platform to continuously promote the reform and development of its domestic sales channels bya "non-face-to-face" transaction mode. Through such business reforms as entire-house sample store,cloud warehouse, omnichain inventory sharing, omnichain big data application, and auxiliarydecision-making, Midea continued to support the efficient implementation of the reform of direct retailin combination with the optimisation and iteration of the Midea Cloud Sales platform system.Meanwhile, Midea further improved the brand mindset of users and the platform-based retailoperation, launched 360 series data products covering online and offline product sales chains,realised omnichain data monitoring and problem diagnosis, provided sales optimisation strategies toimprove product sales, and increased the return on investment (ROI) in marketing by 15%.Additionally, Midea optimised store site selection using a data algorithm, and kept empoweringchannel reform by digital means. In August 2022, Midea launched a data model for store siting, whichcan rapidly improve the efficiency and accuracy of siting. Particularly, the hit rate of the recommendeddigital siting for COLMO brand stores reached 86%, with the siting efficiency increasing by more than10 times. In terms of overseas sales, Midea effectively supported the "Global Impact" strategy,deepened the development of digital capabilities of the system driven by the original equipmentmanufacturer (OEM) and own branding & manufacturing (OBM), promoted the digital transformationof overseas business in line with local circumstances, and supported the product plan based on userinsights to upgrade its overseas products in an all-around way. Besides, Midea refined the capabilityfor OEM best practice, improve the business capability for in-depth cooperation with OEM customersand the customer service capability with respect to corresponding functions. Based on newtechnology architecture, Midea built the iBOS platform for the integration of overseas sales. With the
collaborative planning, forecasting and replenishment (CPFR) model, whole-procedure visualisationof overseas orders, and other features, the iBOS platform can improve the execution and deliveryefficiency of overseas orders at a much lower cost. Additionally, Midea independently developed theMCC channel management system to support the channel management reform for overseas markets,and promoted digital products and experience with respect to domestic sales to overseas markets,with great pilot results being obtained in retail and channel distribution. Furthermore, Mideacomprehensively upgraded the overseas localised digital marketing platform in Brazil on a pilot basis,to shore up the ToC capability development of overseas markets. Midea also pushed ahead with theestablishment of the overseas user operation and membership system, and rolled out the overseascontact centre system in the Asia-Pacific region in an all-around way, thereby providing betterservices for users of the OBM business. The construction of digital systems in manufacturing bases inThailand, Italy and Egypt was completed, contributing to the improvement of the efficiency ofoverseas manufacturing. In terms of R&D, following the "Technology Leadership" strategy, Mideasteadily promoted the digitalisation of R&D, improved its digitisation and intelligence capabilities inmultiple application areas such as technology innovation, user research, digital simulation andverification, software-defined hardware, development of the global platform cluster, and C2Mcustomisation, increasing the online processing rate, transparency rate and digitalisation rate of R&Dto 85%, 80% and 40% respectively. In addition, Midea built a digital planning platform to rapidlytranslate technological capabilities into popular products, and kept promoting the modularisation ofplatform, increasing the hit rate of product planning and the benchmark efficiency of platform by 15%year on year, and shortening the average development period by 10%. Furthermore, Midea startedthe digital simulation era, established a unified digital simulation platform and simulation talent system,and drove the transformation toward an efficient and collaborative R&D. In terms of supply chain andmanufacturing, Midea promoted the transformation toward an end-to-end integrated supply chain,established the management system for integrated supply chain (ISC), developed industry-leadingcapabilities in regard to order execution, global supply chain management and agile delivery as wellas highly-flexible, highly-efficient, and highly-elastic agile delivery capabilities to achieve intelligentchannel replenishment and improve inventory turnover, built the sales and operations planning(S&OP) cockpit to improve the synergy efficiency of production, supply and sales of the whole valuechain, and established the commitment mechanism of sales and production by order pre-scheduling
rules. In addition, Midea improved resource sharing in such aspects as electronics, sheet metal,injection molding, mold and labour, adopted the big data technology for intelligent stocking andreplenishment, and managed to complete the stocking and replenishing of all product portfolioswarehoused in an hour, thereby supporting the improvement of manufacturing capability. The datalinkage between the intelligent order centre and the intelligent plan centre was constantly upgraded tosupport the global operation of Midea as planned, and the M·IoT industrial Internet platform wascontinuously improved and recognized as a "cross-industry and cross-field platform” by the Ministry ofIndustry and Information Technology. Based on the M·IoT industrial Internet platform, Midea has builta number of green benchmark factories and dark workshops with high quality and great flexibility, aswell as benchmark factories featuring the full access of washing machine to 5G. Increasing theproduction efficiency and reducing the defective rate by more than 30%, the benchmark factories arebeing rapidly replicated to multiple manufacturing bases. Moreover, the project "Pilot Demonstrationof Information-based Digital Navigation for Air Conditioning" was selected into the "List of PilotDemonstration Projects for the Integrated Development of Next-generation Information Technologyand Manufacturing in 2022" of the Ministry of Industry and Information Technology. For externalcustomers in the industry, M·IoT has created a total of 75 effective solutions in combination withindustry application scenes. Covering nine key areas such as R&D, design, manufacturing, andsupply chain management, the aforesaid solutions have helped more than 400 large-scaleenterprises achieve digital transformation and upgrade. In the process of operation and management,Midea has fully promoted the objective and key result (OKR) system as well as management byobjectives and collaboration, improved the digital collaboration platform, strengthened thefundamental capabilities of office platforms, and enhanced the efficiency and transparency of cross-team collaboration. The five scenes of smart logistics have been extended to more than 30 industrialparks across the country, expanding the coverage of administrative services and improved customers'experiences when they provide services. By creating a unified bidding invitation and procurementplatform for Midea Group, all scenes designed for non-production materials have been unified,network-based, and process-based. With the optimization of the process efficiency as the core lever,Midea has further clarified the decentralization system and has achieved reciprocity between powerand responsibility. It also has constantly boosted organizational vitality. As a result, the processefficiency of the core value chain covering research, production, sales, and supply has increased by
10%; the process efficiency of finance and other functions has risen by 30%; the process efficiency ofthe office automation (OA) system has climbed by 50%.Midea strengthened the construction of the digital base, and built a new CloudNative platform forcorporate digital application to reshape the business foundation model by virtue of the CloudNativearchitecture. In 2022, the number of micro services accessed to the CloudNative platform increasedby 87%. Media further developed the PaaS technology platform by initiating the overseas layoutthereof and building PaaS stations in Hong Kong, North America and Europe, thereby empoweringthe international OTC projects of Midea and increasing the overall response efficiency of overseasbusiness by more than 50%. As of the end of 2022, the number of services accessed to PaaSTechnology had increased by three times, and the total amount of API requests of PaaS componentsincreased by five times. The big data base of the one-stop data platform was comprehensivelyupgraded, accompanied by a 40% reduction in overall cost and a 30% increase in resource efficiency.Continuous efforts were made to promote the security transformation and performance optimisation ofdatabases and to optimise the power usage efficiency (PUE) of data centres. As a result, the overallperformance of databases was improved by three times, and the PUE of data centres decreased bymore than 10%. In March 2022, the contract for the cloud project in Guian New Area was officiallysigned. The project will meet the computing need of Digital Midea in the next ten years and provide aguarantee for Midea to develop into a leader in the IoT era. The data-empowered business wascomprehensively promoted, and data governance strengthened. Through covering core businessscenes such as R&D, supply chain, marketing and manufacturing, Midea boosted the standardisationof data and the efficiency improvement and cost reduction of relevant business. Moreover, Mideacultivated more high-quality digital talents through establishing the standards and systems forcultivating digital talents. Midea systematically trained nearly 10,000 people in 2022. In addition, interms of information security, Midea has basically established a system of security defence in bothdepth and breadth, and a 7*24h safety operation system, which can, in combination with theintegrated and efficient digital operation maintenance base, effectively ensure the safe and stableoperation of business.Midea put continuous efforts into the R&D of artificial intelligence (AI) technologies, and
comprehensively promoted the application of intelligent technologies. In 2022, Midea AI InnovationCenter put continuous efforts and achieved application breakthroughs in four fields, namely smarthome empowered by AI, smart manufacturing empowered by AI, smart medical services empoweredby AI, and household robots. WISHUG, the home service robot brand of Midea, has been unveiled,together with XIAOWEI, the first-generation robot product of the brand. XIAOWEI has been mass-produced and put on sale. XIAOWEI has four core features, namely AI housekeeper, home assistant,security guard, and technology playmate. Besides, the voice full-stack technology developed byMidea has been applied to its home appliances of all categories. At present, five voicers with differentcharacteristics have been launched online together with stable text-to-speech (TTS) services, with asuccessful voice recognition rate of over 90% in home appliance control. Midea has also created agraph of nutrition and health knowledge for the vertical field of the home appliance industry, thelargest of its kind, which can provide fundamental data support for such scenes as human-robotinteraction, smart customer services, and active services. Additionally, Midea has achieved thecombination of navigation technology, SLAM (simultaneous localisation and mapping) schemeframework, and SLAM algorithm based on multi-sensor fusion, providing more stable and reliablepositioning and better environmental adaptability for the robot system. Meanwhile, Aidget, an edge AIdeployment tool chain independently developed by Midea, has been delivered, mass-produced andapplied in such products as smart refrigerators, dishwashers and home service robots, and has beensimultaneously launched in the two communities of GitHub and OpenAI under the support of itsdeveloper, which is expected to help Midea boost the co-creation of AI ecology together with thedeveloped, and thus empower technical development of the industry. Thanks to its continuous effortsin the AI-based platform empowerment R&D system, Midea has already launched data annotationplatform, model training platform, knowledge graph development platform, AI dialogue developmentplatform, visual open platform, XiaoMei voice interaction platform, etc., greatly improving the productdevelopment efficiency. Furthermore, the first voice AI chip of Midea has also completed thepreliminary module manufacturing on a trial basis. In 2022, the Ministry of Science and Technologyannounced the latest batch of "National Open Innovation Platforms for the New Generation ArtificialIntelligence", clearly supporting Midea's construction of the "National Open Innovation Platform for theNew Generation Artificial Intelligence on Intelligent Service Robot". Midea will rely on the aforesaidplatform to achieve innovation breakthroughs in key core technologies.
F. Promoted the strategy of “Digitization & Intelligence Driven” and accelerated theimplementation of “Comprehensive Intellectualization” to “Customize a Smarter Midea Life forYou”In 2022, M·IoT remained committed to improving the comprehensive user experience of Mideaproducts, perfecting the building of open platform capability, consolidating the entire-house basicguarantee capability, and creating customer-oriented Midea Smart Life solutions, so as to provideusers with whole-scene experience services and more quality ecosystem value-added services, andcreate more convenient, open and reliable "Midea Smart Life". Focusing on themes such as kitchen,balcony, bathroom, living room, bedroom, entire-house air and entire-house water, M·IoT acceleratedthe launch of smart entire-house solutions with full-scenario experience in the pre-installation market,while continuously iterating and optimizing such solutions based on the demand of the pre-installationmarket, thereby satisfying the demands of customers. Midea offered users with stable and smoothclient end usage experience through improving the comprehensive performance indicators of theMSmartLife App to industry-leading level, and further improved the capability for configuring smarthome scenes and improved the linkage efficiency of device access scene through creating anindustry-leading IoT technology platform. Over 95% of smart devices support scenario-basedinteraction by the end of 2022. Midea's smart scenarios were executed more than 300 million times.Through scenario-based user connection, the number of users of multiple scenario-based deviceshas been growing steadily.Midea has built a comprehensive test and experiment base covering communication modules, smarthome control applications, entire-house intelligence and other business fields, which can providebasic guarantee for Midea to offer the best entire-house intelligent experience for hundreds of millionsof families around the world. With the protection of user privacy and data security at the core, Mideahas continuously built and improved the Midea smart home security system that is in line with thestandards of the domestic and overseas industry, which has been CNAS, ISO 17025, UL, and SGScertified by many authorities. In 2022, the China National App Administration Center (CNAAC) carriedout an all-around inspection of information security and privacy protection of the MSmartLife App andawarded the app "CNAAC App Security Mark". The M·IoT Laboratory was granted the radio
frequency QTL qualification by UL Solutions, which allows Midea to complete all tests on relevantproducts by virtue of its own laboratory equipment. The authorisation of QTL qualification will helpMidea effectively shorten its product testing cycle, further improve the efficiency of product testing,and support and promote its product layout in overseas markets. According to the result of theappraisal of excellent cases for practicing the national standards on cybersecurity on the 20thanniversary released by the National Information Security Standardization Technical Committee,Midea was the only home appliance business that was included in the list and won a case award for"the application of personal information security standards to smart home". Besides, the mobilesecurity technology of Midea's MSmartLife App was included in the "2022 Security Guard ProgramExcellent Cases" by the China Academy of Information and Communications Technology (CAICT)and the China Communications Standards Association (CCSA). As such, M-Smart is consideredindustry-leading in terms of data security. Meanwhile, as a member unit of the Council of theConnectivity Standards Association (CSA) and a contributor to and participant in the formulation ofthe Matter Protocol, M·IoT joined hands with ecosystem partners such as Amazon, Google and Apple,to promote the establishment and application of the Matter Protocol, and Midea U-shaped Window AirConditioner has been among the first to be Matter-certified, thus contributing to the building of anopen global smart home ecosystem. During 2022, M·IoT played an active part in the drafting andformulation of relevant industry standards, thereby promoting the wider popularization and applicationof new industry technologies. In the year, four of these group standards in the smart home applianceindustry were issued, including Technical Requirements for Smart Home Appliance Sets, ApplicationGuide for Knowledge Graph of Smart Home Appliances, Assessment Model of IntelligenceCapabilities of Smart Home, and Technical Specifications for WLAN Modules of Smart HomeAppliances and Connection Performance of the Whole Machine.G. In view of consumer stratification, launched multiple brands and diversified productportfolios, and enhanced the promotion of the core values of these brands to empower retailsales and user operationCOLMO serves high-end users with high-end smart products. Its overall sales reached over RMB8billion in 2022, up 100% year on year. In terms of product, after three years of development,
COLMO's entire-house high-end smart products have basically satisfied all the demands for electricalappliances in home life by covering the five entire-house systems of entire-house distributedintelligent control, entire-house air, entire-house water, entire-house food nutrition and enjoyment, andentire-house washing and care, preliminarily establishing a leading high-end smart life solution in thehome appliance market. In 2022, COLMO launched the EVO suite to, following the product conceptof "extremely built-in, on-demand customisation, and home integration" and the brand spirit of beingrationally aggressive, continuously satisfy the new demands of high-end users for kitchen life andprovide a natural kitchen life. With a vision of "providing global high-end users with an all-inclusivehigh-end smart life solution", COLMO started in 2021 the evolution and upgrade from high-end smartproduct suites to high-end entire-house smart systems, took the lead in proposing higher-end entire-house intelligent solutions cantered on "Smart Villa Expert" in early 2022, achieved in-depth intelligentcontrol of smart home by integrating entire-house appliances with the smart screen of central airconditioner, sketched a new picture of smart entire-villa control, and launched the "Smart Villa Expert"solution together with five core "Smart Villa" systems to consolidate the industry positioning of "smartentire-villa control". In terms of branding, COLMO takes the lead in proposing the concept of "SmartVilla Life, COLMO Lifestyle" to lead the life evolution of 1% high-net-worth customers worldwide,exclusively sponsors the third season of Life Evolution, a high-end talk show, and becomes the entire-house smart home partner of Our Folks 2022, an annual super variety show in 2022, with a view to,through cooperation with various fields such as culture, art, sports and architecture, presenting ahigher-end COLMO Lifestyle from different dimensions. In terms of user and market, COLMO hasmade continuous efforts to reach and spiritually resonate with high-end users, and has worked hand-in-hand with more than 520,000 high-net-worth customers since its launch. According to the data fromAVC, the proportion of COLMO products in the high-end market increased significantly in 2022, withthe water dispenser products occupying more than 65% of the offline high-end market, water purifierproducts and floor-standing air conditioners more than 20%, and dishwashers more than 13%. Interms of sales channels, to provide high-end users with better entire-house smart experiences,COLMO collaborated with the international fashion media group Marie Clarie to build a high-end,stylist architectural and cultural landmark, the COLMO "Villa Intelligence Beautiful Home" ExperienceSpace, in Sino-Ocean Taikoo Li Chengdu. Additionally, it further expanded the high-end whole-scenechannel by setting up over 270 smart experience pavilions across more than 120 major cities.
As a world-renowned home appliances brand with a century-old history, Toshiba is committed toproviding users with inspiring, perfect products and services. With strict requirements for the entireproduction flow and quality inspection criteria higher than international standards, Toshiba hasbecome the bellwether of international quality in the home appliance industry. In recent years,Toshiba's increasing sales in China have made it a new choice for high-end home appliances in thecountry. To create a leader in a high-end, exquisite and star-level lifestyle, Toshiba continued itsefforts in 2022. In terms of product, it constantly improved the layout of home appliances of allcategories, created an industry-leading mainline of core technology, and launched a series of annualpopular single products such as the "479 Large White Peach" and "429 Small White Peach"refrigerators, X10 Heat Pump Washer-dryer, XD95 Superheated Steam Oven, Dishwasher S5W with15 place settings capacity, and RC-10IH Rice Cooker, with a view to building the ingenuity andcraftsmanship mindset following the "product as band" concept. In terms of marketing, campaignswere carried out for different user circles, including food lovers and mothers, to achieve precisemarketing and sustain inbound marketing through targeted membership coverage combined with KOLrecommendations. Toshiba's brand proposition of "Details Matter" is aimed at a wide range ofsophisticated lifestyle consumers, and in 2022, Toshiba gathered celebrities to promote the IP"Craftsman of Life" at Xiaohongshu for all product categories, and launched a series of shopexperience activities under the theme of “Details Matter for Toshiba”. In terms of channel, Toshibaactively promoted retail transformation. In 2022, Toshiba completed the cooperation with nearly 80brand operators, built 130 star-level life pavilions, promoted the joint development of Toshiba's whitegoods of all categories, and made continuous efforts to ensure a unified image at the retail end. Interms of market, the total retail sales of Toshiba products in the domestic market surpassed RMB2billion in 2022, a year-on-year increase of more than 55%. During the "Double 11" sale, the onlinesales of Toshiba increased by 100% year on year.WAHIN continued breaking the boundaries of traditional home appliance models. The brand insistson innovation, embracing the Generation Z with “Trendy Designs, Practical Functions and FunInteractions”. Its operating revenue exceeded RMB7 billion during 2022. It has established the slogan“Young and Daring” for branding, and positioned itself as a brand of "young, high-tech and trendyappliances", continuing to provide users with good-looking, interesting and surprising products with
easy-to-use technology. In 2022, WAHIN integrated marketing and upgraded the anime IP WAHINGirl to an ultra-high-simulation digital human, who won the 2021 Forbes Business Value Award forVirtual Humans in Chinese Home Appliance Industry and reached 150 million users while serving asthe brand's digital manager. In the meantime, WAHIN cooperated with the School of Journalism &Communication of the Peking University and the School of Arts Administration and Education of theCentral Academy of Fine Arts, using a young brand positioning to gain penetration into and resonancewith young consumers. On the May 4th Youth Day, WAHIN announced a full range of new products atits "Dare to Be a Youth to Step Forward" Launch, being the first to provide good-looking suiteproducts in all categories. Meanwhile, with the help of professional esports players, its new productskept breaking the circle, attracting over 200 million unique visitors overall. Additionally, the brandreleased the idea of "Lite Smart" that gradually covered all product categories, with the philosophy ofbeing instantly discovered, instantly connected and instantly controlled for the “Lite Smart 2.0”software products. During the "Double 11" sale, WAHIN launched the "resume-based customizedpackage", achieving an overall exposure of more than 100 million UV in collaboration with the TVprogram “Exciting Offer". In terms of sales, the sales of WAHIN products reached close to RMB1.6billion during the "618" promotion in 2022, up 80% year on year. Particularly, WAHIN refrigeratorsranked among the top three in JD.com, Tmall and Douyin, grew 10 times from the previous year atthe self-operated store on Pinduoduo, and sold 95,000 units via livestreaming. During the "Double 11"sale, WAHIN air conditioner products ranked top three in retail sales on JD.com, and Douyinplatforms, among which WAHIN 2 HP wall-mounted air conditioner ranked first online. In terms ofbranding, in 2022, WAHIN air conditioner products kept expanding content precipitation andimproving brand volume by the strategy of "professional expert content + user recommendation".Furthermore, more than 10,000 articles were published online in WAHIN's air conditioner-focusedcontent marketing during the "618" promotion. Notably, the search index of "WAHIN air conditioner"increased by 300% on Xiaohongshu and by 260% on Zhihu. During the "Double 11" sale, bypositioning crowd portraits and accurately matching KOL matrix, WAHIN triggered a social mediatopic of "WAHIN 2 HP Wall-mounted Air Conditioner", with an exposure of more than 40 million UVoutside the online channel.H. Seized market opportunities amid domestic and international circulations, responded to
China’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 andsolutions in four major fields: intelligent transportation, industrial automation, green energy, andconsumer appliances. The Industrial Technology Research Institute and a strategic developmentorganisation have been established in 2021. It focuses on both independent development andacquisitions, and centres around a solid technical foundation, including heat management technology,drive technology, control technology, energy technology, chip technology, etc. In the four major areas,a complete industrial chain layout and technical matrix have been formed, covering information,control, drive, and execution. It continues to increase investments in the development of key andcutting-edge technologies, with R&D investment exceeding RMB1 billion in 2022, and over 50% ofR&D personnel having master's or doctoral degrees. At the same time, it continues to increase therecruitment of senior experts in the industry. In 2022, Midea Industrial Technology received numerousindustry awards, including an Excellence Award at the 23rd China Patent Awards for the inventionpatent "Compressor and Heat Exchange System with it”, in addition to one Gold Award and two SilverAwards at the Guangdong Patent Awards, as well as one Gold Award and two Silver Awards at theAnhui Patent Awards. The Industrial Technology Business Group's "Research and Application of KeyTechnology of Low-noise, Heavy Rare Earth-free Permanent Magnet Motor for Compressors","Research and Application of Key Technology of Lightweight, Silent and High-efficiency Compressorfor Refrigerators with High Volume Rate", "Research and Application of Key Technology of High-overload Permanent Magnet Synchronous Motor Drive System for Home Appliances", "KeyTechnology and Application of Variable Capacitance Driven High-efficiency and Miniaturized MemoryMotor System for Home Appliances", and "Application of Micro Phase Change Heat PumpTechnology for Typical Home Appliances" were all certified as "Internationally Advanced" by the ChinaNational Light Industry Council. "Research and Application of Key Technology of High-overloadPermanent Magnet Synchronous Motor Drive System for Home Appliances" also won the 2022 ChinaNational Light Industry Council Technology Progress Award (First Prize). Additionally, three products,
including "New-type High-efficiency, High-speed Variable Frequency Scroll Compressor", "New-generation Ultra-efficient Air Conditioner BLDC Motor", and "New-generation High-volume-rateRefrigerator Variable Frequency Compressor" were selected as the 2022 Energy-saving and Eco-friendly Products by the China Association of Refrigeration.Midea Industrial Technology made constant efforts for consumer appliances and consolidated itsleading position in the industry. According to data provider ChinaIOL, in 2022, the global market shareof residential A/C compressors rose to 44%, continuing to be the largest, while the sales volume ofcompressors for heat-pump heating and chilling units went up 50% year on year. The global marketshare of refrigerator compressors reached 16.7%, thus ranking at the forefront of the industry. Theunit sales of motors for residential air conditioners and laundry appliances accounted for 39% and
17.5% of the global figures respectively, still leading the way in the industry. The whole-new M SeriesDC Compressor for car refrigerators has been launched to the market in May 2022, with the salesvolume surpassing 150,000 units in 2022. Furthermore, Midea Industrial Technology continues toexpand its focus on the four major product lines of MCU, IoT, power supply, and power chips. Annualsales have surpassed 10 million, with quality indicators ranking at the international leading levelamong comparable products. Concurrently, the company has supplied products to more than 30manufacturers. Midea continues with digital and intelligent transformation and keeps expanding andimproving its capacities. The Foshan Xingtan Base for components of consumer appliances has beenestablished to make a forward-looking layout in intelligent manufacturing of mechanical and electricalproducts. Midea has comprehensively automated, digitalized and intellectualized the productionlayout, process design and production management, seeking to build an Industry 4.0 intelligentmanufacturing demonstration base in China. The integration work on the Thai compressor companyproceeded well, which has helped significantly increase the overseas production capacity ofrefrigerator compressors. The first phase of the Thai motor factory's construction has been completed,initially establishing overseas production capacity for ECM motors. Midea Industrial Technologyremains dedicated to developing the Indian market, and its first self-built overseas A/C compressorbase completed the delivery of its initial batch of orders by the end of 2022. This accomplishment laysthe groundwork for rapid growth in overseas strategic markets and further enhances the global supplycapability of core components. Deepening its focus on intelligent transportation components, Midea
Industrial Technology leverages its solid core technology in the consumer electronics field to quicklydevelop three major product lines: Automotive Grade thermal management, electric drive systems,and chassis execution systems. The existing eight product lines of the three major systems graduallywent into production. In terms of technological breakthroughs, it has developed cutting-edge CO?automotive electric compressor technology to overcome the industry's pain points in low-temperatureheating and has launched the world's first high-speed electric SiC compressor operating at 800V and12,000rpm to address user pain points such as slow charging and short range. Simultaneously, it hasbroken through the bottleneck of large-scale flexible production of flat-wire motors. In terms of marketexpansion, an overseas local marketing team has been established. In 2022, the cumulative sales ofproducts reached nearly 200,000 sets, with nearly 30 new designated cooperation projects added,and the total output value of orders generated by designated cooperation projects is expected toexceed RMB8 billion in the future. In terms of production capacity assurance, the new energy vehicleparts manufacturing base in Anqing was completed and put into production in 2022, with an annualproduction capacity of 1 million electric compressors, 1.2 million EPS steering motors, and 200,000drive motors. Midea Industrial Technology Business Group acquired WuHan TTium Motor in April2022, officially entering the field of two-wheeled travel and expanding the core components of two-wheeled pedelecs. By introducing Midea's supply-chain system and advanced experience of large-scale production, it set up modern factories in China and Vietnam to continuously provide customerswith high-quality products. Additionally, at the Eurobike 2022, it launched three large crankset centermotor products with technical advantages such as high power density, high efficiency, quick responseand low loss rate, attracting extensive attention. In the field of industrial automation, Midea IndustrialTechnology's two major brands, Servotronix and Hiconics, provide complete solutions from thesensing to the control level for customers in the process, hybrid and discrete industries, helpingindustrial customers improve quality and efficiency, and achieve digital transformation and greendevelopment. As an integrated solution provider in the field of automation equipment, Servotronixfocuses on the entire industrial automation chain, including software tools, equipment control, servodrives, servo motors, and encoders, continuously providing customised motion control solutions forcustomers in various fields. In 2022, its linear drive product revenue increased by over 55% year onyear, and it actively cultivated and expanded overseas markets, with overseas revenue in 2022significantly increasing by approximately 140% year on year. Relying on its leading technology
advantages, Servotronix successfully developed and launched the enhanced DS2P servo drive in2022, significantly improving the comprehensive performance of the servo system, and introducedcore products and solutions such as the softMC703 High-performance Multi-axis Controller, softMCCompact 301 Compact Motion Controller, and CDHD and CDHD2 High-performance Servo Drives.With "high-speed, high-precision, and high-performance" customised solutions, it continues to expandthe application of existing products in new fields, covering industries such as lithium batteries,photovoltaics, semiconductors, robots, laser processing, and consumer electronics. Meanwhile, itfocuses on pain points in emerging markets, launching a series of product combination solutions, anddemonstrating superior performance in intelligent manufacturing scenarios such as laser precisioncutting, lean manufacturing of die-bonding machines, precise control of six-axis robots, and precisepositioning of visual inspection equipment. At the 2022 China Motion Control and Linear DriveTechnology Industry Development Summit, Servotronix won the "2022 Linear Drive Brand InfluenceEnterprise of the Year" award for its contributions and innovative technology to the industry. Hiconicssuccessfully developed and launched a new generation of high-performance high-voltage frequencyconverter HCA series products in the high-voltage inverter field, comprehensively improvingoperational efficiency, energy-saving effects, and human-machine operation. The leading domesticpower plant's "First Domestic Water Pump High-Speed Direct Drive Frequency Conversion EnergySaving Retrofit Project" was successfully retrofitted and put into operation without stopping themachine, significantly improving the overall power-saving rate after the retrofit. In the low-voltageinverter field, a new generation of high-performance vector inverters CM530H-PLUS, which can bewidely used in asynchronous motor/synchronous motor speed control, was introduced. It can achievehigher performance and precision in motor drive control, compatible with multiple buscommunications, with rich functionality and strong interconnectivity. Through the perfect "Motor +Drive + Oil Pump" industry solution, the high-end low-voltage inverter product ES300 was launched,successfully entering the top hydraulic industry customers. Midea Industrial Technology activelydeployed core component technologies such as valves and reducers, and achieved mass productionof HVAC electronic expansion valves in 2022. The independently developed "Harmonic Reducer HighPrecision Long Life Design Technology Research and Application" was certified as “InternationallyAdvanced” by the Guangdong Mechanical Engineering Society. In the green energy field, MideaIndustrial Technology continued to lay out the entire energy value chain of "sources, grids, load, and
storage". On the "source" side, photovoltaic engineering projects made breakthroughs in multiplescenarios, saving customers millions in annual electricity costs; on the "grid" side, intelligent micro-grid adopted the "self-generation and self-use, surplus power to the grid" model, providing corporatecustomers with whole life cycle solutions including project planning, design, construction, andoperation and maintenance, helping to achieve "low cost, low risk, low carbon emissions", andproviding intelligent micro-grid and SVG dynamic reactive power compensation devices for intelligentand stable grid and micro-grid management; on the "load" side, the use of high and low voltageinverters significantly improved energy-saving and consumption reduction for industrial enterprises;on the "storage" side, household energy storage products and integrated photovoltaic storagesolutions were successfully launched, with overseas market orders exceeding RMB100 million.Midea Building Technologies, with the mission of "co-building sustainable smart space" and the vision"to be a global leader in building technology", has transformed from a commercial air conditioningproduct supplier to an integrated solution service provider for intelligent building ecosystems.Currently, Midea Building Technologies has six major product manufacturing bases and seven R&Dcentres worldwide, with a sales network covering global markets. It has formed the largest and mostcomprehensive professional smart building product matrix and service network in China. At the "MakeiBuilding come TRUE" building technology conference held in early 2022, Midea BuildingTechnologies released the "iBUILDING, Midea Building Digital Platform" to empower hardwareproducts and promote business transformation. The platform serves as a digital foundation andintegrates hardware equipment such as MDV multi-unit central air conditioning, K WING chillercentral air conditioning, LINVOL smart elevators, KONG building automation, and business servicessuch as carbon consulting, carbon management, and contract energy management. This integrationforms four industry solutions for smart low-carbon, smart rail transit, smart hospitals, and smartindustrial parks.In the domestic market, according to the data from ChinaIOL.com, Midea Commercial Air Conditionerhas continued to rank first with respect to domestic market share in 2022. It leads the domesticbrands in the multi-split market with a market share exceeding 18%. According to Commercial AirConditioner Market data, the market share of both Midea’s air-cooled screw chillers and water-cooled
screw chillers is the highest among domestic brands, and the annual sales volume of Midea’scentrifugal chillers exceeds 1,600 units, ranking first among domestic brands. In the overseas market,data from ChinaIOL.com show that in 2022, Midea accounted for 29% of China's total central airconditioning export value, ranking first. Midea's air source heat pump product exports increased bymore than 160% year on year. According to the European Heat Pump Association's data forecasts, toachieve the REPowerEU plan, the number of heat pumps in the European market will increase fromthe current 17 million units to 60 million units by 2030. Midea Building Technologies is continuouslyexpanding its heat pump production base in Italy, with an annual production capacity of 300,000 units.The future delivery cycle of heat pump products will be shortened to one month, comprehensivelyenhancing Midea's competitiveness in the European market. Midea Building Technologies haslaunched the iEasyEnergy "light storage and heat flex" integrated solution in Europe. Based on the"dual storage" system, combined with "zero-carbon" heat pumps and flexible control, the energy self-sufficiency rate can be increased to 90%. The Aqua Thermal Super commercial hot water product,with its high efficiency, reliability, and energy-saving features, can provide hot water at 65°C even at -25°C extreme low temperature. The ESG series frequency conversion swimming pool heat pump isMidea's first net-zero energy consumption product, manufactured on a zero-carbon production lineand certified by SGS for zero-carbon emissions. The product uses recyclable materials for the bodyand packaging, environmentally friendly R32 refrigerant, and can utilise clean energy from rooftopphotovoltaic panels and connect to energy storage systems during operation to achieve energy-saving and emission reduction.In terms of product innovation, Midea Building Technologies launched many new products in 2022 tostrengthen its business in areas such as commercial air conditioning, building automation, andelevators. This includes the launch of two innovative products under the new chiller brand "K WING",where the magnetic levitation ice storage dual-condition unit uses industry-first horizontally-opposedcompression technology to help bearings overcome disturbances caused by inertial forces generatedduring compressor operation, thereby improving the machine's reliability. The air levitation centrifugalunit adopts the industry's first non-equal height foil oil-free air-floating bearing, solving the problem oflow bearing capacity in traditional units, increasing the overall bearing capacity by 52%, andimproving energy efficiency by over 40% compared to traditional units. The unit has a small size and
occupies an area of only 0.78m?, with modular installation and easy disassembly. The MDV8Unbounded VRF, loaded with digital sensors and MDV-Link chips, reconstructs the integrated value ofspace, air, and people. Midea's fully variable frequency air-cooled chiller (heat pump) offers heatingand cooling, environmental protection, energy saving, intelligent technology, and health and safetyfeatures. The energy-saving, comfortable, and smart MDV FIT unit is designed specifically for smalland medium-sized commercial spaces. The modular evaporative cooling scroll chiller has smartcontrol, high-efficiency energy-saving, and modular combination features, with independent dualsystems and a whole-machine anti-corrosion design. Midea Precision Machine Room Air Conditioneroffers a variety of modes, such as fluorine pump natural cooling, variable frequency regulation,precise control, wet film humidification, and mixed cooling. In the field of building automation, Midealaunched the building intelligent control system "NZ" with cloud-edge collaborative capabilities basedon the KONG C3SI building automation strategic path, as well as the "WU KONG Smart WardSolution" aimed at smart medical scenarios, efficiently and rapidly promoting the application of IoTtechnology in the field of smart buildings from three aspects, i.e. software, data, and services. MideaBuilding Technologies' digital and intelligent elevator brand LINVOL launched two new villa elevators,“HOMI" and “CUBY", the first digital and intelligent passenger elevator series, “EVIN" Machine RoomLess and “EVIK” Mini Machine Room, as well as the retrofitted digital elevator with safety protectionand intelligent and convenient access for the elderly, “EVIN-X”. Meanwhile, an iBUILDING-basedintelligent elevator management platform has been launched, empowering building traffic with whole-new digital and intelligent solutions.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 managementwith a customized design based on the building's characteristics. In 2022, iBUILDING expanded itssmart building business from industrial parks to hospitals and public facilities. Midea BuildingTechnologies secured project orders for the Shanghai Citigroup Tower, Douyin Group's ShanghaiHeadquarters, iSoftStone, and Vanke Group. iBUILDING's zero-carbon solutions continuouslystrengthened their presence in zero-carbon parks, assisting projects like the Midea Industrial Park
West District, Chongqing Chiller Factory, and Jingzhou Factory in achieving carbon neutrality. In thewestern part of Midea Industrial Park, iBUILDING connects the systems of power grid, carbon trading,energy and HVAC to deliver "low-carbon and energy-saving" in every link. In terms of powergeneration, the platform developed a distributed photovoltaic + energy storage integrated project onthe roof of Midea office buildings. In terms of power consumption, energy is saved by the MDV8Unbounded Multi-split Machine with digital sensors through space characteristic recognition, systemrefrigerant temperature judgment, and self-adaptive indoor machine air and flow volume. Moreover,by connecting the park's carbon management system, iBUILDING provides the trading of carbonemission rights and green certificates, building a model project for zero-carbon buildings. In ShanghaiTongji Hospital, centering on people and equipment, iBUILDING makes deep involvement of buildingautomation system and new technologies such as cloud computing, bid data, IoT and artificialintelligence in smart building management. For example, the whole process of staff entry and exit isvisualized though 3D virtual hospital modeling, and the hyper-converged application of buildingautomation system, medical special system and medical information system is realized by using theIOC platform to connect information islands. In the He Art Museum (HEM) in Foshan, iBUILDINGused a digital twin model to create a "Virtual HEM", which senses the museum's temperature andhumidity as well as monitors the status of precious collections in the storage cabinet in real time.Additionally, iBUILDING integrates security, operation and maintenance, elevators, and energymanagement into unified management to achieve interconnection between devices, customer-oriented experience and full life cycle management of buildings, effectively supporting the betteroperation of HEM. In Shenzhen's Meilin Vanke Center, the Space Tech Energy Management Systemwas built based on iBUILDING. It not only solves the energy data statistics and predictive analysis ofexisting buildings but also provides energy optimization suggestions based on self-developedalgorithms, delivering consumption reduction targets for building through a smart operation. Duringthe 24th Winter Olympics, Midea Building Technologies provided a wide range of products for multiplescenes, from the opening ceremony to the closing ceremony, from sports venues to logistical support,and at the window of broadcasting the event globally and the transportation hub connecting the world.It provided low-carbon, efficient and smart HVAC solutions for Winter Olympic venues and supportingbuildings, including the National Stadium "Bird's Nest", the mountain broadcasting center inZhangjiakou, Shougang Park, the National Speed Skating Stadium, Beijing-Zhangjiakou High-speed
Railway, Winter Olympic Village, and Taizicheng Snow Town, helping the event to fulfill its greencommitment. In May 2022, the first phase of the Guangzhou Metro Line 7 West Extension ShundeSection officially opened. Midea transitioned from supplying single equipment for rail transit toproviding integrated procurement, design, and operation services, implementing wind-water linkageand intelligent, energy-efficient system solutions at all stations for the first time. In June 2022, the finalpiece of the world's first desert railway, the Haruo Railway, officially opened. Midea addressed thecooling challenges faced by communication base stations in 70°C heat through technologicalinnovation and equipment upgrades. With professional solutions and extensive global serviceexperience in rail transit, Midea also became the air conditioning system supplier for Southeast Asia'sfirst high-speed railway, the Jakarta-Bandung High-Speed Railway. They provided design optimisation,equipment supply, electromechanical installation, and after-sales maintenance for six building clusters,including apartments, station buildings, and train depots, in support of the Belt and Road Initiative. InDecember 2022, Midea Building Technologies signed a cooperation agreement with China SouthernPower Grid to jointly promote the implementation of virtual power plants across five southernprovinces and launch a pilot program in Shenzhen, actively exploring the commercial model andindustrialisation of virtual power plants and related businesses. Additionally, several projects poweredby the iBUILDING Midea Building Digital Platform received industry recognition, such as MideaBuilding Technologies iBUILDING IOC for He Art Museum winning the "Red Dot Award: Brands &Communication Design 2022"; Midea Headquarters Building, Shanghai Tongji Hospital, and MideaSmart Building Integrated Digital Management Cloud Platform iBUILDING Portal each winning the16th IDA Award; and the Midea West District Industrial Park project receiving the "LEED & WELLDual Gold Certification" from the U.S. Green Building Council (USGBC) and the International WELLBuilding Institute.In terms of technology development, in 2022, Midea Building Technologies' "Key Technologies andEquipment for Urban Sustainable Development" project, focusing on "Key Technologies and Productsfor Human Factors Engineering in Public Buildings", was approved and included in China's 14th Five-Year Plan for National Key R&D Projects. Several technological achievements, such as "High-efficiency Supply of Multi-flavor Heat Energy from Air Source Heat Pumps" and "Key Technologiesand Industrialization of Wide Temperature Range Full Condition High-efficiency Multi-split Air
Conditioning Systems", have been certified by authorities as “Internationally Advanced”. MideaBuilding Technologies' independently developed "Variable Frequency Screw High-Temperature WaterSource Heat Pump" was selected for the 2022 China Association of Refrigeration Energy-saving andEco-friendly Product Catalog, while "Horizontal Opposed Maglev Variable Frequency CentrifugalCompressor Technology" and "Digital Simulation Key Technology for Multi-split System" wereincluded in the 2022 China Association of Refrigeration Energy-saving and Eco-friendly TechnologyCatalog. Midea MDV8 Series Multi-split Air Conditioner (Heat Pump) Unit was granted the certificatesof "professional, characteristic, energy-saving and refined products", low-carbon certification andcarbon footprint evaluation in the inspection and assessment by Hefei General Machinery & ElectricalProducts Inspection Institute (National Quality Supervision and Inspection Center of Compressorsand Refrigeration Equipment). MDV8 VRF was honored with multiple Tick-Mark performancecertifications issued by Intertek, three of which are free topology high reliability, ultra-high temperaturestable operation and ultra-high energy efficiency. In April 2022, two of Midea's star products,"Medium- and High-temperature Water Outlet Variable Frequency Direct Drive Centrifugal Unit" and"High-efficiency Modular Integrated Cooling Station", were listed in the "2021 Excellent Cold SourceProducts for Data Center Cooling" selected by the China Association of Refrigeration. In July 2022, atthe 2022 China Heat Pump Industry Annual Conference and the 11th International Heat PumpIndustry Development Summit Forum, Midea Building Technologies' "Ultra-low Temperature AirSource Heat Pump Heating and Hot Water Integrated Blaze Series Products" won the "Energy-savingand Emission Reduction Technology Progress Award for Heat Pump Technology Innovation". With thewinners of the 2022 International Exhibition of Inventions of Geneva announced, Midea BuildingTechnologies’ "MDV8 Smart Building Energy Solution" project won the Gold Medal, and its "KONGCell: Empowering Traditional DDC with IoT Technology" and "M-thermal Arctic Heating Heat Pump"projects won the Silver Awards. Meanwhile, its "Maglev Compressor High-precision ControlTechnology" and "VRF Smart Control Technology" won the Patent Gold Award and Silver Award ofGuangdong Province. The "Control Method, Controller, and Air Conditioner for an Outdoor Fan inHeating Mode" was honoured with a Gold Award at the Anhui Patent Awards. Midea BuildingTechnologies has a mature technology research and product development system, a research anddevelopment team of nearly 1,000 people, and invested over RMB1 billion in R&D in 2022. It hasestablished joint research centres with Tsinghua University, Shanghai Jiao Tong University, and Xi'an
Jiao Tong University, leading or participating in multiple national and provincial-level research projects.In 2022, Midea Building Technologies reached strategic cooperation with Nanjing Yangtze RiverUrban Architectural Design Co., Ltd., Space Tech and Shanghai Tongji Hospital in cloud computing,big data, information security and other fields.I. 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 productsthroughout their life cycle, and its mature design concept can continuously give birth to new productsable to lead the market. In 2022, KUKA continued to promote the innovation of various products andtechnologies. In the software field, KUKA won the German Innovation Award with its new iiQKArobotic operating system and ecosystem. Relying on its excellent applicability, modern and modularsoftware architecture, and high performance and flexibility, iiQKA.OS can help improve developmentefficiency, and enable users to easily and quickly achieve automation. In the field of general industry,KUKA’s new-generation KR CYBERTECH nano robotics will operate on the KR C5 micro roboticscontroller, which can ensure excellent operating accuracy in continuous path motion, and can thus beapplied in multiple scenarios such as PCB assembly, painting, bonding, machining, polishing,packaging and arc welding. The all-new KR 3 D1200, made from innovative materials, is lighter inweight, faster in speed, and more flexible, with a maximum load capacity of 6kg and a standard cycletime of less than 0.32 seconds. It also features a self-lubricating ball bearing design. Targeting theelectric vehicle and renewable energy sectors, KUKA has introduced four standard products andthree cleanroom versions of KR SCARA robots, capable of handling loads up to 12kg. The 12kg-classstandard and cleanroom robots both offer three different working ranges of 650, 750, and 850 mm,with the standard model's shortest cycle time ranging between 0.4 and 0.42 seconds. Moreover, theIrish technology company Votechnik has developed the ALR-4000 automation system based onKUKA's KR QUANTEC series industrial robots, which extracts hasardous gases and removes sharp-edged components to reduce harm to humans and the environment, enabling the recycling anddisposal of electronic components such as LCD devices. In the field of human-robot collaboration,
KUKA's LBR iisy collaborative robot and the smartPAD pro robot controller duo have won a total offour Red Dot Design Awards and iF Design Awards. The LBR iisy is a sensitive, precise, and easy-to-operate collaborative robot. Its edgeless arm design allows personnel and collaborative robots towork safely side by side, and all joints are equipped with integrated torque sensors that can instantlydetect the slightest touch. The smartPAD pro robot controller makes robot operation intuitive andsimple, featuring an ergonomic product design and robust durability. In the medical field, KUKA LBRMed is a certified collaborative robotics applied in medical products. At the International Conferenceon Robotics and Automation (ICRA) held in May 2022, KUKA and its partners demonstrated how theLBR Med robotics could be applied in highly complex and sensitive medical scenarios such as braintumor biopsies. Considering that the food, medicine and cosmetics industries have special hygienerequirements for robotic automation, the new "Hygienic Oil" product portfolios and "Hygienic Machine"products of KUKA are designed to avoid potential contamination and meet the higher hygienerequirements, while maintaining excellent performance in packaging, palletizing and other applicationscenarios that prioritize hygiene requirements. Applied with lubricants compatible with food andboasting smooth surfaces easy to clean, KUKA’s "Hygienic Oil" also complies with the hygienerequirements of such standards as the EU Machinery Directive 2006/42/EC and the international DINISO 14159. In 2022, in terms of market expansion, KUKA and Ford Otosan signed a frameworkagreement, based on which KUKA will provide more than 700 robotics for the new generation ofelectrically interconnected commercial vehicle project at Ford's Kocaeli Plant in Turkey for such fieldsas the production of white vehicle body. KUKA's proprietary technologies also serve the SwedishAutomotive Group. Specifically, KUKA provides such services as design and assembly of productionlines for the chassis systems of the two new electric vehicles of Swedish Automotive Group at itsSouthern California Plant. Meanwhile, KUKA is also responsible for the transformation of theproduction line's logistics transportation system, which includes technologies such as spot welding,self-piercing riveting, flow drilling screw assembly and connection, and gluing. KUKA has received anorder from Germany's ZF Group, a globally renowned automotive systems supplier, to provide 36 KRIONTEC series robots for use in the die-casting manufacturing of plug-in hybrid transmission casings.KUKA continuously promotes the integration and expansion of the robotics business in the Chinesemarket and deepens the promotion of organizational reform with a focus on industrial applications
and key customers. Its product varieties are further enriched, supply chain bottlenecks such as corecomponents are gradually addressed, and operating trend keeps improving overall. In terms ofmarket expansion, KUKA China set historical records in orders and deliveries in 2022. According toMIR Industrial's forecast analysis, KUKA China's domestic industrial robot shipment share reached 8%in 2022. KUKA continued to deepen its cooperation with leading clients such as BYD, Tesla, FAW-Volkswagen, NIO, and CATL, providing comprehensive solutions for new energy vehiclemanufacturing. Additionally, after 2017, 2019, and 2021, KUKA won the "Outstanding Partner" awardfrom FAW-Volkswagen again in 2022 due to its excellent project execution capabilities and efficientproject collaboration performance. It also achieved breakthroughs in multiple industries such as foodand beverages, photovoltaics, consumer electronics, and pharmaceuticals, by integrating intelligentwarehousing and manufacturing products to optimise supply chain resources, provide one-stop full-chain solutions, enhance customer value, and user experience. Sales have also significantlyincreased as they actively expand waste systems while maintaining growth in traditional pneumaticlogistics systems. In product development, KUKA continuously enriches its product matrix. Forgeneral industrial sectors, they launched the KR CYBERTECH nano E series six-axis robot, with twomodels catering to different demands and multiple process packages. The compact structure andhollow arm meet various arc welding application requirements. The optimised body design improvesrigidity and effectively prevents welding jitter, combined with high trajectory accuracy to ensureexcellent welding results. Targeting the consumer electronics and new energy sectors, KUKAintroduced the full series of four-axis robots, KR SCARA CS, with compact, minimalist, intelligent, andeasy-to-use controllers and a new generation operating system. Payloads cover 3kg-12kg, with amaximum working distance of 850mm, suitable for high-speed handling and high-precision pickingapplications. For logistics, KUKA released mobile robot products such as KMP 600i and KMP 1500i,covering mainstream 600 kg and 1500 kg material handling scenarios, and expanding KMP+ seriesproducts for a broader range of industrial manufacturing scenarios. They also released theKMP600S-2 product for overseas businesses, meeting IP54 protection level and CE standards,compatible with K-arOS body control system, K-Studio deployment system, and K-MReS intelligentfactory logistics scheduling system. In the medical field, the TransGuard rail logistics transportationsystem completed localisation development, and KMP mobile robots and stackers have beensuccessfully localised for a series of tray storage and transportation solutions. In terms of capacity
expansion, KUKA China fully leveraged Midea's experience and advantages in production andoperational efficiency in 2022. KUKA's first fully automated production line for heavy-duty robotics inChina, which was developed and designed independently, was put into operation, and was the firstproduction line of "robotics-produced robotics" in Guangdong Province. The entire process, from thefirst operation to the final product, was unmanned, significantly increasing single-shift capacity. Interms of technical research and development, KUKA China's laboratory was rated as the first"National Robot Testing and Evaluation Center (Headquarters)" data exchange laboratory and CNASauthorised and approved digital evaluation centre. This authorised listing signifies the high recognitionof KUKA China's product quality control and laboratory level by the National Evaluation Center(Headquarters). In the future, KUKA China can independently issue CNAS-approved test reports,significantly improving research and development verification testing efficiency, and providing"Laboratory CE level" product certification externally. The patented technology of "control method,device, computer equipment and storage media for robotics motion" independently developed byKUKA China won the Silver Award of the 9th Guangdong Patent Award. The new KR DELTA robotwon the 2022 G-Mark GOOD DESIGN Award for outstanding industrial design. In addition, KUKA hasbeen playing an active part in raising Midea Group’s intelligent manufacturing level. By the end of2022, the robot density of Midea reached 500 units per 10,000 persons. And this number is expectedto reach 700 by in the next two years with greater investments in this respect.J. Deepened the long-term incentive and protected the interests of shareholdersIn 2022, 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, six restricted share incentive schemes,eight global partner stock ownership schemes and five business partner stock ownership schemes,which have helped, in a more effective manner, to align the long-term interests of senior managementand core business backbones with that of all shareholders.Midea Group protects its shareholders’ interests by ensuring a consistent dividend policy. It shares itsgrowth with shareholders by putting forward cash dividend plans with a total amount of more thanRMB86 billion (inclusive of the 2022 dividend plan) since Group listing in 2013. In addition to the
consistent dividend payouts, the Company has carried out a string of share repurchase plans. Tofurther stabilize the market capitalization and protect the shareholders’ interests, the Company haslaunched share repurchase plans for four consecutive years since 2019. And the repurchased shareswould be used for equity incentive schemes and employee stock ownership schemes. During theReporting Period ended 31 December 2022, Midea has used more than RMB2.6 billion for sharerepurchases.
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 throughits wide product range.As a white goods and HVAC enterprise with a whole industrial chain and full product line, MideaGroup has developed a complete industrial chain combining R&D, manufacturing and sales of corecomponents and finished products, supported by an industry-leading R&D center and manufacturingtechnologies of core components (such as compressors, electrical controls, magnetrons andcontrollers), and ultimately based on its powerful capabilities in logistics and services. Midea owns topbrands of household appliance and HVAC in China. Its dominance in the major appliance and HVACmarkets means that it can provide a wide range of competitive product sets. It also means internalsynergies in brand awareness, price negotiation as a whole, customer needs research and R&Dinvestments. Compatibility, coordination and interaction among household appliances have becomeincreasingly important since smart home is gaining popularity. With a full product line, Midea has hada 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 innovationThe Group is focused on building a globally competitive R&D capability and system. It hasestablished a three-tier technical committee system responsible for the formulation and
implementation of technology strategies. And the four-tier R&D system has been improved with anaim to build world-leading R&D capabilities. The interconnected technology strategies and mid- andlong-term product planning serve as two drivers of growth. Midea currently focuses on 11technologies in a bid to make breakthroughs with key technologies and achieve technologyleadership. It has invested over RMB50 billion in R&D over the past five years, with the investment ofmore than RMB12 billion in 2022. In order to deepen its global technology ecosystem in a faster way,the Group has set up a total of 35 research centers in 12 countries. It has over 20,000 R&D personnel.With the “2+4+N” global R&D network, it has gained the advantage of scale in R&D across the world.Domestically, Midea Global Innovation Center in Shunde District, Foshan City and Midea GlobalInnovation Center in Shanghai are the cores of Midea’s R&D arm. Overseas, with Midea AmericaResearch Center, Midea Germany Research Center, Midea Japan Research Center and Midea ItalyResearch Center as the cores, Midea makes use of the regional technological advantages, integratesglobal R&D resources, and builds complementary global R&D capabilities. Following the strategy of“Technology Leadership”, it attracts more professional talent and builds an organic global R&Dnetwork.Midea’s long-term focus on building technology, marketing, design, product and open innovationsystems, building a cutting-edge research system and building reserves in technology for mid/longterm, has provided a solid foundation for the Group to maintain long-term product and technologicalsuperiority. While strengthening its global R&D network, Midea also works on constructing an openplatform of innovative ecosystems. Through deepening the implementation of technology projects tointegrate quality technological resources across the world, a global innovation system has been put inplace. By way of integrating various resources of large companies, technology companies,universities, research institutes and innovation consulting agencies, a technology ecosystem hasbeen put in place and continuously expanded, which has access to enormous resources fortechnological innovation. Additionally, a scientist system has been established with eight academicianworkstations/workshops and 19 academicians on more than 200 cooperation projects. These projectscover green, energy-saving, health, intelligent, robotics and automaton technologies, among others.In terms of basic research, the Group cooperates with domestic and foreign scientific researchinstitutions, such as Massachusetts Institute of Technology, University of California, Berkeley,
University of Illinois at Urbana-Champaign, Stanford, Purdue University, University of Maryland, TheUniversity of Sheffield, Tsinghua University, Shanghai Jiao Tong University, Zhejiang University, theChinese Academy of Sciences, Harbin Institute of Technology, Xi’an Jiaotong University, HuazhongUniversity of Science and Technology and South China University of Technology, in order to establishjoint labs for deepening technological cooperation. The Group also upgrades and make innovationson cooperation models by carrying out strategic cooperation with tech companies such as 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 andinvestments, globally-advanced manufacturing capabilities and advantage of scaleThe success of a series of global acquisitions and new business expansion moves has furthersolidified Midea’s global operations and leading advantages in robotics and automation. With theworld’s leading production capacity and experience, and a wide variety of products as well as itsproduction bases all over the world, the Group has been able to expand rapidly into the emergingoverseas markets and is becoming a stronger competitor in those mature overseas markets. TheGroup 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 unableto replicate. Overseas sales of the Group accounts for more than 40% of the total sales revenue. Itsproducts have been exported to over 200 countries and regions, and it owns 18 overseasmanufacturing bases and 24 overseas operating agencies. Midea’s global operations system hasbeen further improved through the reform of international business organizations towards diversebusiness models. It also increases investments in overseas business operations, focuses on theneeds of local customers and enhances product competitiveness in a bid to promote significantgrowth in its Own Branding & Manufacturing (OBM) business. In addition, with a deep knowledge andunderstanding on product characteristics and product demands in overseas market, Midea ispromoting worldwide branding and expansion through global collaboration and cooperation. In thisway, 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 market
With 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 ofonline and offline consumers for household appliances. Midea continues to improve its offlinebusiness layout around user needs, and has created a network layout of comprehensive householdappliance stores, specialty stores of self-owned products, traditional retailers and e-commercefranchise stores. It provides easy access to Midea's products and services for individual customers,as well as professional scenario-based solutions for corporate customers, covering the entire marketfrom first-tier cities to townships. Particularly, Midea boasts a unique exclusive shop system in theindustry with nearly 20,000 outlets, where various needs of users from new decoration to updates canbe met in pre-decoration stores, flagship stores, professional stores, combo stores and other stores.Midea continuously provides industry-leading digital platform services to retail stores, havingcompleted multi-product-category, pre-decoration, and retail transformations for more than 9,000existing store outlets. Over 6,000 digital retail benchmark stores have been established, with a focuson expanding and constructing premium brand stores for COLMO and Toshiba. Cantered around"smart suite operation" and "entire-house renovation solutions", Midea actively cooperates with homedecoration, furniture, building materials, and design channels, seeking to capture front-end traffic. TheCompany has built over 500 "home decoration + appliances" deeply integrated brand stores,providing one-stop services for customers. Midea also explores nationwide property cooperationchannels, offering localised renovation and replacement services to homeowners through variousmethods such as model rooms in residential communities, and developing a systematic solution forpartial renovation of existing houses. The Company promotes layered operations for pre-decorationstores, creating an integrated decoration style for home appliances and home decoration, andlaunching exclusive smart product suites for the pre-decoration market. In 2022, the retail sales onthe pre-decoration market saw a year-on-year increase of over 100%. In 2022, Midea combined theexclusive store business and the pre-decoration store business to create “Midea Cloud Sales+”. Witha unified platform, unified management and unified operation, the “Midea Cloud Sales+” ecosystemhas been enhanced, with its business covering markets of all tiers. Upholding the customer-orientedprinciple, Midea continuously promotes digital transformation on the direct retail end, providingcustomers with digital platform services that are industry-leading. By providing offline stores withprofessional digital platform support such as capacity enhancement, purchasing guarantee, and user
operation, it can help improve the actuarial rate, order review timeliness and logistics efficiency toensure store supply experience. The Company continues to refine the Midea Cloud Sales App,improve the supply chain capability, and increase logistics efficiency. It also builds an online shoppingmall for offline stores through the Midea Home Delivery mini-app, empowering offline retail by usingtools such as marketing tool packages, user operation platforms, and the home delivery platform.Besides, in Pinduoduo, Douyin, Kuaishou and other emerging channels, Midea grows at a faster pace,driving sales and user growth through membership operation, as well as the offering of product suitesand smart products. Meanwhile, Midea specifically promotes product structure breakthroughs,accurately identifying user needs through data insights, using innovative approaches to drive growthin emerging categories, and continuously enhancing its intelligent scenario operation capabilities andbreaking into the high-end market.Annto, a technological innovation-based provider of new supply chain (logistics) services under MideaGroup, makes full use of digital and big data technologies to refine and manage its comprehensivelogistics network. Annto gathers data from all aspects of the logistics chain and leverages informationtechnology to optimise process execution, enabling seamless coordination among people, goods,vehicles, and sites. Through intelligent management and decision-making related to orders,information, and logistics, building a smart and digital integrated logistics service platform. Anntocreates a supply chain business model that has been successfully validated through corporatepractice while focusing on industry characteristics, deeply exploring pain points in the entire valuechain, and forming a business framework and operation management system that combines softwareand hardware capabilities. Annto provides systematic and in-depth solutions for different industryclients. Annto concentrates its resources on urban and rural distribution and is able to provide fullyvisualized direct distribution services covering every town and village of the country. Relying on morethan 140 urban distribution centers nationwide, it covers more than 99% of towns and villages acrossthe country. It can finish the delivery to 30,739 (or over 77% of) towns and villages within 24 hoursand to 37,260 (or over 94% of) towns and villages within 48 hours in the country. Additionally, Anntostrengthens the shared inventory system for online and offline channels and the competitive edge ofintegrated delivery for the ToB/ToC business, refines its network of integrated delivery and installationservices, drives connectivity through the whole process from manufacturing to sale, provides quality
service solutions for various orders from customers, as well as comprehensively better the end userexperience.E. A user experience-oriented reform of “Comprehensive Digitalization and ComprehensiveIntellectualization” that focuses on “Digitization & Intelligence Driven” to make Midea a leaderin the IoT eraMidea has put in place and will prioritize the development of the Midea Cloud Sales commercialplatform supported by unified data and technology platforms, the IoT ecosystem platform, and theIndustrial Internet platform of “M·IoT”, with an aim to become a world-leading technology group drivenby digitization & intelligence. On one hand, it promotes deep integration of the digital technology andbusiness in the whole value chain, with the view to becoming an icon in digitalization. On the otherhand, with foresight, it plans for whole new products, services and business models centering onsmart technologies, products and scenes, so as to outcompete Internet companies. With continualinvestment and research in artificial intelligence (AI), silicon chip, sensor, big data, cloud computingand other new technologies, Midea has built 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 the combination of big data and AI, in order to reduceobstacles for man-machine interaction to the minimum and create smart appliances without anyassistance in interaction. Focusing on “people and their family”, Midea builds a whole value chain ofIoT. Breakthroughs have been made in user data protection, content operation 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 able to offer completesmart 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”,Midea has successfully materialized operations driven by software and data through its value chain,connecting end to end and covering planning and R&D, Product Ordering, intelligent scheduling,flexible manufacturing, coordinative supply, product quality tracking, logistics, installation & post-saleservices, etc. The Group’s digital platform has made come true C2M flexible manufacturing, platform-based and modularized R&D, digitalized production techniques and simulation, intelligent logistics,
digital marketing, digital customer service, etc. By way of integrating the IoT capabilities of its AIInnovation Center, Software Engineering Institute, IT Department, IoT Division, Smart Home BusinessGroup, Robotics & Automation Division, Building Technologies Division, Other Innovation Businessand other organs, Midea has established a unified IoT technology platform. Its Industrial Internetplatform has been upgraded to “M·IoT 2.0”, and five of its factories have been included in the “GlobalLighthouse Network” initiated by the World Economic Forum, representing Midea’s powerfultechnology attribute and strong intelligent manufacturing capability. These practices are swiftlyapplied to other Midea manufacturing bases across the world. Based on these “Lighthouse” factoriesand the “Lighthouse Network”, Midea brings the relevant experience and services outside the Groupto empower ecosystem partners and facilitate the transformation of China’s manufacturing sector. Ithas provided the relevant products and services for around 400 customers in more than 40 marketsegments. Therefore, it is safe to say that Midea has built a solid foundation regarding IndustrialInternet systems. While driving online systems and digitalization, Midea also adopts a systematicdata-based approach to governance. A whole new data platform has been put in place to accumulatedata assets and achieve integration of online and offline business data, as well as product andservice data. Further, the “User One_ID” system has been refined to provide adequate data supportfor all business lines.F. Sound corporate governance mechanism and effective incentive scheme to provide a solidfoundation for Midea’s sustained and steady developmentPaying close attention to the construction of a governance framework, regarding its corporate control,centralization and decentralization systems, the Group formed a mature management system forprofessional managers. The divisional system has been in operation for many years, and itsperformance- oriented evaluation and incentive mechanism featuring full decentralization has becomea training and growth platform for the Group's professional managers. The Group's primary seniormanagement team consists of professional managers who have been trained and forged in theoperational practices of Midea Group, with an average length of service of over 15 years in the Group.They have rich management experience and practices in the relevant industries, deep understandingand insights of the relevant industries with respect to ToC and ToB, and accurate understanding of the
industry environment and corporate operations and management. The Company's advantages insuch systems and mechanisms have laid a solid foundation for the efficient and effective businessoperations, as well as the promising, stable and sustainable future development of the Company. Atpresent, the Company has launched nine Stock Option Incentive Schemes, six Restricted ShareIncentive Schemes, eight Global Partner Stock Ownership Schemes and five Business Partner StockOwnership Schemes for key managerial and technical personnel at different levels, in addition to theexploration and practices with respect to diversified stock ownership schemes of key innovativesubordinates. As such, a governance structure has been put in place that aligns the interests ofsenior management and core business backbones with that of all shareholders, as well as compriseslong and short-term incentives and restrains.
4. Analysis of Main Business
4.1 Overview
See contents under the heading “2. Business Scope in the Reporting Period”.
4.2 Revenues and Costs
4.2.1 Breakdown of operating revenue
Unit: RMB’000
| 2022 | 2021 | YoY Change (%) | |||
| Amount | As a percentage of total operating revenue (%) | Amount | As a percentage of total operating revenue (%) | ||
| Total | 343,917,531 | 100% | 341,233,208 | 100% | 0.79% |
| By business segment | |||||
| Manufacturing | 305,846,997 | 88.93% | 301,026,573 | 88.22% | 1.60% |
| By product category | |||||
| HVAC | 150,634,586 | 43.80% | 141,879,146 | 41.58% | 6.17% |
| Consumer appliances | 125,284,737 | 36.43% | 131,866,099 | 38.64% | -4.99% |
| Robotics & automation systems | 29,927,674 | 8.70% | 27,281,328 | 7.99% | 9.70% |
| By geographical segment | |||||
| PRC | 201,272,589 | 58.52% | 203,579,380 | 59.66% | -1.13% |
| Outside PRC | 142,644,942 | 41.48% | 137,653,828 | 40.34% | 3.63% |
| By sales model | |||||
| Online | 68,012,355 | 19.78% | 62,103,887 | 18.20% | 9.51% |
| Offline | 275,905,176 | 80.22% | 279,129,321 | 81.80% | -1.16% |
Note: Consumer appliances in the table above primarily include refrigerators, laundry appliances, kitchen appliancesand small domestic appliances.The Industrial Technology Business Group, the Building Technologies Division, and the Robotics &Automation Division recorded revenue of RMB21.6 billion (up 7% year-on-year), RMB22.8 billion (up16% year-on-year), and RMB27.7 billion (up 10% year-on-year) respectively during the ReportingPeriod.
4.2.2 Business segments, products, geographical segments or sales models contributing over10% of the operating revenue or 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 | 305,846,997 | 227,347,877 | 25.67% | 1.60% | -0.57% | 1.62% |
| By product category | ||||||
| HVAC | 150,634,586 | 116,234,025 | 22.84% | 6.17% | 3.77% | 1.79% |
| Consumer appliances | 125,284,737 | 87,449,080 | 30.20% | -4.99% | -8.22% | 2.45% |
| Robotics & automation systems | 29,927,674 | 23,664,772 | 20.93% | 9.70% | 10.84% | -0.81% |
| By geographical segment | ||||||
| PRC | 201,272,589 | 151,542,264 | 24.71% | -1.13% | -3.37% | 1.74% |
| Outside PRC | 142,644,942 | 108,996,437 | 23.59% | 3.63% | 1.20% | 1.83% |
| By sales model | ||||||
| Online | 68,012,355 | 47,374,843 | 30.34% | 9.51% | 5.29% | 2.80% |
| Offline | 275,905,176 | 213,163,858 | 22.74% | -1.16% | -2.90% | 1.39% |
Under the circumstances that the statistical standards for the Company's main business dataadjusted in the Reporting Period, the Company's main business data in the recent year is calculatedbased on adjusted statistical standards at the end of the Reporting Period
□Applicable √N/A
4.2.3 Whether revenue from physical sales is higher than service revenue
√Yes □No
| Business segment | Item | Unit | 2022 | 2021 | YoY Change (%) |
| Home appliances | Sales | In thousand units/sets | 547,765.0 | 562,677.2 | -2.65% |
| Output | Ditto | 539,852.5 | 585,074.7 | -7.73% | |
| Inventory | Ditto | 87,067.8 | 87,636.3 | -0.65% |
Reason for any over 30% YoY movements in the data above
□Applicable √N/A
4.2.4 Execution of significant sales and purchase contracts in the Reporting Period
□Applicable √N/A
4.2.5 Breakdown of cost of sales
Unit: RMB’000
| Business segment | Item | 2022 | 2021 | YoY Change (%) | ||
| Amount | As a percentage of total cost of sales (%) | Amount | As a percentage of total cost of sales (%) | |||
| Home appliances | Raw materials | 170,337,613 | 83.63% | 175,102,256 | 84.47% | -2.72% |
| Labor costs | 12,746,704 | 6.26% | 12,186,025 | 5.88% | 4.60% | |
| Depreciation | 3,242,335 | 1.59% | 3,203,362 | 1.55% | 1.22% | |
| Energy | 2,760,289 | 1.36% | 2,846,166 | 1.37% | -3.02% | |
4.2.6 Changes in the scope of the consolidated financial statements for the Reporting Period
√Yes □No
The detailed information of major subsidiaries included in the consolidation scope in the currentperiod is set out in Notes 5 and 6. Entities newly included in the consolidation scope in the currentperiod through acquisition mainly include Midea Capital Co., Ltd. and its subsidiaries (inclusive ofstructured entities), WuHan TTium Motor Technology Co., Ltd. and its subsidiaries, as well as KONGSmart Environment (Xi'an) Co., Ltd. (formerly known as “Shaanxi Construction Investment Group Co.,Ltd.”) (please refer to Note 5(1)(a)), while details of those through incorporation can be found in Note5(2)(a). The detailed information of subsidiaries no longer included in the consolidation scope in thecurrent period is set out in Note 5(2)(b).
4.2.7 Major changes in the business, products or services in the Reporting Period
□Applicable √N/A
4.2.8 Main customers and suppliers
Major customers of the Company
| Total sales to top five customers (RMB'000) | 39,056,405 |
| Total sales to top five customers as a percentage of the total sales for the year (%) | 11.36% |
| Total sales to related parties among top five customers as a percentage of the total sales for the year (%) | 0 |
Information about top five customers
| No. | Customer | Sales revenue (RMB'000) | As a percentage of the total sales revenue (%) |
| 1 | Customer A | 23,909,634 | 6.95% |
| 2 | Customer B | 6,425,663 | 1.87% |
| 3 | Customer C | 3,667,310 | 1.07% |
| 4 | Customer D | 2,949,572 | 0.86% |
| 5 | Customer E | 2,104,226 | 0.61% |
| Total | -- | 39,056,405 | 11.36% |
Other information about top five customers
□Applicable √N/A
Major suppliers of the Company
| Total purchases from top five suppliers (RMB'000) | 15,589,950 |
| Total purchases from top five suppliers as a percentage of the total purchases for the year (%) | 6.36% |
| Total purchases from related parties among top five suppliers as a percentage of the total purchases for the year (%) | 0 |
Information about top five suppliers of the Company
| No. | Supplier | Purchase (RMB'000) | As a percentage of the total purchases (%) |
| 1 | Supplier A | 5,288,172 | 2.16% |
| 2 | Supplier B | 3,740,282 | 1.53% |
| 3 | Supplier C | 2,331,059 | 0.95% |
| 4 | Supplier D | 2,233,939 | 0.91% |
| 5 | Supplier E | 1,996,498 | 0.81% |
| Total | -- | 15,589,950 | 6.36% |
Other information about top five suppliers
□Applicable √N/A
4.3 Expense
Unit: RMB'000
| 2022 | 2021 | YoY Change (%) | Reason for any significant change | |
| Selling and distribution expenses | 28,716,121 | 28,647,344 | 0.24% | |
| General and administrative expenses | 11,582,664 | 10,266,283 | 12.82% | |
| Finance costs | 3,387,491 | 4,386,111 | -22.77% |
| Research and development expenses | 12,618,506 | 12,014,907 | 5.02% |
4.4 R&D investment
√Applicable □N/A
Information about R&D personnel
| 2022 | 2021 | YoY Change (%) | |
| Number of R&D personnel | 20,782 | 18,105 | 14.79% |
| R&D personnel as a percentage of total employees | 12.50% | 10.92% | 1.58% |
| Educational background of R&D personnel | —— | —— | —— |
| Bachelor’s degree | 12,353 | 10,881 | 13.53% |
| Master’s degree | 4,457 | 3,934 | 13.29% |
| Doctoral degree | 548 | 427 | 28.34% |
| Other | 3,424 | 2,863 | 19.59% |
| Age structure of R&D personnel | —— | —— | —— |
| Below 30 | 6,566 | 5,956 | 10.24% |
| 30~40 | 11,208 | 9,532 | 17.58% |
| Over 40 | 3,008 | 2,617 | 14.94% |
Information about R&D investment
| 2022 | 2021 | YoY Change (%) | |
| R&D investment (RMB’000) | 12,618,506 | 12,014,907 | 5.02% |
| R&D investment as a percentage of operating revenue | 3.67% | 3.52% | 0.15% |
Reasons for any significant change in the composition of R&D personnel and the impact
□Applicable √N/A
Reasons for any significant YoY change in the percentage of R&D investment in operating revenue
□Applicable √N/A
Reasons for any significant change in the percentage of capitalized R&D investment and rationale
□Applicable √N/A
4.5 Cash flow
Unit: RMB'000
| Item | 2022 | 2021 | YoY Change (%) |
| Subtotal of cash inflows from operating activities | 343,767,987 | 330,415,497 | 4.04% |
| Subtotal of cash outflows due to operating activities | 309,110,159 | 295,323,793 | 4.67% |
| Net cash flows from operating activities | 34,657,828 | 35,091,704 | -1.24% |
| Subtotal of cash inflows from investing activities | 102,953,948 | 127,801,101 | -19.44% |
| Subtotal of cash outflows due to investing activities | 116,463,458 | 114,201,515 | 1.98% |
| Net cash flows from investing activities | -13,509,510 | 13,599,586 | -199.34% |
| Subtotal of cash inflows from financing activities | 54,739,462 | 21,145,221 | 158.87% |
| Subtotal of cash outflows due to financing activities | 65,594,343 | 52,349,760 | 25.30% |
| Net cash flows from financing activities | -10,854,881 | -31,204,539 | 65.21% |
| Net increase in cash and cash equivalents | 10,581,929 | 17,001,531 | -37.76% |
Explanation of why the data above varied significantly
√Applicable □N/A
a. Primarily driven by a decrease in cash received from disposal of investments, net cash flows frominvesting activities decreased 199.34% from last year.b. Primarily driven by an increase in cash received from borrowings, net cash flows from financingactivities increased 65.21% from last year.c. Primarily driven by a decrease in net cash flows from investing activities, net increase in cash andcash equivalents decreased 37.76% from last year.Explanation of main reasons leading to the material difference between net cash flows from operatingactivities during the Reporting Period and net profit for the year
□ Applicable √ N/A
5. Analysis of Non-Core Business
□Applicable √N/A
6. Assets and Liabilities
6.1 Material changes of asset items
Unit: RMB'000
| 31 December 2022 | 1 January 2022 | Change in | Explanation about any |
| Amount | As a percentage of total assets (%) | Amount | As a percentage of total assets (%) | percentage (%) | material change | |
| Cash at bank and on hand | 55,270,099 | 13.08% | 71,875,556 | 18.53% | -5.45% | |
| Accounts receivable | 28,237,973 | 6.68% | 24,636,440 | 6.35% | 0.33% | |
| Contract assets | 4,498,956 | 1.06% | 3,823,476 | 0.99% | 0.07% | |
| Inventories | 46,044,897 | 10.90% | 45,924,439 | 11.84% | -0.94% | |
| Investment properties | 809,936 | 0.19% | 859,195 | 0.22% | -0.03% | |
| Long-term equity investments | 5,188,817 | 1.23% | 3,796,705 | 0.98% | 0.25% | |
| Fixed assets | 26,082,992 | 6.17% | 22,852,848 | 5.89% | 0.28% | |
| Construction in progress | 3,843,777 | 0.91% | 2,690,930 | 0.69% | 0.22% | |
| Right-of-use assets | 2,339,878 | 0.55% | 2,297,354 | 0.59% | -0.04% | |
| Short-term borrowings | 5,169,480 | 1.22% | 5,381,623 | 1.39% | -0.17% | |
| Long-term borrowings | 50,685,948 | 12.00% | 19,734,020 | 5.09% | 6.91% | |
| Contract liabilities | 27,960,038 | 6.62% | 23,916,595 | 6.16% | 0.46% | |
| Lease liabilities | 1,507,480 | 0.36% | 1,533,552 | 0.40% | -0.04% |
Indicate whether overseas assets account for a larger proportion in total assets.
□Applicable √N/A
6.2 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) | 5,879,202 | -661,037 | 8,229,719 | 10,231,578 | 68,287 | 3,284,593 | ||
| 2. Derivative financial assets | 1,298,815 | -802,930 | -304,606 | 506,664 | 6,072 | 60,580 | 752,451 | |
| 3. Receivables financing | 10,273,552 | 3,252,988 | - | 13,526,540 | ||||
| 4. Other debt investments and other | 27,484,322 | 10,468,000 | 21,290,895 | 964,875 | 17,626,302 | |||
| 5. Investments in other equity instruments | 45,747 | -2,481 | - | 2,062 | 155 | 41,359 | ||
| 6. Other non-current financial assets | 5,912,873 | -797,785 | 732,939 | 5,368,375 | 1,142,919 | 551,761 | 10,625,244 | |
| Sub-total of financial assets | 50,894,511 | -2,261,752 | 425,852 | - | 27,825,746 | 32,673,526 | 1,645,658 | 45,856,489 |
| Investment properties | ||||||||
| Productive living assets | ||||||||
| Others | ||||||||
| Sub-total of the above | 50,894,511 | -2,261,752 | 425,852 | 27,825,746 | 32,673,526 | 1,645,658 | 45,856,489 | |
| Financial liabilities | 166,649 | -129,583 | 31,962 | 1,923,605 | 99,876 | 2,553 | 1,895,310 |
Contents of other changesWhether there were any material changes on the measurement attributes of major assets of theCompany during the Reporting Period
□ Yes √ No
6.3 Restricted asset rights as of the end of this Reporting Period
As of the end of this Reporting Period, there were no such circumstances where any main assets ofthe Company 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 last year (RMB’000) | YoY Change (%) |
| 116,463,458 | 114,201,515 | 1.98% |
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 | 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 | Gain or loss in the period | Closing carrying amount | Accounting title | Funding source |
| Overseas listed stock | 1810 | XIAOMI-W | 769,972 | Fair value method | 927,158 | -412,068 | 71,252 | -412,068 | 586,342 | Financial assets held for trading | Own funds | ||
| Overseas listed stock | SOUN | SoundHound AI | 157,203 | Fair value method | -25,883 | -2,965 | 80,737 | -25,883 | 51,889 | Financial assets held for trading | Own funds | ||
| Domestically listed stock | 688165 | EFORT | 178,534 | Fair value method | 392,312 | -118,192 | - | - | -118,192 | 274,120 | Financial assets held for trading | Own funds | |
| Domestically listed stock | 688159 | Neoway | 31,600 | Fair value method | - | -31,208 | - | 60,308 | - | -31,208 | 29,100 | Financial assets held for trading | Raised funds |
| Domestically listed stock | 688322 | Orbbec | 300,000 | Fair value method | -100,585 | 235,255 | -100,585 | 134,670 | Other non-current financial assets | Own funds | |||
| Domestically listed stock | 688162 | JEE | 88,180 | Fair value method | - | -164,426 | - | 317,779 | - | -164,426 | 153,353 | Financial assets held for trading | Raised funds |
| Domestically listed stock | 301135 | Real-Design | 40,000 | Fair value method | - | -28,466 | 90,567 | - | -28,466 | 62,101 | Other non-current financial assets | Raised funds | |
| Domestically listed stock | 688097 | BOZHON | 55,000 | Fair value method | - | -54,997 | 144,743 | - | -54,997 | 89,746 | Other non-current financial assets | Raised funds |
| Domestically listed stock | 001283 | Highpower Technology | 20,000 | Fair value method | - | -3,436 | 41,466 | - | -3,436 | 38,030 | Other non-current financial assets | Raised funds | |
| Total | 1,640,489 | - | 1,319,470 | -939,261 | 68,287 | 970,855 | - | -939,261 | 1,419,351 | - | - | ||
7.4.2 Derivatives investments
√Applicable □N/A
A. Derivatives investments for hedging purposes in the Reporting Period
√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 | 71,790 | 0 | -22,714 | - | - | 85,017 | 0.06% |
| Forward contracts | 902,875 | -602,152 | -313,854 | 350,012 | 6,072 | 352,895 | 0.25% |
| Cross-currency interest rate swaps | -305,423 | 732,939 | 4,276,688 | 2.99% | |||
| Total | 974,665 | -907,575 | 396,371 | 350,012 | 6,072 | 4,714,600 | 3.30% |
| 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-2,289.381 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: | ||||||
| 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 | Changes in the fair value of derivatives were recognized at RMB-511.204 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 foreign 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) | 30 April 2022 |
| Disclosure date of the announcement about the general meeting’s consent for the derivative investment (if any) | 21 May 2022 |
| 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. |
B. Derivatives investments for speculative purposes in the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
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/A
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
| 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 | 21,442 | 10,139 | 16,218 | 2,283 | 2,021 |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Subsidiary | Manufacturing of home appliances | USD42 million | 18,125 | 9,810 | 7,372 | 1,095 | 1,001 |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Subsidiary | Manufacturing of water heaters | RMB60 million | 15,048 | 1,661 | 13,425 | 1,580 | 1,379 |
| Wuxi Little Swan Electric Co., Ltd. | Subsidiary | Manufacturing of laundry appliances | RMB732,487,764 | 22,260 | 6,651 | 22,043 | 2,102 | 1,927 |
Acquisition and disposal of subsidiaries during the Reporting Period
√Applicable □N/A
The detailed information of major subsidiaries included in the consolidation scope in the currentperiod is set out in Notes 5 and 6. Entities newly included in the consolidation scope in the currentperiod through acquisition mainly include Midea Capital Co., Ltd. and its subsidiaries (inclusive ofstructured entities), WuHan TTium Motor Technology Co., Ltd. and its subsidiaries, as well as KONGSmart Environment (Xi'an) Co., Ltd. (formerly known as “Shaanxi Construction Investment Group Co.,Ltd.”) (please refer to Note 5(1)(a)), while details of those through incorporation can be found in Note5(2)(a). The detailed information of subsidiaries no longer included in the consolidation scope in thecurrent period is set out in Note 5(2)(b).
10. Structured Bodies Controlled by the Company
√Applicable □N/A
As 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 andinvestor of the structured entity, the Group has relevant management power in and variable returnsfrom 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 Company
Midea adheres to the strategic focus of “Technology Leadership, Direct to Users, Digitization &Intelligence Driven, and Global Impact”, focuses on “Comprehensive Digitalization andComprehensive Intellectualization”, and drives sustained business growth under the guidance of thestrategic focus. Midea are built to grow on the back of advanced governance mechanism, future-proofvalues, and managerial mindset growth. Midea will continuously improve the governance mechanismby empowering responsibilities, rights and obligations, clarify decentralization and authorization,constantly refine the agent mechanism, optimize the incentive and constraint system, encourageentrepreneurship and boost organizational vitality, and establish a flat and agile organization andoptimization 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 EHSgovernance and ESG rating. Additionally, the Management will keep reflecting on and challengingthemselves, endeavoring to achieve all-round growth both spiritually and intellectually. Meanwhile,Midea will continue to improve the talent structure, build diverse teams that are inclusive andcollaborative, further strengthen diversity, openness and inclusiveness, and create a simple,straightforward, flat and equal environment. In the meantime, it will constantly improve consistencymanagement across the Group, so as to achieve consistent operations, corporate culture and valuesand philosophies, which will ensure the sustained and steady development of the Company. Thereare no shortcuts for the development and operation of a company. Looking back at 2022, theCompany has further reinforced and adhered to basic principles in the face of risks, setbacks, andchanges, returned to the basics and remained practical and reasonable. Not distracted from the long-term goals, the Company prioritised cash flows, product capabilities, and technology accumulation.Adhering to the principles of simplicity and efficiency, it has clarified its positioning, avoided impulsivedecisions, removed the ego from decision-making process, and eliminated formalism. In the face offuture changes, only by remaining cautiously open-minded, staying alert of potential challenges, andmaking adequate preparations can the goals be achieved. Despite the continuous increase inuncertainty, technology-driven transformation remains the main theme of the current era. Midea willadhere to the core strategic focus with “Technology Leadership” as the core, remain committed in thecoordinated development of ToC and ToB businesses, and fire up the "Second Growth Engine". It willstrive to boost the strength of its products and core technologies in the ToC business while improvingprofitability to provide strategic support for the transformation of the ToB business. The Company is
constantly consolidating and improving its globalisation capabilities, striving to transform from aChinese business to an international one. Midea will also extend its advantages in efficiency toinnovation, products, and technologies.Key operation points in 2023:
In 2023, based on the core strategic focus with “Technology Leadership” as the core, Midea willadhere to the annual business principle of "Stabilize Profit & Drive Growth". "Stabilize Profit" entailsmaintaining a steady profit level based on the recovery of the previous year's profitability, while "DriveGrowth" demands fully embracing entrepreneurship and proactively driving growth. It is essential tostep out of the comfort zone, confront risks and uncertainties, as well as seek out new paths, newgrowth drivers, and new methodologies. Growth can be achieved by continuously expanding into newmarkets, product categories, mechanisms, and growth areas. The Smart Home Business Group aimsto achieve high-quality growth, ensure stable and sustainable profitability and cash flow, and tacklechallenges and issues in the development of non-advantaged categories, emerging categories, andpremium brands through innovative transformation. The Company is committed to firing up the"Second Growth Engine", focusing on core ToB businesses such as Robotics & Automation, BuildingTechnologies, and New Energy, while fully harnessing entrepreneurship. It will concentrate on R&Dinvestment intensity and system construction, benchmark against world-class enterprises, establishand refine the "Three Generations" R&D system, actively expand overseas business, and achieve“Global Impact” through continuous innovation to address development challenges. Also, it willemphasize goal orientation, problem orientation, and result orientation, promote organisationalinnovation and mechanism restructuring, establish an agile organisation, effectively support Midea'sstrategic transformation. Measures will be taken to ensure the alignment of responsibility, authority,and benefits through further decentralisation, fully invigorate organisational and personnel vitality,enhance incentives for core personnel, encourage refined operations to bolster efficiency advantages,and continuously improve core operating indicators such as per capita efficiency and cash cycle.Entrepreneurship is the core competitiveness of an enterprise, necessitating continuous innovation incorporate governance and incentive mechanisms to fully stimulate the entrepreneurship and establishand reinforce Midea's entrepreneurial groups that are willing to take responsibility, admit mistakes, be
diligent in learning, and skilful in thinking through mechanism reform. Key tasks for 2023 include:
a. Based on the core strategy of “Technology Leadership”, Midea will establish a comprehensiveresearch organization, increase investment in digitalization and R&D, improve talent structure, carryout the task of technology innovation, product innovation, technological innovation, business modelinnovation, and process innovation, as well as build a mechanism that can support “TechnologyLeadership”. Midea will resolutely increase R&D investment, build up R&D scale advantage, andcontinuously lay out key technologies, cutting-edge technologies, basic technologies, digitalizationand intellectualization. By virtue of the two drivers of technology strategy and product strategy, as wellas innovation mechanism assurance of the three-tier technical committee and the four-tier R&Dsystem, Midea will enhance the "Three Generations" system and pool together its R&D strength. Itwill continue to promote localized R&D in overseas operations, increase investment in localized R&D,and leverage the advantages of localized R&D to better serve the local markets. Also, efforts will bemade to continuously drive core technology breakthroughs in green development, energy saving,health, intelligent transformation, robotics & automation, etc. by adopting a joint innovation model, inpursuit of a stronger presence in the technology world. It will actively respond to China’s dual-carbonstrategy and carry on with its "Green Strategy", apply eco-friendly and low-carbon technology toproducts by technology innovation, help to save energy and reduce emissions in the life cycle ofproducts, and lead the formulation of green standards in a deep manner to obtain the national greenproduct certification of all categories of products. To promote the rapid application of scientificinnovation through standardization, it will implement the "3+1" strategy for standardization, drivetechnological 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 andbuilding key technology barriers in all the product categories, and promoting innovation of globalproducts, product structure improvement and high-end strategy, it will continue to implement the"Three Generations" project, accelerate the application of research results, and retain the "NumberOne Engine" of ToC business. In ToB business, it will cooperate with strategic partners by digitaltechnology to increase the research on differentiated innovation technologies in new industries andfoster the industrialization of innovation technologies. Also, it will continuously build the scientist
system, attract global research talent, vigorously introduce high-end talent, and constantly refine theR&D network. Based on regional technology advantages, it will continue to improve the "2+4+N" R&Dnetwork, increase the comprehensive strength of overseas R&D centers, and build an innovationmechanism for the “Technology Leadership” strategy, so as to maintain technology leadership in acomprehensive manner.b. Midea will keep a high-quality development direction and stick to internal, sustained and effectiveorganic growth. In the process of implementing new strategies to boost new growth areas, the key forMidea's survival in competition lies in improving operational efficiency. Therefore, Midea will optimizethe delivery 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 userresearch, user insight, product plan transforming and user operation. Midea will promote the T+3business model reform and high-performance operations in the whole value chain in every link fromproduct planning to after-sales service, so as to increase efficiency in the whole value chain and thedata-driven efficiency. Channel reform will be firmly pushed forward for the front-end market in pursuitof better profitability. In order to win in competition, it is important to develop high-end products torefine the product mix. Breakthroughs must be made in a faster manner regarding small appliancesand upgrading of the major appliance business must be accelerated, in addition to the promotion ofproducts catering to new consumption trends. Midea will plan for, establish and refine businessmiddle platforms, especially data and technology middle platforms. In the meantime, it will maintainoverall consistency by sticking to “One Midea, One System, One Standard”. In face of commonproblems such as fluctuations in exchange rates and prices of bulk raw materials, as well as sourcingmanagement, Midea will firmly promote its internal coordination and sharing mechanism and keepperfecting the relevant solutions. It will also maintain effective investments, control non-operatingexpenses, increase labor productivity, improve human resource allocation efficiency, promote leanmanagement and provide fresh impetus for continual growth through 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
of efforts to connect with users' preferences. In terms of channel reform, the Company will deepenmarketing changes and simplify delivery rules with a focus on terminal retail, and set up aprofessional team in the regional headquarters and operation center in China with a focus on retailcapability and user operation. While organizing organizational reform, the Company will continuouslystrengthen the principle of "One Midea, One System and One Standard", give full play to collaborativeadvantages, and do well in result-oriented process control to achieve constant improvement ofoperating 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-quality Store Establishment", "Store Classification and Grading Online with Layered ResourceMatching", "Product Assortment Upgrade", and "Full-Link Retail Operations". The Company aims todevelop user operation capabilities and data analysis decision-making capabilities for the retailplatform, supporting retail transformation. In the online channels, Midea is promoting the constructionof 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, anddrop-shipping services. This will satisfy the needs of customers and users while improving turnoverefficiency, accelerating the scale expansion of premium brands and the enhancement of content live-streaming marketing capabilities. In terms of product marketing, the Company will strengthenbranding and product suite-based operation to provide users with home appliance package solutions.Furthermore, the Company will continue to, centering around product structure upgrade, promote theimplementation of intelligent scenes and the construction of entire-house smart decoration centre,build retail outlets for immersive experience of Midea Smart Home, and cultivate the core capability ofproviding entire-house smart solutions. Centred around the theme of "sensory technology", Midea islaunching a series of product experience and targeted marketing activities. In terms of user operationand service, the Company will continue to, centering around the principle of "Create Value for Users"and the orientation of user experience, improve the iteration of product design and experience ofpurchase services, optimise the rights and interests of members, and accelerate the construction ofprivate domain traffic platform. The Company will continue to optimise service process reconstruction,enhance user participation in closed-loop confirmation rates, and strengthen users' perception of theservice process. Midea will upgrade service standards and technical process standards, striving tomake Midea's services an industry benchmark, continuously enhancing the full-category service
capabilities, pre-decoration service capabilities, and entire-house smart scene-oriented servicecapabilities of suite-based service outlets, and improving the user experience of delivery, installation,and packaged services. Midea is also promoting the construction of a directly operated servicesystem, strengthening the cultivation of diversified skill certification, and other service reform projects,enhancing the comprehensive capabilities of service engineers. Furthermore, Midea is advancinggreen recycling, proactive services, and intelligent customer service construction, providing users witha one-stop service experience.d. On the overseas market, Midea will centre on horizontal and vertical capability expansion in 2023.On the horizontal dimension, it will concentrate on "Insight to Product," "Marketing to Order," "Order toPayment," and "Problem to Solution." On the vertical dimension, it will focus on capability frameworks,process construction, organisational mechanisms, and digital support to create a global businesscapability landscape and management support system that integrates OEM and OBM. In terms ofproducts, based on the "Three Generations" cornerstone, it will strengthen the value synergy betweenthe market front-end and R&D backend, emphasise overseas R&D localisation, continuously optimiseproduct structure, build overseas user experience centres with a focus on intelligent sceneexperiences, comprehensively promote the entire-house smart scene system and smart retailupgrades, and construct a product competition system with high added value. In terms ofmanufacturing, it will continue to advance the construction and production of manufacturing bases inBrazil, Egypt, and Mexico, promote capacity planning in key markets such as Europe and ASEAN,and strengthen the "Local Supply" layout. In terms of user services, it is committed to building astable global spare parts supply and a comprehensive global service system. It will complete theconstruction of the global spare parts centre’s main warehouses in China and Thailand, achieve fullcoverage of Midea's Global Call Centre, pilot social media access in some markets, comprehensivelyupgrade the global engineering technology platform, and enhance service channel capabilities in keycountries. In terms of digital construction, it will continue to drive business efficiency improvementthrough special process change teams, and advance the value chain data online to achieve the fullvalue chain order information visualisation. In terms of organisational capabilities, it will achieve aunified talent management system for its own brand businesses, establish an organisationalcapability model, build specialised talent pools and training plans, shift organisational focus forward,
carry out the localisation of global business talents, and gradually construct a global organisationalteam. In terms of brand building, it will continuously deepen global brand building and marketingcapability improvement. On one hand, it will insist on brand investment in strategic markets tomaximise commercial sponsorship effects. On the other hand, it will strengthen front-end retailmarketing infrastructure construction, continuously promote digital system construction, and supportuser growth through digital marketing.In 2023, TLSC will focus on the basics of business, calmly and flexibly respond to marketuncertainties and challenges, and continue to strengthen close cooperation with key customers. It willenhance market awareness and response speed, actively respond to various market risks, and relyon endogenous capabilities to drive growth. It will improve product strength and synergy efficiency,ensuring stable profitability through optimizing price strategies, improving product structure andchannel systems. At the same time, by deepening the collaboration with the Group and relatedproduct divisions, it will further promote product quality improvement, optimise product developmentprocesses, ensure the progress of new product launches and product supply, enhance userexperience value, fulfil global Toshiba brand development goals, and fully promote the global ownbrand strategy.e. In 2023, Midea will continue to implement its double 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 comprehensivehigh-end smart living solutions, and leading the entire-house intelligence industry into the era of deepcontrol. Targeting the segmented high-end market, the Toshiba brand will continue to deploy multiplecategories such as refrigerators, laundry appliances, small domestic appliances, and kitchenappliances, further expanding scenarios in entire-house water usage, heating, and kitchen.Meanwhile, it will strengthen brand consistency, promote multi-category suite-based products toprovide a refined living experience, upgrade brand image and build brand mindset, and deeply focuson layer marketing to strive for a dual breakthrough in customer base and scale. In 2023, WAHIN willcontinue to optimise product and service experience, offering a multi-category product layout to
provide consumers with intelligent and comfortable consumption experiences. It will maintain its focuson young user groups, continuously targeting young groups through school-enterprise cooperation,and explore diversified cross-border modes during Youth Day, summer graduation season, and job-hunting season. By creating new shopping scenarios in e-commerce channels with content-driven"virtual stores" and increasing coverage of pioneer youth user groups, WAHIN aims to drive salesgrowth through branding.f. Midea will continue to focus on driving the transformation of its core business and digitalempowerment, establishing an online operating system, and building a unified "business, system, anddata" system. By optimizing the top-level architecture, Midea will continuously strengthen theconstruction of its underlying digital capabilities. In the R&D stage, Midea will support thedevelopment of the "Three Generations" R&D system, fostering product innovation and marketinsights through three generations of data. In the manufacturing and supply chain stages, Midea willpromote the comprehensive implementation of integrated supply chain transformation, continuouslyimproving planning accuracy, enhancing overseas order delivery efficiency, advancing visualisationand intelligent management of multi-dimensional order fulfilment information, popularizing darkinjection melding factories and electronic benchmark factories, and achieving visualised managementof carbon emissions during the manufacturing process to boost green manufacturing capabilities. Inthe domestic sales stage, Midea will concentrate on promoting end-to-end retail capability upgrades,increasing supply-side efficiency, ensuring consistency in e-commerce business, and constructing aplatform digital transformation capability. It will also establish entire-house smart experience stores. Inthe export stage, Midea will enhance after-sales spare parts supply chain delivery efficiency andoptimise spare parts warehouse layout, empowering the construction of global call centres with AIintelligent tools, improving after-sales service efficiency, increasing overseas sales efficiency withdigital tools, and achieving transparency and automation of overseas sales orders throughout theentire chain. In the field of information security, Midea will persistently improve its in-depth securitydefence and security operation systems. By adopting the "Yundi" collaborative defence paradigm,Midea will enhance its security operation capabilities, continuously promoting the integration anditerative upgrading of basic services through a cloud-native platform, and deeply building a one-stopdata platform capability to achieve service-oriented databases and big data capabilities, improving
resource utilisation and service efficiency. In the field of big data, Midea will expand the scale andintensity of digital talent cultivation, encouraging the digital upgrading of enterprises, focusing onconstructing overseas national data maps, and promoting the comprehensive development of its ownbrands through the integration of large and small overseas data. It will also explore and expand dataapplications to empower the growth of ToB businesses. In the field of AI, Midea will continue toconcentrate on edge intelligence, natural conversation, autonomous navigation and mapping, androbot autonomous learning to help upgrade the intelligence of its entire product line, comprehensivelypromoting the efficient use of AI platforms, and empowering smart homes, intelligent customer service,smart buildings, intelligent manufacturing, smart healthcare, and smart finance. In the smart homefield, Midea will focus on key technologies such as intelligent perception, reliable communication, andautonomous decision-making in future entire-house intelligent solutions. It will develop deeplyintelligent products and provide users with higher quality, more convenient intelligent scenarios, andpersonalised services.g. Midea aims to drive new growth in its core ToB business, continuously expand businessboundaries, and accelerate growth by rapidly deploying and entering new markets. In 2023, in thefield of core components for consumer appliances, Midea will continue to enhance digitalisation anddata operations, increase investment in R&D resources, and make continuous breakthroughs in newproducts, technologies, and applications, providing customers with eco-friendly, efficient, andintelligent products and technology solutions. The Company will bolster its global supply chaincapabilities, promote mass production in its factories in India, expand production in its Thailand base,and accelerate the development of the Foshan Xingtan Park, aiming to establish an Industry 4.0smart manufacturing demonstration base. Midea will create an overseas professional service platform,offering one-stop services for small and medium-sized customers and specialised services for largecustomers, achieving breakthroughs with overseas large customers and increasing the global marketshare of its products. Midea will strengthen its competitiveness in the home appliance chip sector,develop new product categories such as new energy vehicle water pump motor chips, energy storageapplication chips, and sensorless FOC low-power IPM chips, and increase sales scale throughenhanced internal cooperation and external customer breakthroughs. In the field of new energyvehicle components, Midea will leverage its innovative advantages, achieve comprehensive
improvements in customer base, products, and manufacturing capabilities, transition from projectacquisition to mass production operations, cover more mainstream customers, and enhancecompetitiveness in the three major systems - thermal management, electric drive systems, andchassis execution. Midea will increase the market coverage of thermal management products andexplore more component technology areas such as flat-line motors, gradually implementing the"parts-components-systems" development path. In the field 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,and provide new products and comprehensive system solutions targeting specific needs in key sub-markets such as lithium batteries, photovoltaics, semiconductors, robotics, and laser processing.Midea will rapidly transform its marketing model, expand new channel resources, stabilise topcustomers, seize market opportunities, and broaden market coverage. The company will enhance itsflexible manufacturing capabilities, improve product delivery efficiency, further refine its end-to-endquality management system, and establish a laboratory with testing capabilities. In the new energysector, Midea will develop integrated, efficient, and safe home energy storage systems tailored forresidential applications and establish dual-channel distribution in new energy and home appliances.The company will set up an overseas channel network, fully leverage Midea's home appliancestrengths, and collaborate with related divisions of the group to develop comprehensive home energymanagement solutions. Midea will complete internal demonstration projects for microgrids, activelyexplore external markets, and extend its reach to the back-end by forming an "EPC + preliminarydigitalisation + operation and maintenance" model, while also expanding to the front-end to tap intoelectricity trading and photovoltaic design service markets.h. Media will accelerate project collaboration between KUKA's 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. Midea will beef up KUKA’s localized operations inChina, increase investment in the development and application of robotics, as well as foster R&Dinnovation of core components and software systems. In terms of marketing, Midea will maintainleadership in the auto sector and take active steps to explore new areas including new energy,general industrial manufacturing, electronics, medical care and logistics, services, etc. Concerning
operation, it will concentrate on R&D, supply chain management, high-performance operations anddigitalization, among others, so as to build the core competitiveness of the robotics and industrialautomation business in a faster manner.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 theglobal economy encounters a heavy hit and consumer demand slows down in growth, the growth ofthe industries in which the Company operates, may slow down accordingly, and as a result, this mayaffect the 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, orthe cost reduction resulted from lean production and improved efficiency, as well as the sale prices ofend products cannot offset the total effects of cost fluctuations, the Company’s business will beinfluenced to some 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 beenmade day by day regarding the Company’s overseas operations and new business expansion.However, its efforts in global resource integration may not be able to produce expected synergies;and in overseas market expansion, there are still unpredictable risks such as local political and
economic situations, significant changes in law and regulation systems, and sharp increases inproduction 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 morethan 40% of the total revenues. Any sharp exchange rate fluctuation might not only bring negativeeffects on the overseas operations of the Company, but could also lead to exchange losses andincrease its finance costs.e. Market risks brought by trade frictions and tariff barriersDue to the rise of anti-globalization and trade protectionism, China will see more uncertainties inexport in 2023. The trade barriers and frictions of some major markets will affect the export businessin the short run, as well as marketing planning and investment in the medium and long run. Politicaland compliance risks are rising in international trade. These can mainly be seen on compulsorysafety certificates, international standards and requirements, and product quality and managementsystems certification, energy-saving requirements, the call for increasingly strict environmentalprotection requirements, as well as with rigorous requirements for recycling household applianceswaste. Trade frictions caused by anti- dumping measures implemented by some countries andregions aggravate the burden in costs and expenses for household appliance enterprises, and havebrought about new challenges to market planning and business expansion for enterprises.In face of the complicated and changeable environment and risks at home and abroad, Midea willstrictly follow the Company Law, the Securities Law, the CSRC regulations and other applicable rules,keep improving its governance structure for better compliance, and reinforce its internal controlsystem so as to effectively prevent and control various risks and ensure its sustained, steady andhealthy development.
12. Visits Paid to the Company for Purposes of Research, Communication, Interview, etc. in the Reporting Period
√Applicable □N/A
| Date | Place | Way of visit | Type of visitor | Visitor | Discussions | Index to main inquiry information |
| 20 January 2022 | Midea Group HQ | By phone | Institution | Alliancebernstein, Eurizon Capital, Marshall Wace, Millennium Partners, Oaktree Capital Management, Southeastern Asset Management, etc. | 1. After acquiring WINONE Elevator, how is the business integration? 2. Nowadays, people of generation Z pursue a low-sugar and low-calorie lifestyle, so does the Company make any related arrangements? 3. Has the Company established the Software Engineering Institute recently? 4. What about the Company’s progress in air conditioning and refrigeration technologies? | Log Sheet of Investor Relations Activities for 20 January 2022 disclosed on www.cninfo.com.cn |
| 21 February 2022 | Midea Group HQ | By phone | Institution | Oriental Alpha Fund, Citic-prudential Fund, Invesco Great Wall Fund Management, China Securities, Sunshine Asset Management Corporation Limited, Harvest Fund, E Fund, etc. | 1. The Electromechanical Business Group was changed into the Industrial Technology Business Group. Why did the Company do so and what is its future plan? 2. How much does the Company invest in its research staff? 3. How does the Company deal with the uncertainty of sea freight? 4. What new contents were put forward at the conference of the Building Technologies Division at the beginning of the year? | Log Sheet of Investor Relations Activities for 21 February 2022 disclosed on www.cninfo.com.cn |
| 17 March 2022 | Midea Group HQ | By phone | Institution | E Fund, Springs Capital, Morgan Stanley Huaxin Fund, First State Cinda Fund, Minsheng Royal Asset Management, China Fund Management Co.,Ltd., Southwest Securities, Bosera Funds, etc. | 1. What is Midea’s progress in new energy? 2. Recently Midea’s subsidiary WDM has launched the world’s first helium-free MRI equipment, so what advantages does it have? 3. Has the Company issued green bonds? 4. What is Midea’s progress in chips? | Log Sheet of Investor Relations Activities for 17 March 2022 disclosed on www.cninfo.com.cn |
| 6 May 2022 | Midea Group HQ | By phone | Institution | Changjiang Securities, GF Asset Management, Everbright Securities, BOCOM Schroders, CMB International, Temasek, Orient Securities, China Merchants Securities, Orient Securities Asset | 1. Since 2021, exports have been affected by many factors, so will Midea change the USD35 billion target for 2025? What’s your opinions for overseas business? 2. In terms of the coordinated development of ToC and ToB businesses, so does Midea have targeted ways for management? Is there discrepancy of resource allocation? 3. Under the pressure of the whole industry, what did Midea do to improve the profit margin of products? 4. There are so many participants in new | Log Sheet of Investor Relations Activities for 6 May 2022 disclosed on www.cninfo.com.cn |
| Management Co. LTD, etc. | energy vehicle parts business, so how do you think of development opportunities? What advantages does Midea have and what is the future outlook of the Company? 5. In the first quarter of 2022, what is the driving force of gross margin improvement in domestic and foreign sales? 6. How do you think about future outlooks of robots business? What competitive edges does Midea have? 7. The Company turns to business reduction and focus, and what industry changes make it do so? How do you think of the ceiling of customer-end (C-end)? 8. Can it be understood that the next three years of Midea is an input period, and the output period is after 2023 or 2024? 9. What is a reasonable level of profit in three years? Does a relatively high-quality development mean reducing capital expense and increasing dividends? 10. Is it challenging to make the gross profit margin of B2B equal to that of B2C? etc. | |||||
| 13 May 2022 | https://m.jhbshow.com/ | Online communication | Institution and individual | Investors | 1. Goodwill experienced drop in the 2021 annual report, so why is that and would it be offset from the current profit? 2. Can you introduce the five business segments of the Group? 3. How will Midea position the companies (TTium Motor, WINONE Elevator and Hiconics) it acquired in the past year on its business map? 4. Nowadays, the costs of raw materials are still high, so how does the situation affect the gross profit margin of Midea? How to deal with related adverse effects? 5. What’s the date of record? 6. What is the business plan of overseas business? 7. How is Midea’s development of electric cleaning appliances? 8. What is the impact of a global shortage of core components such as microchips? 9. Will export orders be affected when overseas competitors’ production capacity recovers in the future? 10. How will Midea’s own brands develop in new markets such as Europe, US, and other developed countries in the future? What are the differences? etc. | Log Sheet of Investor Relations Activities for the 2021 Annual Results Presentation disclosed on www.cninfo.com.cn |
| 13 June 2022 | Midea Group HQ | By phone | Institution | 3W Fund Management Limited, FIL Investment Management (Hong Kong) Limited, Green Court Capital, JF Asset Management Limited, Point72 Associates II LLC, etc. | 1. How is the development of COLOMO, the premium brand of the Company, in 2021? 2. How is the Company’s dividend and buyback policy? 3. What major risks the Company will face in the future development? 4. Media says the management mentioned the industry might encounter cold winter in the a few years, so why did they say so and out of what background did | Log Sheet of Investor Relations Activities for 13 June 2022 disclosed on www.cninfo.com.cn |
| they say so? 5. What do you think of the competitive landscape and market performance of residential air conditioners? | ||||||
| 7 July 2022 | Midea Group HQ | By phone | Institution | Hotland Innovation Asset Management, Minsheng Royal Asset Management, Taikang Asset, Tianfeng Securities, Chang Xin Asset Management, Pengyang AMC, etc. | 1. How is the domestic channel reform of Midea? 2. What are the Company’s priorities when it continuously expands its diversified ToB business? 3. Can you introduce the development of intelligent household appliances? 4. What do you think of the overall size and development prospect of Midea Building Technologies? 5. How do you think of the development prospect of medical business? | Log Sheet of Investor Relations Activities for 7 July 2022 disclosed on www.cninfo.com.cn |
| 28 July 2022 | Midea Group HQ | By phone | Institution | Morgan Stanley Huaxin Fund, New China Fund, New Thinking, China Merchants Securities, Pengyang AMC, BlackRock, etc. | 1. What is Midea’s progress in medical sector? 2. What are the arrangements of Annto Logistics for intelligent logistics? 3. Can you introduce the “Midea Digital 2025” strategy? | Log Sheet of Investor Relations Activities for 28 July 2022 disclosed on www.cninfo.com.cn |
| 13 September 2022 | Midea Group HQ | By phone | Institution | Alliancebernstein LP, Arohi AM Balyasny AM, BC Investment Management Corp, Coatue Mgmt, etc. | 1. What is the latest development of overseas business? 2. How is the performance of the Toshiba brand in the first half of the year? 3. How is the performance of COLMO, the high-end household appliance? 4. What is Midea’s progress in new energy? | Log Sheet of Investor Relations Activities for 13 September 2022 disclosed on www.cninfo.com.cn |
| 22 September 2022 | https://rs.p5w.net/html/134915.shtml | Online communication | Institution | Investors | 1. How is the production and sales volume of automobiles parts and its profitability? 2. Until now, how many shares have been repurchased? 3. How are Midea’s business-end (B-end) and customer-end (C-end)? 4. Midea’s stock price continues to be low, so how do you guarantee the benefits of small investors? You have been making the industrial input, but how long will it take to bring benefits? Do you think it is too hasty to do so? 5. Europe is trapped in an energy crisis, the residential energy storage market has exploded, and micro inverter business directly benefits from it. Clou Electronics is no worse than Deye Shares in terms of technologies, so it is suggested that the Company make more efforts to expand household energy storage and micro inverters, provide financial support, and make the energy storage business of Clou Electronics better and better. 6. In the face of the so-called three-year “cold winter”, has the Group taken any measures to prevent it? 7. What is the development prospect of Indian plants? Why don’t you build plants in South Asia? | Log Sheet of Investor Relations Activities for 22 September 2022 disclosed on www.cninfo.com.cn |
| 6 December | Midea Group | By phone | Institution | M&G Investment | 1. What is Midea’s new progress in the air conditioner | Log Sheet of Investor |
| 2022 | HQ | Management, GIC Private Limited, Wellington MGT CO LLP, Polymer Capital Management (HK) Limited, Fenghe Fund Management PTE LTD, etc. |
export business in the second half of the year? 2. Whatis Midea’s input in heat pump export? 3. What is the
latest progress in channels?
| Relations Activities for 6 December 2022 disclosed on www.cninfo.com.cn | ||||||
| 22 December 2022 | Midea Group HQ | By phone | Institution | Bosera Funds, Harvest Fund, BOCOM Schroders, HuaAn Fund, AEGON-INDUSTRIAL Fund, Tianhong Asset Management, etc. | 1. What are the highlights of the Company’s technology month? 2. How is the recent cooperation between Midea and its partners? 3. Can you introduce Midea’s progress since it launched Midea Medical? | Log Sheet of Investor Relations Activities for 22 December 2022 disclosed on www.cninfo.com.cn |
Section IV Corporate Governance
1. Basic Situation of Corporate Governance
The Company is constantly improving its corporate governance in strict accordance with theCompany Law, the Securities Law and the relevant regulations of the China Securities RegulatoryCommission. There are five special committees under the Board, namely the Strategy Committee, theAudit Committee, the Nomination Committee, the Remuneration and Appraisal Committee, as well asthe ESG Committee. They were designed to provide consultation and advice to the Board andvalidate the professionalization and efficiency of discussions and decision-making. The Company hasestablished clear rules of procedure for its shareholders' meeting, board of directors, SupervisoryCommittee and special committees under the board, as well as the Work Rules for CompanySecretary. It has also established a set of standard documents including Information DisclosureManagement System, Funds Raising Management System, Connected Transaction ManagementSystem, Wealth Management Entrustment Management System, Insider Registration System,External Guaranty Decision-making System, Foreign Investment Management System, andManagement System for Finance Flow with Connected Parties, Internal Auditing System. Theshareholders' meeting, the Board of Directors, the Supervisory Committee and operationsmanagement departments have clear authority and responsibility. Each performs its own functionsand maintains its stability effectively. Their scientific decision-making and coordinated operationshave laid a firm foundation for the sustained, healthy and steady development of the Company.The Company has also launched core management team shareholding plans and equity incentiveplans for core research, quality control, technical, production and management staff, which helps todevelop a sound shareholding structure for the future growth of the Company.In 2022, the Company won the following honors:
No. 245 of “Fortune Global 500”; No. 35 of the “BrandZ? 2021 Top 100 Most Valuable ChineseBrands” jointly released by WPP and Kantar Millward Brown; No. 186 of the “2022 Brand Finance
Global 500”; and the Top 500 New Economy Enterprises of China unveiled by the China Associationfor Public Companies.Any incompliance with the applicable laws, administrative regulations, and regulations issued by theCSRC governing the governance of listed companies
□Yes √No
No such cases in the Reporting Period.
2. Independence of assets, personnel, finance, organizations and businesseswhich are separate from the controlling shareholder and the actual controllerThe Company is totally autonomous with respect to business, personnel, assets, organizations, andfinance from Midea Holding Co., Ltd., the controlling shareholder of the Company, thereforemaintaining integrity and independency in both business and operations.
2.1 Business independence:
The Company has a complete industrial chain for its manufacturing business, a completely distinctpurchase and sales system, and an independent and comprehensive business operation capability.
2.2 Personnel independence:
The Company is completely autonomous from the controlling shareholder regarding its personnel.The labor, personnel and remuneration management of the company are totally unrelated. All seniormanagement members received remuneration from the Company except those that hold only adirector’s position in the controlling shareholder.
2.3 Asset integrity:
The Company has its own independent production system as well as ancillary production systemsand facilities. Intangible assets such as industrial rights, trademark ownership and non-patenttechnology are held by the Company.
2.4 Organization independence:
The Company has set up an independent organizational structure which maintains its independentoperation. The Company has the right to appoint or remove any personnel so there is no overlappingwith the controlling shareholder.
2.5 Financial independence:
The Company's financial management is independent from the controlling shareholder. The Companyhas its own accounting department, accounting system, financial management system, and bankaccounts and independently makes financial decisions and pays its own taxes according to relevantlaws.
3. Horizontal Competition
□Applicable √N/A
4. Annual and Extraordinary General Meetings of Shareholders Convened duringthe Reporting Period
4.1 General meetings of shareholders convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Convened date | Disclosure date | Disclosure index |
| First Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 59.0587% | 14 January 2022 | 15 January 2022 | Announcement No. 2022-002, disclosed on www.cninfo.com.cn |
| Second Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 58.1929% | 11 March 2022 | 12 March 2022 | Announcement No. 2022-012, disclosed on www.cninfo.com.cn |
2021 AnnualGeneral Meetingof Shareholders
| 2021 Annual General Meeting of Shareholders | Annual | 58.3112% | 20 May 2022 | 21 May 2022 | Announcement No. 2022-035, disclosed on www.cninfo.com.cn |
| Third Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 57.6136% | 24 June 2022 | 25 June 2022 | Announcement No. 2022-068, disclosed on www.cninfo.com.cn |
| Fourth Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 57.6464% | 19 August 2022 | 20 August 2022 | Announcement No. 2022-083, disclosed on www.cninfo.com.cn |
| Fifth Extraordinary | Extraordinary | 59.1660% | 16 September 2022 | 17 September | Announcement No. |
| General Meeting of Shareholders of 2022 | 2022 | 2022-093, disclosed on www.cninfo.com.cn |
4.2 Extraordinary general meetings of shareholders convened at the request of preferenceshareholders with resumed voting rights
□Applicable √N/A
5. Directors, Supervisors and Senior Management
5.1 General information
| Name | Office title | Incumbent/ Former | Gender | Age | Starting date of tenure | Ending date of tenure | Shares held at the year-begin (share) | Shares increased in the period (share) | Shares decreased in the period (share) | Other increase/decrease (share) | Shares held at the period-end (share) | Reason for share changes |
| Fang Hongbo | Chairman of the Board and CEO | Incumbent | Male | 55 | 2012/8/25 | 2024/9/16 | 116,990,492 | 116,990,492 | ||||
| He Jianfeng | Director | Incumbent | Male | 55 | 2012/8/25 | 2024/9/16 | 0 | 0 | ||||
| Gu Yanmin | Director and Vice President | Incumbent | Male | 59 | 2014/4/21 | 2024/9/16 | 0 | 0 | ||||
| Wang Jianguo | Director and Vice President | Incumbent | Male | 46 | 2021/9/17 | 2024/9/16 | 0 | 0 | ||||
| Yu Gang | Director | Incumbent | Male | 63 | 2018/9/26 | 2024/9/16 | 0 | 0 | ||||
| Xue Yunkui | Independent Director | Incumbent | Male | 58 | 2018/9/26 | 2024/9/16 | 179,914 | 179,914 | ||||
| Guan Qingyou | Independent Director | Incumbent | Male | 45 | 2018/9/26 | 2024/9/16 | 0 | 0 | ||||
| Han Jian | Independent Director | Incumbent | Female | 50 | 2018/9/26 | 2024/9/16 | 0 | 0 | ||||
| Dong Wentao | Chairman of the Supervisory Committee | Incumbent | Male | 37 | 2020/10/16 | 2024/9/16 | 0 | 0 | ||||
| Zhao Jun | Supervisor | Incumbent | Male | 47 | 2014/4/21 | 2024/9/16 | 0 | 0 | ||||
| Liang Huiming | Employee Supervisor | Incumbent | Female | 39 | 2017/3/30 | 2024/9/16 | 0 | 0 | ||||
| Zhang Xiaoyi | Vice President | Incumbent | Male | 49 | 2018/4/23 | 2024/9/16 | 516,575 | 516,575 | ||||
| Hu Ziqiang | Vice President | Incumbent | Male | 65 | 2014/8/18 | 2024/9/16 | 400,000 | 400,000 |
| Wang Jinliang | Vice President | Incumbent | Male | 55 | 2014/8/18 | 2024/9/16 | 340,000 | 80,000 | 420,000 | 80,000 restricted shares were granted | ||
| Li Guolin | Vice President | Incumbent | Male | 46 | 2020/7/3 | 2024/9/16 | 400,700 | 80,000 | 480,700 | 80,000 restricted shares were granted | ||
| Fu Yongjun | Vice President | Incumbent | Male | 54 | 2021/9/17 | 2024/9/16 | 200,000 | 200,000 | ||||
| Guan Jinwei | Vice President | Incumbent | Male | 43 | 2021/9/17 | 2024/9/16 | 535,000 | 535,000 | ||||
| Zhong Zheng | Vice President, CFO and Director of Finance | Incumbent | Female | 41 | 2022/2/22 2019/3/22 | 2024/9/16 | 276,152 | 276,152 | ||||
| Zhao Wenxin | Chief People Officer | Incumbent | Female | 40 | 2022/2/22 | 2024/9/16 | 400,000 | 80,000 | 480,000 | 80,000 restricted shares were granted | ||
| Bai Lin | Vice President | Incumbent | Male | 42 | 2022/5/30 | 2024/9/16 | 95,079 | 95,079 | ||||
| Wei Chang | Chief Technology Officer | Incumbent | Male | 60 | 2022/8/29 | 2024/9/16 | 0 | 0 | ||||
| Jiang Peng | Board Secretary | Incumbent | Male | 49 | 2013/10/30 | 2024/9/16 | 438,600 | 80,000 | 518,600 | 80,000 restricted shares were granted | ||
| Yin Bitong | Director and Vice President | Former | Male | 54 | 2016/12/16 | 2022/12/30 | 2,109,655 | 2,109,655 | ||||
| Cai Weiding | CFO | Former | Male | 41 | 2021/4/19 | 2022/1/29 | 0 | 0 |
Indicate whether any director, supervisor or senior management resigned before the expiry of theirtenures during the Reporting Period.
□ Yes √ No
Changes in directors, supervisors and senior management
√Applicable □N/A
| Name | Office title | Type of change | Date | Reason |
| Cai Weiding | Chief Financial Officer | Former | 2022-1-29 | Personal reason |
| Zhong Zheng | Chief Financial Officer | Appointed | 2022-2-22 | - |
| Zhao Wenxin | Chief People Officer | Appointed | 2022-2-22 | - |
| Bai Lin | Vice President | Appointed | 2022-5-30 | - |
| Wei Chang | Chief Technology Officer | Appointed | 2022-8-29 | - |
| Zhong Zheng | Vice President | Appointed | 2022-12-01 | - |
| Yin Bitong | Director and Vice President | Former | 2022-12-30 | Personal reason |
5.2 Brief biographies
Professional backgrounds, main work experience and current responsibilities in the Company of theincumbent directors, supervisors and senior managementMr. Fang Hongbo, male, holder of a Master's degree, is the Chairman of the Board and CEO ofMidea Group. He joined Midea in 1992 and previously served as the General Manager of Midea Air-Conditioning Division, CEO of Midea Refrigeration Electric Appliances Group, Chairman of the Boardand CEO of GD Midea Holding Co., Ltd., etc.Mr. He Jianfeng, male, holder of a Bachelor's degree, is a Director of Midea Group. He is also theChairman of the Board and President of Infore Group Co., Ltd.Mr. Gu Yanmin, male, holder of a Doctoral degree, joined Midea in 2000 and has functioned as theHead of Planning & Investment, Head of Overseas Strategy & Development, Vice President andHead of Overseas Business Development of Midea Air-Conditioning & Refrigeration Group, Head ofOverseas Strategy of Midea Group. Currently he is a Director and Vice President of Midea Group, thePresident of the Robotics & Automation Division, as well as the Chairman of the SupervisoryCommittee of KUKA.
Mr. Wang Jianguo, male, a Master’s degree holder, joined Midea in 1999. He was once the Directorof the Supply Chain Management Department of Midea Group’s Residential Air Conditioner Division,the Director of the Administration and Human Resources Department of Midea Group, and theGeneral Manager of Midea Group’s Refrigeration Division. Currently, he is a Director and VicePresident of Midea Group, the President of the Smart Home Business Group, and the President ofMidea International Business, in addition to being in charge of the TLSC Division, the internationallogistics platform and legal affairs.Mr. Yu Gang, male, holder of a Doctoral degree given by the Wharton School of the University ofPennsylvania, is the Honorary Chairman and a co-founder of YHD.COM. He once served as theGlobal Supply Chain Vice President of Amazon and the Global Procurement Vice President of Dell.He is now a co-founder and a Co-Chairman of the Board of Directors of 111, Inc.Mr. Xue Yunkui, male, is a holder of a Doctoral degree given by the Southwest University and aholder of a Post-Doctoral degree given by the Shanghai University of Finance and Economics. Heused to be the associate dean and a doctoral supervisor at the School of Accountancy of ShanghaiUniversity of Finance and Economics, a Founding Vice President of Shanghai National AccountingInstitute and Cheung Kong Graduate School of Business, the Secretary-General of China Associationof Accounting Professors, a Vice Chairman of the Steering Committee of the National AccountingInstitute under the Ministry of Finance, etc. He is now an accounting professor of Cheung KongGraduate School of Business, and an Independent Director of Midea Group.Mr. Guan Qingyou, male, obtained a PhD degree in economics from Chinese Academy of SocialSciences ("CASS") and Post-doctoral degree from Tsinghua University. He previously worked asProgram Director at the Institute for Contemporary China Studies, Tsinghua University, Division Chiefof the main office of China National Offshore Oil Corporation, Vice President of Minsheng SecuritiesCo., Ltd., and Head of Minsheng Securities Research Institute. Other positions currently held by himinclude Dean of Reality Institute of Advanced Finance, professor at School of Economics, HainanUniversity, Chairman of China Institute of Private Sector, Director of China Society of EconomicReform, member of APEC China Business Council Digital Economy Committee, Chief EconomicAdvisor of China Fortune Securities, independent director of Midea Group Co. Ltd., Nanhua Futures
Co., Ltd., Beijing Yingpu Technology Co., Ltd., Hangzhou Hikvision DIGITAL Technology Co., Ltd.,Shaanxi International Trust Co., Ltd., and Ucap Cloud Information Technology Co., Ltd., and memberof the Fiscal Reform and Development Think Tank under the Ministry of Finance, AcademicCommittee of China Center for Urban Development under the National Development and ReformCommission, and Expert Advisory Committee on Industrial Economic Operation under the Ministry ofIndustry and Information Technology ("MIIT").Ms. Han Jian, female, holder of a Doctoral degree given by the Cornell University, is a professor ofmanagement in China Europe International Business School, a specialist of the World EconomicForum, as well as an Independent Director of Midea Group.Mr. Dong Wentao, male, a Master's degree graduate, joined Midea in 2016. He used to work inCIMC and ZTE. And he once served in the Legal Affairs Department, the Investor RelationsDepartment, etc. of Midea Group, with over 10 years of experience in legal affairs, risk control, marketvalue management, capital operation, etc.Mr. Zhao Jun, male, a Master's degree graduate, joined Midea in 2000 and has functioned as theDirector and the CFO of GD Midea Holding Co., Ltd. He is now a Supervisor of Midea Group, theExecutive President in Midea Holding Co., Ltd., as well as a Non-Executive Director of Midea RealEstate Holding Limited.Ms. Liang Huiming, female, is a holder of a Bachelor’s degree. Joining Midea in 2007, she used toserve as the Chief Business Administration Commissioner in Midea Group’s Administration andHuman Resources Department. She is now the Employee Supervisor of Midea Group.Mr. Zhang Xiaoyi, male, is a holder of a Master’s degree. Joining Midea Group in 2010, he used toserve as the head of the overseas process IT system, the head of the supply chain system, and the ITDirector of Midea Group, etc. He is now a Vice President and the CDO of Midea Group.Mr. Hu Ziqiang, male, holder of a Doctoral degree, joined Midea in 2012, and has formerly workedfor GE and Samsung and as a Vice GM in Wuxi Little Swan Co., Ltd. At present he is a VicePresident of Midea Group, in addition to being the Chairman of the Board of Beijing Wandong Medical
Technology Co., Ltd., a listed company subordinate to Midea Group.Mr. Wang Jinliang, male, holder of a Master’s degree, joined Midea in 1995 and previously workedas the Vice President of China Marketing in Midea Group, and was GD Midea Holding’s VicePresident and Marketing Head. He is now a Vice President of Midea Group.Mr. Li Guolin, male, holder of a Master’s degree, joined Midea in 1998 and previously worked as aVice President of the Residential Air Conditioner Division, and the President of the Small DomesticAppliance Division of Midea Group. He is now a Vice President and the Director of Quality andIntelligent Manufacturing of Midea Group.Mr. Fu Yongjun, male, holder of a Master’s degree, joined Midea in 1999 and previously worked asthe General Manager of Midea Environment Appliances Division, the General Manager of MideaComponent Division, and the President of Midea Electromechanical Division. He is now a VicePresident, and the President of the Industrial Technology Business Group, of Midea Group.Mr. Guan Jinwei, male, holder of a Master’s degree, joined Midea in 2002 and previously worked asthe Deputy General Manager of the Commercial Air Conditioner Division and the General Manager ofan overseas marketing company of Midea Group, as well as an Assistant to the President of MideaInternational and the General Manager for the ASEAN region, among others. He is now a VicePresident, and the President of the Building Technologies Division, of Midea Group.Mr. Bai Lin, male, holder of a Bachelor’s degree, joined Midea in 2002. He once served as the AsiaPacific General Manager of the Refrigeration Group, the General Manager of the overseas marketingcompany of the Refrigerator Division, the General Manager of the domestic marketing company ofthe Refrigerator Division, and the President of the Refrigerator Division. And he is now a VicePresident and the China President of Midea Group.Ms. Zhong Zheng, female, holder of a Master’s degree, joined Midea in 2002. She once was theDirector of Finance of the Financial Center and the Component Division, as well as the Audit Directorof Midea Group, etc. She is now a Vice President as well as the CFO and Director of Finance ofMidea Group.
Mr. Wei Chang, male, holder of a Doctoral degree, joined Midea in 2022. He used to be the TechnicalDirector for Water Treatment and Polymers at the Global R&D Centre and the Greater China GeneralManager for Water Treatment Products at General Electric. He also served as the Director of theNational Institute of Clean and Low-Carbon Energy of CHN Energy from 2014 to 2022. Currently, heis the Chief Technology Officer of Midea Group.Ms. Zhao Wenxin, female, holder of a Master’s degree, joined Midea in 2004. She used to be aDeputy General Manager and the Overseas Marketing General Manager of the Residential AirConditioner Division in Midea Group, a Vice President of Midea International, etc. Currently, she is theChief People Officer and Director of Human Resources of Midea Group.Mr. Jiang Peng, male, holder of a Master’s degree, joined Midea in 2007 and used to be theRepresentative for Securities Affairs and Board Secretary for GD Midea Holding Co., Ltd. He is nowthe Board Secretary and Director of Investor Relations of Midea Group.Posts held in shareholding entities
√Applicable □N/A
| Name | Shareholding entity | Position | Beginning date of office term | Ending date of office term | Allowance from the shareholding entity |
| He Jianfeng | Midea Holding Co., Ltd. | President | 2016-01 | - | No |
| Zhao Jun | Midea Holding Co., Ltd. | Executive President | 2020-03 | - | Yes |
| Note | N/A | ||||
Posts held in other entities
√Applicable □N/A
| Name | Other entity | Position | Beginning date of office term | Ending date of office term | Allowance from the entity |
| He Jianfeng | Infore Group Co., Ltd. | Chairman of the Board and President | 1995-06 | - | Yes |
| Gu Yanmin | KUKA | Chairman of the Supervisory Committee | 2017-01 | 2024-06 | Yes |
| Yu Gang | 111, Inc. | Executive Chairman of the Board | 2011-04 | - | Yes |
| Xue Yunkui | Ouyeel Co., Ltd. | Independent Director | 2022-08 | 2025-08 | Yes |
| Zhuhai Wanda Commercial Management Group Co., Ltd. | Independent Director | 2021-03 | 2024-03 | Yes | |
| Bank of Shanghai Co., Ltd. | Independent | 2021-01 | 2024-01 | Yes |
| Director | ||||||
| Hinova Pharmaceuticals Inc. | Independent Director | 2020-09 | 2023-09 | Yes | ||
| Guan Qingyou | Beijing Rushi Research Information Consulting Service Co., Ltd. | Chairman of the Board | 2017-12 | - | Yes | |
| Shaanxi International Trust Co., Ltd. | Independent Director | 2022-07 | 2025-07 | Yes | ||
| Nanhua Futures Co., Ltd. | Independent Director | 2019-02 | 2025-02 | Yes | ||
| Shandong Hi-Speed Road&Bridge Co., Ltd. | Independent Director | 2020-06 | 2022-03 | Yes | ||
| Hangzhou Hikvision Digital Technology Co., Ltd. | Independent Director | 2021-03 | 2024-03 | Yes | ||
| Note | N/A | |||||
Punishments imposed in the recent three years by the securities regulators on the incumbent directors,supervisors and senior management as well as those who left in the Reporting Period
□Applicable √N/A
5.3 Remuneration of directors, supervisors and senior managementThe following describes the decision-making procedures, grounds on which decisions are made andactual remuneration payment of directors, supervisors and senior management.The decision-making remuneration procedure for directors, supervisors and senior management: Theremuneration is proposed by the Board Remuneration Committee and approved by the Board.Decisions are made finally after the deliberation of shareholders' meeting.The remuneration of directors, supervisors and senior management consist of basic annual paymentsand performance-related annual payments according to the Salary Management System for theDirectors, Supervisors and Senior Management which has been approved by the Company. Basicpayment is determined based on the responsibility, risk and pressure of directors, supervisors andsenior management. The basic annual payment remains stable. Performance-related annual paymentis related to the completion rate of corporate profit, the assessment result of target responsibilitysystem and the performance evaluation structure of their own department. The remuneration systemfor directors, supervisors and senior management serves the Company's strategy, and shall beadjusted with the Company's operating conditions in order to meet the Company’s developmentrequirements. The basis for adjusting the remuneration of directors, supervisors and seniormanagement are as follows:
a. Wage growth in the industryb. Inflationc. Corporate earningsd. Organizational structure adjustmente. Individual adjustment due to a change in position
Remuneration of directors, supervisors and senior management during the Reporting Period
Unit: RMB'000
| Name | Position | Gender | Age | Incumbent/ Former | Total before-tax remuneration from the Company | Remuneration from related parties of the Company |
| Fang Hongbo | Chairman of the Board and CEO | Male | 55 | Incumbent | 11,301.4 | |
| He Jianfeng | Director | Male | 55 | Incumbent | 0 | Yes |
| Gu Yanmin | Director and Vice President | Male | 59 | Incumbent | 7,683.7 | |
| Wang Jianguo | Director and Vice President | Male | 46 | Incumbent | 6,194.8 | |
| Yu Gang | Director | Male | 63 | Incumbent | 450 | |
| Xue Yunkui | Independent Director | Male | 58 | Incumbent | 450 | |
| Guan Qingyou | Independent Director | Male | 45 | Incumbent | 450 | |
| Han Jian | Independent Director | Female | 50 | Incumbent | 450 | |
| Dong Wentao | Chairman of the Supervisory Committee | Male | 37 | Incumbent | 750.7 | |
| Zhao Jun | Supervisor | Male | 47 | Incumbent | 0 | Yes |
| Liang Huiming | Employee Supervisor | Female | 39 | Incumbent | 294.6 | |
| Zhang Xiaoyi | Vice President | Male | 49 | Incumbent | 6,916.3 | |
| Hu Ziqiang | Vice President | Male | 65 | Incumbent | 3,224.7 | |
| Wang Jinliang | Vice President | Male | 55 | Incumbent | 4,583.2 | |
| Li Guolin | Vice President | Male | 46 | Incumbent | 4,789.2 | |
| Fu Yongjun | Vice President | Male | 54 | Incumbent | 8,690.8 | |
| Guan Jinwei | Vice President | Male | 43 | Incumbent | 9,074.6 | |
| Zhong Zheng | Vice President, CFO and Director of Finance | Female | 41 | Incumbent | 7,271.4 | |
| Zhao Wenxin | Chief People Officer | Female | 40 | Incumbent | 4,702.4 | |
| Bai Lin | Vice President | Male | 42 | Incumbent | 8,278.6 |
| Wei Chang | Chief Technology Officer | Male | 60 | Incumbent | 2,472.3 | |
| Jiang Peng | Board Secretary | Male | 49 | Incumbent | 2,521.1 | |
| Yin Bitong | Director and Vice President | Male | 54 | Former | 9,571.8 | |
| Cai Weiding | CFO | Male | 41 | Former | 987.7 | |
| Total | -- | -- | -- | -- | 101,109.3 | -- |
6. Activities of Directors during the Reporting Period
6.1 Board meetings convened during the Reporting Period
| Meeting | Convened date | Disclosure date | Resolutions |
| The Fifth Meeting of the Fourth Board of Directors | 22 February 2022 | 23 February 2022 | See the Announcement on Resolutions of the Fifth Meeting of the Fourth Board of Directors (Announcement No. 2022-005), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 23 February 2022 |
| The Sixth Meeting of the Fourth Board of Directors | 10 March 2022 | 11 March 2022 | See the Announcement on Resolutions of the Sixth Meeting of the Fourth Board of Directors (Announcement No. 2022-008), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 11 March 2022 |
| The Seventh Meeting of the Fourth Board of Directors | 28 April 2022 | 30 April 2022 | See the Announcement on Resolutions of the Seventh Meeting of the Fourth Board of Directors (Announcement No. 2022-018), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 30 April 2022 |
| The Eighth Meeting of the Fourth Board of Directors | 30 May 2022 | 31 May 2022 | See the Announcement on Resolutions of the Eighth Meeting of the Fourth Board of Directors (Announcement No. 2022-039), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 31 May 2022 |
| The Ninth Meeting of the Fourth Board of Directors | 8 June 2022 | 9 June 2022 | See the Announcement on Resolutions of the Ninth Meeting of the Fourth Board of Directors (Announcement No. 2022-041), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 9 June 2022 |
| The 10th Meeting of the Fourth Board of Directors | 22 July 2022 | 23 July 2022 | See the Announcement on Resolutions of the 10th Meeting of the Fourth Board of Directors (Announcement No. 2022-078), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 23 July 2022 |
| The 11th Meeting of the Fourth Board of Directors | 29 August 2022 | 31 August 2022 | See the Announcement on Resolutions of the 11th Meeting of the Fourth Board of Directors (Announcement No. 2022-085), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 31 August 2022 |
| The 12th Meeting of the Fourth Board of Directors | 28 October 2022 | - | The Interim Report for the Third Quarter 2022 was approved with nine affirmative votes, 0 negative notes and 0 abstentions. |
| The 13th Meeting of the Fourth Board of Directors | 1 December 2022 | 2 December 2022 | See the Announcement on Resolutions of the 13th Meeting of the Fourth Board of Directors (Announcement No. 2022-102), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 2 December 2022 |
| The 14th Meeting of the Fourth Board of Directors | 16 December 2022 | 17 December 2022 | See the Announcement on Resolutions of the 14th Meeting of the Fourth Board of Directors (Announcement No. 2022-103), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 17 December 2022 |
6.2 Attendance of directors in Board meetings and meetings of shareholders
| Attendance of directors in Board meetings and meetings of shareholders | |||||||
| Director | Presence due at Board meetings in the Reporting Period (times) | Presence at Board meetings on site (times) | Presence at Board meetings by telecommunication (times) | Presence at Board meetings through a proxy (times) | Absence from Board meetings (times) | Absence from Board meetings for two consecutive times | Presence at meetings of shareholders (times) |
| Fang Hongbo | 10 | 1 | 9 | 0 | 0 | No | 4 |
| He Jianfeng | 10 | 1 | 9 | 0 | 0 | No | 0 |
| Yin Bitong | 10 | 1 | 9 | 0 | 0 | No | 0 |
| Gu Yanmin | 10 | 1 | 9 | 0 | 0 | No | 1 |
| Wang Jianguo | 10 | 1 | 9 | 0 | 0 | No | 1 |
| Yu Gang | 10 | 1 | 9 | 0 | 0 | No | 0 |
| Xue Yunkui | 10 | 1 | 9 | 0 | 0 | No | 0 |
| Guan Qingyou | 10 | 1 | 9 | 0 | 0 | No | 0 |
| Han Jian | 10 | 1 | 9 | 0 | 0 | No | 0 |
6.3 Objections from directors on related issues of the Company
Were there any objections on related issues of the Company from directors
□Yes √No
No such cases in the Reporting Period.
6.4 Other information about the activities of directors
Were there any suggestions from directors adopted by the Company
√Yes □No
During the Reporting Period, in line with the Company Law, the Securities Law, the Rules for StockListing of Shenzhen Stock Exchange, and other relevant laws and regulations, as well as the Articlesof Association, and the Rules of Procedure of the Board of Directors, directors of the Company
actively paid attention to the Company's production, operation, financial position, and the effectsresulting from the changes in the economic status on the Company, vetted miscellaneous informationreports provided by the Company in a timely manner, and voiced opinions and exercised their powerat the Board of Directors. In addition, they supervised and checked the information disclosure of theCompany and fulfilled the duties of directors faithfully and conscientiously. Based on the Company'sreality, they put forward relevant opinions and suggestions about corporate governance and operatingdecisions, as well as supervised and promoted the execution and implementation of the resolutions ofthe Board of Directors to ensure scientific, timely, and efficient decision-making and safeguard thelegitimate rights and interests of the Company and all shareholders.
7. Activities of Special Committees under the Board of Directors during theReporting Period
| Committee | Members | Number of meetings convened | Convened date | Topics | Substantial opinion and recommendations | Other information |
| Audit Committee | Xue Yunkui, Guan Qingyou, Han Jian, and Yu Gang | 3 | 2022-4-28 | The following proposals were approved: The 2021 Annual Report and Its Summary, The Interim Report for the First Quarter 2022, and The Proposal on Re-appointment of CPA Firm. | - | - |
| 2022-8-29 | The Semi-Annual Report 2022 and Its Summary was approved. | - | - | |||
| 2022-10-28 | The Interim Report for the Third Quarter 2022 was approved. | - | - | |||
| Nomination Committee | Guan Qingyou, Yu Gang, Xue Yunkui, and Han Jian | 3 | 2022-2-22 | The following proposals were approved: The Proposal on Appointment of CFO, and The Proposal on Appointment of Chief People Officer. | - | - |
| 2022-5-30 | The following proposals were approved: The Proposal on Appointment of Vice President, and The Proposal on Establishment of the ESG Committee. | - | - | |||
| 2022-12-1 | The Proposal on Appointment of Vice President was approved. | - | - |
| Remuneration and Appraisal Committee | Han Jian, Yu Gang, Xue Yunkui, and Guan Qingyou | 3 | 2022-4-28 | The following proposals were approved: The Remuneration Payment Standards for Directors, Supervisors and Senior Management for 2021, The Proposal on the Ninth Stock Option Incentive Scheme (Draft) and Its Summary, The Proposal on the 2022 Restricted Share Incentive Scheme (Draft) and Its Summary, The Eighth Core Management and Global Partner Stock Ownership Scheme of Midea Group Co., Ltd. (Draft) and Its Summary, The Fifth Core Management and Business Partner Stock Ownership Scheme of Midea Group Co., Ltd. (Draft) and Its Summary, and The Proposal for the Retirement of Unexercised Reserved Stock Options under the Fifth Stock Option Incentive Scheme upon Expiry. | - | - |
| 2022-6-8 | The following proposals were approved: The Proposal on Matters Related to the Stock Option Exercise for the Third Exercise Period for the First Grant under the Fifth Stock Option Incentive Scheme, The Proposal on Matters Related to the Stock Option Exercise for the Second Exercise Period for Reserved Stock Options of the Fifth Stock Option Incentive Scheme, The Proposal on Matters Related to the Stock Option Exercise for the Second Exercise Period of the Sixth Stock Option Incentive Scheme, The Proposal on Matters Related to the Stock Option Exercise for the Second Exercise Period of the Seventh Stock Option Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Third Unlocking Period for the First Grant under the 2018 Restricted Share Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Second Unlocking Period for Reserved Restricted Shares under the 2018 Restricted Share Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Second Unlocking Period of the 2019 Restricted Share Incentive Scheme, and The Proposal on the Satisfaction of Unlocking Conditions for the Second Unlocking Period of the 2020 Restricted Share Incentive Scheme. | - | - |
| 2022-12-16 | The following proposals were approved: The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018 Restricted Share Incentive Scheme, The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2019 Restricted Share Incentive Scheme, The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2020 Restricted Share Incentive Scheme, The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2021 Restricted Share Incentive Scheme, and The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2022 Restricted Share Incentive Scheme. | - | - | |||
| Strategy Committee | Fang Hongbo, Gu Yanmin, Yu Gang, and Guan Qingyou | 1 | 2022-4-28 | The Shareholder Return Plan for 2022-2024 was approved. | - | - |
| ESG Committee | Li Guolin, Zhong Zheng, Zhao Wenxin, Jiang Peng, and Zhi Shuai | 0 | - | - | - | - |
8. Activities of the Supervisory Committee
Were there any risks to the Company identified by the Supervisory Committee when performing itsduties during the Reporting Period
□Yes √No
The Supervisory Committee of the Company had no objection to the matters of supervision during theReporting Period.
9. Employees
9.1 Number, functions and educational backgrounds of employees
| Number of in-service employees of the Company | 1,199 |
| Number of in-service employees of main subsidiaries | 165,044 |
| Total number of in-service employees | 166,243 |
| Total number of paid employees in the period | 166,243 |
| Number of retirees to whom the Company or its main subsidiaries need to pay retirement pension | 1,897 |
| Functions | |
| Function | Number of employees |
| Production | 132,036 |
| Sales | 9,093 |
| Technical | 20,657 |
| Financial | 2,098 |
| Administrative | 2,359 |
| Total | 166,243 |
| Educational backgrounds | |
| Educational background | Number of employees |
| Master’s and doctoral degrees | 6,528 |
| Bachelor’s degree | 28,974 |
| Others | 130,741 |
| Total | 166,243 |
9.2 Remuneration policy
Remunerations for employees are paid on time according to the remuneration system of theCompany. The Company decides the regular salaries of the employees according to the position’svalue and evaluation performances and decides the variable salary according to the Company's andemployee’s performance. The remuneration distribution shows more consideration for strategic talentand ensures the market competitiveness in the salary of core talent. The Company shall makedynamic adjustments to the staff remuneration policy according to regional differences, number ofemployees, staff turnover, environment changes in the industry and paying ability of the Company.
9.3 Employee training
Focused on building the “Employee Growth Platform + Strategy Facilitation Platform + KnowledgeManagement Platform”, Midea Academy consists of the Leadership Empowerment Center, theProfessionalism Empowerment Center, the Globalization Empowerment Center, and the NewcomerEmpowerment Center, in addition to a professional online learning platform—M-Learning, whichmotivates employees to learn on their own through special learning courses and practical learningfunctions. Meanwhile, Midea is building an offline three-tier empowerment system, linking the Group-business units-departments, to comprehensively develop the job knowledge and skills required byemployees at each stage, taking into account personal development and corporate needs, andsupporting the learning and growth of all Midea employees.In Midea, new employees will receive orientation and job-specific skill training or tutoring, while in-service ones will be given a full range of learning and development programmes in leadership,
professionalism and general skills. Additionally, irregular trainings inside or outside the Company offerbetter opportunities for employees to improve their professional and general skills.The leadership programme, in particular, is focused on building a multi-tier talent system, including amature leadership development program comprising the Sailor Project, the Voyager Project and thePilot Project to cultivate reserve talent for mid-level key personnel, heads for the primary structure ofbusiness units/business entities, and presidents for business divisions, respectively. To embody andpromote "Employees First" in the behaviour of the management, Midea provides internal resources tohelp the management improve their sensitivity to "people" and diversity and inclusiveness, offers newmanagement tools to support the accumulation and sharing of managerial experience, and builds aculture in which the senior management personnel tend to cultivate and inspire employees.The attendances at internal training sessions were 1,114,608 in 2022, of which 108,766 weremanagement personnel, 317,680 R&D and marketing personnel and 761,010 operational personnel.a. Building Leadership Development Programs such as the Sailor-Voyager-Pilot program and a High-Potential Leaders Training system to facilitate talent management and training. 33 talent trainingprograms were carried out.b. To facilitate the implementation of the “Global Impact” strategy, seven global talent developmentprogrammes were launched in 2022, covering a total of 708 trainees.c. Building a professionalism promotion system. In 2022, 46,054 professionalism improvementcourses were given, and the professionalism system courses for key personnel covered a total of857,197 trainees for 1,959,657 man-hours.d. Providing channels for general skill improvement. 926 such courses such as the CareerDevelopment Center were given, covering a total of 197,550 trainees for 484,615 man-hours.e. A total of 1,004 external training courses were introduced to broaden the horizons of employees,covering a total of 90,716 trainees for 1,128,513 man-hours.
f. In order to help new graduates develop themselves fast and foster a new power for the Company,205 relevant courses such as the Re-Education of New Graduates, the Training Camp for NewGraduates, and the Orientation Training Camp for New Graduates were organized, where 9,434 newgraduates were trained for a total of 31,912 man-hours.g. Facilitating organizational learning. With the addition of 1,619 new internal trainers, annualteaching time reached 9,775 hours in total. And a total of 3,280 courses were designed in the year.172,873 employees visited M-Learning for a total of 1,051,611 times in 2022, with the total learningtime reaching 490,718 hours.
9.4 Labor outsourcing
□Applicable √N/A
10. Profit Distribution and Converting Capital Surplus into Share CapitalThe Company has strictly implemented the Shareholder Return Plan for 2022-2024, which specifiesthe decision-making process for dividend standards, dividend ratios and profit distribution policies,ensures a continual and consistent profit distribution policy from the mechanism perspective, and fullyprotects the legitimate rights and interests of minority investors. In addition, the Company carried outshare repurchases through centralized price bidding in 2022. As per the Company Law, the StockListing Rules of the Shenzhen Stock Exchange, and Guideline No. 9 of the Shenzhen StockExchange for the Self-regulation of Listed Companies—Share Repurchases, the amount used torepurchase shares in a year shall be deemed as cash dividends and included in the total cashdividends for the year when it comes to calculation.Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, inthe Reporting Period
√Applicable □N/A
| Special statement about the cash dividend policy | |
| In compliance with the Company’s Articles of Association and resolution of meeting of shareholders | Yes |
| Specific and clear dividend standards and ratios | Yes |
| Complete decision-making process and mechanism | Yes |
| Independent directors faithfully performed their duties and played their due role | Yes |
| Minority shareholders are able to fully express their opinion and desire and their legitimate rights and interests are fully protected | Yes |
| In case of adjusting or altering the cash dividend policy, the conditions and process involved are in compliance with applicable regulations and transparent | No adjustment was made to the cash dividend policy. |
The Company made a profit in the Reporting Period and the profit distributable to shareholders of theCompany (without subsidiaries) was positive, but it did not put forward a preliminary plan for cashdividend distribution
□Applicable √N/A
Preliminary plan for profit distribution and converting capital surplus into share capital for theReporting Period
√ Applicable □ N/A
| Bonus shares for every 10 shares (share) | 0 |
| Dividend for every 10 shares (RMB) (tax included) | 25 |
| Additional shares converted from capital surplus for every 10 shares (share) | 0 |
| Total shares as the basis for the preliminary plan for profit distribution (share) | 6,875,060,728 |
| Cash dividends (RMB) (tax inclusive) | 17,187,651,820 |
| Cash dividends in other forms (such as share repurchase) (RMB) | 2,636,704,772 |
| Total cash dividends (inclusive of those in other forms) (RMB) (tax inclusive) | 19,824,356,592 |
| Distributable profits (RMB) | 27,719,633,000 |
| Percentage of total cash dividends (inclusive of those in other forms) in the total distributed profit (%) | 100% |
| Cash dividend policy adopted | |
| Where the Company is at a mature stage of development and has significant expenditure arrangements, cash dividends shall account for at least 40% of the total distributed profit when carrying out profit distribution. | |
| Details about the preliminary plan for profit distribution and converting capital surplus into share capital | |
| According to the Auditor’s Report PwC ZT Shen Zi (2023) No. 10017 issued by PricewaterhouseCoopers Zhong Tian LLP, the parent company realized a net profit of RMB12,530,265,000 for 2022. Pursuant to the relevant provisions under the Articles of Association, it provided 10% as statutory surplus reserve, namely RMB1,253,027,000. Plus undistributed profits at the beginning of the year of RMB28,094,420,000 and minus the profit distributed in the year of RMB11,652,025,000, the actual distributable profit would be RMB27,719,633,000. | |
11. Implementation of any Equity Incentive Scheme, Employee Stock OwnershipScheme or Other Incentive Measures for Employees
√Applicable □N/A
11.1 Equity incentive schemes
Overview of the Fifth Stock Option Incentive Schemea. The Proposal for the Retirement of Unexercised Reserved Stock Options under the Fifth StockOption Incentive Scheme upon Expiry was approved at the Seventh Meeting of the Fourth Board ofDirectors. As such, 58,000 stock options of five awardees that had been unexercised upon expirywere retired.b. The Proposal for the Retirement of Unexercised Stock Options in the First Grant under the FifthStock Option Incentive Scheme upon Expiry was approved at the Ninth Meeting of the Fourth Boardof Directors. As such, 30,270 stock options of five awardees that had been unexercised upon expirywere retired.c. At the above-mentioned meeting, the Proposal for the Retirement of Unexercised Reserved StockOptions under the Fifth Stock Option Incentive Scheme upon Expiry was approved. As such, 260,000stock options of 18 awardees that had been unexercised upon expiry were retired.d. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for theStock Option Incentive Scheme was approved. According to the arrangements in the 2021 AnnualProfit Distribution, the exercise price for the first grant under the Fifth Stock Option Incentive Schemewas revised from RMB51.88 to RMB50.21 per share, and the exercise price for the reserved stockoptions under the Fifth Stock Option Incentive Scheme was revised from RMB42.71 to RMB41.04 pershare.e. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. It was agreed to adjust the awardee list and their exercisable stock options for the firstgrant under the Fifth Stock Option Incentive Scheme due to the resignation, substandard businessunit performance, substandard individual performance, reassignment, violation of the Company’s“Red Lines”, or other factors of some awardees. Upon the adjustments, the number of locked-upstock options granted to them in the first grant under the Fifth Stock Option Incentive Scheme was
reduced from 20,380,000 to 17,447,750.f. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Third Exercise Period for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. A total of 926 awardees who are eligible for the Fifth Stock Option Incentive Scheme havebeen allowed to exercise 8,237,750 stock options in the third exercise period (ended 6 May 2023).g. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Reserved Stock Options under the Fifth Stock Option IncentiveScheme was approved. It was agreed to adjust the awardee list and their exercisable stock optionsfor the reserved stock options under the Fifth Stock Option Incentive Scheme due to the resignationof some awardees. Upon the adjustments, the number of locked-up reserved stock options granted tothem under the Fifth Stock Option Incentive Scheme was reduced from 3,270,000 to 2,835,000.h. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Second Exercise Period for the Reserved Stock Options under the Fifth Stock Option IncentiveScheme was approved. A total of 69 awardees who are eligible for the reserved stock options underthe Fifth Stock Option Incentive Scheme have been allowed to exercise 945,000 stock options in thesecond exercise period (ended 10 March 2023).During the Reporting Period, 5,298,269 shares were exercised with respect to the first grant underthe Fifth Stock Option Incentive Scheme.During the Reporting Period, 541,300 shares were exercised with respect to the reserved stockoptions under the Fifth Stock Option Incentive Scheme.Overview of the Sixth Stock Option Incentive Schemea. The Proposal for the Retirement of Unexercised Stock Options under the Sixth Stock OptionIncentive Scheme upon Expiry was approved at the Ninth Meeting of the Fourth Board of Directors.As such, 25,100 stock options of four 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 theStock Option Incentive Scheme was approved. According to the arrangements in the 2021 AnnualProfit Distribution, the exercise price for the Sixth Stock Option Incentive Scheme was revised fromRMB49.71 to RMB48.04 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Sixth Stock Option Incentive Scheme was approved. It was agreedto adjust the awardee list and their exercisable stock options under the Sixth Stock Option IncentiveScheme due to the resignation, substandard business unit performance, substandard individualperformance, reassignment, violation of the Company’s “Red Lines” or other factors of someawardees. Upon the adjustments, the number of locked-up stock options granted to them under theSixth Stock Option Incentive Scheme was reduced from 30,255,000 to 26,982,250.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Second Exercise Period for the Sixth Stock Option Incentive Scheme was approved. A total of905 awardees who are eligible for the Sixth Stock Option Incentive Scheme have been allowed toexercise 8,412,250 stock options in the second exercise period (ended 29 May 2023).During the Reporting Period, 5,476,736 shares were exercised under the Sixth Stock Option IncentiveScheme.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 Ninth Meeting of the Fourth Board of Directors.As such, 103,990 stock options of 12 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 theStock Option Incentive Scheme was approved. According to the arrangements of the 2021 AnnualProfit Distribution, the exercise price for the Seventh Stock Option Incentive Scheme was revisedfrom RMB48.86 to RMB47.19 per share.
c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Seventh Stock Option Incentive Scheme was approved. It wasagreed to adjust the awardee list and their exercisable stock options under the Seventh Stock OptionIncentive Scheme due to the resignation, substandard business unit performance, substandardindividual performance, reassignment, violation of the Company’s “Red Lines” or other factors ofsome awardees. Upon the adjustments, the number of locked-up stock options granted to them underthe Seventh Stock Option Incentive Scheme was reduced from 49,440,000 to 44,200,200.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Second Exercise Period for the Seventh Stock Option Incentive Scheme was approved. A total of1,237 awardees who are eligible for the Seventh Stock Option Incentive Scheme have been allowedto exercise 15,490,200 stock options in the second exercise period (ended 4 June 2023).During the Reporting Period, 7,137,992 shares were exercised under the Seventh Stock OptionIncentive Scheme.Overview of the Eighth Stock Option Incentive Schemea. The Proposal for the Adjustments to the Exercise Prices for the Stock Option Incentive Schemeswas approved at the Ninth Meeting of the Fourth Board of Directors. According to the arrangements inthe 2021 Annual Profit Distribution, the exercise price for the Eighth Stock Option Incentive Schemewas revised from RMB81.41 to RMB79.74 per share.Overview of the Ninth Stock Option Incentive Schemea. The Proposal on the Ninth Stock Option Incentive Scheme (Draft) of Midea Group Co., Ltd. and itsAbstract was approved at the Seventh Meeting of the Fourth Board of Directors and the 2021 AnnualGeneral Meeting of Shareholders, and the awardee list for the Ninth Stock Option Incentive Scheme(Draft) was reviewed at the Fourth Meeting of the Fourth Supervisory Committee.b. The Proposal for the Adjustments to the Exercise Price, Awardee List and Granted Number for theNinth Stock Option Incentive Scheme was approved at the Ninth Meeting of the Fourth Board of
Directors. According to the arrangements in the 2021 Annual Profit Distribution, the exercise price forthe Ninth Stock Option Incentive Scheme was revised from RMB56.28 to RMB54.61 per share. And itwas agreed to adjust the awardee list and their stock options under the Ninth Stock Option IncentiveScheme due to the resignation of some awardees. Upon the adjustments, the number of awardeesand the total stock options under the Ninth Stock Option Incentive Scheme were reduced from 2,849to 2,815, and from 109,074,000 to 107,791,000, respectively.c. On 8 June 2022, the Company granted 107,693,000 stock options to 2,813 awardees with theexercise price being RMB54.61 per share.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 Third Meeting of the Fourth Board ofDirectors and the First Extraordinary General Meeting of Shareholders of 2022 on 14 January 2022.As such, it was agreed to repurchase and retire 386,250 restricted shares that had been granted to13 awardees but were still in lockup, for the reasons of their resignation or being reassigned. Theretirement of the said restricted shares was completed on 20 April 2022.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the Ninth Meeting of the Fourth Board of Directors. According to the 2021Annual Profit Distribution Plan, the repurchase prices for the first grant under the 2018 RestrictedShare Incentive Scheme was revised from RMB23.11 to RMB21.44 per share, and the repurchaseprice for the reserved restricted shares under the 2018 Restricted Share Incentive Scheme fromRMB19.13 to RMB17.46 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of CertainIncentive Shares under the 2018 Restricted Share Incentive Scheme was approved. As such, it wasagreed to repurchase and retire 767,551 restricted shares that had been granted to 54 awardees butwere still in lockup, for the reasons of their resignation, being reassigned, violation of the Company’s“Red Lines” or other factors. The retirement was completed on 24 October 2022.
d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the First Grant under the 2018 Restricted Share Incentive Scheme wasapproved. A total of 189 awardees were eligible for this unlocking, with 2,791,699 restricted shares(0.0399% of the Company’s total existing share capital) unlocked for public trading on 28 June 2022,of which 25,000 shares, 25,000 shares, 20,000 shares, and 25,000 shares were unlocked for seniormanagement Guan Jinwei, Zhang Xiaoyi, Zhong Zheng, and Hu Ziqiang, respectively.e. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the Reserved Restricted Shares under the 2018 Restricted Share IncentiveScheme was approved. A total of 21 awardees were eligible for this unlocking, with 377,083 restrictedshares (0.0054% of the Company’s total existing share capital) unlocked for public trading on 22 June2022, of which 25,000 shares were unlocked for senior management Zhao Wenxin.f. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018Restricted Share Incentive Scheme was approved at the 14th Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 218,958 restricted shares that had beengranted to 14 awardees but were still in lockup, for the reasons of their resignation, being reassigned,violation of the Company’s “Red Lines” or other factors.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 Third Meeting of the Fourth Board ofDirectors and the First Extraordinary General Meeting of Shareholders of 2022 on 14 January 2022.As such, it was agreed to repurchase and retire 771,042 restricted shares that had been granted to18 awardees but were still in lockup, for the reasons of their resignation or being reassigned. Theretirement of the said restricted shares was completed on 20 April 2022.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the Ninth Meeting of the Fourth Board of Directors. According to the 2021Annual Profit Distribution Plan, the repurchase price for the granted restricted shares under the 2019
Restricted Share Incentive Scheme was revised from RMB22.63 to RMB20.96 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of CertainIncentive Shares under the 2019 Restricted Share Incentive Scheme was approved. As such, it wasagreed to repurchase and retire 1,348,916 restricted shares that had been granted to 81 awardeesbut were still in lockup, for the reasons of their resignation, being reassigned, substandard individualor business unit performance, violation of the Company’s “Red Lines” or other factors. The retirementwas completed on 24 October 2022.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the 2019 Restricted Share Incentive Scheme was approved. A total of 334awardees were eligible for this unlocking, with 5,247,500 restricted shares (0.0750% of theCompany’s total existing share capital) unlocked for public trading on 11 July 2022, of which 25,000shares, 30,000 shares and 25,000 shares were unlocked for senior management Zhao Wenxin,Wang Jinliang and Guan Jinwei, respectively.e. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2019Restricted Share Incentive Scheme was approved at the 14th Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 431,250 restricted shares that had beengranted to 14 awardees but were still in lockup, for the reasons of their resignation, being reassignedor other factors.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 Third Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 1,314,501 restricted shares that had beengranted to 30 awardees but were still in lockup, for the reasons of their resignation, being reassigned,violation of the Company’s “Red Lines” or other factors. The retirement of the said restricted shareswas completed on 20 April 2022.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share Incentive
Schemes was approved at the Ninth Meeting of the Fourth Board of Directors. As the 2021 AnnualProfit Distribution Plan had been carried out, the repurchase price for the restricted shares grantedunder the 2020 Restricted Share Incentive Scheme was revised from RMB22.85 to RMB21.18 pershare.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of CertainIncentive Shares under the 2020 Restricted Share Incentive Scheme was approved. As such, it wasagreed to repurchase and retire 1,914,495 restricted shares that had been granted to 154 awardeesbut were still in lockup, for the reasons of their resignation, being reassigned, violation of theCompany’s Red Lines or other factors. The retirement was completed on 24 October 2022.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the 2020 Restricted Share Incentive Scheme was approved. A total of 443awardees were eligible for this unlocking, with 7,899,587 restricted shares (0.1129% of theCompany’s total existing share capital) unlocked for public trading on 19 July 2022, of which 36,000shares, 30,000 shares and 36,000 shares were unlocked for senior management Zhao Wenxin, LiGuolin and Wang Jinliang, respectively.e. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2020Restricted Share Incentive Scheme was approved at the 14th Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 753,209 restricted shares that had beengranted to 25 awardees but were still in lockup, for the reasons of their resignation, being reassigned,violation of the Company’s “Red Lines” or other factors.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 Third Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 290,000 restricted shares that had beengranted to 7 awardees but were still in lockup, for the reasons of their resignation, being reassigned,violation of the Company’s “Red Lines” or other factors. The retirement of the said restricted shares
was completed on 20 April 2022.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the Ninth Meeting of the Fourth Board of Directors. According to the 2021Annual Profit Distribution Plan, the repurchase price for the 2021 Restricted Share Incentive Schemewas revised from RMB39.92 to RMB38.25 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of CertainIncentive Shares under the 2021 Restricted Share Incentive Scheme was approved. As such, it wasagreed to repurchase and retire 1,100,000 restricted shares that had been granted to 21 awardeesbut were still in lockup, for the reasons of their resignation, being reassigned, violation of theCompany’s “Red Lines” or other factors. The retirement was completed on 24 October 2022.d. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2021Restricted Share Incentive Scheme was approved at the 14th Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 824,500 restricted shares that had beengranted to 18 awardees but were still in lockup, for the reasons of their resignation, being reassignedor other factors.Overview of the 2022 Restricted Share Incentive Schemea. The 2022 Restricted Share Incentive Scheme (Draft) and its Abstract was approved at the SeventhMeeting of the Fourth Board of Directors. And the awardee list for the 2022 Restricted ShareIncentive Scheme (Draft) was reviewed at the Fourth Meeting of the Fourth Supervisory Committee.b. The Proposal for the Adjustments to the Grant Price, Awardee List and Granted Number for the2022 Restricted Share Incentive Scheme was approved at the Ninth Meeting of the Fourth Board ofDirectors. According to the 2021 Annual Profit Distribution Plan, the repurchase price for the 2022Restricted Share Incentive Scheme was revised from RMB28.14 to RMB26.47 per share. And it wasagreed that the number of awardees and total restricted shares under the 2022 Restricted ShareIncentive Scheme was revised from 199 to 197 awardees, and from 12,630,000 to 12,450,000 shares,respectively.
c. On 13 July 2022, the Company granted 12,152,500 restricted shares to 191 awardees with thegrant price being RMB26.47 per share, of which senior management Wang Jinliang, Li Guolin, JiangPeng and Zhao Wenxin were granted 80,000 shares each.d. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2022Restricted Share Incentive Scheme was approved at the 14th Meeting of the Fourth Board ofDirectors. As such, it was agreed to repurchase and retire 270,000 restricted shares that had beengranted to 10 awardees but were still in lockup, for the reasons of their resignation, being reassignedor other factors.Equity incentives for directors and senior management
√Applicable □N/A
Unit: share
| Name | Office title | Restricted shares held at the beginning of the Reporting Period | Unlocked shares in the Reporting Period | Restricted shares granted in the Reporting Period | Grant price of the restricted shares (RMB/share) | Restricted shares held at the end of the Reporting Period |
| Zhang Xiaoyi | Vice President | 50,000 | 25,000 | 25,000 | ||
| Hu Ziqiang | Vice President | 50,000 | 25,000 | 25,000 | ||
| Wang Jinliang | Vice President | 286,000 | 66,000 | 80,000 | 26.47 | 300,000 |
| Li Guolin | Vice President | 180,000 | 30,000 | 80,000 | 26.47 | 230,000 |
| Guan Jinwei | Vice President | 125,000 | 50,000 | 75,000 | ||
| Zhong Zheng | Vice President, CFO and Director of Finance | 40,000 | 20,000 | 20,000 | ||
| Jiang Peng | Board Secretary | 80,000 | 80,000 | 26.47 | 160,000 | |
| Zhao Wenxin | Chief People Officer | 326,000 | 86,000 | 80,000 | 26.47 | 320,000 |
| Total | -- | 1,137,000 | 302,000 | 320,000 | -- | 1,155,000 |
| Remark (if any) | 2. A total of 377,083 shares were allowed for public trading in the Second Unlocking Period for the Reserved Restricted Shares of the 2018 Restricted Share Incentive Scheme on 22 June 2022, of which senior management Zhao Wenxin unlocked 25,000 shares. 3. A total of 5,247,500 shares were allowed for public trading in the Second Unlocking Period of the 2019 Restricted Share Incentive Scheme on 11 July 2022, of which senior management Zhao Wenxin, Wang Jinliang and Guan Jinwei unlocked 25,000 shares, 30,000 shares and 25,000 shares, respectively. 4. A total of 7,899,587 shares were allowed for public trading in the Second Unlocking Period of the 2020 Restricted Share Incentive Scheme on 19 July 2022, of which senior management Zhao Wenxin, Li Guolin and Wang Jinliang unlocked 36,000 shares, 30,000 shares and 36,000 shares, respectively. 5. A total of 12,152,500 shares were granted under the 2022 Restricted Share Incentive Scheme on 8 June 2022, of which senior management Wang Jinliang, Li Guolin, Jiang Peng and Zhao Wenxin were granted 80,000 shares each. |
Appraisal mechanism and incentives for senior managementWith respect to remunerations for directors and supervisors, the Remuneration and AppraisalCommittee under the Board of Directors formulates the relevant plan, which is submitted to the Boardof Directors for approval and then to the meeting of shareholders for final approval. As forremunerations for senior management, the Remuneration and Appraisal Committee formulates therelevant plan, which is submitted to the Board of Directors for final approval.
11.2 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 Stock Ownership Scheme | 55 | 2,826,759 | N/A | 0.0404% | Special fund for the scheme and part of the performance bonuses for senior management |
Shares held by directors, supervisors and senior management under employee stock ownershipschemes during the Reporting Period
| Name | Office title | Shares held at the beginning of the Reporting Period | Shares held at the end of the Reporting Period | As a percentage of the Company’s total share capital |
| Fang Hongbo | Chairman of the Board and CEO | 5,277,672 | 7,328,039 | 0.1047% |
| 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 2021. 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/A
As 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 includedin the relevant costs/expenses and capital surplus at the fair value of the equity instruments at thegrant date 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 RMB198.02 millionfor 2022, which was included in the relevant expense items and capital surplus.Termination of employee stock ownership schemes during the Reporting Period
□Applicable √N/A
11.3 Other incentive measures for employees
□Applicable √N/A
12. Establishment and Implementation of the Internal Control System during theReporting Period
12.1 Establishment and implementation of the internal control systemDuring the Reporting Period, in line with the Basic Code for Internal Control of Enterprises and otherrelated regulations, the Company updated and improved the internal control system timely andestablished a set of internal control systems which was designed scientifically and operatedeffectively. Besides, an organization system for internal risk control and management comprising theAudit Committee and the internal audit department was set up to supervise and assess theCompany's internal control management. Through the operation, analysis, and assessment of theinternal control system, the Company effectively prevented the risks in operations management andpromoted the realization of internal control objectives.
12.2 Serious internal control defects found in the Reporting Period
□Yes √No
13. The Company’s Management and Control of Subsidiaries during the ReportingPeriod
| Company name | Consolidation plan | Consolidation progress | Problems arising in consolidation | Solutions taken | Solution implementation progress | Subsequent solutions |
| N/A | N/A | N/A | N/A | N/A | N/A | N/A |
14. Self-evaluation Report and Auditor’s Report on Internal Control
14.1 Self-evaluation report on internal control
| Disclosure date of the internal control self-evaluation report | 29 April 2023 | ||
| Index to the disclosed internal control self-evaluation report | For details, please refer to the 2022 Self-Evaluation Report on Internal Control, which has been disclosed on www.cninfo.com.cn | ||
| Ratio of the total assets of the appraised entities to the consolidated total assets | 70% | ||
| Ratio of the operating revenue of the appraised entities to the consolidated operating revenue | 70% | ||
| Defect identification standards | |||
| Type | Financial-report related | Non-financial-report related | |
| Nature standard | For details, please refer to “(c) Basis for internal control evaluation and identification standards for internal control defects” under Section III of The 2022 Self-Evaluation Report on Internal Control | For details, please refer to “(c) Basis for internal control evaluation and identification standards for internal control defects” under Section III of The 2022 Self-Evaluation Report on Internal Control | |
| disclosed on www.cninfo.com.cn dated 29 April 2023. | disclosed on www.cninfo.com.cn dated 29 April 2023. | |
| Quantitative standard | For details, please refer to “(c) Basis for internal control evaluation and identification standards for internal control defects” under Section III of The 2022 Self-Evaluation Report on Internal Control disclosed on www.cninfo.com.cn dated 29 April 2023. | For details, please refer to “(c) Basis for internal control evaluation and identification standards for internal control defects” under Section III of The 2022 Self-Evaluation Report on Internal Control disclosed on www.cninfo.com.cn dated 29 April 2023. |
| Number of serious financial-report-related defects | 0 | |
| Number of serious non-financial-report-related defects | 0 | |
| Number of important financial-report-related defects | 0 | |
| Number of important non-financial-report-related defects | 0 | |
14.2 Auditor’s report on internal control
√Applicable □N/A
| Opinion paragraph in the auditor’s report on internal control | |
| The internal control auditor holds the view that on 31 December 2022, Midea Group maintained an effective internal control of a financial report in all significant aspects based on the General Specifications of Company Internal Control and relevant specifications. | |
| Auditor’s report on internal control disclosed or not | Disclosed on www.cninfo.com.cn |
| Date of disclosing the full text of the auditor’s report on internal control | 29 April 2023 |
| Index to the disclosed full text of the auditor’s report on internal control | For details, please refer to the 2022 Auditor’s Report on Internal Control, which has been disclosed on www.cninfo.com.cn |
| Type of the auditor’s opinion | Standard & unqualified |
| Serious non-financial-report-related defects | No |
Whether any modified opinions are expressed by the accounting firm in its auditor’s report on theCompany’s internal control
□ Yes √ No
Whether the auditor’s report on the Company’s internal control issued by the accounting firm isconsistent with the self-evaluation report of the Board
√ Yes □ No
15. Remediation of Problems Identified by Self-inspection in the Special Action onthe Governance of Listed Companies
In accordance with the requirements of regulatory authorities, the Company launched a special self-inspection of the governance of listed companies that would last four months on 17 December 2020,which would review the corporate governance comprehensively from seven perspectives, namely the
basic information of the listed companies, the operation and decision-making of the organization,controlling shareholder/Actual Controller and related parties, the establishment of the system forstandardizing the internal control, information disclosure and transparency, and institutional/overseasinvestors. In addition, it identified problems and deficiencies by referring to regulations, Articles ofAssociation, and other normative documents, and saw the special self-inspection as an opportunity toimprove the governance and protect the gains of investors.This self-inspection found that the Company had no matters that had violated the national and CSRCregulations, and the corporate governance was in compliance with the laws and regulations, such asthe Company Law, the Securities Law, the Guidelines on Standardized Operation of ListedCompanies on Shenzhen Stock Exchange, and the Guidelines for Articles of Association of ListedCompanies. Besides, the structure of the corporate governance was well-developed, and theoperation was standard.The Company will inspect and update the internal control system it has released in a timely manner inaccordance with the existing laws and regulations and continuously establish and improve the internalcontrol systems so that the systems can function effectively.
Section V Environmental and Social Responsibility
1. Major Environmental Issues
Whether the Company or any of its subsidiaries is declared a heavily polluting business by the environmental protection authorities
√ Yes □ No
Policies and industry standards for environmental protection
Administrative permits in relation to environmental protectionAll subsidiaries strictly observe the laws and regulations governing environmental protection, and all construction projects are in compliance with theenvironmental effect requirements and other rules, with no misdeeds during the Reporting Period. Once a construction project is finished, a third-party testing institution is hired to examine indexes including waste water, waste gas and noise, and the compilation and approval of theenvironmental effect evaluation report is finished in 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 |
| Foshan Shunde Midea Washing Applianc | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The southern side of 2# plant in the Washing and Sterilizing Appliances Park | 34 mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) of Guangdong Province | 0.00018 | 0.228 | No |
| SS | 122.5 mg/L | 0.00048 | / | No | |||||
| BOD5 | 115.2 mg/L | 0.0012 | / | No | |||||
| Petroleum | 0.06 mg/L | 0.00045 | / | No | |||||
| Ammonia- | 0.8205mg/L | 0.00036 | 0.0576 | No |
| es Manufacturing Co., Ltd. (the Washing and Sterilizing Appliances Park) | nitrogen | ||||||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 1 | The southern side of 2# plant in the Washing and Sterilizing Appliances Park | 0.025 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) | 0.0028 | / | No | |
| Toluene and xylene | 0.54 mg/m? | 0.035 | / | No | |||||
| VOCS | 4.48 mg/m? | 0.57 | / | No | |||||
| 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 | 112 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 42.9 | 70.898 | No |
| Ammonia-nitrogen | 1.11 mg/ L | 1.05 | 2.496 | No | |||||
| BOD5 | 34.1mg/ L | 10.26 | / | No | |||||
| Petroleum | 1.43mg/ L | 0.43 | / | No | |||||
| Total phosphorus | 2.16 mg/m? | 0.52 | / | No | |||||
| Fluoride | 5.25 mg/m? | 1.02 | / | No | |||||
| Soot | 15m high altitude discharge | 45 | Plants at each workshop | 19.91 mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 7.64 | / | No | |
| Sulfur dioxide | <3mg/m? | 1.6 | / | No | |||||
| Nitrogen oxide | 18.2mg/m? | 7.9 | / | No | |||||
| Particles | High altitude discharge after being treated by waste gas treatment station | 71.15mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 203 | / | No | |||
| Xylene | <0.01mg/m? | 0.002 | / | No | |||||
| VOCs | 5.22mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 9.3 | / | 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 | 47.24mg/ L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 6.447 | / | No |
| Ammonia-nitrogen | 5.885 mg/ L | 0.350 | |||||||
| BOD5 | 39.72mg/ L | 2.3184 | |||||||
| Total nitrogen (by N) | 35.40mg/ L | 1.246 | |||||||
| Total phosphorus (by P) | 0.897mg/ L | 0.0531 | |||||||
| Anionic | 1.04mg/ L | 0.06095 | |||||||
| surfactant | |||||||||
| Suspended matters | 54.83mg/ L | 3.1398 | |||||||
| Petroleum | 0.44mg/ L | 0.02733 | |||||||
| pH value | 8.02 | / | |||||||
| NMHC | RTO equipment | 2 | 1 set at the northeastern side of 3# plant and 1 at the southwestern side of 4# plant | 2.6mg/m? | Integrated Emission Standards for Atmospheric Pollutants GB16297-1996 Level 2 | 0.33017 | / | No | |
| Water spray + activated carbon equipment | 3 | 2 sets at 1# plant and 1 set at 2# plant | 3.27 mg/m? | 0.320 | |||||
| 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 | 6.4275mg/m? | 1.2727 | |||||
| Particles | Filter cartridge dust collector | 8 | 2 at 1# plant, 3 at 2# plant, 2 at 3# plant and 1 at 4# plant | 0.81 mg/m? | 1.156 | / | 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 | 42mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 7.855 | 58.150 | No |
| Ammonia-nitrogen | The eastern side of wastewater treatment station | 1.36 mg/L | 0.91 | / | No | ||||
| Particles | 15m high altitude discharge after being treated by cyclone + filter cartridge dust collector | 2 | 1 at 2# plant, 1 at 6# plant | ＜20 mg/m? | Table 5 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Special Emission Limit Requirements | 0.28 | / | No | |
| Particles | 15m high altitude discharge after being treated by water spraying + dedusting+ UV photolysis + activated carbon | 1 | 1 at 3# plant | ＜20 mg/m? | 1.57 | / | No | ||
| NMHC | 1.52 mg/m? | 0.24 | / | No | |||||
| NMHC | 15m high altitude discharge after being treated by waste gas treatment station | 3 | 1 at 2# plant | 1.91mg/m? | 0.27 | / | No | ||
| NMHC | 15m high altitude discharge after being treated by waste gas treatment station | 6 | 6 at 6# plant | 0.89 mg/m? | 0.35 | / | No | ||
| NMHC | 15m high altitude discharge after being treated by low-temperature plasma | 2 | 1 at 1# plant, 1 at 5# plant | 1.52mg/m? | 0.23 | / | No | ||
| NMHC | 15m high altitude discharge after being treated by photocatalyst and activated carbon | 2 | 2 at 3# plant | 2.34 mg/m? | 0.45 | / | No | ||
| GD Midea Air-Conditio | COD | Discharge after being treated by wastewater treatment station | 1 | The southeastern side of 4# plant | 110 mg/L | The Discharge Standard of Water Pollutants for Electroplating (DB441597- 2015) Chart 2 PRD | 2.03 | 9.59 | No |
| Ammonia-nitrogen | 15 mg/L | 0.12 | / | No | |||||
| SS | 100 mg/L | 1.13 | / | No | |||||
| ning Equipment Co., Ltd. | Petroleum | 8 mg/L | standard | 0.085 | / | No | |||
| COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of 2# plan | 85 mg/L | The Discharge Limits of Water Pollutants (DB44/26-2001) | 5.4 | 9.59 | No | |
| SS | 58.5 mg/L | 3.65 | / | No | |||||
| Ammonia-nitrogen | 2.52 mg/L | 0.169 | / | No | |||||
| Petroleum | 5.02 mg/L | 0.33 | / | No | |||||
| VOCs (dusting) | 15m high altitude discharge after being treated by spray tower + activated carbon | 3 | 4# plant | 21.23mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.74 | 14 | No | |
| VOCs (Screen Printing) | 15m high altitude discharge after being treated by environmental protection equipment | 4 | 1#, 5#, 9#, 11# plants | 1.92 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.66 | No | ||
| VOCs (electronic) | 15m high altitude discharge after being treated by environmental protection equipment | 2 | 10# plants | 25.21mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 6.24 | No | ||
| NMHC (evaporator & condenser) | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2#, 5# plants | 25 mg/m? | Emission Limits of Air Pollutants (DB44/27- 2001) the second time period | 4.39 | No | ||
| Wuhu Maty Air-Conditioning Equipment Co., Ltd | COD | Discharge after being treated by wastewater treatment station | 1 | The northern side of the park | 98mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | 6.709 | 7.5 | No |
| SS | 46mg/L | 2.85 | / | No | |||||
| BOD | 85.2mg/L | 3.85 | / | No | |||||
| Ammonia-nitrogen | 10.2mg/L | 0.651 | 0.675 | No | |||||
| Petroleum | 1.01mg/L | / | / | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2# plant | 10mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 8.43 | / | No | |
| VOCs | 8 | 2#, 3# plants | 10.4mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 0.066 | / | No | ||
| NOx | 3 | 3# plant | 7.7mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 2.041 | 2.209 | No | ||
| SO2 | 3 | 3# plant | 1.5mg/m? | 0.61 | / | 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 | 34mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 15.27 | 16.28 | No |
| Suspended matters | 6mg/L | 2.93 | / | No | |||||
| Petroleum | 0.56mg/L | 0.604 | / | No | |||||
| Total phosphorus | 0.22mg/L | 0.23 | / | No | |||||
| Total zinc | ND | 0.031 | / | No | |||||
| pH value | 7.9mg/L | 3.07 | / | No | |||||
| Total nitrogen | 1.3mg/L | 1.05 | / | No | |||||
| Ammonia-nitrogen | 0.737mg/L | The discharge limits of water pollutants in Guangdong DB44/26-2001 | 0.194 | 2.034 | No | ||||
| Fluoride | 0.44mg/L | 0.106 | / | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of the plant | 17.04mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace（GB 9078-1996） | 27.602 | / | No | |
| SO2 | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 1.5mg/m? | Emission Standard of Air Pollutants for Boiler （DB44/765-2019） | 0.305 | 0.436 | No | |
| NOx | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 6.16mg/m? | 1.914 | 2.039 | No | ||
| VOCs | 15m high altitude discharge after being treated by environmental protection equipment | 10 | Roof of the plant | 3.6516mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry （DB44/816-2010） | 3.977 | 4.553 | No | |
| Benzene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of the plant | 0.0299mg/m? | 0.0144 | / | No | ||
| Total toluene and xylene | 15m high altitude discharge after being treated by environmental protection equipment | Roof of the plant | 0.317mg/m? | 0.168609 | / | 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 | 36mg/L | The Discharge Standard of Water Pollutants for Electroplating of Guangdong Province DB-441597-2015, before 1 September 2012 | 5.895 | 6.046 | No |
| Suspended matters | 9.3mg/L | 1.528 | / | No | |||||
| Petroleum | 0.81mg/L | 0.134 | / | No | |||||
| Total | 0.44mg/L | 0.072 | / | No | |||||
| phosphorus | |||||||||
| Total zinc | 0.0525mg/L | 0.028 | / | No | |||||
| pH value | 7.25mg/L | / | / | No | |||||
| Total nitrogen | 4.49mg/L | 0.737 | / | No | |||||
| Ammonia-nitrogen | 2.309mg/L | 0.378 | 0.756 | No | |||||
| Fluoride | 0.341mg/L | 0.056 | / | No | |||||
| Total nickel | ND | 0.008 | 0.024 | No | |||||
| Particles | Over-15m high altitude discharge after being treated by environmental protection equipment | 17 | Roof of main plant and metal plate workshop | 17.17mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace（GB 9078-1996） | 7.078 | 8.705 | No | |
| SO2 | Over-15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 0.75mg/m? | Emission Standard of Air Pollutants for Boiler （DB44/765-2019） | 0.484 | 0.799 | No | |
| NOx | Over-15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 4.45mg/m? | 4.64 | 7.814 | No | ||
| Benzene | Over-15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.117mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry （DB44/816-2010） | 0.053 | / | No | |
| Total toluene and xylene | Over-15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.617mg/m? | 0.282 | / | No | ||
| VOCs | Over-15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of main plant and metal plate workshop | 2.63mg/m? | 3.069 | 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 | 52.5 mg/L | Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 4.397 | 15.304 | No |
| Petroleum | 0.17 mg/L | 0.013 | / | No | |||||
| Ammonia-nitrogen | 0.53 mg/L | 0.466 | 1.913 | No | |||||
| Total toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 7 | Waste gas sprayers 1 and 2 at 3# plant, outlets 1, 2 and 3 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 | 0.36311 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 | 2.850 | / | No | |
| VOCs | High altitude discharge after being treated by waste gas treatment station | 3.5992mg/m? | 10.652 | 22.72 | No | ||||
| NMHC | High altitude discharge after being treated by waste gas treatment station | 2 | Outlet of injection molding waste gas in the south side of 1# plant, outlet of injection molding waste gas in the south side of 9# plant | 0.4038 mg/m? | Table 4 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.156 | / | 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 | 0.4231mg/m? | Table 2 of the Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2 | 0.158 | / | No | |
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 2 | Oxidation wire roof of 3# plant | 4.75 mg/m? | 0.095 | 3.8231 | No | ||
| Oxynitride | Drying furnace of 3# plant | 3..31 mg/m? | 0.881 | 13.132 | No | ||||
| Cooking fume | Discharge after being treated by waste gas treatment station | 2 | South and north section canteens | 0.29 mg/m? | Emission Standard of Cooking Fume (Trial) (GB 18483-2001) | 0.110 | / | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | CODcr | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Sewage treatment station | 28mg/L | Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 2.589 | 4.8 | No |
| Petroleum | 0.06mg/L | 0.00486 | / | No | |||||
| SS | 18.5mg/L | 1.2250 | / | No | |||||
| Ammonia-nitrogen | 0.7885mg/L | 0.375 | 0.96 | No | |||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 1 | Spraying waste gas outlet at 1# plant | 0.01 mg/m? | Table 1 of the Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010): Discharge Limits for VOCs through Exhaust Funnel/for Time Period II | 0.000514 | / | No | |
| Toluene | High altitude discharge after being treated by waste gas treatment station | 0.09 mg/m? | 0.00502 | / | No | ||||
| Xylene | High altitude discharge after being treated by waste gas treatment station | 1.08 mg/m? | 0.0154 | / | No | ||||
| Total toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 1.17 mg/m? | 0.0204 | / | No | ||||
| VOCs | High altitude discharge after being treated by waste gas treatment station | 4.45 mg/m? | 0.1764 | 0.61 | No | ||||
| NMHC | High altitude discharge after being treated by waste gas treatment station | 2 | Injection molding waste gas outlet in the southern side of 2# plant, injection molding waste gas outlet in the northern side of 2# plant | 0.5575 mg/m? | Table 4 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.10199 | 0.104 | No | |
| Particles | Pulse bag dust collecting | 7 | Polishing waste gas outlet of 1# plant | 0.45 mg/m? | Table 2 of the Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2 | 0.0636 | / | No | |
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 1 | Drying furnace of 1# plant | <3 mg/m? | 0.02325 | 0.028 | No | ||
| Oxynitride | High altitude discharge after being treated by waste gas treatment station | <3 mg/m? | Emission Standard of Air Pollutants for Boiler （DB44/765-2019） | 0.0938 | 0.131 | No | |||
| Cooking fume | Discharge after being treated by waste gas treatment station | 1 | Canteen of 1# plant | 0.575 mg/m? | Emission Standard of Cooking Fume (GB 18483-2001) | 0.01425 | / | No | |
| Anhui Meizhi Compressor Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The western side of the comprehensive wastewater treatment station | 16 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 6.80 | / | No |
| Ammonia-nitrogen | 0.207 mg/L | 0.12 | / | No | |||||
| Particles | Collected by gas trap hood+15m high exhaust cylinder | 13 | No. 1 workshop welding soot discharge outlet for waste gas | 7.0mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 10.61 | 65.45 | No | |
| No. 3 workshop discharge outlet for the welding waste gas | 5.2 mg/m? | ||||||||
| Waste gas outlet of 1# heat-treating furnace at No. 2 workshop | 7.1 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 | 6.4 mg/m? | ||||||||
| Waste gas outlet for die casting at No. 2 workshop | 7.5 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | |||||||
| Waste gas outlet for die casting at No. 4 workshop | 4.6 mg/m? | 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 | 6.6 mg/m? | ||||||||
| Waste gas outlet of 2# heat-treating furnace at No. 4 workshop | 5.2 mg/m? | ||||||||
| Waste gas outlet for electrophoresis and drying at No. 1 workshop | 7.3 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | |||||||
| Waste gas outlet for electrophoresis and drying | 6.4 mg/m? | Integrated Emission Standards for Atmospheric | |||||||
| at No. 3 workshop | Pollutants (GB16297-1996) | |||||||
| Waste gas outlet of 1#-3# furnaces | 4.7 mg/m? | Emission Standard of Air Pollutants for Boiler （GB13271-2014） | ||||||
| Sulfur dioxide | Collected by gas trap hood+15m high exhaust cylinder | 9 | Waste gas outlet of 1#-3# furnaces | <3 mg/m? | Emission Standard of Air Pollutants for Boiler （GB13271-2014） | 39.66 | 112.2 | No |
| Outlet of 1# heat-treating furnace at No. 2 workshop | 111 mg/m? | Air Pollutant Emission Standards (GB16297-1996) Standard Level 2 | ||||||
| Outlet of 2# heat-treating furnace at No. 2 workshop | 66 mg/m? | |||||||
| Waste gas outlet for die casting at No. 2 workshop | 8 mg/m? | |||||||
| Outlet of 1# heat-treating furnace at No. 4 workshop | 90 mg/m? | |||||||
| Outlet of 2# heat-treating furnace at No. 4 workshop | 32 mg/m? | |||||||
| Waste gas outlet for die casting at No. 4 workshop | 9 mg/m? | |||||||
| Oxynitride | Collected by gas trap hood+15m high exhaust cylinder | 9 | Waste gas outlet of 1#-3# furnaces | 25 mg/m? | Emission Standard of Air Pollutants for Boiler （GB13271-2014） | 12.77 | 33.24 | No |
| Outlet of 1# heat-treating furnace at No. 2 workshop | 29 mg/m? | Air Pollutant Emission Standards (GB16297-1996) Standard Level 2 | ||||||
| Outlet of 2# heat-treating furnace at No. 2 workshop | 18 mg/m? | |||||||
| Waste gas outlet for die casting at No. 2 workshop | 18 mg/m? | |||||||
| Outlet of 1# heat-treating furnace at No. 4 workshop | 6 mg/m? | |||||||
| Outlet of 2# heat-treating furnace at No. 4 workshop | <3 mg/m? | |||||||
| Waste gas outlet for die casting at No. 4 workshop | 5mg/m? | |||||||
| VOCs | Direct-fired waste gas incinerator+15m high exhaust cylinder | 4 | Waste gas outlet of the drying furnace at No. 1 workshop | 1.64 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/ 524-2020) | 1.94 | 21.6 | No |
| Waste gas outlet of 1# drying furnace at No. 3 workshop | 25.0 mg/m? | |||||||
| Die casting at No. 2 workshop | 0.66 mg/m? |
| Die casting at No. 4 workshop | 0.86 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 | 0.255 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 1.32 | / | No | |
| Total VOCs | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | 3.17mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 1.74 | 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 | 38 mg/L | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010)/Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010)/Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015)/Guangdong Province Emission Limits of Air Pollutants (DB44/27-2001)/Emission Standard | 9.50 | 22.77 | No |
| Ammonia-nitrogen | 0.439 mg/L | 0.077 | 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 | 0.52 mg/m? | 1.376 | / | No | ||
| Sulfur dioxide | 7 mg/m? | 0.763 | 1.055 | No | |||||
| Oxynitride | 9 mg/m? | 4.21 | 10.314 | No | |||||
| Benzene | ND | 0.079 | / | No | |||||
| Total toluene and xylene | 0.45 mg/m? | 3.42 | / | No | |||||
| VOCs | 6.07 mg/m? | 17.8 | 35.051 | No | |||||
| NMHC | 3.99 mg/m? | 0.28 | / | No | |||||
| Styrene | 3.847mg/m? | 0.931 | / | No | |||||
| Fume | 15m high altitude discharge after being treated by oil fume purification facility and reaching the standard | 0.05 mg/m? | 0.0322 | / | No | ||||
| of Volatile Organic Compounds for Printing Industry (DB44/815-2010)/Emission Standard of Cooking Fume (on Trial) (GB18483-2001) | |||||||||
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | Particles | Collected by gas trap hood + dust collector + activated carbon +15m high exhaust cylinder | 3 | Exhaust funnels 1-3 for mold injection | 20 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 3.029 | / | No |
| VOCs | Collected by gas trap hood+15m high exhaust cylinder | 1 | Die casting waste gas outlet | 0.91 mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) | 4.6152 | / | No | |
| VOCs | Adsorption and desorption catalytic combustion treatment equipment + 15m high exhaust cylinder | 1 | Exhaust funnels for dip coating | 0.98mg/m? | Hebei Province Standard DB13/2322-2016 The Concentration Limits at Emission Reference Point for Coating Operations | 2.064 | / | No | |
| COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | General wastewater outlet | 40mg/m? | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | 1.8144 | / | No | |
| Ammonia-nitrogen | 20 mg/m? | 0.5184 | / | No | |||||
| BOD | 7.4 mg/m? | 1.2926 | / | No | |||||
| SS | 9 mg/m? | 0.4686 | / | No | |||||
| Petroleum | 0.45 mg/m? | 0.1201 | / | No | |||||
| Anhui Meizhi Precision Manufacturing Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The south side of Building 6 for night shift at the north side of the plant area | 116.4mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | 87.8 | / | No |
| Ammonia-nitrogen | 16.1mg/L | 12.1 | / | No | |||||
| BOD | 41.1mg/L | 31.0 | / | No | |||||
| SS | 15.6mg/L | 11.7 | / | No | |||||
| Petroleum | 0.58 mg/L | 0.44 | / | No | |||||
| Particles | Collected by gas trap hood +21m high exhaust cylinder | 10 | Welding waste gas outlet 1# | 11.6 mg/m? | Requirements in Table 1 of Integrated Emission Standards of Air Pollutants of Shanghai (DB31/933-2015) | 13.04 | / | No | |
| Welding waste gas outlet 2# | 9.4 mg/m? | ||||||||
| Collected by gas trap hood +21m high exhaust cylinder | Heat-treating furnace 1# | 12.4mg/m? | Integrated emission standards for atmospheric pollutants GB16297-1996, chart 2, Level 2 | ||||||
| Heat-treating furnace 2# | 13.8 mg/m? | ||||||||
| Heat-treating furnace 3# | 15.0 mg/m? | ||||||||
| Heat-treating furnace | 13.2mg/m? | ||||||||
| Drying waste gas outlet 1# | 5.6mg/m? | ||||||||
| Drying waste gas outlet 2# | 8.1mg/m? | ||||||||
| Drying waste gas outlet 3# | 8.5 mg/m? | ||||||||
| Drying waste gas outlet 4# | 9.4mg/m? | ||||||||
| Sulfur dioxide | Collected by gas trap hood +21m high exhaust cylinder | 8 | Heat-treating furnace 1# | 3.8 mg/m? | Emission limit standards for other industrial furnaces and kilns in the Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q.[2019] NO.56) | 2.31 | / | No | |
| Heat-treating furnace 2# | 3.6 mg/m? | ||||||||
| Heat-treating furnace 3# | 3.4mg/m? | ||||||||
| Heat-treating furnace | 2.9 mg/m? | ||||||||
| Drying waste gas outlet 1# | 3.0mg/m? | ||||||||
| Drying waste gas outlet 2# | 2.6 mg/m? | ||||||||
| Drying waste gas outlet 3# | 3.6mg/m? | ||||||||
| Drying waste gas outlet 4# | 3.1 mg/m? | ||||||||
| Oxynitride | Collected by gas trap hood +21m high exhaust cylinder | 8 | Heat-treating furnace 1# | 11.8mg/m? | 4.07 | / | No | ||
| Heat-treating furnace 2# | 4.6mg/m? | ||||||||
| Heat-treating furnace 3# | 1.5 mg/m? | ||||||||
| Heat-treating furnace | 11.25 mg/m? | ||||||||
| Drying waste gas outlet 1# | 10.6 mg/m? | ||||||||
| Drying waste gas outlet 2# | 1.5 mg/m? | ||||||||
| Drying waste gas outlet 3# | 7 mg/m? | ||||||||
| Drying waste gas outlet 4# | 5.8 mg/m? | ||||||||
| VOCs | Direct-fired waste gas incinerator+21m high exhaust cylinder | 2 | Drying waste gas outlet 1# | 8.1 mg/m? | NMHC emissions meet the relevant standard limit requirements in Table 1 of Shanghai Integrated Emission Standards for Atmospheric Pollutants (DB31/933-2015) | 6.88 | / | No | |
| Drying waste gas outlet 2# | 12.3mg/m? | ||||||||
| Adsorption and desorption catalytic combustion +21m high exhaust cylinder | 2 | Drying waste gas outlet 3# | 11.5 mg/m? | ||||||
| Drying waste gas outlet 4# | 11.1 mg/m? | ||||||||
| GD Midea Environment Appliances Mfg. Co.,Ltd. | VOCs | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 2 | During the screen printing process | 2.28 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.888 | / | No |
| Dry filtering + direct combustion of natural gas +15m high altitude discharge | 2 | Outlet for waste gas from dip coating, drying and hardening | 26.02mg/m? | Emission Standards for Odor Pollutants GB14554-93 | 2.651 | 3.42 | No | ||
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the manual welding process | 4.33mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.121 | / | No | ||
| NMHC | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude | 6 | Exhaust funnel for waste gas from the baking and | 3.45 mg/m? | Emission Standards of Industrial Pollutants in the | 5.354 | / | No | |
| discharge | injection molding processes | Synthetic Resin Industry（BG 31572-2015） | |||||||
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 3 | Metal plate dusting waste gas exhaust cylinder | 4.62 mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（BG 31572-2015） | 1.699 | / | No | ||
| Particles | Gas trap hood + water spraying + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | Dusting waste gas | 1.53mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.201 | / | No | |
| Cooking fume | Fume hood + electrostatic range hood + 15m high altitude discharge | 7 | Cooking fume outlet at canteen | 0.47 mg/m? | Emission Standard of Cooking Fume GB18483-2001 | 0.116 | / | No | |
| Suspended matters | Oil separation and slagging - hydrolysis and acidification - contact oxidation - MRB | 1 | Domestic wastewater treatment station | 6.67 mg/L | Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant GB18918-2002 | 0.211 | |||
| COD | 19.12 mg/L | 0.558 | / | No | |||||
| Animal and vegetable oil | 0.19 mg/L | 0.016 | / | No | |||||
| Ammonia-nitrogen（NH3- N) | 0.093 mg/L | 0.9121 | / | No | |||||
| pH value | 7.16 mg/L | / | / | No | |||||
| Five-day BOD | 7.05mg/L | 0.223 | / | No | |||||
| Total zinc | Coagulation and sedimentation + hydrolysis and acidification + aeration + biological tank + MBR + water reuse | 1 | Domestic wastewater treatment station | 0.0079 mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 0.01064 | / | No | |
| COD | 8.49 mg/L | 0.655 | / | No | |||||
| Suspended matters | 5 mg/L | 0.408 | / | No | |||||
| pH value | 7.67 mg/L | / | / | No | |||||
| Total phosphorus（by P ) | 0.01 mg/L | 0.4121 | / | No | |||||
| Ammonia-nitrogen（NH3-N) | 0.28mg/L | 0.0207 | 1.724 | No | |||||
| Petroleum | 0.03 mg/L | 0.00245 | / | No | |||||
| Total aluminum | 0.13 mg/L | 0.0106 | / | No | |||||
| Total iron | 0.051mg/L | 0.00416 | / | No | |||||
| Wuxi Little Swan Electric Co., Ltd. | COD | Discharge to municipal sewage network | 1 | Exit at the middle gate of the plant | 176.75 mg/L | Integrated Wastewater Discharge Standard（GB8978-1996） | 83.87 | 123.8994 | No |
| SS | 59 mg/L | 33.31 | 87.2473 | No | |||||
| Animal and vegetable | 1.54mg/L | 2.27 | 10.7034 | No |
| oil | |||||||||
| Total phosphorus | 1.8mg/L | 0.75 | 1.0701 | No | |||||
| Total nitrogen | 25.13mg/L | 9.14 | 11.2612 | No | |||||
| Ammonia-nitrogen | 20.1mg/L | 6.38 | 6.6906 | No | |||||
| Particles | Water spraying + UV + activated carbon + Filter cartridge dust collector +15m high altitude discharge Grade 2 activated carbon+15m high altitude discharge Dry Filtering + electrostatic degreasing + 15m high altitude discharge Pulse dust collecting +15m high altitude discharge | 11 | 2. Buildings A and D 3. Painting workshop 4. Injection molding workshop of Building C 5. Crushing workshop of Building C | 1.65mg/m? | Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds DB12/524-2014/ Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015）/Emission Standard of Air Pollutants for Boiler （GB13271-2014） | 0.3814 | 2.0696 | No | |
| VOCS | 12.11mg/m? | 0.9011 | 1.2218 | No | |||||
| Sulfur dioxide | 22.5mg/m? | 0.42 | 0.624 | No | |||||
| Oxynitride | 30.5mg/m? | 0.4879 | 3.38 | No | |||||
| Huaian Welling Motor Manufacturing Co., Ltd. | Particles | 8#: Grade 3 filtering + Grade 2 activated carbon | 2 | 8# waste gas outlet: outside the reactor dip coating room | 2.4 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 0.1565 | 2.697 | No |
| NMHC | 4.6mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 0.8038 | 1.3853 | No | ||||
| Styrene | ND | Emission Standards for Odor Pollutants (GB14554-93) | 0.002 | 0.032 | No | ||||
| Midea Group Wuhan Refrigeration Equipment Co.,Ltd. | pH value | Discharge after being treated by wastewater treatment station and reaching the standard | 1 | West Gate 2 of 4# plant on the west side of plant areas | 7.2 mg/L | Integrated Wastewater Discharge Standard GB8978-1996 | 7.2 | / | No |
| COD | 108 mg/L | 7.07 | 19.60 | No | |||||
| Ammonia-nitrogen | 0.638 mg/L | 0.0105 | 1.764 | No | |||||
| Suspended matters | 27 mg/L | 1.464 | / | No | |||||
| Petroleum | 4.05 mg/L | 0.1515 | / | No | |||||
| Total phosphorus | 0.39 mg/L | 0.0059 | / | No | |||||
| Fluoride | 7.08 mg/L | 0.145 | / | No | |||||
| Total zinc | 0.25 mg/L | 0.0467 | / | No | |||||
| BOD5 | 22.6 mg/L | 1.618 | / | No | |||||
| Particles | Discharge after being treated by environmental protection equipment | 21 | 1# plant, 3# plant, 4# plant, 5# plant | 9.8 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 3.64 | 6.09 | No | |
| Sulfur dioxide | 16 | 4 mg/m? | 0.94 | 1.56 | No | ||||
| Oxynitride | 16 | 12 mg/m? | 3.57 | 5.9 | No | ||||
| Tin and its compounds | 3 | 3# plant | 5.92*10-4 mg/m? | 0.00041 | / | No | |||
| Acrylonitrile | 3 | 0 mg/m? | 0 | / | No | ||||
| Styrene | 3 | 0.098 mg/m? | 0.0554 | / | No | ||||
| VOCs | 10 | 1# plant | 18.5 mg/m? | 2.708 | / | 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? | 2) Sulfur dioxide/nitrogen oxides/particles: Implementation of the new furnace standards in Table 1 and Table 2 of Emission Standard of Air Pollutants for Industrial Kiln and Furnace (DB13/1640-2012) 3) Tin and its compounds: Implementation of the requirements of Level 2 in the Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 5.6 | / | No |
| Particles | 7 | 1#, 2#, 3# plants | 1.98 mg/m? | 1.29 | / | No | |||
| Oxynitride | 7 | 1#, 2#, 3# plants | 7.67 mg/m? | 4.75 | 0.42 | No | |||
| Sulfur dioxide | 7 | 1#, 2#, 3# plants | < 3 mg/m? | 1.77 | 3.241 | No | |||
| Tin and its compounds | 4 | 2# plant | <3*10-6mg/m? | 1.5*10-6 | / | No | |||
| COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | North side of the power house | 43.67 mg/L | Requirements for inflow water quality of wastewater treatment plant in Handan Economic and Technological Development Zone | 0.7559 | 8.97 | No | |
| Ammonia-nitrogen | 1 | 4.33mg/L | 0.075 | 0.7 | No | ||||
| pH | 1 | 7.34 | / | / | No | ||||
| Suspended matters | 1 | 9mg/L | 0.1558 | / | No | ||||
| Petroleum | 1 | 0.44mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 | 0.0076 | / | No | |||
| Fluoride | 1 | 1.04 mg/L | 0.018 | / | No | ||||
| Level 3 | ||||||||||
| Wuxi Filin Electronics Co., Ltd. | COD | Discharged to the municipal sewage network | 1 | Exit at the southeast gate of the plant | 4 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 0.084 | 0.09462 | No | |
| SS | 4 mg/L | 0.084 | 0.09462 | No | ||||||
| Animal and vegetable oils | 0.06mg/L | 0.00126 | 0.001419 | No | ||||||
| Total phosphorus | 0.01mg/L | 0.00021 | 0.000237 | No | ||||||
| Total nitrogen | 0.05mg/L | 0.00105 | 0.001185 | No | ||||||
| Ammonia nitrogen | 0.025mg/L | 0.000525 | 0.000592 | No | ||||||
| Particles | Activated carbon treatment + 33m high altitude discharge | 4 | 3 and 4 at Building B | 0 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) for particles and chemical compounds, and Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/524-2014) for VOCs | 0 | 0.2879 | No | ||
| VOCS | 20 mg/m? | 3.25 | 3.57 | No | ||||||
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | pH value | Treatment by waste water treatment station and reaching the standard | 1 | West gate | 7.7 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | / | / | No | |
| COD | 293 mg/L | 3.736 | 76.63 | No | ||||||
| SS | 9 mg/L | 0.712 | / | No | ||||||
| NH3-N | 20.5 mg/L | 0.2614 | 5.32 | No | ||||||
| Petroleum | 0.24 mg/L | 0.005 | / | No | ||||||
| Fluoride | 11.5 mg/L | 0.13 | / | No | ||||||
| BOD5 | 121 mg/L | 1.4 | / | No | ||||||
| LAS | 0.105 mg/L | 0.002 | / | No | ||||||
| Total zinc | 0.03 mg/L | 0.0008 | / | No | ||||||
| Animal and vegetable oil | 0.43 mg/L | 0.004 | / | No | ||||||
| Particles | After treatment by environmental | 11 | East, west, south and | 9.9 mg/m? | Integrated Emission | 15.06 | / | No | ||
| SO2 | protection and treatment facilities and reaching the standard, 25m high altitude discharge | north corners of the plant | 5 mg/m? | Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 1.595 | / | No | ||
| NOX | 14 mg/m? | 3.942 | / | No | |||||
| Tin and its compounds | 0.27 mg/m? | 0.342 | / | No | |||||
| NMHC | 2.5 mg/m? | 5.66 | / | 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 | 7.97 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) Chart 4 Level 3 | / | / | No |
| Suspended matters | 13.5mg/L | 1.659 | / | No | |||||
| COD | 160.25mg/L | 19.696 | / | No | |||||
| Ammonia-nitrogen（NH3-N） | 6.01mg/L | 0.739 | / | No | |||||
| Animal and vegetable oil | 1.2mg/L | 0.148 | / | No | |||||
| Petroleum | 0.46mg/L | 0.057 | / | No | |||||
| Five-day BOD | 63.6mg/L | 7.817 | / | No | |||||
| Anionic surfactant | 0.25mg/L | 0.031 | / | No | |||||
| Phosphate | 0.09mg/L | 0.011 | / | No | |||||
| Fluoride | 2.96mg/L | 0.364 | / | No | |||||
| Particles | High altitude discharge after being treated by waste gas treatment station | 4 | 2 sets for paint waste gas of 1# and 4# plants each | 12.464mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 3.702 | / | No | |
| Toluene | 0.224mg/m? | 0.055 | / | No | |||||
| Xylene | 0.044mg/m? | 0.013 | / | No | |||||
| NMHC | 2.401mg/m? | 0.662 | / | No | |||||
| Particles | Filter cartridge dust collector | 9 | 5 sets for 1# plant and 4 sets for 4# plant | 12.6 mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 3.285 | / | No | |
| Direct discharge | 2 | Brazing waste gas outlets for 2# and 4# plants | |||||||
| Sulfuric acid mist | Lye spray tower | 2 | Acid pickling waste gas outlets for 1# and 4# plants | 0.772 mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 0.0083 | / | No | |
| Hydrogen Chloride | 6.086 mg/m? | 0.0690 | / | No | |||||
| Particles | 1 set of RTO | 2 | Volatile oil drying waste gas outlet | 15.925 mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace DB 50/659-2016 Table 1/2 | 0.134 | / | No | |
| Sulfur dioxide | 7.75 mg/m? | 0.066 | / | No | |||||
| Oxynitride | 28.75 mg/m? | 0.234 | / | No | |||||
| NMHC | 4.38 mg/m? | 0.052 | / | No | |||||
| Hefei branch of Hefei Hualing Co., Ltd. | COD | After deep treatment by industrial waste water treatment station, discharge to municipal sewage network with domestic sewage | 1 | Freezer waste water outlet | 15mg/L | Takeover standards of the Western Group wastewater treatment plant | 6.85 | 9.53 | No |
| Ammonia-nitrogen | 0.3mg/L | 2.8 | / | No | |||||
| BOD | 2.8mg/L | 15 | / | No | |||||
| SS | 5mg/L | 8.21 | / | No | |||||
| Petroleum | / | 2.05 | / | No | |||||
| Phosphate | 0.08mg/L | 1.02 | / | No | |||||
| Total zinc | 0.35mg/L | 0.65 | / | No | |||||
| Fluoride | 1.3mg/L | 1.52 | / | No | |||||
| pH | 7.1 mg/L | / | / | No | |||||
| NMHC | After photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | Screen printing waster gas outlet | 6.1mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.32 | / | No | |
| NMHC | 1 | 5# plastic uptake/foaming waster gas outlet | 2.4mg/m? | 0.16 | / | No | |||
| Particles | After filter cartridge dust collector + activated carbon, 15m high altitude discharge | 2 | Welding waste gas outlets of 7# and 8# plants | 12mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.38 | / | No | |
| Particles | After filter cartridge dust collector, 15m high altitude discharge | 1 | Crushing waste gas outlet | 9.8mg/m? | 0.35 | / | No | ||
| NMHC | After Grade 2 activated carbon, 15m high altitude discharge | 2 | Foaming waste gas outlets of 7# and 8# plants | 34mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015） | 1.86 | / | No | |
| Odor concentration | 549mg/m? | Emission Standards for Odor Pollutants（GB14554-93）Table 1 | / | / | No | ||||
| NMHC | After Grade 2 activated carbon, 15m high altitude discharge | 1 | 7# plastic uptake waster gas outlet | 7.3mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015） | 0.75 | / | No | |
| After dry filtering + photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | 8# plastic uptake waster gas outlet | 11mg/m? | 0.96 | / | No | |||
| After spray tower + demister + photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | Spraying waste gas outlet | 7.1mg/m? | 0.56 | / | No | |||
| Guangzhou Hualing Refrigera | Waste mineral oil, waste oil-containing | treatment entrusted to third-party qualified enterprise | N/A | N/A | N/A | N/A | 164.636 | 185.523 | No |
| ting Equipment Co.,ltd. | liquid, waste packaging, waste activated carbon, waste lead battery, waste filter cotton, waste circuit board, etc |
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 wasteduring the production and operation process meets the national and local laws and regulations. There is no excessive discharge by any subsidiary,which is in compliance with the relevant requirements of the environment administrations.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 after
being treated at the waste water treatment stations. Monitoring items include CODcr, SS and petroleum, etc. The data is uploaded to thegovernmental monitoring authority online and the government authority conducts real-time monitoring; 3) Noise monitoring: Noise monitoring pointsare set at noise sensitive points and on the border of factories. Noise is monitored once in spring and summer respectively and at daytime and atnighttime respectively each time; 4) Solid waste pollution source monitoring: Hazardous waste produced from the subsidiaries is handed over to theunits with qualifications for treatment, monitoring systems are established, and related management forms and accounts are set up.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 accidentshas been enhanced, so as to maintain social stability, protect the lives, health and properties of the public, protect the environment, and promote acomprehensive, coordinated and sustainable development of the society.According to the accident levels, subsidiaries have formulated rules covering working principles, contingency plans, risk prevention measures,commanding departments, responsibilities and labor division, and have filed these contingency plans with the government.Spending on environmental management and protection and payment of environmental protection taxThe Company played an active role in environmental management and protection during the Reporting Period, with total spending of approximatelyRMB256.39 million in this respect for the year.Measures taken to reduce carbon emissions during the Reporting Period and the results
√ Applicable □ N/A
a. The Group's manufacturing plants combined have an installed capacity of 187MW of distributed PV, with 87MW under construction. Approximately210 million kWh of PV power was generated in 2022, reducing carbon emissions by about 168,000 tons of CO2.b. All manufacturing plants kept improving their energy management systems and carried out work related to ISO 50001 (GB23331) certification. Asof December 2022, 35 plants have been certified. The certification of the energy management systems has greatly improved the energymanagement 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 and low-carbon technologies, as well as the implementation of therelated projects. Energy saving and emission reduction projects are promoted from eight major scenarios such as injection moulding, sheet metal,electronics, compressed air, central air conditioning, optical storage, labs, and energy management platform. As confirmed by the relevant plants’financial departments, the energy saving and emission reduction projects produced an income of over RMB100 million.Administrative penalties received during the Reporting Period due to environmental issues
□Applicable √N/A
Other environment-related information that should be made publicNone
Other environment-related informationNone
2. Corporate Social Responsibility (CSR)
The Company has voluntarily disclosed its CSR activities. Attaching great importance to protecting the legal rights and interests of its shareholders,employees, consumers and business partners, as well as the government, the community and other stakeholders, the Company sticks to harmoniouscommon growth with them, honors its commitments, abides by law and moral principles, and continue to contribute to the sustainable development ofthe society and the environment. For further information, see the Company’s ESG Report 2022 released on www.cninfo.com.cn.
3. Efforts in Poverty Alleviation and Rural Revitalization
3.1 Support for rural revitalization
In 2022, Midea Group actively responded to the call for rural revitalization and implemented the East China and West China coordination policy bydonating RMB10 million to Qiandongnan Prefecture in Guizhou Province, which was used to help the students and teachers in the region for bettereducational development.Besides the existing support projects, Midea Group continued its efforts in this regard and spent a total of over RMB2 million to help revitalise thecountryside and consolidate the results of poverty alleviation. In particular, RMB550,000 was used for the renovation of a farming and cultural tourismdemonstration base in Sansui County, Qiandongnan Prefecture, Guizhou Province, as well as for the renovation of a bridge in Xuedong Town,helping to improve the efficiency of the local agricultural production and facilitate the local people.
3.2 Support for educational development
Midea has been donating RMB100,000 to the Dandelion School (specialized school for the children of rural migrant workers) in Beijing for threeconsecutive years from 2021 to 2023. The donated money would be used to improve education in the school and the living conditions of the studentsand teachers of the school, support teacher cultivation plans, fund and cultivate volunteers for the school, etc. With the support from Midea andvarious caring individuals and organisations, the school officially opened in 2006 and 92 students graduated in the class of 2022, all of whom choseto continue their education. 61 of them went on to high school and the rest 31 to vocational high school. This has helped solve the problem ofeducation for the children of migrant workers.
3.3 Subsequent plans
In 2023, Midea will focus on rural revitalisation, helping to do a good job in the economic development of the rural areas while collaborating with localgovernments to fully explore the local ecological, social and cultural values based on local conditions, mobilising local farmers to actively participatein rural reform and accelerating the modernisation of agriculture and rural areas.
Section VI Significant Events
1. Performance of Undertakings
1.1 Undertakings of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and othercommitment makers fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable □ N/A
| Undertaking | Undertaking giver | Type of undertaking | Details of undertaking | Undertaking date | Term | Particulars on the performance |
| Undertaking made in offering documents or shareholding alternation documents | Controlling shareholder and actual controller | Maintenance of independence | 1. Midea Holding and He Xiangjian have undertaken as follows: He Xiangjian, Midea Holding and their controlled enterprises will remain independent from Midea Group in respect of personnel, finance, assets, business and institutions, in accordance with relevant laws and regulations and regulatory documents. They will faithfully fulfill the above undertaking, and assume the corresponding legal liability. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal liabilities according to relevant laws, rules, regulations and regulatory documents. | 28 March 2013 | Long-standing | 1. There has been no violation of this undertaking. |
| Controlling shareholder and actual controller | Avoiding competition within the industry | (1) None of the entities or individuals mentioned above is or will be engaged in the same or similar business as the existing main business of Midea Group and its controlled companies. They are not or will not be engaged or participate in such business that is competitive to the existing main business of Midea Group and its controlled companies by controlling other economic entities, institutions or economic organizations; (2) If Midea Group and its controlled companies expand their | 28 March 2013 | Long-standing | 2. There has been no violation of this undertaking. |
| (3) If Midea Group and its controlled companies expand their business scope on the basis of the existing ones to those where the above mentioned related subjects have not gone into production or operation, as long as He Xiangjian is still the actual controller of Midea Group, and Midea Holding the controlling shareholder, they would undertake as not to engage in competitive business to the new ones of Midea Group and its controlled companies; (4) In accordance with effective laws, regulations or other regulatory documents of People's Republic of China, as long as Midea Holding is identified as the controlling shareholder of Midea Group, and He Xiangjian the actual controller, they will not change or terminate this undertaking. (5) Midea Holding and He Xiangjian shall faithfully fulfill the above undertaking, and assume the corresponding legal responsibilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they would bear the corresponding legal responsibilities according to relevant laws, rules, regulations and regulatory documents. | |||||
| Controlling shareholder and actual controller | Regulation of related transactions | (1) They will regulate any related transactions with Midea Group and its controlled companies using their utmost efforts to reduce them. For unavoidable related transactions with Midea Group and its controlled companies, including but not limited to commodity trading, providing services to each other or as agent, they will sign legal normative agreements with Midea Group, and go through approval procedures in accordance with related laws, regulations, rules, other regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They guarantee to offer fair prices | 28 March 2013 | Long-standing | 3. There has been no violation of this undertaking. |
| (2) They shall fulfill the obligation of withdrawing from voting that involves the above mentioned related transactions at the general meeting of Midea Group; (3) The related subject mentioned above shall not require Midea Group to offer more favorable conditions than those to any independent third party in any fair market transactions. (4) In accordance with effective laws, regulations or other regulatory documents of People's Republic of China, as long as Midea Holding is identified as the controlling shareholder of Midea Group, and He Xiangjian the actual controller, they shall not change or terminate this undertaking. (5) Midea Holding and He Xiangjian will faithfully fulfill the above undertaking and assume the corresponding legal liabilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal responsibilities according to relevant laws, rules, regulations and regulatory documents. | |||||
| Controlling shareholder and actual controller | On Midea Trade Union Committee transferring its limited equity of Midea Group | On 28 June 2013, Foshan Shunde Beijiao General Union, superior department of Midea Trade Union Committee, issued a confirmation letter to the fact that the Midea Trade Union Committee funded the establishment of Midea Group Co., Ltd. In addition the letter also confirmed that the council of Midea | 28 March 2013 | Long-standing | 4. So far, this shareholding transfer has not brought about any loss caused by any dispute or potential disputes. There has been no violation of this undertaking. |
| Midea Holding and He Xiangjian, respectively the controlling shareholder and actual controller of Midea Group Co., Ltd. have undertaken as follows: For any loss to Midea Group caused by any dispute or potential dispute arising from the matters of equity transfer mentioned above, they are willing to assume full liability for such loss. | |||||
| Controlling shareholder and actual controller | Issues about Payment of the Staff Social Insurance and the Housing Provident Fund involved in Midea Group's Overall Listing | 5. Midea Holding and He Xiangjian have undertaken to be liable for (1) paying such expenses and related expenses on time based on the requirements of relevant state departments if Midea Group is required to be liable for the payment of staff social insurance, housing provident fund and the payment required by relevant state authorities prior to this merger, (2) paying corresponding compensation for all direct and indirect losses incurred by Midea Group and its subsidiaries due to this merger, (3) indemnifying and holding harmless Midea Group and its subsidiaries in time from such expenses when Midea Group and its subsidiaries are required to pay them in advance. | 28 March 2013 | Long-standing | 5. So far, the payment of the staff social insurance and the housing provident fund has not brought about any controversy or potential disputes. There has been no violation of this undertaking. |
| Controlling shareholder and actual controller | Issues about asset alteration, asset flaw and house leasing of Midea Group and its subsidiaries | Midea Holding and He Xiangjian have undertaken as follows: (1) Midea Holding will do its utmost to assist and urge Midea Group (including its subsidiaries) to complete renaming procedures of related assets, such as land, housing, trademarks, patents and stock rights, declared in the related files of this merger. Midea Holding will be liable for all compensations of losses caused by issues about renaming procedures of related assets mentioned above to Midea Group. (2) Midea Holding shall do its utmost to assist Midea Group (including its subsidiaries) to apply for ownership certificates of land and housing or property declared in related files of this merger. (3) Midea Holding shall assist Midea Group (including its | 28 March 2013 | Long-standing | 6. So far, the issues about asset alteration, asset flaw and house leasing of Midea Group and its subsidiaries have not brought about any controversy or potential disputes. There has been no violation of this undertaking. And Midea Holding shall honor this undertaking before its expiration. |
| (4) Under any circumstances that Midea Group suffers from losses incurred from no longer using these properties or presently using the land or house above due to failing to obtain or collect in time the ownership certificates of the land or house above or any losses caused by any other reasons, Midea Holding shall compensate any loss for these reasons in time and in full. Midea Holding shall compensate the actual loss Midea Group suffers from any circumstances above resulting in penalties subjected to from competent authorities or through claims from any other third party. (5) Based on issues of defective house leasing declared in related files of this merger, Midea Holding shall provide sufficient compensations for all economic losses incurred by Midea Group (including its subsidiaries) where the leasehold relations above become invalid or other disputes occur, which are caused by rights claims from a third party or by means of an administrative authority exercising a right and therefore results in any economic losses due to eviction from rental houses, or any penalties subjected to by competent government departments or any recourse from related parties. (6) Based on the issues of defective land leasing declared in related files of this merger, when leasehold relations become invalid caused by defects of land leasing or when other disputes occur, resulting in any economic losses to Midea Group (including its subsidiaries) or through any penalties administered by competent government departments. Likewise if the lessor cannot compensate for losses caused by such defective leasing, Midea Holding shall compensate Midea Group for losses caused by such defective land leasing. Midea Holding has further undertaken that where a violation of guarantees and undertakings referred to previously occurs or such guarantees and undertakings are not consistent with the reality and Midea Group has suffered any loss therefrom, |
| Midea Holding shall compensate in cash or make up for Midea Group’s loss upon Midea Group’s notice in writing within 30 days when the loss occurs and the loss amount is definite. | |||
| Whether the undertaking is fulfilled on time | Yes | ||
| Specific reasons for failing to fulfill any undertaking and plan for the next step | N/A | ||
1.2 Where any earnings forecast was made for any of the Company’s assets or projects and the Reporting Period is still within the forecastperiod, the Company shall explain whether the performance of the asset or project reaches the earnings forecast and why
□Applicable √N/A
2. Occupation of the Company’s Capital by the Controlling Shareholder or ItsRelated Parties 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. Explanation of the Board of Directors Regarding the Last "Non-standard AuditOpinion"
□ Applicable √ N/A
5. Explanation of the Board of Directors, the Supervisory Committee andIndependent Directors (If Any) Regarding the "Non-standard Audit Opinion" for theReporting Period
□Applicable √N/A
6. Changes in Accounting Policies and Accounting Estimates as Compared to theFinancial Report for the Prior Year, as well as Correction of Material AccountingErrors
□Applicable √N/A
7. Reason for Changes in Scope of the Consolidated Financial Statements asCompared to the Financial Report for the Prior Year
√ Applicable □ N/A
The detailed information of major subsidiaries included in the consolidation scope in the current periodis set out in Notes 5 and 6. Entities newly included in the consolidation scope in the current periodthrough acquisition mainly include Midea Capital Co., Ltd. and its subsidiaries (inclusive of structuredentities), WuHan TTium Motor Technology Co., Ltd. and its subsidiaries, as well as KONG SmartEnvironment (Xi'an) Co., Ltd. (formerly known as “Shaanxi Construction Investment Group Co., Ltd.”)(please refer to Note 5(1)(a)), while details of those through incorporation can be found in Note 5(2)(a).The detailed information of subsidiaries no longer included in the consolidation scope in the currentperiod is set out in Note 5(2)(b).
8. Engagement and Disengagement of CPA Firm
CPA firm at present
| Name of the domestic CPA firm | PricewaterhouseCoopers Zhong Tian LLP |
| The Company’s payment to the domestic CPA firm | RMB8.975 million |
| Consecutive years of the audit service provided by the domestic CPA firm | Eight years |
| Names of the certified public accountants from the domestic CPA firm | Yao Wenping and Wu Fangfang |
| Consecutive years of the audit service provided by the certified public accountants from the domestic CPA firm | Three years and two years respectively |
Whether the CPA firm was changed in the current period
□Yes √No
Engagement of any CPA firm for internal control audit, financial advisor or sponsor
√ Applicable □ N/A
During the year, the Company engaged PricewaterhouseCoopers Zhong Tian LLP as the auditor of theCompany's internal control for the year 2022.
9. Possibility of Delisting after Disclosure of this Report
□Applicable √N/A
10. Bankruptcy and Reorganization
□Applicable √N/A
No such cases in the Reporting Period.
11. Material Litigation and Arbitration
□Applicable √N/A
No such cases in the Reporting Period.
12. Punishments and Rectifications
□Applicable √N/A
No such cases in the Reporting Period.
13. Credit Conditions of the Company as well as Its Controlling Shareholder andActual Controller
□Applicable √N/A
14. Significant Related Transactions
14.1 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 | - | 1,399,675 | 0.57% | 1,900,000 | No | Payment after delivery | - | 30 April 2022 | www.cninfo.com.cn |
| Midea Real Estate Holding Limited | Controlled by Company’s actual controller | Sale | Sale of goods | Market price | - | 225,887 | 0.07% | 576,430 | No | Payment after delivery | - | 30 April 2022 | www.cninfo.com.cn |
| Details of any sales return of a large amount | Zero | ||||||||||||
| Give the actual situation in the Reporting Period (if any) where a forecast had been made for the total amounts of continuing related-party transactions by type to occur in the current period | The line for continuing related transactions between the Company and the related parties and their subsidiaries did not exceed the total amount of continuing related transactions estimated by the Company by type. | ||||||||||||
| Reason for any significant difference between the transaction price and the market reference price (if applicable) | N/A | ||||||||||||
14.2 Related transactions regarding purchase or sales of assets or equity interests
□Applicable √N/A
No such cases in the Reporting Period.
14.3 Related transactions arising from joint investments in external parties
□Applicable √N/A
No such cases in the Reporting Period.
14.4 Credits and liabilities with related parties
□Applicable √N/A
No such cases in the Reporting Period.
14.5 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.
14.6 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.
14.7 Other significant related transactions
□Applicable √N/A
No such cases in the Reporting Period.
15. Significant Contracts and Their Execution
15.1 Trusteeship, contracting and leasing
15.1.1 Trusteeship
□Applicable √N/A
No such cases in the Reporting Period.
15.1.2 Contracting
□Applicable √N/A
No such cases in the Reporting Period.
15.1.3 Leasing
□Applicable √N/A
No such cases in the Reporting Period.
15.2 Major guarantees
√Applicable □N/A
Unit: RMB'000
| Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries) | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| No such cases | ||||||||
| Total external guarantee line approved during the Reporting Period (A1) | 0 | Total actual external guarantee amount during the Reporting Period (A2) | 0 | |||||
| Total approved external guarantee line at the end of the Reporting Period (A3) | 0 | Total actual external guarantee balance at the end of the Reporting Period (A4) | 0 | |||||
| Guarantees provided by the Company for its subsidiaries | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Midea Group Finance Co., Ltd. | 2022/4/30 | 8,000,000 | - | Joint liability | One year | No | No | |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 15,430,000 | 2022-1-1 | 6,665,030 | Joint liability | One year | No | No |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 2022/4/30 | 1,350,000 | 2022-1-4 | 122,310 | Joint liability | One year | No | No |
| Foshan Midea Carrier Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 360,000 | 2022-2-23 | 2,760 | Joint liability | One year | No | No |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 2,800,000 | - | Joint liability | One year | No | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 380,000 | 2022-1-1 | 36,240 | Joint liability | One year | No | No |
| Guangdong Midea Precision Molding Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 2022/4/30 | 550,000 | - | Joint liability | One year | No | No | |
| Hainan Midea United Materials Supply Co. Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 1,200,000 | - | Joint liability | One year | No | No | |
| Midea Group (Shanghai) Co., Ltd. | 2022/4/30 | 1,000 | - | Joint liability | One year | No | No | |
| Midea Group Wuhan Heating & Ventilating Equipment Co., Ltd. | 2022/4/30 | 258,000 | - | Joint liability | One year | No | No | |
| Meizhisheng Technology Co., Ltd. | 2022/4/30 | 1,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2022/4/30 | 7,032,000 | 2022-1-1 | 1,727,500 | Joint liability | One year | No | No |
| Guangdong Witol Vacuum Electronic | 2022/4/3 | 100,000 | 2022-1-5 | 280 | Joint liability | One | No | No |
| Manufacture Co., Ltd | 0 | year | ||||||
| Wuhu Midea Kitchen Appliances Manufacturing Co., Ltd. | 2022/4/30 | 2,520,000 | 2022-1-18 | 1,000,000 | Joint liability | One year | No | No |
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2022/4/30 | 640,000 | 2022-1-1 | 9,430 | Joint liability | One year | No | No |
| Maytech Technology Co., LTD. | 2022/4/30 | 75,000 | - | Joint liability | One year | No | No | |
| Hainan Meizhi Canghai E-commerce Service Co., Ltd. | 2022/4/30 | 22,000 | - | Joint liability | One year | No | No | |
| Hainan Meizhi Hangjian Electric Appliance Co., Ltd. | 2022/4/30 | 22,000 | - | Joint liability | One year | No | No | |
| Eureka Technology Co., Ltd. | 2022/4/30 | 22,000 | - | Joint liability | One year | No | No | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2022/4/30 | 3,110,000 | 2022-1-1 | 166,270 | Joint liability | One year | No | No |
| Guangdong Midea-SIIX Electronics Co., Ltd. | 2022/4/30 | 10,000 | 2022-3-9 | 130 | Joint liability | One year | No | No |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 2022/4/30 | 40,000 | - | Joint liability | One year | No | No | |
| Hefei Midea-SIIX Electronics Co., Ltd. | 2022/4/30 | 5,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | 2022/4/30 | 30,000 | 2022-1-1 | 9,170 | Joint liability | One year | No | No |
| Meitong Energy Technology (Chongqing) Co., Ltd. | 2022/4/30 | 80,000 | - | Joint liability | One year | No | No | |
| Guangdong MeiKong Intelligent Building Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Shanghai M-BMS Intelligent Construction Co., Ltd. | 2022/4/30 | 40,000 | - | Joint liability | One year | No | No | |
| Winone Elevator Company Limited | 2022/4/30 | 410,000 | 2022-1-1 | 65,610 | Joint liability | One year | No | No |
| Guangdong Lingmei Technology Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Hubei Midea Building Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Meizhi Compressor Limited | 2022/4/30 | 290,000 | 2022-1-1 | 37,870 | Joint liability | One year | No | No |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd | 2022/4/30 | 55,000 | - | Joint liability | One year | No | No | |
| Guangdong Welling Motor Manufacturing Co., Ltd. | 2022/4/30 | 250,000 | 2022-1-1 | 22,890 | Joint liability | One year | No | No |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | 2022/4/30 | 310,000 | 2022-1-1 | 18,490 | Joint liability | One year | No | No |
| Guangdong Midea Environmental Technologies Co., Ltd. | 2022/4/30 | 20,000 | - | Joint liability | One year | No | No | |
| Huaian Welling Motor Manufacturing Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 2022/4/30 | 20,000 | - | Joint liability | One year | No | No | |
| Zhejiang Meizhi Compressor Co., Ltd. | 2022/4/30 | 4,000,000 | 2022-3-31 | 602,000 | Joint liability | One year | No | No |
| Anhui Meizhi Compressor Co., Ltd. | 2022/4/30 | 40,000 | 2022-1-1 | 7,660 | Joint liability | One year | No | No |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 2022/4/30 | 60,000 | 2022-1-24 | 310 | Joint liability | One year | No | No |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | 2022/4/30 | 10,000 | 2022-1-17 | 800 | Joint liability | One year | No | No |
| Wuhu Welling Motor Sales Co., Ltd. | 2022/4/30 | 1,865,000 | - | Joint liability | One year | No | No | |
| Anhui Welling Auto Parts Co. , Ltd. | 2022/4/30 | 130,000 | 2022-5-9 | - | Joint liability | One year | No | No |
| Dorna Technology Co., Ltd. | 2022/4/30 | 55,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| MiSiliconn SemiConductor Technologies Co., Ltd. | 2022/4/30 | 67,000 | - | Joint liability | One year | No | No | |
| Guangdong Jiya Precision Machinery Technology Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Anqing Welling Auto Parts Co., Ltd. | 2022/4/30 | 50,000 | - | Joint liability | One year | No | No | |
| Servotronix Motion Technology Development (Shenzhen) Ltd. | 2022/4/30 | 30,000 | - | Joint liability | One year | No | No | |
| Ningbo Midea United Materials Supply Co. Ltd. | 2022/4/30 | 2,000,000 | 2022-1-12 | 40,990 | Joint liability | One year | No | No |
| Guangzhou Kaizhao Commercial and Trading Co., Ltd | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 2022/4/30 | 185,000 | 2022-1-1 | 2,630 | Joint liability | One year | No | No |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2022/4/30 | 1,665,000 | 2022-1-1 | 192,320 | Joint liability | One year | No | No |
| GD Midea Environment Appliances Mfg. Co.,Ltd. | 2022/4/30 | 1,400,000 | 2022-1-1 | 11,700 | Joint liability | One year | No | No |
| Guangdong Midea Cuchen Company Ltd. | 2022/4/30 | 6,000 | - | Joint liability | One year | No | No | |
| GD Midea Caffitaly Coffee Machine Manufacturing Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2022/4/30 | 2,200,000 | 2022-6-6 | 810,000 | Joint liability | One year | No | No |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 2022/4/30 | 2,750,000 | 2022-1-1 | 244,760 | Joint liability | One year | No | No |
| Guangdong Midea Kitchen & Bath Appliances Manufacturing Co., Ltd. | 2022/4/30 | 400,000 | - | Joint liability | One year | No | No | |
| Foshan Shunde Midea Water Dispenser Manufacturing Company Limited | 2022/4/30 | 855,000 | 2022-1-1 | 14,910 | Joint liability | One year | No | No |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | 2022/4/30 | 230,000 | 2022-1-20 | 12,970 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2022/4/30 | 2,600,000 | 2022-1-1 | 4,520 | Joint liability | One year | No | No |
| Wuxi Little Swan Electric Co., Ltd. | 2022/4/30 | 3,395,000 | 2022-1-1 | 1,135,290 | Joint liability | One year | No | No |
| Hefei Midea Laundry Appliance Co., Ltd. | 2022/4/30 | 2,880,000 | 2022-1-1 | 12,440 | Joint liability | One year | No | No |
| Wuxi Filin Electronics Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Hubei Midea Laundry Appliance Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Hainan Midea Refrigerator & Washer Sales Co., Ltd. | 2022/4/30 | 50,000 | - | Joint liability | One year | No | No | |
| Hefei Hualing Co., Ltd. | 2022/4/3 | 700,000 | 2022-1-1 | 99,790 | Joint liability | One | No | No |
| 0 | year | |||||||
| Hubei Midea Refrigerator Co., Ltd. | 2022/4/30 | 260,000 | - | Joint liability | One year | No | No | |
| Hefei Midea Refrigerator Co., Ltd. | 2022/4/30 | 3,000,000 | - | Joint liability | One year | No | No | |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 2022/4/30 | 700,000 | 2022-1-6 | 9,880 | Joint liability | One year | No | No |
| Toshiba Home Appliances Manufacturing (Nanhai) Co., Ltd | 2022/4/30 | 100,000 | 2022-3-10 | - | Joint liability | One year | No | No |
| Little Swan (Jing Zhou) Sanjin Electronic Appliances Limited | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea Group E-Commerce Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2022/4/30 | 91,200 | 2022-1-1 | 4,130 | Joint liability | One year | No | No |
| Reis Robotics (Kunshan) Co., Ltd. | 2022/4/30 | 70,000 | 2022-1-1 | 1,880 | Joint liability | One year | No | No |
| KUKA Systems (China) CO., Ltd. | 2022/4/30 | 500,000 | 2022-1-1 | 56,670 | Joint liability | One year | No | No |
| KUKA Robotics Manufacturing China Co.,Ltd | 2022/4/30 | 50,000 | 2022-1-19 | 22,700 | Joint liability | One year | No | No |
| KUKA Robotics Guangdong Co., Ltd | 2022/4/30 | 150,000 | 2022-2-24 | 61,140 | Joint liability | One year | No | No |
| KUKA Robotics (Shanghai) Co.,Ltd. | 2022/4/30 | 450,000 | 2022-1-1 | 32,790 | Joint liability | One year | No | No |
| Shanghai Swisslog Healthcare Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Swisslog Technology Co., Ltd. | 2022/4/30 | 50,000 | 2022-2-23 | 550 | Joint liability | One year | No | No |
| Shanghai Swisslog Technology Co., Ltd. | 2022/4/30 | 230,000 | 2022-1-1 | 48,140 | Joint liability | One year | No | No |
| Swisslog (Shanghai) Co., Ltd. | 2022/4/30 | 80,000 | - | Joint liability | One year | No | No | |
| Meicloud Technology Co., Ltd. | 2022/4/30 | 40,000 | - | Joint liability | One year | No | No | |
| Foshan Meicloud Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Yueyun Industrial Internet Innovative Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Wuhan Meicloud Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Suzhou Meicloud Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea International Corporation Company Limited | 2022/4/30 | 12,330,000 | 2022-1-1 | 9,867,720 | Joint liability | One year | No | No |
| Midea Investment Development Company Limited | 2021/12/27 | 8,053,680 | 2022-2-24 | 3,020,130 | Joint liability | One year | No | No |
| Midea International Trading Company Limited | 2022/4/30 | 650,000 | 2022-1-5 | 4,230 | Joint liability | One year | No | No |
| Welling International Hong Kong Ltd | 2022/4/30 | 310,000 | - | Joint liability | One year | No | No | |
| Midea Electric Trading (Singapore) Co.,Pte. Ltd. | 2022/4/30 | 3,000,000 | 2022-3-15 | 367,200 | Joint liability | One year | No | No |
| Orient Household Appliances Ltd. | 2022/4/30 | 33,500 | - | Joint liability | One year | No | No |
| Midea Consumer Electric (Vietnam) Co., Ltd. | 2022/4/30 | 6,700 | - | Joint liability | One year | No | No | |
| Concepcion Midea Inc. | 2022/4/30 | 6,700 | 2022-1-1 | - | Joint liability | One year | No | No |
| Midea Italia S.R.L. | 2022/4/30 | 120,000 | - | Joint liability | One year | No | No | |
| Midea Mexico, S. DE R.L. DE C.V. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Midea Electric Trading (Thailand) Co., Ltd. | 2022/4/30 | 13,400 | - | Joint liability | One year | No | No | |
| Midea America Corp. | 2022/4/30 | 150,000 | 2022-1-1 | 64,350 | Joint liability | One year | No | No |
| PT. Midea Planet Indonesia | 2022/4/30 | 247,000 | - | Joint liability | One year | No | No | |
| Midea Europe GmbH | 2022/4/30 | 400,000 | - | Joint liability | One year | No | No | |
| Midea America (Canada) Corp. | 2022/4/30 | 102,900 | 2022-1-1 | - | Joint liability | One year | No | No |
| Midea Consumer Appliances DMCC | 2022/4/30 | 175,000 | - | Joint liability | One year | No | No | |
| Midea Middle East | 2022/4/30 | 70,000 | - | Joint liability | One year | No | No | |
| Meco Innovations Technology, LLC | 2022/4/30 | 80,000 | - | Joint liability | One year | No | No | |
| Toshiba Lifestyle Products & Services Corporation | 2022/4/30 | 2,055,390 | 2022-1-1 | 8,250 | Joint liability | One year | No | No |
| Midea Electric Netherlands (I) B.V. | 2022/4/30 | 52,260,000 | 2022-1-1 | 28,856,400 | Joint liability | One year | No | No |
| Midea Electrics Netherlands B.V. | 2022/4/30 | 1,000,000 | - | Joint liability | One year | No | No | |
| Clivet S.p.A. | 2022/4/30 | 90,000 | 2022-1-1 | 76,150 | Joint liability | One year | No | No |
| Servotronix Motion Control Ltd. | 2022/4/30 | 940 | - | Joint liability | One year | No | No | |
| Midea Austria GmbH | 2022/4/30 | 5,000 | - | Joint liability | One year | No | No | |
| Midea (Egypt) Kitchen & water heater appliances Co. ,Ltd | 2022/4/30 | 70,000 | - | Joint liability | One year | No | No | |
| Total guarantee line for subsidiaries approved during the Reporting Period (B1) | 160,967,410 | Total actual guarantee amount for subsidiaries during the Reporting Period (B2) | 57,807,670 | |||||
| Total approved guarantee line for subsidiaries at the end of the Reporting Period (B3) | 160,967,410 | Total actual guarantee balance for subsidiaries at the end of the Reporting Period (B4) | 55,579,380 | |||||
| Guarantees between subsidiaries | ||||||||
| Guaranteed party | Disclosure date of the 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 |
| Guangdong Midea Electric Co., Ltd. | 2022/2/23 | 2,803,360 | 2022-4-26 | 1,177,410 | Joint liability | One year | No | No |
| Wuhu Midea Annto Logistics Co., Ltd. | 2022/4/30 | 1,450,000 | 2022-1-1 | 296,340 | Joint liability | One year | No | No |
| Ningbo Annto Logistics Co., Ltd. | 2022/4/30 | 950,000 | - | Joint liability | One year | No | No | |
| Hainan Annto Zhilian Supply Chain Management Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Total line for guarantees between subsidiaries approved during the Reporting Period (C1) | 5,303,360 | Total actual guarantee amount between subsidiaries during the Reporting Period (C2) | 1,596,480 | |||||
| Total approved line for guarantees between subsidiaries at the end of the Reporting Period (C3) | 5,303,360 | Total actual guarantee balance between subsidiaries at the end of the Reporting Period (C4) | 1,473,750 | |||||
| Total guarantee amount (total of the above-mentioned three kinds of guarantees) | ||||||||
| Total guarantee line approved during the Reporting Period (A1+B1+C1) | 166,270,770 | Total actual guarantee amount during the Reporting Period (A2+B2+C2) | 59,404,150 | |||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 166,270,770 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 57,053,130 | |||||
| Proportion of the total actual guarantee amount (A4+B4+C4) in net assets of the Company | 39.92% | |||||||
| Of which: | ||||||||
| Amount of guarantees provided for shareholders, the actual controller and their related parties (D) | 0 | |||||||
| Amount of debt guarantees provided directly or indirectly for entities with a liability-to-asset ratio over 70% (E) | 52,602,990 | |||||||
| Portion of the total guarantee amount in excess of 50% of net assets (F) | 0 | |||||||
| Total amount of the three kinds of guarantees above (D+E+F) | 52,602,990 | |||||||
| 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 | |||||||
15.3 Entrusted cash management
15.3.1 Entrusted asset management
□ Applicable √ N/A
No such cases in the Reporting Period.
15.3.2 Entrusted loans
□ Applicable √ N/A
No such cases in the Reporting Period.
15.4 Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
16. Other Significant Events
□ Applicable √ N/A
There were no other significant events in the Reporting Period that require disclosure.
17. Significant Events of Subsidiaries
□ Applicable √ N/A
Section VII Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
| Before | Increase/decrease in the Reporting Period (+/-) | After | |||||
| Shares | Percentage (%) | New issue | Others | Subtotal | Shares | Percentage (%) | |
1. Restricted shares
| 1. Restricted shares | 156,538,881 | 2.24 | -12,923,865 | -12,923,865 | 143,615,016 | 2.05 |
1.1 Shares held by the
state
| 1.1 Shares held by the state |
1.2 Shares held by
state-ownedcorporations
| 1.2 Shares held by state-owned corporations |
1.3 Shares held by
other domesticinvestors
| 1.3 Shares held by other domestic investors | 153,773,081 | 2.20 | -12,641,607 | -12,641,607 | 141,131,474 | 2.02 |
Among which: Sharesheld by domesticcorporations
| Among which: Shares held by domestic corporations | 2,363,601 | 0.03 | 0 | 2,363,601 | 0.03 |
Shares held bydomestic individuals
| Shares held by domestic individuals | 151,409,480 | 2.17 | -12,641,607 | -12,641,607 | 138,767,873 | 1.98 |
1.4 Shares held by
foreign investors
| 1.4 Shares held by foreign investors | 2,765,800 | 0.04 | -282,258 | -282,258 | 2,483,542 | 0.04 |
Among which: Sharesheld by foreigncorporations
| Among which: Shares held by foreign corporations |
Shares held byforeign individuals
| Shares held by foreign individuals | 2,765,800 | 0.04 | -282,258 | -282,258 | 2,483,542 | 0.04 |
2. Non-restricted shares
| 2. Non-restricted shares | 6,830,024,963 | 97.76 | 18,601,987 | 5,031,110 | 23,633,097 | 6,853,658,060 | 97.95 |
2.1 RMB common
shares
| 2.1 RMB common shares | 6,830,024,963 | 97.76 | 18,601,987 | 5,031,110 | 23,633,097 | 6,853,658,060 | 97.95 |
2.2 Domestically listed
foreign shares
| 2.2 Domestically listed foreign shares |
2.3 Overseas listed
foreign shares
| 2.3 Overseas listed foreign shares |
2.4 Other
| 2.4 Other |
3. Total shares
| 3. Total shares | 6,986,563,844 | 100.00 | 18,601,987 | -7,892,755 | 10,709,232 | 6,997,273,076 | 100.00 |
Reasons for the changes in shares
√Applicable □N/A
a. The 377,083 restricted shares of a total of 21 eligible awardees for the second unlocking period ofthe reserved restricted shares under the 2018 Restricted Share Incentive Scheme were unlocked on 22June 2022.b. The 2,791,699 restricted shares of a total of 189 eligible awardees for the third unlocking period ofthe first grant under the 2018 Restricted Share Incentive Scheme were unlocked on 28 June 2022,including 182,250 restricted shares of foreign employees.c. The 5,247,500 restricted shares of a total of 334 eligible awardees (inclusive of 144,750 such sharesof foreign awardees) for the second unlocking period of the 2019 Restricted Share Incentive Schemewere unlocked on 11 July 2022.d. The 7,899,587 restricted shares of a total of 443 eligible awardees (inclusive of 345,750 such sharesof foreign awardees) for the second unlocking period of the 2020 Restricted Share Incentive Schemewere unlocked on 19 July 2022.e. For the reasons of certain awardees’ resignation, violation of the Company’s “Red Lines”, beingreassigned or other factors, on 20 April 2022, the Company repurchased and retired 248,333 shares ofnine awardees with respect to the first grant under the 2018 Restricted Share Incentive Scheme,137,917 shares of four awardees with respect to the reserved restricted shares under the 2018Restricted Share Incentive Scheme, 771,042 shares of 18 awardees under the 2019 Restricted ShareIncentive Scheme, 1,314,501 shares of 30 awardees under the 2020 Restricted Share IncentiveScheme, and 290,000 shares of seven awardees under the 2021 Restricted Share Incentive Scheme,totaling 2,761,793 restricted shares.f. For the reasons of certain awardees’ resignation, violation of the Company’s “Red Lines”, beingreassigned or other factors, on 24 October 2022, the Company repurchased and retired 700,051 sharesof 52 awardees with respect to the first grant under the 2018 Restricted Share Incentive Scheme,67,500 shares of two awardees with respect to the reserved restricted shares under the 2018Restricted Share Incentive Scheme, 1,348,916 shares of 81 awardees under the 2019 Restricted ShareIncentive Scheme, 1,914,495 shares of 154 awardees under the 2020 Restricted Share IncentiveScheme, and 1,100,000 shares of 21 awardees under the 2021 Restricted Share Incentive Scheme,totaling 5,130,962 restricted shares.g. In the Reporting Period, the awardees of stock options chose to exercise 18,601,987 shares, whichhave been registered into the Company’s share capital.h. In the Reporting Period, locked-up shares held by senior management decreased by 867,741 shares.Approval of share changes
□ Applicable √ N/A
Transfer of share ownership
□ Applicable √ N/A
Effects of changes in shares on basic EPS, diluted EPS, net assets per share attributable to commonshareholders of the Company and other financial indexes over the last year and the last ReportingPeriod
□Applicable √N/A
Other contents that the Company considers necessary or is required by the securities regulatoryauthorities to disclose
□Applicable √N/A
1.2 Changes in restricted shares
√ Applicable □ N/A
Unit: share
| Name of shareholder | Opening restricted shares | Unlocked in current period | Increased in current period | Repurchased and retired | Closing restricted shares | Reason for change | Date of unlocking |
Awardees of thefirst grant of 2018Restricted ShareIncentiveScheme
| Awardees of the first grant of 2018 Restricted Share Incentive Scheme | 6,687,750 | 2,791,699 | 0 | 948,384 | 2,947,667 | Locked up according to the Scheme | 28 June 2022 |
Awardees ofreservedrestricted sharesunder 2018Restricted ShareIncentive Scheme
| Awardees of reserved restricted shares under 2018 Restricted Share Incentive Scheme | 1,297,500 | 377,083 | 0 | 205,417 | 715,000 | Locked up according to the Scheme | 22 June 2022 |
Awardees of 2019Restricted ShareIncentive Scheme
| Awardees of 2019 Restricted Share Incentive Scheme | 18,668,625 | 5,247,500 | 0 | 2,119,958 | 11,301,167 | Locked up according to the Scheme | 11 July 2022 |
Awardees of 2020Restricted ShareIncentive Scheme
| Awardees of 2020 Restricted Share Incentive Scheme | 25,672,500 | 7,899,587 | 0 | 3,228,996 | 14,543,917 | Locked up according to the Scheme | 19 July 2022 |
Awardees of 2021Restricted ShareIncentive Scheme
| Awardees of 2021 Restricted Share Incentive Scheme | 9,940,000 | 0 | 0 | 1,390,000 | 8,550,000 | Locked up according to the Scheme | - |
Awardees of 2022Restricted ShareIncentive Scheme
| Awardees of 2022 Restricted Share Incentive Scheme | 0 | 0 | 12,152,500 | 0 | 12,152,500 | Locked up according to the Scheme | - |
Zhu Fengtao
| Zhu Fengtao | 780,300 | 780,300 | 0 | 0 | 0 | Locked up for senior management | - |
Xiao Mingguang
| Xiao Mingguang | 353,750 | 353,750 | 0 | 0 | 0 | Locked up for senior management | - |
Zhang Xiaoyi
| Zhang Xiaoyi | 337,431 | 0 | 25,000 | 0 | 362,431 | Locked up for senior management | - |
Jiang Peng
| Jiang Peng | 268,950 | 20,000 | 0 | 0 | 248,950 | Locked up for | - |
seniormanagementHu Ziqiang
| Hu Ziqiang | 250,000 | 0 | 25,000 | 0 | 275,000 | Locked up for senior management | - |
Guan Jinwei
| Guan Jinwei | 276,250 | 0 | 50,000 | 0 | 326,250 | Locked up for senior management | - |
Bai Lin
| Bai Lin | 0 | 0 | 71,309 | 0 | 71,309 | Locked up for senior management | - |
Zhong Zheng
| Zhong Zheng | 167,114 | 0 | 20,000 | 0 | 187,114 | Locked up for senior management | - |
Zhao Weinxin
| Zhao Weinxin | 0 | 0 | 60,000 | 0 | 60,000 | Locked up for senior management | - |
Wang Jinliang
| Wang Jinliang | 0 | 0 | 35,000 | 0 | 35,000 | Locked up for senior management | - |
Total
| Total | 64,700,170 | 17,469,919 | 12,438,809 | 7,892,755 | 51,776,305 | -- | -- |
2. Issuance and Listing of Securities
2.1 Securities (excluding preference shares) issued in the Reporting Period
□Applicable √N/A
2.2 Changes in total shares of the Company and the shareholder structure, as well as the assetand liability structures
□Applicable √N/A
2.3 Existing staff-held shares
□Applicable √N/A
3. Shareholders and Actual Controller
3.1 Total number of shareholders and their shareholdings
Unit: share
| Total number of common shareholders at the period-end | 404,913 | Total number of common shareholders at the prior month-end before the disclosure date of the annual report | 404,380 |
5% or greater common shareholders or top 10 common shareholders
5% or greater common shareholders or top 10 common shareholdersName ofshareholder
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Total common shares held at the period-end | Increase/decrease during the Reporting Period | Number of restricted common shares held | Number of non-restricted common shares held | Shares in pledge or frozen | |
| Status | Shares | |||||||
| Midea Holding Co., Ltd. | Domestic non-state-owned corporation | 31.00% | 2,169,178,713 | - | 0 | 2,169,178,713 | In pledge | 100,000,000 |
Hong KongSecuritiesClearingCompanyLimited
| Hong Kong Securities Clearing Company Limited | Foreign corporation | 20.48% | 1,432,714,576 | 182,898,645 | 0 | 1,432,714,576 |
China SecuritiesFinance Co.,Ltd.
| China Securities Finance Co., Ltd. | Domestic non-state-owned corporation | 2.83% | 198,145,134 | - | 0 | 198,145,134 |
Fang Hongbo
| Fang Hongbo | Domestic individual | 1.67% | 116,990,492 | - | 87,742,869 | 29,247,623 |
Central HuijinAssetManagementLtd.
| Central Huijin Asset Management Ltd. | State-owned corporation | 1.26% | 88,260,460 | - | 0 | 88,260,460 |
Huang Jian
| Huang Jian | Domestic individual | 1.23% | 86,140,000 | - | 0 | 86,140,000 |
Canada PensionPlan InvestmentBoard－ ownfunds (stockexchange)
| Canada Pension Plan Investment Board－ own funds (stock exchange) | Foreign corporation | 0.88% | 61,913,903 | - | 0 | 61,913,903 |
Li Jianwei
| Li Jianwei | Foreign individual | 0.66% | 46,264,545 | - | 0 | 46,264,545 |
Yuan Liqun
| Yuan Liqun | Domestic individual | 0.56% | 39,214,919 | -418,678 | 0 | 39,214,919 |
Merrill LynchInternational
| Merrill Lynch International | Foreign corporation | 0.56% | 39,213,698 | 658,821 | 0 | 39,213,698 |
Strategic investors or generalcorporations becoming top-ten common shareholdersdue to placing of new shares
| 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 theshareholders above
| Related-parties or acting-in-concert parties among the shareholders above | N/A |
Explain if any of theshareholders above wasinvolved in entrusting/beingentrusted with voting rights orwaiving voting rights
| Explain if any of the shareholders above was involved in entrusting/being entrusted with voting rights or waiving voting rights | N/A |
Special account forrepurchased shares amongthe top 10 shareholders
| Special account for repurchased shares among the top 10 shareholders | 146,638,028 shares (or 2.10% 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
Top 10 non-restricted common shareholdersName of shareholder
| Name of shareholder | Number of non-restricted common shares held at the period-end | Type of shares | |
| Type | Shares | ||
Midea Holding Co., Ltd.
| Midea Holding Co., Ltd. | 2,169,178,713 | RMB common stock | 2,169,178,713 |
Hong Kong SecuritiesClearing Company Limited
| Hong Kong Securities Clearing Company Limited | 1,432,714,576 | RMB common stock | 1,432,714,576 |
| China Securities Finance Co., Ltd. | 198,145,134 | RMB common stock | 198,145,134 |
Central Huijin AssetManagement Ltd.
| Central Huijin Asset Management Ltd. | 88,260,460 | RMB common stock | 88,260,460 |
Huang Jian
| Huang Jian | 86,140,000 | RMB common stock | 86,140,000 |
Canada Pension PlanInvestment Board－ ownfunds (stock exchange)
| Canada Pension Plan Investment Board－ own funds (stock exchange) | 61,913,903 | RMB common stock | 61,913,903 |
Li Jianwei
| Li Jianwei | 46,264,545 | RMB common stock | 46,264,545 |
Yuan Liqun
| Yuan Liqun | 39,214,919 | RMB common stock | 39,214,919 |
Merrill Lynch International
| Merrill Lynch International | 39,213,698 | RMB common stock | 39,213,698 |
Huang Xiaoxiang
| Huang Xiaoxiang | 37,835,332 | RMB common stock | 37,835,332 |
Related-parties or acting-in-concert parties among thetop ten non-restrictedcommon shareholders andbetween the top ten non-restricted commonshareholders and the top tencommon shareholders
| 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 10common shareholdersparticipating in securitiesmargin trading
| Explanation on the top 10 common shareholders participating in securities margin trading | The Company’s shareholder Huang Xiaoxiang holds 29,435,332 shares in the Company through his common securities account and 8,400,000 shares in the Company through his account of collateral securities for margin trading, representing a total holding of 37,835,332 shares in the Company. |
Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of theCompany conduct any promissory repurchase during the Reporting Period
□Yes √No
3.2 Controlling shareholder
Nature of the controlling shareholder: Controlled by individualType of the controlling shareholder: Corporation
| Name of controlling shareholder | Legal representative / company principal | Date of establishment | Organization code | Main business scope |
| Midea Holding Co., Ltd. | He Xiangjian | 5 August 2002 | 914406067429989733 | Manufacture and commerce investment; domestic commerce and materials supply and marketing industry (excluding state-designated monopoly); CP software and hardware development; industrial product design; information technology consulting services, providing investment consultant and consulting services; installation, maintenance and after-sales service of electric appliances; real estate intermediary service and forwarding agent service. |
| Shareholdings of the controlling shareholder in other controlled or | Apart from a direct control over the Company, Midea Holding does not directly control or have shares in other listed companies at home or abroad. | |||
94.55%
non-controlled listedcompanies at home orabroad during theReporting Period
Change of the controlling shareholder during the Reporting Period
□Applicable √N/A
No such cases in the Reporting Period.
3.3 Actual controller and acting-in-concert parties thereof
Nature of the actual controller: Domestic individualType of the actual controller: Individual
non-controlled listedcompanies at home orabroad during theReporting PeriodName of the actual controller
| Name of the actual controller | Relationship with the actual controller | Nationality | Right of residence in other countries or regions |
| He Xiangjian | Actual controller himself | The People's Republic of China | No |
| Main occupation and duty | Incumbent board chairman of Midea Holding Co., Ltd. | ||
| Domestically and overseas listed companies controlled in the last 10 years | Midea Group (000333.SZ), Hiconics (300048.SZ), WDM (600055.SH), Midea Real Estate (3990.HK), KUKA (KU2.DE) (delisted in 2022), Little Swan (A: 000418.SZ; B: 200418) (delisted in 2019), and Welling Holding (00382.HK) (delisted in 2018) | ||
Change of the actual controller during the Reporting Period
□Applicable √N/A
Ownership and control relations between the actual controller and the Company
The actual controller controls the Company via trust or other ways of asset management
□Applicable √N/A
3.4 Indicate whether the cumulative shares of the controlling shareholder or the largestshareholder and their acting-in-concert parties that are in pledge account for 80% or greater oftheir shareholdings in the Company
□Applicable √N/A
3.5 Other corporate shareholders with a shareholding percentage above 10%
□Applicable √N/A
Midea Group Co., Ltd.
0.46%
0.46%
31.00%
31.00%
Midea Holding Co., Ltd.
Midea Holding Co., Ltd.He Xiangjian
3.6 Limits on the Company’s shares held by its controlling shareholder, actual controller,reorganizer and other commitment subjects
□Applicable √N/A
4. Share Repurchases during the Reporting Period
Progress of any share repurchase
√ Applicable □ N/A
| Disclosure date of the scheme | Number of shares to be repurchased | As a percentage of the total share capital | Amount to be used | Repurchase period | Purpose | Number of shares repurchased | Shares repurchased as a percentage of the total target number of the equity incentive scheme (if any) |
| 2022.03.12 | No more than 71,428,571 shares and no less than 35,714,285 shares based on the repurchase price ceiling of RMB70/share | No more than 1.0208% and no less than 0.5104% based on the repurchase price ceiling of RMB70/share | No more than RMB5 billion and no less than RMB2.5 billion | 2022.03.10-2023.03.10 | For use in equity incentive and/or employee stock ownership schemes | 48,558,888 | - |
Progress of any repurchased share reduction through centralized price bidding
□ Applicable √ N/A
Section VIII Preference Shares
□ Applicable √ N/A
No such cases in the Reporting Period.
Section IX Bonds
√ Applicable □ N/A
1. Enterprise Bonds
□ Applicable √ N/A
No such cases in the Reporting Period.
2. Corporate Bonds
√ Applicable □ N/A
2.1 General information on corporate bonds
| 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 protectionclauses
□ Applicable √ N/A
2.3 Intermediary agencies
| Bond name | Intermediary agency | Office address | Accountant writing signatures | Contact person | Tel. |
| Midea Investment Development Company Limited 2.88% Secured Notes 2027 | Bank of America Securities | 55/F, Cheung Kong Centre, 2 Queen’s Road Central, Hong Kong | - | Lin Yin | +852 3508 7994 |
| Standard Chartered Bank | 15/F, Two International Finance Centre, Central, Hong Kong | - | Chen Junda | +852 3983 0769 | |
| Crédit Agricole Corporate and Investment Bank | 30/F, Two Pacific Place, 88 Queensway, Hong Kong | - | Fang Lei | +852 2826 7396 | |
| Bank of China | 22/F, Bank of China Tower, 4 Battery Road, Singapore | - | He Fan | +65 6412 9815 | |
| China Construction Bank (Asia) | 28/F, China Construction Bank Building, 3 Connaught Road Central, Hong Kong | - | Huang Hai | +852 3918 6312 | |
| Development Bank of Singapore | 10/F, The Center, 99 Queen’s Road Central, Hong Kong | - | Lin Huixin | +852 3668 9137 | |
| Industrial and Commercial Bank of China (Asia) | 28/F, ICBC Tower, 3 Garden Road, Central, Hong Kong | - | Chen Jiaqi | +852 3510 3522 | |
| Linklaters LLP | 11/F, Alexandra House, Chater Road, Hong Kong | - | Liu Kecheng | +852 2901 5257 | |
| Fangda Partners | 27/F, Beijing Kerry Center North Tower, 1 Guanghua Road, Chaoyang District, Beijing, China | - | Jiang Xueyan | +86 10 5769 5627 | |
| Clifford Chance LLP | 27/F, Jardine House, 1 Connaught Place, Central, Hong Kong | - | Wang Yanlin | +852 2826 2457 |
| Jingtian & Gongcheng LLP | 34/F, Office Building No. 3, Huamao Center, 77 Jianguo Road, Chaoyang District, Beijing | - | Ling Tezhi | +86 10 5809 1279 |
| OBC Law Firm | 11/F, Central Tower, 28 Queen’s Road Central, Hong Kong | - | Huang Ying | +852 3656 6073 |
| Fitch Ratings | 19/F, Man Yee Building, 68 Des Voeux Road Central, Hong Kong | - | Guo Shu／Wang Sai | +852 2263 9608 |
| S&P Global Ratings Hong Kong Limited | 3/F and 4/F, Three Exchange Square, 8 Connaught Place, Central, Hong Kong | - | Shen Xi／Xie Manqi | +852 2263 9992 |
Change of the agencies in the table above during the Reporting Period
□ Yes √ No
2.4 Use of raised funds
| Bond name | Total amount raised | Amount used | Amount unused | Status of the special account for raised funds (if any) | Rectification for any irregularity (if any) in the use of raised funds | In compliance with the purpose, use plan and other information stated in the prospectus |
| Midea Investment Development Company Limited 2.88% Secured Notes 2027 | USD450 million | USD450 million | 0 | The raised funds account has been established to ensure the funds will be used as stated. | No irregularities | Yes |
Use of raised funds in construction projects
□ Applicable √ N/A
Indicate whether the raised funds were re-purposed during the Reporting Period
□ Applicable √ N/A
2.5 Changes in credit ratings in the Reporting Period
□ Applicable √ N/A
2.6 Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the Reporting Period, as well as the impact on the interests of debtinstrument holders
□ Applicable √ N/A
3. Debt Instruments as a Non-financial Enterprise
√ Applicable □ N/A
3.1 General information on debt instruments as a non-financial enterprise
Unit: RMB
| Name of debt instrument | Abbr. | Code of debt instrument | Date of issuance | Value date | Maturity | Outstanding balance | Interest rate | Way of principal repayment and interest payment | Place of trading |
| Super-short-term Commercial Papers of Midea Group Co., Ltd. (Tranche 1, 2022) | 22 Midea SCP001 | 012281718 | From 27 April 2022 to 28 April 2022 | 29 April 2022 | 26 October 2022 | 0 | 2.2300% | Principal and interest repayable in full upon maturity | Inter-bank market |
| Investor eligibility arrangements (if any) | N/A | ||||||||
| Trading system applicable | N/A | ||||||||
| Risk of termination of listing and trading (if any) and countermeasures | No such risk | ||||||||
Overdue debt instruments
□ Applicable √ N/A
3.2 Triggering and execution of issuer or investor option clauses and investor protection
clauses
□ Applicable √ N/A
3.3 Intermediary agencies
| Name of debt instrument | Intermediary agency | Office address | Accountant writing signatures | Contact person | Tel. |
| Super-short-term Commercial Papers of Midea Group Co., Ltd. (Tranche 1, | Industrial and Commercial Bank of China Limited | 55 Fuxingmennei Street, Xicheng District, Beijing | / | Dai Ying | 010-66109649 |
| Industrial Bank | 15 Industrial | / | Zhao Xinle | 010-89926570 |
| 2022) | Co., Ltd. | Bank Plaza, 20 Chaoyangmen Street North, Chaoyang District, Beijing | |||
| Beijing Jiayuan Law Firm | F408, Yuanyang Plaza, 158 Fuxingmennei Street, Xicheng District, Beijing | / | Liu Xing | 010-66413377 | |
| S&P Credit Rating (China) Co., Ltd. | Room 06, 40/F, Tower 5, East Third Ring Middle Road, Chaoyang District, Beijing | / | Ren Yingxue | 010-65166037 |
Change of the agencies in the table above during the Reporting Period
□ Yes √ No
3.4 Use of raised funds
Unit: RMB
| Name of debt instrument | Total amount raised | Amount used | Amount unused | Status of the special account for raised funds (if any) | Rectification for any irregularity (if any) in the use of raised funds | In compliance with the purpose, use plan and other information stated in the prospectus |
| Super-short-term Commercial Papers of Midea Group Co., Ltd. (Tranche 1, 2022) | RMB4 billion | RMB4 billion | 0 | The raised funds account has been established to ensure the funds will be used as stated. | No irregularities | Yes |
Use of raised funds in construction projects
□ Applicable √ N/A
Indicate whether the raised funds were re-purposed during the Reporting Period
□ Applicable √ N/A
3.5 Changes in credit ratings in the Reporting Period
□ Applicable √ N/A
3.6 Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the Reporting Period, as well as the impact on the interests of debtinstrument holders
□ Applicable √ N/A
4. Convertible Corporate Bonds
□ Applicable √ N/A
No such cases in the Reporting Period.
5. Consolidated Loss of the Reporting Period Over 10% of Net Assets as at the Endof Last Year
□ Applicable √ N/A
6. Interest-bearing Liabilities Other than Bonds that Were Overdue at the End of theReporting Period
□ Applicable √ N/A
7. Irregularities during the Reporting Period
□ Yes √ No
8. Key Financial Information of the Company in the Past Two Years
Unit: RMB’000
| Item | 31 December 2022 | 31 December 2021 | Change |
Current ratio
| Current ratio | 126.54% | 111.67% | 14.87% |
Debt/asset ratio
| Debt/asset ratio | 64.05% | 65.25% | -1.20% |
Quick ratio
| Quick ratio | 98.38% | 86.92% | 11.46% |
| 2022 | 2021 | Change |
Net profit before non-recurring gains and losses
| Net profit before non-recurring gains and losses | 28,801,052 | 26,257,754 | 9.69% |
EBITDA/debt ratio
| EBITDA/debt ratio | 46.38% | 46.70% | -0.32% |
Interest cover (times)
| Interest cover (times) | 20.09 | 25.84 | -22.25% |
Cash-to-interest cover(times)
| Cash-to-interest cover (times) | 23.06 | 28.35 | -18.66% |
EBITDA-to-interest cover(times)
| EBITDA-to-interest cover (times) | 23.65 | 30.39 | -22.18% |
Loan repayment ratio (%)
| Loan repayment ratio (%) | 100.00% | 100.00% | 0.00% |
Interest payment ratio (%)
| Interest payment ratio (%) | 100.00% | 100.00% | 0.00% |
| PwC ZT Shen Zi (2023) No. 10017 | |
| (Page 1 of 6) | |
| To the Shareholders of Midea Group Co., Ltd., | |
| Opinion | |
| What we have audited | |
| ? the consolidated and company balance sheets as at 31 December 2022; ? the consolidated and company income statements for the year then ended; ? the consolidated and company cash flow statements for the year then ended; ? the consolidated and company statements of changes in shareholders’ equity for the year then ended; and ? notes to the financial statements. | |
| Our opinion | |
| In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company’s financial position of the Group as at 31 December 2022, and their financial performance and cash flows for the year then ended in accordance with the requirements of the Accounting Standards for Business Enterprises (“CASs”). | |
| Basis for Opinion | |
| We conducted our audit in accordance with China Standards on Auditing (“CSAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. | |
| We are independent of the Group in accordance with the Code of Ethics for Professional Accountants of the Chinese Institute of Certified Public Accountants (“CICPA Code”), and we have fulfilled our other ethical responsibilities in accordance with the CICPA Code. | |
| Key Audit Matters | |
| Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. | |
| Key audit matters identified in our audit are summarised as follows: | |
| ? Impairment assessment of goodwill |
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| PwC ZT Shen Zi (2023) No. 10017 |
| (Page 2 of 6) |
| Key Audit Matters (Cont’d) |
| Key Audit Matters | How our audit addressed the Key Audit Matters |
| Revenue recognition of HVAC and consumer appliances Refer to Note 2(25)(a) of accounting policy of “Revenue - sales of goods” and Note 4(49) “Operating revenue and cost of sales” to the financial statements. The Group recognises relevant revenue at the amount of the consideration which the Group is expected to receive when the customer obtains control over relevant goods or services. In 2022, the Group’s consolidated operating revenue was approximately RMB 343,917,531,000 and the revenue from HVAC and consumer appliances was approximately RMB 275,919,323,000. We identified this as a key audit matter due to the large size of both domestic and overseas customer base and high volume of sales through various distribution channels, the amount of revenue recognised from HVAC and consumer appliances is material to the financial statements, completing the necessary audit procedures required our focuses and substantial audit resources. | We have performed the following procedures to address this key audit matter: 1. Interviewed management to understand the necessary details of sales processes of all distribution channels and evaluate the internal control of processes relating to the revenue from sales of HVAC and consumer appliances designed by management and tested the operating effectiveness of key controls; 2. Reviewed household appliance sales contract template entered into by and between the Group and the clients from all distribution channels, and analysed and evaluated the appropriateness of the Group’s accounting policies on the revenue from sales of HVAC and consumer appliances based on our interview with management, understanding of the Group’s business operation and audit experience; 3. Performed fluctuation analysis of monthly sales and gross margin by product; 4. Reviewed the consistency between book records of product sales revenue and supporting documents relevant to revenue recognition on a sample basis, including sales contracts, orders, rebate agreement, sales invoices, shipping orders, acknowledgement of goods receipts signed by customers, billing agreements with customers, etc.; 5. Validated the revenue from sales of products by external confirmation on a sampling basis; 6. Evaluated whether or not the sales of products occurred near year end was recorded in the proper period by reconciling the book records of product sales revenue to the supporting documents which include records of revenue from sales of products, acknowledgement of goods receipts signed by customers, billing agreements with customers or other supporting documents. Based on the work performed, the Group’s revenue recognition of HVAC and consumer appliances were supported by the available evidence. |
- 3 -
| PwC ZT Shen Zi (2023) No. 10017 |
| (Page 3 of 6) |
| Key Audit Matters (Cont’d) |
| Key Audit Matters | How our audit addressed the Key Audit Matters |
| Impairment assessment of goodwill Refer to Note 2(18) of accounting policy of “Impairment of long-term assets”, Note 2(30)(i) “Critical accounting estimates and judgements - Provision for impairment of goodwill” and Note 4(21) “Goodwill” to the financial statements. As at 31 December 2022, the carrying amount of goodwill of the Group amounted to approximately RMB 28,548,653,000, including goodwill of RMB 21,122,932,000 and RMB 2,437,914,000 arising from business acquisition of KUKA Aktiengesellschaft and its subsidiaries (“KUKA Group”) and Toshiba Lifestyle Products & Services Corporation (“TLSC”), respectively. Management performs the goodwill impairment assessment in accordance with the accounting policy stated in Note 2(18) to the financial statements. The recoverable amount of the goodwill is determined based on fair value less costs of disposal or value-in-use calculations (whichever is the higher). The assessment result indicated that the recoverable amount of the cash generating unit and cash generating units, to which the goodwill was allocated, exceeded its carrying value and therefore no impairment was recorded. The recoverable amount of cash generating unit and cash generating units was determined based on value-in-use using cash flow projections. The key assumptions used in the goodwill impairment assessment included estimated revenue growth rate, EBITDA margin, perpetual annual growth rate and discount rate. We identified this as a key audit matter due to the significance of the goodwill balance arising from the business acquisition of KUKA Group and TLSC, and the significant accounting estimates and judgements in key assumptions used in the impairment assessment. | We have performed the following procedures to address this key audit matter: 1. Understood the internal controls and evaluation process relating to goodwill impairment assessment, and assessed the inherent risks of material misstatement by considering the degree of estimation uncertainty and the level of other inherent risk factors, such as complexity, subjectivity, changes and susceptibility to management’s bias and fraud; 2. Evaluated and tested the operating effectiveness of key controls relevant to the goodwill impairment assessment, including review and approval of key assumptions applied and internal control over calculating recoverable amounts of the cash generating unit and cash generating units; 3. Assessed the reasonableness of the identification of the cash generating unit and cash generating units; 4. Compared the historical actual results to prior year budgets and forecasts to assess whether there are management bias in the process and reasonableness; 5. Evaluated the key assumptions used in the impairment assessment, including estimated revenue growth rate, EBITDA margin, perpetual annual growth rate and discount rate by considering the Company’s historical operating performance, future operation plan and market developments; 6. Tested the mathematical accuracy of the calculation process of the impairment assessment; 7. Evaluated the appropriateness of the goodwill impairment assessment model and discount rate by involving our internal valuation experts. Based on the work performed, the management’s judgements as adopted in the goodwill impairment assessment of KUKA Group and TLSC were supported by the available evidence. |
- 4 -
| PwC ZT Shen Zi (2023) No. 10017 |
| (Page 4 of 6) |
| Other Information |
| Management of the Group is responsible for the other information. The other information comprises all of the information included in 2022 annual report of the Group other than the financial statements and our auditor’s report thereon. |
| Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. |
| In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. |
| Responsibilities of Management and Those Charged with Governance for the Financial Statements |
| Management of the Group is responsible for the preparation and fair presentation of these financial statements in accordance with the CASs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. |
| In preparing these financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. |
| Those charged with governance are responsible for overseeing the Group’s financial reporting process. |
- 5 -
| PwC ZT Shen Zi (2023) No. 10017 |
| (Page 5 of 6) |
| Auditor’s Responsibilities for the Audit of the Financial Statements |
| Our objectives are to obtain reasonable assurance about whether these financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. |
| As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: |
| ? Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| ? Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. |
| ? Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| ? Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in these financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
| ? Evaluate the overall presentation, (including the disclosures), structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
| ? Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
- 6 -
| PwC ZT Shen Zi (2023) No. 10017 | ||
| (Page 6 of 6) | ||
| Auditor’s Responsibilities for the Audit of the Financial Statements (Cont’d) | ||
| We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. | ||
| We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. | ||
| From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. | ||
| Shanghai, the People’s Republic of China 27 April 2023 | Signing CPA | ————————— Yao Wenping (Engagement Partner) ————————— Wu Fangfang |
- 1 -
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETSAS AT 31 DECEMBER 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| ASSETS | Note | 31 December 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 |
| Consolidated | Consolidated | Company | Company | ||
| Current assets | |||||
| Cash at bank and on hand | 4(1) | 55,270,099 | 71,875,556 | 28,492,401 | 48,153,997 |
| Financial assets held for trading | 4(2) | 3,284,593 | 5,879,202 | 274,120 | 3,442,317 |
| Derivative financial assets | 665,484 | 545,865 | - | 157,501 | |
| Notes receivable | 4(3) | 4,758,129 | 4,784,914 | - | - |
| Accounts receivable | 4(4) | 28,237,973 | 24,636,440 | - | - |
| Receivables financing | 4(6) | 13,526,540 | 10,273,552 | - | - |
| Advances to suppliers | 4(7) | 4,367,211 | 4,352,807 | 34,724 | 106,838 |
| Contract assets | 4(8) | 4,498,956 | 3,823,476 | - | - |
| Loans and advances | 4(9) | 14,138,756 | 20,656,600 | - | - |
| Other receivables | 4(5), 18(1) | 2,211,177 | 3,104,065 | 26,175,101 | 31,447,849 |
| Inventories | 4(10) | 46,044,897 | 45,924,439 | - | - |
| Current portion of non-current assets | 4(11) | 37,553,078 | 19,851,577 | 33,168,421 | 19,095,262 |
| Other current assets | 4(12) | 46,542,378 | 33,156,012 | 33,476,601 | 11,713,182 |
| Total current assets | 261,099,271 | 248,864,505 | 121,621,368 | 114,116,946 | |
| Non-current assets | |||||
| Other debt investments | 4(13) | 11,094,259 | 7,893,935 | 7,215,301 | 6,034,563 |
| Long-term receivables | 4(14) | 614,598 | 871,356 | - | - |
| Loans and advances | 4(9) | 693,294 | 851,927 | - | - |
| Long-term equity investments | 4(15), 18(2) | 5,188,817 | 3,796,705 | 73,103,569 | 66,805,691 |
| Investments in other equity instruments | 41,359 | 45,747 | - | - | |
| Other non-current financial assets | 4(16) | 10,625,244 | 5,912,873 | 347,698 | 537,214 |
| Investment properties | 809,936 | 859,195 | 386,435 | 428,460 | |
| Fixed assets | 4(17) | 26,082,992 | 22,852,848 | 1,223,553 | 661,692 |
| Construction in progress | 4(18) | 3,843,777 | 2,690,930 | 504,757 | 800,243 |
| Right-of-use assets | 4(19) | 2,339,878 | 2,297,354 | 8,040 | 2,585 |
| Intangible assets | 4(20) | 16,908,915 | 17,173,072 | 653,320 | 669,158 |
| Goodwill | 4(21) | 28,548,653 | 27,874,752 | - | - |
| Long-term prepaid expenses | 4(22) | 1,579,899 | 1,394,240 | 85,109 | 79,799 |
| Deferred tax assets | 4(23) | 10,244,296 | 8,192,309 | 327,251 | 289,964 |
| Other non-current assets | 4(24) | 42,840,079 | 36,374,356 | 35,423,939 | 33,023,304 |
| Total non-current assets | 161,455,996 | 139,081,599 | 119,278,972 | 109,332,673 | |
| TOTAL ASSETS | 422,555,267 | 387,946,104 | 240,900,340 | 223,449,619 |
- 2 -
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)AS AT 31 DECEMBER 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| LIABILITIES AND SHAREHOLDERS’ EQUITY | Note | 31 December 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 |
| Consolidated | Consolidated | Company | Company | ||
| Current liabilities | |||||
| Short-term borrowings | 4(27) | 5,169,480 | 5,381,623 | - | - |
| Borrowings from the Central Bank | - | 178,878 | - | - | |
| Customer deposits and deposits from banks and other financial institutions | 77,469 | 78,180 | - | - | |
| Financial liabilities held for trading | 4(28) | 1,580,771 | - | - | - |
| Derivative financial liabilities | 234,606 | 157,602 | - | - | |
| Notes payable | 4(29) | 25,572,421 | 32,752,007 | - | - |
| Accounts payable | 4(30) | 64,233,225 | 65,983,559 | - | - |
| Contract liabilities | 4(31) | 27,960,038 | 23,916,595 | - | - |
| Employee benefits payable | 4(32) | 7,152,217 | 7,535,168 | 173,824 | 420,536 |
| Taxes payable | 4(33) | 4,955,335 | 5,404,267 | 718,181 | 1,184,813 |
| Other payables | 4(34) | 4,322,025 | 4,288,104 | 159,953,351 | 151,450,555 |
| Current portion of non-current liabilities | 4(35) | 7,240,626 | 28,947,540 | 5,896,701 | 92,647 |
| Other current liabilities | 4(36) | 57,843,528 | 48,227,953 | 77,066 | 35,932 |
| Total current liabilities | 206,341,741 | 222,851,476 | 166,819,123 | 153,184,483 | |
| Non-current liabilities | |||||
| Long-term borrowings | 4(37) | 50,685,948 | 19,734,020 | 15,619,900 | 12,509,900 |
| Debentures payable | 4(38) | 3,163,616 | - | - | - |
| Lease liabilities | 4(39) | 1,507,480 | 1,533,552 | 2,350 | - |
| Provisions | 394,977 | 310,571 | - | - | |
| Deferred income | 4(40) | 1,721,092 | 1,228,459 | 152,548 | 154,015 |
| Long-term employee benefits payable | 4(41) | 1,488,456 | 1,825,016 | - | - |
| Deferred tax liabilities | 4(23) | 4,647,673 | 4,950,245 | - | 17,028 |
| Other non-current liabilities | 4(42) | 680,482 | 687,689 | - | - |
| Total non-current liabilities | 64,289,724 | 30,269,552 | 15,774,798 | 12,680,943 | |
| Total liabilities | 270,631,465 | 253,121,028 | 182,593,921 | 165,865,426 | |
| Shareholders’ equity | |||||
| Share capital | 4(43) | 6,997,273 | 6,986,564 | 6,997,273 | 6,986,564 |
| Capital surplus | 4(45) | 19,693,139 | 20,516,930 | 27,826,208 | 27,105,153 |
| Less: Treasury stock | 4(44) | (14,933,944) | (14,044,550) | (14,933,944) | (14,044,550) |
| Other comprehensive income | 4(46) | 108,289 | (1,758,948) | (5,679) | (7,295) |
| General risk reserve | 671,999 | 719,922 | - | - | |
| Special reserve | 16,350 | 15,542 | - | - | |
| Surplus reserve | 4(47) | 10,702,928 | 9,449,901 | 10,702,928 | 9,449,901 |
| Undistributed profits | 4(48) | 119,679,202 | 102,982,763 | 27,719,633 | 28,094,420 |
| Total equity attributable to shareholders of the Company | 142,935,236 | 124,868,124 | 58,306,419 | 57,584,193 | |
| Minority interests | 8,988,566 | 9,956,952 | - | - | |
| Total shareholders’ equity | 151,923,802 | 134,825,076 | 58,306,419 | 57,584,193 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 422,555,267 | 387,946,104 | 240,900,340 | 223,449,619 |
The accompanying notes form an integral part of these financial statements.Legal representative: Principal in charge of accounting: Head of accounting department:
- 3 -
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | 2022 | 2021 | 2022 | 2021 | |
| Consolidated | Consolidated | Company | Company | |||
| Total revenue | 345,708,706 | 343,360,825 | 1,385,528 | 1,865,278 | ||
| Including: Operating revenue | 4(49), 18(3) | 343,917,531 | 341,233,208 | 1,385,528 | 1,865,278 | |
| Interest income | 4(50) | 1,790,454 | 2,127,043 | - | - | |
| Fee and commission income | 721 | 574 | - | - | ||
| Less: Cost of sales | 4(49) | (260,538,701) | (264,525,999) | (42,071) | (58,510) | |
| Interest costs | 4(50) | (49,461) | (87,066) | - | - | |
| Fee and commission expenses | (7,681) | (13,015) | - | - | ||
| Taxes and surcharges | 4(51) | (1,565,884) | (1,609,384) | (32,814) | (48,126) | |
| Selling and distribution expenses | 4(52) | (28,716,121) | (28,647,344) | - | - | |
| General and administrative expenses | 4(53) | (11,582,664) | (10,266,283) | (1,125,438) | (684,794) | |
| Research and development expenses | 4(54) | (12,618,506) | (12,014,907) | - | - | |
| Financial income | 4(55) | 3,387,491 | 4,386,111 | 2,204,154 | 2,107,914 | |
| Including: Interest expenses | 1,830,915 | 1,357,564 | 2,645,223 | 2,257,440 | ||
| Interest income | 5,837,713 | 5,181,658 | 4,859,955 | 4,397,266 | ||
| Add: Other income | 4(61) | 1,896,113 | 1,307,504 | 26,642 | 280,318 | |
| Investment income | 4(59), 18(4) | 208,054 | 2,365,773 | 10,917,956 | 12,462,103 | |
| Including: Investment income from associates | 608,278 | 560,679 | 260,651 | 265,491 | ||
| Losses on changes in fair value | 4(58) | (251,171) | (166,406) | (512,502) | (203,057) | |
| (Losses on)/Reversal of credit impairment | 4(57) | (513,686) | (383,451) | 9,884 | (127,693) | |
| Asset impairment losses | 4(56) | (533,363) | (483,420) | - | - | |
| (Losses)/Gains on disposal of assets | 4(60) | (59,854) | 58,257 | (276) | (272) | |
| Operating profit | 34,763,272 | 33,281,195 | 12,831,063 | 15,593,161 | ||
| Add: Non-operating income | 395,406 | 624,744 | 34,465 | 31,358 | ||
| Less: Non-operating expenses | (202,747) | (188,395) | (10,490) | (48,783) | ||
| Total profit | 34,955,931 | 33,717,544 | 12,855,038 | 15,575,736 | ||
| Less: Income tax expenses | 4(62) | (5,145,700) | (4,702,168) | (324,773) | (740,348) | |
| Net profit | 29,810,231 | 29,015,376 | 12,530,265 | 14,835,388 | ||
| (1) Classified by continuity of operations | ||||||
| Net profit from continuing operations | 29,810,231 | 29,015,376 | 12,530,265 | 14,835,388 | ||
| Net profit from discontinued operations | - | - | - | - | ||
| (2) Classified by ownership of the equity | ||||||
| Attributable to shareholders of the Company | 29,553,507 | 28,573,650 | 12,530,265 | 14,835,388 | ||
| Minority interests | 256,724 | 441,726 | - | - | ||
- 4 -
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS (CONT'D)FOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | 2022 | 2021 | 2022 | 2021 | |
| Consolidated | Consolidated | Company | Company | |||
| Other comprehensive income, net of tax | 1,892,922 | (237,306) | 1,616 | 8,714 | ||
| Other comprehensive income attributable to shareholders of the Company, net of tax | 1,865,886 | (207,079) | 1,616 | 8,714 | ||
| (1) Other comprehensive income items which will not be reclassified subsequently to profit or loss | 207,457 | (6,748) | - | - | ||
| 1) Changes arising from remeasurement of defined benefit plan | 208,349 | (7,172) | - | - | ||
| 2) Changes in fair value of investments in other equity instruments | (892) | 424 | - | - | ||
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | 1,658,429 | (200,331) | 1,616 | 8,714 | ||
| 1) Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | 17,391 | (3,032) | 1,616 | 8,714 | ||
| 2) Cash flow hedging reserve | 395,617 | (6,997) | - | - | ||
| 3) Differences on translation of foreign currency financial statements | 1,175,539 | (190,302) | - | - | ||
| 4) Others | 69,882 | - | - | - | ||
| Other comprehensive income attributable to minority shareholders, net of tax | 27,036 | (30,227) | - | - | ||
| Total comprehensive income | 31,703,153 | 28,778,070 | 12,531,881 | 14,844,102 | ||
| Attributable to shareholders of the Company | 31,419,393 | 28,366,571 | 12,531,881 | 14,844,102 | ||
| Minority interests | 283,760 | 411,499 | - | - | ||
| Earnings per share | ||||||
| Basic earnings per share (in RMB Yuan) | 4(63) | 4.34 | 4.17 | Not applicable | Not applicable | |
| Diluted earnings per share (in RMB Yuan) | 4(63) | 4.33 | 4.14 | Not applicable | Not applicable | |
| The accompanying notes form an integral part of these financial statements. |
| Legal representative: Principal in charge of accounting: Head of accounting department: |
- 5 -
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | 2022 | 2021 | 2022 | 2021 |
| Consolidated | Consolidated | Company | Company | ||
| 1. Cash flows from operating activities | |||||
| Cash received from sales of goods or rendering of services | 316,997,825 | 310,489,824 | - | - | |
| Net decrease in loans and advances | 6,660,035 | - | - | - | |
| Net decrease in deposits with the Central Bank | 91,309 | 1,287,927 | - | - | |
| Net increase in borrowings from the Central Bank | - | 178,878 | - | - | |
| Cash received from interest, fee and commission | 1,788,062 | 1,889,716 | - | - | |
| Refund of taxes and surcharges | 10,934,799 | 9,968,330 | - | - | |
| Cash received relating to other operating activities | 4(64)(a) | 7,295,957 | 6,600,822 | 18,834,797 | 31,451,132 |
| Sub-total of cash inflows | 343,767,987 | 330,415,497 | 18,834,797 | 31,451,132 | |
| Cash paid for goods and services | (221,345,706) | (209,216,044) | - | - | |
| Net increase in loans and advances | - | (4,062,432) | - | - | |
| Net decrease in customer deposits and deposits from banks and other financial institutions | (711) | (9,355) | - | - | |
| Net decrease in borrowings from the Central Bank | (178,878) | - | - | - | |
| Cash paid for interest, fee and commission | (57,141) | (101,110) | - | - | |
| Cash paid to and on behalf of employees | (35,674,963) | (32,095,846) | (549,897) | (32,879) | |
| Payments of taxes and surcharges | (17,387,253) | (15,613,276) | (379,098) | (453,861) | |
| Cash paid relating to other operating activities | 4(64)(b) | (34,465,507) | (34,225,730) | (2,959,364) | (3,996,431) |
| Sub-total of cash outflows | (309,110,159) | (295,323,793) | (3,888,359) | (4,483,171) | |
| Net cash flows from operating activities | 4(64)(c) | 34,657,828 | 35,091,704 | 14,946,438 | 26,967,961 |
| 2. Cash flows (used in)/from investing activities | |||||
| Cash received from disposal of investments | 98,564,716 | 121,628,148 | 58,600,000 | 59,767,847 | |
| Cash received from returns on investments | 3,800,095 | 5,648,277 | 13,491,657 | 14,887,506 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 239,226 | 336,186 | 53 | 86 | |
| Net cash received from disposal of subsidiaries and other business units | 14,829 | 188,490 | 422,024 | 8,326 | |
| Cash received relating to other investing activities | 335,082 | - | - | - | |
| Sub-total of cash inflows | 102,953,948 | 127,801,101 | 72,513,734 | 74,663,765 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | (7,352,115) | (6,825,357) | (518,305) | (752,937) | |
| Cash paid to acquire investments | (108,149,195) | (105,347,246) | (73,645,090) | (68,932,311) | |
| Net cash paid to acquire subsidiaries and other business units | (962,148) | (2,028,912) | - | - | |
| Sub-total of cash outflows | (116,463,458) | (114,201,515) | (74,163,395) | (69,685,248) | |
| Net cash flows (used in)/from investing activities | (13,509,510) | 13,599,586 | (1,649,661) | 4,978,517 | |
| 3. Cash flows used in financing activities | |||||
| Cash received from capital contributions | 1,348,283 | 1,550,951 | 1,321,468 | 1,487,792 | |
| Including: Cash received from capital contributions by minority shareholders of subsidiaries | 26,815 | 63,159 | - | - | |
| Cash received from borrowings | 46,476,320 | 16,033,803 | 9,000,000 | 6,800,000 | |
| Cash received from issuance of debentures | 2,845,196 | - | - | - | |
| Cash received from issuance of short-term financing bonds | 3,999,500 | 2,999,629 | 3,999,500 | 2,999,629 | |
| Cash received relating to other financing activities | 70,163 | 560,838 | - | - | |
| Sub-total of cash inflows | 54,739,462 | 21,145,221 | 14,320,968 | 11,287,421 | |
| Cash repayments of borrowings | (40,920,787) | (18,225,351) | (90,000) | (4,799,414) | |
| Cash payments for redemption of short-term financing bonds | (4,000,000) | (6,000,000) | (4,000,000) | (6,000,000) | |
| Cash payments for interest expenses and distribution of dividends or profits | (13,740,037) | (12,894,125) | (14,753,066) | (13,261,677) | |
| Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (279,216) | (426,947) | - | - | |
| Cash payments relating to other financing activities | 4(64)(d) | (6,933,519) | (15,230,284) | (2,827,492) | (13,810,829) |
| Sub-total of cash outflows | (65,594,343) | (52,349,760) | (21,670,558) | (37,871,920) | |
| Net cash flows used in financing activities | (10,854,881) | (31,204,539) | (7,349,590) | (26,584,499) | |
| and cash equivalents | 288,492 | (485,220) | - | - | |
| 5. Net increase in cash and cash equivalents | 4(64)(c) | 10,581,929 | 17,001,531 | 5,947,187 | 5,361,979 |
| Add: Cash and cash equivalents at the beginning of the year | 40,550,039 | 23,548,508 | 21,957,042 | 16,595,063 | |
| 6. Cash and cash equivalents at the end of the year | 4(64)(e) | 51,131,968 | 40,550,039 | 27,904,229 | 21,957,042 |
| The accompanying notes form an integral part of these financial statements. |
| Legal representative: Principal in charge of accounting: Head of accounting department: |
- 6 -
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Attributable to shareholders 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 | ||||
| (Note 4(43)) | (Note 4(45)) | (Note 4(44)) | (Note 4(46)) | (Note 4(47)) | (Note 4(48)) | ||||||
| Balance at 1 January 2021 | 7,029,976 | 22,488,105 | (6,094,347) | (1,549,003) | 587,984 | 12,730 | 7,966,362 | 87,074,453 | 6,720,840 | 124,237,100 | |
| Movements for the year ended 31 December 2021 | |||||||||||
| Total comprehensive income | |||||||||||
| Net profit | - | - | - | - | - | - | - | 28,573,650 | 441,726 | 29,015,376 | |
| Other comprehensive income, net of tax | - | - | - | (207,079) | - | - | - | - | (30,227) | (237,306) | |
| Total comprehensive income | - | - | - | (207,079) | - | - | - | 28,573,650 | 411,499 | 28,778,070 | |
| Capital contribution and withdrawal by shareholders | |||||||||||
| Ordinary shares invested by shareholders | 34,437 | 1,495,004 | - | - | - | - | - | - | 587,480 | 2,116,921 | |
| Business combinations | - | - | - | - | - | - | - | - | 3,189,892 | 3,189,892 | |
| Share-based payment included in shareholders’ equity | - | 1,190,124 | - | - | - | - | - | - | 62,031 | 1,252,155 | |
| Others | (77,849) | (5,178,730) | (7,950,203) | - | - | - | - | - | (449,682) | (13,656,464) | |
| Profit distribution | |||||||||||
| Appropriation to general risk reserve | - | - | - | - | 131,938 | - | - | (131,938) | - | - | |
| Appropriation to surplus reserve | - | - | - | - | - | - | 1,483,539 | (1,483,539) | - | - | |
| Profit distribution to shareholders | - | - | - | - | - | - | - | (11,052,729) | (401,397) | (11,454,126) | |
| Special reserve | |||||||||||
| Appropriation in the current period | - | - | - | - | - | 2,812 | - | - | 703 | 3,515 | |
| Use in the current period | - | - | - | - | - | - | - | - | - | - | |
| Others | - | 522,427 | - | (2,866) | - | - | - | 2,866 | (164,414) | 358,013 | |
| Balance at 31 December 2021 | 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 | |
- 7 -
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Attributable to shareholders 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 | ||||
| (Note 4(43)) | (Note 4(45)) | (Note 4(44)) | (Note 4(46)) | (Note 4(47)) | (Note 4(48)) | ||||||
| Balance at 1 January 2022 | 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 year ended 31 December 2022 | |||||||||||
| Total comprehensive income | |||||||||||
| Net profit | - | - | - | - | - | - | - | 29,553,507 | 256,724 | 29,810,231 | |
| Other comprehensive income, net of tax | - | - | - | 1,865,886 | - | - | - | - | 27,036 | 1,892,922 | |
| Total comprehensive income | - | - | - | 1,865,886 | - | - | - | 29,553,507 | 283,760 | 31,703,153 | |
| Capital contribution and withdrawal by shareholders | |||||||||||
| Ordinary shares invested by shareholders | 18,602 | 1,123,649 | - | - | - | - | - | - | 26,815 | 1,169,066 | |
| Business combinations | - | - | - | - | - | - | - | - | 89,520 | 89,520 | |
| Share-based payment included in shareholders’ equity | - | 765,914 | - | - | - | - | - | - | 45,583 | 811,497 | |
| Others | (7,893) | (1,209,146) | (889,394) | - | - | - | - | - | (1,131,616) | (3,238,049) | |
| Profit distribution | |||||||||||
| Reversal of general risk reserve | - | - | - | - | (47,923) | - | - | 47,923 | - | - | |
| Appropriation to surplus reserve | - | - | - | - | - | - | 1,253,027 | (1,253,027) | - | - | |
| Profit distribution to shareholders | - | - | - | - | - | - | - | (11,652,025) | (291,638) | (11,943,663) | |
| Special reserve | |||||||||||
| Appropriation in the current period | - | - | - | - | - | 3,313 | - | - | 828 | 4,141 | |
| Use in the current period | - | - | - | - | - | (2,505) | - | - | (626) | (3,131) | |
| Others | - | (1,504,208) | - | 1,351 | - | - | - | 61 | 8,988 | (1,493,808) | |
| Balance at 31 December 2022 | 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 | |
| The accompanying notes form an integral part of these financial statements. |
| Legal representative: Principal in charge of accounting: Head of accounting department: |
- 8 -
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Surplus reserve | Undistributed profits | Total shareholders’ equity | |
| Balance at 1 January 2021 | 7,029,976 | 29,123,547 | (6,094,347) | (16,009) | 7,966,362 | 25,795,300 | 63,804,829 | |
| Movements for the year ended 31 December 2021 | ||||||||
| Total comprehensive income | ||||||||
| Net profit | - | - | - | - | - | 14,835,388 | 14,835,388 | |
| Other comprehensive income, net of tax | - | - | - | 8,714 | - | - | 8,714 | |
| Total comprehensive income | - | - | - | 8,714 | - | 14,835,388 | 14,844,102 | |
| Capital contribution and withdrawal by shareholders | ||||||||
| Ordinary shares invested by shareholders | 34,437 | 1,495,004 | - | - | - | - | 1,529,441 | |
| Share-based payment included in shareholders’ equity | - | 1,231,289 | - | - | - | - | 1,231,289 | |
| Others | (77,849) | (5,178,730) | (7,950,203) | - | - | - | (13,206,782) | |
| Profit distribution | ||||||||
| Appropriation to surplus reserve | - | - | - | - | 1,483,539 | (1,483,539) | - | |
| Profit distribution to shareholders | - | - | - | - | - | (11,052,729) | (11,052,729) | |
| Others | - | 434,043 | - | - | - | - | 434,043 | |
| Balance at 31 December 2021 | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | 9,449,901 | 28,094,420 | 57,584,193 | |
- 9 -
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Surplus reserve | Undistributed profits | Total shareholders’ equity | |
| Balance at 1 January 2022 | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | 9,449,901 | 28,094,420 | 57,584,193 | |
| Movements for the year ended 31 December 2022 | ||||||||
| Total comprehensive income | ||||||||
| Net profit | - | - | - | - | - | 12,530,265 | 12,530,265 | |
| Other comprehensive income, net of tax | - | - | - | 1,616 | - | - | 1,616 | |
| Total comprehensive income | - | - | - | 1,616 | - | 12,530,265 | 12,531,881 | |
| Capital contribution and withdrawal by shareholders | ||||||||
| Ordinary shares invested by shareholders | 18,602 | 1,123,649 | - | - | - | - | 1,142,251 | |
| Share-based payment included in shareholders’ equity | - | 789,849 | - | - | - | - | 789,849 | |
| Others | (7,893) | (1,209,146) | (889,394) | - | - | - | (2,106,433) | |
| Profit distribution | ||||||||
| Appropriation to surplus reserve | - | - | - | - | 1,253,027 | (1,253,027) | - | |
| Profit distribution to shareholders | - | - | - | - | - | (11,652,025) | (11,652,025) | |
| Others | - | 16,703 | - | - | - | - | 16,703 | |
| Balance at 31 December 2022 | 6,997,273 | 27,826,208 | (14,933,944) | (5,679) | 10,702,928 | 27,719,633 | 58,306,419 |
| The accompanying notes form an integral part of these financial statements. |
| Legal representative: Principal in charge of accounting: Head of accounting department: |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 10 -
1 General information
The principal business activities of Midea Group Co., Ltd. (hereinafter referred to as “theCompany”) and its subsidiaries (hereinafter collectively referred to as “the Group”) includeresidential air-conditioner, central air-conditioner, heating and ventilation systems, kitchenappliances, refrigerators, washing machines and various small appliances, robotics andautomation system. Other services include the smart supply chain; sale, wholesale andprocessing of raw materials of household electrical appliances; and financial businessinvolving customer deposits, interbank lendings and borrowings, consumption credits,buyer’s 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 31 December 2022, the Company’s share capital was RMB 6,997,273,076, and thetotal number of shares in issue was 6,997,273,076, of which 143,615,016 shares wererestricted tradable A shares and 6,853,658,060 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 include Midea Capital Corporation Limited.and its subsidiaries (including structured entities), Wuhan TTium Motor Technology Co., Ltd.and its subsidiaries and KONG Intelligent Environment (Xi'an) Co., LTD (formerly known asShaanxi Construction Investment Co., Ltd.), and are detailed in Note 5(1)(a); subsidiariesnewly included in the consolidation scope via establishment in the current year are detailedin Note 5(2)(a); subsidiaries no longer included in the consolidation scope in the current yearare detailed in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directorson 27 April 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 ofinventory (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).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 11 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard forBusiness Enterprises - Basic Standard, and the specific accounting standards and otherrelevant regulations issued by the Ministry of Finance on 15 February 2006 and insubsequent periods (hereinafter collectively referred to as the “Accounting Standards forBusiness Enterprises” or “CASs”) and the disclosure requirements in the PreparationConvention of Information Disclosure by Companies Offering Securities to the Public No. 15- General Rules on Financial Reporting issued by the China Securities RegulatoryCommission (“CSRC”).
The financial statements are prepared on a going concern basis.
(2) Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements of the Company for the year ended 31 December 2022 are incompliance with the Accounting Standards for Business Enterprises, and truly andcompletely present the consolidated and company’s financial position of the Company as at31 December 2022 and their financial performance, cash flows and other information for theyear then ended.
(3) Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
(4) Functional currency
The functional currency of the Company is Renminbi (“RMB”). The subsidiaries determinetheir functional currency based on the primary economic environment in which the businessis operated, mainly including EUR, JPY, USD and HKD. The financial statements arepresented in RMB.
(5) Business combinations
(a) Business combinations involving enterprises under common control
The consideration paid and net assets obtained by the Group in a business combination aremeasured at the carrying amount. If the absorbed party was bought by the ultimate controllerfrom a third party in prior years, the value of its assets and liabilities (including goodwillgenerated due to the combination) are based on the carrying amount in the ultimatecontroller’s consolidated financial statements. The difference between the carrying amountof the net assets obtained by the Group and the carrying amount of the consideration paidfor the combination is treated as an adjustment to capital surplus (share premium). If thecapital surplus (share premium) is not sufficient to absorb the difference, the remainingbalance is adjusted against retained earnings. Costs directly attributable to the combinationare included in profit or loss in the period in which they are incurred. Transaction costsassociated with the issue of equity or debt securities for the business combination areincluded in the initially recognised amounts of the equity or debt securities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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
The cost of combination and identifiable net assets obtained by the Group in a businesscombination are measured at fair value at the acquisition date. Where the cost of thecombination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognised as goodwill; where the cost of combination is lower thanthe acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the differenceis recognised in profit or loss for the current period. Costs directly attributable to thecombination are included in profit or loss in the period in which they are incurred. Transactioncosts associated with the issue of equity or debt securities for the business combination areincluded in the initially recognised amounts of the equity or debt securities.
For business combinations achieved by stages involving enterprises not under commoncontrol, previously-held equity in the acquiree is remeasured at its fair value at theacquisition dates. For the equity interest held in the acquiree before the acquisition dateunder equity method, the difference between its fair value and carrying amount is recognisedas investment income for the current period; for the other comprehensive income under theequity method and shareholders’ equity changes other than those arising from the net profitor loss, other comprehensive income and profit distribution, the related other comprehensiveincome and other shareholders' equity changes are transferred into profit or loss for thecurrent period to which the acquisition dates belong, excluding those arising from changesin the investee's remeasurements of net liability or net asset related to the defined benefitplan, and those arising from accumulative changes in fair value of investments in equityinstruments not held for trading that are held by investees and designated as at fair valuethrough other comprehensive income. For previously-held equity in the acquireecategorised as financial assets at fair value through profit or loss, the difference between itsfair value and carrying amount is transferred to investment income under the cost method;for previously-held equity in the acquiree categorised as investments in equity instrumentsnot held for trading at fair value through other comprehensive income, its accumulativechanges in fair value that are originally recognised in other comprehensive income aredirectly reclassified to retained earnings. The excess of the sum of fair value of thepreviously-held equity and fair value of the consideration paid at the acquisition date overshare of fair value of identifiable net assets acquired from the subsidiary is recognised asgoodwill.
(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.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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 current periodattributable to the minority shareholders of the subsidiaries exceeds the share of the minorityinterests in the opening balance of owners’ equity, the excess is deducted against minorityinterests. Unrealised profits and losses resulting from the sales of assets by the Companyto its subsidiaries are fully eliminated against net profit attributable to shareholders of theparent company. Unrealised profits and losses resulting from the sales of assets by asubsidiary to the Company are eliminated and allocated between net profit attributable toshareholders of the parent company and net profit attributable to minority interests inaccordance with the allocation proportion of the parent company in the subsidiary.Unrealised profits and losses resulting from the sales of assets by one subsidiary to anotherare eliminated and allocated between net profit attributable to shareholders of the parentcompany and net profit attributable to minority interests in accordance with the allocationproportion of the parent company in the subsidiary.
If the accounting treatment of 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(8) Foreign currency translation
(a) Foreign currency transactions
Foreign currency transactions are translated into functional currency using the exchangerates prevailing at the dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translatedinto functional currency using the spot exchange rates on the balance sheet date. Exchangedifferences arising from these translations are recognised in profit or loss for the currentperiod, except for those attributable to foreign currency borrowings that have been takenout specifically for acquisition or construction of qualifying assets, which are capitalised aspart of the cost of those assets. Non-monetary items denominated in foreign currencies thatare measured at historical costs are translated at the balance sheet date using the spotexchange rates at the date of the transactions. The effect of exchange rate changes on cashis presented separately in the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated atthe spot exchange rates on the balance sheet date. Among the equity items, the items otherthan undistributed profits are translated at the spot exchange rates of the transaction dates.The income and expense items in the income statements of overseas operations aretranslated at the spot exchange rates of the transaction dates. The differences arising fromthe above translation are recognised in other comprehensive income. The cash flows ofoverseas operations are translated at the spot exchange rates on the dates of the cashflows. The effect of exchange rate changes on cash is presented separately in the cash flowstatement.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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
The debt instruments held by the Group refer to the instruments that meet the definition offinancial liabilities from the perspective of the issuer, and are measured in the following threeways:
Measured at amortised cost:
The objective of the Group’s business model is to hold the financial assets to collect thecontractual cash flows, and the contractual cash flow characteristics are consistent with abasic lending arrangement, which gives rise on specified dates to the contractual cash flowsthat are solely payments of principal and interest on the principal amount outstanding. Theinterest income of such financial assets is recognised using the effective interest method.Such financial assets mainly comprise cash at bank and on hand, loans and advances,notes receivable, accounts receivable, other receivables, other current assets, debtinvestments, long-term receivables and other non-current assets, etc. Debt investments andlong-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 in othercurrent 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 method which are recognised in profit or loss for the current period.Such financial assets mainly include receivables financing, other debt investments, etc.Other debt investments of the Group that are due within one year (inclusive) as from thebalance sheet date are included in the current portion of non-current assets; other debtinvestments with maturities no more than one year (inclusive) at the time of acquisition areincluded in other current assets.
Measured at fair value through profit or loss:
Debt instruments held by the Group that are not divided into those at amortised cost, orthose measured at fair value through other comprehensive income, are measured at fairvalue through profit or loss. At initial recognition, the Group designates a portion of financialassets as at fair value through profit or loss to eliminate or significantly reduce an accountingmismatch. Financial assets that are due over one year as from the balance sheet date andare expected to be held over one year are included in other non-current financial assets.Others are included in financial assets held for trading.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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 other comprehensiveincome under investments in other equity instruments. The relevant dividend income of suchfinancial 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 17 -
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
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.
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 ofa non-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 other comprehensiveincome are retained and subject to accounting treatment under the subsequent treatmentmethod of aforesaid cash flow hedging reserve; for hedged future cash flows that theforecast transaction will never happen, the accumulated gains or losses that have beenrecognised in other comprehensive income are transferred immediately and included inprofit 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.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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:
| 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 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 19 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculates theECL of notes receivable and receivables financing that are classified into groupings withconsideration to historical credit losses experience, current conditions and forecasts offuture economic conditions.
With consideration to historical credit loss experience, current conditions and forecasts offuture economic conditions, the Group prepares the cross-reference between the numberof overdue days of accounts receivable and the lifetime ECL rate, and calculates the ECLof accounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime ECL rate,calculates the ECL of other receivables, loans and advances 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 the currentperiod. For debt instruments held at fair value through other comprehensive income, theGroup adjusts other comprehensive income while the impairment loss or gain is recognisedin profit or loss for the current period.
(iii) Derecognition of financial assets
A financial asset is derecognised when: (1) the contractual rights to the cash flows from thefinancial asset expire, (2) the financial asset has been transferred and the Group transferssubstantially all the risks and rewards of ownership of the financial asset to the transferee,or (3) the financial asset has been transferred and the Group has not retained control of thefinancial asset, although the Group neither transfers nor retains substantially all the risksand rewards of ownership of the financial asset.
When a financial asset is derecognised, the difference between the carrying amount andthe sum of the consideration received and the cumulative changes in fair value that arepreviously recognised directly in other comprehensive income is recognised in profit or lossfor the current period, except for those as investments in other equity instruments, thedifference aforementioned is recognised in retained earnings instead.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(b) Financial liabilities
Financial liabilities are classified as financial liabilities at amortised cost and 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, debentures payableand short-term financing bonds payable in other current liabilities, customer deposits anddeposits from banks and other financial institutions, borrowings from the Central Bank, andlong-term payables. Such financial liabilities are initially recognised at fair value, net oftransaction costs incurred, and subsequently measured using the effective interest method.Financial liabilities that are due within one year (inclusive) are classified as current liabilities;those with maturities over one year but are due within one year (inclusive) as from thebalance sheet date are classified as current portion of non-current liabilities. Others areclassified 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.
(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, consigned processingmaterials and low value consumables, are measured at the lower of cost and net realisablevalue.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) Inventories (Cont'd)
(c) Basis for determining net realisable values of inventories and method for making provision
for decline in the value of inventories.
Inventories are initially measured at cost. The cost of inventories comprises purchase cost,processing cost and other expenditures to bring the inventories to current site and condition.
On the balance sheet date, inventories are measured at the lower of cost and net realisablevalue.
Net realisable value is determined based on the estimated selling price in the ordinarycourse of business, less the estimated costs to completion and estimated contract fulfilmentcosts and costs necessary to make the sale and related taxes.
Provision for decline in the value of inventories is determined at the excess amount of thecost as calculated based on the classification of inventories over their net realisable value,and are recognised in profit or loss for the current period.
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of relatedassets or in profit or loss for the current period.
(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 which theGroup has joint control together with other parties and only has rights to the net assets ofthe arrangement based on legal forms, contractual terms and other facts and circumstances.An associate is an investee that the Group has significant influence on their financial andoperating policies.
Investments in subsidiaries are presented in the Company’s financial statements using 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11) Long-term equity investments (Cont’d)
(a) Determination of investment cost
For long-term equity investments acquired through a business combination involvingenterprises under common control, the investment cost shall be the absorbing party’s shareof the carrying amount of owners’ equity of the party being absorbed at the combinationdate; for long-term equity investment acquired through a business combination involvingenterprises not under common control, the investment cost shall be the combination cost.
For business combinations achieved by stages involving enterprises not under commoncontrol, the initial investment cost accounted for using the cost method is the sum of carryingamount of previously-held equity investment and additional investment cost. For previously-held equity investments accounted for using the equity method, the accounting treatment ofrelated other comprehensive income from disposal of the equity is carried out on a samebasis with the investee’s direct disposal of related assets or liabilities. Owners’ equity, whichis recognised due to changes in investee’s owners’ equity other than those arising from thenet profit or loss, other comprehensive income and profit distribution, is accordinglytransferred into profit or loss for the period in which the investment is disposed.
For the investments in previously-held equity without significant influence or common controlthat previously recognised as financial assets at fair value through profit or loss, thedifference between the fair value and carrying amount is transferred to investment incomefor the current period under cost method; for the investments previously recognised asinvestments in equity instruments not held for trading at fair value through othercomprehensive income, the difference between the fair value and carrying amount andaccumulated changes in fair value previously recognised in other comprehensive incomeare 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 issuing equitysecurities, the initial investment cost shall be the fair value of the equity securities issued.
(b) Subsequent measurement and recognition methods of gains and losses
For long-term equity investments accounted for using the cost method, they are measuredat the initial investment costs, and cash dividends or profit distribution declared by theinvestees are recognised as investment income in profit or loss for the current period.
For long-term equity investments accounted for using the equity method, where the initialinvestment cost of a long-term equity investment exceeds the Group’s share of the fair valueof the investee’s identifiable net assets at the acquisition date, the long-term equityinvestment is measured at the initial investment cost; where the initial investment cost isless than the Group’s share of the fair value of the investee’s identifiable net assets at theacquisition date, the difference is included in profit or loss and the cost of the long-termequity investment is adjusted upwards accordingly.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11) Long-term equity investments (Cont’d)
(b) Subsequent measurement and recognition methods of gains and losses (Cont’d)
For long-term equity investments accounted for using the equity method, the Grouprecognises the investment income according to its share of net profit or loss of the investee.The Group discontinues recognising its share of the net losses of an investee after thecarrying amount of the long-term equity investment together with any long-term intereststhat in substance form part of the investor’s net investment in the investee are reduced tozero. However, if the Group has obligations for additional losses and the criteria with respectto recognition of provisions are satisfied, the Group continues recognising the investmentlosses and the provisions at the amount it expects to undertake. The changes of the Group’sshare in investee’s owners’ equity other than those arising from the net profit or loss, othercomprehensive income and profit distribution are recognised in capital surplus with acorresponding adjustment to the carrying amount of the long-term equity investment. Thecarrying amount of the investment is reduced by the Group’s share of the profit distributionor cash dividends declared by the investees. The unrealised profits or losses arising fromthe transactions between the Group and its investees are eliminated in proportion to theGroup’s equity interest in the investees, based on which the investment gain or losses arerecognised. Any losses resulting from transactions between the Group and its investeesattributable to asset impairment losses are not eliminated.
(c) Basis for determining existence of control, joint control, significant influence over investees
Control is the power to govern an investee and obtain variable returns from participating theinvestee’s activities, and the ability to utilise the power of an investee to affect its returns.
Joint control is the contractually agreed sharing of control over an arrangement, and relevanteconomic activity can be arranged upon the unanimous approval of the Group and otherparticipants sharing of control rights.
Significant influence is the power to participate in the financial and operating policy decisionsof the investee, but is not control or joint control over those policies.
(d) Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint 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, buildingsthat are held for the purpose of leasing and buildings that are being constructed ordeveloped for future use for leasing, are measured initially at cost. Subsequent expendituresincurred in relation to an investment property are included in the cost of the investmentproperty when it is probable that the associated economic benefits will flow to the Groupand their costs can be reliably measured; otherwise, the expenditures are recognised inprofit or loss for the period in which they are incurred.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Investment properties (Cont’d)
The Group adopts the cost model for subsequent measurement of investment properties.Buildings and land use rights are depreciated or amortised to their estimated net residualvalues over their estimated useful lives. The estimated useful lives, the estimated netresidual values that are expressed as a percentage of cost and the annual depreciation(amortisation) rates of investment properties are as follows:
| Estimated useful lives | Estimated net residual values | Annual depreciation (amortisation) rates | |
| Buildings | 20 to 40 years | 5% | 2.38% to 4.75% |
| Land use rights | 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.
The investment properties’ estimated useful lives, the estimated net residual values and thedepreciation (amortisation) methods applied are reviewed and adjusted as appropriate ateach year-end.
An investment property is derecognised on disposal or when the investment property ispermanently withdrawn from use and no future economic benefits are expected from itsdisposal. The net amount of proceeds from sale, transfer, retirement or damage of aninvestment property after its carrying amount and related taxes and expenses is recognisedin profit or loss for the current period.
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, motor vehicles,electronic equipment and others.
Fixed assets are recognised when it is probable that the related economic benefits will flowto the Group and the cost can be reliably measured. The initial cost of purchased fixedassets include purchase price, related taxes and expenditures that are attributable to theassets incurred before the assets are ready for their intended use. The initial cost of self-constructed fixed assets is determined based on Note 2(14).
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed assetwhen it is probable that the associated economic benefits will flow to the Group and therelated cost can be reliably measured. The carrying amount of the replaced part isderecognised. All the other subsequent expenditures are recognised in profit or loss for theperiod in which they are incurred.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(13) Fixed assets (Cont’d)
(b) Depreciation method of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assetsto their estimated net residual values over their estimated useful lives. For the fixed assetsthat have been provided for impairment loss, the related depreciation charge is prospectivelydetermined based upon the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated net residual values expressed as a percentage ofcost and the annual depreciation rates of the Group’s fixed assets are as follows:
| Categories | Estimated useful lives | Estimated net residual values | Annual depreciation rates |
| Buildings | 15 to 50 years | 0% to 10% | 6.7% to 1.8% |
| Machinery and equipment | 2 to 25 years | 0% to 10% | 50% to 3.6% |
| Motor vehicles | 2 to 20 years | 0% to 10% | 50% to 4.5% |
| Electronic equipment and others | 2 to 20 years | 0% to 10% | 50% to 4.5% |
| Overseas land | Permanent | Not applicable | Not applicable |
The estimated useful lives and the estimated net residual values of the Group’s fixed assetsand the depreciation methods applied to the assets are reviewed, and adjusted asappropriate at each year-end.
(c) The carrying amount of a fixed asset is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(18)).
(d) Disposal of fixed assets
A fixed asset is derecognised on disposal or when no future economic benefits are expectedfrom its use or disposal. The amount of proceeds from disposals on sale, transfer, retirementor damage of a fixed asset net of its carrying amount and related taxes and expenses isrecognised in profit or loss for the current period.
(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. Construction inprogress is transferred to fixed assets when the assets are ready for their intended use, anddepreciation begins from the following month. The carrying amount of construction inprogress is reduced to the recoverable amount when the recoverable amount is below itscarrying amount (Note 2(18)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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 have commenced.The capitalisation of borrowing costs ceases when the asset under acquisition orconstruction becomes ready for its intended use and the borrowing costs incurred thereafterare recognised in profit or loss for the current period. Capitalisation of borrowing costs issuspended during periods in which the acquisition or construction of an asset is interruptedabnormally and the interruption lasts for more than 3 months, until the acquisition orconstruction is resumed.
For the specific borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of borrowing costs eligible for capitalisation isdetermined by actual interest expenses deducting any interest income earned fromdepositing the unused specific borrowings in the banks or any investment income arising onthe temporary investment of those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of general borrowing costs eligible for capitalisationis determined by applying the weighted average effective interest rate of general borrowings,to the weighted average of the excess amount of cumulative expenditures on the asset overthe amount of specific borrowings. The effective interest rate is the rate at which the futurecash flows during the period of expected duration of the borrowings or applicable shorterperiod are discounted to the initial amount of the borrowings.
(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, the periodas stipulated by contracts or the beneficial period.
(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)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(16) Intangible assets (Cont’d)
(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 40 years.
(e) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisationmethod is performed at each year-end, with adjustment made as appropriate.
(f) Research and development (R&D)
The expenditure on an internal research and development project is classified intoexpenditure on the research phase and expenditure on the development phase based onits nature and whether there is material uncertainty that the research and developmentactivities can form an intangible asset at the end of the project.
Expenditure on the planned investigation, evaluation and selection for the research ofproduction processes or products is categorised as expenditure on the research phase, andit is recognised in profit or loss when it is incurred. Expenditure on design and test for thefinal application of the development of production processes or products before massproduction is categorised as expenditure on the development phase, which is capitalisedonly if all of the following conditions are satisfied:
? The development of production processes or products has been fully justified bytechnical team;? The budget on the development of production processes or products has beenapproved by management;? There is market research analysis that demonstrates the product produced by the
production process or product has the ability of marketing;? There are sufficient technical and financial resources to support the development ofproduction processes or products and subsequent mass production; and? Expenditure attributable to the development of production processes or products can
be reliably measured.
Other development expenditures that do not meet the conditions above are recognised inprofit or loss in the period in which they are incurred. Development costs previouslyrecognised as expenses are not recognised as an asset in a subsequent period. Capitalisedexpenditure on the development phase is presented as development costs in the balancesheet and transferred to intangible assets at the date that the asset is ready for its intendeduse.
(g) Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when therecoverable amount is below the carrying amount (Note 2(18)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(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 be derivedfrom 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 an individualasset, the recoverable amount of a group of assets to which the asset belongs isdetermined. A group of assets is the smallest group of assets 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 asset groupor a group of asset groups, including the allocated goodwill, is lower than its carryingamount, the corresponding impairment loss is recognised. The impairment loss is firstdeducted from the carrying amount of goodwill that is allocated to the asset group or groupof asset groups, and then deducted from the carrying amounts of other assets within theasset group or group of asset groups in proportion to the carrying amounts of assets otherthan goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the valuerecovered in the subsequent periods.
(19) Employee benefits
Employee benefits refer to all forms of consideration or compensation given by the 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(19) Employee benefits (Cont’d)
(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, union running costs and employeeeducation costs, short-term paid absences, etc. 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 the currentperiod or the cost of relevant assets. Non-monetary benefits are measured at fair value.
(b) Post-employment benefits
The Group classifies post-employment benefit plans as either defined contribution plans ordefined benefit plans. Defined contribution plans are post-employment benefit plans underwhich the Group pays fixed contributions into a separate fund and will have no obligation topay further contributions; and defined benefit plans are post-employment benefit plans otherthan defined contribution plans. During the reporting period, the Group’s defined contributionplans mainly include basic pensions and unemployment insurance, while the defined benefitplans are Toshiba Lifestyle Products & Services Corporation (“TLSC”) and its subsidiaries(“TLSC Group”) and KUKA Aktiengesellschaft (“KUKA”) and its subsidiaries (“KUKAGroup”), etc. provide supplemental retirement benefits beyond the national regulatoryinsurance system.
Basic pensions
The Group’s employees participate in the basic pension plan set up and administered bylocal authorities of Ministry of Human Resource and Social Security. Monthly payments ofpremiums on the basic pensions are calculated according to prescribed bases andpercentage by the relevant local authorities. When employees retire, the relevant localauthorities are obliged to pay the basic pensions to them. The amounts based on the abovecalculations are recognised as liabilities in the accounting period in which the service hasbeen rendered by the employees, with a corresponding charge to the profit or loss for thecurrent period or the cost of relevant assets.
Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans isthe present value of the defined benefit 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 obligation termand currency. The charges related to supplementary retirement benefits (including currentservice costs, historical service costs and gains or losses on settlement) and net interestare recognised in profit or loss for the current period or included in the cost of an asset, andthe changes arising from remeasurement in net liabilities or net assets of defined benefitplans are recognised in other comprehensive income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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 cannot unilaterallywithdraw an employment termination plan or a curtailment proposal; 2) when the Grouprecognises costs or expenses related to a restructuring that involves the payment oftermination 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 early retirementbenefits in accordance with the treatment for termination benefits, in which the salaries andsocial security contributions to be paid to and for the early retired employees from the off-duty date to the normal retirement date are recognised as liabilities with a correspondingcharge to the profit or loss for the current period. The differences arising from the changesin the respective actuarial assumptions of the early retirement benefits and the adjustmentsof benefit standards are recognised in profit or loss in the period in which they occur.
The termination benefits expected to be settled within one year since the balance sheet dateare classified as current liabilities.
(20) General risk reserve
General risk reserve is the reserve appropriated from undistributed profits to cover part ofunidentified potential losses, on the basis of the estimated potential risk value of risk assetsassessed by the standardised approach, which is deducted from recognised provision forimpairment losses on loans. Risk assets include loans and advances, long-term equityinvestments, deposits with banks and other financial institutions and other receivables ofsubsidiaries engaged in financial business.
(21) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved bythe shareholders’ meeting.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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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 settle therelated present obligation. Factors surrounding a contingency, such as the risks,uncertainties and the time value of money, are taken into account as a whole in reachingthe best estimate of a provision. Where the effect of the time value of money is material, thebest estimate is determined by discounting the related future cash outflows. The increase inthe discounted amount of the provision arising from passage of time is recognised asinterest expenses.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted toreflect the current best estimate.
The provisions expected to be settled within one year since the balance sheet date areclassified as current liabilities.
(23) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employeesas consideration for equity instruments of the entity or by incurring liabilities for amountsbased on the equity instruments. Equity instruments include equity instruments of theCompany, its parent company or other accounting entities of the Group. Share-basedpayments are divided into equity-settled and cash-settled payments. The Group’s share-based payments are equity-settled payments.
Equity-settled share-based payment
The Group’s equity-settled share-based payment contains share option incentive plan,restricted share plan and employee stock ownership plan. These plans are measured at thefair value of the equity instruments at grant date and the equity instruments are tradable orexercisable when services in vesting period are completed or specified performanceconditions are met. In the vesting period, the services obtained in the current period areincluded in relevant cost and expenses at the fair value of the equity instruments at grantdate based on the best estimate of the number of tradable or exercisable equity instruments,and capital surplus is increased accordingly. If the subsequent information indicates thenumber of tradable or exercisable equity instruments differs from the previous estimate, anadjustment is made and, on the exercise date, the estimate is revised to equal to the numberof actual vested equity instruments.
(b) Determination of fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which isBlack-Scholes option pricing model.
The fair value of other equity instruments is based on the share prices, which exclude theprice that incentive objects pay, and the number of the shares on the grant date, taking intoaccount the effects of clause of the Group’s relevant plans.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(23) Share-based payment (Cont’d)
(c) Basis for determining best estimate of tradable or exercisable equity instruments
As at each balance sheet date in the vesting period, the Group would make best estimatein accordance with the newly acquired information such as changes in the number ofemployees entitled with exercisable or tradable equity instruments, and amend theestimated number of exercisable or tradable equity instruments. On the exercise ordesterilisation date, the final number of estimated exercisable or tradable equity instrumentsis consistent with the actual number of exercisable or tradable equity instruments.
(24) Treasury stock
The Group’s treasury stock mainly comes from the repurchase of equity instruments andthe issuance 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. On theday of release of restricted shares, relevant treasury stocks, liabilities and capital surplusrecognised in the vesting period are reversed based on the actual vesting results.
(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.
When any of the following conditions is met, the Group is subject to performance obligationswithin a period of time; otherwise, at a point in time:
(1) Customers obtain and consume economic benefits coming from the Group’s
performance of contract while the Group performs the contract.
(2) Customers can control goods under construction during the Group’s performance
of contract.
(3) Goods produced during the Group’s performance of contract are irreplaceable.
During the whole contract period, the Group is entitled to collect payments for thosewhich 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 33 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Revenue (Cont’d)
Where the status of completion cannot be reasonably determined, revenue is recognised atthe 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, etc.) and consumerappliances (mainly comprise kitchen appliances, refrigerators, washing machines andvarious small appliances, etc.), and robotics and automation system and sales of productsand materials 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 accordance withthe sales contract.
Revenue from sales of robotics and automation system is recognised when the Group hasdelivered products to the location specified in the sales contract and the buyer has confirmedthe acceptance of the products, and the delivery order is signed by both parties.
Revenue from sales of materials is recognised when the buyer has accepted the materialsas contracted and the delivery order is signed by both parties.
The credit period granted to distributors by the Group is determined based on their creditrisk characteristics, which is consistent with industry practice, and there is no significantfinancing component. Generally, the retail customers of the Group are entitled to return theproducts within 7 days after the confirmation of receipt.
The Group provides distributors with sales discount, and the relevant revenue is recognisedat contract consideration net of the discount amount estimated.
The periods and terms of product quality warranty are provided in accordance with the lawsand regulations related to the products. The Group has not provided any additional servicesor product quality warranty, so the product quality warranty does not constitute a separateperformance obligation.
The rights to receive considerations for transferring goods to the customer (and such rightsdepend on factors other than the passage of time) are recognised as contract assets. TheGroup’s obligation to transfer products to customers for consideration received or receivableis presented as contract liabilities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Revenue (Cont’d)
(b) Rendering of services
The Group provides robotics and automation system construction service, intelligentlogistics integration solution, storage services, delivery services, installation services andtransportation service, which are recognised in a certain period of time based on the stageof completion. On the balance sheet date, the Group re-estimates the stage of completionto reflect the actual status of contract performance.
When the Group recognises revenue based on the stage of completion, the amount withunconditional collection right obtained by the Group is recognised as accounts receivable,and the rest is recognised as contract assets. Meanwhile, loss provision for accountsreceivable and contract assets are recognised on the basis of ECL (Note 2(9)). If the contractprice received or receivable exceeds the amount for the completed service, the excessportion will be recognised as contract liabilities. Contract assets and contract liabilities underthe same contract are presented on a net basis.
Contract costs include contract performance costs and contract acquisition costs. The costsincurred by the Group for the provision of services are recognised as contract performancecosts. The recognised revenue is carried forward to the cost of sales from main operationsbased on the stage of completion. Incremental costs incurred by the Group for theacquisition of contract are recognised as the costs to obtain a contract. For the costs toobtain a contract with the amortisation period within one year, the costs are charged to profitor loss when incurred. For the costs to obtain a contract with the amortisation period beyondone year, the costs are charged in the current profit or loss on the same basis as aforesaidrevenue of rendering of services recognised under the relevant contract. If the carryingamount of the contract costs is higher than the remaining consideration expected to beobtained by rendering of the service net of the estimated cost to be incurred, the Groupmakes provision for impairment on the excess portion and recognises it as asset impairmentlosses. As at the balance sheet date, based on whether the amortisation period of the coststo fulfil a contract is more than one year when initially recognised, the amount of the Group’scosts to fulfil a contract net of related provision for asset impairment is presented asinventories or other non-current assets. For costs to obtain a contract with amortisationperiod beyond one year at the initial recognition, the amount net of related provision forasset impairment is presented as other non-current assets.
(c) Interest income
Interest income from financial instruments is calculated by effective interest method andrecognised in profit or loss for the current period. Interest income comprises premiums ordiscounts, or the amortisation based on effective rates of other difference between the initialcarrying amount and the due amount of interest-earning assets.
The effective interest method is a method of calculating the amortised cost of a financialasset or liability and the interest income or interest costs based on effective rates. Theeffective interest rate is the rate at which the estimated future cash flows during the periodof expected duration of the financial instruments or applicable shorter period are discountedto the current carrying amount of the financial instruments. When calculating the effectiveinterest rate, the Group estimates cash flows by considering all contractual terms of thefinancial instrument (e.g., early repayment options, similar options, etc.), but withoutconsidering future credit losses. The calculation includes all fees and interest paid orreceived that are an integral part of the effective interest rate, transaction costs, and all otherpremiums or discounts.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Revenue (Cont’d)
(c) Interest income (Cont’d)
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.
(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 the governmentto the Group at nil consideration, including refund of taxes and financial subsidies, etc.
A government grant is recognised when the conditions attached to it can be complied withand the government grant can be received. For a government grant in the form of transferof monetary assets, the grant is measured at the amount received or receivable. For agovernment grant in the form of transfer of non-monetary assets, it is measured at fair value;if the fair value is not reliably determinable, the grant is measured at nominal amount.
Government grants related to assets are grants that are acquired by the Group and usedfor acquisition, construction or forming long-term assets in other ways. Government grantsrelated to income 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 in non-operating income and expenses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
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2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Government grants(Cont’d)
Loans to the Group at political preferential rate are recorded at the actual amount received,and the related loan expenses are calculated based on the principal and the politicalpreferential rate. Finance discounts directly received offset related loans expenses.
(27) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities are calculated and recognised based on thedifferences arising between the tax bases of assets and liabilities and their carrying amounts(temporary differences). Deferred tax asset is recognised for the deductible losses that canbe carried forward to subsequent years for deduction of the taxable profit in accordance withthe tax laws. No deferred tax liability is recognised for a temporary difference arising fromthe initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognisedfor the temporary differences resulting from the initial recognition of assets or liabilities dueto a transaction other than a business combination, which affects neither accounting profitnor taxable profit (or deductible losses) and whose initially recognised assets and liabilitiesdo not result in equal taxable temporary differences and deductible temporary differences.At the balance sheet date, deferred tax assets and deferred tax liabilities are measured atthe tax rates that are expected to apply to the period when the asset is realised or the liabilityis 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 temporary differencewill not reverse in the foreseeable future. When it is probable that the temporary differencesarising from investments in subsidiaries, associates and joint ventures will be reversed inthe foreseeable future and that the taxable profit will be available in the future against whichthe temporary differences can be utilised, the corresponding deferred tax assets arerecognised.
Deferred tax assets and deferred tax liabilities are offset when:
? the deferred tax assets and deferred tax liabilities are related to the same tax payerwithin 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.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 37 -
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. Variable leasepayments in proportion to sales are excluded from lease payments and recognised in profitor loss as incurred. Lease liabilities that are due within one year (inclusive) as from thebalance sheet date are included in the current portion of non-current liabilities.
Right-of-use assets of the Group comprise leased buildings, machinery and equipment,motor vehicles, etc. Right-of-use assets are measured initially at cost which comprises theamount of the initial measurement of lease liabilities, any lease payments made at or beforethe commencement date and any initial direct costs, less any lease incentives received. Ifthere is reasonable certainty that the Group will obtain ownership of the underlying asset bythe end of the lease term, the asset is depreciated over its remaining useful life; otherwisethe asset is depreciated over the shorter of the lease term and its remaining useful life. Thecarrying amount of the right-of-use asset is reduced to the recoverable amount when therecoverable 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 applies thepractical expedient and records the undiscounted concessions in profit or loss when theagreement is reached to discharge the original payment obligation with correspondingadjustment of lease liabilities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 38 -
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
(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 operating segments.
An operating segment is a component of the Group that satisfies all of the followingconditions: (1) the component is able to earn revenue and incur expenses from its ordinaryactivities; (2) whose operating results are regularly reviewed by the Group’s managementto make decisions about resources to be allocated to the segment and to assess itsperformance, and (3) for which the information on financial position, operating results andcash flows is available to the Group. Two or more operating segments that have similareconomic characteristics and satisfy certain conditions can be aggregated into one singleoperating segment.
(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 of causinga material adjustment to the carrying amounts of assets and liabilities within the nextaccounting year are outlined below:
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 39 -
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
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 goodwill isdetermined by the higher value between the present value of the future cash flows and thenet value that is calculated by the fair value less the disposal costs. Accounting estimate isrequired for the calculation of the recoverable amount. The impairment testing is performedby assessing the recoverable amount of the asset group or group of asset groups containingthe relevant goodwill, based on the present value of cash flows forecasts. Key assumptionsadopted in the impairment testing of goodwill included estimated revenue growth rate,EBITDA margin, perpetual annual growth rate, discount rate, etc. which involved criticalaccounting estimates and judgement.
If management revises the estimated revenue growth rate and perpetual annual growth ratethat are used in the calculation of the future cash flows of asset groups or groups of assetgroups, and the revised rates are lower than the current rates, the Group would need torecognise further impairment against goodwill.
If management revises the EBITDA margin that is used in the calculation of the future cashflows of asset groups or groups of asset groups, and the revised EBITDA margin is lowerthan 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.
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’s estimates,the impairment loss of goodwill previously provided for is not allowed to be reversed by theGroup.
(ii) Income tax and deferred income tax
The Group is subject to enterprise income tax in numerous jurisdictions. There are manytransactions and events for which the ultimate tax determination is uncertain during theordinary course of business. Significant judgement is required from the Group in determiningthe provision for income taxes in each of these jurisdictions. Where the final tax outcome ofthese matters is different from the amounts that were initially recorded, such differences willimpact the income tax and deferred tax provisions in the period in which such determinationis made.
As stated in Note 3(1), some subsidiaries of the Group are high-tech enterprises. The “High-Tech Enterprise Certificate” is effective for three years. Upon expiration, application for high-tech enterprise assessment should be submitted again to the relevant governmentauthorities. Based on the past experience of reassessment for high-tech enterprise uponexpiration and the actual condition of the subsidiaries, the Group considers that thesubsidiaries are able to obtain the qualification for high-tech enterprises in future years, andtherefore a preferential tax rate of 15% is used to calculate the corresponding deferredincome tax. If some subsidiaries cannot obtain the qualification for high-tech enterprise uponexpiration, then the subsidiaries are subject to a statutory tax rate of 25% for the calculationof the income tax, which further influences the recognised deferred tax assets, deferred taxliabilities and income tax expenses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 40 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(30) Critical accounting estimates and judgements (Cont’d)
(ii) Income tax and deferred income tax (Cont’d)
Deferred tax assets are recognised for the deductible tax losses that can be carried forwardto subsequent years to the extent that it is probable that taxable profit will be available in thefuture against which the deductible tax losses can be utilised. Taxable profit that will beavailable in the future includes the taxable profit that will be realised through normaloperations and the taxable profit that will be increased upon the reversal of taxabletemporary differences incurred in prior periods. Judgements and estimates are required todetermine the time and amounts of taxable profit in the future. Any difference between thereality and the estimate may result in adjustment to the carrying amount of deferred taxassets.
| (31) | Significant changes in accounting policies |
| The Ministry of Finance released the Circular on Issuing Interpretation No. 15 of Accounting Standards for Business Enterprises (Interpretation No. 15) in 2021, and Q&A on Implementation of Accounting Standards for Business Enterprises, Interpretation No. 16 of Accounting Standards for Business Enterprises and Notice on Strictly Implementing the Accounting Standards for Business Enterprises and Effectively Conducting the Work in Relation to the 2022 Annual Reports of Enterprises (Cai Kuai [2022] No. 32) in 2022. The financial statements for the year ended 31 December 2022 have been prepared by the Group and the Company in accordance with the above circulars and Q&A, which 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.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 41 -
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 2022 as they qualified as high-tech enterprises and obtained the High-tech EnterpriseCertificate:
Name of taxpayer
| 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 |
| 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 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 42 -
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 2022 as they qualified as high-tech enterprises and obtained the High-tech EnterpriseCertificate (Cont’d):
Name of taxpayer
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| 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 |
| 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 |
In addition, pursuant to the Announcement on Increasing the Pre-tax Deductions in Supportof Technological Innovation (Announcement [2022] No. 28) issued by the Ministry ofFinance, the State Taxation Administration and the Ministry of Science and Technology,during the period from 1 October 2022 to 31 December 2022, the cost of newly purchasedequipment and appliances by high-tech enterprises can be fully deducted against taxableprofit in 2022, and entitled to additional pre-tax deduction at 100%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 43 -
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 rateof 15% 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 incometax rate of 15%. Therefore, Midea Commercial Factoring Co., Ltd., a subsidiary of theCompany, is subject to enterprise income tax at a rate of 15% from 1 January 2021 to 31December 2025.
(a-4) According to the Announcement on Continuing the Enterprise Income Tax Policies for the
Development of Western China jointly issued by the Ministry of Finance, the State TaxationAdministration and the National Development and Reform Commission on 23 April 2020,Chongqing Midea Air-Conditioning Equipment Co., Ltd., Chongqing Midea CommercialFactoring Co., Ltd., Chongqing Annto Logistics Technology Co., Ltd. and Guiyang AnntoLogistics Technology Co., Ltd., subsidiaries of the Company, are subject to enterpriseincome tax at a rate of 15% from 1 January 2021 to 31 December 2030.
(a-5) On 28 November 2017, Luanping Huitong Photovoltaic Power Co., Ltd., a subsidiary of the
Company, obtained the Record Form for Enterprise Income Tax Preference issued by theLuanping County Office of the State Taxation Administration. According to Item 2 of Article27 in the Enterprise Income Tax Law of the People’s Republic of China, Order of thePresident of the People’s Republic of China (No. 63), Phase II Project of the company wassubject to the preferential policy of enterprise income tax exemption from 2017 to 2019, andis subject to the preferential policy of enterprise income tax reduction of 50% from 2020 to2022.
(a-6) According to the Notice on Implementing the Inclusive Tax Deduction and Exemption
Policies for Micro and Small Enterprises (Cai Shui [2019] No. 13), the Announcement onthe Matters Concerning the Implementation of Preferential Income Tax Policies for theDevelopment of Small and Micro Enterprises and Individual Industrial and CommercialHouseholds (Announcement [2021], No. 12) and the Announcement on the MattersConcerning the Implementation of Preferential Income Tax Policies for the Development ofSmall and Micro Enterprises (Announcement [2022], No. 13) jointly issued by the Ministryof Finance and the State Taxation Administration, for Shenzhen Midea Capital CorporationLimited., Guangdong Ling Mei Technology Co. Ltd, Shanghai Annto Logistics Supply ChainTechnology Co., Ltd., Foshan Annto Logistics Technology Co., Ltd., Shenzhen AnntoIntelligent Technology Co., Ltd., Tianjin Annto Network Technology Co., Ltd.and HangzhouLong-termism Tech Co.,Ltd., subsidiaries of the Company and qualified as a small low-profitenterprise, in 2022, EIT is based on a 20% rate applied to 12.5% of its taxable incomeamount for the proportion of taxable income up to RMB 1 million, and a 20% rate applied to25% of its taxable income amount for the proportion of taxable income between RMB 1million and RMB 3 million.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 44 -
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-7) The Company's subsidiaries in Mainland China other than those mentioned in (a-1) to (a-6)
are subject to enterprise income tax at the rate of 25%.
(a-8) In August 2008, Midea Electric Trading (Singapore) Co., Pte Ltd., the Company's subsidiary,
was awarded with the Certificate of Honour for Development and Expansion (No. 587) bythe Singapore Economic Development Board and is subject to the applicable preferentialincome tax rate of 5.5% for 2022. Lifestyle Orchestra Co.Pte.Ltd. and Little SwanInternational (Singapore) Co., Pte. LTD., the Company's subsidiaries, are subject toenterprise income tax at the rate of 17%.
(a-9) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax at the rate
of 16.5%. Such subsidiaries include Midea International Trading Company Limited, MideaInternational Corporation Company Limited, Midea Home Appliances Investments (HongKong) Co., Limited, Century Carrier Residential Air-conditioning Equipment Co., Limited,Midea Refrigeration (Hong Kong) Limited, Welling Holding Limited, Welling InternationalHong Kong Ltd., Chairing Holding Limited, Main Power Electrical Factory Limited and MideaInvestment (Asia) Company Limited.
(a-10) The Company's subsidiaries in BVI and Cayman Islands are exempted from enterprise
income tax. Such subsidiaries include Mecca International (BVI) Limited, Titoni InvestmentsDevelopment Ltd., Midea Investment Holding (BVI) Limited, Midea Electric Investment (BVI)Limited, Welling Holding (BVI) Ltd., Midea Holding (Cayman Islands) Limited and MideaInvestment Development Company Limited.
(a-11) Springer Carrier Ltda., the Company's subsidiary in Brazil, is subject to Brazil enterprise
income tax at the rate of 34%.
(a-12) Some subsidiaries of TLSC, the Company's subsidiary in Japan, are subject to Japan
enterprise income tax at the rate of 34.01%.
(a-13) Clivet S.P.A (“Clivet”), the Company's subsidiaries in Italy, are subject to Italy enterprise
income tax at the rate between 20% and 31.4%.
(a-14) KUKA Group, the Company's subsidiary in Germany, is subject to Germany enterprise
income tax at the rate of 32%.
(a-15) Servotronix Motion Control Ltd. (“SMC”), the Company's subsidiary in Israel, is subject to
Israel enterprise income tax at the rate of 23%.
(a-16) Misr Refrigeration and Air Conditioning Manufacturing Company, S.A.E., the Company's
subsidiary in Egypt, is subject to Egypt enterprise income tax at the rate of 22.5%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 45 -
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-17) Midea America Corp., the Company's subsidiary in the USA, is subject to the USA enterprise
income tax at the rate of 21%.
(a-18) 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-19) 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 StateTaxation Administration and the General Administration of Customs and relevantregulations, the applicable tax rate of revenue arising from sales of goods and rendering ofrepairing and replacement services of the Company’s certain subsidiaries is 13% from 1April 2019, and that of revenue arising from real estate leasing and transportation servicesof the Company’s certain 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 relevant provisions of the Announcement on Relevant Policies for Deepening
the Value-Added Tax Reform (Announcement [2019] No. 39) issued by the Ministry ofFinance, the State Taxation Administration and the General Administration of Customs andthe Announcement on the VAT Policy Relating to the Promotion of Relief and Developmentof Difficulty-ridden Industries in the Service Sector (Announcement [2022] No. 11) issued bythe Ministry of Finance and the State Taxation Administration, certain subsidiaries of theCompany engaged in the production service sector are eligible for a 10% additional VATdeduction based on deductible input VAT in the current year from 1 April 2019 to 31December 2022.
(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,the State Taxation Administration, the Ministry of Human Resources and Social Security andthe State 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 maintenanceand construction tax, educational surcharge, local educational surcharge and enterpriseincome tax will be deducted in sequence and based on quota in accordance with the actualnumber of employees in 3 years, and the period of validity will be until 31 December 2025.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 46 -
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
| 31 December 2022 | 31 December 2021 | |||
| Cash on hand | 1,645 | 1,609 | ||
| Cash at bank (a) | 28,581,529 | 46,691,119 | ||
| Other cash balances (b) | 1,688,278 | 443,893 | ||
| Statutory reserve with the Central Bank (c) | 328,409 | 419,718 | ||
| Surplus reserve with the Central Bank (d) | 172,394 | 272,949 | ||
| Deposits with banks and other financial institutions (e) | 24,287,610 | 23,351,878 | ||
| Interest receivable | 210,234 | 694,390 | ||
| 55,270,099 | 71,875,556 | |||
| Including: Total amounts deposited with banks overseas (including Singapore, Japan, Hong Kong, China, Germany, Egypt, the USA, etc.) | 7,133,785 | 6,763,152 |
(a) As at 31 December 2022, cash at bank included fixed deposits with the term of over 3
months and due within 1 year, amounting to RMB 1,911,210,000 (31 December 2021: RMB28,767,516,000).
(b) Other cash balances mainly include letter of bank acceptance notes, letters of guarantee
and letters of credit.
(c) Statutory reserve with the Central Bank represents the statutory reserve deposited in
People’s Bank of China by the financial enterprise in accordance with relevant regulations.They are restricted cash and are not available for use in the Group’s daily operations.
(d) Surplus reserve with the Central Bank represents the excess over the required statutory
reserve paid by financial institutions in the Central Bank, and it is bank deposit that can bereadily drawn on demand.
(e) As at 31 December 2022, deposits with banks and other financial institutions included no
fixed deposits with the term of over 3 months (31 December 2021: RMB 1,000,000,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 47 -
4 Notes to the consolidated financial statements (Cont’d)
(2) Financial assets held for trading
| 31 December 2022 | 31 December 2021 | ||
| Structural deposits (a) | 1,606,608 | 4,285,607 | |
| Investments in equity instrument held for trading (b) | 1,264,595 | 1,319,470 | |
| Others | 413,390 | 274,125 | |
| 3,284,593 | 5,879,202 |
(a) Structural deposits were deposits with financial institutions due within 1 year, which were
measured at fair value through profit or loss.
(b) Investments in equity instrument held for trading referred to equity investments in listed
companies, which were measured at fair value through profit or loss.
(3) Notes receivable
| 31 December 2022 | 31 December 2021 | |||
| Bank acceptance notes | 4,705,290 | 4,689,898 | ||
| Trade acceptance notes | 114,595 | 126,640 | ||
| Less: Provision for bad debts (a) | (61,756) | (31,624) | ||
| 4,758,129 | 4,784,914 |
(a) Provision for bad debts
For notes receivable of the Group arising from sales of goods or rendering of services in theordinary course of business, the Group measures bad debts based on the lifetime ECLregardless of whether there exists a significant financing component. As at 31 December2022, the Group considered that there was no significant credit risk associated with its bankacceptance notes and did not expect that there would be any significant losses from non-performance by these banks.
| (b) | As at 31 December 2022, notes receivable endorsed or discounted but unmatured are as follows: | |||
| Derecognised | Not derecognised | |||
| Trade acceptance notes | — | 2,996 | ||
| Bank acceptance notes (i) | 20,360 | 2,615,039 | ||
| 20,360 | 2,618,035 | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 48 -
4 Notes to the consolidated financial statements (Cont’d)
| (3) | Notes receivable (Cont’d) |
| (b) | As at 31 December 2022, notes receivable endorsed or discounted but unmatured are as follows (Cont’d): |
| (i) | For the year ended 31 December 2022 and 31 December 2021, certain bank acceptance notes were discounted and endorsed and derecognised by some subsidiaries of the Group for the purpose of daily treasury management, and the business model for managing the notes receivable was aimed to both collect the contractual cash flows and sell such financial assets, which thereby categorised the balance of these bank acceptance notes that satisfied the above conditions as financial assets at fair value through other comprehensive income and presented them as receivables financing (Note 4(6)). The remained bank acceptance notes that not met the above conditions and business model were presented as notes receivable. |
(4) Accounts receivable
| 31 December 2022 | 31 December 2021 | |||
| Accounts receivable | 29,570,582 | 25,495,619 | ||
| Less: Provision for bad debts (b) | (1,332,609) | (859,179) | ||
| 28,237,973 | 24,636,440 |
(a) The ageing of accounts receivable is analysed as follows:
| 31 December 2022 | 31 December 2021 | |||
| Within 1 year | 28,142,167 | 24,566,401 | ||
| 1 to 2 years | 1,099,842 | 617,355 | ||
| 2 to 3 years | 140,153 | 144,300 | ||
| 3 to 5 years | 101,202 | 134,460 | ||
| Over 5 years | 87,218 | 33,103 | ||
| 29,570,582 | 25,495,619 |
As at 31 December 2022 and 31 December 2021, the Group had no significant overdueaccounts receivable.
(b) Provision for bad debts
For accounts receivable, the Group recognises the loss provision based on the lifetime ECLregardless of whether there exists a significant financing component.
As at 31 December 2022, accounts receivable for which the related provision for bad debtswas provided on an individual basis are analysed as follows:
| Book balance | Lifetime ECL rate | Provision for bad debts | Reason | |||
| Domestic customers | 1,061,199 | 52.13% | (553,196) | The debtor encountered financial distress, etc. | ||
| Foreign customer | 22,437 | 97.37% | (21,847) | |||
| 1,083,636 | (575,043) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 49 -
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable (Cont’d)
(b) Provision for bad debts (Cont’d)
As at 31 December 2021, accounts receivable for which the related provision for bad debtswas provided on an individual basis are analysed as follows:
| Book balance | Lifetime ECL rate | Provision for bad debts | Reason | |||
| Domestic customers | 111,443 | 47.74% | (53,208) | The debtor encountered financial distress, etc. | ||
Overseas customers
| Overseas customers | 561 | 100.00% | (561) | |||
| 112,004 | (53,769) |
As at 31 December 2022, accounts receivable for which the related provision for bad debtswas provided on the grouping basis are analysed as follows:
| 31 December 2022 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | Lifetime ECL rate | Amount | ||||
| Domestic business grouping | 12,494,592 | 2.72% | (340,084) | |||
| Overseas business grouping | 15,992,354 | 2.61% | (417,482) | |||
| 28,486,946 | (757,566) | |||||
As at 31 December 2021, accounts receivable for which the related provision for bad debtswas provided on the grouping basis are analysed as follows:
| 31 December 2021 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | Lifetime ECL rate | Amount | ||||
| Domestic business grouping | 12,689,502 | 3.08% | (390,701) | |||
| Overseas business grouping | 12,694,113 | 3.27% | (414,709) | |||
| 25,383,615 | (805,410) | |||||
(c) The provision for bad debts in the current year amounted to RMB 680,932,000 (2021: RMB
173,575,000). The provision for bad debts reversed in the current year amounted to RMB205,575,000 (2021: RMB 88,386,000). The provision for bad debts written off in the currentyear amounted to RMB 55,411,000 (2021: RMB 92,215,000).
(d) As at 31 December 2022, the five largest accounts receivable aggregated by debtor are
summarised and analysed as follows:
| Amount | bad debts | % of total balance | ||||
| Total amount of the five largest accounts receivable | 1,510,333 | (207,163) | 5.11% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 50 -
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables
| 31 December 2022 | 31 December 2021 | |||
| Other receivables | 2,249,186 | 3,147,595 | ||
| Less: Provision for bad debts | (38,009) | (43,530) | ||
| 2,211,177 | 3,104,065 |
(a) Other receivables mainly include security deposit and guarantee, current accounts, petty
cash to staff and receivables related to share options.
The ageing of other receivables is analysed as follows:
| 31 December 2022 | 31 December 2021 | |||
| Within 1 year | 1,932,646 | 2,856,634 | ||
| 1 to 2 years | 137,213 | 149,331 | ||
| 2 to 3 years | 97,205 | 97,424 | ||
| 3 to 5 years | 48,616 | 28,029 | ||
| Over 5 years | 33,506 | 16,177 | ||
| 2,249,186 | 3,147,595 |
(b) Provision for losses and changes in book balance statement
| Stage 1 | Stage 3 | ||||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | (Credit impaired) | Sub-total | ||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | Book balance | Provision for bad debts | Provision for bad debts | |
| 31 December 2021 | 2,992,048 | 38,263 | 150,280 | - | 5,267 | 5,267 | 43,530 |
| Transfer to Stage 3 | (560) | (56) | - | - | 560 | 56 | - |
| Net decrease in the current year | (814,523) | (3,442) | (82,321) | - | (1,565) | (899) | (4,341) |
| Including: Write-off in the current year | - | - | - | - | (1,565) | (1,565) | (1,565) |
| Derecognition | - | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | - | (1,018) | - | - | - | (162) | (1,180) |
| 31 December 2022 | 2,176,965 | 33,747 | 67,959 | - | 4,262 | 4,262 | 38,009 |
As at 31 December 2022 and 31 December 2021, the Group had no other receivables atStage 2.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 51 -
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont’d)
(b) Provision for losses and changes in book balance statement (Cont’d)
(i) As at 31 December 2022, other receivables for which the related provision for bad debts
was provided on an individual basis are analysed as follows:
| Book balance | 12-month ECL rate | Provision for bad debts | Reason | ||||
| Stage 1 | 67,959 | 0.00% | - | Relatively low bad debt risks |
| Book balance | Lifetime ECL | Provision for bad debts | Reason | ||||
| Stage 3 | 4,262 | 100.00% | (4,262) | The debtor encountered financial distress, etc. |
As at 31 December 2021, other receivables for which the related provision for bad debtswas provided on an individual basis are analysed as follows:
| Book balance | 12-month ECL rate | Provision for bad debts | Reason | ||||
| Stage 1 | 150,280 | 0.00% | - | Relatively low bad debt risks |
| Book balance | Lifetime ECL | Provision for bad debts | Reason | ||||
| Stage 3 | 5,267 | 100.00% | (5,267) | The debtor encountered financial distress, etc. |
(ii) As at 31 December 2022 and 31 December 2021, other receivables for which the related
provision for bad debts was provided on the grouping basis were all at Stage 1, which areanalysed as follows:
| 31 December 2022 | 31 December 2021 | ||||||||
| 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 | 2,176,965 | (33,747) | 1.55% | 2,992,048 | (38,263) | 1.28% | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 52 -
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont’d)
(c) The provision for bad debts in the current year amounted to RMB 36,072,000 (2021: RMB
158,923,000). The provision for bad debts reversed in the current year amounted to RMB38,848,000 (2021: RMB 43,460,000). The provision for bad debts written off in the currentyear amounted to RMB 1,565,000 (2021: RMB 124,041,000).
(d) As at 31 December 2022, the five largest other receivables aggregated by debtor are
summarised and analysed as follows:
| Amount | Provision for bad debts | % of total balance | ||||
| Total amount of the five largest other receivables | 122,691 | (848) | 5.45% |
(e) As at 31 December 2022 and 31 December 2021, the Group had no significant government
grants recognised at amounts receivable.
(6) Receivables financing
| 31 December 2022 | 31 December 2021 | |||
| Receivables financing | 13,526,540 | 10,273,552 |
| The Group’s receivables financing were mainly accounts receivable and bank acceptance notes transferred, discounted and endorsed for the purpose of daily treasury management and were qualified for derecognition. | ||||
As at 31 December 2022 and 31 December 2021, the Group measured provision for baddebts based on the lifetime ECL and expected that there was no significant credit riskassociated with its bank acceptance notes and did not expect that there would be anysignificant losses from non-performance by these banks.
As at 31 December 2022, in addition to Note 4(3)(b), the Group’s bank acceptance notesendorsed or discounted but not matured amounted to RMB 12,368,841,000 (31 December2021: RMB 10,944,665,000), all of which were derecognised.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 53 -
4 Notes to the consolidated financial statements (Cont’d)
(7) Advances to suppliers
| 31 December 2022 | 31 December 2021 | |||
| Prepayments for raw materials and others | 4,367,211 | 4,352,807 |
(a) The ageing of advances to suppliers is analysed below:
| 31 December 2022 | 31 December 2021 | |||||||
| Amount | % of total balance | Amount | % of total balance | |||||
| Within 1 year | 4,238,120 | 97.04% | 4,241,867 | 97.45% | ||||
| 1 to 2 years | 83,905 | 1.92% | 74,391 | 1.71% | ||||
| 2 to 3 years | 17,820 | 0.41% | 18,798 | 0.43% | ||||
| Over 3 years | 27,366 | 0.63% | 17,751 | 0.41% | ||||
| 4,367,211 | 100.00% | 4,352,807 | 100.00% | |||||
As at 31 December 2022, advances to suppliers with ageing over 1 year with a carryingamount of RMB 129,091,000 (31 December 2021: RMB 110,940,000) were mainly unsettledprepayments for raw materials.
As at 31 December 2022, the five largest advances to suppliers aggregated by debtor aresummarised and analysed as follows:
| Amount | % of total balance | |||
| Total amount of the five largest advances to suppliers | 665,045 | 15.23% |
(8) Contract assets
| 31 December 2022 | 31 December 2021 | ||
| Contract assets | 4,572,177 | 3,870,243 | |
| Less: Provision for impairment of contract assets | (73,221) | (46,767) | |
| Total | 4,498,956 | 3,823,476 |
For contract assets, the Group measures the loss provision based on the lifetime ECLregardless of whether there exists a significant financing component.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 54 -
4 Notes to the consolidated financial statements (Cont’d)
(8) Contract assets (Cont’d)
As at 31 December 2022, there were no contract assets for which the related provision forbad debts was provided on an individual basis.
As at 31 December 2021, contract assets for which the related provision for bad debts wasprovided on an individual basis are analysed as follows:
| Book balance | Lifetime ECL rate | Provision for impairment | Reason | |||
| Domestic business grouping | 11,444 | 26.70% | (3,056) | The debtor encountered financial distress, etc. |
As at 31 December 2022, contract assets for which the related provision for bad debts wasprovided on the grouping basis are analysed as follows:
| 31 December 2022 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | Lifetime ECL rate | Amount | ||||
| Domestic business grouping | 1,469,430 | 2.80% | (41,155) | |||
| Overseas business grouping | 3,102,747 | 1.03% | (32,066) | |||
| 4,572,177 | (73,221) | |||||
As at 31 December 2021, contract assets for which the related provision for bad debts wasprovided on the grouping basis are analysed as follows:
| 31 December 2021 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | Lifetime ECL rate | Amount | ||||
| Domestic business grouping | 840,430 | 4.22% | (35,436) | |||
| Overseas business grouping | 3,018,369 | 0.27% | (8,275) | |||
| 3,858,799 | (43,711) | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 55 -
4 Notes to the consolidated financial statements (Cont’d)
(9) Loans and advances
(a) By individual and corporation:
| 31 December 2022 | 31 December 2021 | |||
| Loans and advances measured at amortised cost | ||||
| Loans and advances to individuals | 1,820,952 | 2,217,220 | ||
| Loans and advances to corporations | 13,475,027 | 19,744,034 | ||
| Including: Loans | 11,138,739 | 12,790,285 | ||
| Note discounting | 2,336,288 | 6,953,749 | ||
| 15,295,979 | 21,961,254 | |||
| Less: Provision for loan losses | (463,929) | (452,727) | ||
| 14,832,050 | 21,508,527 |
As at 31 December 2022, loans and advances over 1 year amounted to RMB 693,294,000(31 December 2021: RMB 851,927,000).
(b) By type of collateral held:
| 31 December 2022 | 31 December 2021 | |||
| Unsecured loans | 1,818,768 | 2,211,108 | ||
| Guaranteed loans | 598,437 | 587,936 | ||
| Pledged loans | 12,878,774 | 19,162,210 | ||
| Total loans and advances | 15,295,979 | 21,961,254 |
(c) The provision for bad debts in the current year amounted to RMB 25,814,000 (2021: RMB
144,691,000), no provision for bad debts was written off in the current year (2021: RMB3,070,000) and the provision for bad debts reversed in the current year amounted to RMB14,612,000 (2021: RMB 1,748,000) (Note 4(25)).
(d) As at 31 December 2022, the Group’s loans and advances for which the provision for bad
debts was provided on an individual basis amounted to RMB 2,202,392,000, and theprovision for bad debts amounted to RMB 97,565,000.
(e) As at 31 December 2022 and 31 December 2021, the Group included the most of loans and
advances in Stage 1 and measured provision for impairment based on the 12-month ECL.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 56 -
4 Notes to the consolidated financial statements (Cont’d)
(10) Inventories
(a) Inventories are summarised by category as follows:
| 31 December 2022 | 31 December 2021 | |||||||||||
| Book balance | value of inventories | Carrying amount | Book balance | value of inventories | Carrying amount | |||||||
| Finished goods | 34,753,459 | (458,121) | 34,295,338 | 33,636,462 | (419,166) | 33,217,296 | ||||||
| Raw materials | 8,675,143 | (241,247) | 8,433,896 | 9,592,914 | (121,217) | 9,471,697 | ||||||
| Work in progress | 2,519,241 | - | 2,519,241 | 2,406,866 | - | 2,406,866 | ||||||
| Consigned processing materials | 427,838 | - | 427,838 | 596,531 | - | 596,531 | ||||||
| Contract fulfilment costs (i) | 368,584 | - | 368,584 | 232,049 | - | 232,049 | ||||||
| 46,744,265 | (699,368) | 46,044,897 | 46,464,822 | (540,383) | 45,924,439 | |||||||
(i) The book balance of contract fulfilment costs mainly refers to transportation costs incurred
to fulfil sales contracts prior to the transferring of control over goods to customers.
(b) Analysis of provision for decline in the value of inventories is as follows:
| Increase in the current year | Decrease in the current year | Differences on translation of foreign currency financial statements | ||||||||
| 31 December 2021 | Provision | Reversal or write-off | 31 December 2022 | |||||||
| Finished goods | 419,166 | 313,608 | (282,102) | 7,449 | 458,121 | |||||
| Raw materials | 121,217 | 150,328 | (35,997) | 5,699 | 241,247 | |||||
| 540,383 | 463,936 | (318,099) | 13,148 | 699,368 |
(c) Provision for decline in the value of inventories is as follows:
| Specific basis for determining net realisable value | Reason for reversal or write-off of provision for decline in the value of inventories | |||
| Finished goods | Stated at the lower of cost and net realisable value | Sales | ||
| Raw materials | Stated at the lower of cost and net realisable value | Requisition for production |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 57 -
4 Notes to the consolidated financial statements (Cont’d)
(11) Current portion of non-current assets
| 31 December 2022 | 31 December 2021 | ||
| Other debt investments due within 1 year (Note 4(13)) | 5,875,076 | 19,360,372 | |
| Long-term receivables due within 1 year (Note 4(14)) | 553,591 | 491,205 | |
| Current portion of other non-current assets (Note 4(24)) | 31,124,411 | - | |
| 37,553,078 | 19,851,577 |
(12) Other current assets
| 31 December 2022 | 31 December 2021 | |||
| Fixed-income products (a) | 38,748,850 | 23,696,825 | ||
| Input VAT to be deducted | 3,875,519 | 6,137,776 | ||
| Prepaid expenses | 856,455 | 828,675 | ||
| Others (b) | 3,061,554 | 2,492,736 | ||
| 46,542,378 | 33,156,012 |
(a) As at 31 December 2022, fixed-income products were monetary investment products
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 31 December 2022, the Group's transferable certificate of deposit due within 1 year
since the time of acquisition amounted to approximately RMB 656,967,000 (31 December2021: RMB 230,015,000), and were measured at fair value through other comprehensiveincome.
(c) As at 31 December 2022, the Group considered that there was no significant increase in
credit risk of fixed-income products and transferable certificate of deposit since initialrecognition, and made provision for loss based on 12-month ECL. The Group consideredthat there was no significant credit risk associated with them, and did not expect that therewould be any significant losses from non-performance by these financial institutions.
(13) Other debt investments
| 31 December 2022 | 31 December 2021 | |||
| Fair value through other comprehensive income | ||||
| - Transferable certificate of deposit | 16,969,335 | 27,254,307 | ||
| Less: Other debt investments due within 1 year (Note 4(11)) | (5,875,076) | (19,360,372) | ||
| 11,094,259 | 7,893,935 |
| As at 31 December 2022, the cost of the Group’s transferable certificate of deposit approximated its fair value. | ||||
| As at 31 December 2022, the Group considered that there was no significant increase in credit risk of transferable certificate of deposit since initial recognition, and made provision for loss based on 12-month ECL. The Group considered that there was no significant credit risk associated with transferable certificate of deposit, and did not expect that there would be any significant losses from non-performance by these financial institutions. | ||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 58 -
4 Notes to the consolidated financial statements (Cont’d)
(14) Long-term receivables
| 31 December 2022 | 31 December 2021 | |||
| Long-term receivables | 1,176,968 | 1,371,022 | ||
| Less: Provision for bad debts | (8,779) | (8,461) | ||
| 1,168,189 | 1,362,561 | |||
| Less: Long-term receivables due within 1 year (Note 4(11)) | (553,591) | (491,205) | ||
| 614,598 | 871,356 |
The Group’s long-term receivables are presented in net amount of finance lease receivablesafter offsetting the unrealised financing income.
(15) Long-term equity investments
Long-term equity investments are classified as follows:
| 31 December 2022 | 31 December 2021 | |||
| Investments in associates (a) | 5,188,817 | 3,796,705 | ||
| Less: Provision for impairment of long-term equity investments | - | - | ||
| 5,188,817 | 3,796,705 |
(a) Investments in associates mainly refer to the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd., Shenzhen Clou Electronics Co., Ltd., Carrier Midea NorthAmerica LLC and Hefei Royalstar Motor Co., Ltd. and other enterprises by the Group.
(16) Other non-current financial assets
| 31 December 2022 | 31 December 2021 | |||
| Measured at fair value | ||||
| - Equity of unlisted companies | 6,348,556 | 5,912,873 | ||
| Others (a) | 4,276,688 | - | ||
| 10,625,244 | 5,912,873 |
(a) As at 31 December 2022, the main information of the Group’s unmatured cross-currency
interest rate swaps were set out in Note 4(37).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 59 -
4 Notes to the consolidated financial statements (Cont’d)
(17) Fixed assets
| Buildings | Overseas land | Machinery and equipment | Motor vehicles | Electronic equipment and others | Total | ||
| Cost | |||||||
| 31 December 2021 | 20,108,658 | 1,330,856 | 22,182,072 | 758,743 | 5,497,346 | 49,877,675 | |
| Increase in the current year | |||||||
| Purchase | 450,465 | 29,246 | 3,143,739 | 66,053 | 1,112,441 | 4,801,944 | |
| Transfer from construction in progress | 1,587,541 | - | 419,909 | 104 | 103,356 | 2,110,910 | |
| Increase by business combinations | - | - | 1,440 | 76 | 35 | 1,551 | |
| Others | 35,198 | - | 3,990 | - | - | 39,188 | |
| Decrease in the current year | |||||||
| Disposal and retirement | (125,160) | (215) | (1,373,355) | (50,821) | (363,310) | (1,912,861) | |
| Others | (19,543) | - | (699) | - | (1,051) | (21,293) | |
| Differences on translation of foreign currency financial statements | 11,977 | (24,610) | (45,183) | (262) | 27,826 | (30,252) | |
| 31 December 2022 | 22,049,136 | 1,335,277 | 24,331,913 | 773,893 | 6,376,643 | 54,866,862 | |
| Accumulated depreciation | |||||||
| 31 December 2021 | 9,003,358 | - | 13,332,180 | 571,319 | 4,067,650 | 26,974,507 | |
| Increase in the current year | |||||||
| Provision | 987,149 | - | 1,537,048 | 31,365 | 809,883 | 3,365,445 | |
| Others | 17,262 | - | 554 | - | - | 17,816 | |
| Decrease in the current year | |||||||
| Disposal and retirement | (79,567) | - | (1,171,611) | (48,556) | (332,896) | (1,632,630) | |
| Others | (8,920) | - | (155) | - | (793) | (9,868) | |
| Differences on translation of foreign currency financial statements | 9,268 | - | (11,791) | (1,410) | 17,011 | 13,078 | |
| 31 December 2022 | 9,928,550 | - | 13,686,225 | 552,718 | 4,560,855 | 28,728,348 | |
| Provision for impairment | |||||||
| 31 December 2021 | 6,179 | 5,469 | 10,011 | 21,093 | 7,568 | 50,320 | |
| Increase in the current year | |||||||
| Provision | 3,281 | - | 2,297 | - | - | 5,578 | |
| Decrease in the current year | |||||||
| Disposal and retirement | - | - | - | (203) | - | (203) | |
| Others | - | - | (61) | - | (1) | (62) | |
| Differences on translation of foreign currency financial statements | (35) | (104) | (9) | 1 | 36 | (111) | |
| 31 December 2022 | 9,425 | 5,365 | 12,238 | 20,891 | 7,603 | 55,522 | |
| Carrying amount | |||||||
| 31 December 2022 | 12,111,161 | 1,329,912 | 10,633,450 | 200,284 | 1,808,185 | 26,082,992 | |
| 31 December 2021 | 11,099,121 | 1,325,387 | 8,839,881 | 166,331 | 1,422,128 | 22,852,848 |
(a) In 2022, the depreciation of fixed assets amounted to RMB 3,365,445,000 (2021: RMB
3,230,049,000) and was included in the income statement in full amount.
(b) As at 31 December 2022, the Company was still in the course of obtaining the ownership
certificate for the fixed asset with a carrying amount of RMB 1,359,215,000 (31 December2021: RMB 617,721,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 60 -
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress
| 31 December 2022 | 31 December 2021 | ||||||||||
| Book balance | Provision for impairment | Carrying amount | Book balance | Provision for impairment | Carrying amount | ||||||
| Shanghai Global Innovation Center Project | 1,427,405 | - | 1,427,405 | 687,704 | - | 687,704 | |||||
| Midea Headquarters A08 Land Parcel Project | 357,612 | - | 357,612 | 234,165 | - | 234,165 | |||||
| Thailand Factories | 347,207 | - | 347,207 | 213,005 | - | 213,005 | |||||
| Midea Xingtan Industrial Park Project | 153,893 | - | 153,893 | - | - | - | |||||
| Welling Auto Parts Project | 152,457 | - | 152,457 | - | - | - | |||||
| Midea Headquarters A04 Land Parcel Project | 147,143 | - | 147,143 | 565,884 | - | 565,884 | |||||
| Midea Digital Factory Project | 142,595 | - | 142,595 | - | - | - | |||||
| Other projects | 1,149,607 | (34,142) | 1,115,465 | 1,023,360 | (33,188) | 990,172 | |||||
| 3,877,919 | (34,142) | 3,843,777 | 2,724,118 | (33,188) | 2,690,930 | ||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 61 -
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress (Cont'd)
(a) Movements of significant projects of construction in progress
| Book balance | Increase in the current year | Transfer to fixed assets in the current year | Other decreases | Differences on translation of foreign currency financial statements | Book balance | Source of funds | |||||||
| Shanghai Global Innovation Center Project | 687,704 | 739,701 | - | - | - | 1,427,405 | Self-financing | ||||||
| Midea Headquarters A08 Land Parcel Project | 234,165 | 123,447 | - | - | - | 357,612 | Self-financing | ||||||
| Thailand Factories | 213,005 | 116,576 | - | - | 17,626 | 347,207 | Self-financing | ||||||
| Midea Xingtan Industrial Park Project | - | 160,327 | (6,434) | - | - | 153,893 | Self-financing | ||||||
| Welling Auto Parts Project | - | 152,457 | - | - | - | 152,457 | Self-financing | ||||||
| Midea Headquarters A04 Land Parcel Project | 565,884 | 260,606 | (679,347) | - | - | 147,143 | Self-financing | ||||||
| Midea Digital Factory Project | - | 142,595 | - | - | - | 142,595 | Self-financing | ||||||
| Other projects | 1,023,360 | 1,598,641 | (1,425,129) | (24,623) | (22,642) | 1,149,607 | Self-financing | ||||||
| 2,724,118 | 3,294,350 | (2,110,910) | (24,623) | (5,016) | 3,877,919 |
(i) As at 31 December 2022, the cost of construction in progress matched the budget amount, and the projects were carried out on schedule.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 62 -
4 Notes to the consolidated financial statements (Cont’d)
(19) Right-of-use assets
| Buildings | Machinery and equipment | Land use rights and others | Total | |
| Cost | ||||
| 31 December 2021 | 2,852,417 | 241,510 | 111,501 | 3,205,428 |
| Increase in the current year | ||||
| New lease contracts | 1,009,405 | 80,089 | 12,715 | 1,102,209 |
| Lease modifications and others | 166,697 | 4,258 | 162 | 171,117 |
| Decrease in the current year | ||||
| Expiration of lease contract | (378,155) | (26,082) | (2,643) | (406,880) |
| Lease modifications and others | (130,742) | (7,311) | (695) | (138,748) |
| Differences on translation of foreign currency financial statements | 22,775 | (191) | 767 | 23,351 |
| 31 December 2022 | 3,542,397 | 292,273 | 121,807 | 3,956,477 |
| Accumulated depreciation | ||||
| 31 December 2021 | 751,536 | 136,409 | 20,129 | 908,074 |
| Increase in the current year | ||||
| Provision | 1,071,925 | 84,020 | 17,640 | 1,173,585 |
| Decrease in the current year | ||||
| Expiration of lease contract | (378,155) | (26,082) | (2,643) | (406,880) |
| Lease modifications and others | (55,716) | (2,854) | (127) | (58,697) |
| Differences on translation of foreign currency financial statements | 2,343 | (1,797) | (29) | 517 |
| 31 December 2022 | 1,391,933 | 189,696 | 34,970 | 1,616,599 |
| Carrying amount | ||||
| 31 December 2022 | 2,150,464 | 102,577 | 86,837 | 2,339,878 |
| 31 December 2021 | 2,100,881 | 105,101 | 91,372 | 2,297,354 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 63 -
4 Notes to the consolidated financial statements (Cont’d)
(20) Intangible assets
| Land use rights | Patents and non-patent technologies | Trademark rights | Trademark use rights | Others | Total | ||
| Cost | |||||||
| 31 December 2021 | 7,158,510 | 3,199,777 | 4,769,814 | 2,295,651 | 5,576,295 | 23,000,047 | |
| Increase in the current year | |||||||
| Purchases | 502,925 | 5,066 | 6,999 | 30 | 276,782 | 791,802 | |
| Increase by business combinations | 5,017 | - | 2,122 | - | 52,682 | 59,821 | |
| Others | 2,822 | 670 | - | - | 7,711 | 11,203 | |
| Decrease in the current year | |||||||
| Disposal | (42,954) | (7,463) | - | - | (155,080) | (205,497) | |
| Others | (1,965) | - | - | - | - | (1,965) | |
| Differences on translation of foreign currency financial statements | (651) | 34,324 | 115,719 | (107,398) | 83,609 | 125,603 | |
| 31 December 2022 | 7,623,704 | 3,232,374 | 4,894,654 | 2,188,283 | 5,841,999 | 23,781,014 | |
| Accumulated amortisation | |||||||
| 31 December 2021 | 1,138,198 | 921,857 | 160,901 | 342,000 | 3,087,655 | 5,650,611 | |
| Increase in the current year | |||||||
| Provision | 150,683 | 232,145 | 57,470 | 54,413 | 522,113 | 1,016,824 | |
| Others | 534 | - | - | - | - | 534 | |
| Decrease in the current year | |||||||
| Disposal | (10,939) | (230) | - | - | (138,755) | (149,924) | |
| Others | (465) | - | - | - | - | (465) | |
| Differences on translation of foreign currency financial statements | 238 | 18,816 | 1,514 | (12,809) | 118,971 | 126,730 | |
| 31 December 2022 | 1,278,249 | 1,172,588 | 219,885 | 383,604 | 3,589,984 | 6,644,310 | |
| Provision for impairment | |||||||
| 31 December 2021 | - | 108,010 | - | - | 68,354 | 176,364 | |
| Increase in the current year | |||||||
| Provision | - | - | - | - | 48,593 | 48,593 | |
| Decrease in the current year | |||||||
| Disposal | - | (5) | - | - | (3) | (8) | |
| Differences on translation of foreign currency financial statements | - | (578) | - | - | 3,418 | 2,840 | |
| 31 December 2022 | - | 107,427 | - | - | 120,362 | 227,789 | |
| Carrying amount | |||||||
| 31 December 2022 | 6,345,455 | 1,952,359 | 4,674,769 | 1,804,679 | 2,131,653 | 16,908,915 | |
| 31 December 2021 | 6,020,312 | 2,169,910 | 4,608,913 | 1,953,651 | 2,420,286 | 17,173,072 |
(a) In 2022, the amortisation of intangible assets amounted to RMB 1,016,824,000 (2021: RMB
1,212,553,000) and was included in the income statement in full amount.
(b) As at 31 December 2022, the Company was still in the course of obtaining the ownership
certificate for the intangible asset with a carrying amount of RMB 33,814,900 (31 December2021: Nil).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 64 -
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, without any change of goodwill allocation in 2022,and the allocation is as follows:
| 31 December 2022 | 31 December 2021 | |||
| Goodwill - | ||||
| KUKA Group | 21,122,932 | 20,544,697 | ||
| TLSC Group | 2,437,914 | 2,580,274 | ||
| Little Swan | 1,361,306 | 1,361,306 | ||
| Others | 4,149,906 | 3,893,186 | ||
| 29,072,058 | 28,379,463 | |||
| Less: Provision for impairment | (523,405) | (504,711) | ||
| 28,548,653 | 27,874,752 |
When making an impairment testing of goodwill, the Group compares the carrying amountsof the relevant cash generating unit or cash generating units with their recoverable amounts.If the recoverable amount is lower than the carrying amount, the difference shall be includedin profit or loss for the current period.
As at 31 December 2022, the recoverable amount of cash generating unit or cashgenerating units with goodwill is calculated using discounted future cash flows determinedaccording to the budget approved by management (the budget period is 5 to 6 years). Thefuture cash flows beyond the budget period are calculated based on the estimated perpetualannual growth rates. The perpetual annual growth rates (mainly 1%-2%) applied bymanagement are consistent with the estimates of the industry, and do not exceed the long-term average growth rates of each product. Management determines estimated revenuegrowth rates (mainly 0.18%-12.94%) and EBITDA margins (mainly 3.14%-13.86%) basedon past experience and forecast on future market development. The discount rates (mainly
10.74%-15.62%) used by management are the pre-tax rates that are able to reflect the risksspecific to the relevant cash generating unit or cash generating units. Management analysesthe recoverable amount of each cash generating unit or cash generating units based onthese assumptions and considers that no further provision for impairment is necessary forthe goodwill.
(22) Long-term prepaid expenses
Long-term prepaid expenses mainly include expenses prepaid for software and projectreconstruction.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 65 -
4 Notes to the consolidated financial statements (Cont’d)
(23) Deferred tax assets and deferred tax liabilities
(a) Deferred tax assets before offsetting
| 31 December 2022 | 31 December 2021 | |||||||
| Deductible temporary differences and deductible losses | Deferred tax assets | Deductible temporary differences and deductible losses | Deferred tax assets | |||||
| Deductible losses | 6,424,498 | 1,500,622 | 6,189,786 | 1,371,028 | ||||
| Provision for asset impairment | 3,562,556 | 753,511 | 2,891,362 | 596,763 | ||||
| Employee benefits payable | 931,503 | 190,398 | 1,214,088 | 285,263 | ||||
| Other current liabilities | 35,502,379 | 6,534,476 | 29,984,331 | 5,531,170 | ||||
| Others | 14,889,531 | 3,233,559 | 9,949,311 | 2,192,050 | ||||
| 61,310,467 | 12,212,566 | 50,228,878 | 9,976,274 | |||||
| Including: | ||||||||
| Expected to be recovered within 1 year (inclusive) | 8,754,919 | 7,205,683 | ||||||
| Expected to be recovered after 1 year | 3,457,647 | 2,770,591 | ||||||
| 12,212,566 | 9,976,274 | |||||||
(b) Deferred tax liabilities before offsetting
| 31 December 2022 | 31 December 2021 | |||||||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |||||
| Changes in fair value | 1,043,209 | 236,440 | 3,159,648 | 349,208 | ||||
| Business combinations involving enterprises not under common control | 10,898,558 | 2,921,290 | 11,683,474 | 3,145,282 | ||||
| Others | 16,872,927 | 3,458,213 | 14,441,530 | 3,239,720 | ||||
| 28,814,694 | 6,615,943 | 29,284,652 | 6,734,210 | |||||
| Including: | ||||||||
| Expected to be recovered within 1 year (inclusive) | 1,221,941 | 1,268,054 | ||||||
| Expected to be recovered after 1 year | 5,394,002 | 5,466,156 | ||||||
| 6,615,943 | 6,734,210 | |||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 66 -
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:
| Balance after offsetting | Balance after offsetting | |||
| Deferred tax assets | 10,244,296 | 8,192,309 | ||
| Deferred tax liabilities | 4,647,673 | 4,950,245 |
(24) Other non-current assets
| 31 December 2022 | 31 December 2021 | ||
| Fixed-income products (a) | 73,157,118 | 35,485,395 | |
| Others | 807,372 | 888,961 | |
| Less: Fixed-income products due within 1 year (Note 4(11)) | (31,124,411) | - | |
| 42,840,079 | 36,374,356 |
(a) As at 31 December 2022, fixed-income products were monetary investment products and
non-transferable certificates of deposit deposited in financial institutions with maturities ofmore than 1 year at the time of acquisition, which were subsequently measured at amortisedcost.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 67 -
4 Notes to the consolidated financial statements (Cont’d)
(25) Asset impairment and provision for loss
| 31 December 2021 | Increase in the current year | Decrease in the current year | Differences on translation of foreign currency financial statements and others | 31 December 2022 | ||||||||
| Reversal | Charge-off/Write-off | |||||||||||
| Provision for bad debts | 1,395,521 | 803,834 | (290,148) | (56,976) | 52,851 | 1,905,082 | ||||||
| Less: Provision for bad debts of accounts receivable | 859,179 | 680,932 | (205,575) | (55,411) | 53,484 | 1,332,609 | ||||||
| Provision for losses of loans and advances | 452,727 | 25,814 | (14,612) | - | - | 463,929 | ||||||
| Provision for bad debts of notes receivable | 31,624 | 60,343 | (30,211) | - | - | 61,756 | ||||||
| Provision for bad debts of other receivables | 43,530 | 36,072 | (38,848) | (1,565) | (1,180) | 38,009 | ||||||
| Provision for bad debts of long-term receivables | 8,461 | 673 | (902) | - | 547 | 8,779 | ||||||
| Provision for decline in the value of inventories | 540,383 | 463,936 | (15,345) | (302,754) | 13,148 | 699,368 | ||||||
| Provision for impairment of long-term equity investments | - | 6,179 | - | (6,179) | - | - | ||||||
| Provision for impairment of fixed assets | 50,320 | 5,578 | - | (265) | (111) | 55,522 | ||||||
| Provision for impairment of intangible assets | 176,364 | 48,593 | - | (8) | 2,840 | 227,789 | ||||||
| Provision for impairment of contract assets | 46,767 | 28,475 | (4,053) | - | 2,032 | 73,221 | ||||||
| Provision for impairment of investment properties | 12,576 | - | - | - | - | 12,576 | ||||||
| Provision for impairment of construction in progress | 33,188 | - | - | - | 954 | 34,142 | ||||||
| Provision for impairment of goodwill | 504,711 | - | - | - | 18,694 | 523,405 | ||||||
| 2,759,830 | 1,356,595 | (309,546) | (366,182) | 90,408 | 3,531,105 | |||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 68 -
4 Notes to the consolidated financial statements (Cont’d)
(26) Assets with use rights restricted
As at 31 December 2022, assets with use rights restricted are mainly as follows:
| 31 December 2022 | 31 December 2021 | |||
| Cash at bank and on hand | ||||
| Including: Cash at bank (Note 4(1)) | 1,911,210 | 28,767,516 | ||
| Other cash balances (Note 4(1)) | 1,688,278 | 443,893 | ||
| Statutory reserve with the Central Bank (Note 4(1)) | 328,409 | 419,718 | ||
| Deposits with banks and other financial institutions (Note 4(1)) | - | 1,000,000 | ||
| 3,927,897 | 30,631,127 |
(27) Short-term borrowings
| 31 December 2022 | 31 December 2021 | |||
| Unsecured borrowings | 3,192,163 | 1,260,780 | ||
| Guaranteed borrowings | 1,399,219 | 1,982,534 | ||
| Pledged borrowings | 578,098 | 2,138,309 | ||
| 5,169,480 | 5,381,623 |
(a) As at 31 December 2022, the annual interest rate range of short-term borrowings was 1.40%
to 15.45% (31 December 2021: 0.41% to 9.75%).
(28) Financial liabilities held for trading
As at 31 December 2022, financial liabilities held for trading referred to the equitiesattributable to third parties in the structured entities included in the consolidation scope, andwere measured at fair value through profit or loss.
(29) Notes payable
| 31 December 2022 | 31 December 2021 | |||
| Bank acceptance notes | 25,572,421 | 32,752,007 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 69 -
4 Notes to the consolidated financial statements (Cont’d)
(30) Accounts payable
| 31 December 2022 | 31 December 2021 | |||
| Materials cost payable | 59,880,772 | 61,527,747 | ||
| Others | 4,352,453 | 4,455,812 | ||
| 64,233,225 | 65,983,559 |
As at 31 December 2022, accounts payable with ageing over 1 year with a carrying amountof RMB 1,168,348,000 (31 December 2021: RMB 1,271,088,000) were mainly unsettledaccounts payable for materials.
(31) Contract liabilities
| 31 December 2022 | 31 December 2021 | |||
| Advances on sales and services | 25,143,337 | 21,319,800 | ||
| Advances for construction projects | 2,816,701 | 2,596,795 | ||
| 27,960,038 | 23,916,595 |
| More than 90% of contract liabilities included in the carrying amount as at 31 December 2021 were transferred to operating revenue in 2022. | ||||
(32) Employee benefits payable
| 31 December 2022 | 31 December 2021 | |||
| Short-term employee benefits payable (a) | 7,041,973 | 7,430,595 | ||
| Others | 110,244 | 104,573 | ||
| 7,152,217 | 7,535,168 |
(a) Short-term employee benefits
| 31 December 2021 | Increase in the current year | Decrease in the current year | 31 December 2022 | |||||
| Wages and salaries, bonus, allowances and subsidies | 6,949,838 | 29,439,271 | (29,849,186) | 6,539,923 | ||||
| Staff welfare | 299,396 | 1,628,361 | (1,600,946) | 326,811 | ||||
| Social security contributions | 67,268 | 1,861,492 | (1,849,420) | 79,340 | ||||
| Including: Medical insurance | 65,663 | 1,791,387 | (1,778,887) | 78,163 | ||||
| Work injury insurance | 664 | 45,636 | (45,522) | 778 | ||||
| Maternity insurance | 941 | 24,469 | (25,011) | 399 | ||||
| Housing funds | 23,079 | 681,265 | (678,657) | 25,687 | ||||
| Labour union funds and employee education funds | 22,246 | 142,044 | (142,288) | 22,002 | ||||
| Other short-term employee benefits | 68,768 | 727,918 | (748,476) | 48,210 | ||||
| 7,430,595 | 34,480,351 | (34,868,973) | 7,041,973 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 70 -
4 Notes to the consolidated financial statements (Cont’d)
(33) Taxes payable
| 31 December 2022 | 31 December 2021 | |||
| Enterprise income tax payable | 2,813,522 | 2,972,040 | ||
| Unpaid VAT | 975,035 | 1,032,688 | ||
| Others | 1,166,778 | 1,399,539 | ||
| 4,955,335 | 5,404,267 |
(34) Other payables
| 31 December 2022 | 31 December 2021 | ||
| Other payables | 4,322,025 | 4,288,104 |
(a) Other payables are mainly restricted share repurchase obligation, deposit and security
deposit payable and reimbursed logistics expense.
(b) As at 31 December 2022, other payables with ageing over 1 year with a carrying amount of
RMB 1,538,928,000 (31 December 2021: RMB 1,288,937,000) were mainly thoserecognised for performing equity incentive plan and deposit and security deposit payable,which were unsettled since related projects were uncompleted.
(35) Current portion of non-current liabilities
| 31 December 2022 | 31 December 2021 | |||
| Current portion of long-term borrowings (Note 4(37)) | 6,248,484 | 28,087,037 | ||
| Current portion of lease liabilities (Note 4(39)) | 992,142 | 860,503 | ||
| 7,240,626 | 28,947,540 |
(36) Other current liabilities
| 31 December 2022 | 31 December 2021 | |||
| Accrued sale rebates | 40,041,953 | 31,307,753 | ||
| Others | 17,801,575 | 16,920,200 | ||
| 57,843,528 | 48,227,953 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 71 -
4 Notes to the consolidated financial statements (Cont’d)
(37) Long-term borrowings
| 31 December 2022 | 31 December 2021 | |||
| Guaranteed borrowings (a) | 35,063,239 | 6,903,645 | ||
| Unsecured borrowings | 21,860,438 | 14,269,908 | ||
| Mortgage borrowings | 9,411 | 26,635,207 | ||
| Pledged borrowings | 1,344 | 12,297 | ||
| 56,934,432 | 47,821,057 | |||
| Less: Current portion of guaranteed borrowings | - | (15,025) | ||
| Current portion of unsecured borrowings | (6,237,729) | (1,439,224) | ||
| Current portion of mortgage borrowings | (9,411) | (26,626,623) | ||
| Current portion of pledged borrowings | (1,344) | (6,165) | ||
| 50,685,948 | 19,734,020 |
(a) As at 31 December 2022, bank guaranteed borrowings mainly included: (i) guaranteed
borrowings 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 inMay 2024; (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 willbe due 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.
As at 31 December 2021, bank guaranteed borrowings mainly included: (i) guaranteedborrowings equivalent to RMB 1,956,539,000 guaranteed by the Company, with interestpaid every quarter, which will be due in April 2024; (ii) guaranteed borrowings equivalent toRMB 3,849,126,000 guaranteed by the Company, with interest paid every month, which willbe due in May 2024; (iii) guaranteed borrowings equivalent to RMB 1,082,955,000guaranteed by the Company, with interest paid every month, which will be due in June 2025.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 72 -
4 Notes to the consolidated financial statements (Cont’d)
(37) Long-term borrowings (Cont’d)
(b) As at 31 December 2022, the annual interest rate range of long-term borrowings was 0.30%
to 5.99% (31 December 2021: 0.49% to 5.50%).
(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.
In 2022, the Group included the effective part of the changes in fair value of the cross-currency interest rate swap (after excluding the foreign exchange basis spread) in “Othercomprehensive income - cash flow hedges”, and transferred them from othercomprehensive income to financial expenses in the period in which the hedging relationshipaffected profit or loss, in a bid to offset the effect of hedged item on profit or loss for thecurrent period. The changes in fair value of foreign currency basis spread were recorded in“Other comprehensive income - others”, and the foreign currency basis spread wastransferred from other comprehensive income to financial expenses in the period in whichthe hedging relationship affected profit or loss (Note 4(46)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 73 -
4 Notes to the consolidated financial statements (Cont’d)
(38) Debentures payable
| 31 December 2021 | Issued in the current year | Issuance expenses | Interest accured on par value | Amortisation of discount | Repayment in the current year | Differences on translation of foreign currency financial statements | 31 December 2022 | ||||||||
| Debentures denominated in USD (a) | - | 2,848,500 | (3,304) | 73,268 | 554 | (41,910) | 286,508 | 3,163,616 |
The information of debentures is as follows:
| Par value | Issuance date | Maturity | Issuance amount | |||||
| Debentures denominated in USD (a) | 2,848,500 | 16 February 2022 | 5 years | 2,848,500 |
| Interest of the debentures is paid on a semi-annual basis and calculated by the simple interest method, and the interest rate is 2.88% annually. The debenture is guaranteed by the Company. |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 74 -
4 Notes to the consolidated financial statements (Cont’d)
(39) Lease liabilities
| 31 December 2022 | 31 December 2021 | |||
| Lease liabilities | 2,499,622 | 2,394,055 | ||
| Less: Current portion of non-current liabilities (Note 4(35)) | (992,142) | (860,503) | ||
| 1,507,480 | 1,533,552 |
(i) As at 31 December 2022, the future minimum lease payments of short-term leases and low
value asset leases adopting the practical expedient according to the new lease standardtotalled RMB 151,531,000 (31 December 2021: RMB 151,561,000) which should be paidwithin one year.
(40) Deferred income
| 31 December 2021 | Increase in the current year | Decrease in the current year | 31 December 2022 | |||||
| Government grants | 1,228,459 | 670,357 | (177,724) | 1,721,092 |
| 31 December 2021 | Increase in the current year | Decrease in the current year | 31 December 2022 | Income related | ||||||
| Government grants related to industrial upgrading | 863,641 | 654,947 | (123,706) | 1,394,882 | Asset related | |||||
| Other government grants | 364,818 | 15,410 | (54,018) | 326,210 | Income related | |||||
| 1,228,459 | 670,357 | (177,724) | 1,721,092 |
(41) Long-term employee benefits payable
| 31 December 2022 | 31 December 2021 | |||
| Supplementary retirement benefits (a) | 1,368,513 | 1,705,440 | ||
| Others | 119,943 | 119,576 | ||
| 1,488,456 | 1,825,016 |
(a) Supplementary retirement benefits
Supplementary retirement benefits obligation of the Group recognised on the balance sheetdate is calculated using the projected unit credit method, and reviewed by externalindependent actuary institution.
(i) The Group’s supplementary retirement benefits liabilities:
| 31 December 2022 | 31 December 2021 | |||
| Defined benefit obligation | 3,209,466 | 3,572,482 | ||
| Less: Fair value of planned assets | (1,840,953) | (1,867,042) | ||
| Liabilities of defined benefit obligation | 1,368,513 | 1,705,440 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 75 -
4 Notes to the consolidated financial statements (Cont’d)
(41) Long-term employee benefits payable (Cont’d)
(a) Supplementary retirement benefits (Cont’d)
(ii) The actuarial assumptions used to determine the present value of defined benefit obligation
| 31 December 2022 | |||
| Discount rate | 0.02% - 9.25% | ||
| Inflation rate | 1.07% | ||
| Salary growth rate | 0.50% - 6.60% | ||
| Pension dynamics | 1.00% - 3.55% | ||
| Early retirement rate | 0.00% - 12.90% | ||
| Changes in cost of medical services | 7.50% |
(42) Other non-current liabilities
Other non-current liabilities are mainly equity purchase payables.
(43) Share capital
| Movements in the current year | ||||||||
| 31 December 2021 | Share-based payment incentive plan (a) | Desterilisation | Additional issuance | Repurchases and write-offs | Sub-total | 31 December 2022 | ||
| RMB-denominated ordinary shares - | ||||||||
| RMB-denominated ordinary shares subject to trading restriction | 156,539 | 12,153 | (17,184) | - | (7,893) | (12,924) | 143,615 | |
| RMB-denominated ordinary shares not subject to trading restriction | 6,830,025 | 6,449 | 17,184 | - | - | 23,633 | 6,853,658 | |
| 6,986,564 | 18,602 | - | - | (7,893) | 10,709 | 6,997,273 | ||
| Movements in the current year | ||||||||
| 31 December 2020 | Share-based payment incentive plan (a) | Desterilisation | Additional issuance | Repurchases and write-offs | Sub-total | 31 December 2021 | ||
| RMB-denominated ordinary shares - | ||||||||
| RMB-denominated ordinary shares subject to trading restriction | 182,863 | 9,940 | (30,391) | - | (5,873) | (26,324) | 156,539 | |
| RMB-denominated ordinary shares not subject to trading restriction | 6,847,113 | 24,497 | 30,391 | - | (71,976) | (17,088) | 6,830,025 | |
| 7,029,976 | 34,437 | - | - | (77,849) | (43,412) | 6,986,564 | ||
(a) In 2022, the share-based payment incentive plan increased the share capital by 18,602,000
shares (2021: 34,437,000 shares).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 76 -
4 Notes to the consolidated financial statements (Cont’d)
(44) Treasury stock
| 31 December 2021 | Increase in the current year | Decrease in the current year | 31 December 2022 | |||||
| Treasury stock used for share-based payment incentive plan | 14,044,550 | 2,637,021 | (1,747,627) | 14,933,944 |
| 31 December 2020 | Increase in the current year | Decrease in the current year | 31 December 2021 | |||||
| Treasury stock used for share-based payment incentive plan | 6,094,347 | 8,665,148 | (714,945) | 14,044,550 | ||||
| Repurchased shares that have not yet been written off | - | 5,000,596 | (5,000,596) | - | ||||
| 6,094,347 | 13,665,744 | (5,715,541) | 14,044,550 |
In 2022, the Group’s repurchased treasury stock amounted to approximately RMB2,637,021,000, and the restricted shares and employee stock ownership plans granted in2022 were approximately RMB 1,461,841,000. As at 31 December 2022, treasury stockmainly comprised treasury stock of approximately RMB 10,837,824,000 used for share-based payment incentive plan, as well as restricted shares and employee stock ownershipplans amounting to approximately RMB 4,096,120,000 that have not met unlock condition,amounting to approximately RMB 14,933,944,000 in total (31 December 2021: RMB14,044,550,000).
(45) Capital surplus
| 31 December 2021 | Increase in the current year | Decrease in the current year | 31 December 2022 | |||||
| Share premium (a) | 14,944,914 | 1,771,809 | (1,209,146) | 15,507,577 | ||||
| Share-based payment incentive plan (b) | 2,161,354 | 983,367 | (865,613) | 2,279,108 | ||||
| Others (c) | 3,410,662 | 41,636 | (1,545,844) | 1,906,454 | ||||
| 20,516,930 | 2,796,812 | (3,620,603) | 19,693,139 | |||||
| 31 December 2020 | Increase in the current year | Decrease in the current year | 31 December 2021 | |||||
| Share premium | 18,185,028 | 1,938,616 | (5,178,730) | 14,944,914 | ||||
| Share-based payment incentive plan | 1,414,842 | 1,516,039 | (769,527) | 2,161,354 | ||||
| Others | 2,888,235 | 737,071 | (214,644) | 3,410,662 | ||||
| 22,488,105 | 4,191,726 | (6,162,901) | 20,516,930 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 77 -
4 Notes to the consolidated financial statements (Cont’d)
(45) Capital surplus (Cont’d)
(a) The increase in share premium arose from the exercise of share options with the amount of
approximately RMB 1,123,649,000, the unlocking of restricted shares and employee stockownership plans with the amount of approximately RMB 648,160,000; the decrease in sharepremium arose from the repurchase and cancellation of restricted shares with the amountof approximately RMB 411,678,000, and the unlocking of restricted shares and employeestock ownership plans with the amount of approximately RMB 797,468,000.
(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 983,367,000, while the decrease arose from the transferof approximately RMB 865,613,000 to share premium due to exercise of share-basedpayment incentive plan.
(c) Others in capital surplus mainly included the Group’s acquisition of the minority
shareholders of Guangdong Meizhi Compressor Limited, Guangdong Meizhi Precision-Manufacturing Co., Ltd., and KUKA, the non-public shares issued by Beijing WandongMedical Technology Co., Ltd., etc.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 78 -
4 Notes to the consolidated financial statements (Cont’d)
(46) Other comprehensive income
| Other comprehensive income in the balance sheet | Other comprehensive income in the income statement for the year ended 31 December 2022 | ||||||||||
| 31 December 2021 | Attributable to the parent company after tax | Other comprehensive income transferred to retained earnings | 31 December 2022 | Amount arising before income tax | Less: Reclassification of 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 | 12,038 | 208,349 | - | 220,387 | 282,388 | - | (62,980) | 208,349 | 11,059 | ||
| Changes in fair value of investments in other equity instruments | (1,949) | (892) | 1,351 | (1,490) | (2,482) | - | 24 | (892) | (1,566) | ||
| Other comprehensive income items which will be reclassified to profit or loss | |||||||||||
| Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | (89,213) | 17,391 | - | (71,822) | 17,391 | - | - | 17,391 | - | ||
| Cash flow hedging reserve (Note 4(37)) | 304,344 | 395,617 | - | 699,961 | (627,935) | 954,423 | 39,490 | 395,617 | (29,639) | ||
| Differences on translation of foreign currency financial statements | (1,984,168) | 1,175,539 | - | (808,629) | 1,222,721 | - | - | 1,175,539 | 47,182 | ||
| Others (Note 4(37)) | - | 69,882 | - | 69,882 | 106,716 | (36,834) | - | 69,882 | - | ||
| (1,758,948) | 1,865,886 | 1,351 | 108,289 | 998,799 | 917,589 | (23,466) | 1,865,886 | 27,036 | |||
| Other comprehensive income in the balance sheet | for the year ended 31 December 2021 | ||||||||||
| 31 December 2020 | Attributable to the parent company after tax | Other comprehensive income transferred to retained earnings | 31 December 2021 | Amount arising before income tax | Less: Reclassification of 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 | 19,210 | (7,172) | - | 12,038 | (20,242) | - | 19,213 | (7,172) | 6,143 | ||
| Changes in fair value of investments in other equity instruments | 493 | 424 | (2,866) | (1,949) | 2,238 | - | - | 424 | 1,814 | ||
| 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 | (86,181) | (3,032) | - | (89,213) | (3,032) | - | - | (3,032) | - | ||
| Cash flow hedging reserve | 311,341 | (6,997) | - | 304,344 | 359,992 | (348,437) | (14,925) | (6,997) | 3,627 | ||
| Differences on translation of foreign currency financial statements | (1,793,866) | (190,302) | - | (1,984,168) | (232,113) | - | - | (190,302) | (41,811) | ||
| (1,549,003) | (207,079) | (2,866) | (1,758,948) | 106,843 | (348,437) | 4,288 | (207,079) | (30,227) | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 79 -
4 Notes to the consolidated financial statements (Cont’d)
(47) Surplus reserve
| 31 December 2021 | Increase in the current year | 31 December 2022 | |||
| Statutory surplus reserve | 9,449,901 | 1,253,027 | 10,702,928 | ||
| 31 December 2020 | Increase in the current year | 31 December 2021 | |||
| Statutory surplus reserve | 7,966,362 | 1,483,539 | 9,449,901 |
In accordance with the Company Law of the People's Republic of China and the Company’sArticles of Association, the Company should appropriate 10% of net profit for the year to thestatutory surplus reserve, and the Company can cease appropriation when the statutorysurplus reserve accumulated to more than 50% of the registered capital. The statutorysurplus reserve can be used to make up for the losses or increase the share capital afterapproval from the appropriate authorities. According to a resolution at the Board of Directors'meeting, the Company appropriated 10% of net profit for the year, amounting toapproximately RMB 1,253,027,000 (2021: 10% of net profit, amounting to approximatelyRMB 1,483,539,000) to the statutory surplus reserve in 2022.
(48) Undistributed profits
| 2022 | 2021 | |||
| Undistributed profits at the beginning of the year | 102,982,763 | 87,074,453 | ||
| Add: Net profit attributable to shareholders of the parent company for the current year | 29,553,507 | 28,573,650 | ||
| Comprehensive income carried forward to retained earnings (a) | (1,351) | 2,866 | ||
| Others | 1,412 | - | ||
| Less: Ordinary share dividends payable (b) | (11,652,025) | (11,052,729) | ||
| Reversal of/(Appropriation to) general risk reserve (c) | 47,923 | (131,938) | ||
| Appropriation to statutory surplus reserve (Note 4(47)) | (1,253,027) | (1,483,539) | ||
| Undistributed profits at the end of the year | 119,679,202 | 102,982,763 |
(a) In 2022, due to the Group’s strategic adjustment, certain investments in other equity
instruments were disposed. Accordingly, the amount of approximately RMB 1,351,000(2021: RMB 2,866,000) accumulated in other comprehensive income was carried forwardto undistributed profits.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 80 -
4 Notes to the consolidated financial statements (Cont’d)
(48) Undistributed profits (Cont’d)
(b) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of Shareholders’ meeting, dated 27 May2022, the Company distributed a cash dividend to the shareholders at RMB 1.70 per share,amounting to approximately RMB 11,677,509,000 calculated by 6,869,123,038 issuedshares less those repurchased; 7,893,000 repurchased incentive shares in the restrictedshares incentive plan were written off (Note 4(43)), and cash dividend amounting toapproximately RMB 25,484,000 was cancelled. The actual cash dividend distributed in thecurrent year amounted to approximately RMB 11,652,025,000.
(c) General risk reserve
In 2022, according to the Notice on Strengthening the Supervision and Administration ofCommercial Factoring Enterprises issued by China Banking and Insurance RegulatoryCommission and the Administrative Measures for the Provision of Reserves of FinancialEnterprises issued by the Ministry of Finance, certain subsidiaries of the Group reversedgeneral risk reserve amounting to approximately RMB 47,923,000 (2021: provided generalrisk reserve amounting to approximately RMB 131,938,000).
(49) Operating revenue and cost of sales
| 2022 | 2021 | |||
| Revenue from main operations | 316,464,774 | 308,297,360 | ||
| Revenue from other operations | 27,452,757 | 32,935,848 | ||
| 343,917,531 | 341,233,208 | |||
| 2022 | 2021 | |||
| Cost of sales from main operations | 237,007,098 | 235,092,045 | ||
| Cost of sales from other operations | 23,531,603 | 29,433,954 | ||
| 260,538,701 | 264,525,999 |
(a) Revenue and cost of sales from main operations
| 2022 | 2021 | |||||||
| Revenue from main operations | Cost of sales from main operations | Revenue from main operations | Cost of sales from main operations | |||||
| HVAC | 150,634,586 | 116,234,025 | 141,879,146 | 112,012,603 | ||||
| Consumer appliances | 125,284,737 | 87,449,080 | 131,866,099 | 95,279,340 | ||||
| Robotics and automation system | 29,927,674 | 23,664,772 | 27,281,328 | 21,349,939 | ||||
| Others | 10,617,777 | 9,659,221 | 7,270,787 | 6,450,163 | ||||
| 316,464,774 | 237,007,098 | 308,297,360 | 235,092,045 | |||||
In 2022, cost of sales from main operations was mainly material costs and labour costs,which accounted for over 80% of total cost of sales from main operations (2021: over 80%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 81 -
4 Notes to the consolidated financial statements (Cont’d)
(49) Operating revenue and cost of sales (Cont’d)
(b) Revenue and cost of sales from other operations
| 2022 | 2021 | |||||||
| Revenue from other operations | Cost of sales from other operations | Revenue from other operations | Cost of sales from other operations | |||||
| Revenue from sales of materials | 24,114,807 | 22,329,521 | 29,458,918 | 28,637,352 | ||||
| Others | 3,337,950 | 1,202,082 | 3,476,930 | 796,602 | ||||
| 27,452,757 | 23,531,603 | 32,935,848 | 29,433,954 | |||||
In 2022, cost of sales from other operations was mainly material costs, which accounted forover 80% of total cost of sales from other operations (2021: over 80%).
(c) In 2022, among the Group’s revenue from main operations, the amount recognised at a
point in time accounted for above 90% (2021: above 90%) of the total amount and theamount recognised within a certain period of time mainly included revenue from mainoperations of robotics and automation system segment. The Group’s revenue from otheroperations was recognised at a point in time.
(50) Interest income and interest costs
The Group’s interest income and expenses arising from financial business are presented asfollows:
| 2022 | 2021 | |||
| Interest income from loans and advances | 1,614,497 | 1,818,709 | ||
| Including: Interest income from loans and advances to corporations and individuals | 1,565,168 | 1,710,237 | ||
| Interest income from note discounting | 49,329 | 108,472 | ||
| Interest income from deposits with banks, other financial institutions and the Central Bank | 175,957 | 308,334 | ||
| Interest income | 1,790,454 | 2,127,043 | ||
| Interest costs | (49,461) | (87,066) | ||
| 1,740,993 | 2,039,977 |
(51) Taxes and surcharges
| 2022 | 2021 | |||
| City maintenance and construction tax | 543,225 | 593,476 | ||
| Educational surcharge | 406,480 | 438,826 | ||
| Others | 616,179 | 577,082 | ||
| 1,565,884 | 1,609,384 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 82 -
4 Notes to the consolidated financial statements (Cont’d)
(52) Selling and distribution expenses
| 2022 | 2021 | |||
| Selling and distribution expenses | 28,716,121 | 28,647,344 |
In 2022, selling and distribution expenses were mainly maintenance expenses,advertisement and promotion fee, employee benefits, E-commerce service fee, storageservice fee and property management expenses, which accounted for over 70% of totalselling and distribution expenses (2021: over 70%).
(53) General and administrative expenses
| 2022 | 2021 | |||
| General and administrative expenses | 11,582,664 | 10,266,283 |
In 2022, general and administrative expenses were mainly employee benefits, depreciationand amortisation expenses, technical maintenance expenses, administrative officeexpenses, storage service fee and property management expenses, which accounted forover 80% of total general and administrative expenses (2021: over 80%).
(54) R&D expenses
| 2022 | 2021 | |||
| R&D expenses | 12,618,506 | 12,014,907 |
In 2022, R&D expenses were mainly employee benefits, depreciation and amortisationexpenses, technical development fee, trial products and material inputs expenses, whichaccounted for over 90% of total R&D expenses (2021: over 90%).
In 2022, the cost of sales, selling and distribution expenses, general and administrativeexpenses and R&D expenses in the income statement were mainly material costs andemployee benefits, which accounted for over 80% of total cost of sales, selling anddistribution expenses, general and administrative expenses and R&D expenses (2021: over80%)
(55) Financial income
The Group's financial income, other than those arising from financial business (Note 4(50)),are presented as follows:
| 2022 | 2021 | |||
| Interest expenses (a) | (1,830,915) | (1,357,564) | ||
| Less: Interest income | 5,837,713 | 5,181,658 | ||
| Exchange gains or losses | (507,081) | 798,120 | ||
| Others | (112,226) | (236,103) | ||
| 3,387,491 | 4,386,111 |
(a) In 2022, interest costs on lease liabilities of the Group amounted to approximately RMB
111,773,000 (2021: RMB 104,903,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 83 -
4 Notes to the consolidated financial statements (Cont’d)
(56) Asset impairment losses
| 2022 | 2021 | |||
| Losses on decline in the value of inventories (Note 4(10)) | 448,591 | 447,348 | ||
| Impairment losses on intangible assets (Note 4(20)) | 48,593 | - | ||
| Impairment losses on contract assets | 24,422 | 1,050 | ||
| Impairment losses of long-term equity investments | 6,179 | - | ||
| Impairment losses on fixed assets (Note 4(17)) | 5,578 | - | ||
| Impairment losses on construction in progress | - | 35,022 | ||
| 533,363 | 483,420 |
(57) Credit impairment losses
| 2022 | 2021 | |||
| Losses on bad debts of accounts receivable (Note 4(4)) | 475,357 | 85,189 | ||
| (Reversal of)/Losses on bad debts of other receivables (Note 4(5)) | (2,776) | 115,463 | ||
| Losses on bad debts of notes receivable (Note 4(3)) | 30,132 | 31,277 | ||
| Impairment losses on loans and advances (Note 4(9)) | 11,202 | 142,943 | ||
| (Reversal of)/Losses on impairment of long-term receivables (Note 4(14)) | (229) | 8,579 | ||
| 513,686 | 383,451 |
(58) Gains or losses on changes in fair value
| 2022 | 2021 | |||
| Derivative financial instruments | (815,922) | (129,248) | ||
| Structural deposits | 44,562 | 313,349 | ||
| Investments in equity instruments | 1,022,531 | (17,695) | ||
| 251,171 | 166,406 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 84 -
4 Notes to the consolidated financial statements (Cont’d)
(59) Investment income
| 2022 | 2021 | |||
| Investment income from associates | 608,278 | 560,679 | ||
| Investment income from holding of financial assets held for trading | 167,002 | 635,828 | ||
| Investment (losses)/income from disposal of derivative financial assets and liabilities | (519,923) | 510,932 | ||
| Investment income from disposal of financial assets held for trading | - | 150,075 | ||
| Others (b) | (47,303) | 508,259 | ||
| 208,054 | 2,365,773 |
(a) There is no significant restriction on recovery of investment income of the Group.
| (b) | As disclosed in Note 4(3)(b), few of notes receivable were discounted and derecognised by certain subsidiaries of the Group, with loss incurred included in investment income. |
(60) (Losses)/Gains on disposal of assets
| 2022 | 2021 | |||
| Gains on disposal of non-current assets | 72,397 | 110,439 | ||
| Losses on disposal of non-current assets | (132,251) | (52,182) | ||
| (59,854) | 58,257 |
(61) Other income
| 2022 | 2021 | Income related | ||||
| Special subsidy | 1,896,113 | 1,307,504 | Income related |
(62) Income tax expenses
| 2022 | 2021 | |||
| Current income tax calculated based on tax law and related regulations | 7,500,259 | 5,959,551 | ||
| Deferred income tax | (2,354,559) | (1,257,383) | ||
| 5,145,700 | 4,702,168 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 85 -
4 Notes to the consolidated financial statements (Cont’d)
(62) Income tax expenses (Cont’d)
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:
| 2022 | 2021 | |||
| Total profit | 34,955,931 | 33,717,544 | ||
| Income tax calculated at tax rate of 25% | 8,738,983 | 8,429,386 | ||
| Effect of different tax rates applicable to subsidiaries | (2,302,968) | (2,703,750) | ||
| Effect of income tax annual filing for prior periods | (45,762) | 1,453 | ||
| Income not subject to tax | (544,607) | (566,876) | ||
| Costs, expenses and losses not deductible for tax purposes | 486,777 | 476,697 | ||
| Utilisation of previous temporary differences or deductible losses for which no deferred tax assets were recognised in prior periods | (106,106) | (75,134) | ||
| Others | (1,080,617) | (859,608) | ||
| Income tax expenses | 5,145,700 | 4,702,168 |
(63) 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 parent company by the weighted average number ofoutstanding ordinary shares:
| Unit | 2022 | 2021 | |||
| Consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 29,553,507 | 28,573,650 | ||
| Less: Dividends payable to restricted shares | RMB’000 | (63,556) | (82,152) | ||
| 29,489,951 | 28,491,498 | ||||
| Weighted average number of outstanding ordinary shares | Thousand shares | 6,790,926 | 6,837,497 | ||
| Basic earnings per share | RMB Yuan/share | 4.34 | 4.17 |
| Including: | |||||
| - Basic earnings per share from continuing operations: | 4.34 | 4.17 | |||
| - Basic earnings per share for discontinued operations: | - | - |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 86 -
4 Notes to the consolidated financial statements (Cont’d)
(63) Calculation of basic and diluted earnings per share (Cont’d)
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the parent company by the diluted weighted average number ofoutstanding ordinary shares:
| Unit: | 2022 | 2021 | |||
| Consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 29,553,248 | 28,573,650 | ||
| Weighted average number of outstanding ordinary shares | Thousand shares | 6,790,926 | 6,837,497 | ||
| Weighted average number of ordinary shares increased from share-based payment | Thousand shares | 28,297 | 68,827 | ||
| Weighted average number of diluted outstanding ordinary shares | Thousand shares | 6,819,223 | 6,906,324 | ||
| Diluted earnings per share | RMB Yuan/share | 4.33 | 4.14 |
(64) Notes to the cash flow statement
(a) Cash received relating to other operating activities
| 2022 | 2021 | |||
| Other income | 2,566,471 | 1,749,871 | ||
| Revenue from other operations | 3,190,182 | 3,373,578 | ||
| Non-operating income | 378,645 | 568,484 | ||
| Financial income - interest income | 765,716 | 323,155 | ||
| Others | 394,943 | 585,734 | ||
| 7,295,957 | 6,600,822 |
(b) Cash paid relating to other operating activities
| 2022 | 2021 | |||
| Selling and distribution expenses (excluding employee benefits and taxes and surcharges) | 22,884,362 | 22,917,401 | ||
| General and administrative expenses and R&D expenses (excluding employee benefits and taxes and surcharges) | 10,504,557 | 10,886,493 | ||
| Others | 1,076,588 | 421,836 | ||
| 34,465,507 | 34,225,730 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 87 -
4 Notes to the consolidated financial statements (Cont’d)
(64) Notes to the cash flow statement (Cont’d)
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flows from operating activities is as follows:
| 2022 | 2021 | |||
| Net profit | 29,810,231 | 29,015,376 | ||
| Add: Asset impairment losses | 533,363 | 483,420 | ||
| Credit impairment losses | 513,686 | 383,451 | ||
| Depreciation and amortisation | 6,507,920 | 6,182,852 | ||
| Losses/(Gains) on disposal of assets | 59,854 | (58,257) | ||
| Gains or losses on changes in fair value | 251,171 | 166,406 | ||
| Financial income | (3,226,913) | (3,119,978) | ||
| Investment income | (208,054) | (2,365,773) | ||
| Increase in deferred tax assets | (1,896,424) | (779,754) | ||
| Decrease in deferred tax liabilities | (424,557) | (647,495) | ||
| Increase in inventories | (423,933) | (15,201,834) | ||
| Increase in operating receivables | (19,423,895) | (5,453,539) | ||
| Increase in operating payables | 21,556,429 | 24,908,660 | ||
| Share-based payments and others | 1,028,950 | 1,578,169 | ||
| Net cash flows from operating activities | 34,657,828 | 35,091,704 | ||
| Net increase/(decrease) in cash and cash equivalents: | ||||
| Cash and cash equivalents at the end of the year | 51,131,968 | 40,550,039 | ||
| Less: Cash and cash equivalents at the beginning of the year | (40,550,039) | (23,548,508) | ||
| Net increase in cash and cash equivalents | 10,581,929 | 17,001,531 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 88 -
4 Notes to the consolidated financial statements (Cont’d)
(64) Notes to the cash flow statement (Cont’d)
(d) Cash payments relating to other financing activities
| 31 December 2022 | 31 December 2021 | |||
| Acquisition of minority interests | 2,773,676 | 457,798 | ||
| Repurchase of outstanding shares | 2,637,021 | 13,665,744 | ||
| Others | 1,522,822 | 1,106,742 | ||
| 6,933,519 | 15,230,284 |
(e) Composition of cash and cash equivalents
| 31 December 2022 | 31 December 2021 | |||
| Cash on hand | 1,645 | 1,609 | ||
| Cash at bank that can be readily drawn on demand | 26,670,319 | 17,923,603 | ||
| Deposits with the Central Bank that can be readily drawn on demand | 172,394 | 272,949 | ||
| Deposits with banks and other financial institutions that can be readily drawn on demand | 24,287,610 | 22,351,878 | ||
| Cash and cash equivalents at the end of the year | 51,131,968 | 40,550,039 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 89 -
4 Notes to the consolidated financial statements (Cont’d)
(65) Monetary items denominated in foreign currencies
| 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 | |||||
| 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 | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 90 -
4 Notes to the consolidated financial statements (Cont’d)
(65) Monetary items denominated in foreign currencies (Cont’d)
| 31 December 2022 | ||||||
| Foreign currency balance | Exchange rate | RMB balance | ||||
| 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 | |||||
| Debentures payable | ||||||
| USD | 454,242 | 6.9646 | 3,163,616 | |||
| 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 | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 91 -
4 Notes to the consolidated financial statements (Cont’d)
(65) Monetary items denominated in foreign currencies (Cont’d)
| 31 December 2021 | ||||||
| Foreign currency balance | Exchange rate | RMB balance | ||||
| Cash at bank and on hand | ||||||
| USD | 602,212 | 6.3757 | 3,839,525 | |||
| JPY | 12,142,726 | 0.0554 | 672,707 | |||
| HKD | 1,630,997 | 0.8176 | 1,333,503 | |||
| EUR | 148,197 | 7.2197 | 1,069,937 | |||
| BRL | 289,406 | 1.1425 | 330,646 | |||
| VND | 448,073,333 | 0.0003 | 134,422 | |||
| Other currencies | Not applicable | Not applicable | 1,452,778 | |||
| Sub-total | 8,833,518 | |||||
| Accounts receivable | ||||||
| USD | 1,060,053 | 6.3757 | 6,758,578 | |||
| JPY | 11,614,937 | 0.0554 | 643,468 | |||
| HKD | 23,316 | 0.8176 | 19,063 | |||
| EUR | 394,600 | 7.2197 | 2,848,894 | |||
| BRL | 635,016 | 1.1425 | 725,506 | |||
| VND | 1,722,254,244 | 0.0003 | 516,676 | |||
| Other currencies | Not applicable | Not applicable | 2,475,054 | |||
| Sub-total | 13,987,239 | |||||
| Other receivables | ||||||
| USD | 175,560 | 6.3757 | 1,119,315 | |||
| JPY | 1,379,057 | 0.0554 | 76,400 | |||
| HKD | 1,901 | 0.8176 | 1,555 | |||
| EUR | 43,768 | 7.2197 | 315,990 | |||
| BRL | 67,455 | 1.1425 | 77,067 | |||
| Other currencies | Not applicable | Not applicable | 328,047 | |||
| Sub-total | 1,918,374 | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 92 -
4 Notes to the consolidated financial statements (Cont’d)
(65) Monetary items denominated in foreign currencies (Cont’d)
| 31 December 2021 | ||||||
| Foreign currency balance | Exchange rate | RMB balance | ||||
| Short-term borrowings | ||||||
| USD | 200,000 | 6.3757 | 1,275,140 | |||
| EUR | 149,976 | 7.2197 | 1,082,782 | |||
| Other currencies | Not applicable | Not applicable | 185,393 | |||
| Sub-total | 2,543,315 | |||||
| Accounts payable | ||||||
| USD | 330,786 | 6.3757 | 2,108,991 | |||
| JPY | 5,227,130 | 0.0554 | 289,583 | |||
| HKD | 12,987 | 0.8176 | 10,618 | |||
| EUR | 219,900 | 7.2197 | 1,587,612 | |||
| BRL | 370,864 | 1.1425 | 423,712 | |||
| Other currencies | Not applicable | Not applicable | 1,845,979 | |||
| Sub-total | 6,266,495 | |||||
| Other payables | ||||||
| USD | 7,124 | 6.3757 | 45,423 | |||
| JPY | 7,415,640 | 0.0554 | 410,826 | |||
| HKD | 10,577 | 0.8176 | 8,648 | |||
| EUR | 2,410 | 7.2197 | 17,401 | |||
| Other currencies | Not applicable | Not applicable | 127,366 | |||
| Sub-total | 609,664 | |||||
| Current portion of non-current liabilities | ||||||
| EUR | 3,824,888 | 7.2197 | 27,614,541 | |||
| USD | 89,993 | 6.3757 | 573,767 | |||
| Other currencies | Not applicable | Not applicable | 115,468 | |||
| Sub-total | 28,303,776 |
| Long-term borrowings | ||||||
| USD | 49,910 | 6.3757 | 318,208 | |||
| Other currencies | Not applicable | Not applicable | 6,905,912 | |||
| Sub-total | 7,224,120 | |||||
| Lease liabilities | ||||||
| EUR | 95,154 | 7.2197 | 686,986 | |||
| JPY | 1,965,358 | 0.0554 | 108,881 | |||
| Other currencies | Not applicable | Not applicable | 45,337 | |||
| Sub-total | 841,204 |
Foreign currencies in which the above monetary items are denominated refer to allcurrencies other than RMB.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 93 -
| 5 | Changes of consolidation scope |
| (1) | Business combinations involving enterprises not under common control |
| (a) | Business combinations involving enterprises not under common control in the current year |
The Group acquired Midea Venture Capital Management Co., Ltd. and its subsidiaries(including structured entities) in January 2022, Wuhan TTium Motor Technology Co., Ltd.and its subsidiaries in April 2022 and KONG Intelligent Environment (Xi'an) Co., LTD(formerly known as Shaanxi Construction Investment Co., Ltd.) in May 2022.
The acquisition has no significant impact on the Group's consolidated financial statements.
| (2) | Changes of consolidation scope due to other reasons |
| (a) | Increase of consolidation scope |
The Company's wholly-owned subsidiary Anhui Welling Auto Parts Corporation Limitedestablished Anqing Welling Auto Parts Corporation Limited in January 2022, holding 100%of the shares.
Annto Logistics Supply Chain Technology Co., Ltd. and Foshan Annto Logistics TechnologyCo., Ltd., the Company's subsidiaries, established Tianjin Antu Supply Chain ManagementCo., Ltd. in January 2022, holding 99% and 1% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Guangdong Midea Smart Home Retail Co.,Ltd. in January 2022, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Guangdong Midea Smart Home TechnologyCo., Ltd. in January 2022, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Wuhu Yubian Intelligent Technology Co., Ltd.in February 2022, holding 95% and 5% of the shares respectively.
Midea International Corporation Company Limited, a wholly-owned subsidiary of theCompany, established MC Innovation Center Co., Ltd. in February 2022, holding 100% ofthe shares.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 94 -
| 5 | Changes of consolidation scope (Cont’d) |
| (2) | Changes of consolidation scope due to other reasons (Cont’d) |
| (a) | Increase of consolidation scope (Cont’d) |
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart HomeTechnology Co., Ltd., wholly-owned subsidiaries of the Company, established Wuhu MideaSmart Home Co., Ltd., Haikou Midea Smart Home Appliances Sales Co., Ltd., HangzhouMidea Smart Home Co., Ltd., Foshan Midea Smart Home Co., Ltd., Lanzhou Midea SmartHome Appliances Sales Co., Ltd., Tianjin Midea Smart Home Co., Ltd., Hefei Midea SmartHome Co., Ltd., Changsha Midea Smart Home Co., Ltd., Guangzhou Midea Smart HomeCo., Ltd., Wuxi Midea Smart Home Co., Ltd., Kunming Midea Smart Home Co., Ltd., Ji’nanMidea Smart Home Co., Ltd., Chengdu Midea Smart Home Co., Ltd., Nanyang Midea SmartHome Co., Ltd., Xi’an Midea Smart Home Appliances Sales Co., Ltd., Beijing Midea SmartHome Co., Ltd., Guizhou Midea Smart Home Co., Ltd., Linyi Midea Smart Home AppliancesSales Co., Ltd., Nanning Midea Smart Home Appliances Sales Co., Ltd., Wuhan MideaSmart Home Co., Ltd. and Xuzhou Midea Smart Home Co., Ltd. in March 2022, holding95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Guizhou Midea Digi-Port Technology Co.,Ltd. in April 2022, holding 95% and 5% of the shares respectively.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart HomeTechnology Co., Ltd., wholly-owned subsidiaries of the Company, established ShijiazhuangMidea Smart Home Co., Ltd., Nanjing Midea Smart Home Co., Ltd., Fuzhou Midea SmartHome Co., Ltd., Nanchang Midea Smart Home Co., Ltd., Urumchi Midea Smart Home Co.,Ltd., Chongqing Midea Smart Home Co., Ltd. and Ningbo Midea Smart Home Co., Ltd. inApril 2022, holding 95% and 5% of the shares respectively.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart HomeTechnology Co., Ltd., wholly-owned subsidiaries of the Company, established ShenzhenMidea Smart Home Appliances Sales Co., Ltd. and Changchun Midea Smart HomeAppliances Sales Co., Ltd. in May 2022, holding 95% and 5% of the shares respectively.
Midea Electrics Netherlands B.V., a wholly-owned subsidiary of the Company, establishedMidea Electrics France in June 2022, holding 100% of the shares.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart HomeTechnology Co., Ltd., wholly-owned subsidiaries of the Company, established ZhengzhouMidea Smart Home Co., Ltd. and Taiyuan Midea Smart Home Co., Ltd. in June 2022, holding95% and 5% of the shares respectively.
Kuka Deutschland GmbH, a subsidiary of the Company, established Kuka TR RobotTeknolojileri Sanayi Ticaret Anonim Sirketi in June 2022, holding 100% of the shares.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 95 -
| 5 | Changes of consolidation scope (Cont’d) |
| (2) | Changes of consolidation scope due to other reasons (Cont’d) |
| (a) | Increase of consolidation scope (Cont’d) |
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart HomeTechnology Co., Ltd., wholly-owned subsidiaries of the Company, established ShanghaiMidea Smart Home Co., Ltd., Qingdao Midea Smart Home Co., Ltd. and Shenyang MideaSmart Home Co., Ltd. in July 2022, holding 95% and 5% of the shares respectively.
Guangdong Midea Intelligent Technologies Co., Ltd., a wholly-owned subsidiary of theCompany, established Shanghai Gaochuang Jiedong Control Technology Co., Ltd. in July2022, holding 100% of the shares.
Clivet, a wholly-owned subsidiary of the Company, established Clivet France SAS inOctober 2022, holding 100% of the shares.
Visual Components Oy, a wholly-owned subsidiary of the Company, acquired DelfoiRobotics OY in October 2022, holding 100% of the shares.
Wuxi Little Swan Electric Co., Ltd. and Foshan Midea Air-conditioning Industry InvestmentCo., Ltd., the Company's wholly-owned subsidiaries, established Wuxi Meizhi Electric Co.,Ltd. in November 2022, holding 95% and 5% of the shares respectively.
| (b) | Decrease of consolidation scope |
Decrease of consolidation scope in the current year mainly includes deregistration anddisposal of subsidiaries. Details are as follows:
| Name of entity | Disposal method of the equity | Disposal time-point of the equity |
| Shanghai Guifu Information Technology Co., Ltd. | Deregistration | January 2022 |
| Wuhan Hiconics Electric Drive Technology Co., Ltd. | Change of equity | March 2022 |
| Shenzhen Midea Financial Leasing Co., Ltd. | Deregistration | May 2022 |
| Ningbo Lingmei Enterprise Management Partnership (L.P.) | Deregistration | June 2022 |
| Hong Kong Hiconics Co., Limited | Deregistration | August 2022 |
| Guangzhou Wandong Medical Equipments Co.,Ltd. | Deregistration | August 2022 |
| Meminent Science and Technology Co., Ltd. | Deregistration | September 2022 |
| Wuhu Jumei New Energy Co., Ltd. | Deregistration | November 2022 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 96 -
6 Interests in other entities
(1) Interests in subsidiaries
(a) Composition of significant subsidiaries
| Subsidiaries | Major business location | Place of registration | Nature of business | Shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| GD Midea Air-Conditioning Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture and sales of air conditioner | 73% | 7% | Business combinations involving enterprises not under common control |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture and sales of air conditioner | 93% | 7% | Business combinations involving enterprises not under common control |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | Wuhan, PRC | Wuhan, PRC | Manufacture of air conditioner | 73% | 7% | Establishment |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of air conditioner | 87% | 13% | Establishment |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Manufacture and sales of air conditioner | 95% | 5% | Establishment |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of air conditioner | 90% | 10% | Establishment |
| Zhejiang Meizhi Compressor Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Manufacture of air conditioner | 100% | - | Establishment |
| Hefei Midea Refrigerator Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerator | 75% | 25% | Business combinations involving enterprises not under common control |
| Hefei Hualing Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerator | 75% | 25% | Business combinations involving enterprises not under common control |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 90% | 10% | Business combinations involving enterprises under common control |
| Wuxi Little Swan Electric Co., Ltd. | Wuxi, PRC | Wuxi, PRC | Manufacture of washing machine | 100% | - | Establishment |
| Midea Electric Trading (Singapore) Co., Pte. Ltd. | Singapore | Singapore | Export trade | - | 100% | Establishment |
| Midea Group Finance Co., Ltd. | Foshan, PRC | Foshan, PRC | Financial industry | 95% | 5% | Establishment |
| Midea Microfinance Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Petty loan | 5% | 95% | Business combinations involving enterprises not under common control |
| Mecca International (BVI) Limited | British Virgin Islands | British Virgin Islands | Investment holding | - | 100% | Establishment |
| Midea International Corporation Company Limited | Hong Kong | Hong Kong | Investment holding | 100% | - | Establishment |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 100% | - | Establishment |
| Midea Electric Netherlands (I) B.V. | Netherlands | Netherlands | Investment holding | - | 100% | Establishment |
| Toshiba Consumer Marketing Corporation | Japan | Japan | Manufacture of household appliances | - | 100% | Business combinations involving enterprises not under common control |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 97 -
6 Interests in other entities (Cont’d)
(1) Interests in subsidiaries (Cont’d)
(a) Composition of significant subsidiaries (Cont’d)
| Subsidiaries | Major business location | Place of registration | Nature of business | Shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| TLSC | Japan | Japan | Manufacture of home 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 |
| Wuhu Midea Annto Logistics Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Logistics | - | 76% | Establishment |
| Midea Innovation Investment Co., Ltd. | Shenzhen, PRC | Shenzhen, PRC | Investment holding | 85% | 15% | Establishment |
| Midea Group (Shanghai) Co. Ltd. | Shanghai, PRC | Shanghai, PRC | Manufacture and sales of intelligent household appliances | 90% | 10% | Establishment |
| Chongqing Midea Commercial Factoring Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Factoring | - | 100% | Establishment |
| Tianjin Midea Commercial Factoring Co., Ltd. | Tianjin, PRC | Tianjin, PRC | Factoring | - | 100% | Establishment |
| Midea Investment Co., Ltd. | Hainan, PRC | Hainan, PRC | Investment | 90% | 10% | Establishment |
| Midea Investment Development Company Limited | British Virgin Islands | British Virgin Islands | Investment | - | 100% | Establishment |
| Guangdong Midea Smart Technology Industry Investment Fund (LLP) (i) | Foshan, PRC | Foshan, PRC | Investment | - | 29% | Business combinations involving enterprises not under common control |
| Midea America Corp. | USA | USA | Sales of household appliances | - | 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 |
| Wuhu Midea Smart Kitchen Appliance Manufacturing Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 95% | 5% | Establishment |
| Hubei Midea Laundry Appliance Co., Ltd. | Jingzhou, PRC | Jingzhou, PRC | Manufacture of laundry appliance | - | 100% | Establishment |
| Midea Refrigeration Equipment (Thailand) Co., Ltd. | Thailand | Thailand | Manufacture of air conditioner | - | 100% | Establishment |
(i) Guangdong Midea Smart Technology Industry Investment Fund (LLP) is a structured entity managed and invested by the Group. The variable return
enjoyed by the Group through participating in the activities related to such entity has a significant impact, and the Group has the ability to use itspower over the entity to affect the amount of the entity's returns.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 98 -
6 Interests in other entities (Cont’d)
(2) Interests in associates
The Group’s associates have no significant influence on the Group and are summarised asfollows:
| 2022 | 2021 | |||
| Aggregated carrying amount of investments | 5,188,817 | 3,796,705 |
| Aggregate of the following items in proportion | ||||
| Net profit (i) | 608,278 | 560,679 | ||
| Other comprehensive income (i) | 17,391 | (3,032) | ||
| Total comprehensive income | 625,669 | 557,647 |
| (i) The net profit and other comprehensive income have taken into account the impacts of both the fair value of the identifiable assets and liabilities upon the acquisition of investment in associates and the unification of accounting policies adopted by the associates to those adopted by the Company. |
7 Segment information
The reportable segments of the Group are the business units that provide different productsor 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 based on negotiation by both parties withreference to selling prices for third parties.
The assets are allocated based on the operations of the segments and the physical locationsof the assets. The liabilities are allocated based on the operations of the segments.Expenses indirectly attributable to the segments are allocated based on the proportion ofeach segment’s revenue.
Operating expenses include cost of sales, interest costs, fee and commission expenses,taxes and surcharges, selling and distribution expenses, general and administrativeexpenses, R&D expenses and financial income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 99 -
8 Segment reporting
(a) Information on the profit or loss, assets and liabilities of reported segment
Segment information as at and for the year ended 31 December 2022 is as follows:
| Heating & ventilation, as well as air-conditioner | Consumer appliances | Robotics and automation system | Other segments and unallocated | Elimination | Total | ||
| Revenue from external customers | 167,072,126 | 135,631,425 | 30,203,793 | 12,801,362 | - | 345,708,706 | |
| Inter-segment revenue | 3,674,995 | 902,151 | 373,373 | 7,288,925 | (12,239,444) | - | |
| Operating costs and expenses | (155,057,892) | (121,217,521) | (30,107,864) | (17,488,764) | 12,180,514 | (311,691,527) | |
| Segment profit | 15,689,229 | 15,316,055 | 469,302 | 2,601,523 | (58,930) | 34,017,179 | |
| Other profit or loss | 938,752 | ||||||
| Total profit | 34,955,931 | ||||||
| Total assets | 173,419,099 | 160,854,058 | 41,186,669 | 203,093,817 | (155,998,376) | 422,555,267 | |
| Total liabilities | 122,574,760 | 126,523,988 | 33,478,351 | 186,475,612 | (198,421,246) | 270,631,465 | |
| Long-term equity investments in associates | 396,327 | 113,029 | 39,183 | 4,640,278 | - | 5,188,817 | |
| Investment income/(losses) from associates | 254,487 | (134) | 1,220 | 352,705 | - | 608,278 | |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 4,663,285 | 3,318,915 | 1,303,041 | 2,021,440 | - | 11,306,681 | |
| Asset impairment losses | 107,496 | 191,771 | 221,592 | 12,504 | - | 533,363 | |
| (Reversal of)/Losses on credit impairment | (26,109) | 468,842 | 10,611 | 29,377 | 30,965 | 513,686 | |
| Depreciation of right-of-use assets | 101,436 | 196,536 | 257,379 | 625,754 | (7,520) | 1,173,585 | |
| Depreciation and amortisation expenses | 2,106,703 | 1,629,145 | 1,018,491 | 579,996 | - | 5,334,335 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 100 -
8 Segment reporting (Cont’d)
(a) Information on the profit or loss, assets and liabilities of reported segment (Cont’d)
Segment information as at and for the year ended 31 December 2021 is as follows:
| Heating & ventilation, as well as air-conditioner | Consumer appliances | Robotics and automation system | Other segments and unallocated | Elimination | Total | ||
| Revenue from external customers | 165,428,603 | 140,406,787 | 27,545,334 | 9,980,101 | - | 343,360,825 | |
| Inter-segment revenue | 3,548,892 | 497,761 | 255,284 | 8,032,181 | (12,334,118) | - | |
| Operating costs and expenses | (155,063,889) | (127,385,637) | (27,349,260) | (15,285,750) | 12,306,649 | (312,777,887) | |
| Segment profit | 13,913,606 | 13,518,911 | 451,358 | 2,726,532 | (27,469) | 30,582,938 | |
| Other profit or loss | 3,134,606 | ||||||
| Total profit | 33,717,544 | ||||||
| Total assets | 159,934,918 | 150,200,053 | 34,442,640 | 186,546,737 | (143,178,244) | 387,946,104 | |
| Total liabilities | 116,536,045 | 115,848,036 | 23,383,691 | 167,205,006 | (169,851,750) | 253,121,028 | |
| Long-term equity investments in associates | 312,249 | 109,982 | 36,564 | 3,337,910 | - | 3,796,705 | |
| Investment income from associates | 185,835 | 5,976 | 2,182 | 366,686 | - | 560,679 | |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 4,946,978 | 2,923,405 | 981,504 | 3,996,272 | - | 12,848,159 | |
| Asset impairment losses | 85,227 | 292,077 | 95,462 | 10,654 | - | 483,420 | |
| Losses on/(Reversal of) credit impairment | 76,301 | (84,444) | 82,143 | 383,414 | (73,963) | 383,451 | |
| Depreciation of right-of-use assets | 73,261 | 163,480 | 275,105 | 400,612 | - | 912,458 | |
| Depreciation and amortisation expenses | 2,075,059 | 1,441,245 | 1,161,783 | 592,307 | - | 5,270,394 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 101 -
8 Segment reporting (Cont’d)
(b) Geographical area information
The Group’s revenue from external customers domestically and in foreign countries orgeographical areas, and the total non-current assets other than long-term equityinvestments, financial assets, goodwill and deferred tax assets located domestically and inforeign countries or geographical areas (including Germany, Hong Kong of China,Singapore, Japan, the USA, Italy and South America) are as follows:
| Revenue from external customers | 2022 | 2021 | ||
| Domestic | 203,063,764 | 205,706,997 | ||
| In other countries/geographical areas | 142,644,942 | 137,653,828 | ||
| 345,708,706 | 343,360,825 | |||
| Total non-current assets | 31 December 2022 | 31 December 2021 | ||
| Domestic | 34,458,577 | 31,293,535 | ||
| In other countries/geographical areas | 17,914,192 | 16,863,065 | ||
| 52,372,769 | 48,156,600 |
In 2022 and 2021, revenue from each individual customer is lower than 10% of the Group’stotal revenue.
9 Related parties and significant related party transactions
(1) Information of the parent company
(a) General information of the parent company
| Name of the parent company | Relationship | Place of registration | Nature of business |
| Midea Holding Co., Ltd. | Controlling shareholder | Shunde District, Foshan | Commercial |
The Company’s ultimate controlling person is Mr. He Xiangjian.
(b) Registered capital and changes in registered capital of the parent company
| 31 December 2021 | |
| Midea Holding Co., Ltd. | 330,000 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 102 -
9 Related parties and significant related party transactions (Cont’d)
(1) Information of the parent company (Cont'd)
(c) The percentages of shareholding and voting rights in the Company held by the parent
company
| 31 December 2022 | 31 December 2021 | ||||||||
| Shareholding (%) | Voting rights (%) | Shareholding (%) | Voting rights (%) | ||||||
| Direct | Indirect | Direct | Indirect | ||||||
| Midea Holding Co., Ltd. | 31.00% | - | 31.00% | 31.05% | - | 31.05% | |||
(2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of the Company’s material subsidiaries.
(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 | 2022 | 2021 | |||
| Content of related party transactions | |||||
| Orinko Advanced Plastics Co., Ltd. | Purchase of goods | 1,399,675 | 1,506,809 | ||
| Foshan Micro Midea Filter Mfg. Co., Ltd. | Purchase of goods | 330,330 | 358,641 | ||
| Guangdong Wellkey Electrician Material Co., Ltd. (i) | Purchase of goods | — | 958,908 | ||
| Anhui Wellkey Electrician Material Co., Ltd. (i) | Purchase of goods | — | 522,549 | ||
| 1,730,005 | 3,346,907 |
(i) As at 31 December 2022, Guangdong Wellkey Electrician Material Co., Ltd. and Anhui
Wellkey Electrician Material Co., Ltd. were not related parties of the Company due tochanges in equity relationship.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 103 -
9 Related parties and significant related party transactions (Cont’d)
(4) Information of related party transactions (Cont'd)
(b) Sales of goods
| Related parties | 2022 | 2021 | |||
| Content of related party transactions | |||||
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Sales of goods | 197,787 | 202,625 |
(c) Investment income and interest income
| 2022 | 2021 | |||
| Guangdong Shunde Rural Commercial Bank Co., Ltd. | 366,918 | 223,659 |
(d) Remuneration of key management
| 2022 | 2021 | |||
| Remuneration of key management | 101,109 | 83,530 |
(5) Balances with related parties
| 31 December 2022 | 31 December 2021 | ||||
| Cash at bank and on hand, other current assets and current portion of non-current assets, etc. | Guangdong Shunde Rural Commercial Bank Co., Ltd. | 11,177,251 | 6,218,638 |
| 31 December 2022 | 31 December 2021 | ||||
| Accounts payable | Orinko Advanced Plastics Co., Ltd. | 93,665 | 150,002 | ||
| Foshan Micro Midea Filter Mfg. Co., Ltd. | 65,207 | 80,498 | |||
| Guangdong Wellkey Electrician Material Co., Ltd. | — | 186,309 | |||
| Anhui Wellkey Electrician Material Co., Ltd. | — | 96,106 |
| Notes payable | Guangdong Wellkey Electrician Material Co., Ltd. | — | 54,613 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 104 -
10 Share-based payment
(1) Share option incentive plan
(a) Pursuant to the ninth share option incentive plan (the “Ninth Share Option Incentive Plan”)
approved at the 2021 annual shareholders’ meeting in 2022, the Company actually granted107,693,000 share options with exercise price of RMB 54.61 to 2,813 employees. Underthe circumstance that the Company meets expected performance, 30%, 30% and 40% ofthe total share options granted will become effective after 2 years, 3 years and 4 yearsrespectively since 8 June 2022.
Pursuant to the eighth share option incentive plan (the “Eighth Share Option Incentive Plan”)approved at the 2020 annual shareholders’ meeting in 2021, the Company granted82,260,000 share options with exercise price of RMB 81.41 to 1,897 employees. Under thecircumstance that the Company meets expected performance, 30%, 30% and 40% of thetotal share options granted will become effective after 2 years, 3 years and 4 yearsrespectively since 4 June 2021.
Determination method for fair value of share options at the grant date
| Ninth share option | Eighth share option | ||
| Exercise price of options: | RMB 54.61 | RMB 81.41 | |
| Effective period of options: | 5 years | 5 years | |
| Current price of underlying shares: | RMB 52.99 | RMB 77.73 | |
| Estimated fluctuation rate of share price: | 35.70% | 35.78% | |
| Estimated dividend rate: | 2.17% | 2.42% | |
| Risk-free interest rate within effective period of options: | 2.00% | 2.34% |
The fair value of the Ninth Share Option Incentive Plan calculated pursuant to the aboveparameters is: RMB 1,334,978,000 (the Eighth Share Option Incentive Plan: RMB1,457,678,000).
(b) Movements in share options during the year ended 31 December 2022
| 2022 | 2021 | |||
| (Share in thousands) | (Share in thousands) | |||
| Share options issued at the beginning of the year | 198,770 | 168,231 | ||
| Share options granted during the year | 107,693 | 82,260 | ||
| Share options exercised during the year | (18,602) | (34,437) | ||
| Share options lapsed during the year | (12,313) | (17,284) | ||
| Share options issued at the end of the year | 275,548 | 198,770 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 105 -
10 Share-based payment (Cont'd)
(1) Share option incentive plan (Cont'd)
(b) Movements in share options during the year ended 31 December 2022 (Cont'd)
As at 31 December 2022, the residual contractual maturity date of the Fifth Share OptionIncentive Plan is on 6 May 2024. The residual contractual maturity date of the Fifth ReservedShare Option Incentive Plan is on 10 March 2025. The residual contractual maturity date ofthe Sixth Share Option Incentive Plan is on 29 May 2025. The residual contractual maturitydate of the Seventh Share Option Incentive Plan is on 4 June 2024. The residual contractualmaturity date of the Eighth Share Option Incentive Plan is on 3 June 2026. The residualcontractual maturity 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 2022 approved at the 2021 annual
shareholders’ meeting in 2022 (the "Restricted Shares Incentive Plan for 2022"), theCompany granted 12,152,500 restricted shares with exercise price of RMB 26.47 to 191incentive recipients. Under the circumstance that the Company meets expectedperformance, 30%, 30% and 40% of the total restricted shares granted will be unlocked after2 years, 3 years and 4 years respectively since 8 June 2023. The listing date for the grantedrestricted shares of this plan is 13 July 2022.
Pursuant to the restricted shares incentive plan for 2021 approved at the 2020 annualshareholders’ meeting in 2021 (the "Restricted Shares Incentive Plan for 2021"), theCompany granted 9,940,000 restricted shares with exercise price of RMB 39.92 to 139incentive recipients. Under the circumstance that the Company meets expectedperformance, 30%, 30% and 40% of the total restricted shares granted will be unlocked after2 years, 3 years and 4 years respectively since 4 June 2021. The listing date for the grantedrestricted shares of this plan is 16 July 2021.
(b) Movements in restricted shares during the year ended 31 December 2022
| 2022 | 2021 | |||
| (Share in thousands) | (Share in thousands) | |||
| Restricted shares issued at the beginning of the year | 62,267 | 74,082 | ||
| Restricted shares granted during the year | 12,153 | 9,940 | ||
| Restricted shares unlocked during the year | (16,316) | (15,882) | ||
| Restricted shares lapsed during the year | (7,893) | (5,873) | ||
| Restricted shares issued at the end of the year | 50,211 | 62,267 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 106 -
10 Share-based payment (Cont'd)
(3) Employee stock ownership plan
Pursuant to the eighth stock ownership plan of the Midea Global Partner Plan (the “EighthGlobal Partner Plan”) approved at the shareholders' meeting for the year ended 31December 2021 held during the year 2022, the Company would purchase a total of3,770,433 shares of Midea Group from the secondary market, with an average purchaseprice of RMB 56.28 per share and the purchase fund was the special fund of approximatelyRMB 212,200,000 accrued by the Company. The Company then entrusted ChinaInternational Capital Corporation Limited (“CICC”) to provide an asset management plan.
Pursuant to the fifth stock ownership plan of the Midea Business Partner Plan (the “FifthBusiness Partner Plan”) approved at the shareholders' meeting for the year ended 31December 2021 held during the year 2022. The Company would purchase a total of2,826,759 shares of Midea Group from the secondary market, with an average purchaseprice of RMB 56.28 per share. The purchase fund was the special fund for the stockownership plan and part of performance bonus for management of approximately RMB159,090,000 in total accrued by the Company. The Company then entrusted CICC to providean asset management plan.
Pursuant to the seventh stock ownership plan of the Midea Global Partner Plan (the“Seventh Global Partner Plan”) approved at the shareholders' meeting for the year ended31 December 2020 held during the year 2021, the Company would purchase a total of2,436,518 shares of Midea Group from the secondary market, with an average purchaseprice of RMB 82.70 per share and the purchase fund was the special fund of approximatelyRMB 201,500,000 accrued by the Company. The Company then entrusted CICC to providean asset management plan.
Pursuant to the fourth stock ownership plan of the Midea Business Partner Plan (the “FourthBusiness Partner Plan”) approved at the shareholders' meeting for the year ended 31December 2020 held during the year 2021. The Company would purchase a total of1,985,611 shares of Midea Group from the secondary market, with an average purchaseprice of RMB 82.70 per share. The purchase fund was the special fund for the stockownership plan and part of performance bonus for management of approximately RMB164,210,000 in total accrued by the Company. The Company then entrusted CICC to providean asset management plan.
(4) The total expenses due to the above share-based payment incentive plan, which were
granted, recognised for the year ended 31 December 2022 were approximately RMB1,028,950,000 (2021: RMB 1,578,070,000). As at 31 December 2022, the balance relatingto the share-based payment incentive plan and accrued from capital surplus wasapproximately RMB 2,279,108,000 (31 December 2021: RMB 2,161,354,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 107 -
11 Contingencies
As at 31 December 2022, the amount in tax disputes involving Brazilian subsidiary with 51%interests held by the Company was about BRL 741 million (equivalent to RMB 990 million)(Some cases have lasted for more than 10 years. The above amount included the principaland interest). As at the date on which the financial statements were authorised for issue,relevant cases are still at court. With reference to judgements of third-party attorneys,management believes that the probability of losing lawsuits and making compensation issmall, and has accrued sufficient amount of provisions based on the probability of makingcompensation. In addition, original shareholders of Brazilian subsidiary have agreed tocompensate the Company according to verdict results of the above tax disputes. Themaximum compensation amount is about BRL 157 million (equivalent to RMB 210 million).
12 Commitments
(1) Capital commitments
Capital expenditures contracted for by the Group but are not yet necessary to be recognisedon the balance sheet as at the balance sheet date are as follows:
| 31 December 2022 | 31 December 2021 | |||
| Buildings, machinery and equipment | 5,145,982 | 5,990,809 |
13 Events after the balance sheet date
(1) Overview of profit distribution
On 27 April 2023, on the basis of the total shares 6,875,060,728 to be distributed (total7,021,698,756 shares net of repurchased 146,638,028 shares) of the Company at the dateon which the financial statements were authorised for issue, the Board of Directors proposeda distribution of cash dividends of RMB 17,187,651,820 at RMB 25 every 10 shares(including tax). Such proposal is pending for approval at the shareholders’ meeting. Thedistribution of cash dividends proposed after the balance sheet date is not recognised asliabilities at the balance sheet date.
14 Operating lease proceeds after the balance sheet date
As the lessor, the Group’s undiscounted lease proceeds receivable after the balance sheetdate are as follows:
| 31 December 2022 | 31 December 2021 | ||
| Within 1 year | 62,028 | 53,370 | |
| 1 to 2 years | 62,643 | 52,871 | |
| 2 to 3 years | 56,275 | 45,965 | |
| 3 to 4 years | 58,624 | 44,678 | |
| 4 to 5 years | 57,669 | 43,903 | |
| Over 5 years | 471,342 | 501,571 | |
| 768,581 | 742,358 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 108 -
15 Financial instruments and risks
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 pricerisk)? Credit risk? Liquidity risk
The following mainly relates to the above risk exposures and relevant causes, objectives,policies and process of risk management, method of risk measurement, etc.
The objective of the Group's risk management is to seek balance between risk and income,minimising the adverse impact of financial risks on the Group's financial performance.Pursuant to the risk management objective, the Group has made risk management policiesto identify and analyse the risks it is exposed to and set appropriate risk resistant level anddesign relevant internal control procedures to monitor the Group’s risk level. The Groupreviews regularly these risk management policies and relevant internal control systems toadapt to changes in market condition or its operating activities.
(1) Market risk
(a) Foreign exchange risk
The Group mainly operates in China, Europe, the USA, Asia, South America and Africa forthe manufacturing, sales, investments and financing activities. Any foreign currencydenominated monetary assets and liabilities other than in RMB would subject the Group tothe risk arising from 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 impactof exchange rate fluctuations on business performance.
(b) Interest rate risk
The Group's interest rate risk arises from interest bearing borrowings including long-termborrowings and debentures payable. Financial liabilities issued at floating rates expose theGroup to cash flow interest rate risk. Financial liabilities issued at fixed rates expose theGroup to fair value interest rate risk. The Group determines the relative proportions of itsfixed rate and floating rate contracts depending on the prevailing market conditions. As at31 December 2022, the Group’s long-term interest bearing borrowings at floating rate arelong-term borrowings.
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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 109 -
15 Financial instruments and risks (Cont’d)
(1) Market risk (Cont’d)
(b) Interest rate risk (Cont’d)
As at 31 December 2022, if the borrowing rate had risen or fallen by 50 base points whileother factors had been remained constant, the Group’s profit before tax would decrease orincrease by approximately RMB 1,739,000 (31 December 2021: RMB 4,459,000).
(c) Other price risk
The Group's other price risk arises mainly from financial assets held for trading (Note 4(2)),other non-current financial assets (excluding the hedging instruments mentioned in Note4(16)) and investments in other equity instruments measured at fair value. As at 31December 2022, if expected price of the investments held by the Group fluctuated, theGroup's gains or losses on changes in fair value and other comprehensive income wouldbe affected accordingly.
As at 31 December 2022, if the Group’s expected price of above mentioned investments inequity instruments had risen or fallen by 10% while other factors had been remainedconstant, the Group would have an increase or decrease in profit before tax amounting toapproximately RMB 761,315,000 (31 December 2021: approximately RMB 723,234,000),and an increase or decrease in other comprehensive income amounting to approximatelyRMB 4,136,000 (31 December 2021: approximately RMB 4,574,700).
(2) Credit risk
Credit risk is managed on a grouping basis. Credit risk mainly arises from cash at bank andon hand, 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 currentassets, other non-current assets and derivative financial assets at fair value through profitor loss that 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. Management does not expect that there will be anysignificant losses from non-performance by these banks.
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, the amount and type of collateral required for loans and advances depend onan assessment of the credit risk of the counterparty. The collaterals pledged for pledgedloans are mainly receivables and inventories. The Group monitors the market value of thecollaterals, requests additional collaterals according to relevant agreements and monitorsthe market value of collaterals when reviewing the adequacy of provision for impairment. Asat 31 December 2022, the Group had no significant collateral or other credit enhancementsheld as a result of the debtor's mortgage (31 December 2021: Nil).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 110 -
15 Financial instruments and risks (Cont’d)
(3) Liquidity risk
Cash flow forecasting is performed by each subsidiary of the Group and aggregated by theGroup’s finance department in its headquarters. The Group’s finance department at itsheadquarters monitors rolling forecasts of the Group's short-term and long-term liquidityrequirements to ensure it has sufficient cash and securities that are readily convertible tocash to meet operational needs, while maintaining sufficient headroom on its undrawncommitted borrowing facilities from major financial institutions so that the Group does notbreach borrowing limits or covenants on any of its borrowing facilities to meet the short-termand long-term liquidity requirements.
The financial liabilities of the Group at the balance sheet date are analysed by their maturitydate below at their undiscounted contractual cash flows:
| 31 December 2022 | ||||||||||
| 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 | |||||
| 127,254,236 | 13,480,031 | 41,174,783 | 312,797 | 182,221,847 | ||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 111 -
15 Financial instruments and risks (Cont’d)
(3) Liquidity risk (Cont’d)
| 31 December 2021 | ||||||||||
| Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total | ||||||
| Short-term borrowings (including interest) | 5,420,066 | - | - | - | 5,420,066 | |||||
| Borrowings from the Central Bank (including interest) | 180,000 | - | - | - | 180,000 | |||||
| Customer deposits and deposits from banks and other financial institutions (including interest) | 78,235 | - | - | - | 78,235 | |||||
| Notes payable | 32,752,007 | - | - | - | 32,752,007 | |||||
| Accounts payable | 65,983,559 | - | - | - | 65,983,559 | |||||
| Other payables | 4,288,104 | - | - | - | 4,288,104 | |||||
| Derivative financial liabilities | 157,602 | - | - | - | 157,602 | |||||
| Other current liabilities | 16,920,200 | - | - | - | 16,920,200 | |||||
| Current portion of non-current liabilities (including interest) | 28,995,245 | - | - | - | 28,995,245 | |||||
| Long-term borrowings (including interest) | 409,056 | 6,656,015 | 13,726,837 | - | 20,791,908 | |||||
| Lease liabilities (including interest) | - | 667,710 | 879,105 | 143,316 | 1,690,131 | |||||
| Other non-current liabilities | - | - | 687,689 | - | 687,689 | |||||
| 155,184,074 | 7,323,725 | 15,293,631 | 143,316 | 177,944,746 | ||||||
(i) As at the balance sheet date, the Group did not provide financial guarantees to external
parties or loan commitments to related parties.
16 Fair value estimates
The level in which fair value measurement is categorised is determined by the level of thefair value hierarchy of the lowest level input that is significant to the entire fair valuemeasurement:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for theasset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 112 -
16 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis
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:
| 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 certificate of deposit | - | 743,934 | - | 743,934 | ||||
| Other debt investments (including the current portion) | - | 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 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 113 -
16 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont’d)
As at 31 December 2021, the financial assets and liabilities measured at fair value on arecurring basis by the above three levels are analysed below:
| Level 1 | Level 2 | Level 3 | Total | |||||
| Financial assets measured at fair value - | ||||||||
| Financial assets held for trading | 1,319,470 | 4,559,732 | - | 5,879,202 | ||||
| Derivative financial assets | - | 545,865 | - | 545,865 | ||||
| Receivables financing | - | 10,273,552 | - | 10,273,552 | ||||
| Other current assets - hedging instruments and transferable certificate of deposit | - | 982,965 | - | 982,965 | ||||
| Other debt investments | - | 27,254,307 | - | 27,254,307 | ||||
| Investments in other equity instruments | - | - | 45,747 | 45,747 | ||||
| Other non-current financial assets | - | - | 5,912,873 | 5,912,873 | ||||
| Total assets | 1,319,470 | 43,616,421 | 5,958,620 | 50,894,511 | ||||
| Financial liabilities measured at fair value - | ||||||||
| Derivative financial liabilities | - | 157,602 | - | 157,602 | ||||
| Other current liabilities - hedging instruments | - | 9,047 | - | 9,047 | ||||
| Total liabilities | - | 166,649 | - | 166,649 |
The Group takes the date on which events causing the transfers between the levels takeplace as the timing specific for recognising the transfers. There was no significant transferof fair value 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 discountedcash flow model and market comparable corporate model. Inputs of valuation techniquemainly comprise risk-free interest rate, floating rate, foreign exchange rate, financial data oftarget companies and market multiple of comparable companies.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 114 -
16 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont’d)
There were no changes in the valuation technique for the fair value of the Group’s financialinstruments in the current year.
| The changes in Level 3 assets and liabilities are analysed below: |
| 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 out of Level 3 | (838,345) | - | ||
| Total gains for the current period | ||||
| Investment (losses)/income recognised in the income statement | (409,005) | 86,306 | ||
| Gains recognised in other comprehensive income | 123,059 | - | ||
| 31 December 2022 | 6,389,915 | (1,580,771) |
| Investments in other equity instruments and other non-current financial assets | |||
| 1 January 2021 | 3,407,500 | ||
| Increase | 2,492,898 | ||
| Decrease | (869,794) | ||
| Transfer into Level 3 | 28,666 | ||
| Total gains for the current period | |||
| Investment income recognised in the income statement | 943,969 | ||
| Gains recognised in other comprehensive income | (44,619) | ||
| 31 December 2021 | 5,958,620 |
(a) The fair value of this part of other non-current financial assets, 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 thefair value hierarchy is based on the materiality of unobservable inputs towards calculationof whole fair value. Significant unobservable inputs mainly include the financial data oftargeted company, market multiple of comparable companies and risk adjusted discountrates.
Assets and liabilities subject to Level 2 fair value measurement are mainly receivablesfinancing, structural deposits, transferable certificate of deposit and cross-currency interestrate swaps are evaluated by discounted cash flows approach, market approach and incomeapproach.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 115 -
16 Fair value estimates (Cont'd)
(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)), othercurrent assets (excluding those mentioned in Note 16(1)), notes payable, accounts payable,contract liabilities, short-term borrowings, lease liabilities, long-term borrowings, debenturespayable, current portion of non-current liabilities, customer deposits and deposits frombanks and other financial institutions, other payables and other current liabilities.
Carrying amounts of the Group’s financial assets and financial liabilities measured atamortised cost as at 31 December 2022 and 31 December 2021 approximated to their fairvalue.
17 Capital management
The Group’s capital management policies aim to safeguard the Group’s ability to continueas a going concern in order to provide returns for shareholders and benefits for otherstakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount ofdividends paid to shareholders, refund capital to shareholders, issue new shares or sellassets to reduce debts.
The Group is not subject to external mandatory capital requirements, and monitors capitalstructure on the basis of gearing ratio (total liabilities divide total assets).
As at 31 December 2022 and 31 December 2021, the Group's gearing ratio is as follows:
| 31 December 2022 | 31 December 2021 | |||
| Total liabilities | 270,631,465 | 253,121,028 | ||
| Total assets | 422,555,267 | 387,946,104 | ||
| Gearing ratio | 64.05% | 65.25% |
18 Notes to the Company’s financial statements
(1) Other receivables
| 31 December 2022 | 31 December 2021 | |||
| Other receivables | 26,182,925 | 31,465,557 | ||
| Less: Provision for bad debts | (7,824) | (17,708) | ||
| 26,175,101 | 31,447,849 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 116 -
18 Notes to the Company’s financial statements (Cont'd)
(1) Other receivables (Cont’d)
(a) Other receivables are analysed by ageing as follows:
| 31 December 2022 | 31 December 2021 | |||
| Within 1 year | 26,069,074 | 31,461,940 | ||
| 1 to 2 years | 110,631 | 1,708 | ||
| Over 2 years | 3,220 | 1,909 | ||
| 26,182,925 | 31,465,557 | |||
(b) Provision for losses and changes in book balance statements
| Stage 1 | Stage 3 | ||||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | (Credit impaired) | Sub-total | ||||
| Book balance | Provision for bad debts | Book balance (i) | Provision for bad debts | Book balance | Provision for bad debts | Provision for bad debts | |
| 31 December 2021 | 31,315,234 | 17,708 | 150,323 | - | - | - | 17,708 |
| Transfer to Stage 3 in the current year | - | - | - | - | - | - | - |
| Net decrease in the current year | (5,200,268) | (9,884) | (82,364) | - | - | - | (9,884) |
| Including: Write-off in the current year | - | - | - | - | - | - | - |
| Derecognition | - | - | - | - | - | - | - |
| 31 December 2022 | 26,114,966 | 7,824 | 67,959 | - | - | - | 7,824 |
(i) As at 31 December 2022 and 31 December 2021, the Company had no other receivables
at Stage 2:
(c) Provision for bad debts
As at 31 December 2022 and 31 December 2021, other receivables of the Company atStage 1 are analysed as follows:
(i) As at 31 December 2022, other receivables for which the related provision for bad debts
was provided on an individual basis are analysed as follows:
| Book balance | 12-month ECL rate | Provision for bad debts | Reason | ||||
| Stage 1 | 67,959 | 0.00% | - | Relatively low bad debt risks |
As at 31 December 2021, other receivables for which the related provision for bad debtswas provided on an individual basis are analysed as follows:
| Book balance | 12-month ECL rate | Provision for bad debts | Reason | ||||
| Stage 1 | 150,323 | 0.00% | - | Relatively low bad debt risks |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 117 -
18 Notes to the Company’s financial statements (Cont'd)
(1) Other receivables (Cont’d)
(c) Provision for bad debts (Cont’d)
(ii) As at 31 December 2022 and 31 December 2021, other receivables for which the related
provision for bad debts was provided on a grouping basis were all at Stage 1, which areanalysed as follows:
| 31 December 2022 | 31 December 2021 | ||||||||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | ||||||||
| Amount | Amount | Provision ratio | Amount | Amount | Provision ratio | ||||||
| guarantee payables grouping | 26,114,966 | (7,824) | 0.03% | 31,315,234 | (17,708) | 0.06% | |||||
(d) As at 31 December 2022, the five largest other receivables aggregated by debtor are
analysed as follows:
| Nature | Balance | Ageing | % of total balance | Provision for bad debts | ||
| Company A | Current accounts | 21,331,391 | Within 1 year | 81.47% | 6,399 | |
| Company B | Current accounts | 1,223,000 | Within 1 year | 4.67% | 367 | |
| Company C | Current accounts | 1,206,130 | Within 1 year | 4.61% | 362 | |
| Company D | Current accounts | 503,702 | Within 1 year | 1.92% | 151 | |
| Company E | Current accounts | 458,672 | Within 1 year | 1.75% | 138 | |
| 24,722,895 | 94.42% | 7,417 |
(2) Long-term equity investments
Long-term equity investments are classified as follows:
| 31 December 2022 | 31 December 2021 | |||
| Subsidiaries (a) | 69,705,046 | 64,376,850 | ||
| Associates (b) | 3,398,523 | 2,428,841 | ||
| 73,103,569 | 66,805,691 | |||
| Less: Provision for impairment | - | - | ||
| 73,103,569 | 66,805,691 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 118 -
18 Notes to the Company’s financial statements (Cont'd)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries
| Movements for the current year | |||||||||||||
| 31 December 2021 | Increase in investment | Decrease in investment | Provision for impairment | Others | 31 December 2022 | Ending balance | Cash dividends attributable to the parent company declared in the current year | ||||||
| Wuxi Little Swan Electric Co., Ltd. | 20,266,584 | - | - | - | 47,039 | 20,313,623 | - | 1,205,831 | |||||
| Foshan Shunde Midea Household Appliances Industry Co., Ltd. | 5,949,000 | - | - | - | 1,999 | 5,950,999 | - | - | |||||
| Guangdong Midea Electric Co., Ltd. | 5,000,000 | - | - | - | 1,072 | 5,001,072 | - | - | |||||
| Beijing Wandong Medical Technology Co., Ltd. | 2,297,093 | 2,051,910 | - | - | - | 4,349,003 | - | 31,958 | |||||
| Midea Group Finance Co., Ltd. | 3,361,856 | - | - | - | 1,623 | 3,363,479 | - | - | |||||
| Midea Innovation Investment Co., Ltd. | 2,135,000 | - | - | - | - | 2,135,000 | - | - | |||||
| GD Midea Air-Conditioning Equipment Co., Ltd. | 1,906,520 | - | - | - | 80,761 | 1,987,281 | - | - | |||||
| Guangdong Midea Microwave Oven Manufacturing Co., Ltd. | 1,880,041 | - | - | - | - | 1,880,041 | - | - | |||||
| Guangdong Midea Intelligent Technologies Co., Ltd. | 1,059,451 | 800,000 | - | - | 1,089 | 1,860,540 | - | - | |||||
| Guangdong Meizhi Compressor Limited | 289,972 | 1,104,610 | - | - | 24,281 | 1,418,863 | - | - | |||||
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 1,171,449 | - | - | - | 30,412 | 1,201,861 | - | - | |||||
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 1,080,049 | - | - | - | 3,371 | 1,083,420 | - | 1,455,842 | |||||
| Hainan Midea Building Technology Co., Ltd. | 921,500 | - | - | - | - | 921,500 | - | - | |||||
| Midea Group (Shanghai) Co. Ltd. | 912,585 | - | - | - | 7,842 | 920,427 | - | - | |||||
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 850,748 | - | - | - | 48,687 | 899,435 | - | 1,075,099 | |||||
| Hubei Midea Refrigerator Co., Ltd. | 874,840 | - | - | - | 10,298 | 885,138 | - | - | |||||
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 831,698 | - | - | - | 3,114 | 834,812 | - | - | |||||
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 772,668 | - | - | - | 4,088 | 776,756 | - | - | |||||
| 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. | 77,435 | 536,453 | - | - | 11,989 | 625,877 | - | - | |||||
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 567,730 | - | - | - | 27,315 | 595,045 | - | - | |||||
| Hefei Midea Refrigerator Co., Ltd. | 551,886 | - | - | - | 4,313 | 556,199 | - | - | |||||
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 526,389 | - | - | - | 6,954 | 533,343 | - | - | |||||
| Ningbo Midea United Materials Supply Co., Ltd. | 501,044 | - | - | - | 2,376 | 503,420 | - | 920,621 | |||||
| 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. | 442,018 | - | - | - | 2,397 | 444,415 | - | - | |||||
| GD Midea Environment Appliances Mfg. Co., Ltd. | 409,734 | - | - | - | 7,648 | 417,382 | - | - | |||||
| Anhui Meizhi Compressor Co., Ltd. | 383,310 | - | - | - | 8,208 | 391,518 | - | - | |||||
| Others | 6,862,367 | 167,163 | (155,346) | - | 486,530 | 7,360,714 | - | 5,589,773 | |||||
| 64,376,850 | 4,660,136 | (155,346) | - | 823,406 | 69,705,046 | - | 10,279,124 | ||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 119 -
18 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., Shenzhen Clou Electronics Co., Ltd. and Hefei Royalstar MotorCo., Ltd. and other companies by the Company.
(3) Operating revenue
Operating revenue mainly comprises other operating revenue including the trademarkroyalty income, rental income and management fee income, obtained by the Company fromthe subsidiaries.
(4) Investment income
| 2022 | 2021 | |||
| Income from long-term equity investments under equity method | 10,279,124 | 11,288,473 | ||
| Investment income from associates | 260,651 | 265,491 | ||
| Investment income from holding of financial assets held for trading | 95,277 | 292,890 | ||
| Others | 282,904 | 615,249 | ||
| 10,917,956 | 12,462,103 |
There is no significant restriction on repatriation of the Company's investment income.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
- 1 -
1 Details of non-recurring profit or loss
| 2022 | 2021 | |||
| Gains or losses on disposal of non-current assets | (59,854) | 77,527 | ||
| 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 | (604,446) | 995,824 | ||
| 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) | 1,777,103 | 2,352,849 | ||
| 1,112,803 | 3,426,200 | |||
| Less: Effect of income tax | (103,624) | (668,578) | ||
| Effect of minority interests (after tax) | (63,645) | (113,058) | ||
| 945,534 | 2,644,564 |
Basis of preparation of details of non-recurring profit or loss:
Under the requirements of the Explanatory Announcement No. 1 on Information Disclosureby Companies Offering Securities to the Public - Non-recurring Profit or Loss [2008] fromCSRC, non-recurring profit or loss refers to that arises from transactions and events that arenot directly 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 andprofitability of an enterprise.
2 Return on net assets and earnings per share
The Group's return on net asset and earnings per share calculated pursuant to 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 (revisedin 2010) issued by CSRC and relevant requirements of accounting standards are as follows:
| return on net assets (%) | Earnings per share (in RMB Yuan) | |||||||||||
| per share | per share | |||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||
| Net profit attributable to ordinary shareholders of the Company | 22.21% | 24.09% | 4.34 | 4.17 | 4.33 | 4.14 | ||||||
| Net profit attributable to ordinary shareholders of the Company, net of non-recurring profit or loss | 21.50% | 21.86% | 4.20 | 3.78 | 4.20 | 3.75 | ||||||
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 ChinaAccounting Standards (CAS) and International Financial Reporting Standards (IFRS)
□ Applicable √ N/A
(2) Differences in the net profit and net assets disclosed in the financial reports prepared under CASand foreign accounting standards
□ Applicable √ N/A
(3) Reasons for the differences. Where any reconciliation is made to any data that have been auditedby an overseas auditor, the name of the overseas auditor shall be provided.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
29 April 2023