Midea Group Co., Ltd.
The 2023 Annual Report
March 2024
Letter to ShareholdersAmidst the profound changes in the market environment and formidable challenges in2023, Midea remained steadfast in implementing the annual business principle of"Stabilize Profitability & Drive Growth”. Our focus on certainties over the long cycle hasultimately resulted in our best-ever business results. In 2023, Midea recorded totalrevenue of RMB373.7 billion, with a net profit reaching RMB33.7 billion. Our net operatingcash flow surpassed RMB57.9 billion. Additionally, Midea ranked No. 278 on the FortuneGlobal 500 list and was included on the Fortune China ESG Impact list and the FortuneMost Admired Chinese Companies list in 2023. We were also lauded by Forbes as anIndustry Benchmark for Sustainable Development Industrial Enterprises in China. Weextend our heartfelt gratitude to all Mideans for your going ever onwards. Withdetermination and calmness, we have been pushing our way through the thick mud of allthe difficulties. Extraordinary dedication even in the most ordinary positions and a deep-rooted entrepreneurial spirit have been the cornerstone of Midea's continuing vitality forgenerations, warming every corner of Midea like sunshine every single day. Appreciationalso goes to all of our shareholders for your steadfast support through thick and thin. Yourtrust has been the driving force and bedrock of our unremitting pursuit of long-term growthand sustained shareholder returns.We stand at a new juncture, where we can view the vast world from a fresh perspective. Inthe past, our business journey resembled a mountaineering expedition, relying solely onour capabilities for success. However, running a business today is more akin to surfing thewaves, navigating through rippling uncertainties. We are often caught off guard by thesudden decline of once glorious corporations and rapid falls of new-money. Even industrygiants are adapting swiftly. Corporate succession has accelerated, with reshuffles andphaseouts happening every day. The rules of the game are being rewritten, and businessparadigms are shifting, leaving every sector and individual facing similar challenges, aswe find ourselves in uncharted territory. It's time to bid farewell to illusions and the past
cycle, breaking free from outdated thinking and embarking on a journey of reflecting onand challenging ourselves. In this process, resilience and determination are crucial.In the face of sluggish global growth, how does Midea secure its growth? How does Mideacultivate new competitive strengths amidst waves of technological advancements andshifting business models? With formidable challenges overseas, how do we expedite ourglobal business distribution? In the face of anxieties over economic restructuring andshifts in growth models, how do we navigate through the cycles?These challenges test our corporate governance, compliance, operational systems, andagility. In this world, there's no room for pessimism or optimism; only realism. As Game ofThrones, a popular TV drama, aptly put, "Chaos isn't a pit. Chaos is a ladder”. Our choices,not fate, determine our path. In this ever-evolving era, our success depends solely on howwe define ourselves. What is certainty? To be certain is to ascend beyond time and space,and to summarize common sense knowledge and methods. To achieve industrialupgrades from basic to premium offerings and from low to high added value, it is essentialto harness the cost-efficiency strengths and the force of technological advancement. Inessence, innovation and creativity play a pivotal role in this process. The greatness of acompany lies in taking common sense to the utmost level, doing the right things,upholding principles, and weathering any storm with resilience. It's not time orcircumstances that trap us, but our mindset. We must reflect on ourselves, confrontchallenges head-on, and brave the waves. Guided by our common sense knowledge andcourage as a compass, we are ready to confront storms and sail into uncharted territory.In 2024, Midea will focus on enhancing value chain-wide efficiency alongside structuralgrowth through upgrades. Several economic crises occurred in the world’s history.Maintaining ample liquidity, high-performance operations with low cost and high efficiency,and competitiveness of core business operations is key to navigating economic crises andmarket downturns. Hence, Midea must stay committed to business model upgrades,structural upgrades, and industrial upgrades and navigate the ever-evolving environmentand changes with strategic certainty.
Business model upgrades: Midea will adhere to the “Chinese Market DTC (Direct ToCustomer), Overseas OBM Priority” strategy. The essence of the DTC strategy iscustomer-oriented retailing. Meanwhile, global breakthroughs are critical at this time. Atruly globalized company is localized. With an internationalized headquarters, we aim tomake ourselves at home across the world. To this end, we will resolutely strengthenoverseas infrastructure for after-sales services, logistics, branding, etc.Structural upgrades: Upholding a customer-oriented principle, we will redouble our effortsto enhance our "Three Generations" capabilities across research, reserves, anddevelopment. We will recruit high-calibre professionals worldwide, including top globaltalent, experts, and scientists, to drive technological advancement and innovation. Seizingopportunities brought by structural upgrades, Midea aims to establish itself in this era as apioneering enterprise.Industrial upgrades: We will continue to balance ToC and ToB business development. Weare fully aware that the development of ToB business involves longer cycles and additionaltime. To that end, we will exhibit strategic patience and persistence and continue to invest,gradually laying the groundwork for developing capabilities of overcoming challenges.There are no friends of times, only friends of trends. The end of an era inevitably heraldsthe dawn of another. In the ebb and flow of industries and in every economic crisis, only aselect few enterprises emerge victorious. This is a constant process where newbusinesses rise and old ones fall. To be a friend of trends in this era full of uncertainties,we must surmount confusion and foster courage. Over the past 55 years, Midea hasadeptly navigated changing times, remaining steadfast in the face of challenges. What haspropelled Midea forward amidst these ever-shifting tides? It's the entrepreneurial spiritdeeply ingrained in our core, driving vitality for generations and fostering sustained growthand progress. This spirit is Midea's legacy. We are dedicated to fostering an environmentwhere every individual is valued, irrespective of their background, and where theentrepreneurial spirit thrives for generations to come. We will seek out those bold sailorsbound for all ports in the world. With an extensive business portfolio comprising the smart
home business and the commercial and industrial solutions, Midea boldly embracesevolution, braving the waves to explore broader business prospects.While no one can precisely predict Midea's future, just as in 2014, we couldn't foresee ourdevelopment in 2024, nor anticipate the profound changes in 2023 when we were at theend of 2022. Yet, Midea's future lies ahead, filled with unexplored markets, regions, andcountries, as well as with undeveloped business, waiting for us to deliver better and betterbusiness results. Together, they constitute the unwritten chapters of Midea's future. Asstated in Blossom Shanghai, a blockbuster TV series in China, running a business is likenavigating an ocean; we must row steadfastly until we reach our destination. Midea mustbrave the waves and forge ahead towards our goal. When the horizon widens and thewater turns azure in front of us, we will know that we’ve arrived at the ocean of endlesspossibilities.We look forward to continuing this journey with our shareholders. Let’s witness Midea’spower to flourish!
Board of Directors, Midea Group
March 2024
Section I Important Statements, Contents and DefinitionsThe Board of Directors, the Supervisory Committee, directors, supervisors andsenior management of Midea Group Co., Ltd. (hereinafter referred to as the“Company”) hereby guarantee that the information presented in this report is freeof any misrepresentations, misleading statements or material omissions, and shalltogether be wholly liable for the truthfulness, accuracy and completeness of itscontents.Mr. Fang Hongbo, Chairman of the Board and CEO of the Company, Ms. ZhongZheng, Vice President, CFO and Director of Finance of the Company, and Ms. ChenLihong, head of the accounting department (equivalent to accounting manager) ofthe Company, have represented and warranted that the financial statements in thisreport 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 reportshall not be considered as promises of the Company to investors. Therefore,investors are kindly reminded to pay attention to possible investment risks.The Board has considered and approved the following dividend payout plan: basedon the 6,920,391,836 shares at the disclosure date of this report (the total sharecapital of 6,968,950,724 shares minus the repurchased 48,558,888 shares in therepurchased share account at that date), it is proposed that the Company shoulddistribute a cash dividend of RMB30 (tax inclusive) per 10 shares to all theshareholders and should not carry out any bonus issue or convert capital surplusinto share capital. When the profit distribution plan is implemented, if any changeoccurs to the total shares eligible for profit distribution, the profit distribution planshall be based on the total shares eligible for profit distribution at the record date ofthe profit distribution, and the total dividend amount shall be adjusted under anunchanged dividend per share.This report has been prepared in both Chinese and English. Should there be anydiscrepancies or misunderstandings between the two versions, the Chinese versionshall prevail.
Contents
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 ...... 15
SECTION IV CORPORATE GOVERNANCE ...... 122
SECTION V ENVIRONMENTAL AND SOCIAL RESPONSIBILITY ...... 158
SECTION VI SIGNIFICANT EVENTS ...... 200SECTION VII CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ..... 220SECTION VIII PREFERENCE SHARES ...... 229
SECTION IX BONDS ...... 230
SECTION X FINANCIAL REPORT ...... 235
Documents Available for Reference
1. The original of The 2023 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 2023 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. |
| CLOU Electronics | ShenZhen CLOU Electronics Co., Ltd. |
| Swisslog | Swisslog Holding AG |
| Servotronix | Servotronix Motion Control Ltd. |
| WINONE | WINONE Elevator Company Limited |
| Reporting Period | 1 January 2023 to 31 December 2023 |
Section II Company Profile and Key Financial Results
1. Corporate Information
| Stock name | Midea Group | Stock code | 000333 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese | 美的集团股份有限公司 | ||
| Abbr. of the Company name in Chinese | 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 | 0757-26637438 |
| 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 during theReporting 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
| 2023 | 2022 | 2023-over-2022 change (%) | 2021 | |
| Operating revenue (RMB'000) | 372,037,280 | 343,917,531 | 8.18% | 341,233,208 |
| Net profit attributable to shareholders of the Company (RMB'000) | 33,719,935 | 29,553,507 | 14.10% | 28,573,650 |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses (RMB'000) | 32,974,908 | 28,607,973 | 15.26% | 25,929,086 |
| Net cash flows from operating activities (RMB'000) | 57,902,611 | 34,657,828 | 67.07% | 35,091,704 |
| Basic earnings per share (RMB/share) | 4.93 | 4.34 | 13.59% | 4.17 |
| Diluted earnings per share | 4.92 | 4.33 | 13.63% | 4.14 |
| (RMB/share) | ||||
| Weighted average ROE (%) | 22.23% | 22.21% | 0.02% | 24.09% |
| 31 December 2023 | 31 December 2022 | Change of 31 December 2023 over 31 December 2022 | 31 December 2021 | |
| Total assets (RMB'000) | 486,038,184 | 422,555,267 | 15.02% | 387,946,104 |
| Net assets attributable to shareholders of the Company (RMB'000) | 162,878,825 | 142,935,236 | 13.95% | 124,868,124 |
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 prepared underChina Accounting Standards (CAS) and International Financial Reporting Standards (IFRS)
□Applicable √N/A
No such differences for the Reporting Period.
7.2 Differences in the net profit and net assets disclosed in the financial reports prepared underCAS and foreign accounting standards
□Applicable √N/A
No such differences for the Reporting Period.
8. Key Financial Results by Quarter
RMB'000
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | |
| Operating revenue | 96,262,922 | 100,725,480 | 94,122,108 | 80,926,770 |
| Net profit attributable to shareholders of the Company | 8,041,853 | 10,190,438 | 9,485,190 | 6,002,454 |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses | 7,672,681 | 9,979,172 | 9,188,736 | 6,134,319 |
| Net cash flows from operating activities | 9,272,312 | 20,512,362 | 15,002,382 | 13,115,555 |
Whether there are any material differences between the financial indicators above or their summationsand those which have been disclosed in the Company’s quarterly or semi-annual reports
□Yes √No
9. Non-recurring Gains and Losses
√Applicable □N/A
RMB'000
| Item | 2023 | 2022 | 2021 | Note |
| Gain or loss from disposal of non-current assets | -233,657 | -59,854 | 77,527 | |
| 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 | -345,146 | -604,446 | 995,824 | |
| Other non-operating income and expenses except above-mentioned items (mainly government grants, reversed impairment provisions for receivables that are tested individually for impairment, compensation income, fine income, etc.) | 1,345,521 | 1,777,103 | 2,352,849 | |
| Less: Corporate income tax | 143,692 | 103,624 | 668,578 | |
| Minority interests (after tax) | -122,001 | 63,645 | 113,058 | |
| Total | 745,027 | 945,534 | 2,644,564 | -- |
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 Information
Disclosure 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 leading global technology group comprising the Smart Home, Energy Solutions andIndustrial Technology, Intelligent Building Technology, Robotics & Automation, and Other Innovationbusinesses. With a business portfolio that is focused on the coordinated development of the ToC andToB businesses, Midea offers various smart home products and services to individual consumers, aswell as provides diversified commercial and industrial solutions for corporate clients. To be specific,Midea Smart Home primarily covers smart appliances, smart home and related peripheral industriesand ecological chains, undertakes the construction of intelligent scenarios for end users, useroperations and data value discovery, and is committed to providing end users with the best experienceof entire-house smart home appliances and service. Midea Energy Solutions and Industrial Technology,with technology as the core driver, commands key technologies in “green energy” and “key industrialcomponents”. It operates many brands including GMCC, Welling, CLOU Electronics, HICONICS,SERVOTRONIX, MR, MOTINOVA, MSCT, TOSHIBA, SUNYE, etc., with its products covering high-precision core components such as compressors, motors, chips, valves, reducers, auto parts, motioncontrol and automation, high- and low-voltage variable frequency drive, energy storage and coolingmodules. It provides green, efficient and intelligent products and technology solutions for pan-industrialcustomers across the world. Midea Intelligent Building Technology is principally engaged in productsand services in relation to buildings, as well as the relevant operations. With iBUILDING, Midea’s digitalbuilding service platform, as the core, its business covers HVAC, elevators, energy, building control, etc.Its primary 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 + DigitalTechnology + Industrial Ecosystem”, it facilitates logistics, information, feeling and energy flows ofbuildings to empower buildings with digital and low-carbon technologies and build sustainable smartspace. Midea Robotics & Automation primarily focuses on providing solutions of industrial robotics,
automatic logistics systems, and transmission systems for future factory-related fields, as well assolutions for health care, entertainment, new consumption, etc. The Other Innovation Business mainlyincludes Annto, which provides customers with end-to-end digital and intelligent supply chain solutions;Midea Cloud, which provides industrial software and digitalisation consulting services for intelligentmanufacturing and industrial interconnectivity through its industrial internet platform M·IoT; MideaLighting, which focuses on the R&D, production, and sales of lighting and intelligent pre-decorationelectrical products; and WDM, which is committed to innovation in medical imaging technology,providing high-quality medical imaging products and services for clinical use.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 build 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 users andreinventing 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 in keyregions 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, 33 R&D centers, 40 major manufacturing bases, and more than 190,000 employees. Itsbusiness covers more than 200 countries and regions. Overseas, Midea has 17 R&D centers and 21major manufacturing bases in more than ten countries.
1.2 Position in the home appliance industry
Midea Group ranks No. 278 on the Fortune Global 500 list unveiled in August 2023, marking its eighthconsecutive year on the list. Meanwhile, Midea has also been named to the 2023 Fortune China ESGImpact list for its high-value practices in environmental management and social contribution, in additionto being included in the 2023 Fortune Most Admired Chinese Companies list for its outstandingperformance in business resilience, sustainability, social responsibility and the like. In June 2023, theForbes magazine released its 2023 Global 2000 list and Midea ranks No. 199, up 18 places from lastyear. Also, Midea Group has been named as one of the Forbes 2023 World’s Top Companies forWomen and the 2022 Forbes World’s Best Employers, among others. In the “2022 Forbes ChinaSustainable Development Industrial Enterprises Top 50 Selection” held in February 2023, Midea wasselected as an Industry Benchmark for Sustainable Development Industrial Enterprises by virtue of itssolid performance in green manufacturing, carbon neutrality, sustainable development and ESGpractices. As shown on the “TIME World's Best Companies 2023” list jointly released in September2023 by America’s TIME magazine and Statista, the world's top business data platform, Midea Groupearned itself a spot and was rated “very high” in terms of “Growth Rate”. Midea Group was successfullyselected and performed very high in the Growth Rate dimension of the list. In July 2023, the SummitForum of Top Enterprises in China Light Industry released the 2022 list of “Top 200 Enterprises inChina Light Industry”, and Midea Group once again topped the list with an outstanding score of 98.07.In March 2023, Midea won the China Industrial Grand Prize at the Seventh China Industrial GrandPrize Ceremony jointly organized by the China Federation of Industrial Economics and 13 nationalindustry associations for its excellent performance in technology innovation, quality management andbranding, among others. By the end of 2023, five of Midea’s factories had been included in the “GlobalLighthouse Network” initiated by the World Economic Forum, covering air conditioners, refrigerators,laundry appliances, microwave ovens, dishwashers, etc., which demonstrates Midea’s leading positionin intelligent manufacturing and digital development among manufacturers worldwide. Meanwhile,Midea takes the lead among domestic home appliance makers by ranking No. 39 and No. 36respectively on the 2023 China 500 list and the 2023 Tech 100 list released by Brand Finance, a Britishbrand assessment institution. Midea has been given excellent credit ratings by the three majorinternational credit rating agencies, Standard & Poor’s, Fitch Ratings and Moody’s. The ratings are in aleading position among home appliance manufacturers worldwide as well as among Chinese non-state-owned enterprises. Particularly, Standard & Poor’s has raised the credit rating on Midea to “A”,
making it the highest-rated private manufacturer in China.In 2023, 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 onlineand offline domestic market share for eight home appliance categories, namely, residential airconditioners, countertop pan-microwave ovens, countertop electric ovens, electric radiators, electricfans, induction cookers, electric kettles, and air fryers.
| Offline market shares and rankings of the Company’s primary home appliance products (by value of retail sales) in 2023 | ||
| Product category | Market share | Ranking |
| Residential air conditioners | 34.9% | 1 |
| Laundry appliances | 26.9% | 2 |
| Clothes dryers | 23.8% | 2 |
| Refrigerators | 15.2% | 2 |
| Countertop pan-microwave ovens | 61.5% | 1 |
| Countertop electric ovens | 48.7% | 1 |
| Induction cookers | 46.9% | 1 |
| Electric radiators | 43.9% | 1 |
| Electric fans | 43.7% | 1 |
| Electric kettles | 41.9% | 1 |
| Rice cookers | 39.4% | 1 |
| Air fryers | 32.0% | 1 |
| Water dispensers | 26.2% | 1 |
| Electric pressure cookers | 40.5% | 2 |
| Electric baking pans | 32.5% | 2 |
| Blenders | 28.7% | 2 |
| Water purifiers | 17.8% | 2 |
| Electric water heaters | 22.3% | 3 |
| Freezers | 11.5% | 3 |
| Online market shares and rankings of the Company’s primary home appliance products (by value of retail sales) in 2023 | ||
| Product category | Market share | Ranking |
| Residential air conditioners | 34.5% | 1 |
| Laundry appliances | 38.1% | 2 |
| Clothes dryers | 40.5% | 1 |
| Refrigerators | 19.0% | 2 |
| Countertop pan-microwave ovens | 51.6% | 1 |
| Countertop electric ovens | 25.9% | 1 |
| Induction cookers | 55.2% | 1 |
| Electric kettles | 26.4% | 1 |
| Electric radiators | 23.0% | 1 |
| Electric fans | 22.8% | 1 |
| Air fryers | 20.6% | 1 |
| Water purifiers | 18.3% | 1 |
| Electric pressure cookers | 38.9% | 2 |
| Rice cookers | 26.9% | 2 |
| Electric water heaters | 29.5% | 2 |
| Electric baking pans | 28.1% | 2 |
| Freezers | 12.5% | 2 |
| Water dispensers | 14.2% | 3 |
| Blenders | 13.3% | 3 |
* Air conditioners refer to floor-standing and wall-mounted ones only.
1.3 Industry Overview
A. Home Appliance IndustryIn 2023, as the external environment continued to improve, the economy saw an ongoing upward trend,and domestic demand steadily expanded, the gross domestic product ("GDP") grew by 5.2% year onyear. Meanwhile, the domestic home appliance industry experienced growth in both export anddomestic sales. According to the statistics released by the General Administration of Customs, China's
total export value of home appliances reached RMB617.42 billion in 2023, marking a 9.9% increasecompared to the previous year. According to the data from AVC, the domestic home appliance retailmarket hit a size of RMB849.8 billion in 2023, showing a 3.6% year-on-year increase. In terms ofcategories, different categories exhibited different development trends. Products such as airconditioners, refrigerators, laundry appliances, and major kitchen appliances, due to their high visibility,exhibited a structural upgrade trend driven by the demand for newer and more advanced models.Meanwhile, categories such as dishwashers, built-in microwave-steamer-ovens, cleaning appliances,and water purifiers were experiencing a steady increase in their market penetration rates. In terms ofconsumers, consumers showed a "K-shaped" differentiation pattern. While rapid growth was seen inthe high-end home appliance market, there was also notable demand for highly cost-effective homeappliances. In terms of products, industry focus was still placed on green, healthy, and smart homeappliances. Regarding retail, there was a notable shift towards whole-process services, with aheightened emphasis among retailers on the shopping experience, convenience, and the quality ofpost-sale services. In 2024, policies will be focused on green, smart, and elderly-friendly homeappliances. Local governments and home appliance enterprises will be encouraged to introduce morepractical subsidy policies, thus expanding green consumption and continually enhancing thesustainability of consumption.According to the data from AVC, the domestic retail sales of air conditioners were RMB211.7 billion in2023, up by 7.5% year on year. Due to the improved macroeconomic landscape and the favourableconsumer environment, 2023 was the first year of growth recovery for the air conditioning sector afterthree years of subdued performance. In terms of products, an upgrade continued in the horsepower("HP") structure. Particularly, both online and offline sales of 2-HP wall-mounted air conditioners surgedby 30.2% and 32.1%, respectively, compared to the previous year. In terms of price, the strategy ofboosting sales using favourable prices was adopted for the large-capacity wall-mounted airconditioners, while the pricing structure for floor-standing air conditioners continued its upward trend. Inthe offline market, products in the RMB5,000 to RMB6,000 range accounted for nearly 27% of 2-HPwall-mounted air conditioners, while those priced within a range of RMB9,000 to RMB10,999represented more than 19% of 3-HP floor-standing air conditioners. From a functionality perspective,the sales share of new Energy Efficiency Grade 1 products grew continuously, surpassing 84% in the
offline market. Furthermore, health, comfort, and intelligence-related functions played a significant rolein fueling growth across the industry.According to the data from AVC, the domestic retail sales of laundry appliances were RMB93.4 billionin 2023, up 5.8% year on year, and the retail sales of clothes dryers reached RMB12.9 billion, up 23.8%year on year. The wash and care segment enjoys a large market, diverse demand scenarios, andhighly inelastic demand. As a major driving force, the washer-dryer suites captured more than 15% ofthe retail sales in the wash and care industry in 2023. Moreover, they experienced steady and robustupgrading of the product structure. According to the projection by AVC, the average price of clothesdryers will increase by 8.5% year on year, and products priced at RMB8,000 and above will constituteover 70% of the washer-dryer suites.According to the data from AVC, the domestic retail sales of refrigerators were RMB133.3 billion in2023, up by 7.0% year on year. The product structure of refrigerators was significantly optimised. Interms of price, the average online product price saw a year-on-year increase of 9.2%, whereas offlineproducts witnessed a 5.7% rise. In the offline market, the retail sales share of refrigerators priced atRMB8,000 and above approximated 55%. In terms of products, cross-four-door and French-style multi-door refrigerators emerged as the main growth drivers of high-end refrigerators. Their combined retailsales share in the offline market exceeded 71%. Meanwhile, driven by renovation scenarios, the trendtowards the "compact yet spacious" feature became more prominent, with attention also given to a highratio of freezer capacity. With the integration of home appliances and home scenarios, the penetrationrate of built-in refrigerators has been steadily rising. In 2023, the retail sales shares of built-inrefrigerators in the online and offline markets reached 17.6% and 36.7%, respectively.According to the data from AVC, the domestic retail sales of major kitchen appliances were RMB167billion in 2023, up by 5.3% year on year. Overall, the market exhibited features such as steady demandfor inelastic categories and a growing preference for high-quality products. In 2023, performancedisparities were seen among categories. The retail sales of inelastic categories such as range hoods,stoves and water heaters reached RMB99.8 billion, marking a 6.5% year-on-year increase. Meanwhile,quality-living categories, including dishwashers, water purifiers, and sterilising cabinets, saw retail salestotaling RMB42.3 billion, reflecting an 8.6% year-on-year growth. However, integrated stoves
experienced a 4.0% decline. By categories, the retail sales of water heaters hit RMB50.5 billion, risingby 7.4% year on year. Due to the accelerated replacement and upgrade, the retail sales share of gaswater heaters increased to 41.3%. Smart features, health-related functions, and increased capacity ofwater heaters contributed to their structural upgrades. Water purifiers achieved a total of RMB20.5billion in retail sales, marking an 11% increase year on year, driven by significant and rapid capacityiteration in the online market. The sales of water purifiers with a capacity of 1,000 G accounted formore than 33% of online market sales, representing a nearly 10% increase from the previous year. Theretail sales of dishwashers reached RMB11.2 billion, up by 9.6% year on year, driven by large built-insets. Full-size built-in dishwashers accounted for 74% of retail sales in the offline market. Functionupgrading continued. In terms of functions, functions such as the integration of functions of washing,sterilisation, drying and storage, layered and separate washing, and automatic recognition and programmatching have become mainstream.According to the data from AVC, the total retail sales of small kitchen appliances in 2023 amounted toRMB54.93 billion, representing a 9.6% year-on-year decrease. Despite an overall decline in thiscategory, certain products, such as soy milk makers, electric steamers, and coffee machines, sawsignificant increases in retail sales, up by 18.8%, 17.5%, and 13.0%, respectively, compared to theprevious year. Moreover, inelastic and big single core items such as rice cookers and electric pressurecookers experienced notable price increases due to growing consumer demand for quality. Additionally,the further development of the "single economy" and "silver economy" has driven the demand forsmall-capacity single products and appliances with elderly-friendly designs.According to the data from AVC, the domestic retail sales of cleaning appliances reached RMB34.4billion in 2023, showing a 6.8% year-on-year increase. By categories, cleaning appliances achieved aboost in both performance and product experience thanks to technological advancement. Specifically,floor scrubbers remained the top performer, experiencing the fastest growth in the cleaning applianceindustry. The retail sales of floor scrubbers amounted to RMB12.2 billion, marking a remarkable 22%year-on-year increase. Additionally, constant innovations, such as high-temperature drying and deepsterilisation technology of floor scrubbers, have contributed to the enhanced product functionality.B. Robotics and Automation Industry
World Robotics 2023 Industrial Robotics released by the International Federation of Robotics (“IFR”)showed that robotics technology has been rapidly advancing. For example, collaborative robotics,utilising sensors and visual recognition technology, can respond in real-time to changes in theirenvironment. With improved safety performance, their range of applications is rapidly expanding.Intelligent robot grippers, leveraging sensors and visual recognition technology, can identify materialsand apply appropriate force to manipulate workpieces, making them more responsive. Throughsoftware technology and open platform communication architectures, the integration and plug-and-playconvenience of robots have been further optimised. By providing more intuitive and user-friendlyinterfaces and enabling natural language or graphical programming, robot programming has becomeeasier. Sensors, vision systems, and 5G technology assist robots in adjusting parameters based onreal-time conditions, achieving self-optimisation capabilities. By integrating cloud computing technology,cloud robotics has discovered a broader array of applications, significantly reducing the maintenancecosts of using robots. Additionally, robotics technology is also contributing to sustainability in manyfields. According to IFR data, the global industrial robot installations reached a record high of 553,052units in 2022, marking a 5% growth over the high base of 2021. In terms of regions, Americas achieveda year-on-year growth of 8%, Europe achieved a year-on-year growth of 3%, and Asia achieved a year-on-year growth of 5%. Among the newly installed robots, 73% were installed in Asia. Domestic robotinstallations in China increased by 5% year-on-year, reaching 290,258 units in 2022, accounting for 52%of the global installations. IFR also predicted that the compound annual growth rate from 2023 to 2026will reach 7%, with the global industrial robot installations expected to reach 718,000 units by 2026.According to the latest statistics of IFR, in terms of industrial robotic density (the average number ofindustrial robotics per 10,000 workers), South Korea ranks No.1 in the world with 1,012 robotics, whilethe robotic density of China has increased from 25 to 392 robotics (close to Japan’s 397 robotics)during the decade from 2013 to 2022, ranking No. 5 across the world. Since 2016, China has been thefastest growing and largest industrial robotics market in the world. Supported by diverse factors suchas flexible demands of the manufacturing sector, declining demographic dividend, emerging marketsand the development of innovative technologies, industrial robotics will be applied to more and moreareas, with great potential and prospects.According to MIR analysis, in 2023, China’s industrial robot industry entered a period of adjustment,
transitioning from a phase of market growth explosion to a new cycle featuring existing market sharecapture and position securing in the segmented incremental markets. Under this circumstance, thedemand side becomes the focal point of the industrial chain. In the second half of 2023, industrial robotmanufacturers implemented measures such as product promotions, enhanced channel expansion, andother incentives to accelerate inventory clearance, and these efforts have proven to be effective. Theindustrial robot market showed improvement in the second half of the year compared to the first half,demonstrating increased resilience. From the perspective of downstream industry demand, thedemand in the photovoltaic industry cooled off towards the end of the year but still maintained rapidgrowth. The automotive, consumer electronics, and general industry sectors experienced somerecovery but fell short of expectations. The demand in the lithium battery industry showed significantdivergence, with strong investment in energy storage batteries while the demand for power batteriesexperienced destocking and investment slowdown. According to MIR data, the shipment volume ofindustrial robots in China in 2023 was 283,154 units, representing a year-on-year growth of 0.4%.Looking at specific models, collaborative robotics and lightweight vertical multi-joint robots have showna growth trend, while other models such as planar multi-joint robots, heavy-duty vertical multi-jointrobots, and delta robotics have experienced some decline in shipment volume. According to MIRpredictions, by the end of 2023, the “destocking” phase in the market had nearly concluded, andmarket demand will gradually pick up. The year-on-year growth rate of industrial robot shipments inChina in 2024 is expected to be between 5% and 10%.C. Intelligent Building Technology IndustryIn the intelligent building technology industry, Midea focuses on products, services and relatedbusinesses with respect to buildings. It aims to provide users with comprehensive, intelligent andsustainable building solutions based on the digital building platform and by facilitating the logistics,information, feeling and energy flows. The smart building ecosystem mainly includes HVAC, elevator,intelligent building (building automation) and integrated energy management. From the perspective ofthe industry competition pattern, domestic HVAC, elevator and building control have the same patternand two major characteristics. The first is the high proportion of foreign and joint venture brands; thesecond is the low market concentration. According to the data from HVAC, ChinaIOL.com and
Changjiang Securities Research Institute, the proportion of foreign brands of commercial air conditionerin 2023 was about 43%, and the long tail effect was obvious as only four manufacturers have a shareof more than 10%. For elevators, the data from the Business Yearbook of Elevator Industry in Chinaindicate that the proportion of foreign and joint venture brands in the elevator market is as high as 70%,while the revenue scale and market share of the top domestic brands are still low. In 2023, the fourmajor brands of Kone, Mitsubishi, Hitachi and OTIS's revenues exceeded RMB20 billion in China. Thebuilding control market is also dominated by Honeywell, Siemens, Johnson Controls, Schneider andother foreign brands. From the perspective of the market size and development prospects, according tothe data from ChinaIOL.com, the sales revenue (excluding tax) of domestic commercial air conditionersin 2023 was RMB142.9 billion, up 11% year on year, of which domestic sales accounted for about 88%;the compound growth rate in the past three years was 13%. The application field of commercial airconditioner is mainly divided into residential, commercial, industrial and public building. By businesstype, the sales of ToB business accounted for more than 70%, and the revenue surpassed RMB100billion in 2023. In industrial development, the periodicity of the non-residential part of commercial airconditioner was smaller than that of residential part, which was more related to infrastructureinvestment. For example, government public construction, transportation, data center, culture,education and entertainment, medicine and other downstream segmentation still maintained a goodgrowth trend, and a long-term high growth rate. According to the data from the National Bureau ofStatistics, in 2023, the domestic output of elevators, escalators and lifts was 1.557 million units,maintaining a solid year-on-year growth of approximately 4%, the majority of which were solddomestically. Judging from the operating data of major manufacturers, the output value of a singleelevator was about RMB200,000, considering the average factory price of a single elevator equipmentand the maintenance business; the annual market size of domestic elevator equipment was RMB250-300 billion, and the scale of the elevator industry was even larger. The data from EqualOceanIntelligence shows that the current market size of intelligent building, which was about RMB7.1 billion in2021, is relatively small. The equipment-based businesses such as commercial air conditioner andelevator are "organs" in building construction, whereas building control is the "nervous system" whichcontrols various equipments for the high-efficiency and low-carbon operation of buildings, anddetermines the overall quality of building solutions. Overall, the domestic revenue of the smart buildingindustry alone is approximately RMB400 billion, and the compound annual growth rate of the industry is
between 5% and 10% (revenue caliber). Meanwhile, the rollout of the Action Programme to PromoteLarge-Scale Equipment Renewal and Consumer Goods Replacement by the State Council may bringstronger demand.As indicated in a report released by the Changjiang Securities Research Institute, new opportunitiesare ushered into the smart building industry, which are "carbon emission peak and carbon neutrality","digital and intelligent transformation" and "domestic replacement". With the establishment of the dual-carbon strategy, the intelligent and low-carbon process of building construction is expected toaccelerate. Buildings account for a relatively high proportion of energy consumption and carbonemissions in China. According to data from the Building Energy Efficiency Research Centre of TsinghuaUniversity, the carbon emissions of building operation accounted for about 22% of the total domesticcarbon emissions in 2021, and the proportion will further increase for the growing newly startedbuildings and the decreasing inventory buildings. Therefore, as one of the major sources of carbonemissions in the whole society, the low-carbon or even zero-carbon process in the construction field willundoubtedly be propelled. In the recent years, a series of "carbon emissions peaking and carbonneutrality" policies were successively issued, such as the Opinions on Implementing the NewDevelopment Concept to Achieve Peak Carbon Emissions and Carbon Neutrality in a Complete,Accurate and Comprehensive Manner, the Opinions on Advancing the Green Development of Urbanand Rural Development, the Action Plan for Peak Carbon Emissions by 2030, and the 14th Five-YearPlan for Comprehensive Work on Energy Conservation and Emission Reduction. China’s localgovernments have issued their action plans for peaking carbon emissions while the ministries andcommittees of the central government rolled out documents for the same purpose, such as the Opinionon Fiscal Support for Peaking Carbon Emissions and Achieving Carbon Neutrality issued by theMinistry of Finance, the 14th Five-Year Plan for Building Energy Efficiency and Green Buildings issuedby the Ministry of Housing and Urban-Rural Development, and the Advanced, Energy-saving andAccessible Levels of Energy Efficiency for Key Energy Consuming Products and Equipment (2024Edition) unveiled by the National Development and Reform Commission. All these policies mentionbuildings, HVAC, etc., with a view to improving the building energy consumption management system,enhancing the building energy consumption monitoring capacity, building energy saving managementcapacity, and building energy efficiency level, and promoting the large-scale development of ultra-low
energy consumption, near-zero energy consumption, and low-carbon buildings. With stronger policyincentives and constraints, the building energy-saving upgrading, intelligent operation, and cooperativeenergy management are bound to become the main measures for the targets in addition to theconstruction of low-carbon building standards and administrative supervision. As to the market side, theelectricity price reform, "power rationing" and other measures have raised the cost and the input-outputratio in building energy saving renovation, energy management, and digital operation, and thus moreand more 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, as oneof the main sources of energy consumption and carbon emissions in the whole society, accelerates theprocess of energy conservation and carbon reduction, and catalyzes the outbreak of demand forefficient low-carbon building solutions. The demand for digital intelligent building will also increasesignificantly, as the development level of buildings is a key link in "smart city" and still lagging behindunder the trend of digital economy. At the same time, with continuous progress of communication,computing power and algorithms, the system-level control such as HVAC and elevators will move to thebuilding-level control - the first is the space expansion brought by changes from "control" to "service";the second is the narrowing gap to foreign enterprises with first mover advantage. Additionally, themore positive and clear signal comes from the transformation and upgrading of the elevator industrydriven by digital intelligence. In 2018, the General Office of the State Council issued the Opinions onStrengthening the Quality and Safety of Elevators for the purpose of promoting the elevator installationon existing residences and the maintenance of old elevators. Specifically, the maintenance shouldpress for quality, and resources should be allocated on the basis of fully grasping the operation ofelevators, hence the application of information technology such as big data and IoT is getting moreimportant. In 2020, the State Administration for Market Regulation divided the maintenance methods ofdifferent elevators according to the standard of "whether there is a remote monitoring system based onIoT". The domestic replacement of commercial air conditioner has undergone three processes: singleunit, multi-split unit, and large chiller. The share of homegrown brands was approximately 57% in 2023,and that of the homegrown brands of large chillers, where the barriers are relatively high, is alsoincreasing. The commercial air conditioner industry has entered the stage of domestic replacement inall aspects, and thus there is a large space for future growth. Compared with air conditioner, thedomestic replacement process of elevator is relatively slow, but the relevant market pattern will be
optimized with the gradually weakened real estate dividend, the changes in maintenance mode, andthe application of IoT. In the medium and long term, there will be more opportunities and increasingcompetition in the smart building industry with the market structure of "high proportion of foreigninvestment & low market concentration". On the one hand, the policy of "double carbon" is fostering theenergy-saving upgrading and smart operation under the context of high proportion of carbon emissionsand energy consumption by buildings. On the other hand, with the improvement of digital intelligence,the input-output effect of smart buildings is changing qualitatively.
2. Business Scope in the Reporting Period
In 2023, despite the gradual recovery of domestic market demand and the overall rebound of theeconomy, the global political and economic environment remained complex and the businessenvironment remained challenging due to fluctuations in overseas economies, currency movementsand the deterioration of geopolitical conflicts overseas. Against this backdrop, Midea Group held firm toits operating philosophies, effectively implemented its annual operating principle of “Stabilize Profit &Drive Growth”, and continued to focus on its core businesses and products. As a result, Mideadelivered the best business results in its entire history, as well as various remarkable advancements,with better key indicators such as profitability and cash flow, demonstrating its operational resilienceand long-term, high-quality growth. For 2023, Midea achieved, on a consolidated basis, total revenue ofRMB373.7 billion, up 8% YoY; and a net profit attributable to its shareholders of RMB33.7 billion, up 14%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 on users'yearning and pursuit for a better life, Midea pursues higher goals such as originality, sustainable sellingpoints and technology explicitness, and continues to empower itself with the tool of big data, so as toachieve the vision of "Bring Great Innovations to Life". In addition, based on user needs and
consumption trends, Midea offers its own products and ecosystem products. It provides users withdifferentiated entire-house smart solutions with the deep integration of “smart home appliances + smarthome”; and launches homegrown core terminals, such as smart central control and household smarthost which deeply integrate home appliances and smart home systems, making life at home moreefficient, convenient, healthy and comfortable. By doing so, it aims to lead the way in the innovation ofsmart household appliances.Residential air conditioners:
Based on three major directions of carbon neutrality, air value, and smart home, Midea has focused onits technological strategy of “cooling, heating, energy conservation, intelligence, health, and comfort”,and rebuilt the “Three Generations”, exploring disruptive and differentiated product technologies toenhance product competitiveness. In 2023, Midea’s R290 technology for air conditioners achievedanother breakthrough. The new Efficlima product achieved a seasonal coefficient of performance(SCOP) of 6.3 and a seasonal energy efficiency ratio (SEER) of 12.17. Compared to R32 refrigerant,which was mainly sold in 9000BTU models of the same power range, R290 Efficlima refrigerantachieved a reduction of approximately 447kg CO? equivalent emissions. In recognition of Midea’scontributions to the implementation of the HCFCs Phase-out Management Plan (HPMP) and ozonelayer protection in the room air conditioner industry, the Foreign Environmental Corporation Centre ofthe Ministry of Ecology and Environment, the United Nations Industrial Development Organisation, andthe China Household Electrical Appliances Association jointly awarded Midea Air Conditioner the first-phase HPMP certification for the room air conditioner industry. Additionally, Midea’s R290 airconditioning products are T?V-certified, surpassing the highest level of energy efficiency in theEuropean Union. Targeting entire-house air solutions, Midea has taken the lead in launching the 1:1Freshness Air Machine, which truly achieves a comprehensive health air system with professional-grade sterilisation, purification, fresh air, and dehumidification. It is equipped with a 2000-fold high-energy pulse sterilisation system, achieving an air purification efficiency of up to 400m?/h and a freshair volume of up to 210m?/h. By utilising high cooling capacity and breezeless technology, it achievesrapid cooling and a golden comfort sensation of 0.1m/s, while also incorporating linked temperatureand humidity control technologies to provide a comfortable experience throughout the seasons. Midea
"Cool Kitchen" Series Kitchen Air Conditioner provides a solution to address core pain points inChinese kitchens. This series is characterized by "large cooling capacity", "cooking smoke resistance",and "easy-to-install design", effectively meeting users' demand for a comfortable and cool kitchen.Moreover, it employs a new system design equipped with technologies such as the graphene thermalconductivity coating, copper pipe sprayed with anti-corrosion coating, black magic box for oil filtration ofthe outdoor unit, and water misting, achieving advantages in new scenes, such as high heat transferperformance, corrosion resistance, and zero water discharge. The All-Season III Commercial AirConditioner relies on the industry’s first entire-house intelligent air solution that meets the criteria of“whole-space, full intelligence, good air, and customisation.” It utilises continuous enhanced vaporinjection technology to achieve robust operation even in environments as low as -2°C. Equipped with aT3-level ultra-high-temperature compressor and employing full liquid cooling zone heat managementtechnology, it achieves robust cooling at temperatures as high as 58°C, maintains high-performancecooling at 43°C, and operates efficiently at 35°C. Integrated with a “multi-system multi-module centralcontrol core,” it can connect to “entire-house floor heating, entire-house fresh air, entire-house humiditycontrol, and entire-house health,” allowing customizable entire-house air management.Laundry appliances and refrigerators:
In view of the four demand directions of cleanness, health, efficiency and care, Midea comprehensivelybuilds its core competitiveness in the global laundry and care industry. It has launched the Washer-Scrubber, the first solution in the industry that integrates the functions of a washing machine and a floorscrubber. Specifically, this product is equipped with a shared water system for its base and washer,demonstrating Midea's novel integrated design in the waterway, air path, dust collection, and circuit.Moreover, it employs the internationally advanced AI-powered Light Dry Cleaning technology. The hot-water-flushing floor scrubber enables potent airflow, penetration, and efficient drying while boasting acleaning ratio of the mop as high as 1.10. Additionally, the AUTO-PROTECT chlorine dioxide slow-release anti-bacterial technology is employed to enable food-level sterilization, safe andenvironmentally friendly. This product adopts AI technology to accurately judge the stain scene andachieve precision mopping through reverse torque. Furthermore, patented technologies, such as theAuto-Dos dual-chamber self-dispensing system and the Auto-Cut automatic hair-cutting technology,
are used for this product. To be more specific, the Auto-Dos system allows precise dispensing ofdifferent cleaning solutions through automatic proportioning. As for the two chambers, the left chamberis intended for cleaning solutions for floor and mop cleaning, enabling thorough dissolution of heavy oiland dust. The right chamber houses an automatic cleaning station and drainage system and enablessterilization and stain removal. The Auto-Cut technology can accurately identify, suck, and cut the hairat the corner, effectively preventing hair entanglement and blockages. Also, this product is equippedwith a high-definition camera, which, through large-scale modelling training on the home scene imagesusing AI technology, allows this product to proactively detect stains on the floor and perform deepcleaning in specific areas. More importantly, this invention has won the Red Dot Design Award and theiF Design Award. COLMO New Image Zero Built-In Washer-Dryer Suite adopts automatic electronicpop-open doors with the industry’s first zero built-in technology, crystal clear dazzling window, andwhite cloud wave appearance. The glass doors are seamlessly integrated with the machine, and canautomatically open after washing and drying. The laundry appliance features clean care soft washing,and employs multi-phase detergent rapid dissolving direct spraying technology, achieving the industry’shighest detergent utilisation rate. It has obtained certifications for washing waterproof levels of technicaljackets, light exercise wear and tear and elastic recovery performance, and international greenwoolmark. The clothes dryer is equipped with the new second-generation full variable frequencytechnology, miniaturised with high energy density, leading the industry in low noise, and fast dryingperformance. To respond to the green strategy, Midea made arrangements for the development of thefull-life-cycle green wash and care technology for products. This move made Midea K03 WashingMachine the first laundry appliance in China to be certified by the Life Cycle Assessment. Concurrently,this product reached the highest energy efficiency rating in Europe, attributed to a decrease of 43% inannual electricity consumption as compared to conventional models. Moreover, the novel ultra-thinplatform reduced the weight of the entire machine by 10%. Through the optimisation of eco-friendlypackaging materials and the degree of recyclability, the consumption of non-biomass resources duringthe whole life cycle of this product is reduced by 26% compared to traditional products on the market.Midea has introduced several localised new products in overseas markets, such as the M01 SeriesFront-Loading Washing Machine tailored for the high-efficiency energy-saving requirements of theEuropean market, the versatile Toshiba front-loading series products designed for the low waterpressure demand in the ASEAN market, Midea Stirring Fully Automatic Washing Machine Series with
A-level energy efficiency targeting the Brazilian market, and MA501, Midea’s first smart wave dryingpaired washing machine, launched for the North American market.Midea focuses on three major technological innovations for refrigeration, i.e. the “High-energy PhotonPulse Sterilization Technology”, the “High Activity ORR-based Ultra-low Oxygen Catalysis RefrigerationTechnology”, and the “Precise Ice Temperature Technology-coordinated Plasma-based Preservationand Purine Regulation Technology for Aquatic Products”. COLMO EVOLUTION Tianshu Refrigerator isequipped with the industry's first AI-Door automatic door opening and closing technology, allowing the90-degree panoramic door opening. This series is also the first one in the industry to have employedthe -40℃ cryogenic technology, allowing AI molecular-level nutrient management and thus capable ofsignificantly increasing the anthocyanin content and effectively inhibiting purine. TOSHIBA Large-capacity Built-in Pear Suite Refrigerator employs the self-developed vacuum insulation material incombination with the novel horizontal evaporator to ensure small dimensions but a large capacity.Moreover, the front bottom cooling system and dual-axis free-track hinge effectively help usersmaximize space efficiency. The industry's pioneering constant-humidity fruit and vegetable preservationtechnology and meat freshness enhancement technology are employed to accurately provide asuitable storage environment for each type of food ingredient. This series boasts the industry's quickest60-minute ice-making function and is equipped with three technologies, namely the "pulse sterilizationtechnology", "low-oxygen preservation technology", and "purine reduction technology". Additionally, anumber of homegrown products have been launched in overseas markets, such as the first French-style refrigerator with chilled water function for the North American market and the new Built-in BMFseries for the European market.Kitchen appliances and other home appliances:
Aiming at delivering a more comfortable kitchen environment, Midea starts with the kitchenenvironment and cooking smoke and has rolled out range hoods that enable efficient smoke suction.To protect users' health, a range of products, including dishwashers, steam ovens, and rice cookers,has been introduced to respond to users' demands for kitchenware cleaning and sterilization, andhealthy cooking. Midea Smoke-free Series Range Hood employs multiple technologies. Specifically,the MAX efficient dual air ducts are used to ensure efficient smoke suction; the FCS future chip power
engine is used to achieve the highest suction in the industry of 28 m?/min and wind pressure of 1,200Pa; the nautilus shell-like design and the aerodynamic streamline wing-like design are incorporated toreduce the smoke discharge resistance, increase the smoke discharge velocity, and effectively lowernoise; the intelligent collaborative cruise technology enables automatic start-up and air volume andwind pressure regulation; the unique 110℃ high-temperature steam technology is used to deliver acleaning and sterilization rate of more than 99%, which, at the same time, has been granted theauthoritative "level-1 smoke removal" certification in the industry. Midea Concentrated FlameFragrance Creating Gas Stove is equipped with a pioneering Concentrated Flame burner that caneffectively increase the covered pot area by 80%, improve warming-up efficiency by 40%, and enhancetemperature picking-up efficiency by 28%, far surpassing the industry’s Grade 1 Fragrance Creatingstandard. It utilises the Tianyuan high-efficiency Concentrated Flame plate, achieving a thermalefficiency of up to 70%. With the pioneering synchronous valve firepower control, it can synchroniseand adjust the inner and outer ring flames for uniform combustion. COLMO AVANT Series Dishwasherboasts the industry’s highest cavity occupancy ratio, with three-layer dish baskets capable ofaccommodating and washing more tableware. They integrate innovative technologies such as DualFlow deep cleaning, ion deodorisation, and ultimate hot air drying, surpassing the highest nationalwater efficiency standards. The industry-first dual-axis variable track hinge enables 5mm micro-seaminsertion, meeting the demand for kitchen integration.Midea Real Taste Built-in Microwave-Steamer-Oven-Fryer Combo features a zero built-in design andemploys microclimate temperature and humidity dual-control technology. This automatically adjusts thetemperature and humidity environment during baking according to the ingredients, significantlyenhancing food texture. It innovatively upgrades the “Steam with Only One Cup of Water” technology,with steam time lasting up to 120 minutes, while increasing steam utilisation and reducing waterbuildup in the cavity. It utilises self-developed MIX fat burning algorithms, achieving an air frying de-fatting rate of over 95%. It also features multi-layer simultaneous baking function and innovative airduct design combined with rapid heating algorithms, enabling multiple ingredients to be bakedsimultaneously and uniformly. Targeting the high-end market, Toshiba’s first built-in waterwave stoveand Toshiba Stone Kiln Microwave Oven have been introduced, while products such as FSR LargeOven and Cabinet-style Freestanding Gas Oven have been launched for the North American market.
Midea Red Flame Premium Aroma Series Rice Cooker focuses on “fragrant and delicious rice” byinnovatively employing top-cover IH heating to achieve a high-temperature red flame plate at 131°C.Combined with bottom and side heating, it enables three-dimensional enveloped heating, bringing outthe deep aroma of rice. Midea Quick Tender Series Electric Pressure Cooker focuses on“deliciousness and speed” by using 2200W 3D intense fire to cover the pot and 3D high-pressuretender locking technologies to lock in juices and enhance flavour from all angles, meeting users’demands for efficient and delicious cooking. Midea Hot Series Air Fryer focuses on “healthy and goodtaste” by using innovative three-dimensional heat source technology and a brand-new air duct designto improve the uneven cooking issue of traditional air fryers. It can also intelligently control cookingtemperature, airflow, humidity, etc., to achieve multidimensional tastes and satisfy the need for healthyand tasty food. Midea Level-1 Silence Quiet Blender, through original noise reduction technology andstructural optimisation, solve the pain point of loud noise during use. Additionally, with the small spacegrinding system, its residue rate is less than 0.5%, and its food crushing performance reaches anindustry-leading level.For entire-house water use scenarios, COLMO Tianshu Electric Water Heater features AI-Core instantheating engine technology and “20x Capacity Expansion” technology. This enables a large water flowrate of 10L/min and produces an extensive hot water volume of 1,200L, achieving the Leader certificatefrom the CHEARI. With AI power adaptation and ATC adaptive constant temperature control systems,it enables cold to hot bidirectional electronic adjustment, achieving precise control for every Celsius ofwater temperature, meeting the water needs of the whole family in whole scenes. It adopts theindustry’s first hexahedral structure design with a sapphire-cut surface. As the industry’s first variablefrequency high-flow water purifier, Midea Waterfall 1,000G Water Purifier introduces the innovativeWaterfall system, boosting flow rate by 36%. Leveraging five-dimensional noise reduction technology, itachieves the lowest noise level in the industry. With a spiral flow channel design, it enhances anti-clogging capabilities. Utilising multi-membrane RO filter technology, it offers a lifespan of up to fiveyears. Its swirl water inlet design eliminates the need for scale inhibitors and has received authoritativecertification for Super Grade 1 Water Efficiency and water conservation in the industry. Midea haslaunched an industry-first 360° spill-proof electric kettle with an innovative structure to prevent leakagewhen pouring. It features built-in gravity pendulums and anti-leakage gravity ball structures, ensuring
comprehensive spill prevention when tilted. Employing a unique combination of a straight spout and abottle flow channel structure, it effectively guides water flow, precisely controlling the stream to ensuresmooth pouring.In the field of entire-house cleaning, Midea has released the next generation of Dust-free FloorScrubber Series GX5 Pro and G9. They feature integrated functions of “vacuuming, mopping, andwashing,” addressing pain points such as hair entanglement, water residue, and incomplete cleaning.With a unique dual scraper design, they effectively prevent hair entanglement, while the triple-edgedfloor brush cleans corner areas efficiently. Additionally, they come with self-cleaning roller brushes andair-drying odor removal functions, providing a more lightweight and user-friendly experience throughtheir lightweight body design combined with self-traction assistance. The Smart Eye Series RoboticVacuum Cleaners V10 and V12 have undergone comprehensive upgrades, including automatic dustcollection, automatic cleaning, and hot air drying functions for their docking stations. They are equippedwith a 5,000Pa suction power to enhance cleaning efficiency and utilise “AI structural light + 3Drecognition” to achieve precise obstacle avoidance and escape.B. Adhered to technological innovation, established a digital R&D system for agile innovation,improved the "Three Generations" R&D model, implemented the strategy of “InnovationPatentability, Patent Standardization, Standard Internationalization and Midea Standard GoesOut”, and promoted the strategy of “Technology Leadership” in a comprehensive mannerMidea continued to invest in R&D. Through larger investments in this respect, it aims to achieveleadership in R&D achievements and product trends, as well as a stronger presence in the industry anda better R&D environment. The Company made innovations with respect to mechanism, 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 ofthe 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 product performance.Through group development of products across the world, building a global product platform, as well asincreasing product development efficiency by way of group planning and group development, Midea isbuilding “Technology Leadership”. As of the end of 2023, Midea boasts 16 national-level science andinnovation platforms, including national key laboratories, national open innovation platforms for artificialintelligence, national cross-industry and cross-field platforms, national industrial design centres andcorporate technology centres, post-doctoral research stations, etc.; as well as 70 provincial- orministerial-level science and innovation platforms, including provincial and ministerial-level corporatetechnology centres, engineering technology research centres, industrial design centres or keylaboratories. Under the guidance of the strategy of “Technology Leadership”, the innovation platformserves as the core of its technology innovation system and is responsible for the implementation oftechnology development strategies and the commercialization and application of technology innovationachievements, thus driving Midea’s transformation towards a global technology group in a fastermanner.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 field of smarthome, Midea has developed several key technologies through the project of “Research andIndustrialisation of Key Technologies for Entire-house Smart Air Solutions”. These technologies includecoordinated control technology for entire-house air treatment equipment, proactive hosting controltechnology, and high-efficiency cooling technology for high-ambient temperature environments. Theyeffectively address issues such as coordinated control of various air treatment devices in the wholehouse, personalised proactive services, and adaptability to high-ambient temperature cooling, providingusers with intelligent air solutions. Through the project of “Research and Industrialisation of KeyTechnologies for High Power Density Digital Variable Frequency Power Supplies”, catering to theneeds of high space utilisation and multifunctional integration of kitchen appliances, Midea has focusedon breakthroughs in key technologies such as small volume, high power density, and high reliability ofdigital variable frequency power supplies for kitchen appliances to meet the diverse needs of users in
various scenarios. Additionally, through the project of “Research and Industrialisation of KeyTechnologies for Natural Refrigerant Electro-thermal Hybrid Heat Pump System with High EnergyEfficiency”, Midea has introduced the concept of micro-channel flat tube uniform flow & reducedcharging technology for the first time, and developed a low GWP refrigerant electro-thermal hybridwater heater based on intelligent logic modelling, achieving the A+ energy efficiency level of EUappliances. Furthermore, Midea has utilised reconfigurable Helmholtz resonance cavity vibrationisolation technology to optimise compressor systems, achieving low-noise effects for water heaters. Inthe field of commercial and industrial solutions, through the project of “CO2 Rotary Compressor forThermal Management of Electric Passenger Vehicles”, Midea is the first to use rotary compressors inpassenger cars. This application of rotary compressors in eco-friendly refrigerant thermal managementareas leads comprehensively in key performance parameters such as energy efficiency ratio, noise,vibration, pulsation, and oil discharge rate under design conditions. Through the project of “High-efficiency and High-reliability Integrated Electromechanical Control Maglev Variable FrequencyCentrifugal Unit”, Midea has developed system stability analysis and gain matrix tuning technologybased on advanced nonlinear matrix inverse solution. This includes the research and development ofmultimodal self-optimising mode identification technology and variable speed state signal trackingdetection technology to enhance the stability of maglev compressor system operation. Through theproject of “Research and Application of Full-time and Full-domain Coordinated Optimisation Controland Panoramic Intelligent Operation and Maintenance Technology for Environmental Control System”,Midea has developed the optimisation control technology of the environmental control system based ona hybrid drive model of data mechanisms. This achieves rolling load prediction based on time series,effectively improving the overall energy efficiency of the environmental control system. By the end of2023, Midea had won a total of three national science and technology awards, and more than 440provincial and ministerial science and technology awards, as well as received over 340 "InternationallyLeading/Advanced" certificates for its technologies. In terms of industrial design, Midea leads the wayin user experience and interaction upgrading with ongoing innovations. In 2023, Midea won a total of135 industrial design awards, including 33 Red Dot Design Awards, 49 iF Design Awards, 47 IDEAAwards, and six G-mark Awards.Midea has strengthened the transformation of R&D achievements while carrying out the core
technology research. By the end of 2023, Midea held more than 80,000 valid patents. In 2023, Mideawas granted more than 4,000 invention patents around the globe. Midea continues to improve patentquality. It won multiple awards at the 2023 24th China Patent Awards. To be specific, the "FrameComponents of the Clothing Handling Device and the Clothing Handling Device" won a Silver InventionAward, the "Stand-alone Air Conditioner (CH)" won a Silver Design Award, and the Excellence Awardwas received for eight patents including the "Control Method and Control Device of the Air Conditioner,the Air Conditioner, and the Storage Medium of the Air Conditioner", the "Rotor Core, the Rotor and theMotor", the "Control Method, Control Device, Computer Equipment and Storage Medium for RoboticMotions", the "Magnetic-bearing Compressor, the Air Conditioner and the Setting Method for theProtective Air Gap Value", the "Range Hood", the "Control Method for Defrosting Food in theMicrowave Oven and the Microwave Oven", the "Air Cylinder, the Compression Mechanism and theCompressor", and the “Smart Door Lock”. In addition, 21 provincial-level patent awards were granted toMidea during 2023.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 through atwo-tier (Group-business divisions) standardization management system and the double drivers of“standard innovation + product innovation”, Midea shifts innovation achievements to advancedtechnological standards. During 2023, Midea put forward the standard quality priority for the first time,and furthered the technology strategy project standard transformation campaign. In the year, it tookpart in the formulation/revision of 235 new technological standards, including five internationalstandards, 70 national standards, 28 industry standards, and 132 local and group standards. And it ledthe introduction of the standard of “Household and Similar Refrigerating Appliances—Purification andHealth” into the ASEAN, playing a part to promote high-quality development of the “Belt and Road”.Besides, the said standards also include “Standard for Functional Requirements of Toolchain forArtificial Intelligence Model Deployment on Edge Devices”, “Ergonomics - Accessible Design - Part 4: AMethod for Estimating Minimum Legible Font Size for People at Any Age”, “Carbon Footprint ofProducts—Product Category Rules—Air Conditioners”, “Technical Requirements for Household andSimilar Tumble Washer-dryer”, “Specification for Home Integration Built-in Effect Evaluation for Built-in
Refrigerator”, “Standard Samples of Induction Cookers for Thermal Efficiency (86%) Testing”, “ElectricDishwashers for Household Use-Methods for Measuring the Performance”, “Standard Samples ofReference Microwave Ovens for Thermal Efficiency Testing”, “Programmable Controllers—Part 2:
Equipment Requirements and Tests”, “Energy Storage Thermal Management—Refrigeration (HeatPump) Units”, “Evaluation Requirements for the Organization of Appraisals of Energy Conservation andCarbon Reduction for Household Appliance Manufacturers”, “Fine Bubble Technology”, as well asgreen and low-carbon standards such as “Carbon Footprint Measurement Rules for HouseholdAppliance Products—Room Air Conditioners”, and “Carbon Efficiency Ratio Calculation Methods forProducts—Room Air Conditioners”. Additionally, Midea leads an international standardization taskforceat IEEE (Institute of Electrical and Electronics Engineers), is the secretariat institution of the 3rdHousehold Appliances Standardization Technical Committee of Guangdong Province, and hosted the2023 Working Meeting of the National General Group for Artificial Intelligence Standardization.Additionally, Midea won 40 new standardisation expert seats in relevant organisations at home andabroad, and undertook seven provincial and above-level standardisation pilot projects.C. Deepened the channel transformation, further improved the channel efficiency and rebuilt theretail 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 transformation. Through the reform of direct retailing,Midea has been continuously promoting the "vertical efficiency improvement" of offline channels, andadvancing the transformation of new operator empowerment. By improving operators' digital drive,retail empowerment, engineering projects and other five capacities, it optimises the operationcompetence and consistency of omni-category operators, and realises "One Midea" for all markets,ensuring the consistency of user service and experience. As online and offline markets integrated at afaster speed, based on changes in levels, characteristics, needs and ways of spending in differentchannels, Midea drives the retail transformation based on user demands and experience, and keepsrefining the retail operations system, so as to achieve direct connection with retail customers.In 2023, online sales (including online sales in lower-tier markets) as a percentage of Midea's totalsales surpassed 50% in the domestic market. In the e-commerce channel, Midea continued to push
ahead with the upgrade of scenario-based product suites and the breakthrough of trending productcategories. Additionally, Midea redoubled its efforts at channel segmentation and made arrangementsfor interest-based e-commerce platforms, which delivered continuous breakthroughs. During the "18June" and “Double 11” shopping festivals in 2023, Midea ranked first in the industry for 11 consecutiveyears in terms of total sales online. Also, efforts were made to promote the integration of online andoffline business in the domestic market, rapidly develop new business models such as O2O and OMO,and build the abilities of the shared inventory system and digitalized delivery. Meanwhile, by promotingomni-channel development of Midea's customer system in the e-commerce ecosystem, Mideaimproved the efficiency of customer operation and met the consumer needs for scenario-based andone-stop shopping through the development of multi-category ecological stores. Midea continued tostrengthen stores' retail capabilities and, starting from self-run exclusive stores, improved their whole-chain retail experiences and helped stores carry out digital retail transformation driven by new systemsand tools. First, it continued to upgrade the "Midea Cloud Sales+" ecosystem, developed Midea's ownretail business platform, and successfully accomplished the “physical operation centre” reform and thefull upgrade of the "Midea Cloud Sales" system. As a result, the "Midea Cloud Sales" App recorded ayear-on-year increase of over 100% in the daily average page views (PV), and the efficiency of directretail was significantly boosted. Second, it reconstructed the retail system of stores based on the"Midea Cloud Sales" App and the "Midea Home Delivery" mini-app to provide service support functionssuch as store management, shopping guide, financial instruments and cloud warehouse. Third, with thesupport of digital marketing tools, it promoted service models such as model rooms of real estateprojects, trade-ins, and precious traffic attraction, as well as facilitated stores' online and offline whole-scene marketing and promotions, thereby empowering online and offline integration, customeracquisition and potential customer conversion. Fourth, it developed a digital and intelligent platformoperations system to improve stores' management efficiency and conducted classified productoperation and hierarchical store management based on the label-based system for products and storesso that retail data and business activities can be reviewed online and stores can carry out rapidanalysis and precise operation. By providing industry-leading digital platform services, Midea hascompleted the all-product-category, pre-decoration, and retail upgrades of more than 17,000 stores,and has established more than 8,000 benchmark stores of digital retail. Midea made vigorous efforts toexpand into the new retail market (lower-tier markets). As a result, Midea gained the largest overall
share of the core new retail channel platforms in the industry and has fully expanded into stores in newretail markets, achieving a product penetration of more than 98%. Through joint, product suite-basedand scenario-based display, it provided a full range of shopping experience. And it continued to workon new categories and products and exploit new potential on the new retail market. As a result, Mideahas outperformed its peers in terms of the sales of emerging products such as residential central airconditioners, dishwashers, air fryers, and clothes dryers. With the introduction of models such ascollective procurement and vouchers, it has improved consumption quality. In this context, the averageprices of Midea’s products in all categories have risen by more than 10% in the new retail channels.Meanwhile, by offering cleaning, clothes care and exchange instead of repair in a year services, Mideahas been providing high-quality whole-chain consumer services at the pre-sale, in-sale and post-salestages, and strengthened the user royalty in the new retail channels. In terms of marketing, Mideapromotes brand image enhancement, content-based marketing and digital traffic attraction, andredefines Midea Entire-house Smart Appliances with "Humanising Technology", "Humanising AI" and"Humanising Design". From single products, product suites, to entire-house products, it creates active,comfortable smart home experience that varies with users in different scenarios. Highlighting premium-brand product suites, Midea empowers terminals with its resources in high-end circles, creates userexperience value, and cultivates perception and sense of identity with long-term systematic marketingand promotion activities. On popular social media platforms, Midea effectively reaches users with newcategories of products through whole-new content marketing, digital marketing, and precisionmarketing to enhance brand presence, user-initiated searches and marketing-based traffic attraction.Midea continues to enhance consistent end consumer experiences. Based on the "M-Smart" platform,it integrates online and offline user services, allowing users to experience products offline and buyproducts online, thus strengthening out-of-store marketing capabilities and expanding the coverage ofpost-sales services. By doing so, Midea ensures that consumers can achieve the same shoppingexperience at franchised stores as they do on e-commerce platforms, improves product promotion ofoffline stores and the effect of distribution and traffic direction of online stores, continues to attractfootfall for stores, and strengthens the marketing capabilities of offline stores. In terms of useroperations, Midea utilises a diverse approach across online and offline touchpoints, leveraging digitaltools such as WeChat Enterprise and mini-apps to connect with users. By deeply exploring user needs
and pain points, Midea has built an integrated TOB/C operation system. This involves accuratelysegmenting user groups, providing targeted products and services, strengthening member benefits andservice systems to enhance user satisfaction. Furthermore, through user co-creation platforms, Mideamotivates more users to actively participate in product co-creation, review, and recommendationactivities. By the end of 2023, Midea’s private domain users had exceeded 20 million, and theregistered members had surpassed 180 million. Based on the “1+3+4+N” axis of the entire-housesmart strategy, Midea has built long-term competitive capabilities. Focusing on the three core terminalsof smart central control, home gateway, and smart sensors, it has established a matrix of smart homeproducts. By integrating a full range of smart home appliances, Midea has launched the system of fourmajor appliances, offering visual, proactive, and intelligent home appliance integration functions andservices. This forms a entire-house product system and capability of “smart home appliances + smarthome”. Midea has established standardised processes and targeted support throughout the entirechain including investment attraction, store establishment, scene design, solution sales, installation,and commissioning. It continuously optimises efficiency tools, providing simple and easy-to-use digitaltools such as “Design Helper”. It has initially established a smart technology service system coveringmultiple regions, forming comprehensive support capabilities for intelligent solution design, delivery,installation, commissioning, acceptance, and after-sales service.Centering around three types of targets: users, customers, and engineers, Midea perseveres in thebusiness model reform of the user service system to improve service quality and user experience andprovide one-stop entire-house smart home appliance service solutions. First, Midea upgraded servicestandards based on the peak experience principle, refined the service procedure and technical processfor various categories of home appliances and introduced them to the public through press conferencesand mainstream media, as well as enabled users to review service standards online at any time.Second, Midea has set up a butler-style service system tailored to specific service scenarios such asfactory-installation, product suites, high-end brands, and special user groups. Based on the entireproduct lifecycle, it proactively engaged with users to provide differentiated butler service models fordifferent groups. Third, the delivery and installation services of product suites have been improved tooptimise the user experience and facilitate the transformation of single-product stores into product-suiteservice stores. It aimed to establish a product suite service network with “one district, one county, one
point”, achieving comprehensive coverage of product suite business in domestic counties and markets.Additionally, it has built an engineer training and certification system to enhance the multi-categoryservice capabilities of engineers. By leveraging the transformation of service networks and multi-skilltraining, it has implemented a service model where product suite purchasers have “one contact person,one visit” service experience. Fourth, it has enhanced entire-house smart service capabilities byestablishing entire-house smart service training bases based on store distribution and providingspecialised training. Through engineer certification for entire-house smart service capabilities and theestablishment of professional service teams, it has gradually achieved comprehensive coverage ofentire-house smart services. Fifth, in-depth insights into user and customer return and exchangeservice needs have led to direct returns and exchanges for users, allowing them to view, expedite, andreview their returns and exchanges. The return and exchange service process was simplified toenhance the return and exchange service experience. Sixth, Midea enhanced the service experience ofhigh-end brands by selecting excellent service outlets, realising “one appointment and one delivery andinstallation” for high-end brand product suites. In some regions, pilot programs were provided forintegrated services including “sales-delivery-installation-maintenance-repair”. Special certification wasoffered for high-end brand engineers, and engineer service incentives were established. Throughprojects such as “Service Butler” and “High-end Private Care”, the aim was to enhance user stickiness,creating a distinctive premium service experience that leaves a lasting impression.Annto, a subsidiary of Midea Group, is a technological innovation-based supply chain managementcompany and is committed to providing customers with end-to-end integrated, digital and intelligentsupply chain solutions. Annto deeply fosters itself in the industrial supply chain service sector and,adhering to the "customer-centric" business philosophy, provides customers with end-to-end digital andintelligent supply chain solutions ranging from production and logistics services from raw materials tofinished products, a shared inventory system from online to offline channels, ToB/C integration, tointegration services of warehouse distribution logistics and integration services of delivery andinstallation. It helps enterprises promote channel reform and supply chain efficiency improvement andimprove competitiveness, and keeps supporting customers' high-quality growth and sustainabledevelopment. With the industry-leading practical experience in channel reform of major enterprisecustomers such as Midea and the continuous improvement of the intelligent warehouse network
system for domestic supply chains, Annto has covered thousands of brand customers in daily chemical,beverage, wine, food, home appliances, home furnishing and new energy industries, with its marketshare and brand presence steadily strengthened. Annto continues to strengthen the in-depthintegration of technology with the logistics and supply chain business to create a comprehensive end-to-end intelligent logistics platform. Through the development of the integrated intelligent logisticsplatform, it opens up the digital chain covering production logistics, warehousing and distributionnetworks, distribution capacity and end service platforms. It has realised the effective application ofmultiple self-developed digital control capabilities, enabled online control of the logistics elements of“people, vehicles, goods and sites”, and significantly improved the efficiency of supplier operation,intelligent warehousing management, whole-process visible distribution, dynamic scheduling oftransport capacity and whole-process control of delivery and installation. By doing so, it facilitatescustomers’ digital upgrades. In terms of production logistics, through the pre-production logistics modelreform of “pre-planning, pre-material preparation and pre-quality control”, Annto realised directdistribution to stations, and improved lean logistics of incoming materials and reduced factoryinventories. It also supported the digital transformation of suppliers and realised whole-value-chaincoordination of replenishment/pick-up plans, label and bar code management and transport-packagingintegration, lowering logistics costs and enhancing delivery quality and efficiency. In terms of thewarehousing and distribution network, with the support of mobile terminals, automation equipment and5G technology application, Annto realised whole-scene mobile operations. Supported by AItechnologies and big data models, it enhanced its warehousing network planning capability withwarehouse locating algorithm and warehousing network model planning algorithm, and provided moreprofessional and efficient warehousing network planning solutions. In terms of transport capacitymanagement, Annto has put in place an urban distribution transport capacity scheduling platform, lineoperation and analysis platform, logistics network planning platform and other platforms based onintelligent algorithms, and optimised transport and distribution costs and distribution quality with thewhole-process visible, intelligent transport scheduling application for urban trunk line distribution. Byplanning vehicle routes and using algorithms and tools to select superior line operators, it supportedthe reform of transport capacity resources control of operation centres, and matched intelligentalgorithms used for the tendering and procurement of scheduling resources to supply and demand. Interms of end services, Annto focused on online management of outlet and engineer resources,
developed the intelligent management platform and "Annto Service +" mini-app to output refinedservices, such as installation appointment, complied delivery and installation, precise appointment andintegration of delivery and installation of large home appliances, home furnishing products andcharging piles, based on big data and mobile technologies, and to improve customer/user serviceexperience. In addition, Annto builds a product operation system. Guided by the Voice of Customer(VOC) platform, it empowers more than 230,000 internal and external users with digital tools,establishes a closed-loop service system, responds quickly to users' suggestions and needs, andsignificantly improves user satisfaction.In 2023, Annto adhered to the “1+3” service model, enhancing its end-to-end service capability.Production and logistics are important parts of the manufacturing supply chain under the “1+3” servicemodel. Centering on the role of an expert in advanced, lean and digital logistics in the manufacturingindustry, Annto applied its experienced “Lighthouse Factory” supply chain solution to manufacturingcustomers, and consolidated its core strengths from aspects of lean logistics and digital empowerment.In terms of transportation mode and transport capacity, a door-to-door parts pick-up model has beencreated through consolidation warehouses. The sites were chosen based on the concentration of partssuppliers, cargo volume, distribution frequency, and routes, with consolidation points alreadyestablished in Changzhou and Wenzhou to significantly improve service efficacy. In terms of greenrecycle packaging, Annto formulated the standards for packaging of incoming parts, promotedrecyclable standard lease cartons at Lighthouse factories in response to Midea’s Green Strategy, andhas provided hundreds of customers with recyclable standard lease carton services that supports thedevelopment of green logistics. In terms of digital capacity building, it focused on the improvement ofdigital capacity of Midea’s Lighthouse factories, created the service model of “product set pre-service,quality pre-service and plan pre-service” for the manufacturing supply chain, trialed at some factories,and improved the full set rate of material orders of factories, management and control of quality and theturnover rate of inventories. Upstream parts suppliers were provided with label cloud service tooptimise the synergistic effect between upstream and downstream industrial chains. Annto achieved anefficiency upgrade through the integration services of “a shared inventory system” and “warehousedistribution logistics.” On the warehousing side, Annto built its warehousing capacity based onwarehousing network planning. It created an IoT intelligent park management system, constructed an
industry-leading warehousing operation system, and provided customers with whole-scene, whole-chain warehousing operation solutions. With self-researched site selection and continuous optimisationof all-category warehousing network layout routes, it accomplished a 6% decrease in average mileageper unit, a 22% decrease in average time per unit, and an 8% increase in the proportion of same-dayand next-day deliveries. Its smart park relied on the IoT intelligent management system, distinguishedscene requirements, created a differentiated service combination, and supported the independentdeployment of internal and external customers. Annto premised its warehousing operation capability onlean enhancement and benchmark/pilot breakthroughs as its method. It simultaneously promotediterative upgrades of “lean”, “information-based”, and “automated,” establishing a whole-chain leanwarehousing operation system from base warehouse to regional distribution centre warehouse. On thetrunk line distribution side, Annto integrated line resources, built the line traffic monitoring system andline cost capacity and supported the optimisation of transport capacity and structure as guided by line-based operation. Leveraging the transport capacity and structure model for core lines and core cities, itconstructed line resource capacity to achieve the optimal capacity structure solution. Meanwhile, itpromoted the dispatcher transitions to operating route capacity and online management of singlevehicles, made the whole chain visible online, and built the high-efficiency whole-vehicle performanceplatform with individual transport capacity resources. It established a routinised and standardised “zero-carriage” network by promoting cooperation in industrial belt and ecosystem parks. This was achievedthrough the integration of resources and structural optimisation, which resulted in a transformation oftransport capacity, and the creation of national front-end assembling and point-to-point deliverycapabilities. It promoted product-wise line operation on the basis of line-based operation, andconstructed the “zero-carriage” network composed of one-way short chains. Through technical toolsand management reform, Annto promoted online management of business at all links, thus improvedcustomer experience. On the urban distribution side, Annto emphasised on “warehousing networkplanning, traffic integration, route operation, and transport capacity transformation”. It achievedwarehousing efficiency through warehouse capacity integration, and optimised personnel efficiency andflat effect. Annto concentrated on route traffic, expanded direct control over the routes, adjustedtransport structure, and increased the total amount of controllable transport capacity, including 6,900units of new energy transport capacity. Based on a mature distribution centre network and over200,000 mature routes, it efficiently covered over 99% of the towns across the nation. By optimising
and iterating algorithm tools according to dispatch factors, dispatch procedures, order profiles, andcustomer profiles, Annto achieved an optimal one-click scheduling with an adoption rate of over 95%. Itdeepened strategic cooperation in the fast-moving consumer goods industry, initially established aregional distribution network for fast-moving consumer goods, and combined DTC strategy and b/Cintegration capacity building to achieve next-day delivery for over 80% of orders and delivery within 48hours for over 94% of orders. On the end delivery and installation service side, Annto strengthened its“2C integrated delivery and installation” capabilities to support businesses in connecting with users.Based on terminal capabilities building, it optimised the delivery and installation management platformand “Annto+” mini-programme, continued to deepen network capacity building, launched digitalmanagement and service tools, and achieved online management and operation of final delivery andinstallation engineers nationwide. By the end of 2023, it was cooperating with over 4,000 domesticoutlets, with more than 40,000 delivery and installation engineers. Focusing on home appliances, homefurnishing, new energy, healthy travel and life services, it provided standardised service products,including the integration of delivery and installation of home appliances, “three-guarantee and five-guarantee” services, new energy-related “surveying and installation” services. It optimised serviceprocesses through strong-control appointment, text message rescheduling, emergency delivery, suitedelivery, positioning signing, and so on. Combined with integrated and smart supply chain servicecapabilities, it comprehensively improved the final delivery and installation service.D. Promoted “Global Impact”, enhanced localized operations overseas and adhered to acustomer-oriented principle when it comes to productsIn 2023, numerous risks and challenges such as fluctuation of macro economy, fierce change ofexchange rate and continuing high inflation were seen in overseas home appliance markets, yet theoverseas business of Midea sustained large-scale growth and stable earnings in performance, whoseoperating tenacity was improved. Aiming at the local primary markets, Midea continued to forward-deploy its overseas business organisations. It established the European, Middle East, and African(EMEA) regional headquarters and the American regional headquarters, which have already begunoperations, in order to respond to the market more quickly and meet local customer demands moreeffectively. Meanwhile, the role of the international business headquarters transitioned to the Centre of
Excellence (CoE), providing further support for the organisational capabilities of the overseasmarketing teams. It established and perfected organisational teams in various regions, continuouslyintegrated localisation talents into the system of internationalisation and optimisation talents, andcontinuously promoted a diverse, equitable, and inclusive (DEI) corporate culture. The overseas R&Dcentre also increased its investments and expanded in scale, optimised its talent system to ensurecontinuing development of overseas business. Meanwhile, Midea built up the core capability system onall fronts, involving studies on front-end users’ demands, definition and development of products,channel expansion, sales and operation, user service, etc. It organised teams in various regions acrossthe globe to hold several meetings to share and discuss local best business practices and futuredevelopment plans, promoting global business expansion and enhancing team cohesion. It continuedto build a digitised human resources system. In 2023, the basic module of the global human resourcessystem was launched, and a whole-module human resources system will be in use worldwide by 2025.Midea continued to expand its overseas manufacturing layout, expedited the introduction of the "China-based Supply for the World + Local Supply" model, promoted the construction of manufacturing basesin Brazil, Indonesia, Italy, Thailand, India, Mexico, and Egypt, among others, and promotedcoordination and support between domestic and overseas teams in the manufacturing end. In addition,it started the Overseas Manufacturing Plants 632 Project and thus realised standardised manufacturingflow and data management. The first phase of the project has been completed and put into use. Basedon the successful practices of domestic Lighthouse factories, Midea selected excellent employees for alean manufacturing system and developed overseas lean manufacturing talents, as well as carried outpilot programmes of automation-oriented transformation in overseas manufacturing bases, thusimproving its overseas manufacturing efficiency and delivery capability. Meanwhile, it kept enhancingthe EHS management system of overseas factories and established the risk prevention mechanism toensure safe and stable operation of its overseas manufacturing bases. Midea refined its global servicesystem and improved its service capability worldwide. Always being customer-oriented, refinementswere made from the four dimensions of spare parts delivery, customer contact, service network andservice technology engineering to improve customer services and experience. Also, Midea continued tooperate its global spare parts centre in an efficient manner, enabled online and visualised orderfulfillment, and strove for global professional operation. Meanwhile, the service network comprisingiService, the overseas after-sales service system, and the cloud call centre platforms has been
improved. In 2023, the cloud call system has been made available in 10 countries and regionsincluding Italy, Singapore, Hong Kong, Malaysia, Germany, Mexico, the United States, Canada andAustralia. Also, Midea optimised the management of master data for global outlets and serviceengineering, enabling shared interfaces between call centres and after-sales service systems, whichhas significantly improved service accuracy and efficiency. Meanwhile, supported by speech analysis,semantic recognition and access to social media by intelligent voice robots, Midea continued to build afast-response and proactive global service system. The introduction of Amazon Connect, a global,omnichannel cloud contact centre, into Midea enabled the Company to achieve the iterative upgrade ofits global contact centre, thereby achieving the whole-procedure closed-loop management ranging fromuser reaching to service completion, while significantly reducing operating cost and improving voice callquality. The Amazon cloud security tool has been adopted to satisfy the overseas requirements for datasecurity and effectively protect privacy and data security for end users. Midea insisted on improving thestructure of its own brand products and enhancing product efficiency. In the North American market, thegrowth in variable frequency air conditioner products was significant, with sales revenue of variablefrequency window air conditioners increasing by over 120% year-on-year, and that of variablefrequency portable air conditioners increasing by over 140% year-on-year; and multi-door refrigeratorsincreased by over 300% year-on-year. In the EMEA market, sales revenue of double-door refrigerators(over 300L) increased by over 110% year-on-year, and sales revenue of large-capacity front-loadingwashing machines increased by over 60% year-on-year. Midea insisted on user-oriented productdevelopment and strengthened the ability to understand local users. In North America, South America,Asia Pacific, and Europe, it built user research and market insight teams with rich experience topromote product innovation and brand building. To strengthen its development of overseas self-ownedbrands, Midea sped up its efforts to make breakthroughs in self-owned brands worldwide, facilitated thesynergy of brands, products and services, deepened its access to users in the front-end market,expanded product and brand promotion, and enhanced the brand awareness in all links of operationand service. Through the improvement of brand value in joint efforts with the world-famous ManchesterCity Footfall Club (the Man City), Midea reached hundreds of millions of footfall fans around the world.The team star Erling Haaland was selected as Midea Global Brand Spokesperson, and the relevantadvertisement was exposed more than 900 million times globally, representing a stronger brandpresence. Drawing on the experience of the North America-specific brand development model, Midea
strengthened the influence of its brands from numerous perspectives, including offline retail experience,shopping guide team development, social media launch and marketing of entire-house collectionproducts, in Asia-Pacific and Middle Eastern markets. Besides, it boosted online content-basedmarketing inside and outside its websites, upgraded its content planning, visual presentation andshopping experience in all aspects, advanced the building of its brands' official websites, refined thebrand matrix, as well as established marketing resource pools. Midea sped up the expansion andrefinement of its overseas channel layout, used digital tools to empower retail, strengthened the retailnetwork in scale and depth, as well as promoted the introduction of specialised channels and channelstructure upgrades. As a result, hundreds of air conditioner-specific channel customers were developedin the Asia-Pacific market, and the scale of channels for built-in products increased more than 30%year on year in the European market. Also, Midea increased the activity of retail business, improvedthe display of new products in retail outlets, and enhanced the interaction with customers and theirbrand awareness, in addition to leveraging digital tools to empower traffic acquisition, transformationand upgrade, user accumulation and other aspects. Midea continued to improve the coverage of itsmanagement system for purchase, sales and inventory in retail outlets, continuously optimised andenriched application scenarios of the system to improve the sales efficiency of stores, and tookadvantage of module- and tool-based system operating model to speed up its iteration of retail stores'promotion tools, thereby improving flexibility in promotional retail and convenience in retail operation. Inthe overseas market, it leveraged new media content-based marketing to enhance the interactionbetween products and users, promoted the application of innovative technology through pilotprogrammes, and optimised the contents launched in quality and efficiency. Moreover, Midea furtherflattened its channels with continuous efforts and accelerated its endeavours to facilitate thetransformation of DTC retail model in North America market, thus achieving an incremental yield asconsiderable as tens of millions of dollars in 2023, up approximately 50% year on year. Mideacontinuously delved into overseas e-commerce businesses to support the development of its ownbrands, and made progress in multiple aspects such as business growth, structural optimisation, andbrand building. In 2023, e-commerce sales revenue increased by 16% year-on-year, and e-commerceoperations covered over 30 major countries or regions worldwide, focusing on a balanced developmentmodel across multiple channels, modes, and countries. Midea established its own e-commerce dataanalysis system to achieve data-driven and whole-chain closed-loop from product to user. It fully
enhanced the operational efficiency and profitability performance of the value chain to create uniquedata capabilities. It continued to maintain the market-leading position and sales channel vitality of corecategories. For instance, in the US online market, the market share of microwave ovens remained atan industry-leading level, and the categories such as dehumidifiers also grew against the trend. Thescale and share of range hoods, refrigerators, laundry appliances and other categories also increased.At the same time, it continued to optimise product structure and create hot-selling Stock Keeping Unit(SKU). During overseas e-commerce shopping festivals such as BFCM and Prime Day, Midea hadover 100 products that entered the best-selling list in their respective categories, and ranked in the topten in sales in more than 20 categories. It boosted content and traffic operation to increase its voice onsocial media. Influencer cooperation projects have attracted tens of millions of viewers and resulted inhundreds of live broadcasts. Midea also advanced the construction of brand official websites andAmazon flagship stores, gradually forming a flagship matrix layout of three major brands across sevenmajor sites.Midea continuously enhanced its international logistics service supporting capabilities. In 2023, thecumulative shipment volume of Midea Group’s global production bases exceeded 800,000 TEUs, withthe proportion of prepaid clause volume increasing by 14%. It continued to build an end-to-end agiledelivery capacity, enhancing customer satisfaction, and establishing a stable, efficient, safe, andcollaborative supply chain system to support the global breakthrough of overseas business. Mideaexpanded the logistics supply ecosystem and deepened cooperation with strategic partners, trunk lines,tractors, railways, wharves and other parties to optimise the competitive advantage of export costs,achieving a year-on-year decrease in pre-port operation costs of 13%. Meanwhile, it promoted multi-mode operation to reduce carbon emissions to achieve green logistics. Midea strengthened the qualitycontrol of order operations, established service evaluation standards and application mechanisms,improved the quality and delivery efficiency of various operations, and the abnormal cost decreased bymore than 60% year-on-year. Midea built overseas local logistics capabilities, deepened localoperations and delivery, and established local logistics teams at multiple overseas manufacturingbases to achieve integrated import and export operations. It completed the construction of numerouswarehousing and distribution networks to achieve short-chain delivery of overseas orders. Throughforward warehouses in Belgium and Greece, it covered nine countries in Europe, shortening the order
delivery cycle to more than three days. The spare parts warehouses in the United Arab Emirates wereestablished to improve the timeliness and satisfaction of post-sale services for its own brands in theMiddle East. The operation of finished products warehouses in Thailand were launched to meet localdelivery and export shipment needs, and at the same time, the overseas e-commerce logistics andinternational express business were expanded to enhance multi-product operational capabilities.In 2023, the depreciation of the Japanese yen led to an increase in the cost of imported products in theJapanese market. The continued price increases in consumer goods inhibited the willingness to spend.The overall demand weakened in the home appliances market, causing more intense competition.Focusing on user experience consistently, TLSC stayed cool-headed when handling numerouschallenges of uncertainty. Through strengthening the coordination with the Group and the relevantproduct divisions, it effectively improved product quality, optimised the product development process,and ensured the launch of new products and stable supply of products. By taking multiple measure likeenhancing communication with key customers, strengthening retail in the market and the developmentof new channels, it sustained a leading market share for refrigerators, microwave ovens and otherproducts. By taking such measures as stabilizing price and improving products structure, it effectivelyalleviated the adversity of market scale downturn. And it delivered further improvements in profitabilitythrough efficiency gains and cost reductions, with an increase in profit. Meanwhile, TLSC continued toboost synergies with the Group and the relevant divisions on branding, R&D and innovation, supplychain integration, quality improvement, etc., so as to build a strong product portfolio for the globalmarket together, thereby enabling business of TLSC to expand to and cover more than 120 countriesand regions.E. Stepped up the comprehensive digitalization to materialize data- and platform-basedoperations in the whole value chain, and thus to become more competitive in the digital eraWith a focus on the “Digitisation & Intelligence Driven” strategy, Midea stepped up the comprehensivedigitalisation to materialise data- and platform-based operations in the whole value chain, and thus tobecome more competitive in the digital era. In terms of domestic sales, Midea promoted a customer-centric DTC transformation strategy. Through measures such as “visible delivery time of productioncapacity, no sales without delivery dates, and automatic order review,” it achieved 100 % visibility of
order delivery dates and over 96 % automatic order review, enhancing delivery efficiency. TheCompany pushed forward “worry-free retail and a O2O shared inventory system,” and the stockstagnation rate dropped by 14%, with the average inventory period of central warehouses shortened by13 days. By implementing “consumer direct returns and exchanges, logistics signing and appointmentadjustments, and the establishment of evaluation systems”, it enhanced the customer experience.Midea further drove retail channel transformation through actions like “trade-in activities,” “model room,”and “precise traffic attraction,” leading to retail sales surpassing RMB3.5 billion. It directed channelinventory back to authenticity, accomplishing the integration of “retail order, logistics order, installationorder,” the whole retail logistics installation chain was online and visible, ensuring the authenticity andcontrollability of overall retail data. The usage rate of cloud warehouse reached 100%, and theinventory with long storage time in the cloud warehouse decreased by 10% compared to the previousyear.” The fulfillment timeliness rate of cloud warehouse ToC delivery reached 92%. Through storesales tools such as “Design Helper” and “Decoration Calendar,” online product selection and visitoraccess were realised. Over 15,000 sales guides have used these tools, producing nearly 100,000proposals, thereby increasing the design efficiency of terminal store guides by up to 90%. Thecontinued improvement of data empowerment, operator empowerment, and tool empowerment throughretail tools such as Retail Assistant has enhanced overall operational efficiency, with the activity rate ofoperators nearing 90%, and an online task rate of 100%. In terms of overseas sales, Midea focused onthe global business efficiency enhancement and digital transformation, and comprehensively launchedthe “Digital 3.0” project. Through end-to-end panoramic analysis of the value chain, it focused on thedigital capabilities of overseas staff, product management, order management, overseas manufacturing,overseas logistics, overseas e-commerce, direct access to overseas users, and supply chains,promoting domestic digital transformation experience abroad and facilitating the “Global Impact”strategy. Coupled with business digital perception capabilities based on user insights, Mideacontinuously created innovative products to meet customer needs and enhance user experience.Through the iBOS integrated sales platform system that was fully implemented across overseassubsidiaries, it integrated end-to-end whole-process information on project production, shipment,logistics, and orders, realised whole-chain data visualisation, and improved overseas order fulfillmentefficiency by 30%. It promoted the improvement of overseas channel management systems, whichhave covered five countries, with the registrations of channel customers exceeding 1,000, further
enhancing the channel operation framework system. The newly established MideaClub systemsupported the establishment of professional installation channels and has been implemented in fourcountries. By early 2024, the number of registered installers exceeded 1,700, with the number ofinstallation orders nearly 10,000, advancing the online data adaptation of overseas installation services.The overseas e-commerce platform I-ECOM can connect to eight major e-commerce platforms toobtain data, with the total amount of data accessed exceeding 300 million. The platform can supportthe e-commerce business of various Midea units and conduct operational analysis from variousdimensions such as market, competition, selling points, and reviews. The newly added post-saleknowledge base enhanced digital capabilities such as the analysis of Voice of Customer (VOC). Amembership system has been piloted in Brazil and a Customer Data Platform (CDP) has beenlaunched online, supporting Midea’s overseas DTC strategy. Through the digital platform, Mideaachieved product planning and development driven by user insights and technological innovation,forming an innovative mechanism for its own overseas brand business. Midea also optimised the digitalcapabilities of overseas manufacturing and completed the digital system building of overseasmanufacturing bases such as the Brazilian factory. In terms of ToB business, Midea planned and builtthe ToB business template based on multiple industrial forms. It designed and defined the ToB endrepeat purchase and project-based business templates, and overall planned the capabilities of the ToBmarketing platform to provide digital service capabilities for pre-sales, mid-sales, and post-sale. In 2023,in the fields of intelligent building technology and energy solutions and industrial technology, pre-salesdigital empowerment was completed, building a customer-centric model to achieve digital capabilitysupport from business opportunities to contract orders. At the same time, using energy solutions andindustrial technology business as a pilot, the design of the ToB end repeat purchase business templatewas completed, and it has been launched in some businesses, achieving the digital empowerment ofintegrated domestic and overseas sales orders, inventory management, logistics management, and theintegration of business and finance. This has facilitated business increment creation and improvedorder fulfillment efficiency by over 15%. In terms of supply chain and manufacturing, Midea supportedglobal planning and order integrated operations through the Integrated Supply Chain (ISC) platform,contributing profits of over RMB150 million and saving 100,000 work hours for the whole value chain.Midea promoted the compliance and controllability of the end-to-end workflow of the overseas supplychain. Efficiency in pricing, supporting systems, and personnel increased by 15%, achieving supply
quality synergy and improving quality indicators by 10%. Midea furthered the construction of several“dark factories”, the domestic manufacturing data operation platform was fully launched and waspromoted in overseas factories. Based on reliability reverse analysis, incoming materials’ dynamictesting was realised, and the assembly scheduling of several overseas factories was put online. Theone-click order ratio of knocked-down parts (KD) enhanced to 98%, achieving traceability of domesticand overseas KD key material quality, real-time visibility of production progress, abnormal workinghours warning, etc., reducing working hours by up to 30%. Midea enhanced production and researchcollaboration, empowered through the digital process platform, shortening the process route generationcycle by 90% and improving transfer production efficiency by 62.5%. Midea further optimised its energyand carbon emission management system, improved the Energy Carbon Management Platform andthe Industrial Park Microgrid Management System. Besides, EHS management in parks achievedintelligent collection, analysis, early warning, and closed-loop handling of abnormal situations at allmonitoring points. M?IoT, Midea’s industrial internet platform, can provide over 90 solutions coveringnine key fields, including safe manufacturing, energy conservation and emission reduction, qualitycontrol, supply chain management, R&D design, production and manufacturing, operationmanagement, warehousing and logistics, and operation and maintenance services. Midea served over500 large enterprises to achieve digital transformation and upgrading. M?IoT was successfully selectedas a “Cross-industry and Cross-field Industrial Internet Platform” by the Ministry of Industry andInformation Technology in 2022 and 2023. Midea’s “model-based three-dimensional structured processdesign solution” by Midea Cloud successfully made the “2023 Annual List of Leading SmartManufacturing System Solution Projects” jointly selected by the Ministry of Industry and InformationTechnology and the State Administration for Market Regulation in 2023. It was also recognised as aleader in the IDC MarketScape: Manufacturing Vendor Assessment Report for Overall Solution ofChina Digital Factories.Midea steadily advanced its data empowerment initiatives, strengthened the construction of a digitaltalent ecosystem, and enhanced the integration of digital capabilities with practical business operations.Thousands of digitally proficient personnel have been trained, possessing practical skills.Simultaneously, efforts were concentrated on data empowerment within core business scenarios suchas research and development, marketing, supply chain, overseas markets, and ToB domains. In the
realm of smart home business, novel concepts were discovered through the fusion of large and smalldata methodologies, facilitating the creation of popular and innovative products. Digital site selectioncapabilities now encompass all store types, facilitating the application of sales operation chain data andadvancing real-time online retail data and channel data sharing. Operational efficiency is enhancedthrough data operation, while thousands of product SKUs are covered by intelligent stocking andreplenishment systems, effectively reducing inventory levels and establishing anomaly alert systems.Leveraging overseas digital planning efforts, numerous new products were crafted, and the globalVoice of Customer (VOC) platform integrated data from multiple channels. This integration realises aclosed-loop tracking function from “customer voice” to “problem improvement”, continuously traversingand analysing the entire chain of data. It provides accurate and effective data-based evidence forchannel optimisation and product pricing in overseas operations. Breakthroughs in digital planningwithin the ToB domain were achieved, leveraging data analysis to facilitate business opportunitydiscovery. A business data analysis framework was constructed around project-based operations,enhancing the competitive edge of ToB business operations.Midea continued to strengthen the building of digital base and information security, focusing on thesupply and stability assurance of basic resources. The first phase of construction of the cloud base ofMidea in Guian has been completed, with a reserve of over 60,000 positions, capable of supportingMidea’s future computing needs for digital development over the next 10 years. Nineteen securitymeasures have been implemented, including the transformation of DRUPS in data centres, networkisolation, and risk assessment of the park, continuously eliminating more than 370 hidden dangers,promoting stability construction, achieving a year without P-level faults, and completing the constructionof a self-developed cloud host platform. The construction of big data and database service platformshas been completed, with the efficiency of data development and management increased by more thanthree times, and both the data volume and computational tasks of the big data platform have increasedsignificantly. The efficiency of the research and development process has been continuously improved,with a 15% increase in front-end construction efficiency, a 35% increase in deployment efficiency, and a22% increase in software release process efficiency achieved through engine optimisation. Acomprehensive defence system, security operation system, and privacy compliance system have beenestablished, comprehensively promoting application security governance and “left-shift” application
security, escorting the stable operation of business security. In addition, innovative use of AIGC largemodels, natural language processing (NLP), and recommendation algorithms has led to the launch of86 intelligent Q&A application scenarios, providing consulting services to employees, service engineers,salespersons, and cooperative customers, with a user base exceeding 750,000. The AI drawingplatform has also been built to address the pain points of external tool usage, providing designsolutions for business needs.Midea promoted the strategy of "Digitization & Intelligence Driven" and accelerated the implementationof "Comprehensive Intellectualization" to "Customize a Smarter Midea Life for You" In terms ofintelligent products, Midea remained committed to improving the comprehensive user experience ofMidea products, consolidating the entire-house basic guarantee capability, and creating a customer-oriented Midea Smart Life solutions. In 2023, the MSmartLife App continued to improve its applicationexperience, reducing device abnormal offline rate by 17%, plugin white screen rate by 79%, andapplication cold start time by 25%. The comprehensive performance reached an industry-leading level,creating a stable and smooth user experience. As at the end of 2023, the registered users of theMSmartLife App exceeded 55 million, and the monthly active users exceeded 8.2 million. Based on theoverarching entire-house smart strategy, Midea has constructed long-term competitive capabilities.Focused on three core terminals: intelligent central control, home gateway, and smart sensors, Mideahas established a multi-category matrix of smart home products including smart door locks, lightingdrivers, and switch panels. Integrating the full range of smart home appliances, Midea has launchedfour major appliance systems, providing visual, proactive, and intelligent functions and services forhome appliances and home integration, forming a entire-house product system and capability of “smarthome appliances + smart home”. In September 2023, Midea released the industry’s first large-scalelanguage model “Meiyan” in the smart home field. Based on the semantic depth understanding andpowerful generation capabilities of general large-scale models, it has the advantages of precise repliesand rapid responses within the domain, satisfying users’ interaction needs in aspects such as “clothing,food, housing, and enjoyment”. Midea also launched the next-generation proactive service-based“Midea’s Home Brain”, based on the “Meiyan” large model, possessing four core capabilities: intelligentconnection, intelligent perception, natural interaction, and autonomous decision-making, supportingeight major subsystems and numerous application scenarios including entire-house air and entire-
house water. Midea’s independently developed full-stack solutions including chips, modules, and AIalgorithm edge deployment toolchain Aidget have addressed the challenge of large-scale deploymentof AI algorithms in IoT edge devices with limited computing resources, achieving innovativebreakthroughs in IoT edge intelligence technology in the smart home field, and won the 2023 Top TenTechnological Advancements in China’s Internet of Things selected by the Chinese Institute ofElectronics and the China Institute of Communications. In addition, Midea actively participated in thedrafting and formulation of relevant industry standards both domestically and internationally, so as topromote the wider popularization and application of new technologies in the industry and enhanceindustry influence. In 2023, Midea established task groups and assumed the chairman of the taskgroups in the IEEE Computer Society/Artificial Intelligence Standards Committee (C/AISC) and IEEERobotics and Automation Society's Standing Committee for Standards Activities (RAS-SCSA), inaddition to being a co-leader and a co-leader unit in the Smart Life Task Group of the ArtificialIntelligence Sub-Committee of the China National Information Technology Standardization Network(NITS).F. 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 operationIn 2023, Midea continued to promote the "COLMO+TOSHIBA" dual high-end brand strategy. In theyear, the overall retail sales of the dual high-end brands saw a year-on-year growth of over 20%.COLMO serves high-end users with premium entire-house smart solutions. In the area of products,after five years of development, COLMO's high-end entire-house smart solutions comprehensivelycover two major segments of smart home appliances and smart home, including a variety of homeappliance categories such as commercial air conditioners, entire-house water, refrigerators, winecabinets, clothes dryers, laundry appliances, nursing cabinets, kitchen appliances, and small domesticappliances. Also, it released the industry's first large model in the field of home furnishing, upgradedthe high-end entire-house smart solutions, and launched the first entire-house smart door lock and theAIRCUBE, solidifying the industry positioning of "Smart Villa Expert". EVOLUTION New Image Suite—Moonstone Grey and Cloud White launched by COLMO, with product upgrades of being completely
built-in, customized, and compatible in combination with differentiated, custom panels, meet the needsof elite consumers when at home. COLMO launched the TURING advanced customised entire-housewater system, using AI intelligent technology to customize the natural high-level water ecosystemthrough five dimensions of safety, purity, skin touch, temperature sensation, and taste. Starting fromdifferent water usage scenarios, COLMO has created five major products: TURING pre-filter, centralwater softener, central water purifier, water purifier-heater, and sparkling water direct drinking machine,providing a customizable entire-house water system solution that comprehensively meets the high-endwater-associated needs of elite users. COLMO Washer-Scrubber has integrated and upgradedwasher-dryers and robot vacuum cleaners, and they are equipped with AI-powered light dry-cleaningtechnology, creating a new form and species in the home appliance industry. COLMO AVANT GasWater Heater features the industry-first Reco dual-core technology, efficiently recovering heat from theflue gas and achieving purification, recovery, and reuse of condensate water. At the user and marketends, COLMO has constructed a user rights system centred around the entire lifecycle of homeappliances, enhancing the overall user experience and launching highlight benefits and services suchas deep appliance cleaning, 1V1 butler service, and exclusive member activities, covering over 1.3million member users. The number of COLMO members increased by over 200% year-on-year in 2023,with a nearly 400% increase in monthly active users on the COLMO mini-app. According to the datafrom AVC, the proportion of COLMO products in the high-end market increased significantly in the firsthalf of 2023, with drinking water products accounting for over 57%, water purification productsaccounting for over 18%, and cabinet air conditioners accounting for 16%. Additionally, retail sales ofCOLMO household products increased by 58% year-on-year. At the brand and channel end, COLMOleveraged cooperation with high-end IP resources through three major marketing activities: the EliteLife Festival, the Ultimate Brand Month, and the COLMO Lifestyle Summit. It also targeted high-endsports user groups by consecutively naming the Wuxi Marathon, sponsoring the Rolex ShanghaiMasters, and cooperating with the Ultra Gobi. Through communication and cooperation with thedesigner community through events like Design Shenzhen, Design Shanghai, and Guangzhou DesignWeek, COLMO accelerated the development of high-end whole-scene channel distribution. Currently, ithas established over 800 experience stores in more than 250 cities.Toshiba upholds its positioning as “the first Takumi and exquisite brand of high-end home appliances”,
committed to creating a breakthrough star-level lifestyle for consumers with its inherited Takumi andexquisite aesthetics. As a globally renowned home appliance brand with a century of history, Toshibahas emerged as a new choice for high-end consumer groups in the domestic market. In 2023,Toshiba’s domestic market retail sales recorded a year-on-year increase of over 60%. During the “618”and “Double 11” periods, online retail sales grew by 92% and 40% respectively year-on-year. In termsof products, according to third-party data, Toshiba 450 White Pearl Refrigerator, focusing on the zerobuilt-in demand, ranked first in sales among products priced above RMB8,000. The sales of Toshiba’shigh-end microwave-steamer-oven combo products ranked first among products priced aboveRMB5,000. Toshiba also launched the first “Cozy Home” suite that covers multiple scenarios andcategories, focusing on kitchen, water, and bathroom scenarios, with spatial layout, residential feel, andauthentic aesthetics as the core concepts, creating a heartfelt living space for sophisticated lifestyleenthusiasts. The total retail sales of the entire suite exceeded RMB500 million in 2023. Toshiba’s starStock Keeping Unit (SKU), the Toshiba Electric Fan “Huaxinfeng”, achieved sales of 50,000 units in2023 and has been ranked first in the industry for five consecutive months according to AVC statistics.In terms of brand, with a focus on the brand proposition of “Details Matter”, Toshiba has established acomplete brand communication chain, effectively covering the 5A crowd, from brand dissemination toend empowerment. This includes activities such as the debut of “Cozy Home” at Japanese airports,national designer tour salons, key city roadshows, and quarterly store experiences. In terms of channel,Toshiba actively promoted retail transformation. Toshiba completed the cooperation with over 200brand operators, built 260 star-level life pavilions of Toshiba brand and over 350 Toshiba brand jointhalls, promoted the realisation of a latest unified terminal image and preliminarily completed thebuilding of the national retail system.WAHIN continued breaking the boundaries of traditional home appliance models. The brand insists oninnovation, embracing the Generation Z with "Trendy Designs, Practical Functions and FunInteractions". It strengthened the slogan "Young and Daring" for branding, and positioned itself as abrand of "young, high-tech and trendy appliances", continuing to provide users with good-looking,interesting and surprising products with easy-to-use technology. The total retail sales of the brand in2023 was close to RMB9 billion. During the "Double 11" period, the sales of WAHIN products reachedclose to RMB1.2 billion. Particularly, WAHIN air conditioning products ranked among the top three in
JD.com, Tmall and Douyin by value of retail sales. In terms of brand, in 2023, WAHIN collaborated withpartners such as champion of the China Rally Championship and the School of Art Management of theCentral Academy of Fine Arts during the spring and Youth Day seasons, initiating synergistic efforts toexplore novel modes of youthful marketing. This endeavour led to the introduction of artist-customisedtrendy products and virtual store metaverse marketing strategies, garnering favour among youngerdemographics. During the summer of 2023, WAHIN engaged in cross-industry collaboration with thetop-tier Chinese anime “Soul Land”, employing AIGC technology for the first time in brand eventmarketing. It launched limited-edition iced beverages and air conditioning fragrances, continuouslydelving into trendy and enjoyable scenarios. On “Double Eleven” in 2023, capitalising on the fervoursurrounding the League of Legends S13 World Championship, WAHIN partnered with the JDG team tounearth the sustained emotional value of its products, perpetuating the cultivation of branddifferentiation. In 2023, WAHIN’s brand exposure exceeded 4.4 billion UV, with a year-long increase infollowers across all platforms surpassing 686,000. In terms of marketing, WAHIN is a solid TOP3 in theair conditioner industry. In 2023, it mainly promoted structural models, such as 3-HP floor-standing, 2-HP wall-mounted and fresh air conditioners to build the user mind of "WAHIN Magic Machine" seriesproducts. Through the matrix penetration of all-platform introduction of off-site celebrities, the searchindexation of "WAHIN Air Conditioner" in Douyin and Xiaohongshu increased by more than 120% and200% respectively year on year, with a total of 280 million visits across the Internet. The e-commercesearch ranking of "WAHIN Air Conditioner" elevated to TOP15, which is an impressive result of thetraffic attraction and sales promotion efforts. As such, the brand has achieved dual gains on brandpresence and product sales.G. With technological innovation as the core driving force, focused on green energy and keyindustrial components, grasped growth opportunities in the industry, and provided green,efficient and intelligent products and technology solutions for pan-industrial customers acrossthe worldMidea Energy Solutions and Industrial Technology is a co-builder in digital transformation and greensustainable development across the global pan-industrial sector. With the vision of "Technology Drivesthe Whole World”, it provides technologically advanced, reliable and eco-friendly key components for
the consumer appliance and industrial automation segments based on decades of experience in thehome appliance and HVAC industries, as well as offers green energy solutions across the entireenergy value chain based on its expertise in energy management. The Industrial Technology ResearchInstitute and a strategic development organisation have been established in 2021 to focus on bothindependent development and acquisitions. Based on the solid root technology system, such asthermal management technology, drive control technology, energy storage technology, power andelectronic technology, etc., a complete industrial chain layout and product matrix have been put inplace in the field of key industrial components and new energy. Continuous efforts are also made toincrease the investment in key and cutting-edge technologies, and enhance the introduction of seniorexperts in the industry. In 2023, Midea Energy Solutions and Industrial Technology received a numberof awards in the industry, including eight science and technology awards that are of the provincial levelor above. To name a few, a first prize of 2023 Science and Technology Progress Award of ChinaNational Light Industry Council for the "Research and Industrialisation of Key Technologies for HighlyAdaptable Silent Variable Frequency Compressor", a first prize of the 2023 National Business Scienceand Technology Progress Award for the "Research and Industrialization of Key Technologies for HighPower Density Permanent Magnet Motor and its Compressor", and a second prize of the 2022 Scienceand Technology Progress Award of Guangdong Province from Guangdong Provincial Department ofScience and Technology for the "Research and Industrialization of Key Technologies for the New-generation Cross-category and Low-carbon Motor Systems". In 2023, more than 1,500 patentapplications were lodged and nearly 400 invention patents were granted, in addition to two 24th ChinaExcellence Awards for Patents. Also in the year, seven technologies of which the development was ledby Midea Energy Solutions and Industrial Technology (namely, "Research and Application of KeyTechnologies for High Power Density Permanent Magnetic Motors and Compressors", "Research andApplication of Key Technologies for Energy-efficient R290 Rotary Compressors", "Research andApplication of Key Technologies for Green and High-quality Thin Permanent Magnet Motors","Research and Application of Key Technologies for Quasi-dual-stage Reciprocating Compressors andCooling Systems", “Research and Application of Key Technologies for High Capacity Highly EfficientVariable Frequency Scroll Compressor”, “Research and Industrialisation of Key Technologies forIntegrated Rotary Compressor”, and “CO
Rotary Compressor for Thermal Management of ElectricPassenger Vehicles”) have been recognized by bodies of experts in the industry as "Internationally
Advanced". Meanwhile, the "R290 Mini-sized Double-cylinder Large-capacity Inverter Compressors"and the "Novel Ultra-high Power Density DC Brush-less Fans for Large Variable Refrigerant Flow (VRF)Air Conditioning Systems" developed by Midea Energy Solutions and Industrial Technology won the2023 AWE Award for Core Components. Additionally, two subsidiaries of Midea Energy Solutions andIndustrial Technology, namely Guangdong Meizhi Precision-Manufacturing Co., Ltd. and GuangdongWelling Motor Manufacturing Co., Ltd., were included by the Ministry of Industry and InformationTechnology into the 2022 List of Green Manufacturing and recognized as national "Green Factories".By maintaining the focus on the field of key industrial components for consumer appliances, MideaEnergy Solutions and Industrial Technology continued to consolidate its leading position in the industry.First, according to the 2023 data from ChinaIOL.com, in terms of residential air conditionercompressors, its global market share increased to 45%, continuing to rank first in the world, while itachieved breakthroughs in overseas markets for scroll compressors, and launched the brand newproduct of R290 Heat Pump Compressor in the European region, providing a new experience that isenergy-efficient, safe, reliable, low-carbon and environmentally friendly, and contributing to thesustainability of the heating, ventilating, and cooling industries. Second, in terms of refrigeratorcompressors, its global market share reached 16%, ranking second in the industry, and breakthroughswere achieved regarding the core customer base in several overseas markets such as the US, Brazil,and India. Third, in terms of motors, its global sales shares recorded approximately 40% and 22% forresidential air conditioner motors and laundry appliances motors, respectively, maintaining theadvantage as an industrial leader, which, coupled with the launch of a high-efficiency silent product ofHousehold Fresh-air Outer Rotor Motor, provided a firm support for the expansion of new marketsegments. The Foshan Xingtan Base for components of consumer appliances has been established tomake a forward-looking layout in intelligent manufacturing of mechanical and electrical products. Mideahas comprehensively automated, digitalized and intellectualized the production layout, process designand production management, seeking to build an Industry 4.0 intelligent manufacturing demonstrationbase in China. The integration work on the Thai compressor company proceeded well, which hashelped significantly increase the overseas production capacity of refrigerator compressors. The Thaimotor factory's construction has been completed, initially establishing overseas mass productioncapacity for ECM motors. Third, through the facilitation of the mass production in 2023 in the
manufacturing base in India, the first self-built overseas base for A/C compressors, the global supplycapacity for the key components continued to increase. Additionally, Midea Energy Solutions andIndustrial Technology continued to invest more in R&D of chip products and technologies, as 14 chipproducts of four major series (namely, master control, touch control, inverter, and IPM) have been putinto mass production and introduced to the market (over 30 million chips sold in the year), with aninternationally advanced performance regarding the quality indicators for the same type of products.This is followed by the successful supply of these products to mainstream manufacturers of householdappliances, and the earning of the Best MCU of the Year of the 2023 China IC Design AchievementAward from AspenCore for MCU MR88F001 (a master control chip product).In response to the rapid growth of the renewable energy industry, Midea Energy Solutions andIndustrial Technology focused on providing comprehensive, effective, and integrated green energysolutions throughout the entire energy value chain. These solutions encompass large-scale energystorage, commercial and industrial energy storage, residential energy storage, smart grids, photovoltaicEPC, and new energy vehicle components. In the energy supply segment, it offered photovoltaicsolutions; in the energy allocation segment, it provided intelligent power distribution system solutions; inthe energy consumption segment, it delivered new energy vehicles and pedelec components thatachieve higher energy efficiency, as well as efficient and energy-saving variable frequency drives; inthe energy regulation segment, it offered energy storage solutions that enhance load adjustability andensure power supply reliability; and in the energy management segment, it provided intelligent energysolutions. With respect to new energy, in 2023, CLOU Electronics tightly grasped opportunities from theglobal energy storage industry by accelerating localization in the Northern American market. It hasincorporated a company in America to further strengthen its presence in the overseas market. Theabilities to design energy storage products and provide localized services have been improved, andactive measures have been taken to conduct business expansion in the energy storage markets ofAsia, Africa and South America based on the channel advantage of foreign power grids, so as toachieve the global layout of the energy storage business. In terms of products, in 2023, CLOUElectronics passed the review as a corporate technology centre recognized by the national government.The Aero product series have been integrated into a platform, which supports rapid deployment andinstallation, thereby greatly reducing the time needed for on-site grid connection. Moreover, it launched
the Aqua series (liquid-cooling product portfolio) to provide one-stop services for customers from early-stage investment to the full-life-cycle capacity increase at the DC side. Meanwhile, it is planning for thedevelopment of the second-generation liquid-cooling products in order to provide integrated energystorage solutions. In the field of smart grids, Midea Energy Solutions and Industrial Technology hassteadily advanced its business development, actively participating in projects with the State GridCorporation of China and the China Southern Power Grid. In the 2023 tender procurement forelectricity meters (including electricity consumption information collection) by the State GridCorporation of China, it was among the first-choice suppliers. It also secured contracts as amainstream supplier in the framework tender for distribution network equipment by the China SouthernPower Grid. Additionally, it intensified efforts to expand into overseas markets, achieving significantyear-on-year growth. It obtained relevant certification qualifications for low-voltage metering switchproducts and actively participated in the formulation of enterprise technical standards for meteringswitches with the State Grid Corporation of China. It completed the development and inspection of theentire series of electricity meters and electricity consumption information collection products for theState Grid Corporation of China and the China Southern Power Grid in 2022. It also completed theresearch and development of intelligent pole-mounted switches with integrated functions (capacitivetapping), digital pole-mounted switch products, integration terminal function and protocol consistencytesting devices for the State Grid Corporation of China, multi-version single-phase/three-phaseelectricity meter simultaneous online testing production line, and remote testing system for chargingpiles. Concurrently, it expedited international certification for new products, with the overseas 24 seriesnew products passing third-party authoritative organisation SGS certification and accelerated aging test(ALT). In terms of the supply chain and manufacturing, in 2023, the resources of the supply chain wereintegrated to reduce the procurement costs. Meanwhile, the reduction in the bids made to win projectsrelated to any category of components or parts for intelligent power grids has been achieved.Furthermore, taking the advantage of large projects, the rapid cost reduction for core energy storagecomponents has been promoted. Additionally, the cell resources were supplemented, and leadingbattery suppliers were employed. On the other hand, the efficiency and automated degree ofproduction was improved by promoting the full-automation-oriented renovation of the production line forsingle-phase electric energy meters, and introducing a fully-automated module production line to theenergy storage base in Yichun. Also, planning and implementation of the expansion of the new liquid-
cooling line has been completed. Hiconics consistently practiced Midea Group’s “Green Strategy” ofsustainable development. In the field of new energy, it rapidly developed residential energy storage andphotovoltaic EPC businesses. In the residential energy storage sector, it adopted an independentresearch and development production model, vigorously introducing research and developmentpersonnel and enhancing production capacity layout. Simultaneously, it invested in the construction ofhigh-standard testing centres within the industry, advanced product certifications in major overseasmarkets, met various requirements of global customers, and has secured significant orders frommultiple overseas markets. It has established integrated research and production capabilities forenergy storage inverters, battery packs, and other vertical integration, covering various core segmentsof the industry chain. Combining overseas market demands, it developed products such as single-phase and three-phase integrated residential energy storage systems, and also positioned itself insolar inverters, charging piles, and component-level power electronic products. In the photovoltaic EPCfield, by establishing a photovoltaic EPC operation headquarters, it quickly seized opportunities inenergy structure transformation and promotes the layout of domestic businesses and backendcapabilities. It offered solutions including residential photovoltaic solutions, zero-carbon industrial andcommercial parks solutions, and smart energy convergence solutions externally, experiencing rapidoperating revenue growth. Continuously increasing investments, it established a new research anddevelopment base in Suzhou, improved the layout of the research and development system, upgradedand transformed production lines, enhanced self-production capabilities in core areas, and constructedmanufacturing bases in Anqing to comprehensively support medium and long-term manufacturingneeds. Simultaneously, it deepened internal and external sales transformations, reshaped overseasmarketing teams, and successfully built marketing channels in mainstream overseas markets such asEurope and the Americas.Deepening its focus on intelligent transportation components, Midea Energy Solutions and IndustrialTechnology leverages its solid core technology in the consumer electronics field to quickly developthree major product lines: Automotive Grade thermal management, electric drive systems, and chassisactuation systems. The existing eight product lines of the three major systems gradually went intoproduction and delivery, and the total shipment of 750,000 units in 2023, representing a YoY increaseof 400%. In terms of technological breakthroughs, following the industrial trend of integration, the
upgrading from components to modules has been implemented. Based on the solid mastery of thermalmanagement technologies for years, Midea launched the Integrated Module for Thermal Management(Comprehensively Integrated) after the introduction of the water-end integrated modules and therefrigerant integrated modules. In terms of market expansion, over 20 new customer-orienteddesignated cooperation projects were initiated in 2023. Furthermore, the compressor products havebeen recognized by multiple customers and have covered all model types of multiple mainstreamautomobile manufacturers. Meanwhile, the first customer-oriented designated cooperation project forthe Integrated Module for Thermal Management (Comprehensively Integrated) has been received, withthe estimated output value of potential orders exceeding RMB300 million. Additionally, theindependently developed product of the 800V Silicon Carbide High Rotation Speed Motor Compressorcontinues to win recognition from more major car makers at home and high-end customers abroad. Interms of capacity guarantees, thermal management, electric drive, and chassis actuation product lineshave all started mass production. Furthermore, the mass production and deliveries of products such ascompressors and valve terminals have been achieved at the new energy vehicle parts manufacturingbase in Anqing. Midea Energy Solutions and Industrial Technology acquired Wuhan TTium Motor in2022, officially entering the field of two-wheeled travel and expanding its business in the keycomponents of pedelecs. Furthermore, by introducing Midea's supply-chain system and advancedexperience of large-scale production, it set up modern factories in China and Vietnam. Moreover, itsuccessfully pitched to multiple industrial leaders in Europe, concluded agreements with domesticstrategic customers, and continued to improve the product matrix of E-bikes in 2023.In the field of industrial automation, Servotronix, Hiconics, SUNYE and other brands under MideaEnergy Solutions and Industrial Technology provide complete solutions from the sensing to the controllevel for customers in the process, hybrid and discrete industries, helping industrial customers improvequality and efficiency, and achieve digital transformation and green development. As a specialist in fullprocess innovation in industrial automation, Servotronix focuses on the entire industrial automationchain, including software tools, motion controllers, servo drives, servo motors, and encoders, andcontinuously provides customised motion control solutions for customers in various fields. Meanwhile, itenhanced the application of products and technologies in new fields, with a focus on customers fromindustries such as lithium batteries, photovoltaics, semiconductors, robots, laser processing, and
consumer electronics by conducting targeted customer pitching campaigns and providing them withintegrated solutions. Based on its advantage of the advanced technological strength, it launchedmultiple products such as the BD3 AC Servo System, the CDHD2S Linear Drive, the DC304Manipulator Control System for Integrated Display and Control, the SoftMC804 Medium-sized MotionController, and the Vision Motion Controller within 2023. Additionally, it continued to promote reforms inmarketing management and enhance process management, and used digital information systems todevelop the full-value-chain closed-loop management system from business leads to paymentcollection, so as to improve the ability to acquire business leads and achieve their successfulconversion. As a domestic top brand in the field of high-voltage variable frequency drives, Hiconics hasformed industrial drive solutions with high-voltage and low-voltage variable frequency drives as its coreproducts. Also, it actively participates in the revision of national and international standards related tovariable frequency drives to promote wider application of technologies in the industry. Hiconics’ HCAseries of high-performance high-voltage variable frequency drives won the "Outstanding ProductInnovation Award" issued by the China Power Supply Society for its high power density, highlyintegrated design, high-speed operation and other features. As for low-voltage variable frequencydrives, SUNYE under Hiconics continues to launch differentiated products. Furthermore, Midea EnergySolutions and Industrial Technology actively works on reducer and other key component technologies.Its self-developed high-performance harmonic reducer won the “Leaderobot 2023 Robot ReducerTechnology Breakthrough Award” at the Annual Conference of China Robots. It also improved itsbusiness layout regarding the harmonic reducer products for SCARA robots, six-axis robots andcollaborative robots. While the new factory for reducers has completely put into operation and theprevious bottleneck on the precision processing technology for harmonic reducers has been eliminated,independent production and delivery of the reducer products have been achieved, with the delivery ofover 6,000 units.H. Seized market opportunities amid domestic and international circulations, responded toChina’s goals regarding “carbon emission peak” and “carbon neutrality”, made technologicalinnovations and business model upgrades, and provided customers with full-stack solutionsfor intelligent buildings
Midea Intelligent Building Technology, with the vision “to be a global leader in building technology" andthe mission of "co-building sustainable smart space", has transformed from a commercial airconditioning product supplier to an integrated solution service provider for intelligent buildingecosystems. Midea Intelligent Building Technology has six major product manufacturing bases andseven R&D centres worldwide, with a sales network covering global markets. It has formed the largestand most comprehensive professional smart building product matrix and service network in China. In2023, according to Commercial Air Conditioner Market data, Midea ranked No. 1 in terms ofcommercial air conditioner sales in the domestic market, and the market shares of Midea's coreproducts, such as centrifugal units, screw chillers and modular units, are the highest among domesticbrands. According to the data from ChinaIOL.com, Midea leads the way in the domestic VRF marketcompared with other domestic or foreign brands, with a market share exceeding 20%. As shown bydata from www.abi.com.cn, the output and unit sales of Midea’s centrifuge products exceeded 2,200units in 2023, surpassing foreign top brands to grasp the largest domestic market share of centrifugalunits. Meanwhile, data from ChinaIOL.com show that in 2023, Midea Commercial Air Conditioneraccounted for more than 27% of China's total commercial air conditioning export value. According tothe European Heat Pump Association's data forecasts, to achieve the REPowerEU plan, the number ofheat pumps in the European market will increase to 60 million units by 2030. In view of that, MideaIntelligent Building Technology is continuously expanding its heat pump production base in Italy, andcomprehensively enhancing Midea's competitiveness in the European market.Midea Intelligent Building Technology launched the "GREEN FOR ONE" strategy and the "Digitalization,Engineering, Procurement, Construction, and Operation (DEPCO)" model at the 2nd TRUE BuildingTechnology Summit held at the beginning of 2023. Specifically, the "GREEN FOR ONE" strategy helpsall practitioners to respond to challenges from the low-carbon industrial transformation from fourdimensions, namely products, ecosystem, services, and, the industry. The DEPCO model is acomplete set of service standards and systems to effectively implement "smart building" projects, whichis people-oriented and operating objectives-centred. In 2023, Midea Intelligent Building Technologyparticipated in domestic and overseas industry exhibitions, such as ComVac ASIA 2023, AHR EXPO,ISH Frankfurt, the China Heat Pump Exhibition (HPE), the China Refrigeration Expo, the ChinaInternational Intelligent Building Exhibition, China International Medical Equipment Fair (CMEF)
(Spring), the China Hospital Construction Conference and International Hospital Build andInfrastructure Exposition (CHCC), the China Animal Husbandry Expo, the Entrepreneurs Summit ofEnergy Conservation Service Industry, the Industrial Green Development Achievements Exhibition, andthe Shanghai International Carbon Neutrality Expo in Technologies, Products and Achievements, todemonstrate a series of product development results and solutions. These included the K WINGMagnetic Levitation Centrifugal AC Compressor and its key component—the Magnetic LevitationVariable Frequency Centrifugal Compressor, the R290 Air-source Heat Pump, the Carbon Neutrality-oriented Air-source Heat Pump Unit, the M-Thermal Air Source Heat Pump, the Full VariableFrequency Air-source Heat Pump Unit for Cooling and Heating, the R32 Variable Frequency Air-cooledModule Unit, the Variable Frequency Direct Heating Circulating Hot Water Unit, the Water-cooledScrew Variable Frequency High-temperature Heat Pump Unit, the Variable Frequency Air SourceBlaze Heating Unit, and the Dual Grade I Sideward Variable Frequency Blaze Unit. Meanwhile, whatwas demonstrated also covered the integrated energy solution, the customised HVAC solutions forscenarios, such as livestock and poultry greenhouses and slaughtering, Midea's comprehensive energysolutions for low-carbon industrial parks, the Intelligent Operation Center (IOC) Platform of MideaIntelligent Building Technology Jingzhou Factory, the smart hospital solution “LIFE2.0” for medicalcustomers, Midea's two brand-new digital carbon reduction platforms--the "iBUILDING Product CarbonFootprint Management Platform" and the "iBUILDING Virtual Power Plant Operation and ManagementPlatform", KONG DDC M0 and KONG NZ Systems. Particularly, the integrated energy solution, basedon the iBUILDING Midea Building Digital Platform, enhances the comfort of users through the buildingload sensing and prediction technology for HVAC. Concurrently, the coupling control of energyconsumption facilities, such as PV, energy storage, heat pumps, and air conditioners, are achieved tosatisfy management requirements, such as green energy supply, dynamic power distribution, efficientpower supply, and the interaction between power supply and load, power the whole house withrenewable electricity, and create a healthy and comfortable living environment. The smart hospitalsolution LIFE2.0 empowers the evolution and upgrading of specific scenarios such as wards, outpatientclinics, surgeries, testing, imaging, machine room facilities, command centres and other healthcarespaces through “a big platform and small scenarios" and the integration of the four flows of LIFE. Thissolution can help promote the change from system integration to scenario application, and help smarthospitals build "future-oriented" capabilities. The iBUILDING Product Carbon Footprint Management
Platform empowers enterprises with the real-time collection, query, and integrated authentication ofdata on carbon footprint throughout the lifecycle of products. Additionally, this platform has multiplefunctional modules, such as carbon footprint modelling, carbon footprint analysis, supply chainmanagement, carbon footprint report management, and supply chain authentication management,establishes strategic cooperation with authentication agencies, such as SGS and T?V SUD, and cangenerate review reports in line with requirements of varied authentication agencies. The iBUILDINGVirtual Power Plant Operation and Management Platform, based on Midea's many commercial airconditioning systems for commercial buildings nationwide, supports the power system in peak shaving.Meanwhile, through Midea Intelligent Building Technology's energy efficiency management solutions, ithas accelerated the connection to the water-cooled air conditioning system, constantly expanded itsadjustable load capacity. Furthermore, this platform can assist the government in maintaining reliablepower supply to residents and enterprises, support power companies to achieve peak shaving andensure the safe and stable operation of power grids, and help users to obtain subsidy benefits ofenergy conservation and emission reduction. Moreover, Midea Intelligent Building Technology signedthe Load Aggregation Platform Cooperation Agreement with the China Electric Power ResearchInstitute in 2023 to jointly create an air conditioning load aggregation platform, which will be promotedto all subsidiaries of State Grid Corporation of China, promote the digital reform of load management,and support the orderly and stable power supply in all regions.With respect to product development, Midea Building Technologies, in 2023, successively launchedmultiple new products to consolidate its business in areas such as HVAC, building automation, andelevators. These include the launch of the whole-new MCube Series Energy Storage ThermalManagement AC Liquid-Cooled Unit and the new-generation R290 Refrigerant Nature Series IntegralHeat Pump in Europe. Among these, the MCube Series Energy Storage Thermal Management ACLiquid-Cooled Unit can operate reliably in various harsh environments, maximising the safety andstability of energy storage containers. It is UL- and CE-certified, reaching a leading level in the industry.Additionally, it achieved a 75% reduction in heating energy consumption and a 23% increase in coolingenergy efficiency through full-frequency intelligent control technology and innovative heat pumptechnology, significantly improving the adaptability of low-temperature batteries. The new-generationNature Integral Heat Pump utilises R290 refrigerant with an extremely low GWP value of 3, featuring
exceptional performance in extreme temperatures. It is the first product to be HP Cold-resistanceCertified by Intertek across the world, functions well in ultra-low temperatures. Midea K WING MagneticLevitation Centrifugal AC Compressor and its key component Magnetic Levitation Variable FrequencyCentrifugal Compressor showcased research and development achievements in the field of oil-freemagnetic levitation. Midea K WING Magnetic Levitation AC Compressor adopted a high-speed motordirect drive structure and magnetic levitation bearing technology, eliminating the need for othermechanical transmission structures and lubricants. The magnetic levitation variable frequencycentrifugal compressor can deliver 100% oil-free air, ensuring compressed air meets the high-qualitylevel of ISO08573-1 Class 0, meeting the strict requirements for compressed air purity in industriessuch as pharmaceuticals, food, and beverages. Midea’s newly developed K WING Screw EvaporativeCooling Chiller Unit optimised the cooling water system using evaporative cooling technology, providinggreater energy savings compared to air-cooled units, with easier installation and maintenance. Iteffectively addressed issues such as large footprint, high energy consumption, high noise levels, andoperational difficulties of traditional chiller units. To address the four major pain points in water machineoperations, Midea officially launched the Chiller Smart Operation Solution, which includes iManagerand Chiller Doctor. iManager, supported by iBUILDING’s underlying digital capabilities, is a large-scaleintelligent software platform for property and equipment maintenance managers of commercial airconditioner equipment. Chiller Doctor covers online, offline/local network intelligent operation andmaintenance, realising software-hardware linkage through 4G intelligent edge gateways, facilitating thedigital and intelligent upgrades of chillers. The new-generation VRF VC MAX with cooling function only,equipped with an efficient and powerful scroll compressor with enhanced vapor injection, satisfiesrefrigeration requirements within a wide range of temperature. Atom X, specifically designed for theNorth American market, integrates 24V unitary units and VRF units, and combines the sidewardoutdoor unit and the indoor unit. It can not only reduce the installation space for the outdoor unit, butalso maintain the current interior architectural style. Coupled with the automatic filling of refrigerants, itcan be flexibly applied to the North American market dominated by alternative scenarios. Atom T is aseries of multifunctional VRF units and products that integrate air cooling and heating and waterheating functions, adopt the R32 environmentally friendly refrigerant, and are developed for theEuropean Union market. The outdoor units of the whole series can meet the requirements of diversefamily scenarios. Additionally, the series meets the EU and Australian subsidy requirements for energy
efficiency. The MDV Power series of light commercial air conditioners features fully variable frequencytechnology, high efficiency, and energy conservation. Midea's third-generation full DC technology that itcarries can help save 20% more energy. It satisfies complex installation requirements through longpiping and high drop height. The standard 35Pa external static pressure of this product enables strongheat dissipation. Being compatible with built-in and ducted internal units, it can be applied in multiplescenarios, such as shops, catering, leisure, and entertainment. With the MDV New Gen Series VRF asa targeted product, Midea powered into emerging markets, supporting VRF transformation needs withnew and old processes and a full-process system, and intelligently and efficiently output optimalsolutions through transformation design software. The newly released KONG DDS (Direct DigitalSphere) system aims to solve problems such as complex installation and high maintenance costs oftraditional building automation systems. DDS features small size, easy installation and maintenance,flexibility, and adaptability to building control upgrade needs. The digital elevator brand, LINVOL,introduced the Evin-E/Evik-E passenger elevator, a digital and intelligent elevator solution specificallydesigned for residential buildings. This solution was aimed at enhancing management and servicesthroughout the entire lifecycle. Utilising the MECS frequency-conversion integrated control system andelevator Internet of Things ("IoT") technology, it has achieved highly integrated, precise, and efficientcontrol. The elevators feature precise leveling technology, as well as multiple protection settings, suchas door light curtain protection, CPU WDT protection, and reverse operation/speed protection, ensuringboth comfort and safety for passengers. Moreover, Midea's digital building platform, iBUILDING, hasbeen utilised to build a digital operation and maintenance system that covers all scenarios of buildings.The construction of the Phase I factory of the Xiaotang Intelligent Manufacturing Base for LINVOL hasbeen completed and the second-generation machine room freight elevator was introduced. Theseindustry-leading strides in terms of speed and lifting height have assisted Midea in unlocking itspotential for vertical space in buildings. Additionally, Midea Swimming Pool Heat Pump received theworld’s first T?V Süd certificate for swimming pool heat pump recycled material content and the firstgovernment procurement demand standard certification (cooling unit for green data centre coolingsystems) issued by the China Quality Certification Centre (CQC).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 customised design based on the building's characteristics. At present, the iBUILDING smartbuilding business has stepped into industrial parks, medical institutions like hospitals, and publicfacilities. In terms of market expansion, in 2023, Midea Intelligent Building Technology secured multiplemarket orders and provided products and services to clients across various industries. These includeprojects such as the National Museum of Chinese Writing, the Chengdu Universiade, the RajkotGreenfield International Airport in India, the Yuanjiang Railway Station Plaza in the China-Laos Railway,the Zhengzhou-Jinan High-Speed Railway, the Ningbo Metro Line 6, the Huawei Artificial IntelligenceComputing Centre, the Shanghai Xinjiangwan Office Park of Douyin Group, the CentralisedProcurement Project of China Mobile for High-pressure Chiller Units, the Wyndham Grand ZhaoqingDowntown at Seven Star Crags, the Xi’an TUS-Children’s Hospital, among others. Industrial projectsencompassed the Chang’an Automobile Yubei Factory and Liangjiang Factory, the CRRC’s factory forthe production of 100-meter-long large blades, the centralised procurement project for commercial airconditioner for Li Auto, and the Keda Intelligent Industrial Park in Guangzhou. Multiple projects ofMidea Intelligent Building Technology have won awards, resulting in constantly improving marketrecognition and influence. Particularly, the iBUILDING Intelligent Operation Centre and the HeyouInternational Hospital Project both entered the Fortune magazine’s list of China's Best Designs 2023.And three awards of the 2023 Red Dot Award and four awards of the iF Design Award 2023 weregranted to Midea Intelligent Building Technology’s ChillerDoctor Gateway, the Cassette Indoor Unitwith 360° Circular Air Exhaust, the R290 Air-source Heat Pump Unit, Midea Headquarters BuildingIntelligent Operations Center (IOC), Midea Jingzhou Factory Intelligent Operation Center (IOC), andMidea Industrial Park West District Intelligent Operation Center (IOC). The three iBUILDING smartbuilding benchmark projects--Midea Headquarter Building, the Jingzhou Factory of Midea IntelligentBuilding Technology, and the West District of Midea Industrial Park--won the 2023 Asia Design Prize.Projects such as the Shanghai Tongji Hospital IOC, the Midea Headquarters Building IOC, and theMidea Jingzhou Factory IOC received the A’ Design Award and the Successful Design Award. MideaHeadquarters Building, Shanghai Tongji Hospital, and Midea Intelligent Building Integrated DigitalManagement Cloud Platform iBUILDING Portal were awarded at the 16th International Design Awards(IDA). In the 2023 “Blue Sky Cup” evaluation of efficient HVAC systems, Midea’s high-efficiency HVAC
system for the Shanghai Citigroup Tower and the M-BMS ultra-efficient intelligent environmental controlsystem for the Beijiao Park Metro Station both received the “Excellent Engineering Award”. The M-BMSultra-efficient intelligent environmental control system for the Dadao Metro Station also received the“Energy Saving Technology Award”. Midea was recognised as a typical case in Guangdong Province’s“Carbon Peak and Carbon Neutrality” initiative for its case study titled Aiding Green SustainableDevelopment with Zero-Carbon Production Lines, Workshops, Parks, and Products. Midea’s "SmartClean Space Solution" won the titles, "Preferred Solution" and "Quality Solution" of Operating RoomPlanning, Design and Construction of the Second "Professional Promotion Project of High-qualityDevelopment of Hospitals in China--Golden Ruyi Award". Additionally, LINVOL smart elevators forvillas were recognized as the "User Preferred Home Elevator Brand" at the First National HomeElevator Summit.In regard to technological innovation and standardization, Midea Intelligent Building Technologycontinuously strengthened R&D input and made remarkable results in 2023. For example, the "KeyTechnologies and Industrialization of Wide Temperature Range Full Condition High-efficiency Multi-split Air Conditioning Systems", jointly completed by Midea, Shanghai Jiao Tong University, Xi'anJiaotong University, and Guangdong Midea Environmental Technologies Co., Ltd., won the First Prizeof Industry-university-research Cooperation Innovation of the China Industry-university-researchCooperation Innovation and Promotion Award. The project “Wide Temperature Range High Efficiencyand Energy Saving Air Source Heat-pump Heating Key Technologies and Industrialisation” completedby Midea in collaboration with Shanghai Jiao Tong University was awarded the Innovation Award FirstPrize of the 2023 Invention and Entrepreneurship Awards by the China Association of Inventions.Midea’s key technology and industrialisation projects for wide temperature range multi-scenario high-efficiency multi-connected air conditioning systems, as well as research and application projects forsmart building IoT control systems and virtual debugging platforms, were respectively awarded the FirstPrize and Second Prize of the 2022 Productivity Promotion (Innovative Development) Awards. Theproject “Efficient Equipment Room Multi-Intelligent Body Distributed Control System and VirtualDebugging Platform Technology Research and Application” by Midea was awarded the First Prize ofthe 2023 Energy Conservation and Emission Reduction Technological Progress Awards. The project“Large-scale Multi-connected Heat Pump Type Air Conditioning High-precision Digital Simulation and
Industrial Application” jointly completed by Midea and Shanghai Jiao Tong University won the FirstPrize of the 2023 China Simulation Federation Scientific and Technological Award. The project “KeyTechnologies for Low Carbon Lifecycle of Large-scale Multi-connected Heat Pump Type AirConditioning Based on Digital Simulation” completed by Midea in collaboration with Shanghai JiaoTong University and the project “Key Technologies and Applications of Ultra-efficient IntelligentEnvironmental Control and Operation Maintenance System for Rail Transit Stations” completed byMidea in collaboration with Guangzhou Metro Group respectively won the first prize and second prizeof the 11th China Association of Refrigeration Scientific and Technological Progress Award; Midea’s“Heat Transfer Enhancement Mechanism and Industrialisation of New Heat Exchangers Based onNon-uniform Collaboration of Wind Speed and Fin” and “Research on New Corrosion-resistantAluminum Tube Technology and its Industrial Application in High Energy Efficiency All-aluminum HeatExchangers” respectively won the first prize and second prize of the 2023 Science and TechnologyProgress Award of Guangdong Light Industrial Council. Four of Midea products, namely the "MDV8Unbounded VRF Unit", the "65kW-R32 Medium- And High-temperature Commercial Heat Pump Unit",the "Magnetic Levitation Ice Storage Chiller Unit", and the "Smart Building IoT Controller", wererecognized as "Innovative Products of the 2023 China Refrigeration Expo" by the OrganizingCommittee of China Refrigeration Expo. Midea’s two technological achievements, “High-efficiency andHigh-reliability Integrated Electromechanical Control Magnetic Levitation Variable FrequencyCentrifugal Unit” and “Key Technologies and Applications of Coordinated Optimisation Control andPanoramic Smart Operation and Maintenance of Environmental Control System” were evaluated by theexpert team of academicians organised by China Machinery Industry Federation and recognised as“Internationally Advanced”. Midea’s “Key Equipment and System Technology for Direct EvaporativeCooling and Waste Heat Recovery in High-altitude Data Centres” completed in collaboration with TibetNingsuan Technology Group Co., Ltd., Xi’an Polytechnic University and other units were evaluated bythe China Refrigeration and Air-Conditioning Industry Association and recognised as “Reaching theOverall Internationally Advanced Level”. Midea’s “Ultra-efficient Intelligent Environmental ControlSystem for Rail Transit” and “Multi-agent Adaptive Energy-saving Control Technology” weresuccessfully selected into the Recommendation Catalog of Energy-saving Technologies andEquipment (Products) of Guangdong Province (Version 2023) organised by the Energy Bureau ofGuangdong Province, providing technical support for promoting comprehensive green transformation of
social and economic development and achieving the goals of carbon peaking and carbon neutrality.Moreover, the "Magnetic Levitation Variable Frequency Centrifugal Ice Storage Dual-condition Unit"and the "R32 All DC Variable Frequency High-efficiency Commercial Heat Pump" developed by MideaIntelligent Building Technology won two Gold Awards and the "Air-cooled Variable Frequency Screw"won a Bronze Award at the 48th Geneva International Inventions Exhibition. With respect to industrystandardization, Midea participated in the formulation or revision of multiple national standards, industrystandards, and group standards, including the national standards of the Water-source HighTemperature Heat Pumps Using The Vapor Compression Cycle and the Chiller (Heat Pump) Units forEnergy Storage Batteries, the industry standards of the Magnetic Levitation Centrifugal Compressorswith Refrigerants, the Air Conditioning Units for Enclosed Space of Communication Base Stations, andthe Technical Specification for Field Measurement of Energy Efficiency and Energy Saving of Multi-splitAir Conditioning System, and the group standards of the Green Intelligent Multi-split Air Conditioning(Heat Pump) Units. Additionally, Midea Intelligent Building Technology won the title, 2023 Organizationwith Outstanding Contribution to Heat Pump Standardization of the China Energy ConservationAssociation.I. Strengthened innovation in robotic product development, promoted high-performanceoperations in the whole value chain and integration in the industrial chain, as well asaccelerated development of 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 2023, KUKA continued to promote the innovation of various products andtechnologies. In the field of general industry, KUKA launched KR CYBERTECH series of robots, whichare suitable for processing and manufacturing scenarios from grip and handling to polish, oriented toprice sensitive markets, with multiple advantages such as lower costs, higher quality, and morecomprehensive functions, and thus easier for customers of small and medium-sized enterprises toachieve automation upgrades. Among the series, KR CYBERTECH KR 20 E robots can operate underdifferent working conditions, with a payload up to 20 kg and an operation distance up to 1820 mm. At
the International Foundry Trade Fair held in Germany in 2023 (GIFA 2023), KUKA showcased KUKAcell4_premachining manufacturing cells and KR FORTEC ultra heavy-duty robots for customisableautomation. Among them, the cell4_premachining manufacturing cells have compact modular design,can be applied in reprocessing casting scenarios such as polish and smoothing, saw cutting, milling,cleaning, and grinding, and can achieve finishing treatments of different materials, parts, andcomponents with maximum flexibility and user-friendliness. The robotic manufacturing cells include KRQUANTEC nano robot, library milling application, powerful motor spindle, quick tool-replacingmechanism, KUKA three-axis positioner kp3-v2v-3, etc. At the Leading Exhibition for Smart Automationand Robotics held in Munich in 2023 (Automatica 2023), KUKA displayed its latest version of KRQUANTEC series robots. This series of products can save energy consumption up to 60%, with apayload up to 300 kg and an operation distance up to 3,904 mm, and can be applied in many marketsegments such as automobile, casting, and medicine, with such advantages as excellent performance,economy, and flexibility. At the 2023 World Robot Conference, KUKA unveiled its new KR FORTEC-2ultra series, representing KUKA’s fifth-generation heavy-duty robot series. With an impressive payloadof up to 800kg and a minimal weight of only 2.2 tons, it boasts an excellent payload-to-weight ratio.With a maximum reach of 3.7 meters and a wide range of motion, it can be widely applied in fields suchas automotive, battery, and aerospace, offering advantages such as high precision, rigidity, andreliability. In the field of human-robot collaboration, KUKA demonstrated its product mix of LBR iisycollaborative robot and the new version of operating system iiQKA.OS, and also showcased suchproducts as KMR iisy mobile collaborative robot. Among the products, LBR iisy is a sensitive, precise,and easy-to-operate collaborative robot. Its edgeless arm design allows personnel and collaborativerobots to work safely side by side, and all joints are equipped with integrated torque sensors that caninstantly detect the slightest touch. Featuring an ergonomic product design, and being easy to operate,solid and durable, LBR iisy can carry a payload of 3-15 kg. In comparison, KMR iisy mobilecollaborative robot is a mix of collaborative robot and transport platform that are comprehensivelyintegrated, comprising LBR iisy collaborative robot with a payload of 11 or 15 kg, and KMP 1500Pmobile platform bearing an additional load up to 200 kg. Fast, safe, and mobile, KMR iisy can beapplied in various scenarios such as installation, internal logistics, and robotic service system. In themedical field, KUKA displayed at the European Robotics Forum 2023 an innovative medical productapplication, namely "Arthritis Ultrasound Robot", which helps physicians to quickly diagnose patients'
rheumatoid arthritis through ultrasonic imaging by using KUKA's highly sensitive light-duty LBR Medmedical collaborative robotics. Besides, at the International Conference on Robotics and Automationheld in London in 2023 (ICRA 2023), KUKA and its partners demonstrated how the LBR Med roboticscould be applied in highly complex and sensitive medical scenarios such as brain tumour biopsies, bysimulating tumour biopsies in the real-time tracking models and enabling physicians to place biopsyneedles with the aid of the robotics. In addition, the extra flexible magnetic endoscopy provided byAtlas Endoscopy can effectively overcome the defects of conventional colonoscopy such as discomfort,sedation-related complications, and high variability of examination results, and this technique alsomainly applies KUKA LBR Med medical collaborative robotics to achieve operation and examination.Italian startup Robota utilises KUKA’s KR 6 AGILUS robot in a surgical instrument sterilisation chamber.It accurately identifies dental surgical instruments and performs disinfection operations on them,enabling unmanned operation for 24 hours, significantly saving time for medical institutions. In 2023,with respect to market development, KUKA and Siemens Healthineers further expanded theircooperation in such fields as minimally invasive surgery, and in the next two years, KUKA will provideSiemens Healthineers’ angiography system with 300 robots, of which, KUKA KR QUANTEC robots willbe the core components. Since 2016, globally there have been more than 550 hospitals using this setof medical system. KUKA also intensified its cooperation with FAW-Volkswagen. In the latter’smanufacturing base in southern China, which is capable of producing 300,000 sets of battery packsannually, approximately 100 KUKA Robotics were applied in multiple manufacturing links of batterypack product lines such as weld, bond, and assembly, involving KUKA's multiple series of robotproducts such as KR QUANTEC, KR FORTEC, and KR titan. KUKA is also designing a CO2-neutralbattery assembly system for Finnish automotive parts supplier Valmet Automotive. Through this systemand leveraging KUKA’s industry experience and professional capabilities, Valmet Automotive aims toset new standards in energy efficiency and is committed to achieving sustainable production of electricvehicle battery systems.KUKA continuously promotes the integration and expansion of resources in the Chinese market andintensifies organizational reform and product iteration with a focus on industrial applications and keycustomers. On the market front, in 2023, KUKA China continued to intensify its cooperation withleading customers in the new energy sector by offering integrated solutions to major NEV
manufacturers, which has been recognised and praised by customers. KUKA China was honoured withawards such as BYD’s Annual Best Partner, Sunwoda’s Excellent Partner, and FAW-Volkswagen’sOutstanding Partner. In the consumer electronics industry, KUKA achieved breakthrough progress,with products such as six-axis robots and SCARA robots entering the supply chain systems of industry-leading brands and being widely used. In the field of logistics automation, KUKA provided logisticsautomation upgrade services to many enterprises including GAC Aion, Melaleuca, Neoperl, and VXLogistics. In the medical industry, KUKA can provide one-stop intra-hospital logistics and pharmacyautomation solutions, and has provided intra-hospital smart logistics product services to hospitals suchas Jingzhou Central Hospital, Zhu Jiang Hospital, the Second Affiliated Hospital of NanchangUniversity, Guowen (Changchun) International, Jinan Central Hospital, and West China Tianfu Hospital.On the product development front, in 2023, KUKA China launched three series of five robot products,including three SCARA KR20 robots adapted to CS box 2 controllers for the consumer electronics andnew energy industries, Delta KR3 SDR for the food, pharmaceutical, and electronics industries, and KRCybertech 20 E and other robot products. In addition, in 2023, KUKA China also completed the firstindependently developed vision product, 2D vision lite, to assist SCARA products in achieving marketbreakthroughs in the consumer electronics industry. KUKA participated in joint research anddevelopment projects such as 3D vision applications and 2D vision applications to empower robotsystem business. In terms of robot application integration, KUKA China continued to cultivate the DTCmodel, closely meeting user needs, and providing continuous support for the automation transformationof customers in different industries. For example, by providing humanoid broom-pan robots to helpcustomers achieve intelligent brewing of high-quality liquor, supporting ranches in achieving dairyfarming automation through the combination of KR IONTEC robots and 3D vision positioning systems,and providing protein extraction automation solutions for biotechnology companies in collaboration withBioyond Robotics. With respect to manufacturing and supply chain, in 2023, the second phase ofMidea KUKA Intelligent Manufacturing Park (Shunde, Guangdong) has been put into full operation,which comprehensively promoted the localization of robot supply, and supported manufacturingautomation and digital transformation. The park has also introduced suppliers covering a variety of keycomponents for robotics to improve the layout of the industrial chain. As such, a park with the mostcomplete industrial robotics industrial chain in China has taken shape. Moreover, the KUKA FORTEC-2production line has been officially put into operation, further ramping up the capacity of heavy-duty
robots. Furthermore, KUKA East China Manufacturing Base (Kunshan, Suzhou) has also been officiallyput into use in 2023. As a manufacturing base for the integrated application products of KUKA China’sindustrial automation, Swisslog Logistics, and Swisslog Healthcare, among others, it has furtherimproved KUKA China's capacity layout. In 2023, the patented technology independently developed byKUKA China, namely the "control method, device, computer equipment and storage media for roboticsmotion", had the honour to win the 24th China Patent Excellence Award. The Intelligent RoboticsIndustrial Design Centre under KUKA China has successfully entered the sixth list of national-levelindustrial design centres by the Ministry of Industry and Information Technology. Furthermore, KUKAalso proactively assisted Midea Group in boosting its intelligent manufacturing. By the end of 2023, therobot density of Midea reached 570 units per 10,000 persons, and Midea Group will further increase itsinput to boost its intelligent manufacturing capacity.J. Deepened the long-term incentive and protected the interests of shareholdersIn 2023, Midea continued to encourage the core management to take responsibility for the Company’slong-term development and growth by further enhancing its long-term incentive schemes. Midea haslaunched nine stock option incentive schemes, seven restricted share incentive schemes, eight globalpartner stock ownership schemes, five business partner stock ownership schemes and the 2023 stockownership scheme, which have helped, in a more effective manner, to align the long-term interests ofsenior management and core business backbones with that of all shareholders. Midea Group protectsits shareholders’ interests by ensuring a consistent dividend policy. It shares its growth withshareholders with a cumulative amount of cash dividend payouts that is about to exceed RMB107billion (inclusive of the proposed 2023 final dividend) since the Group’s listing in 2013. In addition to theconsistent 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.
3. Core Competitiveness Analysis
With the following core competitive edges, Midea is able to fully grasp development opportunities and
achieve significant growth.A leading global technology company in smart home and commercial and industrial solutionsAs a leading global technology company in smart home and commercial and industrial solutions, Mideaprovides services to customers in over 200 countries and regions. It leads the way in various markets,including various household appliances and their key components, commercial air conditioners,robotics and automation. In 2023, Midea Group’s revenue reached RMB373.7 billion, marking its eighthconsecutive year on the Fortune Global 500 list, demonstrating its global leadership and outstandingperformance. Midea persists in consolidating its market leadership in the global home applianceindustry. According to a report by Frost & Sullivan, based on sales volume and revenue in 2022, Mideais the world’s largest home appliance supplier. Currently, Midea has an extensive brand matrixtargeting high-end, mass-market, and young consumer segments, and provides various smart homeappliance products. Based on sales volume in 2022, Midea’s products ranked first in six categories inboth online and offline markets in Mainland China. Furthermore, Midea has become a sizable providerof commercial and industrial solutions, leading the way in multiple markets. According to productionvolume, Midea ranked first in the residential AC compressor market in 2022, with a global market shareof 44%. Also, based on production volume, Midea ranked first in residential air conditioner and laundryappliance motors, with global market shares of 39.0% and 17.5%, respectively. According to a reportby Frost & Sullivan, based on revenue in 2022, Midea is the largest commercial air conditioner supplierin Mainland China and the fifth largest globally. Additionally, according to Frost & Sullivan’s report,KUKA Group, a subsidiary of Midea, is one of the “Big Four” industrial robot companies globally andthe second largest heavy-duty robot company based on sales volume in 2022.World-leading research and development capabilities for sustainable innovationMidea possesses leading research and development capabilities and is committed to allocatingsignificant resources to R&D efforts. From 2021 to 2023, the total R&D investment exceeded RMB39billion, with R&D spending surpassing RMB14 billion in 2023 alone, showing a continuous upwardtrend. As of December 2023, Midea has over 23,000 R&D personnel worldwide, accounting for over 50%of its non-production staff. According to a report by Frost & Sullivan, as of 31 December 31 2022,
Midea ranks seventh globally in the total number of patent families and first among Chinese enterprisesand in the global home appliance industry, with over 28,000 invention patents.Midea has established and continues to enhance its R&D system, including research units and teamswithin the Corporate Research Centre (CRC) and various business divisions. Based on research ontechnology, users, and markets, Midea has adopted a “Three Generations” R&D model andcontinuously optimised the “Four-Tier R&D System”. This system relies on the CRC for cutting-edge,basic, and common technologies, while business divisions focus on product technologies, collectivelyconstructing world-class R&D capabilities. Midea strengthens the operation mechanism of the “Three-Tier Technical Committee System”, as well as drives the exploration of cutting-edge technologies,breakthroughs in core technologies, and the layout of technology commercialisation projects. It alsopromotes the alignment of technology strategies with medium and long-term product planning, drivinggrowth through the dual-wheel propulsion of technology and products. The building of a global R&Dnetwork has been accelerated. The Group has set up a total of 33 R&D centers in 11 countries. Withthe “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 and better talents, particularly top technology leaders andtalents, to build a competitive edge of talents.While strengthening its global R&D network, Midea also works on constructing an open platform ofinnovative ecosystems. Through deepening the implementation of technology projects to integratequality technological resources across the world, a global innovation system has been put in place. Byway of integrating various resources of large companies, technology companies, universities, researchinstitutes and innovation consulting agencies, a technology ecosystem has been put in place andcontinuously expanded, which has access to enormous resources for technological innovation.Additionally, a scientist system has been established with seven academician workstations/workshops
and 18 academicians on more than 200 cooperation projects. These projects cover green, energy-saving, health, intelligent, robotics, automaton, medical and energy technologies, among others. Interms of basic research, the Group cooperates with domestic and foreign scientific research institutions,such as the University of Illinois at Urbana-Champaign, Purdue University, The University of Sheffield,University of Minnesota System, UC Berkeley, Tsinghua University, Shanghai Jiao Tong University,Zhejiang University, the Chinese Academy of Sciences, Harbin Institute of Technology, Xi’an JiaotongUniversity, Huazhong University of Science and Technology and South China University of Technology,in order to establish joint labs for deepening technological cooperation. The Group also upgrades andmake innovations on cooperation models by carrying out strategic cooperation with tech companiessuch as BASF, Honeywell, 3M, and SCHOTT to build a global innovation ecosystem through multiplechannels. Midea continues to achieve major technological breakthroughs and product innovationsthrough R&D investment, and its R&D achievements continue to optimise its product portfolio andrefine its brand image, as well as contributing to the technological progress of the industry.High-performance operations and digitisation throughout the value chainEvery operational link of enterprises, including supply chain, manufacturing, sales, and productdevelopment, faces intricate processes and vast scales. Every year, Midea procures raw materials andcomponents worth hundreds of billions of RMB from over 8,000 suppliers and sells products acrossmore than 200 categories to tens of thousands of small and medium-sized retailers and othercustomers. Therefore, digitisation is crucial for the Company’s operations. More than 5,000professionals within the Group are dedicated to the digital transformation and upgrade of the Group.In terms of the supply chain, Midea’s Integrated Supply Chain (ISC) management system sets anexample of excellent supply chain management operations. It provides a vital system architecture forefficiently fulfilling customer orders and managing global supply chains, achieving intelligentreplenishment and faster inventory turnover, and enhancing the collaborative efficiency of production,supply, and sales throughout the value chain. The ISC management system enables seamlessconnection with suppliers and automation of the procurement process based on sales and inventorydata. Supported by an efficient supply chain and big data, inventory building and replenishment of theentire warehouse product portfolio can be achieved in an efficient manner, greatly improving production
efficiency.With respect to intelligent manufacturing, leveraging digital technologies, Midea is committed tobuilding high-quality, flexible, green and efficient factories. Five factories have been recognised as“Lighthouse Factories” by the World Economic Forum, representing significantly improved productionefficiency. After digital transformation, the residential AC factory in Nansha, Guangdong, has reducedoperating costs by 23% and increased production efficiency by 36%. The experience of LighthouseFactories is rapidly promoted across multiple production bases globally. Midea’s intelligentmanufacturing capabilities combined with efficient supply chains enable a rapid response to customerdemands, aligning production with customer needs, increasing production efficiency, and reducinginventory.In terms of market channels, Midea leverages digital technologies to directly connect with an extensivenetwork of small and medium-sized retailers, continuously optimising sales channel networks. Throughthe “Midea Cloud Sales” platform, small and medium-sized retailers can directly order products,promoting the sales of core products and new products. Midea continues to enhance the functionalityof “Midea Cloud Sales” and constructs the “Midea Cloud Sales+” ecosystem covering all tiers ofmarkets. As a core competitive edge, Midea possesses an exclusive store system that coversextensive markets. And it says steadfast in promoting the enhancement and transformation of theexclusive store system in service, operation, and comprehensive retailing, among other capabilities.In terms of product development, Midea improves its product development capabilities throughdigitisation. By establishing a digital product planning platform, Midea rapidly translates technology intoproducts that meet customer needs. It keeps advancing platform modularisation to increase theaccuracy of product planning. During the period from 2021 to 2023, the project development cycle(calculated based on the average time from project initiation to completion) has been shortened byapproximately 16%. Leveraging its comprehensive product portfolio and considerable economies ofscale, combined with a digital consumer engagement model, Midea continuously enhances userresearch and insight capabilities to assist in formulating efficient research and development strategiesand developing products and solutions that meet market demands.
High-performance operations and economies of scale throughout the value chain has broughtoperational efficiency advantages that are difficult to replicate. Midea’s “T+3” model, supported bycomprehensive digitisation, efficient supply chain management, and production and sales channeloperations, has led to improvements in multiple efficiency indicators year by year. For example, theaverage cycle time from order placement to delivery in the domestic market decreased from 21 days in2021 to 12.5 days in 2023, significantly lower than the industry average.A comprehensive and continuously deepening global networkIn the domestic market, with its continuous efforts over the years, Midea has formed a multi-channelnetwork which has a complete business layout and covers a wide range of areas, thus meeting thepurchase needs of online and offline consumers for household appliances. Midea continues to improveits offline business layout around user needs, and has created a network layout of comprehensivehousehold appliance stores, specialty stores of self-owned products, traditional retailers and e-commerce franchise stores, covering the entire market from first-tier cities to townships. It also providesprofessional scenario-based solutions for corporate customers. Particularly, Midea boasts a uniqueexclusive shop system in the industry with more than 20,000 outlets, where various needs of usersfrom new decoration to updates can be met in pre-decoration stores, flagship stores, professionalstores, combo stores and other stores. Midea continuously provides industry-leading digital platformservices to retail stores. It also focuses on expanding and constructing premium brand stores forCOLMO and Toshiba. Centred around "smart suite operation" and "entire-house renovation solutions",Midea actively cooperates with home decoration, furniture, building materials, and design channels,seeking to capture front-end traffic. The Company has built over 2,500 "home decoration + appliances"deeply integrated brand stores. In 2023, the retail sales on the pre-decoration market saw a year-on-year increase of over 80%. With exclusive stores as the core, the Company builds a “Midea CloudSales +” ecosystem covering markets at all tiers, establishes an exclusive store system with corecompetitiveness for various markets, as well as firmly promotes and transforms the exclusive storeservice, operation, and all-product-category retailing capabilities, among others. In addition, Midea isalso accelerating the development of new channels such as Pinduoduo, Douyin, Kuaishou, andXiaohongshu. These efforts, together with membership operation, product suite promotion and
intelligent transformation, can drive sales and user growth.In overseas markets, Midea has put in place a global network for research and development,manufacturing, and marketing, representing the capability for global development. With 17 overseasresearch and development centres in 10 countries, Midea integrates global R&D resources to buildcomplementary advantages in global technological research and development. Among the 40 majorproduction bases globally, 21 are located overseas. As such, Midea is able to realise global productionand delivery, seizing growth opportunities in overseas markets. Overseas sales contribute to over 40%of Midea’s total sales, with products exported to over 200 countries and regions worldwide. In manyoverseas markets, online and offline sales networks have been established, with approximately 5,000after-sales service outlets. Continuously deepening the application of digital sales platforms inoverseas markets, over 9,000 retailers in Southeast Asia have joined Midea’s overseas sales platform.As of 31 December 31 2023, Midea has over 30,000 overseas employees. Midea also continuouslydeepens and expands its global business network through strategic acquisitions and joint ventures.The rapid growth of Midea’s overseas original brand manufacture (OBM) business is evident, with OBMrevenue exceeding 40% of overseas smart home revenue in 2023. Mainly featuring Toshiba, Midea,and Comfee brands, OBM products have demonstrated strong competitiveness in numerous overseasmarkets. In 2023, on the Amazon platform in the United States, the market shares of Midea’s own-brand window air conditioners and microwave ovens approached 30% and exceeded 40%, respectively.Additionally, TLSC achieved a turnaround from loss to profit within approximately three years after theacquisition, showcasing Midea’s capabilities in global business integration and global brandmanagement.Sustained growth in the business of commercial and industrial solutionsMidea has established a rapidly growing business of commercial and industrial solutions. Revenuefrom this business as a percentage of total revenue has increased from 18.5% in 2020 to over 26% in2023, with revenue from the said business approaching RMB100 billion in 2023. Commercial andindustrial solutions have become one of the main engines driving the continuous growth in Midea’sbusiness.
Midea Energy Solutions and Industrial Technology, with technology as the core driver, commands keytechnologies in “green energy” and “key industrial components”. With a rich brand portfolio, it continuesto deepen cooperation with customers in high-growth areas such as consumer appliances, industrialautomation, photovoltaic energy storage, and intelligent transportation, among others. It provides globalpan-industrial customers with green, efficient and intelligent products and technological solutions. Thebusiness group continues to increase investment in key and cutting-edge technologies. Through theacquisition of new energy companies—CLOU Electronics and Hiconics, it has entered the energystorage industry with tremendous market potential.Midea Intelligent Building Technology offers integrated solutions for intelligent buildings in various fields,including infrastructure, utilities, industrial parks, and agricultural facilities. Its comprehensive smartsolutions mainly cover smart low-carbon solutions, smart rail transit, smart hospitals, and smart parks.With the digital platform iBUILDING at its core, it empowers building equipment and enhances theoperational and management efficiency of building facilities. It has successfully provided solutions forlandmark projects such as the Jakarta-Bandung High-Speed Railway in Indonesia and the NationalStadium (Bird’s Nest) in Beijing.With KUKA Group at its core, the robotics and automation systems business, as one of the world-renowned providers of intelligent robotic automation solutions, KUKA provides comprehensive products,system integration, and services to customers in various industries such as automobile, electronics,consumer goods, logistics/e-commerce, healthcare, and more. KUKA continues to consolidate andenhance its market leadership in the field of robotics and automation solutions. In 2023, both revenueand profit of KUKA Group hit record highs. Its business performance in China was particularlyoutstanding, with revenue contribution from KUKA China increasing from 15% in 2020 to over 22% in2022.Midea possesses diversified commercial and industrial solutions, providing integrated solutions toclients across multiple industries. In horizontal expansion, it consistently enriches product categories,expands scale, and enhances efficiency advantages. In vertical expansion, it continuously developsand iterates compressors, motors, and other key industrial components, and enters cutting-edgetechnology fields through acquisitions, such as servo systems and industrial robots. Through both
horizontal and vertical expansions, Midea creates industrial synergies, laying a solid foundation andinjecting strong momentum for the sustained growth of its business of commercial and industrialsolutions.Advanced corporate governance and valuesMidea is built to grow on the back of advanced governance mechanism, future-proof values, andmanagerial mindset growth. Midea’s corporate governance emphasises the shared responsibilities,rights and obligations, striving to establish an internal entrepreneurial group and fully inspireentrepreneurial spirit. Midea has long been committed to creating maximum value for employees,customers, shareholders, and society. To recognise employee contributions and acknowledgeperformance, Midea has established a multi-tiered long-term incentive mechanism primarily based onstock incentives. As of the end of 2023, Midea has launched nine Stock Option Incentive Schemes,seven Restricted Share Incentive Schemes, and 14 Stock Ownership Schemes for its managementteams and key employees at different levels. Midea is committed to providing the best experience forcustomers, striving to deeply understand their needs and preferences, and optimising productdevelopment and business models accordingly. Over the years, Midea’s product portfolio hascontinuously expanded to meet diverse customer needs. The trust and support from shareholders arecrucial to Midea’s development. Midea is dedicated to creating value for shareholders and sharinggrowth with them. Since its listing in 2013, Midea has paid out a total of RMB86.7 billion in cashdividends and implemented share repurchases totaling over RMB27.1 billion. Midea attaches greatimportance to environmental and social responsibility, striving for sustainable development. It wasrecognised as an Industry Benchmark for Sustainable Development Industrial Enterprises in the “2022Forbes China Sustainable Development Industrial Enterprises Top 50 Selection”. In “Forbes China2023 ESG Inspiring Cases” selection, it was recognised as one of the ESG Case Companies withPractical Reference Significance.
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
| 2023 | 2022 | YoY Change (%) | |||
| Amount | As a percentage of total operating revenue (%) | Amount | As a percentage of total operating revenue (%) | ||
| Total | 372,037,280 | 100.00% | 343,917,531 | 100.00% | 8.18% |
| By business segment | |||||
| Manufacturing | 333,060,319 | 89.52% | 305,846,997 | 88.93% | 8.90% |
| By product category | |||||
| HVAC | 161,110,843 | 43.31% | 150,634,586 | 43.80% | 6.95% |
| Consumer appliances | 134,691,669 | 36.20% | 125,284,737 | 36.43% | 7.51% |
| Robotics, automation systems and other manufactured products | 37,257,807 | 10.01% | 29,927,674 | 8.70% | 24.49% |
| By geographical segment | |||||
| PRC | 221,131,596 | 59.44% | 201,272,589 | 58.52% | 9.87% |
| Outside PRC | 150,905,684 | 40.56% | 142,644,942 | 41.48% | 5.79% |
| By sales model | |||||
| Online | 77,330,838 | 20.79% | 68,012,355 | 19.78% | 13.70% |
| Offline | 294,706,442 | 79.21% | 275,905,176 | 80.22% | 6.81% |
Note: Consumer appliances in the table above primarily include refrigerators, laundry appliances, kitchen appliances andsmall domestic appliances.
During the Reporting Period, the energy solutions and industrial technology revenue was RMB27.9billion, up 29% year-on-year; the intelligent building technology revenue was RMB25.9 billion, up 14%year-on-year; and the robotics & automation revenue was RMB31.1 billion, up 12% year-on-year.
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 | 333,060,319 | 238,575,505 | 28.37% | 8.90% | 4.94% | 2.70% |
| By product category | ||||||
| HVAC | 161,110,843 | 119,912,866 | 25.57% | 6.95% | 3.17% | 2.73% |
| Consumer appliances | 134,691,669 | 90,239,157 | 33.00% | 7.51% | 3.19% | 2.80% |
| Robotics, automation systems and other manufactured products | 37,257,807 | 28,423,482 | 23.71% | 24.49% | 20.11% | 2.78% |
| By geographical segment | ||||||
| PRC | 221,131,596 | 163,562,521 | 26.03% | 9.87% | 7.93% | 1.33% |
| Outside PRC | 150,905,684 | 109,918,852 | 27.16% | 5.79% | 0.85% | 3.57% |
| By sales model | ||||||
| Online | 77,330,838 | 52,961,520 | 31.51% | 13.70% | 11.79% | 1.17% |
| Offline | 294,706,442 | 220,519,853 | 25.17% | 6.81% | 3.45% | 2.43% |
Under the circumstances that the statistical standards for the Company's main business data adjustedin the Reporting Period, the Company's main business data in the recent year is calculated based onadjusted statistical standards at the end of the Reporting Period
□Applicable √N/A
4.2.3 Whether revenue from physical sales is higher than service revenue
√Yes □No
| Business segment | Item | Unit | 2023 | 2022 | YoY Change (%) |
| Home appliances | Sales | In thousand units/sets | 597,163.1 | 547,765.0 | 9.02% |
| Output | Ditto | 580,947.3 | 539,852.5 | 7.61% | |
| Inventory | Ditto | 92,512.9 | 87,067.8 | 6.25% |
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 | 2023 | 2022 | YoY Change (%) | ||
| Amount | As a percentage of total cost of sales (%) | Amount | As a percentage of total cost of sales (%) | |||
| Home appliances | Raw materials | 175,242,843 | 83.39% | 170,337,613 | 83.63% | 2.88% |
| Labor costs | 13,676,011 | 6.51% | 12,746,704 | 6.26% | 7.29% | |
| Depreciation | 3,521,545 | 1.68% | 3,242,335 | 1.59% | 8.61% | |
| Energy | 2,886,391 | 1.37% | 2,760,289 | 1.36% | 4.57% |
4.2.6 Changes in the scope of the consolidated financial statements for the Reporting Period
√Yes □No
The detailed information of changes in the consolidation scope in the current period is set out in Note 5to the Financial Statements. Entities newly included in the consolidation scope in the current periodthrough acquisition mainly include ShenZhen CLOU Electronics Co., Ltd. and its subsidiaries (pleaserefer to Note 5(1)(a)), while details of those through incorporation can be found in Note 5(2)(a). Thedetailed information of subsidiaries no longer included in the consolidation scope in the current periodis 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) | 43,667,937 |
| Total sales to top five customers as a percentage of the total sales for the year (%) | 11.74% |
| 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 | 25,454,192 | 6.84% |
| 2 | Customer B | 7,330,760 | 1.97% |
| 3 | Customer C | 5,046,912 | 1.36% |
| 4 | Customer D | 3,230,985 | 0.87% |
| 5 | Customer E | 2,605,088 | 0.70% |
| Total | -- | 43,667,937 | 11.74% |
Other information about top five customers
□Applicable √N/A
Major suppliers of the Company
| Total purchases from top five suppliers (RMB'000) | 15,872,076 |
| Total purchases from top five suppliers as a percentage of the total purchases for the year (%) | 6.19% |
| 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 | 4,998,223 | 1.95% |
| 2 | Supplier B | 4,568,479 | 1.78% |
| 3 | Supplier C | 2,152,149 | 0.84% |
| 4 | Supplier D | 2,119,501 | 0.83% |
| 5 | Supplier E | 2,033,724 | 0.79% |
| Total | -- | 15,872,076 | 6.19% |
Other information about top five suppliers
□Applicable √N/A
4.3 Expense
Unit: RMB'000
| 2023 | 2022 | YoY Change (%) | Reason for any significant change | |
| Selling and distribution expenses | 34,880,875 | 28,716,121 | 21.47% | |
| General and administrative expenses | 13,476,908 | 11,582,664 | 16.35% | |
| Finance costs | 3,261,656 | 3,387,491 | -3.71% | |
| Research and development expenses | 14,583,311 | 12,618,506 | 15.57% |
4.4 R&D investment
√Applicable □N/A
Information about R&D personnel
| 2023 | 2022 | YoY Change (%) | |
| Number of R&D personnel | 23,242 | 20,782 | 11.84% |
| R&D personnel as a percentage of total employees | 11.69% | 12.50% | -0.81% |
| Educational background of R&D personnel | —— | —— | —— |
| Bachelor’s degree | 12,633 | 12,353 | 2.27% |
| Master’s degree | 5,115 | 4,457 | 14.76% |
| Doctoral degree | 648 | 548 | 18.25% |
| Other | 4,846 | 3,424 | 41.53% |
| Age structure of R&D personnel | —— | —— | —— |
| Below 30 | 7,204 | 6,566 | 9.72% |
| 30~40 | 11,842 | 11,208 | 5.66% |
| Over 40 | 4,196 | 3,008 | 39.49% |
Note: “Other” under “Educational background of R&D personnel” in the table above includes personnelunder privacy protection.Information about R&D investment
| 2023 | 2022 | YoY Change (%) | |
| R&D investment (RMB’000) | 14,583,311 | 12,618,506 | 15.57% |
| R&D investment as a percentage of operating revenue | 3.92% | 3.67% | 0.25% |
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 | 2023 | 2022 | YoY Change (%) |
| Subtotal of cash inflows from operating activities | 372,833,745 | 343,767,987 | 8.46% |
| Subtotal of cash outflows due to operating activities | 314,931,134 | 309,110,159 | 1.88% |
| Net cash flows from operating activities | 57,902,611 | 34,657,828 | 67.07% |
| Subtotal of cash inflows from investing activities | 122,203,235 | 102,953,948 | 18.70% |
| Subtotal of cash outflows due to investing activities | 153,423,090 | 116,463,458 | 31.73% |
| Net cash flows from investing activities | -31,219,855 | -13,509,510 | -131.10% |
| Subtotal of cash inflows from financing activities | 37,112,135 | 54,739,462 | -32.20% |
| Subtotal of cash outflows due to financing activities | 55,022,348 | 65,594,343 | -16.12% |
| Net cash flows from financing activities | -17,910,213 | -10,854,881 | -65.00% |
| Net increase in cash and cash equivalents | 8,755,292 | 10,581,929 | -17.26% |
Explanation of why the data above varied significantly
√Applicable □N/A
a. Primarily driven by an increase in cash received from sale of goods or rendering of services, netcash flows from operating activities increased 67.07% from last year.b. Primarily driven by an increase in cash paid to acquire investments, net cash flows from investingactivities decreased 131.10% from last year.c. Primarily driven by a decrease in cash received from borrowings, net cash flows from financingactivities decreased 65.00% from last year.d. Net increase in cash and cash equivalents decreased 17.26% 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
It is primarily due to the increased operating payables.
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 2023 | 1 January 2023 | Change in percentage (%) | Explanation about any material change | |||
| Amount | As a percentage of total assets (%) | Amount | As a percentage of total assets (%) | |||
| Cash at bank and on hand | 81,673,846 | 16.80% | 55,270,099 | 13.08% | 3.72% | |
| Accounts receivable | 32,884,739 | 6.77% | 28,237,973 | 6.68% | 0.09% | |
| Contract assets | 4,045,925 | 0.83% | 4,498,956 | 1.06% | -0.23% | |
| Inventories | 47,339,255 | 9.74% | 46,044,897 | 10.90% | -1.16% | |
| Investment properties | 1,293,629 | 0.27% | 809,936 | 0.19% | 0.08% | |
| Long-term equity investments | 4,976,109 | 1.02% | 5,188,817 | 1.23% | -0.21% | |
| Fixed assets | 30,937,963 | 6.37% | 26,082,992 | 6.17% | 0.20% | |
| Construction in progress | 4,681,220 | 0.96% | 3,843,777 | 0.91% | 0.05% | |
| Right-of-use assets | 3,048,785 | 0.63% | 2,339,878 | 0.55% | 0.08% | |
| Short-term borrowings | 8,819,176 | 1.81% | 5,169,480 | 1.22% | 0.59% | |
| Long-term borrowings | 46,138,736 | 9.49% | 50,685,948 | 12.00% | -2.51% | |
| Contract liabilities | 41,765,475 | 8.59% | 27,960,038 | 6.62% | 1.97% | |
| Lease liabilities | 2,047,319 | 0.42% | 1,507,480 | 0.36% | 0.06% |
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) | 3,284,593 | 284,587 | - | 15,811,293 | 17,607,075 | 17,190 | 1,790,588 | |
| 2. Derivative financial assets | 752,451 | -12,067 | 125,812 | 1,254,362 | 194,374 | -255,430 | 1,670,754 | |
| 3. Receivables financing | 13,526,540 | - | - | - | 196,532 | - | 13,330,008 | |
| 4. Other debt investments and other | 17,626,302 | - | - | 30,000 | 7,253,610 | 610,784 | 11,013,476 | |
| 5. Investments in other equity instruments | 41,359 | - | -1,025 | - | - | -2,460 | 37,874 | |
| 6. Other non-current financial assets | 10,625,244 | -1,128,350 | -266,696 | 172,008 | 2,597,153 | 964,885 | 7,769,938 | |
| Sub-total of financial assets | 45,856,489 | -855,830 | -141,909 | 17,267,663 | 27,848,744 | 1,334,969 | 35,612,638 | |
| Investment properties | ||||||||
| Productive living assets | ||||||||
| Others | ||||||||
| Sub-total of the above | 45,856,489 | -855,830 | -141,909 | 17,267,663 | 27,848,744 | 1,334,969 | 35,612,638 | |
| Financial liabilities | 1,895,310 | 272,054 | -38,001 | 150,077 | 520,924 | 3,662 | 1,762,178 | |
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 of theCompany were sealed, distrained, frozen, impawned, pledged or limited in any other way.
7. Investment made
7.1 Total investment amount
√Applicable □N/A
| Total investment amount of the Reporting Period (RMB’000) | Total investment amount of last year (RMB’000) | YoY Change (%) |
| 153,423,090 | 116,463,458 | 31.73% |
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 | 586,342 | 252,053 | 9,936 | -59,180 | 254,576 | 791,674 | Financial assets held for trading | Own funds | |
| Overseas listed stock | SOUN | SoundHound AI | 157,203 | Fair value method | 51,889 | 10,395 | 920 | - | 10,395 | 63,204 | Financial assets held for trading | Own funds | |
| Domestically listed | 688165 | EFORT | 178,534 | Fair value met | 274,120 | 136,138 | -100,570 | 125,451 | 299,001 | Financial assets held for trading | Own funds |
| stock | hod | ||||||||||||
| Domestically listed stock | 688322 | Orbbec | 300,000 | Fair value method | 134,670 | 150,612 | 150,612 | 285,282 | Financial assets held for trading | Own funds | |||
| Domestically listed stock | 688249 | Nexchip | 1,000,000 | Fair value method | - | -220,185 | 1,675,429 | -220,185 | 1,455,244 | Other non-current financial assets | Own funds | ||
| Domestically listed stock | 688159 | Neoway | 31,600 | Fair value method | 29,100 | 6,194 | - | -65,261 | 42,526 | 6,365 | Financial assets held for trading | Raised funds | |
| Domestically listed stock | 688162 | JEE | 88,180 | Fair value method | 153,353 | -41,135 | - | -41,135 | 112,218 | Financial assets held for trading | Raised funds | ||
| Domestically listed stock | 301135 | Real-Design | 40,000 | Fair value method | 62,101 | 7,761 | -1,017 | 8,213 | 69,297 | Financial assets held for trading | Raised funds | ||
| Domestically listed stock | 688097 | BOZHON | 55,000 | Fair value method | 89,746 | 24,341 | - | 24,341 | 114,087 | Other non-current financial assets | Raised funds | ||
| Domestically listed stock | 001283 | Highpower Technology | 20,000 | Fair value method | 38,030 | -14,299 | -32,514 | 1,729 | 7,245 | Financial assets held for trading | Raised funds | ||
| Domestically listed stock | 002157 | ST Zhengbang | 210 | Fair value method | - | 0 | 210 | 0 | 210 | Financial assets held for trading | Debt restructuring | ||
| Total | 2,640,699 | - | 1,419,351 | 311,875 | 10,856 | 1,675,639 | -258,542 | 356,523 | 3,203,827 | - | - | ||
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 | Opening amount | Gain or loss from change in fair value during the period | Cumulative fair value change recorded in equity | Purchased in the period | Sold in the period | Closing amount | Closing amount as a percentage of the Company’s closing net assets |
| Futures contracts | 85,017 | 85,017 | 0 | -3,925 | 0 | 0 | 81,092 | 0.0498% |
| Forex contracts | 352,895 | 352,895 | -233,247 | 167,738 | 128,792 | 37,722 | 118,788 | 0.0729% |
| Cross-currency interest rate swaps | 4,276,688 | 4,276,688 | -815,482 | -266,696 | 0 | 0 | 3,137,717 | 1.9264% |
| Total | 4,714,600 | 4,714,600 | -1,048,729 | -102,883 | 128,792 | 37,722 | 3,337,597 | 2.0491% |
| Explanation of significant changes in accounting policies and specific financial accounting principles in respect of the Company's hedges for the period as compared to the prior period | No change | |||||||
| Actual gain/loss in the period | Actual loss from derivatives investments during the Reporting Period was RMB-1,903.841 million. | |||||||
| Results of hedges | The Company's major risks during the Reporting Period included foreign exchange risk exposures and raw material price risks. Foreign exchange risks included foreign currency-denominated asset and liability exposures arising from overseas sales, raw material purchases, financing and other operations. And raw material price risks included exposures to fluctuations in spot trading market prices for bulk material purchases. These uncertainties arising from currency fluctuations were effectively hedged against by buying derivative contracts of the same amount and maturity but in opposite directions. | |||||||
| Source of derivatives investment funds | All from the Company’s own funds | |||||||
| Risk analysis of positions held in derivatives during the Reporting Period and explanation of control measures (Including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a result of significant fluctuations in raw material prices, the Company not only carried out futures business for some of the bulk materials, but also made use of bank financial instruments and promoted forex funds business, with the purpose of avoiding the risks of exchange and interest rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities, as well as achieving locked-in costs. The Company has performed sufficient evaluation and control against derivatives investment and position risks, details of which are described as follows: 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted in compliance with laws and regulations, with clearly covenanted responsibility and obligation relationship between the Company and the agencies. Control measures: The Company has designated relevant responsible departments to enhance learning of laws and regulations and market rules, conducted strict examination and verification of contracts, defined responsibility and obligation well, and strengthened compliance check, so as to ensure that the Company's derivatives investment and position operations meet the requirements of the laws and regulations and internal management system of the Company. 2. Operational risk: Imperfect internal process, staff, systems and external issues may cause the Company to suffer from loss during the course of its futures business and forex funds business. Control measures: The Company has not only developed relevant management systems that clearly defined the assignment of responsibility and approval process for the futures business and forex funds business, but also established a comparatively well-developed monitoring mechanism, aiming to effectively reduce operational risk by strengthening risk control over the business, decision-making and trading processes. 3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange rate fluctuations in foreign exchange market could lead to greater market risk in the futures business and forex funds business. Meanwhile, inability | |||||||
| to timely raise sufficient funds to establish and maintain hedging positions in futures operations, or the forex funds required for performance in forex funds operations being unable to be credited into account could also result in loss and default risks. Control measures: The futures business and forex funds business of the Company shall always be conducted by adhering to prudent operation principles. For futures business, the futures transaction volume and application have been determined strictly according to the requirements of production & operations, and the stop-loss mechanism has been implemented. Besides, to determine the prepared margin amount which may be required to be supplemented, the futures risk measuring system has been established to measure and calculate the margin amount occupied, floating gains and losses, margin amount available and margin amount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has submitted application for funds business should conduct risk analysis on the conditions and environment affecting operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update operating status of the funds business on a timely basis to ensure proper funds arrangement before the expiry dates. | |
| Changes in market prices or fair value of derivative products during the Reporting Period, specific methods used and relevant assumption and parameter settings shall be disclosed for analysis of fair value of derivatives | The Company carried out recognition and measurement according to “Section VII Recognition of Fair Value” in the Accounting Standard No. 22 for Business Enterprises—Recognition and Measurement of Financial Instruments. Changes in the fair value of derivatives were recognized at RMB-1,151.612 million during the Reporting Period. 1. The fair value of futures contracts was determined on the basis of publicly quoted prices in the futures market. 2. The fair value of forex contracts was determined based on banks’ quoted prices for foreign exchange products. 3. The main parameter assumptions used in the analysis of the fair value of cross-currency interest rate swaps included interest rate paid, interest rate received, frequency of interest received, frequency of interest paid, interest rate curve, exchange rate curve, etc. |
| Litigation involved (if applicable) | N/A |
| Disclosure date of the announcement about the board’s consent for the derivative investment (if any) | 29 April 2023 |
| Disclosure date of the announcement about the general meeting’s consent for the derivative investment (if any) | 20 May 2023 |
| Special opinions expressed by independent directors concerning the Company's derivatives investment and risk control | The Company's independent directors are of the view that the futures hedging business is an effective instrument for the Company to eliminate price volatility and implement risk prevention measures through enhanced internal control, thereby improving the operation and management of the Company; the Company's foreign exchange risk management capability can be further improved through the forex funds business, so as to maintain and increase the value of foreign exchange assets and the abovementioned investment in derivatives can help the Company to fully bring out its competitive advantages. Therefore, it is practicable for the Company to carry out derivatives investment business, and the risks are controllable. |
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 | 23,257 | 12,394 | 16,237 | 2,512 | 2,211 |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | Subsidiary | Manufacturing of home appliances | RMB50 million | 15,000 | 1,623 | 25,802 | 1,737 | 1,493 |
| Wuxi Little Swan Electric Co., Ltd. | Subsidiary | Manufacturing of home appliances | RMB732,487,764 | 25,504 | 6,290 | 23,830 | 1,535 | 1,393 |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | Subsidiary | Manufacturing of commercial air conditioners | RMB500 million | 16,618 | 2,629 | 18,624 | 1,459 | 1,324 |
Acquisition and disposal of subsidiaries during the Reporting Period
√Applicable □N/A
The detailed information of changes in the consolidation scope in the current period is set out in Note 5to the Financial Statements. Entities newly included in the consolidation scope in the current period
through acquisition mainly include ShenZhen CLOU Electronics Co., Ltd. and its subsidiaries (pleaserefer to Note 5(1)(a)), while details of those through incorporation can be found in Note 5(2)(a). Thedetailed information of subsidiaries no longer included in the consolidation scope in the current periodis 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 and investorof the structured entity, the Group has relevant management power in and variable returns from theentity, and has the ability to exercise its management power to impact the returns.
11. Outlook for the Future Development of the Company
Development strategies of the CompanyMidea adheres to the strategic focus of “Technology Leadership, Direct to Users, Digitization &Intelligence Driven, and Global Impact”, focuses on “Comprehensive Digitalization and ComprehensiveIntellectualization”, drives balanced development of ToC and ToB businesses under the guidance of thestrategic focus, as well as builds a complementary cycle among diverse industries. The Companydrives profitability improvement through the enhancement of product strength and core technologies inthe ToC end, providing strategic support for the transformation of the ToB business. Also, it continues tostrengthen its globalisation capability, striving to transform from a China-based company to a globalone. While maintaining its superiority in efficiency, the Company drives growth through innovation andbuilds product and technological advantages. Midea are built to grow on the back of advancedgovernance mechanism, future-proof values, and managerial mindset growth. Midea will continuouslyimprove the governance mechanism by empowering responsibilities, rights and obligations, clarifydecentralization and authorization, constantly refine the agent mechanism, optimize the incentive andconstraint system, encourage entrepreneurship and boost organizational vitality, and establish a flatand agile organization and optimization process. It will also adhere to the values of long-termism andaltruism, truly put employees, users, customers and partners at the center of all things, and improve the
EHS governance and ESG rating. Additionally, the Management will endeavor to achieve all-roundgrowth both spiritually and intellectually. Meanwhile, Midea will continue to improve the talent structure,build diverse teams that are inclusive and collaborative, and create a simple, straightforward, flat andequal environment. In the meantime, it will constantly improve consistency management across theGroup, so as to achieve consistent operations, corporate culture and values and philosophies, whichwill ensure the sustained and steady development of the Company.With strategic certainty, Midea is well prepared for uncertainties in the future. It firmly upgrades itsbusiness models. In terms of the home appliance business, the key is to achieve further growth throughbusiness model upgrades such as the Chinese Market DTC reform and the Overseas OBM Prioritystrategy, and to explore new approaches to continuously drive cost reduction and efficiencyimprovement through the combination of the through-value-chain, no-breakpoint, seamless, andpeople-never-see-people digitalisation capabilities and lean management. It is also important to insiston structural upgrading, i.e. adjusting large structures, refining small structures, and creating newstructures. The key is to provide high-quality, differentiated products. The Company continues to investin and improve the "Three Generations" R&D system to increase added value and profitability ofproducts, better support technological research and development and structural upgrading, andcontinue to invest in the future in order to achieve stable and sustained high-quality growth. In addition,Midea insists on business upgrading. By further increasing investment in the ToB business,continuously improving product strength, realising value chain autonomy, grasping opportunities toquickly seize market share, the Company fully fires up the "Second Growth Engine". With thecustomer-oriented principle as the root of corporate innovation and reform, the Company acceleratesDTC breakthroughs. Grasping capital flow, cargo flow, information flow and other information of thewhole value chain through direct contact with customers/users, the Company is able to deepen theimplementation of an online system for policies and visualisation of the whole order process. By doingso, it can gather retail data in real time, and acquire first-hand information on customer needs for itsreform and innovation. Further, the Company shortens the factory-to-user process through thedevelopment of online capabilities and the further online-offline integration, so that the products andservices can be delivered to the users at the lowest cost and the fastest speed.
Key operation points in 2024:
In 2024, based on the core strategic focus with “Technology Leadership” as the core, Midea will adhereto the operating principles of “enhancing value chain-wide efficiency alongside structural growththrough upgrades”. It will strive for a bigger business size through structural growth, globalised regionalexpansion and upgrading of the ToB business. Continuous efforts will be made to optimise cash flow,improve cost management and focus on developing competitive businesses at both the strategic andoperational levels. By working on overall efficiency improvement instead of partial fine-tuning, Midea isin a position to better cope with market volatility and uncertainty. It will endeavour to achieve its annualobjectives in a steady and high-quality manner. Meanwhile, further efforts will be made to promote thedecentralisation and improvement of the governance mechanism, develop an internal entrepreneurialgroup, and fully stimulate entrepreneurial spirit. Midea will strive to be the best it can be in a long cycle,looking at its own problems and shortcomings in a calm and rational manner.Midea will focus on "efficiency, performance and results". It will continue to drive businessbreakthroughs, advance faster with innovation, as well as explore new approaches, models, productsand capabilities. On the product end, the Company will continue to strengthen the product structureadjustment, the development of new product categories and breakthroughs in weak product categories;on the channel end, efforts are being made to promote the expansion of new markets, the use of newapproaches, and the development of new business forms such as interest-based e-commerce; and onthe operation end, the Company will insist on controlling operating risks and expenses, balancinginvestments and returns, driving higher profitability and improving cash flow. Key tasks for 2024 include:
a. Based on the core strategy of “Technology Leadership”, Midea will increase investment in R&D,improve talent structure, carry out the tasks of technology innovation, product innovation, businessmodel innovation, and process innovation, as well as build a mechanism that can support “TechnologyLeadership”. Midea will continue to promote the transformation of R&D organisations, enhanceresearch capabilities, establish the scientist system, attract global research talents and high-end R&Dpersonnel, improve the R&D network, accelerate the cultivation of overseas R&D capabilities,strengthen the development and management of overseas R&D organisations, advance the planningand implementation of overseas R&D centres by various business units, and focus on the construction
of research organisations and overseas OBM R&D teams as well as talent structure to developdifferentiated products with potential brand effects. Through the implementation of the “ThreeGenerations” plan, it will promote the improvement of operational quality, establish a quantifiedevaluation system for the “Three Generations,” use leading research projects and common technologyprojects as leverage, and continuously build a future technological leadership moat from thedimensions of technology, patents, and standards. It will continuously optimise the structure of projectsrelated to exploring cutting-edge technologies, breakthroughs in core technologies, and technologytransfer to promote the implementation of research results and enhance product capabilities. It willcontinue to advance the product technology planning of dual high-end brands, guide the productstructure upgrade of relevant product business units with “big structures, small structures, and newstructures”, and further support business development through the layout and implementation of newproducts.b. Midea will keep a high-quality development direction and stick to organic, sustained and effectiveorganic growth. In the process of implementing new strategies to boost new growth areas, the key liesin improving operational efficiency. Therefore, Midea will optimize the delivery cycle, enhance theinventory turnover, improve the cash cycle, and implement the shared inventory system. Beingcustomer-oriented, Midea will strive to be “Direct to Users” through user research, user insight, productplan transforming and user operation. Midea will promote the T+3 business model reform and high-performance operations in the whole value chain in every link from product planning to after-salesservice, so as to increase efficiency in the whole value chain and the data-driven efficiency. Channelreform will be firmly pushed forward for the front-end market. In order to win in competition, it isimportant to develop high-end products to refine the product mix. Midea will plan for, establish andrefine business middle platforms, especially data and technology middle platforms. In the meantime, itwill maintain overall consistency by sticking to “One Midea, One System, One Standard”. In face ofcommon problems such as fluctuations in exchange rates and prices of bulk raw materials, as well assourcing management, Midea will firmly promote its internal coordination and sharing mechanism andkeep perfecting 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 organisational structure, improve retail capacity, and develop user operation and back-endcapacity. Midea will also commit itself to intelligent experience terminals and user experience. In termsof channel transformation, Midea will deepen DTC transformation, transform the value chain andbusiness model, focus on the development of retail capabilities and the enhancement of useroperations around customers and users, precisely and efficiently improving end-to-end experiencessuch as services, products, and supply chains; at the customer-oriented M2b link, digital operationempowerment will be carried out, delivery efficiency will be improved through mechanisms such asvisual delivery period, overdue compensation, simplified online policies, and empowered cloudwarehouses, customer liquidity will be increased, inventory sharing will be promoted, online and offlineproduct pools will be interconnected, and a shared inventory system of innovative shared businessmodels will be achieved, improving store inventory turnover efficiency; At the b2C link, focusing onusers, digital retail empowerment will be carried out, retail resources and policies will be optimised, amodel of operating multiple stores with one business will be promoted, and user experience will beenhanced; Based on digital systems and tools, increased investment will be made in building a retailmiddle platform, cultivating user operation capabilities and data analysis decision-making capabilities,supporting retail transformation; enhancing the front-end category store user service capabilities andcross-store customer service guidance and recommendation capabilities of shelf e-commerceplatforms, optimising the allocation of internal and external traffic resources, deepening internal trafficspecial cooperation and developing KOLs and private domain traffic, while acceleratingcontent/interest-based e-commerce channel layout; strengthening the construction of online customerecosystem, focusing on cultivating stores for all categories and multiple categories of customers,expanding customer scale, improving channel structure, enhancing online and offline integratedbusiness capabilities, unifying cross-category marketing, and promoting online and offline integration.With respect to marketing, Midea will empower the retail end and customers through the refinement ofevent operations, structured product marketing, and standardised retail experience. With consistentonline and offline branding, the Company will strengthen the node integrated marketing capability. Byintegrated branding strategy, content and advertising, it is able to strengthen the quality of content andbranding effect, increase brand and product visibility, and reach customers effectively. Meanwhile, theCompany will continuously expand the base of private domain users to enhance user satisfaction and
royalty. In terms of user operation and service, Media will, focusing on user experience, improveproduct design iterations and purchasing service experiences, accelerate the establishment of two-waycommunication channels with private domain users, optimise membership operation capabilities, andimprove user satisfaction and loyalty; through refined hierarchical management of service outlets andengineer training certification systems, service capabilities and service quality will be enhanced; Mediawill also expand sales customer service evaluation scenarios, realise intelligent analysis and closed-loop management of evaluation results for service providers, and bridge the whole-scene evaluationchain for service providers; through improving performance capabilities, optimising products, andreshaping channels, a service product operation platform will be built to achieve commercial operation,continuously promote service process restructuring, service-side sales diversion, and digitaltransformation of services, providing users with a one-stop service experience. In terms of intelligence,based on existing products, Midea will continue to develop its comprehensive smart home system,focusing on the construction of a “wired + wireless” high-stability communication technology, anintegrated decision-making hub combining “cloud + edge”, and a deep integration control system of“smart home + smart appliances”, establishing a leading comprehensive smart home system. Mideawill continue to invest in research and development, developing technologies such as smart sensing, AIcontrol strategies, and large-scale model applications, introducing smart products with differentiationand leadership, continuously optimising key capabilities such as voice interaction, refining key productssuch as intelligent control screens, and enhancing the competitiveness of comprehensive smart homesolutions. Midea will build exquisite sales experience scenarios, create ultimate user store journeys,and establish highly standardised stores. By combining popular Stock Keeping Unit (SKU) withpackages, Midea will formulate different product marketing combinations, integrating home furnishingsand appliances to drive sales growth. Midea will optimise and upgrade digital tools, reduce thethreshold for store design services, and provide a complete experience of “product solutions +standardised sales services + full-chain design and installation capabilities” to enhance usersatisfaction and brand presence.d. In the overseas market, Midea will adhere to the front-end organisational system and regionaliseddevelopment as the core, accelerate the front-end infrastructure construction, build a front-end marketresource sharing platform, cultivate an international organisation and talent system, particularly
emphasising the strengthening of localisation teams, and initiate the “Global Talent Development andReserve Plan”. Midea will firmly invest in the construction of its proprietary brands, focusing onproducts, retail, and channels. On the product side, guided by user orientation, Midea will continuouslyenhance product strength and structural upgrades, improve product efficiency, adhere to the “OBMPriority” strategy, and promote the differentiation and competitiveness of proprietary brand products. Onthe channel side, Midea will continue to focus on the development of overseas e-commerce, product-centric, efficiency-oriented, actively exploring new models, embracing AI tools, focusing on the entirevalue chain operation, achieving high-quality growth and sustainable development. On the logistics andwarehousing side, Midea will focus on customer needs, establish online process control towers, buildend-to-end logistics delivery capabilities for manufacturing, channels, and customer service foroverseas proprietary brands, deploy multi-level, multi-purpose, and globally covered warehousenetworks, achieve inventory sharing and short-chain delivery, establish manufacturing materialwarehouses, multi-channel finished product sales warehouses, and post-sale spare parts warehouses,establish a globally consistent customs compliance management system, and simultaneously promoteproduct data governance, and formulate standardised processes for import and export business atoverseas bases. On the service side, Midea will continue to build a global service system covering callcentres, spare parts warehouses, technical support, IT systems, and organisational capabilities, relyingon special funds to improve OBM infrastructure, benchmarking industry benchmarks, piloting thedevelopment of comprehensive overseas service solutions in three countries. Midea will continue tocarry out basic service capacity building, promote the application of intelligent tools such as AIGC, andaccess social media and brand official websites to improve the efficiency and quality of call centres.Midea will optimise and promote the application of a global service knowledge base, establish trainingcentres in key markets, systematise training management, update service personnel’s knowledge andskills, improve the quality of technical materials and intelligent applications, establish localised repaircapabilities in multiple scenarios and technologies, and improve network coverage and single-ratecompletion in key markets. This aims to further enhance service quality, providing customers withconsistent and high-quality service experiences, and improving the digital capabilities of after-salesservice.e. In 2024, Midea will continue to deepen the implementation of its dual high-end brands strategy,
further strengthening the dual-engine power of COLMO and Toshiba brands. The COLMO brand willadvance the combination of territory retail and precision distribution, continue to expand brand storeconstruction, deepen cloud warehouse transformation, while focusing on crowd assets, layout salesaccounts, and achieve online and offline full-domain operations. COLMO will further evolve aroundproducts and user experience, launching more product suites to consolidate and enhance the high-endmarket position of air conditioners and refrigerators, and build a diversified portfolio of high-endproducts around the comprehensive smart air and water heating solutions for the whole house. In thefield of comprehensive smart home, COLMO will launch products such as home smart hosts, smartdimming drivers, and switch panels, and based on its self-developed large-scale model capabilities,provide users with more complete, reliable, and intelligent smart home appliances and integrated homesolutions. To further enhance the brand store image and experience, COLMO will provide one-stoppurchase through entire-house smart home appliance solution design services, and enhance userrepurchase and recommendation rates through integrated delivery and installation, 1V1 managerservices, appliance cleaning, and other member rights and services.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 to provide a refinedliving experience, upgrade brand image and build brand mindset, and deeply focus on layer marketingto strive for a dual breakthrough in customer base and scale. The Toshiba brand will completenationwide coverage of brand operators in the channel end and focus on key efforts in core cities,relying on brand operators to build self-operated star-rated living halls. It is expected that thecumulative number of star-rated living halls and brand joint halls will reach 1,000, focusing on retail andemphasising the cultivation of retail teams to improve store output. In the e-commerce channel,Toshiba will build a “2+5+8” customer system as a key growth driver. On the brand side, Toshiba willestablish an independent membership system, complete the supplementation of membership benefits,achieve user precipitation, and strengthen multi-product integration and cultivate loyal users.WAHIN will continue to differentiate and innovate around users, products and product accessories. It
will build a multi-category product portfolio, pursue best product functions, promote product categoryinnovation, and provide consumers with smart, comfortable and scenario-based experience. It willcontinue to promote marketing innovation, maintain its focus on forward-looking young consumers,continuously target young groups through school-enterprise cooperation, and explore diversified cross-field models during graduations and job-hunting seasons. Continued efforts will be made to improve theconversion chain, promote synergy between sales and marketing, as well as empower the conversionto e-commerce sales. Also, it will expand content-driven "virtual stores" based on “e-commercechannels + new media”, create new shopping scenarios, and drive sales through branding.f. Midea will continue to focus on the “Digitisation & Intelligence Driven” strategy, with a focus on threemain directions: enabling domestic DTC transformation, deepening overseas digitalisation 3.0, andenhancing ToB data application to improve and perfect data application capabilities. In the domesticmarket, Midea will promote the implementation of the DTC strategy, achieve retail-driventransformation, improve end-to-end service, product, and supply chain experiences, achieve a sharedinventory system of full-channel inventory integration, enhance turnover efficiency, and meet thegrowth in sales scale with minimal inventory. Midea will enhance the digital coordination capabilities ofnew product launches and price management, deepen the application of big data and algorithms,optimise the Midea Cloud Sales platform, and improve the efficiency of the domestic full value chain.Further improvements in cloud warehouse construction will enhance the retail operational experience,achieve accurate and comprehensive retail terminal data, and real-time online capabilities. In themanufacturing sector, Midea will comprehensively enhance overseas manufacturing digitalisation,deepen assembly production scheduling applications, achieve overseas mixed-flow productionapplications and online assembly, improve the efficiency of overseas supply chain operations, shortensupplier introduction cycles and improve distribution efficiency, integrate end-to-end order processinformation, and establish scenarios such as integrated logistics automatic distribution andmanufacturing data operation. Domestically, Midea will promote integrated assembly solutions, achieveintegrated headquarters assembly scheduling and simplified logic, promote supplier sourcingtransformation, deepen the end-to-end application of bulk cutting demand to settlement, driveinspection dynamicization and onlineization based on VOC/VOP, promote process digitisation toshorten process design cycles, establish an EHS operations centre to achieve risk control and agile
scheduling, deepen occupational health applications, optimise energy and carbon managementplatforms, and develop standardised solutions for energy and carbon management and microgrid toassist in year-round energy conservation and emission reduction. In the ToB business field, Midea willcontinue to increase digital investment, comprehensively explore and establish project-based digitalbusiness templates, lead in the implementation of intelligent building technology business to improveorder delivery performance, achieve end-to-end order visibility, enhance customer service quality, andactively enable various ToB industries with digital capabilities.Regarding intelligent ask-and-answer products, Midea will focus on the capabilities of intelligentquestion-and-answer, intelligent tutoring, AI dialogues, etc., around the “knowledge + AIGC algorithm +application”, targeting core scenarios. Midea will break through the bottlenecks of terminal customersand overseas multilingual intelligent question-and-answer applications, establish data and knowledgeoperation mechanisms, and improve response accuracy. The construction of the AI drawing platformwill cover the entire chain of “creative concept - material production - graphic processing”, striving toachieve the efficiency improvement goals of AIGC application promotion. The plan for cloud-nativesystems is to build a fully self-developed infrastructure platform based on container platform, hostplatform, storage platform, network platform, monitoring platform, and middleware platform to meet theavailability and data reliability requirements of mainstream public clouds. Midea will enhance the depthof the security defence system, solidifying the information security architecture of “preventing intrusion,detecting, preventing leakage, ensuring compliance, and emphasising operation”, combining securityautomation orchestration and security GPT technology to improve the automation and intelligence ofsecurity operations. In the infrastructure field, focusing on cloud business migration and establishing arapid response emergency system, Midea will continue to focus on stability construction, strengthenmonitoring capabilities, achieve smooth migration of business systems, and ensure stable operation ofthe business.g. Midea aims to drive further growth in its energy solutions and industrial technology business,continuously expand business boundaries, and accelerate growth. In 2024, in the field of green energy,Midea will promote internal business integration, focus on the grid market, explore non-grid markets,expand the new energy market, promote further integration of residential energy storage products with
smart homes, and create efficient and safe integrated household energy storage solutions for homescenarios. Leveraging overseas channel advantages, Midea will expand overseas market customers,focus on large-scale energy storage as well as industrial and commercial energy storage markets inEurope, strengthen the promotion of household energy storage in overseas markets, achieve globallayout of energy storage business, and accelerate the expansion of photovoltaic EPC business. Mideawill continue to promote platform-based research and development, optimise product processes,accelerate overseas new product development and certification, continuously reduce costs andimprove efficiency, optimise inventory management capabilities, and enhance operational managementquality. Midea will increase investment to enhance intelligent manufacturing capabilities, further deployenergy storage capacity, promote capacity expansion of the Yichun production line, and buildmanufacturing bases in Anqing and Shunde. Focusing on the main business and accelerating thegrowth of new industries, Midea will initially build differentiated competitive capabilities for the future. Inthe field of smart transportation, integrating the innovative advantages of the Midea system, Midea willaccelerate the establishment of new energy vehicle components that meet customer needs in terms of“quality, cost, and delivery (QCD)” capabilities, achieve comprehensive improvements in customers,products, and manufacturing capabilities. Midea will continue to expand the market, explore moredomestic and foreign key customers, focus on leading new energy vehicle customers, enhance themarket coverage and market share of various thermal management products for different vehiclemodels to ensure rapid growth in sales operating revenue. Simultaneously, Midea will increase producttechnology investment, promote the product technology development of surface-mounted permanentmagnet synchronous motors (SPM) and interior permanent magnet synchronous motors (IPM), andcarry out the development of next-generation platform product technologies, gradually realising thedevelopment path of “components-components-systems”. Midea will continuously improvemanufacturing capabilities, complete the expansion of electric power steering (EPS) motor productionlines, and achieve sustained capacity improvement. In the field of core components for consumerappliances, Midea will continue to enhance digitalisation and data operations, increase investment inR&D resources, improve the processes and mechanisms of technology and platform research,optimise the product mix, and driving profitability. Also, it will make continuous breakthroughs in newproducts, technologies, and applications, providing customers with eco-friendly, efficient, and intelligentproducts and technology solutions. Continued breakthroughs will be driven in market segments, and
mass production of valve, pump and other products will be promoted. Moreover, the Company willimprove production efficiency and strengthen product cost advantages, bolster its global supply chaincapabilities, as well as enhance global competitiveness by fully leveraging the local advantages of thefactories in India and Thailand. Aiming to establish an Industry 4.0 smart manufacturing demonstrationbase, it will strive for comprehensive digital and intelligent transformation in the Foshan XingtanIndustrial Park. Midea will create an overseas professional service platform, offering one-stop servicesfor small and medium-sized customers and specialised services for large customers, achievingbreakthroughs with overseas key customers and increasing the global market share of its products.The Company continues to strengthen the competitiveness of its chips for home appliances. It isdeveloping high-quality industrial-grade chips for home appliances such as master control, touchcontrol, and variable frequency chips, in addition to driving integration of chips. Relying on theadvantages of the Group's industrial chain cluster, continuous efforts are also made to drive internalsales and its percentage, as well as attract other major home appliance makers. In terms of industrialautomation, Midea will further consolidate its technological expertise in motion control, adapt to marketconditions and competitive strategies, utilise its technological advantages, and carry out differentiatedresearch and development. Focused on the iterations and upgrades of controllers and the combinationof controllers and drives, Midea will explore more product applications, and promote integratedsolutions. Additionally, it will further refine the layout of harmonic reducer product lines, develop moretop customers in the industry, and drive production and shipment breakthroughs for multiple products.h. Midea will fully leverage the advantages of domestic rapid response and manufacturing capabilities,continuously enhancing KUKA’s global competitiveness. In terms of research and development, Mideawill continue to increase research and development investment, accelerating the innovation of corecomponents and software systems through the collaboration of internal and external resources ofChinese and German research teams. In terms of market development, Midea will actively cooperatewith leading enterprises in various industries to expand into new energy, general industry, electronics,medical, logistics, and service sectors, accelerating the layout in new industries. In manufacturing,Midea will improve the domestic manufacturing layout, leveraging domestic manufacturing bases toaccelerate the formation of advantages in the industrial robot industry chain, further enhancingoperational efficiency, shortening product delivery cycles. Simultaneously, Midea will initiate the Phase
III ToB of the KUKA East China production base to provide basic support for integrated business andestablish collaborative robotic capacity. Through industry-education integration, Midea will acceleratethe layout of the KUKA education sector, expedite talent recruitment, strengthen the team size for pre-sales, post-sale, and project implementation, and provide talent reserves for business expansion.i. Midea will adhere to the value positioning of production logistics and continue to deepen digitisationand greenisation. On one hand, Midea will achieve the integration of the upstream and downstreamvalue chains through digital connectivity, launching applications such as tag clouds and building adigital collaboration platform for production logistics to assist small and medium-sized manufacturingenterprises in digital transformation, and continuously promote the integration of the manufacturingindustry and the service sector. On the other hand, in the field of green circular packaging, Midea willfocus on building a more complete packaging circulation and recycling network around factories,covering more regions and categories to continuously improve the utilisation rate of packagingresources and practice a green and low-carbon development path. Also, it will continue to deepen thewarehouse and distribution b/C integrated business, release more operational vitality through deepmechanism change, and actively explore new business models to provide services for more customers.Annto is committed to using smart supply chains as a lever to enhance the full-chain value of enterprisecustomers and improve the service experience of individual users, gradually transforming into adigital/operational logistics enterprise, with a significant increase in the number and scale of externalcustomers year by year. First, Annto will enhance service quality, focus on user experience, andachieve “online business, online service, online management” in whole scenes, creating an integratedclosed-loop service. Second, Annto will firmly move towards digitisation, introducing professionaltalents and strengthening the construction of knowledge-based and technology-based teams,increasing investment in the development of digital systems for full-chain operation platforms andmanagement platforms. Third, Annto will continue to promote standardisation and intelligence inaspects such as warehouse optimisation, traffic integration, route operation, structural changes intransportation capacity, and intelligent scheduling. Fourth, Annto will continue to deepen thewarehouse and distribution b/C integrated business, release more operational vitality through deepmechanism change, and actively explore new business models.
Risks Faced by the Company and Countermeasures:
a. Risk of macro economy fluctuationThe market demand for the Company’s consumer appliances, HVAC equipment, industrial robotics,among other products, can be easily affected by the economic situation and macro control. If the globaleconomy encounters a heavy hit and consumer demand slows down in growth, the growth of theindustries in which the Company operates, may slow down accordingly, and as a result, this may affectthe product sales of Midea Group.b. Risks in the fluctuation of production factorsThe raw materials required by Midea Group to manufacture its consumer appliances and corecomponents primarily include different grades of copper, steel, plastics and aluminum. At present, thehousehold appliance manufacturing sector belongs to a labor intensive industry. If the price of rawmaterials fluctuate largely, or there is a large fluctuation in the cost of production factors (labor, water,electricity, and land) caused by a change to the macroeconomic environment and policy change, or thecost reduction resulted from lean production and improved efficiency, as well as the sale prices of endproducts cannot offset the total effects of cost fluctuations, the Company’s business will be influencedto 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; andin overseas market expansion, there are still unpredictable risks such as local political and economicsituations, significant changes in law and regulation systems, and sharp increases in production costs.d. Risk in foreign exchange losses caused by exchange rate fluctuationAs Midea carries on with its overseas expansion plan, its overseas sales have accounted for more than
40% of the total revenues. Any sharp exchange rate fluctuation might not only bring negative effects onthe overseas operations of the Company, but could also lead to exchange losses and increase itsfinance costs.e. Market risks brought by trade frictions and tariff barriersDue to the rise of anti-globalization and trade protectionism, China will see more uncertainties in exportin 2023. The trade barriers and frictions of some major markets will affect the export business in theshort run, as well as marketing planning and investment in the medium and long run. Political andcompliance risks are rising in international trade. These can mainly be seen on compulsory safetycertificates, international standards and requirements, and product quality and management systemscertification, energy-saving requirements, the call for increasingly strict environmental protectionrequirements, as well as with rigorous requirements for recycling household appliances waste. Tradefrictions caused by anti- dumping measures implemented by some countries and regions aggravate theburden in costs and expenses for household appliance enterprises, and have brought about newchallenges 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 control systemso as to effectively prevent and control various risks and ensure its sustained, steady and healthydevelopment.
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 |
| 10 February 2023 | Midea Group HQ | By phone | Institution | ICBC Credit Suisse Asset Management, Panjing Invest, BOCIM, Everbright Pramerica Fund, Hwabao WP Fund, Taikang Asset, China Securities Capital Management, UBS SDIC, Tianhong Asset Management, TF Securities Asset Management, Oriental Alpha Fund, Rongtong Fund | 1. In terms of the continuous improvement in the penetration rate of residential commercial air conditioners, what are the Company's layouts in this field? 2. What achievements did the Company make in the heat pump business in 2022? | Log Sheet of Investor Relations Activities for 10 February 2023 disclosed on www.cninfo.com.cn |
| 28 February 2023 | Midea Group HQ | By phone | Institution | Taiping Asset Management, UBS SDIC, Hwabao WP Fund, HuaAn Fund, Maxwealth Fund, DH Fund Management, Great Wall Fund, BNB Wealth Management, HSBC Jintrust Fund Management, Zhong Ou Asset, Ping An Asset Management, China Universal | 1. What are the Company's latest developments in the automotive parts field? 2. What achievements did the Company make in research and development in 2022? 3. It has been noted that the Company's Building Technology Division and Industrial Technology Business Group participated in the 2023 AHR Expo. Could you please provide some information about this? | Log Sheet of Investor Relations Activities for 28 February 2023 disclosed on www.cninfo.com.cn |
| 17 March 2023 | Midea Group HQ | By phone | Institution | Pengyang Asset Management, CITIC Securities, Orient Fund Management, Dajia Asset Management, Franklin Templeton Sealand Fund Management, Generali China Asset Management, Tianhong Asset Management, Gfund Management, China Securities | 1. Midea Building Technology Division recently held the second TRUE Conference for Building Technology. What are the new changes? 2. What are the recent developments in cooperation between the Company and external institutions? | Log Sheet of Investor Relations Activities for 17 March 2023 disclosed on www.cninfo.com.cn |
| Capital Management, Taikang Asset, Minsheng Royal Asset Management, Bosera Funds, Bosera Funds | ||||||
| 6 May 2023 | Midea Group HQ | https://m.jhbshow.com/ | Institution and individual | The Company's investors | 1. Questions for Mr. Fang Hongbo: Regarding the acquisition of WDM, how will you position WDM in the market and within the Midea Group? What effects does Midea hope to achieve through the acquisition of WDM? 2. In 2022, the main business gross profit margin was 25.1%, compared to 23.7% in 2021, which increased significantly. What are the main reasons for this increase? Is it due to product price increases or decreases in raw material prices? 3. Please introduce the research and development situation and future plans of Midea Group. 4. The significant increase in dividends in 2022 is because the Company's short-term cash flow situation is good or because there are very good expectations for the future? 5. What is the development situation of Midea in the field of cleaning appliances? 6. In the continuous expansion process of the ToB business field, what are the key points of the Company's development? 7. What were the EBIT of KUKA and KUKA China in 2022? Thank you. 8. In Q4 2022, part of the operating costs were adjusted to selling expenses, resulting in a significant year-on-year change in gross profit margin. Has there been a change in the new revenue criteria for transportation and installation expenses? Will this adjustment also | Log Sheet of Investor Relations Activities for 6 May 2023 disclosed on www.cninfo.com.cn |
| occur in 2023? etc. | ||||||
| 13 June 2023 | Midea Group HQ | By phone | Institution | Wellington Management Hongkong Limited, Morgan Stanly Asia Limited, Fubon Fund Management (Hong Kong) Limited, PineBridge Investments Asia Limited, Great Wall Fund Management Limited, Haitong International Securities Limited, Industrial Securities International Asset Management Limited, D. E. Shaw Investment Management (Shanghai) Limited, WT AssetManagement Limited, Neuberger Berman Asia Limited, T.Rowe Price HongKong Limited, Balyasny Asset Management (Hong Kong) LTD | 1. What are the Company's current development status and future development plans for high-end brands? 2. What progress has the Building Technology Division made in implementing the "Dual Carbon" strategy and promoting the "Digitization" process? 3. What new initiatives has the Company taken in practicing corporate social responsibility and promoting sustainable development? 4. What recent breakthroughs has the Company made in the medical field? | Log Sheet of Investor Relations Activities for 13 June 2023 disclosed on www.cninfo.com.cn |
| 18 July 2023 | Midea Group HQ | By phone | Institution | Capital Investment, Foresight Fund, Morgan Stanley Huaxin Fund, New China Pension, Value Partners, New Thinking Investment Management, China Asset Management, China Merchants Securities Asset | 1. What are the Company's new initiatives in promoting smart manufacturing? 2. What new progress has the Company made in its "Global Impact" strategy this year? 3. What new collaborations has the Company engaged in within the automotive parts | Log Sheet of Investor Relations Activities for 18 July 2023 disclosed on www.cninfo.com.cn |
| Management, BlackRock Asset Management, Foresea Life Insurance, Golden Trust Investment Management, Harvest Fund, Bosera Funds, China Life Insurance, Guotai Junan Securities Asset Management, BNB Wealth Management, HZ Bank Wealth Management Wideview Asset Management, Dacheng Fund | sector? 4. What recent advancements has the Company made in the medical field? | |||||
| 19 September 2023 | Midea Group HQ | https://rs.p5w.net/html/134915.shtml | Institution and individual | The Company's investors | 1. Please introduce the development situation and highlights of Midea Group's ToB business in the first half of the year. 2. What are the main new products planned by Midea in the next stage? 3. a) Will the high growth of air conditioning this year affect demand next year? b) What are the company's sales growth expectations for the next 5 years? c) Has the Company's goal of achieving a trillion-dollar target by 2027 in Building Technology and Industrial Technology business units changed? 4. Since the acquisition of CLOU Electronics by the Company, has the operating performance of CLOU Electronics improved from losses? Has there been any improvement in the ability to obtain energy storage orders? No improvement. 5. How does Midea plan to advance amidst the trend of smartification? 6. How is the progress of the investment in Hiconics? etc. | Log Sheet of Investor Relations Activities for 19 September 2023 disclosed on www.cninfo.com.cn |
| 16 November 2023 | Midea Group HQ | By phone | Institution | China Asset Management, China Southern Asset Management, Morgan Stanley, Ping An Fund Management, Zhongrong Fund, Foresea Life Insurance, Bosera Funds, Great Wall Fund, Penghua Fund, E Fund, GF Fund Management, Orient Securities Asset Management, Bank of Communications Schroder Fund Management, Huatai-PineBridge Investments, AEGON-INDUSTRIAL Fund, Foresight Fund, Green Court, Canada Pension | 1. What are the reasons for the Company's listing in Hong Kong? What is the proportion of issuance? 2. What are the latest achievements of the Company in digital transformation? 3. How is KUKA advancing in the integration and expansion of resources in the Chinese market? 4. What are the new developments in the Company's global layout in the energy storage field? | Log Sheet of Investor Relations Activities for 16 November 2023 disclosed on www.cninfo.com.cn |
| 18 December 2023 | Midea Group HQ | By phone | Institution | Penghua Fund, China Merchants Fund, Ping An Fund Management, China Southern Asset Management, Baoying Fund Management, Springs Capital, Great Wall Fund, Wellington Fund, Dacheng Fund, Invesco Great Wall Fund Management | 1. What new initiatives has the Company taken in overseas expansion? 2. What new progress has the Company made in smart manufacturing? 3. What achievements has Midea made in product carbon footprint management? | Log Sheet of Investor Relations Activities for 18 December 2023 disclosed on www.cninfo.com.cn |
Section IV Corporate Governance
1. Basic Situation of Corporate Governance
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.The Company is constantly improving its corporate governance in strict accordance with the CompanyLaw, the Securities Law and the relevant regulations of the China Securities Regulatory Commission.There are five special committees under the Board, namely the Strategy Committee, the AuditCommittee, the Nomination Committee, the Remuneration and Appraisal Committee, as well as theESG Committee. They were designed to provide consultation and advice to the Board and validate theprofessionalization and efficiency of discussions and decision-making. The Company has establishedclear rules of procedure for its shareholders' meeting, board of directors, Supervisory Committee andspecial committees under the board, as well as the Work Rules for Company Secretary. It has alsoestablished a set of standard documents including Information Disclosure Management System, FundsRaising Management System, Connected Transaction Management System, Wealth ManagementEntrustment Management System, Insider Registration System, External Guaranty Decision-makingSystem, Foreign Investment Management System, and Management System for Finance Flow withConnected Parties, Internal Auditing System. The shareholders' meeting, the Board of Directors, theSupervisory Committee and operations management departments have clear authority andresponsibility. Each performs its own functions and maintains its stability effectively. Their scientificdecision-making and coordinated operations have laid a firm foundation for the sustained, healthy andsteady 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.
2. Independence of assets, personnel, finance, organizations and businesses whichare 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. Thelabor, 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 systems andfacilities. Intangible assets such as industrial rights, trademark ownership and non-patent technologyare 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 Company
has 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 2023 | Extraordinary | 56.9880% | 6 January 2023 | 7 January 2023 | Announcement No. 2023-001, disclosed on www.cninfo.com.cn |
| 2022 Annual General Meeting of Shareholders | Annual | 57.7129% | 19 May 2023 | 20 May 2023 | Announcement No. 2023-026, disclosed on www.cninfo.com.cn |
| Second Extraordinary General Meeting of Shareholders of 2023 | Extraordinary | 57.8273% | 13 July 2023 | 14 July 2023 | Announcement No. 2023-057, disclosed on www.cninfo.com.cn |
| Third Extraordinary General Meeting of Shareholders of 2023 | Extraordinary | 58.2956% | 11 October 2023 | 12 October 2023 | Announcement No. 2023-082, 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 | Gender | Age | Office title | Incumbent/ Former | 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 | Male | 56 | Chairman of the Board and CEO | Incumbent | 2012/8/25 | 2024/9/16 | 116,990,492 | 116,990,492 | ||||
| He Jianfeng | Male | 56 | Director | Incumbent | 2012/8/25 | 2024/9/16 | 0 | 0 | ||||
| Gu Yanmin | Male | 60 | Director and Vice President | Incumbent | 2014/4/21 | 2024/9/16 | 0 | 0 | ||||
| Wang Jianguo | Male | 47 | Director and Vice President | Incumbent | 2021/9/17 | 2024/9/16 | 0 | 0 | ||||
| Fu Yongjun | Male | 55 | Director | Incumbent | 2023/7/13 | 2024/9/16 | 200,000 | 200,000 | ||||
| Vice President | Incumbent | 2021/9/17 | 2024/9/16 | |||||||||
| Yu Gang | Male | 64 | Director | Incumbent | 2018/9/26 | 2024/9/16 | 0 | 0 | ||||
| Xue Yunkui | Male | 59 | Independent Director | Incumbent | 2018/9/26 | 2024/9/16 | 179,914 | 179,914 | ||||
| Guan Qingyou | Male | 46 | Independent Director | Incumbent | 2018/9/26 | 2024/9/16 | 0 | 0 | ||||
| Han Jian | Female | 51 | Independent Director | Incumbent | 2018/9/26 | 2024/9/16 | 0 | 0 | ||||
| Dong Wentao | Male | 38 | Chairman of the Supervisory Committee | Incumbent | 2020/10/16 | 2024/9/16 | 0 | 0 | ||||
| Zhao | Male | 48 | Supervisor | Incumbent | 2014/4/21 | 2024/9/16 | 0 | 0 |
| Jun | ||||||||||||
| Liang Huiming | Female | 40 | Employee Supervisor | Incumbent | 2017/3/30 | 2024/9/16 | 0 | 0 | ||||
| Zhang Xiaoyi | Male | 50 | Vice President | Incumbent | 2018/4/23 | 2024/9/16 | 516,575 | 516,575 | ||||
| Hu Ziqiang | Male | 66 | Vice President | Incumbent | 2014/8/18 | 2024/9/16 | 400,000 | 400,000 | ||||
| Wang Jinliang | Male | 56 | Vice President | Incumbent | 2014/8/18 | 2024/9/16 | 420,000 | -42,000 | 378,000 | |||
| Li Guolin | Male | 47 | Vice President | Incumbent | 2020/7/3 | 2024/9/16 | 480,700 | -40,000 | 440,700 | |||
| Zhao Lei | Male | 38 | Vice President | Incumbent | 2023/12/26 | 2024/9/16 | 102,700 | 102,700 | ||||
| Guan Jinwei | Male | 44 | Vice President | Incumbent | 2021/9/17 | 2024/9/16 | 535,000 | 535,000 | ||||
| Zhong Zheng | Female | 42 | Vice President | Incumbent | 2022/12/1 | 2024/9/16 | 276,152 | 276,152 | ||||
| CFO | 2022/2/22 | |||||||||||
| Director of Finance | 2019/3/22 | |||||||||||
| Zhao Wenxin | Female | 41 | Chief People Officer | Incumbent | 2022/2/22 | 2024/9/16 | 480,000 | -36,000 | 444,000 | |||
| Bai Lin | Male | 43 | Vice President | Incumbent | 2022/5/30 | 2024/9/16 | 95,079 | 95,079 | ||||
| Wei Chang | Male | 61 | Vice President and Chief Technology Officer | Incumbent | 2022/8/29 | 2024/9/16 | 0 | 0 | ||||
| Jiang Peng | Male | 50 | Board Secretary | Incumbent | 2013/10/30 | 2024/9/16 | 518,600 | -24,000 | 494,600 |
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 |
| Fu Yongjun | Director | Elected | 2023/7/13 | - |
| Wei Chang | Vice President | Appointed | 2023/12/27 | - |
| Zhao Lei | Vice President | Appointed | 2023/12/27 | - |
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 of MideaGroup. 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 and Headof 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 Director ofthe Supply Chain Management Department of Midea Group’s Residential Air Conditioner Division, theDirector of the Administration and Human Resources Department of Midea Group, and the General
Manager of Midea Group’s Refrigeration Division. Currently, he is a Director and Vice President ofMidea Group, the President of the Smart Home Business Group, and the President of MideaInternational Business, in addition to being in charge of the TLSC Division, and legal affairs.Mr. Fu Yongjun, male, holder of a Master’s degree, joined Midea in 1999 and previously worked as theGeneral Manager of Midea Environment Appliances Division, the General Manager of MideaComponent Division, and the President of Midea Electromechanical Division. He is now a Director, VicePresident, and the President of the Energy Solutions and Industrial Technology Business Group, ofMidea Group.Mr. Yu Gang, male, holder of a Doctoral degree given by the Wharton School of the University ofPennsylvania, is the Honorary Chairman and a co-founder of YHD.COM. He once served as the GlobalSupply Chain Vice President of Amazon and the Global Procurement Vice President of Dell. He is nowa Director of Midea Group, as well as 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 a holderof a Post-Doctoral degree given by the Shanghai University of Finance and Economics. He used to bethe associate dean and a doctoral supervisor at the School of Accountancy of Shanghai University ofFinance and Economics, a Founding Vice President of Shanghai National Accounting Institute andCheung Kong Graduate School of Business, the Secretary-General of China Association of AccountingProfessors, a Vice Chairman of the Steering Committee of the National Accounting Institute under theMinistry of Finance, etc. He is now an accounting professor of Cheung Kong Graduate School ofBusiness, 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 Chief ofthe main office of China National Offshore Oil Corporation, Vice President of Minsheng Securities Co.,Ltd., and Head of Minsheng Securities Research Institute. Other positions currently held by him includeDean of Reality Institute of Advanced Finance, professor at School of Economics, Hainan University,
Chairman of China Institute of Private Sector, Director of China Society of Economic Reform, memberof APEC China Business Council Digital Economy Committee, Chief Economic Advisor of ChinaFortune Securities, independent director of Midea Group Co. Ltd., Nanhua Futures Co., Ltd., HangzhouHikvision DIGITAL Technology Co., Ltd., Shaanxi International Trust Co., Ltd., and Ucap CloudInformation Technology Co., Ltd., and member of the Fiscal Reform and Development Think Tankunder the Ministry of Finance, Academic Committee of China Center for Urban Development under theNational Development and Reform Commission, and Expert Advisory Committee on IndustrialEconomic Operation under the Ministry of Industry 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. And he once served in theLegal Affairs Department, the Investor Relations Department, etc. of Midea Group, with over 10 yearsof experience in legal affairs, risk control, market value management, capital operation, etc. He is nowthe Chairman of the Supervisory Committee.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 and HumanResources Department. She is now the Chief Legal Entity Management Commissioner of the InvestorRelations Department and the Employee Supervisor 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 Midea
International 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 of theRefrigerator Division, and the President of the Refrigerator Division. And he is now a Vice Presidentand the China President of Midea Group.Mr. Zhao Lei, male, holder of a Master’s degree, joined Midea Group in 2011. He used to serve as theNorth China Director of the Residential Air Conditioner Division, China Retail Director, the GeneralManager of the domestic marketing company of the Laundry Appliance Division, and President of theLaundry Appliance Division. And he is now a Vice President of Midea Group and the President of itsResidential Air Conditioner Division.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 Director ofMidea Group, etc. She is now a Vice President as well as the CFO and Director of Finance of MideaGroup.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. 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, CSO, and the Director of Quality andSupply Chain of Midea Group.Mr. Hu Ziqiang, male, holder of a Doctoral degree, joined Midea in 2012, and has formerly worked forGE and Samsung and as a Vice GM in Wuxi Little Swan Co., Ltd. At present he is a Vice President ofMidea 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 worked asthe Vice President of China Marketing in Midea Group, and was GD Midea Holding’s Vice Presidentand Marketing Head. He is now a Vice President of Midea 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, he isa Vice President and 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 now theBoard 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 | |
| Yu Gang | 111, Inc. | Executive Chairman of the Board | 2011-04 | - | Yes | |
| Zall Smart Commerce Group Ltd. | Executive Director and Co-Chairman | 2015-08 | - | 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 Director | 2021-01 | 2024-01 | 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 | ||
| Ucap Cloud Information Technology Co., Ltd. | Independent Director | 2022-09 | 2025-09 | 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 payment
is 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 | 56 | Incumbent | 13,540 | |
| He Jianfeng | Director | Male | 56 | Incumbent | 0 | Yes |
| Gu Yanmin | Director and Vice President | Male | 60 | Incumbent | 9,880 | |
| Wang Jianguo | Director and Vice President | Male | 47 | Incumbent | 11,430 | |
| Fu Yongjun | Director and Vice President | Male | 55 | Incumbent | 11,540 | |
| Yu Gang | Director | Male | 64 | Incumbent | 450 | |
| Xue Yunkui | Independent Director | Male | 59 | Incumbent | 450 | |
| Guan Qingyou | Independent Director | Male | 46 | Incumbent | 450 | |
| Han Jian | Independent Director | Female | 51 | Incumbent | 450 | |
| Dong Wentao | Chairman of the Supervisory Committee | Male | 38 | Incumbent | 960 |
| Zhao Jun | Supervisor | Male | 48 | Incumbent | 0 | Yes |
| Liang Huiming | Employee Supervisor | Female | 40 | Incumbent | 420 | |
| Guan Jinwei | Vice President | Male | 44 | Incumbent | 11,780 | |
| Zhao Lei | Vice President | Male | 38 | Incumbent | 15,480 | |
| Zhong Zheng | Vice President, CFO and Director of Finance | Female | 42 | Incumbent | 9,450 | |
| Bai Lin | Vice President | Male | 43 | Incumbent | 10,090 | |
| Zhang Xiaoyi | Vice President | Male | 50 | Incumbent | 7,990 | |
| Hu Ziqiang | Vice President | Male | 66 | Incumbent | 3,350 | |
| Li Guolin | Vice President | Male | 47 | Incumbent | 6,490 | |
| Wang Jinliang | Vice President | Male | 56 | Incumbent | 6,060 | |
| Wei Chang | Vice President and Chief Technology Officer | Male | 61 | Incumbent | 7,730 | |
| Zhao Wenxin | Chief People Officer | Female | 41 | Incumbent | 6,350 | |
| Jiang Peng | Board Secretary | Male | 50 | Incumbent | 3,360 | |
| Total | -- | -- | -- | -- | 137,700 | -- |
Other information
□Applicable √N/A
6. Activities of Directors during the Reporting Period
6.1 Board meetings convened during the Reporting Period
| Meeting | Convened date | Disclosure date | Resolutions |
| The 15th Meeting of the Fourth Board of Directors | 27 April 2023 | 29 April 2023 | See the Announcement on Resolutions of the 15th Meeting of the Fourth Board of Directors (Announcement No. 2023-008), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 29 April 2023 |
| The 16th Meeting of the Fourth Board of Directors | 20 June 2023 | 21 June 2023 | See the Announcement on Resolutions of the 16th Meeting of the Fourth Board of Directors (Announcement No. 2023-029), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 21 June 2023 |
| The 17th Meeting of the Fourth Board of Directors | 21 July 2023 | 22 July 2023 | See the Announcement on Resolutions of the 17th Meeting of the Fourth Board of Directors (Announcement No. 2023-061), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 22 July 2023 |
| The 18th Meeting of the Fourth Board of Directors | 28 July 2023 | 29 July 2023 | See the Announcement on Resolutions of the 18th Meeting of the Fourth Board of Directors (Announcement No. 2023-065), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai |
| Securities News dated 29 July 2023 | |||
| The 19th Meeting of the Fourth Board of Directors | 9 August 2023 | 10 August 2023 | See the Announcement on Resolutions of the 19th Meeting of the Fourth Board of Directors (Announcement No. 2023-071), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 10 August 2023 |
| The 20th Meeting of the Fourth Board of Directors | 30 August 2023 | - | The Semi-Annual Report 2023, together with its summary, was approved with nine affirmative votes, 0 negative notes and 0 abstentions. |
| The 21st Meeting of the Fourth Board of Directors | 18 September 2023 | 19 September 2023 | See the Announcement on Resolutions of the 21st Meeting of the Fourth Board of Directors (Announcement No. 2023-074), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 19 September 2023 |
| The 22nd Meeting of the Fourth Board of Directors | 30 October 2023 | 31 October 2023 | See the Announcement on Resolutions of the 22nd Meeting of the Fourth Board of Directors (Announcement No. 2023-084), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 31 October 2023 |
| The 23rd Meeting of the Fourth Board of Directors | 26 December 2023 | 27 December 2023 | See the Announcement on Resolutions of the 23rd Meeting of the Fourth Board of Directors (Announcement No. 2023-091), which has been disclosed on http://www.cninfo.com.cn, China Securities Journal, Securities Times, and Shanghai Securities News dated 27 December 2023 |
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 | 9 | 1 | 8 | 0 | 0 | No | 4 |
| He Jianfeng | 9 | 1 | 8 | 0 | 0 | No | 0 |
| Fu Yongjun | 9 | 1 | 8 | 0 | 0 | No | 0 |
| Gu Yanmin | 9 | 1 | 8 | 0 | 0 | No | 0 |
| Wang Jianguo | 9 | 1 | 8 | 0 | 0 | No | 0 |
| Yu Gang | 9 | 1 | 8 | 0 | 0 | No | 0 |
| Xue Yunkui | 9 | 1 | 8 | 0 | 0 | No | 0 |
| Guan Qingyou | 9 | 1 | 8 | 0 | 0 | No | 1 |
| Han Jian | 9 | 1 | 8 | 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 Articles ofAssociation, and the Rules of Procedure of the Board of Directors, directors of the Company activelypaid attention to the Company's production, operation, financial position, and the effects resulting fromthe changes in the economic status on the Company, vetted miscellaneous information reportsprovided by the Company in a timely manner, and voiced opinions and exercised their power at theBoard 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 | 4 | 2023-4-27 | The following proposals were approved: The 2022 Annual Report and Its Summary, The Interim Report for the First Quarter 2023, and The Proposal on Re-appointment of CPA Firm. | - | - |
| Jian, and Yu Gang | 2023-8-30 | The 2023 Semi-Annual Report and Its Summary was approved. | - | - | ||
| 2023-9-18 | The Proposal on the Engagement of Independent Auditor for the Issuance and Listing of the H-stock was approved. | - | - | |||
| 2023-10-30 | The Interim Report for the Third Quarter 2023 was approved. | - | - | |||
| Nomination Committee | Guan Qingyou, Yu Gang, Xue Yunkui, and Han Jian | 3 | 2023-4-27 | The Proposal on Addition of Non-Independent Director was approved. | - | - |
| 2023-9-18 | The Proposal on Addition of Independent Director for the Fourth Board of Directors was approved. | - | - | |||
| 2023-12-26 | The Proposal on Appointment of Vice President was approved. | - | - | |||
| Remuneration and Appraisal Committee | Han Jian, Yu Gang, Xue Yunkui, and Guan Qingyou | 2 | 2023-4-27 | The following proposals were approved: The Remuneration Payment Standards for Directors, Supervisors and Senior Management for 2022, The Proposal on the 2023 Restricted Share Incentive Scheme (Draft) and Its Summary, and The 2023 Stock Ownership Scheme (Draft) of Midea Group Co., Ltd. | - | - |
| 2023-6-20 | The following proposals were approved: The Proposal on Matters Related to the Stock Option Exercise for the Fourth 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 Third 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 Third Exercise Period of the Sixth Stock Option Incentive Scheme, The Proposal on Matters Related to the Stock Option Exercise for the Third Exercise Period of the Seventh Stock Option Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Fourth Unlocking Period for the First Grant under the 2018 Restricted Share Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Third Unlocking Period for Reserved Restricted Shares under the 2018 Restricted Share Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Third Unlocking Period of the 2019 Restricted Share Incentive Scheme, The Proposal on the Satisfaction of Unlocking Conditions for the Third Unlocking Period of the 2020 Restricted Share Incentive Scheme, and The Proposal on Unmet Unlocking Conditions for the First Unlocking Period of the 2021 Restricted Share Incentive Scheme. | - | - | |||
| ESG Committee | Li Guolin, Zhong | 1 | 2023-4-27 | The 2022 ESG Report of Midea Group was approved. | - | - |
Zheng,ZhaoWenxin,JiangPeng,and ZhiShuai
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 at the period-end | 961 |
| Number of in-service employees of main subsidiaries at the period-end | 197,652 |
| Total number of in-service employees at the period-end | 198,613 |
| Total number of paid employees in the period | 198,613 |
| Number of retirees to whom the Company or its main subsidiaries need to pay retirement pension | 2,353 |
| Functions | |
| Function | Number of employees |
| Production | 154,046 |
| Sales | 14,063 |
| Technical | 23,242 |
| Financial | 2,762 |
| Administrative | 4,500 |
| Total | 198,613 |
| Educational backgrounds | |
| Educational background | Number of employees |
| Master’s and doctoral degrees | 7,252 |
| Bachelor’s degree | 31,265 |
| Other | 160,096 |
| Total | 198,613 |
Note: “Other” under “Educational backgrounds” in the table above includes personnel under privacyprotection.
9.2 Remuneration policy
Remunerations for employees are paid on time according to the remuneration system of the Company.The Company decides the regular salaries of the employees according to the position’s value andevaluation performances and decides the variable salary according to the Company's and employee’sperformance. The remuneration distribution shows more consideration for strategic talent and ensuresthe market competitiveness in the salary of core talent. The Company shall make dynamic adjustmentsto the staff remuneration policy according to regional differences, number of employees, 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.Newcomer Empowerment Center: It provides new employees with onboarding training andspecialized position skill training or coaching. Through projects such as campus recruitment graduatetraining camps, Jumei, Huimei, Chuangmei, etc., it helps new employees become familiar withcorporate culture and values, and accelerates their integration into a new environment. During theReporting Period, a total of 308 projects were carried out, with a total of 41,537 participations by
employees and a cumulative training time of 112,149.9 person-hours.Leadership Empowerment Center: Around the management cadres talent training system, itestablishes a mature cadre training model, including the Sailor Project, the Voyager Project, theExplorer Project and the Pilot Project, which are aimed at training talents in the middle and seniormanagement echelons. During the Reporting Period, a total of 55 cadre training projects werepromoted, with a total of 131,458 participations by employees and a cumulative training time of199,595.30 person-hours.Globalization Empowerment Center, Intelligent Manufacturing Empowerment Center, and DigitalProfessional Empowerment Center: Based on Midea's strategy and business characteristics,promote the diversified development of global talents and help industrial skill workers and R&D,manufacturing, information technology, and other professional talents improve their skills. During theReporting Period, a total of 27 special empowerment projects were carried out by Media based onactual business needs.We encourage employees to learn autonomously and establish the M-Learning platform tocomprehensively help employees improve their professional capabilities. The M-Learning platform hasnow formed a comprehensive integration of online learning, online exams, online live broadcasts,learning journeys, and offline face-to-face teaching, realizing integrated management functions forknowledge management, student management, lecturer management, and certificate management. Atthe same time, we fully integrate training content on anti-corruption and integrity, environmental healthand safety into the M-Learning platform, require all new employees to carry out comprehensivelearning, and adopt an "online-based, offline-assisted" training mode to strengthen employees'compliance, health, and safety concepts. (For more detailed content of employee training anddevelopment, please refer to the Company's ESG report 2023).
9.4 Labor outsourcing
□Applicable √N/A
10. Profit Distribution and Converting Capital Surplus into Share Capital
The Company has strictly implemented the Shareholder Return Plan for 2022-2024, which specifies thedecision-making process for dividend standards, dividend ratios and profit distribution policies, ensuresa continual and consistent profit distribution policy from the mechanism perspective, and fully protectsthe legitimate rights and interests of minority investors.
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, in theReporting 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 the ReportingPeriod
√ Applicable □ N/A
| Bonus shares for every 10 shares (share) | 0 |
| Dividend for every 10 shares (RMB) (tax included) | 30 |
| 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) | 6,920,391,836 |
| Cash dividends (RMB) (tax inclusive) | 20,761,175,508 |
| Cash dividends in other forms (such as share repurchase) (RMB) | 0 |
| Total cash dividends (inclusive of those in other forms) (RMB) (tax inclusive) | 20,761,175,508 |
| Distributable profits (RMB) | 27,901,530,000 |
| 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 (2024) No. 10017 issued by PricewaterhouseCoopers Zhong Tian LLP, the parent company realized a net profit of RMB17,326,161,000 for 2023. Plus undistributed profits at the beginning of the year of RMB27,719,633,000 and minus the profit distributed in the year of RMB17,144,264,000, the actual distributable profit would be RMB27,901,530,000. | |
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 Stock Options in the First Grant under the FifthStock Option Incentive Scheme upon Expiry was approved at the 16th Meeting of the Fourth Board ofDirectors. As such, 79,180 stock options of 21 awardees that had been unexercised upon expiry wereretired.b. At the above-mentioned meeting, the Proposal for the Retirement of Unexercised Reserved StockOptions under the Fifth Stock Option Incentive Scheme upon Expiry was approved. As such, 38,500stock options of four awardees that had been unexercised upon expiry were retired.c. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for theStock Option Incentive Scheme was approved. As the 2022 Annual Profit Distribution Plan had beencarried out, the exercise price for the first grant under the Fifth Stock Option Incentive Scheme wasrevised from RMB50.21 to RMB47.71 per share, and the exercise price for the reserved stock optionsunder the said scheme was revised from RMB41.04 to RMB38.54 per share.
d. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. It was agreed to adjust the awardees and their exercisable stock options for the first grantunder the Fifth Stock Option Incentive Scheme due to the resignation, substandard business unitperformance, substandard individual performance, reassignment, violation of the Company’s “RedLines” or other factors of some awardees. Upon the adjustments, the number of locked-up stockoptions for the first grant under the Fifth Stock Option Incentive Scheme was reduced from 9,195,000to 7,325,333.e. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Fourth Exercise Period for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. A total of 801 awardees who are eligible for the Fifth Stock Option Incentive Scheme havebeen allowed to exercise 7,325,333 stock options in the fourth exercise period (ended 6 May 2024).f. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Reserved Stock Options under the Fifth Stock Option IncentiveScheme was approved. It was agreed to adjust the awardee list and their exercisable stock options forthe first grant under the Fifth Stock Option Incentive Scheme due to the resignation, substandardindividual performance, or other factors of some awardees. Upon the adjustments, the number oflocked-up stock options granted to them for the first grant under the Fifth Stock Option IncentiveScheme was reduced from 9,195,000 to 7,325,333.g. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Third Exercise Period for the Reserved Stock Options under the Fifth Stock Option IncentiveScheme was approved. A total of 61 awardees who are eligible for the Fifth Stock Option IncentiveScheme have been allowed to exercise 860,000 stock options in the third exercise period (ended 8March 2024).h. The Proposal for the Retirement of Unexercised Reserved Stock Options under the Fifth StockOption Incentive Scheme upon Expiry was approved at the 17th Meeting of the Fourth Board ofDirectors. As such, 115,000 stock options of 11 awardees that had been unexercised upon expiry were
retired.During the Reporting Period, 9,554,233 shares were exercised with respect to the first grant under theFifth Stock Option Incentive Scheme.During the Reporting Period, 927,950 shares were exercised with respect to the reserved stock optionsunder 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 16th Meeting of the Fourth Board of Directors. Assuch, 40,591 stock options of seven awardees that had been unexercised upon expiry were retired.b. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for theStock Option Incentive Scheme was approved. According to the arrangements in the 2022 AnnualProfit Distribution, the exercise price for the Sixth Stock Option Incentive Scheme was revised fromRMB48.04 to RMB45.54 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Sixth Stock Option Incentive Scheme was approved. It was agreed toadjust the awardees and their exercisable stock options under the Sixth Stock Option IncentiveScheme due to the resignation, substandard business unit performance, substandard individualperformance, reassignment or other factors of some awardees. Upon the adjustments, the number oflocked-up stock options granted to them under the Sixth Stock Option Incentive Scheme was reducedfrom 18,570,000 to 15,830,667.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Third Exercise Period for the Sixth Stock Option Incentive Scheme was approved. A total of 762awardees who are eligible for the Sixth Stock Option Incentive Scheme have been allowed to exercise7,339,417 stock options in the third exercise period (ended 29 May 2024).
During the Reporting Period, 9,231,056 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 16th Meeting of the Fourth Board of Directors. Assuch, 55,200 stock options of three 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 2022 AnnualProfit Distribution, the exercise price for the Seventh Stock Option Incentive Scheme was revised fromRMB47.19 to RMB44.69 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Seventh Stock Option Incentive Scheme was approved. It wasagreed to adjust the awardees and their exercisable stock options under the Seventh Stock OptionIncentive Scheme due to the resignation, substandard business unit performance, substandardindividual performance, reassignment or other factors of some awardees. Upon the adjustments, thenumber of locked-up stock options granted to them under the Seventh Stock Option Incentive Schemewas reduced from 28,680,000 to 20,867,916.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise forthe Third Exercise Period for the Seventh Stock Option Incentive Scheme was approved. A total of1,047 awardees who are eligible for the Seventh Stock Option Incentive Scheme have been allowed toexercise 20,867,916 stock options in the third exercise period (ended 4 June 2024).During the Reporting Period, 18,776,931 shares were exercised under the Seventh Stock OptionIncentive Scheme.Overview of the Eighth Stock Option Incentive Scheme
a. The Proposal for the Adjustments to the Exercise Prices for the Stock Option Incentive Schemeswas approved at the 16th Meeting of the Fourth Board of Directors. According to the arrangements inthe 2022 Annual Profit Distribution, the exercise price for the Eighth Stock Option Incentive Schemewas revised from RMB79.74 to RMB77.24 per share.b. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Eighth Stock Option Incentive Scheme was approved. It was agreedto adjust the awardee list and their exercisable stock options under the Eighth Stock Option IncentiveScheme due to the resignation, unmet exercise conditions, violation of the Company’s “Red Lines” orother factors of some awardees. Upon the adjustments, the number of locked-up stock options grantedto them under the Eighth Stock Option Incentive Scheme was reduced from 81,740,000 to 45,785,250.Overview of the Ninth Stock Option Incentive Schemea. The Proposal for the Adjustments to the Exercise Prices for the Stock Option Incentive Schemeswas approved at the 16th Meeting of the Fourth Board of Directors. According to the arrangements inthe 2022 Annual Profit Distribution, the exercise price for the Ninth Stock Option Incentive Scheme wasrevised from RMB54.61 to RMB52.11 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 14th Meeting of the Fourth Board of Directorsand the First Extraordinary General Meeting of Shareholders of 2023 on 6 January 2023. As such, itwas agreed to repurchase and retire 218,958 restricted shares that had been granted to 14 awardeesbut were still in lockup due to the resignation, reassignment, violation of the Company’s “Red Lines” orother factors of these awardees. The retirement of the said restricted shares was completed on 18 April2023.b. The Proposal for the Adjustments to the Repurchase and Grant Prices and for the Restricted ShareIncentive Schemes was approved at the 16th Meeting of the Fourth Board of Directors. According tothe 2022 Annual Profit Distribution Plan, the repurchase prices for the first grant under the 2018
Restricted Share Incentive Scheme was revised from RMB21.44 to RMB18.94 per share, and therepurchase price for the reserved restricted shares under the said scheme from RMB17.46 toRMB14.96 per share.c. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the FourthUnlocking Period for the First Grant under the 2018 Restricted Share Incentive Scheme was approved.A total of 172 awardees were eligible for this unlocking, with 2,566,396 restricted shares (0.0365% ofthe Company’s total existing share capital) unlocked for public trading, of which 25,000 shares, 25,000shares, 25,000 shares, and 20,000 shares were unlocked for senior management Guan Jinwei, ZhangXiaoyi, Hu Ziqiang, and Zhong Zheng, respectively.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the Reserved Restricted Shares under the 2018 Restricted Share IncentiveScheme was approved. A total of 18 awardees were eligible for this unlocking, with 324,167 restrictedshares (0.0046% of the Company’s total existing share capital) unlocked for public trading, of which25,000 shares were unlocked for senior management Zhao Wenxin.e. 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 233,146 restricted shares that had been granted to 29 awardees butwere still in lockup due to the resignation, reassignment, substandard 2022 individual/business unitperformance or other factors of these awardees. The retirement of the said restricted shares wascompleted on 10 November 2023.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 14th Meeting of the Fourth Board of Directorsand the First Extraordinary General Meeting of Shareholders of 2023 on 6 January 2023. As such, itwas agreed to repurchase and retire 431,250 restricted shares that had been granted to 14 awardeesbut were still in lockup due to the resignation, reassignment or other factors of these awardees. The
retirement of the said restricted shares was completed on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors. According to the 2022Annual Profit Distribution Plan, the repurchase price for the granted restricted shares under the 2019Restricted Share Incentive Scheme was revised from RMB20.96 to RMB18.46 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of CertainIncentive Shares under the 2019 Restricted Share Incentive Scheme was approved. As such, it wasagreed to repurchase and retire 694,532 restricted shares that had been granted to 62 awardees butwere still in lockup due to the resignation, reassignment, substandard 2022 individual or business unitperformance or other factors of these awardees. The retirement of the said restricted shares wascompleted on 10 November 2023.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the 2019 Restricted Share Incentive Scheme was approved. A total of 308awardees were eligible for this unlocking, with 4,897,510 restricted shares unlocked for public trading,of which 30,000 shares, 25,000 shares and 25,000 shares were unlocked for senior managementWang Jinliang, Zhao Wenxin, and Guan Jinwei, respectively.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 14th Meeting of the Fourth Board of Directorsand the First Extraordinary General Meeting of Shareholders of 2023 on 6 January 2023. As such, itwas agreed to repurchase and retire 753,209 restricted shares that had been granted to 25 awardeesbut were still in lockup due to the resignation, reassignment, violation of the Company’s “Red Lines” orother factors of these awardees. The retirement of the said restricted shares was completed on 18 April2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors. As the 2022 Annual Profit
Distribution Plan had been carried out, the repurchase price for the restricted shares granted under the2020 Restricted Share Incentive Scheme was revised from RMB21.18 to RMB18.68 per share.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 2,939,626 restricted shares that had been granted to 316 awardeesbut were still in lockup due to the resignation, reassignment, substandard 2022 individual/business unitperformance and other factors of these awardees. The retirement of the said restricted shares wascompleted on 10 November 2023.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the 2020 Restricted Share Incentive Scheme was approved. A total of 394awardees were eligible for this unlocking, with 10,851,082 restricted shares unlocked for public trading,of which 48,000 shares, 48,000 shares and 40,000 shares were unlocked for senior managementWang Jinliang, Zhao Wenxin, and Li Guolin, respectively.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 14th Meeting of the Fourth Board of Directorsand the First Extraordinary General Meeting of Shareholders of 2023 on 6 January 2023. As such, itwas agreed to repurchase and retire 824,500 restricted shares that had been granted to 18 awardeesbut were still in lockup due to the resignation, reassignment or other factors of these awardees. Theretirement of the said restricted shares was completed on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase Prices for the Restricted Share IncentiveSchemes was approved at the 16th Meeting of the Fourth Board of Directors. As the 2022 Annual ProfitDistribution Plan had been carried out, the repurchase price for the 2021 Restricted Share IncentiveScheme was revised from RMB38.25 to RMB35.75 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 was
agreed to repurchase and retire 2,576,500 restricted shares that had been granted to 112 awardeesbut were still in lockup due to the resignation, reassignment, substandard company performance orother factors of these awardees. The retirement of the said restricted shares was completed on 10November 2023.Overview of the 2022 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2022Restricted Share Incentive Scheme was approved at the 14th Meeting of the Fourth Board of Directorsand the First Extraordinary General Meeting of Shareholders of 2023 on 6 January 2023. As such, itwas agreed to repurchase and retire 270,000 restricted shares that had been granted to 10 awardeesbut were still in lockup due to the resignation, reassignment or other factors of these awardees. Theretirement of the said restricted shares was completed on 18 April 2023.b. The Proposal for the Adjustments to the Repurchase and Grant Prices for the Restricted ShareIncentive Schemes was approved at the 16th Meeting of the Fourth Board of Directors. As the 2022Annual Profit Distribution Plan had been carried out, the repurchase price for the 2022 RestrictedShare Incentive Scheme was revised from RMB26.47 to RMB23.97 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of CertainIncentive Shares under the 2022 Restricted Share Incentive Scheme was approved. As such, it wasagreed to repurchase and retire 1,052,500 restricted shares that had been granted to 24 awardees butwere still in lockup due to the resignation, reassignment or other factors of these awardees. Theretirement of the said restricted shares was completed on 10 November 2023.Overview of the 2023 Restricted Share Incentive Schemea. The 2023 Restricted Share Incentive Scheme (Draft) and its Abstract was approved at the 15thMeeting of the Fourth Board of Directors. And the awardee list for the 2023 Restricted Share IncentiveScheme (Draft) was reviewed at the Ninth Meeting of the Fourth Supervisory Committee.b. The Proposal on the Adjustments to the Repurchase and Grant Prices for the Restricted Share
Incentive Schemes, the Proposal on the Determination of the Grant Date for the 2023 Restricted ShareIncentive Scheme, and the Proposal on Grant-related Matters for the 2023 Restricted Share IncentiveScheme were approved at the 16th Meeting of the Fourth Board of Directors. According to the 2022Annual Profit Distribution Plan, the grant price was revised from RMB28.39 to RMB25.89 per share.c. On 20 June 2023, the Company granted 18,325,000 restricted shares to 415 awardees with thegrant price being RMB25.89 per share.
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 | Retired shares |
| Zhang Xiaoyi | Vice President | 25,000 | 25,000 | 0 | |||
| Hu Ziqiang | Vice President | 25,000 | 25,000 | 0 | |||
| Wang Jinliang | Vice President | 300,000 | 78,000 | 180,000 | 42,000 | ||
| Li Guolin | Vice President | 230,000 | 40,000 | 150,000 | 40,000 | ||
| Guan Jinwei | Vice President | 75,000 | 50,000 | 25,000 | |||
| Zhong Zheng | Vice President, CFO and Director of Finance | 20,000 | 20,000 | 0 | |||
| Zhao Wenxin | Chief People Officer | 320,000 | 98,000 | 186,000 | 36,000 | ||
| Jiang Peng | Board Secretary | 160,000 | 0 | 136,000 | 24,000 | ||
| Zhao Lei | Vice President | 90,000 | 60,000 | 20,000 | 10,000 | ||
| Total | -- | 1,245,000 | 396,000 | 0 | -- | 697,000 | 152,000 |
| Remark (if any) | 1. A total of 2,566,396 shares were allowed for public trading in the Fourth Unlocking Period for the First Grant of the 2018 Restricted Share Incentive Scheme on 3 July 2023, of which senior management Guan Jinwei, Zhang Xiaoyi, Zhong Zheng and Hu Ziqiang unlocked 25,000 shares, 25,000 shares, 20,000 shares and 25,000 shares, respectively. 2. A total of 324,167 shares were allowed for public trading in the Third Unlocking Period for the Reserved Restricted Shares of the 2018 Restricted Share Incentive Scheme on 7 July 2023, of which senior management Zhao Wenxin unlocked 25,000 shares. 3. A total of 4,897,510 shares were allowed for public trading in the Third Unlocking Period of the 2019 Restricted Share Incentive Scheme on 13 July 2023, 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 10,851,082 shares were allowed for public trading in the Third Unlocking Period of the 2020 Restricted Share Incentive Scheme on 18 July 2023, of which senior management Zhao Wenxin, Li Guolin and Wang Jinliang unlocked 48,000 shares, 40,000 shares and 48,000 shares, respectively. |
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 (share) | Change | As a percentage of the Company’s total share capital | Funding source |
| Employees under the Sixth Global Partner Stock Ownership Scheme | 17 | 3,537,663 | N/A | 0.05% | Special fund for the scheme |
| Employees under the Third Business Partner Stock Ownership Scheme | 46 | 1,873,559 | N/A | 0.03% | 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 | 0.03% | Special fund for the scheme |
| Employees under the Fourth Business Partner Stock Ownership Scheme | 44 | 1,985,611 | N/A | 0.03% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under | 15 | 3,770,433 | N/A | 0.05% | Special fund for the |
| the Eighth Global Partner Stock Ownership Scheme | scheme | ||||
| Employees under the Fifth Business Partner Stock Ownership Scheme | 55 | 2,826,759 | N/A | 0.04% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the 2023 Stock Ownership Scheme | 147 | 9,946,276 | N/A | 0.14% | Employees’ legal income, performance bonuses, or other sources allowed by laws and regulations |
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 (share) | Shares held at the end of the Reporting Period (share) | As a percentage of the Company’s total share capital |
| Fang Hongbo | Chairman of the Board and CEO | 4,770,564 | 4,941,346 | 0.07% |
| Gu Yanmin | Director and Vice President | |||
| Wang Jianguo | Director and Vice President | |||
| Fu Yongjun | Director and Vice President | |||
| Zhang Xiaoyi | Vice President | |||
| Zhao Lei | Vice President | |||
| Wang Jinliang | Vice President | |||
| Li Guolin | 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 Period
During the Reporting Period, holders under employee stock ownership schemes exercised theshareholder rights to receive the cash dividends for 2022. Other than that, they did not exercise othershareholder rights such as voting in a meeting of shareholders.Other information about employee stock ownership schemes during the Reporting Period
□Applicable √N/A
Changes in members of the management committees for employee stock ownership schemes
□Applicable √N/A
Financial impact of employee stock ownership schemes on the Company during the Reporting Periodand the relevant accounting treatments
√Applicable □N/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 included inthe relevant costs/expenses and capital surplus at the fair value of the equity instruments at the grantdate based on the best estimate of the number of exercisable equity instruments. The expenseamortization of the Company’s share-based payment incentive schemes stood at RMB279,864thousand for 2023, 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 and
established a set of internal control systems which was designed scientifically and operated effectively.Besides, an organization system for internal risk control and management comprising the AuditCommittee and the internal audit department was set up to supervise and assess the Company'sinternal control management. Through the operation, analysis, and assessment of the internal controlsystem, the Company effectively prevented the risks in operations management and promoted therealization 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. Evaluation Report and Auditor’s Report on Internal Control
14.1 Evaluation report on internal control
| Disclosure date of the internal control self-evaluation report | 28 March 2024 | ||
| Index to the disclosed internal control self-evaluation report | For details, please refer to the 2023 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 2023 Self-Evaluation Report on Internal Control disclosed on www.cninfo.com.cn dated 28 March 2024. | For details, please refer to “(c) Basis for internal control evaluation and identification standards for internal control defects” under Section III of The 2023 Self-Evaluation Report on Internal Control disclosed on www.cninfo.com.cn dated 28 March 2024. | |
| 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 2023 Self-Evaluation Report on Internal Control disclosed on www.cninfo.com.cn dated 28 March 2024. | For details, please refer to “(c) Basis for internal control evaluation and identification standards for internal control defects” under Section III of The 2023 Self-Evaluation Report on Internal Control disclosed on www.cninfo.com.cn dated 28 March 2024. | |
| 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 2023, 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 | 28 March 2024 |
| Index to the disclosed full text of the auditor’s report on internal control | For details, please refer to the 2023 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 thebasic 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 to
improve 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 Listed Companieson Shenzhen Stock Exchange, and the Guidelines for Articles of Association of Listed Companies.Besides, the structure of the corporate governance was well-developed, and the operation wasstandard. The Company will inspect and update the internal control system it has released in a timelymanner in accordance with the existing laws and regulations and continuously establish and improvethe internal control 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 □ NoPolicies and industry standards for environmental protectionThe Company has attached great importance to environmental protection. It has been strictly abiding by the Law of the People's Republic of Chinaon Environmental Protection, the Law of the People's Republic of China on Water Pollution Prevention and Control, the Law of the People's Republicof China on Air Pollution Prevention and Control, the Law of the People's Republic of China on Noise Pollution Prevention and Control, the Law ofthe People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Wastes, the Law of the People's Republic of Chinaon Environmental Impact Assessment, the Regulations on Administration of Discharge Permits as well as other applicable laws, administrative rulesand regulatory documents. The Company has been taking practical and effective environmental protection measures to protect the ecologicalenvironment and fulfill its corporate responsibility.In terms of pollutant management, the Company has been in compliance with the existing pollutant discharge standards and limits, which arespecified as follows:
With respect to wastewater management, the Company is subject to the Integrated Wastewater Discharge Standard (GB8978-1996), the Discharge
Limits of Water Pollutants (DB44/26-2001), the Discharge Standard of Water Pollutants for Electroplating (DB 44/1597-2015), and the DischargeLimits of Water Pollutants of Guangdong Province (DB44/26-2001), among other standards.With respect to waste gas management, the Company is subject to the Integrated Emission Standard of Air Pollutants (GB16297-1996), theEmission Standard of Air Pollutants for Boiler (GB13271-2014), the Emission Control Standard of Volatile Organic Compounds for IndustrialEnterprises (DB13/2322-2016), the Emission Standard of Pollutants for Synthetic Resin Industry (GB31572-2015), the Emission Limits of AirPollutants (DB44/27-2001), the Emission Standard of Volatile Organic Compounds for Furniture Manufacturing Operations (DB44/814-2010), andthe Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB 9078-1996), among other standards.With respect to noise management, the Company is subject to the Emission Standard for Industrial Enterprises Noise at Boundary (GB12348-2008).With respect to treatments of solid and hazardous waste, the Company has been in strict compliance with the Law on the Prevention and Control ofthe Environmental Pollution of Solid Waste, disposing of solid and hazardous waste in a compliant manner.Administrative permits in relation to environmental protectionAccording to the requirements of the applicable environmental protection laws and regulations, all construction projects of the Company fulfill theprocedures of environmental impact assessment and other administrative licensing procedures for environmental protection, strictly abide by theenvironmental requirements for construction projects, and implement environmental treatment. After the completion of the project construction,according to the requirements of the environmental impact assessment documents, the Company commissions a third-party monitoring organisationto test the project's wastewater, waste gas, noise and other indicators, and applies for a discharge permit in accordance with the Regulations on the
Administration of Discharge Permits and other regulations and standards.During the Reporting Period, the existing discharge permits of the Company's subsidiaries were all within the validity period. During the validityperiod of the discharge permits, if there are matters such as changes in the basic information of the discharge permits, implementation of revisions inpollutant discharge standards, changes in the total pollutant discharge limits, etc., the subsidiaries of the Company shall, in accordance with therelevant requirements, submit an application for change of the discharge permits to the local competent environmental protection authorities within aspecified period of time.Industry standards for discharges and discharges of pollutants in production and operation activities
| Name of the Company or subsidiary | Type of major pollutant | Name of major pollutant | Discharge method | Number of discharge outlets | Distribution of discharge outlets | Concentration of the discharge | Pollutant discharge standards | Total discharge (ton) | Approved total discharge (ton) | Excess discharge |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Western gate of the Wuhu plant | 130mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 58.97 | 70.898 | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 3.1mg/L | 1.41 | 2.496 | No | |||||
| Physical and comprehensive indicators | Five-day BOD | 27.35mg/L | 12.4 | / | No | |||||
| Oil | Petroleum | <0.06mg/L | 0.027 | / | No |
| Inorganic pollutants | Total phosphorus (by P) | 0.43mg/m? | 0.2 | / | No | |||||
| Inorganic pollutants | Fluoride (by F-) | 0.73mg/m? | 0.32 | / | No | |||||
| Particles | Soot | 15m high altitude discharge | 45 | Plants at each workshop | 4.6mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 9.27 | / | No | |
| Gaseous inorganic substances | Sulfur dioxide | <3mg/m? | 1.9 | / | No | |||||
| Gaseous inorganic substances | Oxynitride | 6.3mg/m? | 1.9 | / | No | |||||
| Particles | Dust | High altitude discharge after being treated by waste gas treatment station | 4.3mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 3.76 | / | No | |||
| Aromatic compounds | Xylene | <0.01 mg/m? | 0.0002 | / | No | |||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Overall volatile organic compounds (VOCs) | 5.77mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 8.08 | / | No | ||||
| Wuhu Midea Smart Kitchen Appliances Manufacturing Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Western gate of the Wuhu plant (Shared kitchen and bathroom wastewater treatment plant) | 130mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 24.34 | / | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 3.1mg/L | 0.59 | / | No | |||||
| Physical and comprehensive indicators | Five-day BOD | 27.35mg/L | 5.11 | / | No | |||||
| Oil | Petroleum | <0.06mg/L | 0.01 | / | No | |||||
| Inorganic pollutants | Total phosphorus (by P) | 0.43mg/m? | 0.08 | / | No | |||||
| Inorganic pollutants | Fluoride (by F-) | 0.73mg/m? | 0.14 | / | No | |||||
| Particles | Soot | 15m high altitude discharge | 10 | Plants at each workshop | 4.9mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 5.52 | / | No | |
| Gaseous inorganic substances | Sulfur dioxide | 6 | <3mg/m? | 0.89 | / | No | ||||
| Gaseous inorganic substances | Oxynitride | 6 | 13.3 mg/m? | 1.48 | / | No | ||||
| Particles | Dust | High altitude discharge after being treated by waste gas treatment station | 6 | 4.9mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 1.7 | / | No | ||
| Aromatic compounds | Xylene | 2 | <0.0015 mg/m? | 0.00035 | / | No | ||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Overall volatile organic compounds (VOCs) | 13 | 6.4mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 8.18 | / | No | |||
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The eastern side of 1# plant | 67.25mg/L | Takeover Standards for Sewage Treatment Plants in Western Clusters of Hefei City Integrated Wastewater Discharge Standard (GB8978-1996), Level 3 | 8.119 | / | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 1.18mg/L | 1.047 | |||||||
| Physical and comprehensive indicators | Five-day BOD | 16.76mg/L | 2.688 | |||||||
| Inorganic pollutants | Total nitrogen (by N) | 17.2mg/L | 1.929 | |||||||
| Inorganic pollutants | Total phosphorus (by P) (by P) | 0.07mg/L | 0.138495 | |||||||
| Other indicators | Anionic surfactant | 0.17mg/L | 0.053443 | |||||||
| Physical and comprehensive indicators | Suspended matters | 17.08mg/L | 2.692 | |||||||
| Oil | Petroleum | 0.06mg/L | 0.0444 | |||||||
| Physical and comprehensive indicators | pH value | 5.64 | / | |||||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | RO equipment | 2 | 1 set in 3# plant and 1 unit in 4# plant | 1.91mg/m? | Integrated Emission Standard of Air Pollutants GB16279-1996 Level 2 | 0.08895 | / | No | |
| Water spray and activated carbon | 3 | 2 sets at 1# plant and 1 set at 2# plant | 14.91mg/m? | 0.57868 | ||||||
| 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 | 7.394mg/m? | 1.67152 | ||||||
| Particles | Soot | Filter cartridge dust collector | 8 | 2 at 1# plant, 3 at 2# plant, 2 at 3# plant and 1 at 4# plant | 4.908mg/m? | 3.3 | / | No | ||
| Hefei Midea Laundry Appliance Co., Ltd. (monito | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of wastewater treatment station | 48 mg/L | Takeover Standards for Sewage Treatment Plants in Western Clusters of Hefei City Integrated Wastewater Discharge Standard (GB8978-1996), Level 3 | 6.154 | 58.150 | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | The eastern side of wastewater treatment station | 0.692mg/L | 0.089 | / | No | ||||
| red by the municipal government) | Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100μm) | High altitude discharge after being treated by cyclone + filter cartridge dust collector/High altitude discharge after being treated by water spraying + demister + activated carbon + activated carbon | 15 | Plants at each workshop | 0.8mg/m? | Table 5 of the Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572-2015): Special Emission Limit Requirements | 1.47 | / | No |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | High altitude discharge after being treated by water spraying + demister + activated carbon + activated carbon/High altitude discharge after being treated by the two-stage activated carbon | Plants at each workshop | 1.73mg/m? | 1.96 | / | No | |||
| GD Midea Air-Conditioning Equipment Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment station | 1 | The southeastern side of 4# plant | 48 mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) | 2.92 | 9.59 | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 1.082mg/L | 0.023 | / | No | |||||
| Physical and comprehensive indicators | Suspended matters | 14mg/L | 0.451 | / | No | |||||
| Oil | Petroleum | 0.32mg/L | 0.005 | / | No | |||||
| Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of 2# plant | 108mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) | 3.66 | 9.59 | No | |
| Physical and comprehensive indicators | Suspended matters | 47mg/L | 0.46 | / | No | |||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 1.832mg/L | 0.013 | / | No | |||||
| Oil | Petroleum | 1.99mg/L | 0.003 | / | No | |||||
| Other organic compounds | Total volatile organic compounds (spray powder) | 15m high altitude discharge after being treated by spray tower + activated carbon | 3 | 4# plant | 15.94mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.77 | 14 | No | |
| Other organic compounds | Overal volatile organic compounds (screen printing) | 15m high altitude discharge after being treated by environmental protection equipment | 4 | 1# and 9# plants | 3.81mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.56 | / | No | |
| Other organic compounds | Overall volatile organic compounds (electronics) | 15m high altitude discharge after being treated by environmental protection equipment | 2 | 10# plants | 1.65mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 4.11 | / | No | |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2#, 5# plants | 2.52mg/m? | Emission Limits of Air Pollutants (DB44/27- 2001) the second time period | 1.88 | / | No | |
| Wuhu Maty Air-Conditioning | Physical and comprehensive indicators | COD | Discharge after treatment by the sewage and wastewater station to meet the standards | 1 | The northern side of the park | 77.65mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | 3.99 | 7.5 | No |
| Equipment Co., Ltd. | Physical and comprehensive indicators | Suspended matters | 42.35mg/L | 2.166 | / | No | ||||
| Physical and comprehensive indicators | Five-day BOD | 11.755mg/L | 1.86 | / | No | |||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 20.923mg/L | 0.598 | 0.675 | No | |||||
| Oil | Petroleum | 1.46mg/L | 0.075 | / | No | |||||
| Particles | Soot | 15m high altitude discharge after being treated by environmental protection equipment | 11 | 1#、2#、3#、4# plants | ND | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 6.03 | / | No | |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | 10 | 1#、2#、3#、4# plants | 5.642mg/m3 | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 7.327 | / | No | ||
| Gaseous inorganic pollutants | Oxynitride | 3 | 3# plant | 5.485mg/m3 | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 1.348 | 2.209 | No | ||
| Gaseous inorganic pollutants | Sulfur dioxide | 3 | 3# plant | 3mg/m3 | 0.468 | / | No | |||
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment station | 1 | Near the wastewater treatment station in the north side of the plant | 32.5mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 12.0708 | 16.28 | No |
| Physical and comprehensive indicators | Suspended matters | 20mg/L | 7.7064 | / | No | |||||
| Oil | Petroleum | 0.48mg/L | 0.161384 | / | No | |||||||
| Inorganic pollutants | Total phosphorus (by P) | 0.15mg/L | 0.10913 | / | No | |||||||
| Metals and metal compounds | Total zinc | ND | 0.01296 | / | No | |||||||
| Physical and comprehensive indicators | pH value | 7.06mg/L | / | / | No | |||||||
| Inorganic pollutants | Total nitrogen | 2.85mg/L | / | No | ||||||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 0.799mg/L | Discharge Limits of Water Pollutants in Guangdong DB44/26-2001 | 0.2754872 | 2.034 | No | ||||||
| Inorganic pollutants | Fluoride (by F-) | 0.15mg/L | 0.050388 | / | No | |||||||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100μm) | 15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of the plant | 14.4mg/m? | Emission Limits of Air Pollutants (DB44/27-2001) / Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB 9078-1996) | 8.69166 | / | No | |||
| Gaseous inorganic pollutants | Sulfur dioxide | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 3.5mg/m? | Emission Standard of Air Pollutants for Boiler (DB44/765-2019) | 0 | 0.436 | No | |||
| Gaseous inorganic pollutants | Oxynitride | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 15mg/m? | 1.946 | 2.039 | No | ||||
| Other organic compounds | Overall volatile organic compounds (VOCs) | 15m high altitude discharge after being treated by environmental protection equipment | 10 | Roof of the plant | 5.005mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010) | 3.6412 | 4.553 | No | |
| Aromatic compounds | Benzene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of the plant | 0.05mg/m? | 0.1056 | / | No | ||
| Aromatic compounds | Total toluene and xylene | 15m high altitude discharge after being treated by environmental protection equipment | Roof of the plant | 0.46mg/m? | 0.205 | / | No | |||
| Guangdong Meizhi Compressor Limited | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment station | 1 | Near the wastewater treatment station in the north side of the plant | 42 mg/L | Discharge Standard of Water Pollutants for Electroplating of Guangdong Province DB-441597-2015, before 1 September 2012 | 3.6 | 6.046 | No |
| Oil | Physical and comprehensive indicators | Suspended matters | 13 mg/L | 5.25 | / | No | ||||
| Oil | Petroleum | 0.43 mg/L | 0.104 | / | No | |||||
| Inorganic pollutants | Total phosphorus (by P) | 0.18mg/L | 0.041 | / | No | |||||
| Metals and metal compounds | Total zinc | 0.05mg/L | 0.008 | / | No | |||||
| Physical and comprehensive indicators | pH value | 7.2mg/L | / | / | No | |||||
| Inorganic pollutants | Total nitrogen | 3.03mg/L | 0.94 | / | No | |||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 0.856mg/L | 0.168 | 0.756 | No | ||||
| Inorganic pollutants | Fluoride (by F-) | 0.071 mg/L | 0.032 | / | No | ||||
| Metals and metal compounds | Total nickel | ND | 0 | 0.024 | No | ||||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100μm) | 15m high altitude discharge after being treated by environmental protection equipment | 17 | Roof of main plant and metal plate workshop | 1Lmg/m? (calculated as half the detection limit when below the detection limit) | Discharge Limits of Air Pollutants (DB44/27-2001)/ Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) | 1.2348 | 8.705 | No |
| Gaseous inorganic pollutants | Sulfur dioxide | 15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 3Lmg/m? (calculated as half the detection limit when below the detection limit) | Emission Standard of Air Pollutants for Boiler (DB44/765-2019) | 0.588 | 0.799 | No |
| Gaseous inorganic pollutants | Oxynitride | 15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 11.6mg/m? | 7.4 | 7.814 | No | |
| Aromatic compounds | Benzene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.21mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010) | 0.1056 | / | No |
| Aromatic compounds | Total toluene and xylene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.695mg/m? | 0.172 | / | No |
| Other organic compounds | Overall volatile organic compounds (VOCs) | 15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of main plant and metal plate workshop | 3.5205mg/m? | 2.93 | 5.718 | No | ||
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Sewage treatment station | 40.75 | Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 5.721 | 16.87 | No |
| Oil | Petroleum | 0.29 | 0.040 | / | No | |||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 5.5 | 1.913 | 2.11 | No | |||||
| Aromatic compounds | Total toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 14 | 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 | 0.165 | 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 | 0.522 | / | No | |
| Other organic compounds | Overall volatile organic compounds (VOCs) | High altitude discharge after being treated by waste gas treatment station | (May 20) | 20.655 | 36.43 | No | ||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | High altitude discharge after being treated by waste gas treatment station | 3 | Outlet of injection molding waste gas in the south side of 1# plant, outlet of injection molding waste gas in the south side of 9# plant | 1.335 | Table 4 of the Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.877 | / | No | |
| Particles | Inhalable particles (aerodynamic diameter 10 below 100μm) | Pulse bag dust collecting | 10 | Outlets 1 and 2 of sanding waste gas at 3# plant, outlets 1 and 2 of polishing waste gas at 3# plant | 21.15 | Table 2 of the Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2 | 23.94 | No | ||
| Gaseous inorganic pollutants | Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 7 | Oxidation wire roof of 3# plant, Drying furnace of 3# plant | 5.31 | 0.108 | 0.78 | No |
| Gaseous inorganic pollutants | Oxynitride | 19.91 | 0.942 | 10.17 | No | |||||
| Particles | Fume | Discharge after being treated by waste gas treatment station | 2 | South and north section canteens | 0.213 | Emission Standard of Cooking Fume (Trial) (GB 18483-2001) | 0.132 | / | No | |
| Anhui Meizhi Compressor Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The western side of the comprehensive wastewater treatment station | 28mg/L | Takeover Standards for Sewage Treatment Plants in Western Clusters of Hefei City Integrated Wastewater Discharge Standard (GB8978-1996), Level 3 | / | No | |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 2.56 mg/L | / | No | ||||||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100μm) | Collected by gas trap hood + 15m high exhaust cylinder | 10 | No. 1 workshop welding soot discharge outlet for waste gas | 1.2mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 9.625365 | 65.45 | No | |
| No.3 workshop discharge outlet for the welding waste gas | 1.2mg/m? | |||||||||
| Waste gas outlet of 1# heat-treating furnace at No. 2 workshop | 3.1mg/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 | 9.3mg/m? | |||||||||
| Waste gas outlet for die casting at No. 2 workshop | 3.4mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | ||||||||
| Waste gas outlet for die casting at No. 4 workshop | 5.1mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078-1996) Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078-1996) | ||||||||
| Waste gas outlet of 1# heat-treating furnace at No. 4 workshop | 4.5mg/m? | |||||||||
| Waste gas outlet of 2# heat-treating furnace at No. 4 workshop | 1.8mg/m? | |||||||||
| Waste gas outlet for electrophoresis and drying at No. 1 workshop | 4.5mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | |||||||
| Waste gas outlet for electrophoresis and drying at No.3 workshop | 3.7mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | |||||||
| Gaseous inorganic pollutants | Sulfur dioxide | Collected by gas trap hood + 15m high exhaust cylinder | 6 | Outlet of 1# heat-treating furnace at No.2 workshop | 23mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) Standard Level 2 | 31.780093 | 112.2 | No |
| Outlet of 2# heat-treating furnace at No.2 workshop | 43mg/m? | ||||||||
| Waste gas outlet for die casting at No. 2 workshop | 10mg/m? | ||||||||
| Outlet of 1# heat-treating furnace at No.4 workshop | 50mg/m? | ||||||||
| Outlet of 2# heat-treating furnace at No.4 workshop | 12mg/m? | ||||||||
| Waste gas outlet for die casting at No.4 workshop | <3mg/m? | ||||||||
| Gaseous inorganic pollutants | Oxynitride | Collected by gas trap hood + 15m high exhaust cylinder | 6 | Outlet of 1# heat-treating furnace at No.2 workshop | 6mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) Standard Level 2 | 10.429364 | 33.24 | No |
| Outlet of 2# heat-treating furnace at No.2 workshop | 6mg/m? | ||||||||
| Waste gas outlet for die casting at No. 2 workshop | 6mg/m? | ||||||||
| Outlet of 1# heat-treating furnace at No.4 workshop | 10mg/m? | ||||||||
| Outlet of 2# heat-treating furnace at No.4 workshop | 22mg/m? | ||||||||
| Waste gas outlet for die casting at No.4 workshop | 5mg/m? | ||||||||
| Other organic compounds | Overall volatile organic compounds (VOCs) | Collected by gas trap hood + 15m high exhaust cylinder Direct-fired waste gas incinerator + 15m high exhaust cylinder | 4 | Waste gas outlet of the drying furnace at No. 1 workshop | 5.97mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/ 524-2020) | 1.27347 | 21.6 | No |
| Waste gas outlet of 1# drying furnace at No. 3 workshop | 1.80 mg/m? |
| Die casting at No. 2 workshop | 1.24mg/m? | |||||||||
| Die casting at No. 4 workshop | 0.87mg/m? | |||||||||
| Guangdong Welling Motor Manufacturing Co., Ltd. | Aromatic compounds | Benzene | Zeolite drum + RO | 1 | Waste gas outlet around plant C | 0mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.00 | / | No |
| Aromatic compounds | Total toluene and xylene | Zeolite drum + RO | 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 | |
| Other organic compounds | Overall volatile organic compounds (VOCs) | Zeolite drum + RO | 1 | Waste gas outlet around plant C | 14mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 3.972 | 17.09 | No | |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | Physical and comprehensive indicators | 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 | 32mg/L | Discharge Limits of Water Pollutants in Guangdong DB-44/26-2001 Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010)/ Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010)/ Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572-2015)/ Guangdong Province Emission Limits of Air Pollutants (DB44/27-2001)/ Emission Standard of Volatile Organic Compounds | 13.05 | 22.77 | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 1.2mg/L | 0.258 | 4.554 | No | |||||
| Particles | Soot | 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 | 0.34mg/m? | 0.7 | / | No | ||
| Gaseous inorganic pollutants | Sulfur dioxide | 3mg/m? | 0.87 | 1.055 | No | |||||
| Gaseous inorganic pollutants | Oxynitride | 4mg/m? | 5.44 | 10.314 | No | |||||
| Aromatic compounds | Benzene | 0.06mg/m? | 0.21 | / | No | |||||
| Aromatic compounds | Total toluene and xylene | 4.65mg/m? | for Printing Industry (DB44/815-2010)/ Emission Standard of Cooking Fume (on Trial) (GB 18483-2001) | 1.34 | / | No | ||||
| Other organic compounds | Overall volatile organic compounds (VOCs) | 10.48mg/m? | 10.2 | 35.051 | No | |||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | 2.73mg/m? | 0.82 | / | No | |||||
| Aromatic compounds | Ethylbenzene | 0.09mg/m? | 0.342 | / | No | |||||
| Particles | Fume | 15m high altitude discharge after being treated by oil fume purification facility and reaching the standard | 0.4mg/m? | 0.198 | / | No | ||||
| Anhui Meizhi Precision Manufacturing Co., Ltd. | Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 2 | The south side of Building 6 for night shift at the north side of the plant area (General outlet) | 106.66mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | 104.8 | 175.5 | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 9.04mg/L | 8.49 | 9.3 | No | |||||
| Physical and comprehensive indicators | Five-day BOD | 147.3mg/L | 89.5 | / | No | |||||
| Physical and comprehensive indicators | Suspended matters | 30.5mg/L | 23.95 | / | No | |||||
| Oil | Petroleum | 3.285mg/L | 1.5 | / | No | ||||
| Metals and metal compounds | Total nickel | Outlet in the sewage station | 0.115mg/L | Integrated Wastewater Discharge Standard (GB8978-1996), the first class pollutant standard | 0.07 | 0.1 | No | ||
| Metals and metal compounds | Total zinc | 0.565mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 0.122 | 1.25 | No | |||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | Collected by gas trap hood + 21m high exhaust cylinder | 3 | Outlet for molybdenum-containing waste gas 1 | 29.15mg/m3 | Relevant standard limit requirements in Table 1 of Shanghai Integrated Emission Standard of Air Pollutants (DB31/933-2015) | 31.1014 | / | No |
| Outlet for molybdenum-containing waste gas 2 | 16.95 | ||||||||
| Outlet for molybdenum-containing waste gas 3 | 9.89mg/m3 | ||||||||
| Collected by gas trap hood + 25m high exhaust cylinder | 7 | 1# Outlet for waste gas from machining | 19.875mg/m3 | No | |||||
| 2# Outlet for waste gas from machining | 14.55mg/m3 | ||||||||
| 3# Outlet for waste gas from machining | 9.54mg/m3 | ||||||||
| 4# Outlet for waste gas from machining | 20.97mg/m3 | ||||||||
| 5# Outlet for waste gas from machining | 10.36mg/m3 | ||||||||
| 6# Outlet for waste gas from machining | 6.3mg/m3 | ||||||||
| 7# Outlet for waste gas from machining | 13.18mg/m3 | ||||||||
| 4 | Outlet for waste gas from coating 1 | 20.28mg/m3 | |||||||
| Outlet for waste gas from coating 2 | 14.015mg/m3 | ||||||||
| Outlet for waste gas from coating 3 | 10.135mg/m3 | ||||||||
| Outlet for waste gas from coating 4 | 23.04mg/m3 | ||||||||
| Particles | Total | Collected by gas trap hood + 25m | 22 | Outlet for heat treatment 1 | 12.5mg/m3 | Comprehensive Control Plan | 25.2677 | / | No |
| suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | high exhaust cylinder | Outlet for heat treatment 2 | 11.45mg/m3 | for Air Pollution of Industrial Furnaces (H.D.Q. [2019] No. 56) | |
| Outlet for heat treatment 3 | 11.3mg/m3 | ||||
| Outlet for heat treatment 4 | 11.5mg/m3 | ||||
| Outlet for heat treatment 5 | 9.65mg/m3 | ||||
| Outlet for heat treatment 6 | 10.4mg/m3 | ||||
| Outlet for heat treatment 7 | 9.45mg/m3 | ||||
| Outlet for heat treatment 8 | 8.4mg/m3 | ||||
| Outlet for heat treatment 9 | 4.65mg/m3 | ||||
| Outlet for heat treatment 10 | 5.45mg/m3 | ||||
| Outlet for heat treatment 11 | 11.6mg/m3 | ||||
| Outlet for heat treatment 12 | 9.9mg/m3 | ||||
| Outlet for heat treatment 13 | 9.35mg/m3 | ||||
| Outlet for heat treatment 14 | 11.3mg/m3 | ||||
| Outlet for heat treatment 15 | 11.5mg/m3 | ||||
| 1# outlet for waste gas from pre-coating treatment and kiln | 10.5 mg/m3 | ||||
| 2# outlet for waste gas from pre-coating treatment and kiln | 9.45mg/m3 | ||||
| 3# outlet for waste gas from pre-coating treatment and kiln | 4.55mg/m3 | ||||
| 3rd stage sintering furnace outlet | 4.5mg/m3 | ||||
| 5th stage coating sintering furnace outlet | 9.65mg/m3 | ||||
| Outlet for waste gas from aluminum melting 1 | 7.95mg/m3 |
| Outlet for waste gas from aluminum melting 2 | 7.1mg/m3 | ||||||||
| Collected by gas trap hood + 21m high exhaust cylinder | 8 | Outlet for the welding waste gas 1 | 8.8mg/m3 | ||||||
| Outlet for the welding waste gas 2 | 8mg/m3 | ||||||||
| Outlet for the welding waste gas 3 | 6.5mg/m? | ||||||||
| Outlet for the welding waste gas 4 | 4.55mg/m3 | ||||||||
| Outlet for the welding waste gas 5 | 3.6mg/m3 | ||||||||
| Outlet for the welding waste gas 6 | 9.6mg/m3 | ||||||||
| Outlet for the welding waste gas 7 | 9.1mg/m3 | ||||||||
| Outlet for the welding waste gas 8 | 3.95mg/m3 | ||||||||
| Gaseous inorganic pollutants | Sulfur dioxide | Collected by gas trap hood + 25m high exhaust cylinder | 22 | Outlet for heat treatment 1 | <3mg/m? | Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q. [2019] No. 56) | 11.7129 | / | No |
| Outlet for heat treatment 2 | <3mg/m? | ||||||||
| Outlet for heat treatment 3 | <3mg/m? | ||||||||
| Outlet for heat treatment 4 | <3mg/m? | ||||||||
| Outlet for heat treatment 5 | 7mg/m3 | ||||||||
| Outlet for heat treatment 6 | 6mg/m3 | ||||||||
| Outlet for heat treatment 7 | 3.5mg/m3 | ||||||||
| Outlet for heat treatment 8 | 64mg/m3 | ||||||||
| Outlet for heat treatment 9 | 67mg/m3 | ||||||||
| Outlet for heat treatment 10 | 73.5mg/m3 | ||||||||
| Outlet for heat treatment 11 | 39mg/m3 | ||||||||
| Outlet for heat treatment 12 | 6mg/m3 | ||||||||
| Outlet for heat treatment 13 | <3mg/m? |
| Outlet for heat treatment 14 | <3mg/m? | ||||||||
| Outlet for heat treatment 15 | <3mg/m? | ||||||||
| 1# outlet for waste gas from pre-coating treatment and kiln | 3.5mg/m3 | ||||||||
| 2# outlet for waste gas from pre-coating treatment and kiln | 9.5mg/m3 | ||||||||
| 3# outlet for waste gas from pre-coating treatment and kiln | 5mg/m3 | ||||||||
| 3rd stage sintering furnace outlet | 4.5mg/m3 | ||||||||
| 5th stage coating sintering furnace outlet | 7.5mg/m3 | ||||||||
| Outlet for waste gas from aluminum melting 1 | 55mg/m3 | ||||||||
| Outlet for waste gas from aluminum melting 2 | <3mg/m? | ||||||||
| Gaseous inorganic pollutants | Oxynitride | Collected by gas trap hood + 25m high exhaust cylinder | 22 | Outlet for heat treatment 1 | 8.5mg/m3 | Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q. [2019] No. 56) | 10.6089 | / | No |
| Outlet for heat treatment 2 | 14.5mg/m3 | ||||||||
| Outlet for heat treatment 3 | 14mg/m3 | ||||||||
| Outlet for heat treatment 4 | 17mg/m3 | ||||||||
| Outlet for heat treatment 5 | 14mg/m3 | ||||||||
| Outlet for heat treatment 6 | 14mg/m3 | ||||||||
| Outlet for heat treatment 7 | 5mg/m3 | ||||||||
| Outlet for heat treatment 8 | 11mg/m3 | ||||||||
| Outlet for heat treatment 9 | 10mg/m3 | ||||||||
| Outlet for heat treatment 10 | 17.5mg/m3 | ||||||||
| Outlet for heat treatment 11 | 10mg/m3 | ||||||||
| Outlet for heat treatment 12 | 20.5mg/m3 |
| Outlet for heat treatment 13 | 7.5 mg/m3 | |||||||||
| Outlet for heat treatment 14 | 5mg/m3 | |||||||||
| Outlet for heat treatment 15 | 7mg/m3 | |||||||||
| 1# outlet for waste gas from pre-coating treatment and kiln | ＜3mg/m3 | |||||||||
| 2# outlet for waste gas from pre-coating treatment and kiln | 6mg/m3 | |||||||||
| 3# outlet for waste gas from pre-coating treatment and kiln | 4mg/m3 | |||||||||
| 3rd stage sintering furnace outlet | 18mg/m? | |||||||||
| 5th stage coating sintering furnace outlet | 16mg/m3 | |||||||||
| Outlet for waste gas from aluminum melting 1 | 6mg/m3 | |||||||||
| Outlet for waste gas from aluminum melting 2 | 8.5mg/m3 | |||||||||
| GD Midea Environment Appliances Mfg. Co., | Other organic compounds | Overall volatile organic compounds (VOCs) | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the screen printing process of the south plant | 15.3mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 1.15619 | / | No |
| Other organic compounds | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the screen printing process of the north plant | 12.63mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 3.33580 | / | No | ||
| Ltd. | Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 6 | Exhaust funnel for waste gas from the baking and injection molding processes | 5.28mg/m? | Emission Standard of Pollutants for Synthetic Resin Industry (BG 31572-2015) | 13.59469 | / | No |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 2 | Exhaust funnel for waste gas from the baking and injection molding processes | 5.60mg/m? | Emission Standard of Pollutants for Synthetic Resin Industry (BG 31572-2015) | 2.03391 | No | |||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 3 | Metal plate dusting waste gas exhaust cylinder | 7.54mg/m? | Emission Standard of Pollutants for Synthetic Resin Industry (BG 31572-2015) | 3.78561 | / | No | ||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Dry filtering + direct combustion of natural gas + 15m high altitude discharge | 1 | Outlet for waste gas from dip coating, drying and hardening of the north plant | 4.98mg/m? | Emission Limits of Air Pollutants (DB44/27-2001) | 0.91463 | / | No | ||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Dry filtering + RCO + 15m high altitude discharge | 1 | Outlet for waste gas from dip coating, drying and hardening of the south plant | 13.6mg/m? | Emission Limits of Air Pollutants (DB44/27-2001) | 0.2272 | / | No | ||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Water spray + dry separation + activated carbon device | 1 | Metal spray painting, outlet for waste gas from drying | 8.165mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 2.32220 | No |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Water spray + dry separation + activated carbon device | 1 | Outlet for waste gas from ceramic spraying, drying, sandblasting, powder spraying and hardening | 11.4mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.754 | No | ||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | Gas trap hood + water spraying + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | Metal plate dusting, waster gas hardening | 5.25mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.53984 | / | No |
| Particles | Gas trap hood + Water wash spray +15m high exhaust | 1 | Outlet for waste gas from aluminum casting machine polishing and grinding | 10mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 1.46311 | / | No | |
| Particles | Gas trap hood + Water wash spray + Oil fume purifie + 15m high exhaust | 1 | Outlet for waste gas from die casting | 3.7mg/m? | Emission Standard of Air Pollutants for Casting Industry (GB 39726-2020) | 0.62215 | / | No | |
| Particles | Gas collection hood + Energy-saving cooling device + Cyclone plate tower + Wet electrostatic precipitator + 15m high exhaust | 1 | Outlet for furnace at machine side and natural gas and waste gas | 3.55mg/m? | Emission Standard of Air Pollutants for Casting Industry (GB 39726-2020) | 0.2239 | / | No | |
| Particles | Water spray + dry separation + activated carbon device | 1 | Metal spray painting, outlet for waste gas from drying | 3.55mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.75546 | No | ||
| Particles | Water spray + dry separation + activated carbon device | 1 | Outlet for waste gas from ceramic spraying, drying, sandblasting, powder spraying and hardening | 10mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.6614 | No | ||
| Particles | Fume | Fume hood + electrostatic range hood + 15m high altitude discharge | 7 | Cooking fume outlet at canteen | 0.13mg/m? | Emission Standard of Cooking Fume GB18483-2001 | 0.0338 | / | No |
| Physical and comprehensive indicators | Suspended matters | Oil separation and slagging - hydrolysis and acidification - contact oxidation - MBR | 1 | Domestic wastewater treatment station | 2.75mg/L | Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant GB18918-2002 Emission standard GB18918-2002 | 0.1354 | No | |
| Physical and comprehensive indicators | COD | 12.58mg/L | 0.7246 | / | No |
| Oil | Animal and vegetable oil | 0.41mg/L | 0.0264 | / | No | ||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 0.08755mg/L | 0.003494 | / | No | ||||
| Physical and comprehensive indicators | pH value | 6.6 | / | / | No | ||||
| Physical and comprehensive indicators | Five-day BOD | 5.4mg/L | 0.2703 | / | No | ||||
| Metals and metal compounds | Total zinc | Coagulation and sedimentation + hydrolysis and acidification + aeration + biological tank + MBR + water reuse | 1 | Production wastewater treatment station | 0.0045 mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 0.00066921 | 0.08 | No |
| Physical and comprehensive indicators | COD | 6.28mg/L | 1.007231 | 3.9191 | No | ||||
| Physical and comprehensive indicators | Suspended matters | 5.5mg/L | 1.420196 | / | No | ||||
| Physical and comprehensive indicators | pH value | 7.5 | / | / | No | ||||
| Inorganic pollutants | Total phosphorus (by P) | 0.02mg/L | 0.0023563 | / | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 0.82mg/L | 0.0164762 | 0.6279 | No | |||||
| Oil | Petroleum | 0.064mg/L | 0.0211041 | / | No | |||||
| Metals and metal compounds | Aluminum | 0.11mg/L | 0.0139012 | / | No | |||||
| Metals and metal compounds | Total iron | 0.0725mg/L | 0.0102071 | / | No | |||||
| Hubei Midea Refrigerator Co., Ltd. | Physical and comprehensive indicators | COD | Discharge to municipal domestic sewage network | 1 | Outlets for domestic sewage at the plant | 68mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 11.6071062 | 15 | No |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 12.3mg/L | 2.21459096 | 2.5 | No | |||||
| Physical and comprehensive indicators | Five-day COD | 27.5mg/L | 7.28871048 | / | No | |||||
| Physical and comprehensive indicators | Suspended matters | 12.3mg/L | 2.0792318 | / | No | |||||
| Oil | Animal and vegetable oil | 1.03mg/L | 0.23554422 | / | No | |||||
| Physical and comprehensive indicators | COD | After deep treatment by industrial waste water treatment station, discharge to municipal industrial sewage network | 1 | Freezer waste water outlet | 96mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 3.106086 | 15 | No | |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 0.185mg/L | 0.01278339 | 2.5 | No |
| Physical and comprehensive indicators | Five-day COD | 23.2mg/L | 1.3381255 | / | No | ||||
| Physical and comprehensive indicators | Suspended matters | 35mg/L | 0.424141 | / | No | ||||
| Oil | Petroleum | 3.25mg/L | 0.10638157 | / | No | ||||
| Oil | Animal and vegetable oil | 1.03mg/L | 0.08450638 | / | No | ||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | After photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | First installation branch waste gas outlets | 0.91mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 16.23147 | / | No |
| 1 | Second installation branch waste gas outlets | 1.28mg/m? | / | No | |||||
| 1 | Waste gas outlets at the injection molding workshop | 0.99mg/m? | / | No | |||||
| After dry filtering + photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | Waste gas outlets at the extrusion workshop | 1.03mg/m? | / | No | ||||
| V photocatalysis + activated carbon, 15m high altitude discharge | 1 | New injection molding outlet | 0.98mg/m? | / | No | ||||
| Cooling and dehumidification + UV photocatalysis + activated carbon, 15m high altitude discharge | 1 | Foam outlet | 0.94mg/m? | / | No | ||||
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Two-door gallbladder molding outlet | 0.94mg/m? | / | No | ||||
| After wet scrubber + rotating-stream-tray scrubber + demister + activated carbon, 15m high altitude discharge | 1 | Waste gas outlets at the freezer branch | 0.54mg/m? | / | No | ||||
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | One-box gallbladder molding outlet | 0.88mg/m? | / | No | ||||
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Two-box gallbladder molding outlet | 0.73mg/m? | / | No | ||||
| Rotating-stream-tray scrubbe + dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Freezer No.2 # plant outlet | 0.53mg/m? | / | No |
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Injection molding machine and injection granulation outlet | 0.56mg/m? | / | No | |||||
| Rotating-stream-tray scrubbe + dry filter + activated carbon, 15m high altitude discharge | 1 | / | No | |||||||
| Rotating-stream-tray scrubbe + dry filter + activated carbon, 15m high altitude discharge | 1 | Extruder outlet | 0.81mg/m? | / | No | |||||
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Molding machine outlet | 0.66mg/m? | / | No | |||||
| Rotating-stream-tray scrubbe + dry filter + activated carbon, 15m high altitude discharge | 1 | Molding and extrusion granulation outlet | 0.98mg/m? | / | No | |||||
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Door foam outlet | 0.95mg/m? | / | No | |||||
| Dry filter + two-stage activated carbon, 15m high altitude discharge | 1 | Box foam outlet | 0.95mg/m? | / | No | |||||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | Cartridge dust removal, 15m high altitude discharge | 1 | Molding and extrusion crushing outlet | 10mg/m? | 1.32314 | / | No | ||
| Cartridge dust removal, 15m high altitude discharge | 1 | Injection crushing outlet | 10mg/m? | / | No | |||||
| After wet scrubber + rotating-stream-tray scrubber + demister + activated carbon, 15m high altitude discharge | 1 | Waste gas outlets at the freezer branch | 4.1mg/m? | / | No | |||||
| Wuxi Little Swan Electric Co., Ltd. | Physical and comprehensive indicators | COD | Discharge to municipal sewage network | 1 | Exit at the middle gate of the plant | 125mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 50.848 | 123.9074 | No |
| Physical and comprehensive indicators | Suspended matters | 43.5mg/L | 15.352 | 87.2553 | No | |||||
| Oil | Animal and vegetable oil | 1.54mg/L | 0.752 | 10.7034 | No | |||||
| Inorganic pollutants | Total phosphorus (by P) | 2.17mg/L | 0.765 | 1.0701 | No | |||||
| Inorganic pollutants | Total nitrogen | 25.13mg/L | 8.579 | 11.2612 | No | |||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 20.2mg/L | 6.267 | 6.6906 | No | |||||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | Water spraying + UV photocatalysis + activated carbon + filter cartridge dust collection + high altitude discharge/Two-stage activated carbon + high altitude discharge/Filter cartridge dust collection + high altitude discharge/High altitude discharge | 11 | Plants at each workshop | 3.05mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996)/ Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/524-2014)/ Emission Standard of Pollutants for Synthetic Resin Industry (GB 31572-2015)/ Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 0.3076 | 2.0696 | No | |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | Water spraying + UV photocatalysis + activated carbon + filter cartridge dust collection + high altitude discharge/Zeolite + CO + high altitude discharge/Dry filtering + electrostatic oil removal + high altitude discharge/Two-stage activated carbon + high altitude discharge | Plants at each workshop | 5.62mg/m? | 1.1984 | 1.2199 | No | |||
| Gaseous inorganic pollutants | Sulfur dioxide | Hight altitude discharge | Natural gas for the metal plate process | 2.07mg/m? | 0.0695 | 0.624 | No | |||
| Gaseous inorganic pollutants | Oxynitride | Hight altitude discharge | Natural gas for the metal plate process | 5.12mg/m? | 0.1655 | 3.38 | No | |||
| Wuxi Filin Electronics Co., Ltd. | Particles | Soot | Bag + activated carbon + high altitude discharge/Activated carbon + high altitude discharge | 4 | Buildings A and B | 0.32 mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) for particles and chemical compounds | 0.173 | 0.2859 | No |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | Activated carbon + high altitude discharge/Bag + activated carbon + high altitude discharge | Buildings A and B | 0.975 mg/m? | Subject to Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/524-2014) | 1.358 | 2.6389 | No | ||
| Huaian Welling Motor Manufacturing Co., Ltd. | Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | 1#: Two-stage activated carbon; 5#: Grade 3 filtering + honeycomb zeolite + CO; 6#: Electrostatic demisting + grade 2 filtering + activated carbon; 7#: Spray tower + plasma; 8#: Grade 2 filtering + two-stage activated carbon; 9#: Bag filtering; 10#: Two-stage activated carbon. | 7 | DA007, DA008, and DA009 | 2.4 7mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 0.55 | 2.697 | No |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | DA001、DA005、DA006、DA008、DA010、DA003 | 2．12mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 1.13 | 1.3853 | No | |||
| Aromatic compounds | Styrene | DA005、DA008、DA003 | 7.11mg/m? | Emission Standards for Odor Pollutants (GB14554-93) | 1.25 | / | No | |||
| Midea Group Wuhan Refrigeration | Physical and comprehensive indicators | pH value | Discharge after treatment at the sewage treatment plant | 1 | Main sewage outlet on the west side of the factory area | 7.5 | Integrated Wastewater Discharge Standard (GB8978-1996) | / | / | No |
| Equipment Co., Ltd. | Physical and comprehensive indicators | COD | 38mg/L | 1.722 | 9.951 | No | ||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 0.543mg/L | 0.0314 | 1.002 | No | |||||
| Physical and comprehensive indicators | Suspended matters | ND | 0.373 | / | No | |||||
| Oil | Petroleum | 0.97mg/L | 0.023 | / | No | |||||
| Inorganic pollutants | Total phosphorus (by P) | ND | 0.003 | / | No | |||||
| Inorganic pollutants | Fluoride (by F-) | 7.82mg/L | 0.172 | / | No | |||||
| Metals and metal compounds | Total zinc | 2.94mg/L | 0.087 | / | No | |||||
| Physical and comprehensive indicators | Five-day BOD | 9.7mg/L | 0.384 | / | No | |||||
| Particles | Soot | Discharge after being treated by environmental protection equipment | 20 | 1# plant, 3# plant, 4# plant, 5# plant | 6.6mg/m? | Integrated Emission Standard of Air Pollutants (GB16297-1996) | 0.178 | / | No | |
| Gaseous inorganic pollutants | Sulfur dioxide | 16 | 3mg/m? | 1.63 | / | No | ||||
| Gaseous inorganic pollutants | Oxynitride | 16 | 3mg/m? | 1.847 | / | No | ||||
| Metal elements and their compounds | Tin and its compounds | 3 | 3# plant | 0.004mg/m? | 0.4215 | / | No |
| Other organic compounds | Acrylonitrile | 1 | 5# plant | 0.0002mg/m? | 0.044 | / | No | |||
| Aromatic compounds | Styrene | 1 | 0.145 mg/m? | 0.0324 | / | No | ||||
| Other organic compounds | Overall volatile organic compounds (VOCs) | 7 | 1# plant, 3# plant, 4# plant | 8.12mg/m? | 0.054 | / | No | |||
| Handan Midea Air-Conditioning Equipment Co., Ltd. | Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | 15m high altitude discharge after being treated by environmental protection equipment | 9 | 1#, 2# plants | 10.21mg/m? | 1) Non-methane hydrocarbons: Implementation of the emission concentration limits on organic chemicals in Table 1 of Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13/2322-2016) 2) Sulfur dioxide/ nitrogen oxides/ particles: Implementation of the new furnace standards in Table 1 and Table 2 of Emission Standard of Air Pollutants for Industrial Kiln and Furnace (DB13/1640-2012) 3) Tin and its compounds: Implementation of the requirements of Level 2 in the Integrated Emission Standard of Air Pollutants (GB16297-1996) | 11.347 | / | No |
| Particles | Soot | 2 | 1# plant | 2.58mg/m? | 1.526 | 7.135 | No | |||
| Gaseous inorganic pollutants | Oxynitride | 2 | 1# plant | 6.0mg/m? | 2.773 | 9.369 | No | |||
| Gaseous inorganic pollutants | Sulfur dioxide | 2 | 1# plant | 2.92mg/m? | 1.425 | 9.408 | No | |||
| Metal elements and their compounds | Tin and its compounds | 4 | 2# plant | 0.01mg/m? | 0.0043 | / | No | |||
| Physical and comprehensive indicators | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | North side of the power house | 128.33mg/L | Requirements for inflow water quality of wastewater treatment plant in Handan Economic and Technological Development Zone | 2.94 | 9.42 | No | |
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 3.07mg/ L | 0.076 | 0.7 | No | |||||
| Physical and comprehensive indicators | pH | 7.17 | / | / | No | |||||
| Physical and comprehensive indicators | Suspended matters | 36mg/L | 0.876 | / | No | |||||
| Oil | Petroleum | 0.47mg/L | 0.011 | / | No | |||||
| Inorganic pollutants | Fluoride (by F-) | 5.45mg/L | 0.129 | / | No | |||||
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | Physical and comprehensive indicators | pH value | Discharge to municipal wastewater treatment plant after being treated by the wastewater treatment system | 1 | General sewage discharge exit of plant areas | 6.933 | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | / | / | No |
| Physical and comprehensive indicators | Suspended matters | 13mg/l | 0.9719 | / | No | |||||
| Physical and comprehensive indicators | COD | 109mg/l | 8.1490 | / | No | |||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 6.817mg/l | 0.5096 | / | No | |||||
| Oil | Petroleum | 1.364mg/l | 0.1384 | / | No | |||||
| Physical and comprehensive indicators | Five-day BOD | 34.667mg/l | 2.5917 | / | No | |||||
| Other indicators | Anionic surfactant | 0.217mg/l | 0.0162 | / | No | ||||
| Inorganic pollutants | Phosphate | 0.117mg/l | 0.0087 | / | No | ||||
| Inorganic pollutants | Fluoride (by F-) | 2.265 mg/L | 0.1693 | / | No | ||||
| Metals and metal compounds | Total copper | 0.013mg/l | 0.0010 | / | No | ||||
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | High altitude discharge after being treated by waste gas treatment station | 5 | 2 sets for paint waste gas of 1# and 4# plants each | 10.226mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown | 2.5886 | / | No |
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | 2.817mg/m? | 0.8687 | / | No | ||||
| Particles | Sulfuric acid mist | Lye spray towers (one is out of service, and the other one is used for occasional emergency cleaning of abnormal materials) | 2 | Acid pickling waste gas outlets for 1# and 4# plants | 1.080mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown | 0.0024 | / | No |
| Gaseous inorganic pollutants | Hydrogen chloride | 8.053mg/m? | 0.0098 | / | No |
| Particles | Total suspended particulate matter (TSP) (aerodynamic diameter below 100 μm) | 1 set of RO | 1 | Volatile oil drying waste gas outlet | 5.943mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown Emission Standard of Air Pollutants for Industrial Kiln and Furnace DB 50/659-2016 Table 1/2 | 0.5886 | / | No | |
| Gaseous inorganic pollutants | Sulfur dioxide | 4.443mg/m? | 0.4282 | / | No | |||||
| Gaseous inorganic pollutants | Oxynitride | 12.223mg/m? | 1.2018 | / | No | |||||
| Fatty hydrocarbons and halogenated fatty hydrocarbons | Non-methane hydrocarbons | 2.853mg/m? | 0.2638 | / | No | |||||
| Physical indicator | Ringelmann emittance | < 1 | / | / | No | |||||
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | Physical and comprehensive indicators | pH value | Treatment by waste water treatment station and reaching the standard | 1 | West gate | 7.6 | Integrated Wastewater Discharge Standard (GB8978-1996) Table 4, Level 3 | / | / | No |
| Physical and comprehensive indicators | COD | 165mg/L | 6.241 | 76.63 | No | |||||
| Physical and | Suspended matters | 38mg/L | 1.362 | / | No | |||||
| comprehensive indicators | |||||||||
| Inorganic pollutants | Ammonia-nitrogen (NH3-N) | 23.6mg/L | 0.865 | 5.32 | No | ||||
| Oil | Petroleum | 0.16mg/L | 0.008 | / | No | ||||
| Inorganic pollutants | Fluoride (by F-) | 1mg/L | 0.1914 | / | No | ||||
| Physical and comprehensive indicators | Five-day BOD | 50.9mg/L | 1.767 | / | No | ||||
| Other indicators | Anionic surfactant | 0.104mg/L | 0.007 | / | No | ||||
| Metals and metal compounds | Total zinc | 0.024mg/L | 0.005 | / | No | ||||
| Oil | Animal and vegetable oil | 0.24mg/L | 0.056 | / | No | ||||
| Particles | Particles | After treatment by environmental protection and treatment facilities and reaching the standard, 25m high altitude discharge | 10 | East, west, south and north corners of the plant | 9.5mg/m? | Integrated Emission Standard of Air Pollutants DB 50/418-2016 Table 1 Central Downtown | 10.492 | / | No |
| Gaseous inorganic pollutants | Sulfur dioxide | 4mg/m? | 1.052 | / | No | ||||
| Gaseous inorganic pollutants | Oxynitride | 8mg/m? | 1.521 | / | No | ||||
| Metal elements and their compounds | Tin and its compounds | 9.47mg/m? | 2.048 | / | No | ||||
| Fatty hydrocarbons and halogenated fatty hydrocarbon | Non-methane hydrocarbons | 11.1mg/m? | 4.7447 | / | No |
| s | ||||||||||
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | N/A | Waste mineral oil, waste oil-containing liquid, waste packaging, waste activated carbon, waste lead battery, waste filter cotton, waste circuit board, etc | Treatment entrusted to third-party qualified enterprises | N/A | N/A | N/A | N/A | 175.158 | / | No |
Treatment of pollutantsDuring the Reporting Period, all subsidiaries have strictly abided by the laws and regulations related to environment protection, and no majorenvironmental pollution incidents occurred. All subsidiaries have set up reliable waste water and gas treatment systems. Through regular monitoring,supervision and inspection mechanisms, as well as third-party testing, it is ensured that the discharge of waste water, waste gas and solid 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 waterafter 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 tax
All 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.Measures taken to reduce carbon emissions during the Reporting Period and the results
√ Applicable □ N/A
a. The Group Carbon Management Measures has been published to further clarify the processes and requirements for organizational carbonmanagement, product carbon management, and carbon asset management.b. Energy-saving projects were carried out, with over 1,300 energy-saving projects undertaken in the year 2023. Among them, the distributedphotovoltaic green electricity generation reached 230 million kWh, representing a 9.52% increase compared to 2022.c. The green development of manufacturing bases was furthered in an orderly manner in accordance with the medium- and long-term plans. Basedon the green manufacturing plan, continuously improve the green manufacturing system and promote the enhancement of green manufacturingcapabilities. In 2023, Midea's residential air conditioner factory in Thailand was awarded the national-level title of Green Factory by the Thaigovernment. The Laundry Appliance Division’s factory in Hefei achieved a green electricity usage ratio of 31% and obtained certifications as anational-level green factory and Anhui province-level green factory. As of the end of the Reporting Period, Midea has a total of 28 national-levelgreen factories.
d. Further promote carbon reduction across the entire value chain, including green design, green procurement, green logistics, and green recycling.In 2023, Midea's R290 technology for air conditioners achieved new breakthroughs, with the Efficlima new product having energy efficiency farexceeding the highest A+++ level. The Laundry Appliance Division established a closed-loop recycling system for the product lifecycle, significantlyreducing carbon emissions. The unit also completed research on washing detergent box components containing 50% recycled materials, obtainingcertification from the Global Recycling Standard (GRS). Utilizing automation and other technologies to create an intelligent production logisticssystem, achieving standardization, intelligence, and unmanned operation in various logistics processes. Midea Group innovated in packagingmaterials for residential air conditioners, developing high-density polyethylene (HDPE) and expanded polypropylene (EPP) packaging materials thatcan be conveniently recycled. In regions where there is no recycling and reuse capability, Midea developed compostable and degradable packagingmaterials based on polybutylene adipate terephthalate (PBAT). Midea achieved its annual target of recycling 2.6 million discarded home appliancesahead of schedule, representing a 151% increase compared to 2022. These achievements lay a solid foundation for exploring broader pathways forcarbon reduction across the value chain.Administrative penalties received during the Reporting Period due to environmental issues
□Applicable √N/A
No such cases during the Reporting Period.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 toharmonious common growth with them, honors its commitments, abides by law and moral principles, and continue to contribute to the sustainabledevelopment of the society and the environment. For further information, see the Company’s ESG Report 2023 released on www.cninfo.com.cn.
3. Efforts in Poverty Alleviation and Rural Revitalization
3.1 Exploring new models for rural revitalisation
In this May, Midea Group organised a staff visit to the First Primary School of Guansuo Street, Guanling Buyi and Miao Autonomous County, AnshunCity, Guizhou Province, to carry out public welfare activities under the theme of "Build Dreams together with Midea through Technology". At the event,Midea Group donated funds to assist in the construction of a science laboratory at the school and provided 600 science experiment kits to the localcommunity.In addition, Midea Group continued to implement the East China and West China coordination mechanism. It spent RMB1 million in QiandongnanPrefecture, Guizhou Province as awards for teachers and students, motivating them to bear in mind the original mission of education, and drivinghigh-quality development in the local education.
3.2 Keeping to the plan of “Talent First, Education First”
In this April, Midea Group donated RMB70 million to support the introduction of the Second Affiliated Midea High School of the East China NormalUniversity into Beijiao, Shunde. As such, Midea has established cooperation with the East China Normal University on high-quality education fromprimary school, middle school, to high school. When the school is put into use, it will provide more than 6,000 places in the primary, middle, and highschools to meet the local demand for quality education resources and make a greater contribution to the local economic and scientific andtechnological development.On October 21, Midea Group organized a public welfare event with the theme "Join Midea to Make Dreams Come True with Technology" at MideaGlobal Innovation Center. More than 40 middle school students from Shunde District engaged in discussions on technology-related topics with threeMidea technology celebrities, experiencing the charm of science together. During the event, Midea's technology stars answered questions from thechildren and imparted scientific knowledge through practical examples. After the event, the organizers also provided the children with "MideaScience Experiment Kits", planting a seed of technology in their hearts through this event.
3.3 Subsequent plans
It is Midea Group’s vision to “Bring Great Innovations to Life”. The Company hopes to deliver the power of science and technology through publicwelfare activities, keep to the plan of “Talent First, Education First”, adhere to the sustainable long-termism, as well as promote both ruralrevitalisation and talent development, so as to play its part in creating more value for society.
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 | 2. In order to avoid possible competition within the industry between Midea Group and Midea Holding and its controlled enterprises as well as He Xiangjian, his immediate family and his controlled companies, Midea Holding and He Xiangjian have undertaken as follows: (1) None of the entities or individuals mentioned above is or will be engaged in the same or similar business as the existing main business of Midea Group and its controlled companies. They are 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; | 28 March 2013 | Long-standing | 2. There has been no violation of this undertaking. |
| (2) If Midea Group and its controlled companies expand their business on the basis of the existing ones to those where the above mentioned related entities or individuals are already performing such production and operations, as long as He Xiangjian is still the actual controller of Midea Group, and Midea Holding the controlling shareholder, they will agree on solving the problem of competition within the industry arising therefrom within a reasonable period; (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 | 3. In order to regulate matters of related transactions that may occur in the future between Midea Group and Midea Holding and its controlled companies as well as He Xiangjian, his immediate family and his controlled companies, Midea Holding and He Xiangjian have undertaken as follows: (1) They will regulate any related transactions with Midea Group and its controlled companies using their utmost efforts to reduce them. For unavoidable related transactions with Midea Group and its controlled companies, 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 | 28 March 2013 | Long-standing | 3. There has been no violation of this undertaking. |
| regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They guarantee to offer fair prices for related transactions, and fulfill the information disclosure obligations in respect of the related transactions according to related laws, regulations, rules, other regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They also guarantee not to illegally transfer the funds or profits from Midea Group, or damage the interests of its shareholders at their advantages during the related transactions. (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 | 4. On 4 January 2001, the Midea Trade Union Committee signed the "Equity Transfer Contract" with five people, namely He Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and Liang Jieyin, where it transferred all its limited equity of Midea Group (22. 85%) respectively to those five people. According to the confirmation letter issued by members of the Midea Trade Union Committee at that time, the equity transfer price was determined after mutual discussion on the basis of their true opinions, therefore there was no dispute or potential dispute. On 28 June 2013, Foshan Shunde Beijiao General Union, superior department of Midea Trade Union Committee, issued | 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. |
| 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 Trade Union Committee is entitled to dispose any property of the committee, and such property disposal does not need any agreement from all staff committee members. Midea Holding and He Xiangjian, respectively the controlling shareholder and actual controller of Midea Group Co., Ltd. have undertaken as follows: For any loss to Midea Group caused by any dispute or potential dispute arising from the matters of equity transfer mentioned above, they are willing to 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 | 6. Undertakings on 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 | 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. |
| 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 theforecast period, 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 Note 6 to the Financial Statements. Entities newly included in the consolidation scope inthe current period mainly include CLOU Electronics (please refer to Note 5(1) and Note 5(2)(a)). Thedetailed information of subsidiaries no longer included in the consolidation scope in the current periodis 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 | RMB8.925 million |
| Consecutive years of the audit service provided by the domestic CPA firm | Nine 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 | Four years and three 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 and financial statements for the year 2023.
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 | - | 1,419,680 | 0.55% | 1,900,000 | No | Payment after delivery | - | 29 April 2023 | www.cninfo.com.cn |
| Midea Real Estate Holding Limited | Controlled by Company’s actual controller | Sale | Sale of goods | Market price | - | 300,900 | 0.08% | 720,530 | No | Payment after delivery | - | 29 April 2023 | www.cninfo.com.cn |
| Details of any sales return of a large amount | Zero | ||||||||||||
| Give the actual situation in the Reporting Period (if any) where a forecast had been made for the total amounts of continuing related-party transactions by type to occur in the current period | The line for continuing related transactions between the Company and the related parties and their subsidiaries did not exceed the total amount of continuing related transactions estimated by the Company by type. | ||||||||||||
| Reason for any significant difference between the transaction price and the market reference price (if applicable) | N/A | ||||||||||||
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.
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. | 2023/4/29 | 2,000,000 | 2023/1/30 | - | Joint liability | One year | No | No |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 12,400,000 | 2023/1/6 | 3,871,270 | Joint liability | One year | No | No |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 2023/4/29 | 2,400,000 | 2023/1/6 | 50,380 | Joint liability | One year | No | No |
| Foshan Midea Carrier Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 350,000 | 2023/1/6 | - | Joint liability | One year | No | No |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 4,100,000 | - | Joint liability | One year | No | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 600,000 | 2023/1/6 | 58,490 | Joint liability | One year | No | No |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 2023/4/29 | 550,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Precision Molding Technology Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 500,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 2023/4/29 | 850,000 | 2023/4/25 | 650 | Joint liability | One year | No | No |
| Midea Group Wuhan Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | 2023/4/29 | 170,000 | 2023/4/21 | - | Joint liability | One year | No | No |
| Guangdong Welling Motor Manufacturing Co., Ltd. | 2023/4/29 | 1,070,000 | 2023/1/17 | 70 | Joint liability | One year | No | No |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | 2023/4/29 | 130,000 | - | Joint liability | One year | No | No | |
| Huaian Welling Motor Manufacturing Co., Ltd. | 2023/4/29 | 110,000 | - | Joint liability | One year | No | No | |
| Wuhu Welling Motor Sales Co., Ltd. | 2023/4/29 | 1,900,000 | 2023/2/27 | - | Joint liability | One year | No | No |
| Hainan Welling Motor Sales Co., Ltd. | 2023/4/29 | 500,000 | - | Joint liability | One year | No | No | |
| Anhui Welling Auto Parts Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Anqing Welling Auto Parts Co., Ltd. | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| Guangdong Meizhi Compressor Limited | 2023/4/29 | 1,130,000 | 2023/1/17 | 12,300 | Joint liability | One year | No | No |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | 2023/4/29 | 515,000 | 2023/4/18 | - | Joint liability | One year | No | No |
| Anhui Meizhi Compressor Co., Ltd. | 2023/4/29 | 420,000 | 2023/1/30 | - | Joint liability | One year | No | No |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Zhejiang Meizhi Compressor Co., Ltd. | 2023/4/29 | 4,500,000 | 2023/2/23 | - | Joint liability | One year | No | No |
| Guangdong Midea Environmental Technologies Co., Ltd. | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Dorna Technology Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Electromechanical | 2023/4/29 | 150,000 | - | Joint liability | One | No | No |
| Technology Co., Ltd. | year | |||||||
| Guangdong Jiya Precision Machinery Technology Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| MiSiliconn SemiConductor Technologies Co., Ltd. | 2023/4/29 | 60,000 | - | Joint liability | One year | No | No | |
| Servotronix Motion Technology Development (Shenzhen) Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/4/29 | 6,417,970 | 2023/1/4 | 521,560 | Joint liability | One year | No | No |
| Guangdong Witol Vacuum Electronic Manufacture Co., Ltd. | 2023/4/29 | 85,000 | 2023/2/24 | 20 | Joint liability | One year | No | No |
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2023/4/29 | 760,000 | 2023/1/9 | - | Joint liability | One year | No | No |
| Wuhu Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/4/29 | 2,000,000 | - | Joint liability | One year | No | No | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 4,370,000 | 2023/1/12 | 125,680 | Joint liability | One year | No | No |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 2023/4/29 | 45,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | 2023/4/29 | 160,000 | 2023/2/20 | 14,260 | Joint liability | One year | No | No |
| Meitong Energy Technology (Chongqing) Co., Ltd. | 2023/4/29 | 120,000 | 2023/9/18 | 660 | Joint liability | One year | No | No |
| Guangdong MeiKong Intelligent Building Co., Ltd. | 2023/4/29 | 80,000 | - | Joint liability | One year | No | No | |
| Shanghai M-BMS Intelligent Construction Co., Ltd. | 2023/4/29 | 80,000 | - | Joint liability | One year | No | No | |
| Winone Elevator Company Limited | 2023/4/29 | 790,000 | 2023/1/12 | 50,760 | Joint liability | One year | No | No |
| Hubei Midea Building Technology Co., Ltd. | 2023/4/29 | 30,000 | - | Joint liability | One year | No | No | |
| Ningbo Midea United Materials Supply Co. Ltd. | 2023/4/29 | 5,040,000 | 2023/1/10 | 69,910 | Joint liability | One year | No | No |
| Guangzhou Kaizhao Commercial and Trading Co., Ltd | 2023/4/29 | 20,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 2023/4/29 | 200,000 | 2023/1/9 | - | Joint liability | One year | No | No |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2023/4/29 | 1,670,000 | 2023/1/9 | 30 | Joint liability | One year | No | No |
| GD Midea Environment Appliances Mfg. Co., Ltd. | 2023/4/29 | 1,400,000 | 2023/1/9 | 16,930 | Joint liability | One year | No | No |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2023/4/29 | 2,200,000 | 2023/2/23 | 609,300 | Joint liability | One year | No | No |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | 2023/4/29 | 130,000 | - | Joint liability | One year | No | No | |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 2023/4/29 | 2,500,000 | 2023/1/30 | 81,360 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2023/4/29 | 2,400,000 | 2023/1/13 | 387,400 | Joint liability | One year | No | No |
| Wuhu Midea Smart Kitchen Appliance Manufacturing Co., Ltd. | 2023/4/29 | 66,000 | 2023/2/21 | - | Joint liability | One year | No | No |
| Foshan Shunde Midea Water Dispenser Manufacturing Company Limited | 2023/4/29 | 310,000 | 2023/3/8 | 10,160 | Joint liability | One year | No | No |
| Hubei Midea Laundry Appliance Co., Ltd. | 2023/4/29 | 50,000 | - | Joint liability | One | No | No |
| year | ||||||||
| Hefei Midea Laundry Appliance Co., Ltd. | 2023/4/29 | 1,930,000 | 2023/1/16 | 490,000 | Joint liability | One year | No | No |
| Wuxi Filin Electronics Co., Ltd. | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| Wuxi Little Swan Electric Co., Ltd. | 2023/4/29 | 4,345,000 | 2023/1/10 | 146,750 | Joint liability | One year | No | No |
| Hefei Midea Refrigerator Co., Ltd. | 2023/4/29 | 3,000,000 | 2023/1/13 | 582,980 | Joint liability | One year | No | No |
| Hefei Hualing Co., Ltd. | 2023/4/29 | 700,000 | 2023/1/30 | 82,310 | Joint liability | One year | No | No |
| Hubei Midea Refrigerator Co., Ltd. | 2023/4/29 | 520,000 | 2023/12/25 | 65,700 | Joint liability | One year | No | No |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 2023/4/29 | 700,000 | 2023/3/22 | 92,700 | Joint liability | One year | No | No |
| Little Swan (Jing Zhou) Sanjin Electronic Appliances Limited | 2023/4/29 | 50,000 | - | Joint liability | One year | No | No | |
| Toshiba Home Appliances Manufacturing (Nanhai) Co., Ltd | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| Midea Group E-Commerce Co., Ltd. | 2023/4/29 | 160,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2023/4/29 | 390,000 | 2023/1/1 | - | Joint liability | One year | No | No |
| Reis Robotics (Kunshan) Co., Ltd. | 2023/4/29 | 200,000 | 2023/1/16 | 19,380 | Joint liability | One year | No | No |
| KUKA Systems (China) CO., Ltd. | 2023/4/29 | 400,000 | 2023/1/5 | 188,920 | Joint liability | One year | No | No |
| KUKA Robotics Manufacturing China Co., Ltd. | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics Guangdong Co., Ltd | 2023/4/29 | 200,000 | - | Joint liability | One year | No | No | |
| KUKA Robotics (Shanghai) Co.,Ltd. | 2023/4/29 | 300,000 | 2023/1/1 | 2,050 | Joint liability | One year | No | No |
| Shanghai Swisslog Healthcare Co., Ltd. | 2023/4/29 | 65,000 | 2023/2/22 | 820 | Joint liability | One year | No | No |
| Guangdong Swisslog Technology Co., Ltd. | 2023/4/29 | 40,000 | - | Joint liability | One year | No | No | |
| Swisslog (Shanghai) Co., Ltd. | 2023/4/29 | 80,000 | 2023/1/1 | - | Joint liability | One year | No | No |
| Shanghai Swisslog Technology Co., Ltd. | 2023/4/29 | 200,000 | 2023/1/6 | 67,140 | Joint liability | One year | No | No |
| Guangdong Midea Intelligent Robotics Co., Ltd. | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea-SIIX Electronics Co., Ltd. | 2023/4/29 | 100,000 | 2023/1/1 | 370 | Joint liability | One year | No | No |
| Hefei Midea-SIIX Electronics Co., Ltd. | 2023/4/29 | 150,000 | - | Joint liability | One year | No | No | |
| Guangdong Meichuangxi Technology Co., Ltd. | 2023/4/29 | 500,000 | - | Joint liability | One year | No | No | |
| Guangdong Meicloud Technology Co., Ltd. | 2023/4/29 | 120,000 | - | Joint liability | One year | No | No | |
| Foshan Meicloud Technology Co., Ltd. | 2023/4/29 | 30,000 | - | Joint liability | One year | No | No | |
| Guangdong Yueyun Industrial Internet Innovative Technology Co., Ltd. | 2023/4/29 | 10,000 | - | Joint liability | One year | No | No |
| Midea International Corporation Company Limited | 2023/4/29 | 15,705,000 | 2023/1/1 | 11,735,520 | Joint liability | One year | No | No |
| Midea Investment Development Company Limited | 2023/4/29 | 8,100,000 | 2023/1/1 | 3,187,220 | Joint liability | One year | No | No |
| Welling International (Hong Kong) Ltd | 2023/4/29 | 250,000 | - | Joint liability | One year | No | No | |
| Midea International Trading Company Limited | 2023/4/29 | 650,000 | - | Joint liability | One year | No | No | |
| Midea Electric Trading (Singapore) Co.,Pte. Ltd. | 2023/4/29 | 6,375,000 | - | Joint liability | One year | No | No | |
| Toshiba Lifestyle Products & Services Corporation | 2023/4/29 | 1,154,400 | 2023/1/1 | 289,590 | Joint liability | One year | No | No |
| Toshiba Thailand Co., Ltd | 2023/4/29 | 152,400 | - | Joint liability | One year | No | No | |
| Toshiba Vietnam Consumer Products Co., Ltd | 2023/4/29 | 66,190 | 2023/2/23 | - | Joint liability | One year | No | No |
| Toshiba Lifestyle Electronics Trading Co., Ltd | 2023/4/29 | 10,090 | 2023/1/1 | 790 | Joint liability | One year | No | No |
| Toshiba consumer products (Thailand) Co.,ltd | 2023/4/29 | 243,310 | 2023/1/1 | 7,940 | Joint liability | One year | No | No |
| Thai Toshiba Electric Industries Co., Ltd | 2023/4/29 | 17,760 | 2023/1/1 | 14,960 | Joint liability | One year | No | No |
| Control Component Co., Ltd | 2023/4/29 | 14,310 | 2023/1/1 | 250 | Joint liability | One year | No | No |
| Clivet S.p.A. | 2023/4/29 | 100,000 | - | Joint liability | One year | No | No | |
| Midea (Egypt) Kitchen & water heater appliances Co., Ltd | 2023/4/29 | 70,000 | - | Joint liability | One year | No | No | |
| Midea Electric Netherlands (I) B.V. | 2023/4/29 | 25,000,000 | 2023/1/1 | 23,631,300 | Joint liability | One year | No | No |
| Total guarantee line for subsidiaries approved during the Reporting Period (B1) | 138,947,430 | Total actual guarantee amount for subsidiaries during the Reporting Period (B2) | 63,628,640 | |||||
| Total approved guarantee line for subsidiaries at the end of the Reporting Period (B3) | 138,947,430 | Total actual guarantee balance for subsidiaries at the end of the Reporting Period (B4) | 46,487,880 | |||||
| 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 |
| Toshiba Sales & Services Sdn. Bhd. | 2023/4/29 | 202,500 | 2023/1/5 | 20 | Joint liability | One year | No | No |
| Toshiba Home Technology Corporation | 2023/4/29 | 7,630 | 2023/1/1 | 1,130 | Joint liability | One year | No | No |
| Midea America Corp. | 2023/4/29 | 400,000.00 | Joint liability | One year | No | No | ||
| Midea America (Canada) Corp | 2023/4/29 | 67,500 | Joint liability | One year | No | No | ||
| Midea Mexico, S. DE R.L. DE C.V. | 2023/4/29 | 168,750 | 2023/2/28 | 31,210 | Joint liability | One year | No | No |
| Midea Consumer Appliances DMCC | 2023/4/29 | 33,750 | Joint liability | One year | No | No | ||
| Orient Household Appliances Ltd.(Orient) | 2023/4/29 | 202,500 | Joint liability | One year | No | No | ||
| Midea Italia S.r.l. | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Midea Europe GmbH | 2023/4/29 | 67,500 | Joint liability | One year | No | No | ||
| Midea Electrics France | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Midea Home Appliances UK Ltd | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Midea Electrics Egypt | 2023/4/29 | 175,500 | Joint liability | One year | No | No | ||
| Midea Electric Espana S.R.L. | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Concepcion Midea Inc. | 2023/4/29 | 50,000 | Joint liability | One year | No | No | ||
| Midea Scott & English Electronics Sdn. Bhd | 2023/4/29 | 120,000 | Joint liability | One year | No | No | ||
| Pt. Midea Planet Indonesia | 2023/4/29 | 102,900 | Joint liability | One year | No | No | ||
| Midea (Japan) Co., Ltd. | 2023/4/29 | 20,250 | Joint liability | One year | No | No | ||
| MC Innovation Center Co., Ltd. | 2023/4/29 | 20,250 | Joint liability | One year | No | No | ||
| Midea Electronics Australia Co Pty Ltd | 2023/4/29 | 13,500 | Joint liability | One year | No | No | ||
| Meco Innovations Technology, LLC | 2023/4/29 | 6,700 | Joint liability | One year | No | No | ||
| Midea India Private Limited | 2023/4/29 | 33,750 | Joint liability | One year | No | No | ||
| GMCC and Welling Appliance Component (Thailand) Co., Ltd. | 2023/4/29 | 40,000 | Joint liability | One year | No | No | ||
| Wuhu Midea Annto Logistics Co., Ltd. | 2023/4/29 | 800,000 | 2023/1/5 | 11,300 | Joint liability | One year | No | No |
| Ningbo Annto Logistics Co., Ltd. | 2023/4/29 | 300,000 | Joint liability | One year | No | No | ||
| Hainan Annto Logistics Supply Chain Management Co., Ltd. | 2023/4/29 | 200,000 | Joint liability | One year | No | No | ||
| Total line for guarantees between subsidiaries approved during the Reporting Period (C1) | 3,086,980 | Total actual guarantee amount between subsidiaries during the Reporting Period (C2) | 283,640 | |||||
| Total approved line for guarantees between subsidiaries at the end of the Reporting Period (C3) | 3,086,980 | Total actual guarantee balance between subsidiaries at the end of the Reporting Period (C4) | 43,660 | |||||
| Guarantees provided with the Company’s asset pool | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Hefei Midea Refrigerator Co., Ltd. | 2023/10/31 | 1,906,00 | 2023/7/21 | 1,167,00 | Joint liability | One | No | No |
| 0 | 0 | year | ||||||
| Ningbo Midea United Materials Supply Co. Ltd. | 2023/10/31 | 1,200,000 | 2023/6/29 | 773,490 | Joint liability | One year | No | No |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 2023/4/29 | 665,000 | 2023/4/26 | 474,830 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2023/10/31 | 635,000 | 2023/8/1 | 332,400 | Joint liability | One year | No | No |
| Midea Group E-Commerce Co., Ltd. | 2023/4/29 | 53,000 | Joint liability | One year | No | No | ||
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2023/4/29 | 268,000 | 2023/11/2 | 40,000 | Joint liability | One year | No | No |
| MiSiliconn SemiConductor Technologies Co., Ltd. | 2023/4/29 | 30,240 | Joint liability | One year | No | No | ||
| Anqing Welling Auto Parts Co., Ltd. | 2023/4/29 | 30,240 | Joint liability | One year | No | No | ||
| Guangdong Jiya Precision Machinery Technology Co., Ltd. | 2023/4/29 | 75,600 | Joint liability | One year | No | No | ||
| Dorna Technology Co., Ltd. | 2023/4/29 | 30,240 | Joint liability | One year | No | No | ||
| Zhejiang Meizhi Compressor Co., Ltd. | 2023/10/31 | 1,088,240 | 2023/4/27 | 998,000 | Joint liability | One year | No | No |
| Wuhu Welling Motor Sales Co., Ltd. | 2023/4/29 | 756,020 | 2023/5/23 | 750,000 | Joint liability | One year | No | No |
| Anhui Welling Auto Parts Co., Ltd. | 2023/4/29 | 30,240 | 2023/12/27 | 5,920 | Joint liability | One year | No | No |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd | 2023/10/31 | 418,000 | Joint liability | One year | No | No | ||
| Midea Group Wuhan Refrigeration Equipment Co.,Ltd. | 2023/10/31 | 1,000,000 | 2023/9/21 | 739,160 | Joint liability | One year | No | No |
| GD Midea Air-Conditioning Equipment Co.,Ltd. | 2023/10/31 | 4,188,000 | 2023/2/15 | 3,108,620 | Joint liability | One year | No | No |
| GD Midea Group Wuhu Air-Conditioning Equipment Co.,Ltd. | 2023/10/31 | 1,000,000 | Joint liability | One year | No | No | ||
| Guangdong Midea Intelligent Robotics Co., Ltd. | 2023/4/29 | 30,000 | Joint liability | One year | No | No | ||
| Shanghai Swisslog Healthcare Co., Ltd. | 2023/4/29 | 20,000 | 2023/8/30 | 16,750 | Joint liability | One year | No | No |
| Reis Robotics (Kunshan) Co., Ltd. | 2023/10/31 | 50,000 | 2023/11/24 | 30,520 | Joint liability | One year | No | No |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2023/10/31 | 100,000 | Joint liability | One year | No | No | ||
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2023/10/31 | 600,000 | 2023/11/27 | 270,230 | Joint liability | One year | No | No |
| GD Midea Environment Appliances Mfg. Co.,Ltd. | 2023/10/31 | 600,000 | 2023/4/27 | 295,480 | Joint liability | One year | No | No |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2023/10/31 | 596,180 | 2023/10/25 | 200,000 | Joint liability | One year | No | No |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/10/31 | 1,664,000 | 2023/4/12 | 1,219,760 | Joint liability | One year | No | No |
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2023/4/29 | 454,000 | 2023/4/25 | 245,920 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen Appliances Manufacturing Co., Ltd. | 2023/10/31 | 151,000 | 2023/11/20 | 32,820 | Joint liability | One year | No | No |
| Hefei Midea Laundry Appliance Co., Ltd. | 2023/10/31 | 1,000,000 | Joint liability | One | No | No |
| year | ||||||||
| Wuxi Little Swan Electric Co., Ltd. | 2023/4/29 | 1,361,000 | 2023/5/15 | 738,800 | Joint liability | One year | No | No |
| Hainan Annto Logistics Supply Chain Management Co., Ltd. | 2023/4/29 | 150,000 | Joint liability | One year | No | No | ||
| Ningbo Annto Logistics Co., Ltd. | 2023/4/29 | 100,000 | 2023/2/2 | Joint liability | One year | No | No | |
| Shenyang Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Guiyang Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Wuhan Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Nanjing Meian Logistics Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Shanghai Annto Logistics Supply Chain Technology Co., Ltd. | 2023/4/29 | 20,000 | 2023/4/25 | 220 | Joint liability | One year | No | No |
| Jingzhou Meian Warehousing and Transportation Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Qihe Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Hefei Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Tianjin Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Xuzhou Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Zhengzhou Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Chongqing Annto Logistics Technology Co., Ltd. | 2023/4/29 | 20,000 | Joint liability | One year | No | No | ||
| Wuhu Midea Annto Logistics Co., Ltd. | 2023/4/29 | 160,000 | 2023/1/13 | 92,750 | Joint liability | One year | No | No |
| Total line for guarantees provided with the Company’s asset pool approved during the Reporting Period (D1) | 20,650,000 | Total actual guarantee amount provided with the Company’s asset pool during the Reporting Period (D2) | 15,696,320 | |||||
| Total approved line for guarantees provided with the Company’s asset pool at the end of the Reporting Period (D3) | 20,650,000 | Total actual guarantee balance provided with the Company’s asset pool at the end of the Reporting Period (D4) | 11,532,670 | |||||
| Total guarantee amount (total of the above-mentioned four kinds of guarantees) | ||||||||
| Total guarantee line approved during the Reporting Period (A1+B1+C1+D1) | 162,684,410 | Total actual guarantee amount during the Reporting Period (A2+B2+C2+D2) | 79,608,600 | |||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3+D3) | 162,684,410 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4+D4) | 58,064,210 | |||||
| Proportion of the total actual guarantee amount (A4+B4+C4+D4) in net assets of the Company | 35.65% | |||||||
| 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) | 54,267,530 | |||||||
| 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) | 54,267,530 |
| 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
The 21st meeting of the 4th Board of Directors and the 13th meeting of the 4th Supervisory Committeeof the Company reviewed and approved the proposal and related proposals on the issuance of Hshares and listing on the Hong Kong Stock Exchange. The above proposal was also approved by theCompany's 2024 third extraordinary general meeting of shareholders.The Company has submitted an application for listing to the Hong Kong Stock Exchange (see theannouncement on the issuance and listing of H shares submitted to the Hong Kong Stock Exchangeand the publication of application materials on the Juchao Information Network on 25 October 2023(Announcement No. 2023-083)), and has submitted the filing materials for this issuance to the ChinaSecurities Regulatory Commission (CSRC). The relevant materials for this issuance have been filedand reviewed by the CSRC and the Hong Kong Stock Exchange, and the Company is activelypromoting related filing and review matters.
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 | 143,615,016 | 2.05 | -10,051,926 | -10,051,926 | 133,563,090 | 1.90 |
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 | 141,131,474 | 2.02 | -9,208,384 | -9,208,384 | 131,923,090 | 1.88 |
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 | 138,767,873 | 1.98 | -9,208,384 | -9,208,384 | 129,559,489 | 1.84 |
1.4 Shares held by
foreign investors
| 1.4 Shares held by foreign investors | 2,483,542 | 0.04 | -843,542 | -843,542 | 1,640,000 | 0.02 |
Among which: Sharesheld by foreigncorporations
| Among which: Shares held by foreign corporations |
Shares held byforeign individuals
| Shares held by foreign individuals | 2,483,542 | 0.04 | -843,542 | -843,542 | 1,640,000 | 0.02 |
2. Non-restricted shares
| 2. Non-restricted shares | 6,853,658,060 | 97.95 | 38,490,170 | 57,705 | 38,547,875 | 6,892,205,935 | 98.10 |
2.1 RMB common
shares
| 2.1 RMB common shares | 6,853,658,060 | 97.95 | 38,490,170 | 57,705 | 38,547,875 | 6,892,205,935 | 98.10 |
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 | 6,997,273,076 | 100.00 | 38,490,170 | -9,994,221 | 28,495,949 | 7,025,769,025 | 100.00 |
Reasons for the changes in shares
√Applicable □N/A
a. The 2,566,396 restricted shares of a total of 172 eligible awardees for the fourth unlocking period ofthe first grant under the 2018 Restricted Share Incentive Scheme were unlocked on 3 July 2023,including 169,750 restricted shares of foreign employees.b. The 324,167 restricted shares of a total of 18 eligible awardees for the third unlocking period of thereserved restricted shares under the 2018 Restricted Share Incentive Scheme were unlocked on 7 July2023.c. The 4,897,510 restricted shares of a total of 308 eligible awardees (inclusive of 132,250 such sharesof foreign awardees) for the third unlocking period of the 2019 Restricted Share Incentive Scheme wereunlocked on 13 July 2023.d. The 10,851,082 restricted shares of a total of 394 eligible awardees (inclusive of 557,500 suchshares of foreign awardees) for the third unlocking period of the 2020 Restricted Share IncentiveScheme were unlocked on 18 July 2023.e. For the reasons of certain awardees’ resignation, violation of the Company’s “Red Lines”, beingreassigned or other factors, on 18 April 2023, the Company retired a total of 2,497,917 restrictedshares (inclusive of 72,500 such shares of foreign awardees) under the 2018 Restricted ShareIncentive Scheme, the 2019 Restricted Share Incentive Scheme, the 2020 Restricted Share IncentiveScheme, the 2021 Restricted Share Incentive Scheme, and the 2022 Restricted Share IncentiveScheme.f. For the reasons of certain awardees’ resignation, violation of the Company’s “Red Lines”, beingreassigned or other factors, on 10 November 2023, the Company retired a total of 7,496,304 restrictedshares (inclusive of 266,542 such shares of foreign awardees) under the 2018 Restricted ShareIncentive Scheme, the 2019 Restricted Share Incentive Scheme, the 2020 Restricted Share IncentiveScheme, the 2021 Restricted Share Incentive Scheme, and the 2022 Restricted Share IncentiveScheme.
g. In the Reporting Period, the awardees of stock options chose to exercise 38,490,170 shares, whichhave been registered into the Company’s share capital.h. In the Reporting Period, locked-up shares held by senior management increased by 256,450 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 | 2,947,667 | 2,566,396 | 381,271 | 0 | Locked up according to the Scheme | 3 July 2023 |
Awardees ofreservedrestricted sharesunder 2018Restricted ShareIncentive Scheme
| Awardees of reserved restricted shares under 2018 Restricted Share Incentive Scheme | 715,000 | 324,167 | 70,833 | 320,000 | Locked up according to the Scheme | 7 July 2023 |
Awardees of 2019Restricted ShareIncentive Scheme
| Awardees of 2019 Restricted Share Incentive Scheme | 11,301,167 | 4,897,510 | 1,125,782 | 5,277,875 | Locked up according to the Scheme | 13 July 2023 |
Awardees of 2020Restricted ShareIncentive Scheme
| Awardees of 2020 Restricted Share Incentive Scheme | 14,543,917 | 10,851,082 | 3,692,835 | 0 | Locked up according to the Scheme | 18 July 2023 |
| Awardees of 2021 Restricted Share Incentive Scheme | 8,550,000 | 3,401,000 | 5,149,000 | Locked up according to the Scheme | - |
Awardees of 2022Restricted ShareIncentive Scheme
| Awardees of 2022 Restricted Share Incentive Scheme | 12,152,500 | 1,322,500 | 10,830,000 | Locked up according to the Scheme | - |
Awardees of 2023Restricted ShareIncentive Scheme
| Awardees of 2023 Restricted Share Incentive Scheme | 0 | 18,325,000 | 18,325,000 | Locked up according to the Scheme | - |
Zhong Zheng
| Zhong Zheng | 187,114 | 20,000 | 207,114 | Locked up for senior management | - |
Zhao Wenxin
| Zhao Wenxin | 60,000 | 78,000 | 138,000 | Locked up for senior management | - |
Zhang Xiaoyi
| Zhang Xiaoyi | 362,431 | 25,000 | 387,431 | Locked up for senior management | - |
Wang Jinliang
| Wang Jinliang | 35,000 | 58,000 | 93,000 | Locked up for senior management | - |
Li Guolin
| Li Guolin | 0 | 20,000 | 20,000 | Locked up for senior management | - |
Jiang Peng
| Jiang Peng | 248,950 | 20,000 | 228,950 | Locked up for senior management | - |
Guan Jinwei
| Guan Jinwei | 326,250 | 50,000 | 376,250 | Locked up for senior management | - |
Hu Ziqiang
| Hu Ziqiang | 275,000 | 25,000 | 300,000 | Locked up for senior management | - |
Yin Bitong
| Yin Bitong | 1,582,241 | 450 | 1,582,691 | Locked up for former senior management | - |
Total
| Total | 53,287,237 | 18,659,155 | 18,601,450 | 9,994,221 | 43,235,311 | -- | -- |
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 | 318,676 | Total number of common shareholders at the prior month-end before the disclosure date of the annual report | 282,456 |
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.
| Midea Holding Co., Ltd. | Domestic non-state-owned corporation | 30.87% | 2,169,178,713 | - | 0 | 2,169,178,713 |
Hong KongSecurities ClearingCompany Limited
| Hong Kong Securities Clearing Company Limited | Foreign corporation | 19.05% | 1,338,736,023 | -93,978,553 | 0 | 1,338,736,023 |
China SecuritiesFinance Co., Ltd.
| China Securities Finance Co., Ltd. | Domestic non-state-owned corporation | 2.82% | 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 Huijin AssetManagement Ltd.
| 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% | 86,170,000 | 30,000 | 0 | 86,170,000 |
Canada PensionPlan InvestmentBoard－ own funds(stock exchange)
| Canada Pension Plan Investment Board－ own funds (stock exchange) | Foreign corporation | 0.70% | 48,842,446 | -13,071,457 | 0 | 48,842,446 |
Li Jianwei
| Li Jianwei | Foreign individual | 0.65% | 45,591,545 | -673,000 | 0 | 45,591,545 |
Yuan Liqun
| Yuan Liqun | Domestic individual | 0.52% | 36,792,400 | -2,422,519 | 0 | 36,792,400 |
Industrial andCommercial Bankof China Limited－Huatai-PineBridgeCSI 300 TradedOpen-ended IndexSecuritiesInvestment Fund
| Industrial and Commercial Bank of China Limited－Huatai-PineBridge CSI 300 Traded Open-ended Index Securities Investment Fund | Foreign corporation | 0.52% | 36,737,633 | 16,692,560 | 0 | 36,737,633 |
Strategic investors or generalcorporations becoming top-tencommon shareholders due toplacing 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 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 for repurchasedshares among the top 10shareholders
| Special account for repurchased shares among the top 10 shareholders | 118,366,752 shares (or 1.68% 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 Securities ClearingCompany Limited
| Hong Kong Securities Clearing Company Limited | 1,338,736,023 | RMB common stock | 1,338,736,023 |
China Securities Finance Co.,Ltd.
| 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 | 86,170,000 | RMB common stock | 86,170,000 |
Canada Pension PlanInvestment Board－own funds(stock exchange)
| Canada Pension Plan Investment Board－own funds (stock exchange) | 48,842,446 | RMB common stock | 48,842,446 |
Li Jianwei
| Li Jianwei | 45,591,545 | RMB common stock | 45,591,545 |
Yuan Liqun
| Yuan Liqun | 36,792,400 | RMB common stock | 36,792,400 |
Industrial and Commercial Bankof China Limited－Huatai-PineBridge CSI 300 TradedOpen-ended Index SecuritiesInvestment Fund
| Industrial and Commercial Bank of China Limited－Huatai-PineBridge CSI 300 Traded Open-ended Index Securities Investment Fund | 36,737,633 | RMB common stock | 36,737,633 |
Temasek Fullerton Alpha Pte Ltd
| Temasek Fullerton Alpha Pte Ltd | 36,142,685 | RMB common stock | 36,142,685 |
Related-parties or acting-in-concert parties among the topten non-restricted commonshareholders and between thetop 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 securities margintrading
| Explanation on the top 10 common shareholders participating in securities margin trading | The Company’s shareholder Yuan Liqun holds 6,002,100 shares in the Company through her common securities account and 30,790,300 shares in the Company through her account of collateral securities for margin trading, representing a total holding of 36,792,400 shares in the Company. |
Top 10 shareholders involved in refinancing shares lending
√Applicable □N/A
| Top 10 shareholders involved in refinancing shares lending | ||||||||
| Full name of shareholder | Shares in the common account and credit account at the period-begin | Shares lent in refinancing and not yet returned at the period-begin | Shares in the common account and credit account at the period-end | Shares lent in refinancing and not yet returned at the period-end | ||||
| Total shares | As % | Total shares | As % | Total shares | As % | Total shares | As % | |
| of total share capital | of total share capital | of total share capital | of total share capital | |||||
| Industrial and Commercial Bank of China Limited－Huatai-PineBridge CSI 300 Traded Open-ended Index Securities Investment Fund | 20,045,073 | 0.29% | 10,000 | 0.00% | 36,737,633 | 0.52% | 10,100 | 0.00% |
Changes in shares that the top 10 shareholders lend in refinancing compared with the prior period
√Applicable □N/A
| Changes in shares that the top 10 shareholders lend in refinancing compared with the end of the prior period | |||||
| Full name of shareholder | Newly added to or exiting the top 10 such shareholders in the Reporting Period | Shares lent in refinancing and not yet returned at the period-end | Shares in the common account and credit account plus shares lent in refinancing and not yet returned at the period-end | ||
| Total shares | As % of total share capital | Total shares | As % of total share capital | ||
| Industrial and Commercial Bank of China Limited－Huatai-PineBridge CSI 300 Traded Open-ended Index Securities Investment Fund | Newly added | 10,100 | 0.00% | 36,737,633 | 0.52% |
| Merrill Lynch International | Exiting | 0 | 0% | 9,155,286 | 0.13% |
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 |
94.55%
design; information technology consultingservices, providing investment consultantand consulting services; installation,maintenance and after-sales service ofelectric appliances; real estate intermediaryservice and forwarding agent service.
| 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 non-controlled listed companies at home or abroad during the Reporting Period | 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. | |
Change of the controlling shareholder during the Reporting Period
□Applicable √N/A
3.3 Actual controller and acting-in-concert parties thereof
Nature of the actual controller: Domestic individualType of the actual controller: Individual
| 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), CLOU Electronics (002121.SZ), 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
Midea Group Co., Ltd.
0.45%
0.45%
30.87%
30.87%
Midea Holding Co., Ltd.
Midea Holding Co., Ltd.He Xiangjian
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
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, | - | Jiang Xueyan | +86 10 5769 5627 |
| China | ||||
| 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
Unit: RMB
| 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
No such cases in the Reporting Period.
4. Convertible Corporate Bonds
□ Applicable √ N/A
No such cases in the Reporting Period.
5. Consolidated Loss of the Reporting Period Over 10% of Net Assets as at the Endof Last Year
□ Applicable √ N/A
6. 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 2023 | 31 December 2022 | Change |
Current ratio
| Current ratio | 111.97% | 126.54% | -14.57% |
Debt/asset ratio
| Debt/asset ratio | 64.14% | 64.05% | 0.09% |
Quick ratio
| Quick ratio | 87.95% | 98.38% | -10.43% |
| 2023 | 2022 | Change |
Net profit before non-recurring gains and losses
| Net profit before non-recurring gains and losses | 33,122,326 | 28,801,052 | 15.00% |
EBITDA/debt ratio
| EBITDA/debt ratio | 52.32% | 46.38% | 5.94% |
Interest cover (times)
| Interest cover (times) | 15.34 | 20.09 | -23.64% |
Cash-to-interest cover(times)
| Cash-to-interest cover (times) | 30.88 | 23.06 | 33.91% |
EBITDA-to-interest cover(times)
| EBITDA-to-interest cover (times) | 17.96 | 23.65 | -24.06% |
Loan repayment ratio (%)
| Loan repayment ratio (%) | 100.00% | 100.00% | 0.00% |
Interest payment ratio (%)
| Interest payment ratio (%) | 100.00% | 100.00% | 0.00% |
- 235 -
Section X Financial Report
1. Auditor’s report
| Type of the auditor’s opinion | Unqualified opinion |
| Signing date of the auditor’s report | 26 March 2024 |
| Name of the auditor | PricewaterhouseCoopers Zhong Tian LLP |
| No. of the auditor’s report | PwC ZT Shen Zi (2024) No. 10017 |
| Names of certified public accountants | Yao Wenping and Wu Fangfang |
| [English Translation for Reference Only] Auditor’s Report |
| PwC ZT Shen Zi (2024) No. 10017 |
| (Page 1 of 6) |
| To the Shareholders of Midea Group Co., Ltd., |
| Opinion |
| What we have audited |
| We have audited the accompanying financial statements of Midea Group Co., Ltd. (hereinafter “the Group”), which comprise: ? the consolidated and company balance sheets as at 31 December 2023; ? 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 2023, 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: |
| ? Revenue recognition of heating & ventilation and as well as air-conditioner (hereinafter referred to as “HVAC”) and consumer appliances |
| ? Impairment assessment of goodwill |
- 2 -
| PwC ZT Shen Zi (2024) 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(26)(a) of accounting policy of “Revenue - sales of goods” and Note 4(48) “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 2023, the Group’s consolidated operating revenue was approximately RMB 372,037,280,000 and the revenue from HVAC and consumer appliances was approximately RMB 323,430,039,000. 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 and billing agreements with customers; 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. |
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| PwC ZT Shen Zi (2024) 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(19) of accounting policy of “Impairment of long-term assets”, Note 2(31)(i) “Critical accounting estimates and judgements - Provision for impairment of goodwill” and Note 4(21) “Goodwill” to the financial statements. As at 31 December 2023, the carrying amount of goodwill of the Group amounted to approximately RMB30,858,237,000, including goodwill of RMB22,364,486,000 and RMB2,338,037,000 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(19) 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 forecast period revenue annual growth rate, gross profit margin, perpetual annual growth rate and pre-tax 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 forecast period revenue annual growth rate, gross profit margin, perpetual annual growth rate and pre-tax 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 pre-tax 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. |
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| PwC ZT Shen Zi (2024) 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 2023 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. |
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| PwC ZT Shen Zi (2024) 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. |
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| PwC ZT Shen Zi (2024) 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. | ||
| PricewaterhouseCoopers Zhong Tian LLP Shanghai, the People’s Republic of China 26 March 2024 | Signing CPA Signing CPA | ————————— Yao Wenping (Engagement Partner) ————————— Wu Fangfang |
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MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETSAS AT 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| ASSETS | Note | 31 December 2023 | 31 December 2022 | 31 December 2023 | 31 December 2022 |
| Consolidated | Consolidated | Company | Company | ||
| Current assets | |||||
| Cash at bank and on hand | 4(1) | 81,673,846 | 55,270,099 | 30,260,602 | 28,492,401 |
| Financial assets held for trading | 4(2) | 1,790,588 | 3,284,593 | 299,001 | 274,120 |
| Derivative financial assets | 1,278,161 | 665,484 | - | - | |
| Notes receivable | 4(3) | 5,521,960 | 4,758,129 | - | - |
| Accounts receivable | 4(4) | 32,884,739 | 28,237,973 | - | - |
| Receivables financing | 4(6) | 13,330,008 | 13,526,540 | - | - |
| Advances to suppliers | 4(7) | 3,316,194 | 4,367,211 | 81,244 | 34,724 |
| Contract assets | 4(8) | 4,045,925 | 4,498,956 | - | - |
| Loan receivables | 4(9) | 14,296,958 | 14,138,756 | - | - |
| Other receivables | 4(5), 18(1) | 2,181,878 | 2,211,177 | 19,614,359 | 26,175,101 |
| Inventories | 4(10) | 47,339,255 | 46,044,897 | - | - |
| Current portion of non-current assets | 4(11) | 10,760,577 | 37,553,078 | 9,363,826 | 33,168,421 |
| Other current assets | 4(12) | 62,900,891 | 46,542,378 | 43,712,760 | 33,476,601 |
| Total current assets | 281,320,980 | 261,099,271 | 103,331,792 | 121,621,368 | |
| Non-current assets | |||||
| Other debt investments | 4(13) | 6,319,047 | 11,094,259 | 3,334,059 | 7,215,301 |
| Long-term receivables | 4(14) | 250,519 | 614,598 | - | - |
| Loan receivables | 4(9) | 975,272 | 693,294 | - | - |
| Long-term equity investments | 4(15), 18(2) | 4,976,109 | 5,188,817 | 75,957,844 | 73,103,569 |
| Investments in other equity instruments | 37,874 | 41,359 | - | - | |
| Other non-current financial assets | 4(16) | 7,769,938 | 10,625,244 | 285,170 | 347,698 |
| Investment properties | 1,293,629 | 809,936 | 393,988 | 386,435 | |
| Property, plant and equipment | 4(17) | 30,937,963 | 26,082,992 | 1,300,998 | 1,223,553 |
| Construction in progress | 4(18) | 4,681,220 | 3,843,777 | 749,934 | 504,757 |
| Right-of-use assets | 4(19) | 3,048,785 | 2,339,878 | 1,683 | 8,040 |
| Intangible assets | 4(20) | 18,457,736 | 16,908,915 | 583,714 | 653,320 |
| Goodwill | 4(21) | 30,858,237 | 28,548,653 | - | - |
| Long-term prepaid expenses | 4(22) | 1,736,199 | 1,579,899 | 72,745 | 85,109 |
| Deferred tax assets | 4(23) | 12,771,150 | 10,244,296 | 289,426 | 327,251 |
| Other non-current assets | 4(24) | 80,603,526 | 42,840,079 | 71,132,070 | 35,423,939 |
| Total non-current assets | 204,717,204 | 161,455,996 | 154,101,631 | 119,278,972 | |
| TOTAL ASSETS | 486,038,184 | 422,555,267 | 257,433,423 | 240,900,340 |
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MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)AS AT 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| LIABILITIES AND SHAREHOLDERS’ EQUITY | Note | 31 December 2023 | 31 December 2022 | 31 December 2023 | 31 December 2022 |
| Consolidated | Consolidated | Company | Company | ||
| Current liabilities | |||||
| Short-term borrowings | 4(27) | 8,819,176 | 5,169,480 | 400,000 | - |
| Customer deposits and deposits from banks and other financial institutions | 88,960 | 77,469 | - | - | |
| Financial liabilities held for trading | 4(28) | 1,346,674 | 1,580,771 | - | - |
| Derivative financial liabilities | 257,668 | 234,606 | - | - | |
| Notes payable | 4(29) | 21,707,608 | 25,572,421 | - | - |
| Accounts payable | 4(30) | 72,530,465 | 64,233,225 | - | - |
| Contract liabilities | 4(31) | 41,765,475 | 27,960,038 | - | - |
| Employee benefits payable | 4(32) | 9,076,027 | 7,152,217 | 169,349 | 173,824 |
| Taxes payable | 4(33) | 5,455,102 | 4,955,335 | 411,715 | 718,181 |
| Other payables | 4(34) | 4,442,928 | 4,322,025 | 170,693,950 | 159,953,351 |
| Current portion of non-current liabilities | 4(35) | 14,457,710 | 7,240,626 | 6,621,910 | 5,896,701 |
| Other current liabilities | 4(36) | 71,297,928 | 57,843,528 | 147,552 | 77,066 |
| Total current liabilities | 251,245,721 | 206,341,741 | 178,444,476 | 166,819,123 | |
| Non-current liabilities | |||||
| Long-term borrowings | 4(37) | 46,138,736 | 50,685,948 | 16,600,000 | 15,619,900 |
| Debentures payable | 4(38) | 3,217,969 | 3,163,616 | - | - |
| Lease liabilities | 4(39) | 2,047,319 | 1,507,480 | - | 2,350 |
| Provisions | 782,539 | 394,977 | - | - | |
| Deferred income | 4(40) | 1,734,932 | 1,721,092 | 157,917 | 152,548 |
| Long-term employee benefits payable | 4(41) | 1,433,874 | 1,488,456 | - | - |
| Deferred tax liabilities | 4(23) | 5,098,280 | 4,647,673 | - | - |
| Other non-current liabilities | 39,165 | 680,482 | - | - | |
| Total non-current liabilities | 60,492,814 | 64,289,724 | 16,757,917 | 15,774,798 | |
| Total liabilities | 311,738,535 | 270,631,465 | 195,202,393 | 182,593,921 | |
| Shareholders’ equity | |||||
| Share capital | 4(42) | 7,025,769 | 6,997,273 | 7,025,769 | 6,997,273 |
| Capital surplus | 4(44) | 21,243,156 | 19,693,139 | 29,479,180 | 27,826,208 |
| Less: Treasury stock | 4(43) | (12,871,738) | (14,933,944) | (12,871,738) | (14,933,944) |
| Other comprehensive income | 4(45) | (164,202) | 108,289 | (6,639) | (5,679) |
| General risk reserve | 642,525 | 671,999 | - | - | |
| Special reserve | 16,040 | 16,350 | - | - | |
| Surplus reserve | 4(46) | 10,702,928 | 10,702,928 | 10,702,928 | 10,702,928 |
| Undistributed profits | 4(47) | 136,284,347 | 119,679,202 | 27,901,530 | 27,719,633 |
| Total equity attributable to shareholders of the Company | 162,878,825 | 142,935,236 | 62,231,030 | 58,306,419 | |
| Minority interests | 11,420,824 | 8,988,566 | - | - | |
| Total shareholders’ equity | 174,299,649 | 151,923,802 | 62,231,030 | 58,306,419 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 486,038,184 | 422,555,267 | 257,433,423 | 240,900,340 |
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 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | 2023 | 2022 | 2023 | 2022 | |
| Consolidated | Consolidated | Company | Company | |||
| Total revenue | 373,709,804 | 345,708,706 | 1,028,572 | 1,385,528 | ||
| Including: Operating revenue | 4(48), 18(3) | 372,037,280 | 343,917,531 | 1,028,572 | 1,385,528 | |
| Interest income | 4(49) | 1,671,908 | 1,790,454 | - | - | |
| Fee and commission income | 616 | 721 | - | - | ||
| Less: Cost of sales | 4(48) | (273, 481,373) | (260,538,701) | (40,060) | (42,071) | |
| Interest costs | 4(49) | (31,660) | (49,461) | - | - | |
| Fee and commission expenses | (3,572) | (7,681) | - | - | ||
| Taxes and surcharges | 4(50) | (1,816,502) | (1,565,884) | (41,009) | (32,814) | |
| Selling and distribution expenses | 4(51) | (34,880,875) | (28,716,121) | - | - | |
| General and administrative expenses | 4(52) | (13, 476,908) | (11,582,664) | (1,465,397) | (1,125,438) | |
| Research and development expenses | 4(53) | (14,583,311) | (12,618,506) | - | - | |
| Financial income | 4(54) | 3, 261,656 | 3,387,491 | 1,864,380 | 2,204,154 | |
| Including: Interest expenses | 2,808,104 | 1,830,915 | 2,994,928 | 2,645,223 | ||
| Interest income | 6,951,446 | 5,837,713 | 4,870,697 | 4,859,955 | ||
| Add: Other income | 4(60) | 2,082,382 | 1,896,113 | 37,934 | 26,642 | |
| Investment income | 4(58), 18(4) | 463,561 | 208,054 | 15,968,890 | 10,917,956 | |
| Including: share of profit of associates and joint ventures | 680,759 | 608,278 | 157,844 | 260,651 | ||
| (Losses)/Gains on changes in fair value | 4(57) | (226,492) | (251,171) | 78,018 | (512,502) | |
| (Losses on)/Reversal of credit impairment | 4(56) | (198,624) | (513,686) | 1,175 | 9,884 | |
| Asset impairment losses | 4(55) | (439,777) | (533,363) | - | - | |
| (Losses)/Gains on disposal of assets | 4(59) | (60,868) | (59,854) | 1,269 | (276) | |
| Operating profit | 40,317,441 | 34,763,272 | 17,433,772 | 12,831,063 | ||
| Add: Non-operating income | 453,397 | 395,406 | 57,573 | 34,465 | ||
| Less: Non-operating expenses | (493,675) | (202,747) | (553) | (10,490) | ||
| Total profit | 40,277,163 | 34,955,931 | 17,490,792 | 12,855,038 | ||
| Less: Income tax expenses | 4(61) | (6,531,811) | (5,145,700) | (164,631) | (324,773) | |
| Net profit | 33,745,352 | 29,810,231 | 17,326,161 | 12,530,265 | ||
| (1) Classified by continuity of operations | ||||||
| Net profit from continuing operations | 33,745,352 | 29,810,231 | 17,326,161 | 12,530,265 | ||
| Net profit from discontinued operations | - | - | - | - | ||
| (2) Classified by ownership of the equity | ||||||
| Attributable to shareholders of the Company | 33,719,935 | 29,553,507 | 17,326,161 | 12,530,265 | ||
| Minority interests | 25,417 | 256,724 | - | - | ||
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MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS (CONT'D)FOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | 2023 | 2022 | 2023 | 2022 | |
| Consolidated | Consolidated | Company | Company | |||
| Other comprehensive income, net of tax | (249,457) | 1,892,922 | (960) | 1,616 | ||
| Other comprehensive income attributable to shareholders of the Company, net of tax | (272,491) | 1,865,886 | (960) | 1,616 | ||
| (1) Other comprehensive income items which will not be reclassified subsequently to profit or loss | (85,764) | 207,457 | - | - | ||
| 1) Changes arising from remeasurement of defined benefit plan | (87,280) | 208,349 | - | - | ||
| 2) Changes in fair value of investments in other equity instruments | 1,516 | (892) | - | - | ||
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | (186,727) | 1,658,429 | (960) | 1,616 | ||
| 1) Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | 7,751 | 17,391 | (960) | 1,616 | ||
| 2) Cash flow hedging reserve | (135,204) | 395,617 | - | - | ||
| 3) Differences on translation of foreign currency financial statements | (84,307) | 1,175,539 | - | - | ||
| 4) Others | 25,033 | 69,882 | - | - | ||
| Other comprehensive income attributable to minority shareholders, net of tax | 23,034 | 27,036 | - | - | ||
| Total comprehensive income | 33,495,895 | 31,703,153 | 17,325,201 | 12,531,881 | ||
| Attributable to shareholders of the Company | 33,447,444 | 31,419,393 | 17,325,201 | 12,531,881 | ||
| Minority interests | 48,451 | 283,760 | - | - | ||
| Earnings per share | ||||||
| Basic earnings per share (in RMB Yuan) | 4(62) | 4.93 | 4.34 | Not applicable | Not applicable | |
| Diluted earnings per share (in RMB Yuan) | 4(62) | 4.92 | 4.33 | 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: |
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MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | 2023 | 2022 | 2023 | 2022 | ||
| Consolidated | Consolidated | Company | Company | ||||
| 1. Cash flows from operating activities | |||||||
| Cash received from sales of goods or rendering of services | 356,076,005 | 316,997,825 | - | - | |||
| Net decrease in loan receivables | - | 6,660,035 | - | - | |||
| Net increase in customer deposits and deposits from banks and other financial institutions | 11,491 | - | - | - | |||
| Net decrease in deposits with the Central Bank | - | 91,309 | - | - | |||
| Cash received from interest, fee and commission | 1,691,771 | 1,788,062 | - | - | |||
| Refund of taxes and surcharges | 7,332,726 | 10,934,799 | - | - | |||
| Cash received relating to other operating activities | 4(63)(a) | 7,721,752 | 7,295,957 | 19,249,193 | 18,834,797 | ||
| Sub-total of cash inflows | 372,833,745 | 343,767,987 | 19,249,193 | 18,834,797 | |||
| Cash paid for goods and services | (216,446,770) | (221,345,706) | - | - | |||
| Net increase in loan receivables | (333,557) | - | - | - | |||
| Net decrease in customer deposits and deposits from banks and other financial institutions | - | (711) | - | - | |||
| Net increase in deposits with the Central Bank | (86,661) | - | - | - | |||
| Net decrease in borrowings from the Central Bank | - | (178,878) | - | - | |||
| Cash paid for interest, fee and commission | (35,232) | (57,141) | - | - | |||
| Cash paid to and on behalf of employees | (38,605,604) | (35,674,963) | (436,207) | (549,897) | |||
| Payments of taxes and surcharges | (18,488,931) | (17,387,253) | (545,928) | (379,098) | |||
| Cash paid relating to other operating activities | 4(63)(b) | (40,934,379) | (34,465,507) | (750,616) | (2,959,364) | ||
| Sub-total of cash outflows | (314,931,134) | (309,110,159) | (1,732,751) | (3,888,359) | |||
| Net cash flows from operating activities | 4(63)(h) | 57,902,611 | 34,657,828 | 17,516,442 | 14,946,438 | ||
| 2. Cash flows used in investing activities | |||||||
| Cash received from disposal of investments | 4(63)(c) | 116,074,693 | 98,564,716 | 81,562,000 | 58,600,000 | ||
| Cash received from returns on investments | 5,336,233 | 3,800,095 | 20,097,443 | 13,491,657 | |||
| Net cash received from disposal of property, plant and equipment, intangible assets and other long-term assets | 391,359 | 239,226 | 5,281 | 53 | |||
| Net cash received from disposal of subsidiaries and other business units | 27,134 | 14,829 | 18,000 | 422,024 | |||
| Cash received relating to other investing activities | 373,816 | 335,082 | - | - | |||
| Sub-total of cash inflows | 122,203,235 | 102,953,948 | 101,682,724 | 72,513,734 | |||
| Cash paid to acquire property, plant and equipment, intangible assets and other long-term assets | (6,314,051) | (7,352,115) | (872,027) | (518,305) | |||
| Cash paid to acquire investments | 4(63)(d) | (146,998,174) | (108,149,195) | (101,234,356) | (73,645,090) | ||
| Net cash paid to acquire subsidiaries and other business units | (712) | (962,148) | - | - | |||
| Cash paid relating to other investing activities | (110,153) | - | - | - | |||
| Sub-total of cash outflows | (153,423,090) | (116,463,458) | (102,106,383) | (74,163,395) | |||
| Net cash flows used in investing activities | (31,219,855) | (13,509,510) | (423,659) | (1,649,661) | |||
| 3. Cash flows used in financing activities | |||||||
| Cash received from capital contributions | 2,357,841 | 1,348,283 | 2,312,260 | 1,321,468 | |||
| Including: Cash received from capital contributions by minority shareholders of subsidiaries | 45,581 | 26,815 | - | - | |||
| Cash received from borrowings | 33,888,703 | 46,476,320 | 8,000,000 | 9,000,000 | |||
| Cash received from issuance of debentures | - | 2,845,196 | - | - | |||
| Cash received from issuance of short-term financing bonds | - | 3,999,500 | - | 3,999,500 | |||
| Cash received relating to other financing activities | 865,591 | 70,163 | 312,438 | - | |||
| Sub-total of cash inflows | 37,112,135 | 54,739,462 | 10,624,698 | 14,320,968 | |||
| Cash repayments of borrowings | (33,114,644) | (40,920,787) | (5,890,000) | (90,000) | |||
| Cash payments for redemption of short-term financing bonds | - | (4,000,000) | - | (4,000,000) | |||
| Cash payments for interest expenses and distribution of dividends or profits | (19,643,828) | (13,740,037) | (20,155,665) | (14,753,066) | |||
| Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (333,316) | (279,216) | - | - | |||
| Cash payments relating to other financing activities | 4(63)(e) | (2,263,876) | (6,933,519) | (292,887) | (2,827,492) | ||
| Sub-total of cash outflows | (55,022,348) | (65,594,343) | (26,338,552) | (21,670,558) | |||
| Net cash flows used in financing activities | (17,910,213) | (10,854,881) | (15,713,854) | (7,349,590) | |||
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | (17,251) | 288,492 | - | - | |||
| 5. Net increase in cash and cash equivalents | 4(63)(h) | 8,755,292 | 10,581,929 | 1,378,929 | 5,947,187 | ||
| Add: Cash and cash equivalents at the beginning of the year | 51,131,968 | 40,550,039 | 27,904,229 | 21,957,042 | |||
| 6. Cash and cash equivalents at the end of the year | 4(63)(i) | 59,887,260 | 51,131,968 | 29,283,158 | 27,904,229 | ||
| 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 2023(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(42)) | (Note 4(44)) | (Note 4(43)) | (Note 4(45)) | (Note 4(46)) | (Note 4(47)) | ||||||
| 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 | |
- 7 -
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2023(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(42)) | (Note 4(44)) | (Note 4(43)) | (Note 4(45)) | (Note 4(46)) | (Note 4(47)) | ||||||||
| Balance at 1 January 2023 | 6,997,273 | 19,693,139 | (14,933,944) | 108,289 | 671,999 | 16,350 | 10,702,928 | 119,679,202 | 8,988,566 | 151,923,802 | |||
| Movements for the year ended 31 December 2023 | |||||||||||||
| Total comprehensive income | |||||||||||||
| Net profit | - | - | - | - | - | - | - | 33,719,935 | 25,417 | 33,745,352 | |||
| Other comprehensive income, net of tax | - | - | - | (272,491) | - | - | - | - | 23,034 | (249,457) | |||
| Total comprehensive income | - | - | - | (272,491) | - | - | - | 33,719,935 | 48,451 | 33,495,895 | |||
| Capital contribution and withdrawal by shareholders | |||||||||||||
| Ordinary shares invested by shareholders | 38,490 | 2,317,783 | - | - | - | - | - | - | 45,581 | 2,401,854 | |||
| Business combinations | - | - | - | - | - | - | - | - | 2,563,374 | 2,563,374 | |||
| Share-based payment included in shareholders’ equity | - | 671,456 | - | - | - | - | - | - | 37,361 | 708,817 | |||
| Others | (9,994) | (1,373,096) | 2,062,206 | - | - | - | - | - | 12,666 | 691,782 | |||
| Profit distribution | |||||||||||||
| Appropriation to general risk reserve | - | - | - | - | 19,678 | - | - | (19,678) | - | - | |||
| Reversal of general risk reserve | - | - | - | - | (49,152) | - | - | 49,152 | - | - | |||
| Profit distribution to shareholders | - | - | - | - | - | - | - | (17,144,264) | (349,745) | (17,494,009) | |||
| Special reserve | |||||||||||||
| Appropriation in the current period | - | - | - | - | - | 7,227 | - | - | 11,500 | 18,727 | |||
| Use in the current period | - | - | - | - | - | (7,537) | - | - | (11,464) | (19,001) | |||
| Others | - | (66,126) | - | - | - | - | - | - | 74,534 | 8,408 | |||
| Balance at 31 December 2023 | 7,025,769 | 21,243,156 | (12,871,738) | (164,202) | 642,525 | 16,040 | 10,702,928 | 136,284,347 | 11,420,824 | 174,299,649 | |||
| 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 2023(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 | |
- 9 -
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2023(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 2023 | 6,997,273 | 27,826,208 | (14,933,944) | (5,679) | 10,702,928 | 27,719,633 | 58,306,419 | |
| Movements for the year ended 31 December 2023 | ||||||||
| Total comprehensive income | ||||||||
| Net profit | - | - | - | - | - | 17,326,161 | 17,326,161 | |
| Other comprehensive income, net of tax | - | - | - | (960) | - | - | (960) | |
| Total comprehensive income | - | - | - | (960) | - | 17,326,161 | 17,325,201 | |
| Capital contribution and withdrawal by shareholders | ||||||||
| Ordinary shares invested by shareholders | 38,490 | 2,317,783 | - | - | - | - | 2,356,273 | |
| Share-based payment included in shareholders’ equity | - | 708,290 | - | - | - | - | 708,290 | |
| Others | (9,994) | (1,375,573) | 2,062,206 | - | - | - | 676,639 | |
| Profit distribution | ||||||||
| Profit distribution to shareholders | - | - | - | - | - | (17,144,264) | (17,144,264) | |
| Others | - | 2,472 | - | - | - | - | 2,472 | |
| Balance at 31 December 2023 | 7,025,769 | 29,479,180 | (12,871,738) | (6,639) | 10,702,928 | 27,901,530 | 62,231,030 |
| 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 2023(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, various small appliances, elevators, variablefrequency drives, medical imaging products and robotics and automation system. Otherservices include the smart supply chain; sales, wholesale and processing of raw materialsof household electrical appliances, and financial business involving 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 2023, the Company’s share capital was RMB 7,025,769,025, and thetotal number of shares in issue was 7,025,769,025, of which 133,563,090 shares wererestricted tradable A shares and 6,892,205,935 shares were unrestricted tradable A shares.
The detailed information of principal subsidiaries included in the consolidation scope in thecurrent year is set out in Note 6. Subsidiaries newly included in the consolidation scope inthe current year mainly include Shenzhen CLOU Electronics Co., Ltd. （hereafter “CLOUElectronics”）and etc, and are detailed in Note 5(1) and Note 5(2)(a); subsidiaries no longerincluded in the consolidation scope in the current year are detailed in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directorson 26 March 2024.
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(10)(a)), valuation method ofinventory (Note 2(11)), depreciation of property, plant and equipment, amortisation ofintangible assets and right-of-use assets (Note 2(14), (17), (29)), impairment of long-termassets (Note 2(19)), and recognition and measurement of revenue (Note 2(26)).
Key judgements and critical accounting estimates and key assumptions applied by theGroup on the determination of significant accounting policies are set out in Note 2(31).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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 2023 are incompliance with the Accounting Standards for Business Enterprises, and truly andcompletely present the consolidated and company’s financial position of the Company as at31 December 2023 and their financial performance, cash flows and other information for theyear 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, etc. The financial statements arepresented in RMB.
(5) The determination method and selection basis of materiality criteria
The Group determined the materiality of financial information in terms of the nature andamount of a item in accordance with the specific environment in which it operates. Indetermining the significance of the nature of a item, the Group mainly considers whether theitem is a routine business operations in nature and whether it significantly affects the Group'sfinancial position, financial performance and cash flows. In determining the significance ofthe amount of a item, the Group considers the proportion of the amount to the amount ofdirectly related items such as total assets, total liabilities, total shareholders' equity,operating revenue, costs of sales, net profit and total comprehensive income, or theproportion of the amount of the financial statement line item separately.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 12 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(6) 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.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 13 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(7) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Companyand all of its subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary that is acquired in abusiness combination involving enterprises under common control, it is included in theconsolidated financial statements from the date when it, together with the Company, comesunder common control of the ultimate controlling party. The portion of the net profits realisedbefore the combination date is presented separately in the consolidated income statement.
In preparing the consolidated financial statements, where the accounting policies and theaccounting periods of the Company and subsidiaries are inconsistent, the financialstatements of the subsidiaries are adjusted in accordance with the accounting policies andthe accounting period of the Company. For subsidiaries acquired from businesscombinations involving enterprises not under common control, the individual financialstatements of the subsidiaries are adjusted based on the fair value of the identifiable netassets at the acquisition date.
All significant intra-group balances, transactions and unrealised profits are eliminated in theconsolidated financial statements. The portion of subsidiaries’ shareholders’ equity and theportion of subsidiaries’ net profits and losses and comprehensive incomes for the period notattributable to the Company are recognised as minority interests, net profit attributed tominority interests and total comprehensive 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.
(8) 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 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 14 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) 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.
(10) 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, a financial liabilityor an equity instrument is recognised when the Group becomes a party to the contractualprovisions of the instrument.
(a) Financial assets
(i) Classification and measurement
Based on the Group’s business model for managing the financial assets and the contractualcash flow characteristics of the financial assets, financial assets are classified as: (1)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 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 15 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) 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 ratemethod. Such financial assets mainly comprise cash at bank and on hand, loan receivables,notes receivable, accounts receivable, other receivables, other current assets, debtinvestments, long-term receivables and other non-current assets. 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 rate method which are recognised in profit or loss for the current period.Such financial assets mainly include receivables financing and other debt investments.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 classified asfinancial assets at fair value through profit or loss. At initial recognition, the Group designatesa portion of financial assets as at fair value through profit or loss to eliminate or significantlyreduce an accounting mismatch. Financial assets that are due over one year as from thebalance sheet date and are 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 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 16 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) 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.
Cash flow hedge
At the inception of the hedge, the Group has completed relevant hedge documents,including the relationship between hedged items and hedging instruments, and riskmanagement objectives and strategies corresponding to various hedging transactions. Atthe inception of the hedge and in subsequent periods, the Group continuously recordswhether the hedge is effectively evaluated, that is, whether the hedging instruments canlargely offset the changes in the fair value or cash flows of hedged items.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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)
(10) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(i) Classification and measurement (Cont’d)
(i-3) Derivative financial instruments (Cont’d)
Cash flow hedge (Cont’d)
The effective portion of changes in fair value on hedging instruments is recognised in othercomprehensive income as cash flow hedging reserve, while the gains or losses related tothe ineffective portion of the hedge are recognised in profit or loss for the current period.Where the hedge is a forecast transaction which subsequently results in the recognition 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 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 18 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
For notes receivable, accounts receivable, receivables financing, lease receivables andcontract assets arising from sales of goods and rendering of services in the ordinary courseof operating activities, the Group recognises the lifetime ECL provision regardless ofwhether there exists a significant financing component. Since contract assets are mainlyrelated to work on the stage of completion without invoice, essentially, their credit riskcharacteristics are similar to the accounts receivable for the same kind of contracts.Therefore, the ECL rate of the contract assets is an approximation to that of accountsreceivable.
Except for the above notes receivable, accounts receivable, receivables financing, leasereceivables and contract assets, at each balance sheet date, the ECL of financialinstruments at different stages are measured respectively. 12-month ECL provision isrecognised for financial instruments in Stage 1 that have not had a significant increase incredit risk since initial recognition; lifetime ECL provision is recognised for financialinstruments in Stage 2 that have had a significant increase in credit risk yet without creditimpairment since initial recognition; and lifetime ECL provision is recognised for financialinstruments in Stage 3 that have had credit impairment since initial recognition.
For the financial instruments with lower credit risk on the balance sheet date, the Groupassumes there is no significant increase in credit risk since initial recognition. The Grouptreats them as financial instruments in Stage 1 and recognises a 12-month ECL.
For the financial instruments in Stage 1 and Stage 2, the Group calculates the interestincome by applying the effective interest rate to the book balance (before deduction of theimpairment provision). For the financial instruments in Stage 3, the interest income iscalculated by applying the effective interest rate to the amortised cost (after deduction of theimpairment provision from the book balance).
In case the ECL of an individually assessed financial asset cannot be evaluated withreasonable cost, the Group divides the receivables and contract assets into certaingroupings based on credit risk characteristics, then pursuant to which, calculates the ECL.Basis and provision method for determining groupings are as follows:
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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)
(10) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
| Grouping of notes receivable 1 | Bank acceptance notes grouping |
| Grouping of notes receivable 2 | Trade acceptance notes grouping |
| Grouping of accounts receivable 1 | Overseas business grouping |
| Grouping of accounts receivable 2 | Domestic business grouping |
| Grouping of contract assets 1 | Overseas business grouping |
| Grouping of contract assets 2 | Domestic business grouping |
| Grouping of other receivables 1 | Security deposit and guarantee receivables grouping |
| Grouping of other receivables 2 | Receivables from related parties grouping |
| Grouping of other receivables 3 | Other receivables grouping |
| Grouping of long-term receivables | Finance lease receivables grouping |
| Grouping of loan receivables | Loans business grouping |
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculates theECL of notes receivable and receivables financing that are classified into groupings withconsideration to historical credit losses experience, current conditions and forecasts offuture economic conditions.
With consideration to historical credit loss experience, current conditions and forecasts offuture economic conditions, the Group prepares the cross-reference between the numberof overdue days of accounts receivable and the lifetime ECL rate, and calculates the ECLof accounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime ECL rate,calculates the ECL of other receivables, loan receivables that are classified into groupingswith consideration to historical credit losses experience, the current conditions and forecastsof future economic conditions.
The Group recognises the loss provision made or reversed into profit or loss for the currentperiod. For debt instruments held at fair value through other comprehensive income, theGroup adjusts other comprehensive income while the impairment loss or gain is recognisedin profit or loss for the current period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 20 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(iii) Derecognition of financial assets
A financial asset is derecognised when: (1) the contractual rights to the cash flows 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.
(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 ratemethod. Financial liabilities that are due within one year (inclusive) are classified as currentliabilities; those with maturities over one year but are due within one year (inclusive) as fromthe balance 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 21 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) Financial instruments (Cont’d)
(c) Determination of fair value of financial instruments
The fair value of a financial instrument that is traded in an active market is determined atthe quoted price in the active market. The fair value of a financial instrument that is nottraded in an active market is determined by using a valuation technique. In valuation, theGroup adopts valuation techniques applicable in the current situation and supported byadequate available data and other information, selects inputs with the same characteristicsas those of assets or liabilities considered in relevant transactions of assets or liabilities bymarket participants, and gives priority to the use of relevant observable inputs. Whenrelevant observable inputs are not available or feasible, unobservable inputs are adopted.
(11) 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.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 22 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11) Inventories (Cont'd)
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of relatedassets or in profit or loss for the current period.
(12) Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in itssubsidiaries, and the Group’s long-term equity investments in its associates and 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 associates and joint ventures are accounted for usingthe equity method.
(a) Determination of investment cost
For long-term equity investments acquired through a business combination involvingenterprises under common control, the investment cost shall be the absorbing party’s shareof the carrying amount of 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 23 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(a) Determination of investment cost (Cont’d)
For 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.
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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 24 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(b) Subsequent measurement and recognition methods of gains and losses (Cont’d)
The unrealised profits or losses arising from the transactions between the Group and itsinvestees are eliminated in proportion to the Group’s equity interest in the investees, basedon which the investment gains or losses of the Company’s financial statements arerecognised. When preparing consolidated financial statements, for the portion of unrealisedprofits or losses of internal transactions attributable to the Group arising from downstreamtransactions in which the Group invests in or sells assets to the investees, the Group shall,on the basis of offsetting the Company's financial statements, offset the portion of unrealisedincome and costs or asset disposal gains or losses attributable to the Group, and adjustinvestment income accordingly; for the unrealised profits or losses of internal transactionsattributable to the Group arising from the upstream transactions in which the investeesinvest in or sell assets to the Group, the Group shall, on the basis of offsetting the Company'sfinancial statements, offset the portion of unrealised profits or losses of internal transactionsattributable to the Group included in the carrying amount of the relevant assets, and adjustthe carrying amount of long-term equity investments accordingly. Any losses resulting fromtransactions between the Group and its investees attributable to asset impairment lossesare 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, associates and jointventures are reduced to the recoverable amounts when the recoverable amounts are belowtheir carrying amounts (Note 2(19)).
(13) Investment properties
Investment properties, including land use rights that have already been leased out, buildingsthat are held for the purpose of leasing and buildings that are being constructed 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 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 25 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(13) 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 property, plant and equipment or intangible asset at the date of the transfer. When anowner-occupied property is transferred out for earning rentals or for capital appreciation, theproperty, plant and equipment or intangible asset is reclassified as investment properties atthe date of the transfer. At the time of transfer, the property is recognised based on thecarrying 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.
(14) Property, plant and equipment
(a) Recognition and initial measurement of property, plant and equipment
Property, plant and equipment comprise buildings, overseas land, machinery andequipment, motor vehicles, electronic equipment and others.
Property, plant and equipment are recognised when it is probable that the related economicbenefits will flow to the Group and the cost can be reliably measured. The initial cost ofpurchased property, plant and equipment include purchase price, related taxes andexpenditures that are attributable to the assets incurred before the assets are ready for theirintended use. The initial cost of self-constructed property, plant and equipment is determinedbased on Note 2(15).
Subsequent expenditures incurred for a property, plant and equipment are included in thecost of the property, plant and equipment when it is probable that the associated economicbenefits will flow to the Group and the related cost can be reliably measured. The carryingamount of the replaced part is derecognised. All the other subsequent expenditures arerecognised in profit or loss for the period in which they are incurred.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 26 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(14) Property, plant and equipment (Cont’d)
(b) Depreciation method of property, plant and equipment
Property, plant and equipment are depreciated using the straight-line method to allocate thecost of the assets to their estimated net residual values over their estimated useful lives. Forthe property, plant and equipment that have been provided for impairment loss, the relateddepreciation charge is prospectively determined based upon the adjusted carrying amountsover 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 property, plant and equipment are asfollows:
| 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 property,plant and equipment and the depreciation methods applied to the assets are reviewed, andadjusted as appropriate at each year-end.
(c) The carrying amount of a property, plant and equipment is reduced to the recoverable
amount when the recoverable amount is below the carrying amount (Note 2(19)).
(d) Disposal of property, plant and equipment
Property, plant and equipment are derecognised on disposal or when no future economicbenefits are expected from its use or disposal. The amount of proceeds from disposals onsale, transfer, retirement or damage of property, plant and equipment net of their carryingamount and related taxes and expenses is recognised in profit or loss for the current period.
(15) Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises constructioncosts, installation costs, borrowing costs that are eligible for capitalisation and other costsnecessary to bring the construction in progress ready for their intended use. Construction inprogress is transferred to property, plant and equipment when the assets are ready for theirintended use, and depreciation begins from the following month. The carrying amount ofconstruction in progress is reduced to the recoverable amount when the recoverable amountis below its carrying amount (Note 2(19)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 27 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(16) Borrowing costs
The borrowing costs that are directly attributable to acquisition and construction of aproperty, plant and equipment that needs a substantially long period of time for its intendeduse commence to be capitalised and recorded as part of the cost of the asset whenexpenditures for the asset and borrowing costs have been incurred, and the activitiesrelating to the acquisition and construction that are necessary to prepare the asset for itsintended use have commenced. The capitalisation of borrowing costs ceases when theasset under acquisition or construction becomes ready for its intended use and theborrowing costs incurred thereafter are recognised in profit or loss for the current period.Capitalisation of borrowing costs is suspended during periods in which the acquisition orconstruction of an asset is interrupted abnormally and the interruption lasts for more than 3months, until the acquisition or construction is resumed.
For the specific borrowings obtained for the acquisition or construction of a property, plantand equipment qualifying for capitalisation, the amount of borrowing costs eligible forcapitalisation is determined by actual interest expenses deducting any interest incomeearned from depositing the unused specific borrowings in the banks or any investmentincome arising on the temporary investment of those borrowings during the capitalisationperiod.
For the general borrowings obtained for the acquisition or construction of a property, plantand equipment qualifying for capitalisation, the amount of general borrowing costs eligiblefor capital property, plant and equipmentisation is determined by applying the weightedaverage effective interest rate of general borrowings, to the weighted average of the excessamount of cumulative expenditures on the asset over the amount of specific borrowings.The effective interest rate is the rate at which the future cash flows during the period ofexpected duration of the borrowings or applicable shorter period are discounted to the initialamount of the borrowings.
(17) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademarkrights, trademark use rights and others, are measured at cost.
(a) Land use rights
Land use rights are amortised on the straight-line basis over their approved use period 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 property, plant and equipment.
(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 of 2 to 20 years.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 28 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(17) Intangible assets (Cont’d)
(c) Trademark rights
The trademark rights are measured at cost when acquired and are amortised over theestimated useful life of 4 to 30 years. The cost of trademark rights obtained in the businesscombinations involving enterprises not under common control is measured at fair value. Assome of the trademarks are expected to attract net cash inflows injected into the Group,management considers that these trademarks have an indefinite useful life and arepresented based upon the carrying amount after deducting the provision for impairment(Note 4(20)).
(d) Trademark use rights
The trademark use rights are measured at cost when acquired. The cost of trademark userights obtained in the business combinations involving enterprises not under commoncontrol is measured at fair value, and is amortised over the estimated useful life of 40 years.
(e) Other intangible assets
Other tangible assets mainly are customers relationships, franchises and software,
measured at cost when acquired or at fair value, and amortized over the estimated usefullife of 2 to 25 years.
(f) 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.
(g) Research and development (R&D)
The Group's R&D expenditure mainly includes the expenditure on materials consumed inconducting the Group's R&D activities, employee benefits in the R&D department,depreciation and amortisation of assets such as equipment and software used in R&D, R&Dtesting expenses, R&D technical service expenses and licensing expenses.
Expenditure on the planned investigation, evaluation and selection for the research ofproduction processes or products is categorised as expenditure on the research phase, andit is recognised in profit or loss when it is incurred. Expenditure on design and test for thefinal application of the development of production processes or products before massproduction is categorised as expenditure on the development phase, which is capitalisedonly if all of the following conditions are satisfied:
? The development of production processes or products has been fully justified by
technical team;? The budget on the development of production processes or products has beenapproved by management;? There is market research analysis that demonstrates the product produced by theproduction process or product has the ability of marketing;? There are sufficient technical and financial resources to support the development ofproduction processes or products and subsequent mass production; and? Expenditure attributable to the development of production processes or products can
be reliably measured.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 29 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(17) Intangible assets (Cont’d)
(g) R&D (Cont’d)
Other development expenditures that do not meet the conditions above are recognised inprofit or loss in the period in which they are incurred. Development costs previouslyrecognised as expenses are not recognised as an asset in a subsequent period. 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.
(h) Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when therecoverable amount is below the carrying amount (Note 2(19)).
(18) Long-term prepaid expenses
Long-term prepaid expenses include the expenditure for improvements to 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.
(19) Impairment of long-term assets
Property, plant and equipment, construction in progress, right-of-use assets, intangibleassets with finite useful lives, investment properties measured using the cost model andlong-term equity investments in subsidiaries, associates and joint ventures are tested forimpairment if there is any indication that the assets may be impaired at the balance sheetdate. Intangible assets not ready for their intended use, intangible assets with infinite usefullives and overseas land are tested at least annually for impairment, irrespective of whetherthere is any indication that it may be impaired. If the result of the impairment test indicatesthat the recoverable amount of an asset is less than its carrying amount, a provision forimpairment and an impairment loss are recognised for the amount by which the asset’scarrying amount exceeds its recoverable amount. The recoverable amount is the higher ofan asset’s fair value less costs to sell and the present value of the future cash flows expectedto be derived from the asset. Provision for asset impairment is determined and recognisedon the individual asset basis. If it is not possible to estimate the recoverable amount of anindividual asset, 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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)
(20) Employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Groupin exchange for service rendered by employees or for termination of employmentrelationship, which include short-term employee benefits, post-employment benefits,termination benefits and other long-term employee benefits.
(a) Short-term employee benefits
Short-term employee benefits include wages and salaries, bonus, allowances andsubsidies, staff welfare, premiums or contributions on medical insurance, work injuryinsurance, maternity insurance, housing funds, labour union funds and employee educationfunds, and short-term paid absences. The short-term employee benefits actually occurredare recognised as a liability in the accounting period in which the service is rendered by theemployees, with a corresponding charge to the profit or loss for the current period or thecost 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 (“KUKA Group”)provide supplemental retirement benefits beyond the national regulatory insurance system.
Basic pensions
The Group’s employees participate in the basic pension plan set up and administered bylocal authorities of Ministry of Human Resource and Social Security. Monthly payments ofpremiums on the basic pensions are calculated according to prescribed bases andpercentage by the relevant local authorities. When employees retire, the relevant localauthorities are obliged to pay the basic pensions to them. The amounts based on the abovecalculations are recognised as liabilities in the accounting period in which the service hasbeen rendered by the employees, with a corresponding charge to the profit or loss for thecurrent period or the cost of relevant assets.
Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans isthe present value of the defined benefit 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 2023(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)
(20) 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.
(21) General risk reserve
General risk reserve is the reserve appropriated from undistributed profits to cover part ofunidentified potential losses, on the basis of the estimated potential risk value of risk assetsassessed by the standardised approach, which is deducted from recognised provision forimpairment losses on loans. Risk assets include loan receivables, long-term equityinvestments, deposits with banks and other financial institutions and other receivables ofsubsidiaries engaged in financial business.
(22) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved bythe shareholders’ meeting.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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) 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.
(24) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employeesas consideration for equity instruments of the entity or by incurring liabilities for amountsbased on the equity instruments. Equity instruments include equity instruments of theCompany, its parent company or other accounting entities of the Group. Share-basedpayments are divided into equity-settled and cash-settled payments. The Group’s share-based payments are equity-settled payments.
Equity-settled share-based payment
The Group’s equity-settled share-based payment contains stock option incentive plan,restricted share incentive schemes and stock ownership schemes. These plans aremeasured at the fair value of the equity instruments at grant date and the equity instrumentsare tradable or exercisable when services in vesting period are completed or specifiedperformance conditions are met. In the vesting period, the services obtained in the currentperiod are included in relevant cost and expenses at the fair value of the equity instrumentsat grant date based on the best estimate of the number of tradable or exercisable equityinstruments, and capital surplus is increased accordingly. If the subsequent informationindicates the number of tradable or exercisable equity instruments differs from the previousestimate, an adjustment is made and, on the exercise date, the estimate is revised to equalto the number of actual vested equity instruments.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(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)
(24) Share-based payment (Cont'd)
(b) Determination of fair value of equity instruments
The Group determines the fair value of stock 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.
(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.
(25) 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.
(26) Revenue
The Group recognises revenue at the amount of the consideration which the Group isexpected to receive when the customer obtains control over relevant goods or services.Revenue is stated net of discounts, rebates and returns.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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) Revenue (Cont’d)
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.
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 designing, manufacturing and selling residentialair conditioner, central air-conditioner, heating and ventilation systems, kitchen appliances,refrigerators, washing machines, various small appliances, elevators, variable frequencydrives, robotics, medical imaging equipment, automation system and sales of products andmaterials to buyers.
Revenue from domestic sales of goods is recognised when the Group has deliveredproducts to the location specified in the sales contract and the buyer has confirmed theacceptance of the products, and the delivery order is signed by both parties. Uponconfirming the acceptance, the buyer has the right to sell the products at its discretion andtakes the risks of any price fluctuations and obsolescence and loss of the products.
Revenue from overseas goods sale is recognised when the products have been declaredto the customs and shipped out of the port in accordance with the sales contract.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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) Revenue (Cont’d)
(a) Sales of goods (Cont’d)
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. The Group makes estimates based on past sales returns and takesinto account the type of customer, type of transaction and characteristics of eacharrangement.
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.
(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(10)). If thecontract price received or receivable exceeds the amount for the completed service, theexcess portion will be recognised as contract liabilities. Contract assets and contractliabilities under the same contract are presented on a net basis.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 36 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont’d)
(b) Rendering of services (Cont’d)
Contract costs include contract performance costs and contract acquisition costs. The costsincurred by the Group for the provision of services are recognised as contract performancecosts. The recognised revenue is carried forward to the cost of sales from main operationsbased on the stage of completion. Incremental costs incurred by the Group for theacquisition of contract are recognised as the costs to obtain a contract. For the costs toobtain a contract with the amortisation period within one year, the costs are charged to profitor loss when incurred. For the costs to obtain a contract with the amortisation period beyondone year, the costs are charged in the current profit or loss on the same basis as aforesaidrevenue of rendering of services recognised under the relevant contract. If the carryingamount of the contract costs is higher than the remaining consideration expected to beobtained by rendering of the service net of the estimated cost to be incurred, the Groupmakes provision for impairment on the excess portion and recognises it as asset impairmentlosses. As at the balance sheet date, based on whether the amortisation period of the coststo fulfil a contract is more than one year when initially recognised, the amount of the Group’scosts to fulfil a contract net of related provision for asset impairment is presented asinventories or other non-current assets. For costs to obtain a contract with amortisationperiod beyond one year at the initial recognition, the amount net of related provision forasset impairment is presented as other non-current assets.
(c) Interest income
Interest income from financial instruments is calculated by effective interest rate 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 rate method is a method of calculating the amortised cost of a financialasset or liability and the interest income or interest costs based on effective rates. Theeffective interest rate is the rate at which the estimated future cash flows during the periodof expected duration of the financial instruments or applicable shorter period are discountedto the current carrying amount of the financial instruments. When calculating the effectiveinterest rate, the Group estimates cash flows by considering all contractual terms of thefinancial instrument (e.g., early repayment options, similar options, etc.), but withoutconsidering future credit losses. The calculation includes all fees and interest paid orreceived that are an integral part of the effective interest rate, transaction costs, and all otherpremiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is usedfor discounting estimated future cash flow when measuring the impairment loss.
(d) Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(e) Rental income
Rental income from investment prosperities is recognised in the income statement on astraight-line basis over the lease period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(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)
(26) Revenue (Cont’d)
(f) Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when theservice is provided. The Group defers the initial charge income or commitment fee incomearising from the forming or acquisition of financial assets as the adjustment to effectiveinterest rate. If the loans are not lent when the loan commitment period is expired, relatedcharges are recognised as fee and commission income.
(27) Government grants
Government grants are transfers of monetary or non-monetary assets from the governmentto the Group at nil consideration, including refund of taxes and financial subsidies.
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 either deducted against the carrying amount of theassets, or recorded as deferred income and recognised in profit or loss on a systemic basisover the useful lives of the assets.
For government grants related to income, where the grant is a compensation for relatedexpenses or losses to be incurred by the Group in the subsequent periods, the grant isrecognised as deferred income, and included in profit or loss over the periods in which therelated costs are recognised; where the grant is a compensation for related expenses 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.
Loans to the Group at political preferential rate are recorded at the actual amount received,and the related loan expenses are calculated based on the principal and the politicalpreferential rate. Finance discounts directly received offset related loans expenses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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) 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.
(29) Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of anidentified asset for a period of time in exchange for consideration.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(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)
(29) 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 assetby the 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 appliesthe practical 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 2023(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)
(29) 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 qualified contract changes that are accounted for by applying the practical expedient, for a lease modification, the Group accounts for it as a new lease from the effective date of the modification, and considers any lease payments received in advance and receivable relating to the lease before modification as receivables of the new lease. |
(b) Finance leases
At the commencement date, the Group recognises the lease payments receivable under afinance lease and derecognises relevant assets. The lease payments receivable under afinance lease are presented as long-term receivables; the lease payments receivable undera finance lease due within one year (inclusive) as from the balance sheet date are includedin the current portion of non-current assets.
(30) Segment information
The Group identifies operating segments based on the internal organisation structure,management requirements and internal reporting system, and discloses segmentinformation of reportable segments which is determined on the basis of operating segments.
An operating segment is a component of the Group that satisfies all of the followingconditions: (1) the component is able to earn revenue and incur expenses from its ordinaryactivities; (2) whose operating results are regularly reviewed by the Group’s managementto make decisions about resources to be allocated to the segment and to assess itsperformance, and (3) for which the information on financial position, operating results andcash flows is available to the Group. Two or more operating segments that have similareconomic characteristics and satisfy certain conditions can be aggregated into one singleoperating segment.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 41 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(31) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgementsapplied based on historical experience and other factors, including expectations of futureevents that are believed to be reasonable.
The critical accounting estimates and key assumptions that have a significant risk of causinga material adjustment to the carrying amounts of assets and liabilities within the nextaccounting year are outlined below:
(i) Provision for impairment of goodwill
The Group tests at least annually whether goodwill has suffered any impairment. Therecoverable amount of the asset group or group of asset groups that contain the apportionedgoodwill is determined by the higher value between the present value of the future cashflows and the net value that is calculated by the fair value less the disposal costs. Accountingestimate is required for the calculation of the recoverable amount. The impairment testingis performed by assessing the recoverable amount of the asset group or group of assetgroups containing the relevant goodwill, based on the present value of cash flows forecasts.Key assumptions adopted in the impairment testing of goodwill included forecast periodrevenue annual growth rate, gross margin, perpetual annual growth rate and pre-taxdiscount rate, etc. which involved critical accounting estimates and judgement.
If management revises the forecast period revenue annual growth rate and perpetual annualgrowth rate that are used in the calculation of the future cash flows of asset groups or groupsof asset groups, and the revised rates are lower than the current rates, the Group will needto recognise further impairment against goodwill.
If management revises the gross margin that is used in the calculation of the future cashflows of asset groups or groups of asset groups, and the revised gross margin is lower thanthe current one, the Group will need to recognise further impairment against goodwill.
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 willneed to recognise further impairment against goodwill.
If the actual revenue annual growth rate, perpetual annual growth rate and gross margin arehigher or the actual pre-tax discount rate is lower than management’s estimates, theimpairment loss of goodwill previously provided for is not allowed to be reversed by theGroup.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 42 -
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(31) Critical accounting estimates and judgements (Cont’d)
(ii) Income tax and deferred income tax
The Group is subject to enterprise income tax in numerous jurisdictions. There are manytransactions and events for which the ultimate tax determination is uncertain during theordinary course of business. Significant judgement is required from the Group in determiningthe provision for income taxes in each of these jurisdictions. Where the final tax outcome ofthese matters is different from the amounts that were initially recorded, such differences willimpact the income tax and deferred tax provisions in the period in which such determinationis made.
As stated in Note 3(1), some subsidiaries of the Group are high-tech enterprises. The “High-Tech Enterprise Certificate” is effective for three years. Upon expiration, application for high-tech enterprise assessment should be submitted again to the relevant governmentauthorities. Based on the past experience of reassessment for high-tech enterprise uponexpiration and the actual condition of the subsidiaries, the Group considers that thesubsidiaries are able to obtain the qualification for high-tech enterprises in future years, andtherefore a preferential tax rate of 15% is used to calculate the corresponding deferredincome tax. If some subsidiaries cannot obtain the qualification for high-tech enterprise uponexpiration, then the subsidiaries are subject to a statutory tax rate of 25% for the calculationof the income tax, which further influences the recognised deferred tax assets, deferred taxliabilities and income tax expenses.
Deferred tax assets are recognised for the deductible tax losses that can be carried forwardto subsequent years to the extent that it is probable that taxable profit will be available in thefuture against which the deductible tax losses can be utilised. Taxable profit that will beavailable in the future includes the taxable profit that will be realised through normaloperations and the taxable profit that will be increased upon the reversal of taxabletemporary differences incurred in prior periods. Judgements and estimates are required todetermine the time and amounts of taxable profit in the future. Any difference between thereality and the estimate may result in adjustment to the carrying amount of deferred taxassets.
(iii) Fair value assessment of financial instruments at level 3 fair value hierarchy
Financial instruments subject to Level 3 fair value hierarchy include unlisted equityinvestments at fair value of other non-current financial assets, investments in other equityinstruments and trading financial liabilities. The fair value of these financial instruments isdetermined using valuation techniques, and the assumptions of valuation model is basedon unobservable inputs, where changes in assumptions and estimates may have an impacton the fair value of these investments. These valuation techniques, unobservable inputsand related assumptions are detailed in Note16(1).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 43 -
| 2 | Summary of significant accounting policies and accounting estimates (Cont’d) |
| (32) | Significant changes in accounting policies |
| The Ministry of Finance released the Circular on Issuing Interpretation No. 16 of Accounting Standards for Business Enterprises in 2022, which stipulates that deferred income taxes related to assets and liabilities arising from individual transactions are not applicable to initial recognition exemption and this is effective from 1 January 2023. The Ministry of Finance released the Q&A on Implementation of Accounting Standards for Business Enterprises in 2023. The financial statements for the year ended 31 December 2023 and for the year ended 31 December 2022 have been prepared by the Group and the Company in accordance with the above interpretation 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 2023(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
| (a-1) The following subsidiaries of the Group are subject to an enterprise income tax rate of 15% in 2023 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate: | |||
| Taxpayer | High-tech Enterprise Certificate number | Certificate acquisition date | Validity |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | GR202134003382 | 18 September 2021 | 3 years |
| Changsha Sunye Electric Co., Ltd. | GR202143000846 | 18 September 2021 | 3 years |
| Anhui Welling Auto Parts Corporation Limited | GR202134002578 | 18 September 2021 | 3 years |
| Hefei Hualing Co., Ltd. | GR202134000541 | 18 September 2021 | 3 years |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | GR202134004969 | 18 September 2021 | 3 years |
| Hefei Midea Laundry Appliance Co., Ltd. | GR202134003561 | 18 September 2021 | 3 years |
| MR Semiconductor Ltd. | GR202131000701 | 10 September 2021 | 3 years |
| Reis Robotics (Kunshan) Co., Ltd. | GR202132000238 | 3 November 2021 | 3 years |
| Wuxi Filin Electronics Co., Ltd. | GR202132000964 | 3 November 2021 | 3 years |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | GR202134003666 | 18 November 2021 | 3 years |
| Beijing Huatairunda Energy Saving Co., Ltd. | GR202111004112 | 17 December 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 |
| Guangdong Midea Environmental Technologies Co., Ltd. | GR202144004692 | 20 December 2021 | 3 years |
| Meicloud Technology Co., Ltd. | GR202144008715 | 20 December 2021 | 3 years |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | GR202144008574 | 20 December 2021 | 3 years |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | GR202144001270 | 20 December 2021 | 3 years |
| Guangdong Swisslog Technology Co., Ltd. | GR202144005648 | 20 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 |
| Shenzhen Hongzhi Software Co., Ltd. | GR202144200284 | 23 December 2021 | 3 years |
| Shenzhen CLOU Precision Measurement Co., Ltd. | GR202144202249 | 23 December 2021 | 3 years |
| Shenzhen Clou Intelligence Industry Co., Ltd. | GR202144200806 | 23 December 2021 | 3 years |
| CLOU Global Technology Co., Ltd. | GR202144206543 | 23 December 2021 | 3 years |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | GR202144012791 | 31 December 2021 | 3 years |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | GR202144010400 | 31 December 2021 | 3 years |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | GR202234002343 | 18 October 2022 | 3 years |
| Anhui Meizhi Compressor Co., Ltd. | GR202234002700 | 18 October 2022 | 3 years |
| WDM Esaote(Suzhou)Medical Technology Co., Ltd. | GR202232006635 | 18 November 2022 | 3 years |
| Midea Group Wuhan Heating Ventilation Equipment Co.,Ltd. | GR202242004390 | 29 November 2022 | 3 years |
| Wuhan TTium Motor Technology Co., Ltd. | GR202242004712 | 29 November 2022 | 3 years |
| Huaian Welling Motor Manufacturing Co., Ltd. | GR202232018102 | 12 December 2022 | 3 years |
| KUKA Robotics Manufacturing China Co., Ltd. | GR202231004961 | 14 December 2022 | 3 years |
| Shenzhen Midea Payment Technology Co., Ltd. | GR202244208053 | 19 December 2022 | 3 years |
| Foshan Shunde Midea Electric Science and Technology Co., Ltd. | GR202244002733 | 19 December 2022 | 3 years |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | GR202244004828 | 19 December 2022 | 3 years |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(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-1) The following subsidiaries of the Group are subject to an enterprise income tax rate of 15%
in 2023 as they qualified as high-tech enterprises and obtained the High-tech EnterpriseCertificate(Cont’d):
| Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
| Guangdong Yueyun Industrial Internet Innovation Technology Co., Ltd. | GR202244006484 | 22 December 2022 | 3 years |
| GD Midea Environment Appliances Mfg. Co.,Ltd. | GR202244008573 | 22 December 2022 | 3 years |
| Wanliyun Medical Information Technology (Beijing) Co., Ltd. | GR202211008024 | 30 December 2022 | 3 years |
| Hubei Midea Laundry Appliance Co., Ltd. | GR202342000522 | 16 October 2023 | 3 years |
| Sichuan CLOU Energy Electric Co., Ltd. | GR202351003347 | 16 October 2023 | 3 years |
| Hubei Midea Building Technology Co., Ltd. | GR202342000405 | 16 October 2023 | 3 years |
| MiSiliconn Semiconductor Technologies Co., Ltd. | GR202351100902 | 16 October 2023 | 3 years |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | GR202313000973 | 28 December 2023 | 3 years |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | GR202351101572 | 26 October 2023 | 3 years |
| Hubei Midea Refrigerator Co., Ltd. | GR202342000311 | 16 October 2023 | 3 years |
| Hiconics Eco-energy Drive Technology Co., Ltd. | GR202311003112 | 26 October 2023 | 3 years |
| Wuxi Little Swan Electric Co., Ltd. | GR202332003281 | 6 November 2023 | 3 years |
| Suzhou CLOU-MGE Electric Co., Ltd. | GR202332003299 | 6 November 2023 | 3 years |
| Jiangsu Midea Cleaning Appliances Co., Ltd. | GR202332002439 | 6 November 2023 | 3 years |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | GR202342003400 | 14 November 2023 | 3 years |
| Midea Network Information Services (Shenzhen) Co., Ltd. | GR202344206239 | 15 November 2023 | 3 years |
| Kuka Systems (China) Co., Ltd. | GR202331002862 | 15 November 2023 | 3 years |
| Shenzhen CLOU Electronics Co., Ltd. | GR202344204605 | 15 November 2023 | 3 years |
| Midea Intelligent Lighting & Controls Technology Co., Ltd. | GR202336001435 | 22 November 2023 | 3 years |
| Beijing Wandong Medical Technology Co.,Ltd. | GR202311003930 | 30 November 2023 | 3 years |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | GR202334004899 | 30 November 2023 | 3 years |
| Wuhu Midea Smart Kitchen Appliance Manufacturing Co., Ltd. | GR202334006446 | 30 November 2023 | 3 years |
| Shanghai Swisslog Healthcare Technology Co., Ltd. | GR202331005355 | 12 December 2023 | 3 years |
| Midea Welling Motor Technology (Shanghai) Co., Ltd. | GR202331003851 | 12 December 2023 | 3 years |
| Guangdong Midea Precision Mould Technology Co., Ltd. | GR202344005048 | 28 December 2023 | 3 years |
| KUKA Robotics Guangdong Co., Ltd. | GR202344010905 | 28 December 2023 | 3 years |
| Guangdong Shunkai Switch Co., Ltd. | GR202344003261 | 28 December 2023 | 3 years |
| Guangdong Witol Vacuum Electronic Manufacture Co., Ltd. | GR202344003728 | 28 December 2023 | 3 years |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | GR202344017927 | 28 December 2023 | 3 years |
| Guangdong Welling Motor Manufacturing Co., Ltd. | GR202344008685 | 28 December 2023 | 3 years |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | GR202344007566 | 28 December 2023 | 3 years |
| GD Midea Air-Conditioning Equipment Co., Ltd. | GR202344001853 | 28 December 2023 | 3 years |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | GR202344003947 | 28 December 2023 | 3 years |
| Guangdong Meizhi Compressor Limited | GR202344005746 | 28 December 2023 | 3 years |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | GR202344008924 | 28 December 2023 | 3 years |
| Foshan Shunde Midea Water Dispenser Manufacturing Co., Ltd. | GR202344017783 | 28 December 2023 | 3 years |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 46 -
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) According to the Announcement of the Ministry of Finance and the State Administration of
Taxation on Implementing the Preferential Income Tax Policies for the Development of Smalland Micro Enterprises (Announcement [2022], No. 13) and the Announcement of theMinistry of Finance and the State Administration of Taxation on Implementing thePreferential Income Tax Policies for Micro and Small Enterprises and Individual Industrialand Commercial Households (Announcement [2023], No. 6) and Announcement of theGeneral Administration of Taxation of the Ministry of Finance on Further Supporting theDevelopment of Small and Micro Enterprises and Individual Industrial and CommercialHouseholds (Announcement [2023], No. 12) jointly issued by the Ministry of Finance andthe State Taxation Administration, for Shenzhen Midea Capital Corporation Limited,Shanghai Andezhilian Supply Chain Technology Co., Ltd., Foshan Annto LogisticsTechnology Co., Ltd., Shenzhen Annto Intelligent Technology Co., Ltd., Tianjin AnntoNetwork Technology Co., Ltd., Jingzhou Meian Storage and Transportation Co., Ltd.,Chongqing Wanxiang Medical Equipment Co., Ltd, Shanghai Wandong Yingrui MedicalTechnology Co., Ltd, and Suzhou Wanying Medical Technology Co., Ltd, subsidiaries of theCompany and qualified as small low-profit enterprises, in 2023, EIT is based on a 20% rateapplied to 25% of its taxable income amount.
(a-6) The Company's subsidiaries in the Chinese mainland other than those mentioned in (a-1)
to (a-5) are subject to enterprise income tax at the rate of 25%.
(a-7) In August 2008, Midea Electric Trading (Singapore) Co., Pte Ltd., the Company's subsidiary,
was awarded with the Certificate of Honour for Development and Expansion (No. 587) bythe Singapore Economic Development Board and is subject to the applicable preferentialincome tax rate of 6% for 2023. Lifestyle Orchestra Co.Pte.Ltd. and Little Swan International(Singapore) Co., Pte. LTD., the Company's subsidiaries, are subject to enterprise incometax at the rate of 17%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 47 -
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-8) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax at the rate
of 16.5%. Such subsidiaries include Midea International Trading Company Limited, MideaInternational Corporation Company Limited, Midea Home Appliances Investments (HongKong) Co., Limited, Century Carrier Residential Air-conditioning Equipment Co., Limited,Midea Refrigeration (Hong Kong) Limited, Welling Holding Limited, Welling InternationalHong Kong Ltd., Chairing Holding Limited, Main Power Electrical Factory Limited and MideaInvestment (Asia) Company Limited.
(a-9) The Company's subsidiaries in BVI and Cayman Islands are exempted from enterprise
income tax. Such subsidiaries include Mecca International (BVI) Limited, Titoni InvestmentsDevelopment Ltd., Midea Investment Holding (BVI) Limited, Midea Electric Investment (BVI)Limited, Welling Holding (BVI) Ltd., Midea Holding (Cayman Islands) Limited and MideaInvestment Development Company Limited.
(a-10) Springer Carrier Ltda., the Company's subsidiary in Brazil, is subject to Brazil enterprise
income tax at the rate of 34%.
(a-11) Some subsidiaries of TLSC, the Company's subsidiary in Japan, are subject to Japan
enterprise income tax at the rate of 34.01%.
(a-12) Clivet S.P.A (“Clivet”), the Company's subsidiaries in Italy, are subject to Italy enterprise
income tax at the rate 24%.
(a-13) KUKA Group, the Company's subsidiary in Germany, is subject to Germany enterprise
income tax at the rate of 32%.
(a-14) Servotronix Motion Control Ltd. (“SMC”), the Company's subsidiary in Israel, is subject to
Israel enterprise income tax at the rate of 23%.
(a-15) Misr Refrigeration and Air Conditioning Manufacturing Company, S.A.E., the Company's
subsidiary in Egypt, is subject to Egypt enterprise income tax at the rate of 22.5%.
(a-16) Midea America Corp., the Company's subsidiary in the USA, is subject to USA enterprise
income tax at the rate of 21%.
(a-17) Midea Consumer Electric (Vietnam) CO., LTD., the Company's subsidiary in Vietnam, is
subject to Vietnam enterprise income tax at the rate of 20%.
(a-18) Midea Refrigeration Equipment (Thailand) Co., Ltd., the Company's subsidiary in Thailand,
is exempt from enterprise income tax under the investment promotion policy of the ThailandBoard of Investment.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 48 -
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont’d)
(b) Notes to the VAT rate of the principal tax payers with different tax rates
(b-1) Pursuant to relevant provisions of the Announcement on Relevant Policies for Deepening
Value-Added Tax Reform (Announcement [2019] No. 39) jointly issued by the Ministry ofFinance, the State Taxation Administration and the General Administration of Customs andrelevant regulations, the applicable tax rate of revenue arising from sales of goods andrendering of repairing and replacement services of the Company’s certain subsidiaries is13% from 1 April 2019, and that of revenue arising from real estate leasing andtransportation services of 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 Clarifying the Value-added Tax
Reduction and Exemption Policies for Small-scale Value-added Tax Taxpayers and OtherPolicies (Announcement [2023] No. 1) issued by the Ministry of Finance and the StateTaxation Administration, certain subsidiaries of the Company engaged in the productionservice sector are eligible for a 5% additional VAT deduction based on deductible input VATin the current year from 1 January 2023 to 31 December 2023.
(b-5) Pursuant to relevant provisions of the Announcement on Relevant Tax Policies for Further
Supporting the Business Startup and Employment of Priority Groups (Announcement [2023]No. 15) issued by the Ministry of Finance, the State Taxation Administration, the Ministry ofHuman Resources and Social Security and the Ministry of Agriculture and Rural Affairs, forcertain subsidiaries of the Company that employ the people who have been lifted out ofpoverty and those who have been registered as unemployed for more than half a year andhold the Certificate of Employment and Start-up or the Registration Certificate ofEmployment and Unemployment (stating “tax policy for business absorption”), since themonth of signing the labour contracts of more than 1 year and paying the social securitycontributions, their VAT, city maintenance and construction tax, educational surcharge, localeducational surcharge and enterprise income tax will be deducted in sequence and basedon quota in accordance with the actual number of employees in 3 years from 1 January2023 to 31 December 2027.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 49 -
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont’d)
(b) Notes to the VAT rate of the principal tax payers with different tax rates (Cont’d)
(b-6) Pursuant to the Notice on the Additional Value-added Tax Credit Policy for Advanced
Manufacturing Enterprises (Announcement [2023] No. 43) issued by the Ministry of Financeand the State Taxation Administration, advanced manufacturing enterprises are eligible fora 5% additional VAT deduction based on deductible input VAT in the current year from 1January 2023 to 31 December 2027. The following subsidiaries of the Group are approvedas advanced manufacturing enterprises for 2023 which can enjoy the above policy:
| KUKA Robotics Guangdong Co., Ltd. | Handan Midea Air-Conditioning Equipment Co., Ltd. |
| Guangdong Swisslog Technology Co., Ltd. | Midea Group Wuhan Refrigeration Equipment Co., Ltd. |
| Kuka Robotics Manufacturing China Co., Ltd. | Midea Group Wuhan Heating Ventilation Equipment Co.,Ltd. |
| Reis Robotics (Kunshan) Co., Ltd. | Guangzhou Hualing Refrigerating Equipment Co., Ltd. |
| Hefei Hualing Co., Ltd. | GD Midea Air-Conditioning Equipment Co., Ltd. |
| Hubei Midea Refrigerator Co., Ltd. | Hefei Midea Heating & Ventilating Equipment Co., Ltd. |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | WINONE ELEVATOR COMPANY LIMITED |
| Toshiba HA Manufacturing (Nanhai) Co., Ltd. | GD Midea Heating & Ventilating Equipment Co., Ltd. |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Chongqing Midea General Refrigeration Equipment Co., Ltd. |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | Guangdong Midea Consumer Electric Manufacturing Co., Ltd. |
| Foshan Shunde Midea Water Dispenser Manufacturing Co., Ltd. | Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | GD Midea Environment Appliances Mfg. Co., Ltd. |
| Hiconics Eco-energy Drive Technology Co., Ltd. | Jiangsu Midea Cleaning Appliances Co., Ltd. |
| Huaian Welling Motor Manufacturing Co., Ltd. | Guangdong Witol Vacuum Electronic Manufacture Co., Ltd. |
| Dorna Technology Co., Ltd. | Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. |
| Anhui Meizhi Compressor Co., Ltd. | Wuxi Filin Electronics Co., Ltd. |
| Anhui Welling Auto Parts Corporation Limited | Wuxi Little Swan Electric Co., Ltd. |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | Hefei Midea Laundry Appliance Co., Ltd. |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | Hubei Midea Laundry Appliance Co., Ltd. |
| Guangdong Meizhi Compressor Limited | Shenzhen CLOU Electronics Co., Ltd. |
| Guangdong Welling Motor Manufacturing Co., Ltd. | Shenzhen CLOU Precision Measurement Co., Ltd. |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | Shenzhen Clou Intelligence Industry Co., Ltd. |
| Guangdong Meizhi Precision- Manufacturing Co., Ltd. | CLOU Global Technology Co., Ltd. |
| Guangdong Midea Intelligent Technologies Co., Ltd. | Guangdong Shunde Switch Factory Co., Ltd. |
| Guangdong Midea Environmental Technologies Co., Ltd. | Hubei Midea Building Technology Co., Ltd. |
| Changsha Sunye Electric Co., Ltd. | MiSiliconn SemiConductor Technologies Co., Ltd. |
| Wuhan TTium Motor Technology Co., Ltd. |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 50 -
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
| 31 December 2023 | 31 December 2022 | |||
| Cash on hand | 1,603 | 1,645 | ||
| Cash at bank (a) | 44,521,913 | 28,581,529 | ||
| Other cash balances (b) | 4,072,963 | 1,688,278 | ||
| Statutory reserve with the Central Bank (c) | 415,070 | 328,409 | ||
| Surplus reserve with the Central Bank (d) | 147,971 | 172,394 | ||
| Deposits with banks and other financial institutions (e) | 32,064,267 | 24,287,610 | ||
| Interest receivable | 450,059 | 210,234 | ||
| 81,673,846 | 55,270,099 | |||
| Including: Total amounts deposited with banks overseas (including Singapore, Japan, Hong Kong, China, Germany, Egypt and the USA), etc. | 11,058,467 | 7,133,785 |
(a) As at 31 December 2023, cash at bank included fixed deposits with the term of over 3
months and due within 1 year, amounting to RMB 16,848,494,000 (31 December 2022:
RMB 1,911,210,000).
(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 2023 and 31 December 2022, deposits with banks and other financial
institutions included no fixed deposits with the term of over 3 months.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 51 -
4 Notes to the consolidated financial statements (Cont’d)
(2) Financial assets held for trading
| 31 December 2023 | 31 December 2022 | ||
| Structural deposits (a) | 53,750 | 1,606,608 | |
| Investments in equity instrument held for trading (b) | 1,726,584 | 1,264,595 | |
| Others | 10,254 | 413,390 | |
| 1,790,588 | 3,284,593 |
(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 2023 | 31 December 2022 | |||
| Bank acceptance notes | 5,477,291 | 4,705,290 | ||
| Trade acceptance notes | 110,271 | 114,595 | ||
| Less: Provision for bad debts (a) | (65,602) | (61,756) | ||
| 5,521,960 | 4,758,129 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 52 -
4 Notes to the consolidated financial statements (Cont’d)
(3) Notes receivable (Cont’d)
(a) Provision for bad debts
The Group's notes receivable are generated from the sale of goods, provision of servicesand other daily business activities, regardless of whether there is a significant financingcomponent, are measured on the basis of expected credit losses throughout the duration ofthe provision for bad debts allowance for doubtful accounts
Allowance for doubtful accounts categories as follows:
| 31 December 2023 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | % of total balance | Amount | Provision ratio | |||
| Provision for bad debts on an individual basis (i) | 64,839 | 1.16% | (64,839) | 100.00% | ||
| Provision for bad debts on a grouping basis (ii) | 5,522,723 | 98.84% | (763) | 0.01% | ||
| 5,587,562 | 100.00% | (65,602) | ||||
| 31 December 2022 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | % of total balance | Amount | Provision ratio | |||
| Provision for bad debts on an individual basis (i) | 61,467 | 1.28% | (59,813) | 97.31% | ||
| Provision for bad debts on a grouping basis (ii) | 4,758,418 | 98.72% | (1,943) | 0.04% | ||
| 4,819,885 | 100.00% | (61,756) | ||||
| (i) | Notes receivable for which the related provision for bad debts was provided on an individual basis are analysed as follows: |
| As at 31 December 2022 and 2023, as the companies encountered financial distress, the Group has evaluated relative cash flow that might be collected under different scenarios, and recognised the present value of the difference between the present value of the cash flows that might be collected and the cash flows receivable according to the contract as provision for bad debts as provision for bad debts,. | |
| (ii) | Notes receivable for which the related provision for bad debts was provided on a grouping basis are analysed as follows: |
| As at 31 December 2023, the Group considered that there was no significant credit risk associated with its bank acceptance notes and did not expect that there would be any significant losses from non-performance by these banks.. |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 53 -
4 Notes to the consolidated financial statements (Cont’d)
(3) Notes receivable (Cont’d)
| (b) | As at 31 December 2023, notes receivable endorsed or discounted but unmatured are as follows: | |||
| Derecognised | Not derecognised | |||
| Trade acceptance notes | —— | 25,747 | ||
| Bank acceptance notes (i) | 181,956 | 3,061,225 | ||
| 181,956 | 3,086,972 | |||
| (i) | For the year ended 31 December 2023 and 31 December 2022, 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 did not meet the above conditions and business model were presented as notes receivable. |
(4) Accounts receivable
| 31 December 2023 | 31 December 2022 | |||
| Accounts receivable | 34,367,460 | 29,570,582 | ||
| Less: Provision for bad debts (b) | (1,482,721) | (1,332,609) | ||
| 32,884,739 | 28,237,973 |
(a) The ageing of accounts receivable is analysed as follows:
| 31 December 2023 | 31 December 2022 | |||
| Within 1 year | 32,609,034 | 28,142,167 | ||
| 1 to 2 years | 1,114,153 | 1,099,842 | ||
| 2 to 3 years | 326,815 | 140,153 | ||
| 3 to 5 years | 188,085 | 101,202 | ||
| Over 5 years | 129,373 | 87,218 | ||
| 34,367,460 | 29,570,582 |
As at 31 December 2023 and 31 December 2022, the Group had no significant overdueaccounts receivable.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 54 -
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable (Cont’d)
(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 2023, 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 | 656,920 | 89.86% | (590,325) | The debtor encountered financial distress, etc. | ||
| Foreign customers | 624,425 | 30.73% | (191,906) | |||
| 1,281,345 | (782,231) |
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 customers | 22,437 | 97.37% | (21,847) | |||
| 1,083,636 | (575,043) |
As at 31 December 2023, accounts receivable for which the related provision for bad debtswas provided on a grouping basis are analysed as follows:
| 31 December 2023 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | Lifetime ECL rate | Amount | ||||
| Domestic business grouping | 14,234,866 | 3.00% | (427,472) | |||
| Overseas business grouping | 18,851,249 | 1.45% | (273,018) | |||
| 33,086,115 | (700,490) | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 55 -
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 2022, accounts receivable for which the related provision for bad debtswas provided on a 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) | |||||
(c) The provision for bad debts in the current year amounted to RMB 571,890,000 (2022: RMB
680,932,000). The provision for bad debts reversed in the current year amounted to RMB384,196,000 (2022: RMB 205,575,000). The provision for bad debts written off in the currentyear amounted to RMB 75,948,000 (2022: RMB 55,411,000).
(d) As at 31 December 2023, the five largest accounts receivable and contract assets
aggregated by debtor are summarised and analysed as follows:
| Amount | Provision for bad debts | % of total balance | ||||
| Total amount of the five largest accounts receivable and contract assets | 3,568,439 | (141,689) | 9.26% |
(e) Certain accounts receivables were pledged for bank loan facilitie as at 31 December 2023.
(5) Other receivables
| 31 December 2023 | 31 December 2022 | |||
| Other receivables | 2,233,595 | 2,249,186 | ||
| Less: Provision for bad debts | (51,717) | (38,009) | ||
| 2,181,878 | 2,211,177 |
The Group does not have amounts that are aggregated to other parties and reported in otherreceivables as a result of centralised fund management.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 56 -
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont’d)
(a) Other receivables mainly include security deposit and guarantee, current accounts, petty
cash to staff and receivables related to stock options.
The ageing of other receivables is analysed as follows:
| 31 December 2023 | 31 December 2022 | |||
| Within 1 year | 1,688,987 | 1,932,646 | ||
| 1 to 2 years | 208,857 | 137,213 | ||
| 2 to 3 years | 162,943 | 97,205 | ||
| 3 to 5 years | 98,851 | 48,616 | ||
| Over 5 years | 73,957 | 33,506 | ||
| 2,233,595 | 2,249,186 |
(b) Provision for losses and changes in book balance statement
Provisions for bad debts of other receivables are analysed by category as follows:
| 31 December 2023 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | % of total balance | Amount | Provision ratio | |||
| Provision for bad debts on an individual basis (i) | 159,088 | 7.12% | (6,332) | 3.98% | ||
| Provision for bad debts on a grouping basis (ii) | 2,074,507 | 92.88% | (45,385) | 2.19% | ||
| 2,233,595 | 100.00% | (51,717) | ||||
| 31 December 2022 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | % of total balance | Amount | Provision ratio | |||
| Provision for bad debts on an individual basis (i) | 72,221 | 3.21% | (4,262) | 5.90% | ||
| Provision for bad debts on a grouping basis (ii) | 2,176,965 | 96.79% | (33,747) | 1.55% | ||
| 2,249,186 | 100.00% | (38,009) | ||||
| Stage 1 | Stage 3 | ||||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | Lifetime ECL (Credit impaired) | Sub-total | ||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | Book balance | Provision for bad debts | Provision for bad debts | |
| 31 December 2022 | 2,176,965 | 33,747 | 67,959 | - | 4,262 | 4,262 | 38,009 |
| Transfer to Stage 3 | (6,166) | (268) | - | - | 6,166 | 268 | - |
| Net /(decrease) /increase in the current year | (96,292) | 17,182 | 84,797 | - | (4,096) | 1,752 | 18,934 |
| Including: Write-off in the current year | - | - | - | - | (4,096) | (4,096) | (4,096) |
| Derecognition | - | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | - | (5,276) | - | - | - | 50 | (5,226) |
| 31 December 2023 | 2,074,507 | 45,385 | 152,756 | - | 6,332 | 6,332 | 51,717 |
As at 31 December 2023 and 31 December 2022, the Group had no other receivables atStage 2.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 57 -
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 2023, 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 | 152,756 | 0.00% | - | Relatively low bad debt risks |
| Book balance | lifetime ECL rates | Provision for bad debts | Reason | ||||
| Stage 3 | 6,332 | 100.00% | (6,332) | The debtor encountered financial distress, etc. |
As at 31 December 2022, 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 | 67,959 | 0.00% | - | Relatively low bad debt risks |
| Book balance | lifetime ECL rates | Provision for bad debts | Reason | ||||
| Stage 3 | 4,262 | 100.00% | (4,262) | The debtor encountered financial distress, etc. |
(ii) As at 31 December 2023 and 31 December 2022, 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 2023 | 31 December 2022 | ||||||||
| 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 | 2,074,507 | (45,385) | 2.19% | 2,176,965 | (33,747) | 1.55% | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 58 -
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 35,940,000 (2022: RMB
36,072,000). The provision for bad debts reversed in the current year amounted to RMB12,910,000 (2022: RMB 38,848,000) The provision for bad debts written off in the currentyear amounted to RMB 4,096,000 (2022: RMB 1,565,000).
(d) As at 31 December 2023, 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 | 283,102 | (3,093) | 12.67% |
(e) As at 31 December 2023 and 31 December 2022, the Group had no significant government
grants recognised at amounts receivable.
(f) As at 31 December 2023 and 31 December 2022, the Group had no overdue dividends
receivable.
(6) Receivables financing
| 31 December 2023 | 31 December 2022 | |||
| Receivables financing | 13,330,008 | 13,526,540 |
The Group’s receivables financing were mainly accounts receivable and bank acceptancenotes transferred, discounted and endorsed for the purpose of daily treasury managementand were qualified for derecognition. In 2023, the Group endorses and discounts the bankacceptance notes and the Group transfers substantially all the risks and rewards ofownership to the transferee. The carrying amount of bank acceptance notes derecognisedwere RMB 37,374,909,000(2022: RMB 39,064,235,000) and the relevant discount losseswere RMB 19,609,000(2022: RMB 55,701,000)
As at 31 December 2023 and 31 December 2022, the Group measured provision for baddebts based on the lifetime ECL. As the credit risk characteristics of these bank acceptancenotes were similar, no provision for impairment was made individually. In addition, the Groupconsidered that there was no significant credit risk associated with its bank acceptancenotes and did not expect that there would be any significant losses from non-performanceby these banks.
As at 31 December 2023, in addition to Note 4(3)(b), the Group’s bank acceptance notesendorsed or discounted but not matured amounted to RMB 10,285,438,000 (31 December2022: RMB 12,368,841,000), all of which were derecognised.
In 2023, there was no material write-off of receivables financing in the Group (2022: Nil).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 59 -
4 Notes to the consolidated financial statements (Cont’d)
(7) Advances to suppliers
| 31 December 2023 | 31 December 2022 | |||
| Prepayments for raw materials and others | 3,316,194 | 4,367,211 |
(a) The ageing of advances to suppliers is analysed below:
| 31 December 2023 | 31 December 2022 | |||||||
| Amount | % of total balance | Amount | % of total balance | |||||
| Within 1 year | 3,175,857 | 95.76% | 4,238,120 | 97.04% | ||||
| 1 to 2 years | 94,533 | 2.85% | 83,905 | 1.92% | ||||
| 2 to 3 years | 21,058 | 0.64% | 17,820 | 0.41% | ||||
| Over 3 years | 24,746 | 0.75% | 27,366 | 0.63% | ||||
| 3,316,194 | 100.00% | 4,367,211 | 100.00% | |||||
As at 31 December 2023, advances to suppliers with ageing over 1 year with a carryingamount of RMB 140,337,000 (31 December 2022: RMB 129,091,000) were mainly unsettledprepayments for raw materials.
As at 31 December 2023, 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 | 488,504 | 14.73% |
(8) Contract assets
| 31 December 2023 | 31 December 2022 | ||
| Contract assets | 4,163,267 | 4,572,177 | |
| Less: Provision for impairment of contract assets | (117,342) | (73,221) | |
| Total | 4,045,925 | 4,498,956 |
For contract assets, the Group measures the loss provision based on the lifetime ECLregardless of whether there exists a significant financing component.
In 2023, there was no material write-off of contract assets in the Group (2022: Nil).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 60 -
4 Notes to the consolidated financial statements (Cont’d)
(8) Contract assets (Cont’d)
As at 31 December 2023, 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 | 71,441 | 72.47% | (51,772) | The debtor encountered financial distress, etc. |
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 2023, contract assets for which the related provision for bad debts wasprovided on a grouping basis are analysed as follows:
| 31 December 2023 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | Lifetime ECL rate | Amount | ||||
| Domestic business grouping | 1,359,776 | 2.31% | (31,467) | |||
| Overseas business grouping | 2,732,050 | 1.25% | (34,103) | |||
| 4,091,826 | (65,570) | |||||
As at 31 December 2022, contract assets for which the related provision for bad debts wasprovided on a 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) | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 61 -
4 Notes to the consolidated financial statements (Cont’d)
(9) Loan receivables
(a) By individual and corporation:
| 31 December 2023 | 31 December 2022 | |||
| loan receivables measured at amortised cost | ||||
| Loan receivables to individuals | 1,555,477 | 1,820,952 | ||
| Loan receivables to corporations | 14,073,508 | 13,475,027 | ||
| Including: Loans | 10,939,505 | 11,138,739 | ||
| Note discounting | 3,134,003 | 2,336,288 | ||
| 15,628,985 | 15,295,979 | |||
| Less: Provision for loan losses | (356,755) | (463,929) | ||
| 15,272,230 | 14,832,050 |
As at 31 December 2023, loan receivables over 1 year amounted to RMB 975,272,000 (31December 2022: RMB 693,294,000).
(b) By type of collateral held:
| 31 December 2023 | 31 December 2022 | |||
| Unsecured loans | 1,553,285 | 1,818,768 | ||
| Guaranteed loans | 481,542 | 598,437 | ||
| Pledged loans | 13,594,158 | 12,878,774 | ||
| Total loan receivables | 15,628,985 | 15,295,979 |
(c) The provision for bad debts in the current year amounted to RMB 44,273,000 (2022: RMB
25,814,000), the provision for bad debts was written off amounted to RMB 9,466,000 (2022:
Nil) and the provision for bad debts reversed in the current year amounted to RMB170,274,000 (2022: RMB 14,612,000) (Note 4(25)).
(d) As at 31 December 2023, the cost of the Group’s loan receivables for which the provision
for bad debts was provided on an individual basis amounted to RMB 3,083,537,000(December 31, 2022: RMB 2,202,392,000), and the provision for bad debts amounted toRMB 62,293,000(December 31, 2022:RMB 97,565,000).
(e) As at 31 December 2023 and 31 December 2022, the Group included the most of loan
receivables 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 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 62 -
4 Notes to the consolidated financial statements (Cont’d)
(10) Inventories
(a) Inventories are summarised by category as follows:
| 31 December 2023 | 31 December 2022 | |||||||||||
| Book balance | Provision for decline in the value of inventories | Carrying amount | Book balance | Provision for decline in the value of inventories | Carrying amount | |||||||
| Finished goods | 35,291,863 | (353,307) | 34,938,556 | 34,753,459 | (458,121) | 34,295,338 | ||||||
| Raw materials | 8,572,689 | (344,224) | 8,228,465 | 8,675,143 | (241,247) | 8,433,896 | ||||||
| Work in progress | 3,170,699 | - | 3,170,699 | 2,519,241 | - | 2,519,241 | ||||||
| Consigned processing materials | 444,995 | - | 444,995 | 427,838 | - | 427,838 | ||||||
| Contract fulfilment costs (i) | 556,540 | - | 556,540 | 368,584 | - | 368,584 | ||||||
| 48,036,786 | (697,531) | 47,339,255 | 46,744,265 | (699,368) | 46,044,897 | |||||||
(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 2022 | Provision | Reversal or write-off | 31 December 2023 | |||||||
| Finished goods | 458,121 | 208,360 | (316,901) | 3,727 | 353,307 | |||||
| Raw materials | 241,247 | 127,041 | (34,095) | 10,031 | 344,224 | |||||
| 699,368 | 335,401 | (350,996) | 13,758 | 697,531 |
(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 |
(11) Current portion of non-current assets
| 31 December 2023 | 31 December 2022 | ||
| Other debt investments due within 1 year (Note 4(13)) | 4,664,429 | 5,875,076 | |
| Long-term receivables due within 1 year (Note 4(14)) | 678,587 | 553,591 | |
| Current portion of other non-current assets (Note 4(24)) | 5,417,561 | 31,124,411 | |
| 10,760,577 | 37,553,078 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 63 -
4 Notes to the consolidated financial statements (Cont’d)
(12) Other current assets
| 31 December 2023 | 31 December 2022 | |||
| Fixed-income products (a) | 53,858,011 | 38,748,850 | ||
| Input VAT to be deducted | 5,852,464 | 3,875,519 | ||
| Prepaid expenses | 1,047,492 | 856,455 | ||
| Others (b) | 2,142,924 | 3,061,554 | ||
| 62,900,891 | 46,542,378 |
(a) Fixed-income products were monetary investment products and certificate of deposit
deposited in financial institutions with maturities of no more than 1 year at the time ofacquisition, which were subsequently measured at amortised cost. As at 31 December 2023and 31 December 2022, the Group considered that there was no significant increase incredit risk of fixed-income products since initial recognition, and made provision for lossbased on 12-month ECL. The Group considered that there was no significant credit riskassociated with them, and did not expect that there would be any significant losses fromnon-performance by these financial institutions. The restrictions on fixed-income productsare detailed in Note(24)(b)
(b) As at 31 December 2023, the Group acquired transferable certificates of deposit with a
maturity of less than one year of RMB 30,000,000 (31 December 2022: RMB 656,967,000),measured at fair value through other comprehensive income.
(13) Other debt investments
| 31 December 2023 | 31 December 2022 | |||
| Fair value through other comprehensive income | ||||
| - Transferable certificate of deposit | 10,983,476 | 16,969,335 | ||
| Less: Other debt investments due within 1 year (Note 4(11)) | (4,664,429) | (5,875,076) | ||
| 6,319,047 | 11,094,259 |
| At 31 December 2023 and 31 December 2022, the cost of the Group's transferable certificates of deposit was not materially different from its fair value. | |
| As at 31 December 2023 and December 31 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. | |
| In current year, there was no material write-off of other debt investments in the Group (2022: Nil). |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 64 -
4 Notes to the consolidated financial statements (Cont’d)
(14) Long-term receivables
| 31 December 2023 | 31 December 2022 | |||
| Long-term receivables | 1,050,627 | 1,176,968 | ||
| Less: Provision for bad debts | (121,521) | (8,779) | ||
| 929,106 | 1,168,189 | |||
| Less: Long-term receivables due within 1 year (Note 4(11)) | (678,587) | (553,591) | ||
| 250,519 | 614,598 |
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 2023 | 31 December 2022 | |||
| Investments in associates and joint ventures (a) | 4,976,109 | 5,188,817 | ||
| Less: Provision for impairment of long-term equity investments | - | - | ||
| 4,976,109 | 5,188,817 |
(a) Investments in associates and joint ventures mainly refer to the investments in Guangdong
Shunde Rural Commercial Bank Co., Ltd. (Shunde Rural Commercial Bank), Carrier MideaNorth America LLC., Hefei Royalstar Motor Co., Ltd., Foshan Micro Midea Filter Mfg. Co.,Ltd., Concepcion Midea Inc., TWENTYTHREEC LLC, Shenzhen CEGN Co., Ltd. , T. G.BATTERY CO. (HONG KONG) LIMITED, and other enterprises by the Group.
The changes in equity of the Group’s investment in associates and joint ventures are asfollows:
| Movements in the current year | ||||||||||
| 31 December 2022 | Increase in investments and transfer-in | Business combinations | Decrease in investments and transfer-out | Share of net profit/(loss) under equity method | Share of other comprehensive income | Share of other changes in equity | Cash dividends or profits declared | Others | 31 December 2023 | |
| 5,188,817 | 15,348 | 366,938 | (936,303) | 680,759 | 8,031 | 3,412 | (360,750) | 9,857 | 4,976,109 | |
(b) In 2023, the Group's sales revenue to associates and joint ventures was RMB 2,587,058,000,
with the closing balance of receivables from associates and joint ventures at RMB275,963,000. The purchase amount to associates and joint ventures was RMB 859,288,000,with the ending balance of payables to associates and joint ventures at RMB 269,155,000.These transactions were conducted in accordance with normal commercial terms at agreedprice by reference to the market price. These transactions are negotiated on normalcommercial terms with reference to market prices.
(c) As at 31 December 2023, the Group's cash deposited in Shunde Rural Commercial Bank
amounted to RMB 4,604,976,000, and other non-current assets amounted to RMB5,900,564,000. The interest income obtained by the Group from Shunde Rural CommercialBank was RMB 293,347,000
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 65 -
4 Notes to the consolidated financial statements (Cont’d)
(16) Other non-current financial assets
| 31 December 2023 | 31 December 2022 | |||
| Measured at fair value | ||||
| - Equity of unlisted companies, etc. | 5,687,591 | 6,348,556 | ||
| Others (a) | 2,082,347 | 4,276,688 | ||
| 7,769,938 | 10,625,244 |
(a) As at 31 December 2023 and December 31 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 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 66 -
4 Notes to the consolidated financial statements (Cont’d)
(17) Property, plant and equipment
| Buildings | Overseas land | Machinery and equipment | Motor vehicles | Electronic equipment and others | Total | ||
| Cost | |||||||
| 31 December 2022 | 22,049,136 | 1,335,277 | 24,331,913 | 773,893 | 6,376,643 | 54,866,862 | |
| Increase in the current year | |||||||
| Purchase | 270,762 | 61,793 | 2,987,375 | 65,439 | 1,298,264 | 4,683,633 | |
| Transfer from construction in progress | 3,266,288 | - | 126,355 | - | 73,969 | 3,466,612 | |
| Increase by business combinations | 1,024,144 | - | 413,976 | 102,997 | 108,537 | 1,649,654 | |
| Others | 231,695 | 2,901 | 89,497 | - | 3,332 | 327,425 | |
| Decrease in the current year | |||||||
| Disposal, retirement and others | (419,589) | (19,673) | (1,783,744) | (49,786) | (554,948) | (2,827,740) | |
| Differences on translation of foreign currency financial statements | 8,819 | 7,330 | (55,246) | (1,694) | 46,591 | 5,800 | |
| 31 December 2023 | 26,431,255 | 1,387,628 | 26,110,126 | 890,849 | 7,352,388 | 62,172,246 | |
| Accumulated depreciation | |||||||
| 31 December 2022 | 9,928,550 | - | 13,686,225 | 552,718 | 4,560,855 | 28,728,348 | |
| Increase in the current year | |||||||
| Provision | 1,100,853 | - | 1,565,697 | 99,145 | 937,590 | 3,703,285 | |
| Others | 145,263 | - | 61,441 | - | 41 | 206,745 | |
| Decrease in the current year | |||||||
| Disposal, retirement and others | (144,871) | - | (876,895) | (29,828) | (413,141) | (1,464,735) | |
| Differences on translation of foreign currency financial statements | (8,107) | - | (43,891) | (811) | 28,527 | (24,282) | |
| 31 December 2023 | 11,021,688 | - | 14,392,577 | 621,224 | 5,113,872 | 31,149,361 | |
| Provision for impairment | |||||||
| 31 December 2022 | 9,425 | 5,365 | 12,238 | 20,891 | 7,603 | 55,522 | |
| Increase in the current year | |||||||
| Provision | 9,978 | - | 20,555 | - | 3,417 | 33,950 | |
| Decrease in the current year | |||||||
| Disposal, retirement and others | - | - | (2,449) | - | (1,991) | (4,440) | |
| Differences on translation of foreign currency financial statements | (94) | (147) | (7) | (3) | 141 | (110) | |
| 31 December 2023 | 19,309 | 5,218 | 30,337 | 20,888 | 9,170 | 84,922 | |
| Carrying amount | |||||||
| 31 December 2023 | 15,390,258 | 1,382,410 | 11,687,212 | 248,737 | 2,229,346 | 30,937,963 | |
| 31 December 2022 | 12,111,161 | 1,329,912 | 10,633,450 | 200,284 | 1,808,185 | 26,082,992 |
(a) In 2023, the depreciation of property, plant and equipment amounted to RMB 3,703,285,000
(2022: RMB 3,365,445,000).
(b) As at 31 December 2023, the Company was still in the course of obtaining the ownership
certificate for the property, plant and equipment with a carrying amount of RMB 854,217,000(31 December 2022: RMB 1,359,215,000).
(c) Certain property, plant and equipment were pledged as securities for bank loan facilities, as
at 31 December 2023.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 67 -
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress
| 31 December 2023 | 31 December 2022 | ||||||||||
| Book balance | Provision for impairment | Carrying amount | Book balance | Provision for impairment | Carrying amount | ||||||
| Shanghai Global Innovation Centre Project | 2,009,875 | - | 2,009,875 | 1,427,405 | - | 1,427,405 | |||||
| Midea Headquarters A08 Land Parcel Project | 749,805 | - | 749,805 | 357,612 | - | 357,612 | |||||
| Midea Digital Factory Project | 358,801 | - | 358,801 | 142,595 | - | 142,595 | |||||
| Midea Xingtan Industrial Park Project | 352,830 | - | 352,830 | 153,893 | - | 153,893 | |||||
| Gui'an Midea Cloud Project | 150,126 | - | 150,126 | 419 | - | 419 | |||||
| Innovation and Technology Park Project | 147,670 | - | 147,670 | 2,789 | - | 2,789 | |||||
| Midea Headquarters A04 Land Parcel Project | - | - | - | 147,143 | - | 147,143 | |||||
| Thailand Factories | - | - | - | 347,207 | - | 347,207 | |||||
| Welling Auto Parts Project | - | - | - | 152,457 | - | 152,457 | |||||
| Other projects | 966,692 | (54,579) | 912,113 | 1,146,399 | (34,142) | 1,112,257 | |||||
| 4,735,799 | (54,579) | 4,681,220 | 3,877,919 | (34,142) | 3,843,777 | ||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 68 -
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress (Cont'd)
(a) Movements of significant projects of construction in progress
| Increase in the current year | Transfer to property, plant and equipment in the current year | Source of funds | ||||||||||
| Differences on translation of foreign currency financial statements | ||||||||||||
| 31 December 2022 Book balance | Other decreases | 31 December 2023 Book balance | ||||||||||
| Shanghai Global Innovation Centre Project | 1,427,405 | 582,470 | - | - | - | 2,009,875 | Self-financing | |||||
| Midea Headquarters A08 Land Parcel Project | 357,612 | 392,193 | - | - | - | 749,805 | Self-financing | |||||
| Midea Digital Factory Project | 142,595 | 216,206 | - | - | - | 358,801 | Borrowings /Self-financing | |||||
| Midea Xingtan Industrial Park Project | 153,893 | 198,937 | - | - | - | 352,830 | Self-financing | |||||
| Gui'an Midea Cloud Project | 419 | 149,707 | - | - | - | 150,126 | Self-financing | |||||
| Innovation and Technology Park Project | 2,789 | 144,881 | - | - | - | 147,670 | Self-financing | |||||
| Midea Headquarters A04 Land Parcel Project | 147,143 | 104,116 | (251,259) | - | - | - | Self-financing | |||||
| Thailand Factories | 347,207 | 20,929 | (372,264) | - | 4,128 | - | Self-financing | |||||
| Welling Auto Parts Project | 152,457 | 77,000 | (229,457) | - | - | - | Self-financing | |||||
| Smart Energy Industrial Park Project | - | 1,445,198 | (1,445,198) | - | - | - | Self-financing | |||||
| Other projects | 1,146,399 | 1,055,211 | (1,168,434) | (63,637) | (2,847) | 966,692 | Self-financing | |||||
| 3,877,919 | 4,386,848 | (3,466,612) | (63,637) | 1,281 | 4,735,799 |
(i) As at 31 December 2023 and December 31 2022, the cost of construction in progress matched the budget amount, and the projects were carried
out on schedule.
(ii) In current year, the Group’s self-constructed plants were transferred to property, plant and equipment upon completion and acceptance and when
ready for their intended use; and the purchased machinery and equipment were transferred to property, plant and equipment when they met thedesign requirements and were ready for their intended use after installation, commissioning and acceptance.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 69 -
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 2022 | 3,542,397 | 292,273 | 121,807 | 3,956,477 |
| Increase in the current year | ||||
| New lease contracts | 1,994,030 | 129,722 | 48,773 | 2,172,525 |
| Lease modifications and others | 62,089 | 32,619 | 17,397 | 112,105 |
| Decrease in the current year | ||||
| Expiration of lease contract | (728,458) | (84,936) | (26,261) | (839,655) |
| Lease modifications and others | (291,619) | (24,230) | (15,634) | (331,483) |
| Differences on translation of foreign currency financial statements | 45,102 | 12,302 | 431 | 57,835 |
| 31 December 2023 | 4,623,541 | 357,750 | 146,513 | 5,127,804 |
| Accumulated depreciation | ||||
| 31 December 2022 | 1,391,933 | 189,696 | 34,970 | 1,616,599 |
| Increase in the current year | ||||
| Provision | 1,184,933 | 100,928 | 54,913 | 1,340,774 |
| Decrease in the current year | ||||
| Expiration of lease contract | (728,458) | (84,936) | (26,261) | (839,655) |
| Lease modifications and others | (51,303) | (13,091) | (1,006) | (65,400) |
| Differences on translation of foreign currency financial statements | 19,960 | 6,466 | 275 | 26,701 |
| 31 December 2023 | 1,817,065 | 199,063 | 62,891 | 2,079,019 |
| Carrying amount | ||||
| 31 December 2023 | 2,806,476 | 158,687 | 83,622 | 3,048,785 |
| 31 December 2022 | 2,150,464 | 102,577 | 86,837 | 2,339,878 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 70 -
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 2022 | 7,623,704 | 3,232,374 | 4,894,654 | 2,188,283 | 5,841,999 | 23,781,014 | ||||
| Increase in the current year | ||||||||||
| Purchase | 200,757 | 4,971 | - | 214 | 108,227 | 314,169 | ||||
| Increase by business combinations | 539,226 | 1,131,085 | - | - | 388,810 | 2,059,121 | ||||
| Others | 19,900 | - | - | - | 272,154 | 292,054 | ||||
| Decrease in the current year | ||||||||||
| Disposal and others | (181,999) | (13,616) | - | - | (511,011) | (706,626) | ||||
| Differences on translation of foreign currency financial statements | (6,357) | 60,689 | 221,783 | (63,091) | 308,364 | 521,388 | ||||
| 31 December 2023 | 8,195,231 | 4,415,503 | 5,116,437 | 2,125,406 | 6,408,543 | 26,261,120 | ||||
| Accumulated amortisation | ||||||||||
| 31 December 2022 | 1,278,249 | 1,172,588 | 219,885 | 383,604 | 3,589,984 | 6,644,310 | ||||
| Increase in the current year | ||||||||||
| Provision | 164,023 | 295,578 | 66,969 | 52,334 | 589,146 | 1,168,050 | ||||
| Others | 6,865 | - | - | - | - | 6,865 | ||||
| Decrease in the current year | ||||||||||
| Disposal and others | (13,949) | (12,840) | - | - | (479,789) | (506,578) | ||||
| Differences on translation of foreign currency financial statements | (255) | 38,160 | 1,683 | (5,510) | 197,770 | 231,848 | ||||
| 31 December 2023 | 1,434,933 | 1,493,486 | 288,537 | 430,428 | 3,897,111 | 7,544,495 | ||||
| Provision for impairment | ||||||||||
| 31 December 2022 | - | 107,427 | - | - | 120,362 | 227,789 | ||||
| Increase in the current year | ||||||||||
| Provision | - | - | - | - | 25,642 | 25,642 | ||||
| Decrease in the current year | ||||||||||
| Disposal and others | - | - | - | - | - | - | ||||
| Differences on translation of foreign currency financial statements | - | (405) | - | - | 5,863 | 5,458 | ||||
| 31 December 2023 | - | 107,022 | - | - | 151,867 | 258,889 | ||||
| Carrying amount | ||||||||||
| 31 December 2023 | 6,760,298 | 2,814,995 | 4,827,900 | 1,694,978 | 2,359,565 | 18,457,736 | ||||
| 31 December 2022 | 6,345,455 | 1,952,359 | 4,674,769 | 1,804,679 | 2,131,653 | 16,908,915 |
(a) In 2023, the amortisation of intangible assets amounted to RMB1,168,050,000 (2022:
RMB1,016,824,000).
(b) As at 31 December 2023, There was no intangible assets without the certificate of title(31
December 2022: RMB 33,814,900).
(c) Certain intangible assets were pledged as securities for bank loan facilities as at 31
December 2023.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 71 -
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 2023,and the allocation is as follows:
| 31 December 2023 | 31 December 2022 | |||
| Goodwill - | ||||
| KUKA Group | 22,364,486 | 21,122,932 | ||
| TLSC Group | 2,338,037 | 2,437,914 | ||
| Little Swan | 1,361,306 | 1,361,306 | ||
| Others | 5,327,237 | 4,149,906 | ||
| 31,391,066 | 29,072,058 | |||
| Less: Provision for impairment | (532,829) | (523,405) | ||
| 30,858,237 | 28,548,653 |
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 2023, the recoverable amount of cash generating unit or cashgenerating units with goodwill was calculated using discounted future cash flows determinedaccording to the budget approved by management (the forecast period is 5 to 6 years). Thefuture cash flows beyond the forecast period are calculated based on the estimatedperpetual annual growth rates. The perpetual annual growth rates (mainly 1%-2%) appliedby management are consistent with the estimates of the industry, and do not exceed thelong-term average growth rates of each product. Management determines forecast periodrevenue annual growth rates (mainly 2.89%-15.43%) and gross margins (mainly 22.79%-
34.17%) based on past experience and forecast on future market development. The pre-taxdiscount rates (mainly 10.73%-14.92%) used by management are the pre-tax rates that areable to reflect the risks specific to the related cash generating unit or cash generating units.Management analyses the recoverable amount of each cash generating unit or cashgenerating units based on these assumptions and considers that no further provision forimpairment is necessary for the goodwill.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 72 -
4 Notes to the consolidated financial statements (Cont’d)
(22) Long-term prepaid expenses
Long-term prepaid expenses mainly include expenses prepaid for software and projectreconstruction.
(23) Deferred tax assets and deferred tax liabilities
(a) Deferred tax assets before offsetting
| 31 December 2023 | 31 December 2022 | |||||||
| Deductible temporary differences and deductible losses | Deferred tax assets | Deductible temporary differences and deductible losses | Deferred tax assets | |||||
| Deductible losses | 10,350,251 | 2,126,566 | 6,424,498 | 1,500,622 | ||||
| Provision for asset impairment | 4,706,740 | 1,038,938 | 3,562,556 | 753,511 | ||||
| Employee benefits payable | 1,065,764 | 213,045 | 931,503 | 190,398 | ||||
| Other current liabilities | 41,533,600 | 7,386,896 | 35,502,379 | 6,534,476 | ||||
| Others | 16,388,482 | 3,915,192 | 14,889,531 | 3,233,559 | ||||
| 74,044,837 | 14,680,637 | 61,310,467 | 12,212,566 | |||||
| Including: | ||||||||
| Expected to be recovered within 1 year (inclusive) | 10,595,710 | 8,754,919 | ||||||
| Expected to be recovered after 1 year | 4,084,927 | 3,457,647 | ||||||
| 14,680,637 | 12,212,566 | |||||||
(b) Deferred tax liabilities before offsetting
| 31 December 2023 | 31 December 2022 | |||||||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |||||
| Changes in fair value | 982,749 | 202,257 | 1,043,209 | 236,440 | ||||
| Business combinations involving enterprises not under common control | 12,819,515 | 3,124,747 | 10,898,558 | 2,921,290 | ||||
| Others | 21,591,963 | 3,680,763 | 16,872,927 | 3,458,213 | ||||
| 35,394,227 | 7,007,767 | 28,814,694 | 6,615,943 | |||||
| Including: | ||||||||
| Expected to be recovered within 1 year (inclusive) | 1,159,024 | 1,221,941 | ||||||
| Expected to be recovered after 1 year | 5,848,743 | 5,394,002 | ||||||
| 7,007,767 | 6,615,943 | |||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 73 -
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:
| 31 December 2023 | 31 December 2022 | |||
| Balance after offsetting | Balance after offsetting | |||
| Deferred tax assets | 12,771,150 | 10,244,296 | ||
| Deferred tax liabilities | 5,098,280 | 4,647,673 |
(d) As at 31 December 2023, the amount of deductible temporary differences and tax losses
not unrecognised deferred tax assets of the Group were approximately RMB15,190,667,000.
(e) Tax losses not recognised deferred tax assets can be carried forward to future years, with
an amount of approximately RMB 264,348,000 expected to expire within one year,approximately RMB 495,325,000 to expire within one to two years, approximately RMB702,361,000 to expire within two to three years, approximately RMB 991,896,000 to expirewithin three to four years, and approximately RMB 11,044,420,000 to expire after four years.
(24) Other non-current assets
| 31 December 2023 | 31 December 2022 | ||
| Fixed-income products (a) | 84,538,948 | 73,157,118 | |
| Others | 1,482,139 | 807,372 | |
| Less: Fixed-income products due within 1 year (Note 4(11)) | (5,417,561) | (31,124,411) | |
| 80,603,526 | 42,840,079 |
(a) As at 31 December 2023 and 31 December 2022, fixed-income products were fixed
deposits, monetary investment products and certificate of deposit deposited in financialinstitutions with maturities of more than 1 year at the time of acquisition, which weresubsequently measured at amortised cost.
(b) Certain fixed-income products were pledged for bank loan facilities as at 31 December 2023.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 74 -
4 Notes to the consolidated financial statements (Cont’d)
(25) Asset impairment and provision for loss
| Increase in the current year | Decrease in the current year | ||||||||||||
| 31 December 2022 | Reversal | Write-off | Differences on translation of foreign currency financial statements and others | 31 December 2023 | |||||||||
| Provision for bad debts | 1,905,082 | 785,606 | (586,982) | (89,510) | 64,120 | 2,078,316 | |||||||
| Less: Provision for bad debts of accounts receivable | 1,332,609 | 571,890 | (384,196) | (75,948) | 38,366 | 1,482,721 | |||||||
| Provision for losses of loan receivables | 463,929 | 44,273 | (170,274) | (9,466) | 28,293 | 356,755 | |||||||
| Provision for bad debts of notes receivable | 61,756 | 22,472 | (18,626) | - | - | 65,602 | |||||||
| Provision for bad debts of other receivables | 38,009 | 35,940 | (12,910) | (4,096) | (5,226) | 51,717 | |||||||
| Provision for bad debts of long-term receivables | 8,779 | 111,031 | (976) | - | 2,687 | 121,521 | |||||||
| Provision for decline in the value of inventories | 699,368 | 335,401 | (10,025) | (340,971) | 13,758 | 697,531 | |||||||
| Provision for impairment of property, plant and equipment | 55,522 | 33,950 | - | (4,440) | (110) | 84,922 | |||||||
| Provision for impairment of intangible assets | 227,789 | 25,642 | - | - | 5,458 | 258,889 | |||||||
| Provision for impairment of contract assets | 73,221 | 47,814 | (11,436) | - | 7,743 | 117,342 | |||||||
| Provision for impairment of investment properties | 12,576 | - | - | - | - | 12,576 | |||||||
| Provision for impairment of construction in progress | 34,142 | 18,431 | - | - | 2,006 | 54,579 | |||||||
| Provision for impairment of goodwill | 523,405 | - | - | - | 9,424 | 532,829 | |||||||
| 3,531,105 | 1,246,844 | (608,443) | (434,921) | 102,399 | 3,836,984 | ||||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 75 -
4 Notes to the consolidated financial statements (Cont’d)
(26) Assets with use rights restricted
As at 31 December 2023 and 31 December 2022, assets with use rights restricted weremainly as follows:
| 31 December 2023 | 31 December 2022 | |||
| Cash at bank and on hand | ||||
| Including: Cash at bank (Note 4(1)) | 16,848,494 | 1,911,210 | ||
| Other cash balances (Note 4(1)) | 4,072,963 | 1,688,278 | ||
| Statutory reserve with the Central Bank (Note 4(1)) | 415,070 | 328,409 | ||
| 21,336,527 | 3,927,897 |
(27) Short-term borrowings
| 31 December 2023 | 31 December 2022 | |||
| Unsecured borrowings | 4,681,574 | 3,192,163 | ||
| Guaranteed borrowings | 1,083,216 | 1,399,219 | ||
| Pledged and mortgage borrowings | 3,054,386 | 578,098 | ||
| 8,819,176 | 5,169,480 |
As at 31 December 2023, the Group had no overdue short-term borrowings with annualinterest rates ranging from 2.20% to 7.04% (31 December 2022: 1.40% to 15.45%).
(28) Financial liabilities held for trading
As at 31 December 2023, 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 2023 | 31 December 2022 | |||
| Banker's Acceptance | 21,626,514 | 25,572,421 | ||
| Trade Acceptance | 81,094 | |||
| 21,707,608 | 25,572,421 |
As at 31 December 2023, the Group had no matured but unpaid notes receivable (31December 2022: Nil).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 76 -
4 Notes to the consolidated financial statements (Cont’d)
(30) Accounts payable
| 31 December 2023 | 31 December 2022 | |||
| Payables for purchase of goods and services | 67,091,595 | 59,880,772 | ||
| Others | 5,438,870 | 4,352,453 | ||
| 72,530,465 | 64,233,225 |
As at 31 December 2023, accounts payable with ageing over 1 year with a carrying amountof RMB 1,672,797,000 (31 December 2022: RMB 1,168,348,000) were mainly unsettledaccounts payable for materials.
(31) Contract liabilities
| 31 December 2023 | 31 December 2022 | |||
| Advances on sales and services | 38,549,278 | 25,143,337 | ||
| Advances for construction projects | 3,216,197 | 2,816,701 | ||
| 41,765,475 | 27,960,038 | |||
| More than 90% of contract liabilities included in the carrying amount as at 31 December 2022 were transferred to operating revenue in 2023. | ||||
| As disclosed in Note 5(1), due to business combinations involving entities not under common control in the current year, the amount of contract liabilities increased by RMB 1,078,665,000. More than 90% of the contract liabilities had been transferred to operating income in 2023. |
(32) Employee benefits payable
| 31 December 2023 | 31 December 2022 | |||
| Short-term employee benefits payable (a) | 8,972,512 | 7,041,973 | ||
| Others | 103,515 | 110,244 | ||
| 9,076,027 | 7,152,217 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 77 -
4 Notes to the consolidated financial statements (Cont’d)
(32) Employee benefits payable (Cont’d)
(a) Short-term employee benefits
| Increase in the current year | Decrease in the current year | |||||||
| 31 December 2022 | 31 December 2023 | |||||||
| Wages and salaries, bonus, allowances and subsidies | 6,539,923 | 33,546,497 | (31,751,302) | 8,335,118 | ||||
| Staff welfare | 326,811 | 2,152,907 | (2,063,183) | 416,535 | ||||
| Social security contributions | 79,340 | 2,229,097 | (2,220,761) | 87,676 | ||||
| Including: Medical insurance | 78,163 | 2,141,044 | (2,132,446) | 86,761 | ||||
| Work injury insurance | 778 | 61,140 | (61,536) | 382 | ||||
| Maternity insurance | 399 | 26,913 | (26,779) | 533 | ||||
| Housing funds | 25,687 | 798,695 | (805,364) | 19,018 | ||||
| Labour union funds and employee education funds | 22,002 | 178,277 | (175,341) | 24,938 | ||||
| Other short-term employee benefits | 48,210 | 980,540 | (939,523) | 89,227 | ||||
| 7,041,973 | 39,886,013 | (37,955,474) | 8,972,512 |
(33) Taxes payable
| 31 December 2023 | 31 December 2022 | |||
| Enterprise income tax payable | 3,477,253 | 2,813,522 | ||
| Unpaid VAT | 1,082,424 | 975,035 | ||
| Others | 895,425 | 1,166,778 | ||
| 5,455,102 | 4,955,335 |
(34) Other payables
| 31 December 2023 | 31 December 2022 | ||
| Other payables | 4,442,928 | 4,322,025 |
(a) Other payables are mainly restricted share repurchase obligation, deposit and security
deposit payable and reimbursed logistics expense.
(b) As at 31 December 2023, other payables with ageing over 1 year with a carrying amount of
RMB 1,305,955,000 (31 December 2022: RMB 1,538,928,000) were mainly thoserecognised for performing equity incentive plan and deposit and security deposit payable,which were unsettled since related projects were uncompleted.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 78 -
4 Notes to the consolidated financial statements (Cont’d)
(35) Current portion of non-current liabilities
| 31 December 2023 | 31 December 2022 | |||
| Current portion of long-term borrowings (Note 4(37)) | 13,290,809 | 6,248,484 | ||
| Current portion of lease liabilities (Note 4(39)) | 1,166,901 | 992,142 | ||
| 14,457,710 | 7,240,626 |
(36) Other current liabilities
| 31 December 2023 | 31 December 2022 | ||||
| Accrued sale rebates | 48,311,934 | 40,041,953 | |||
| Others | 22,985,994 | 17,801,575 | |||
| 71,297,928 | 57,843,528 |
(37) Long-term borrowings
| 31 December 2023 | 31 December 2022 | |||
| Guaranteed borrowings (a) | 36,013,250 | 35,063,239 | ||
| Unsecured borrowings | 23,223,556 | 21,860,438 | ||
| Pledged and mortgage borrowings | 192,739 | 10,755 | ||
| 59,429,545 | 56,934,432 | |||
| Less: Current portion of guaranteed borrowings | (6,631,136) | - | ||
| Current portion of unsecured borrowings | (6,619,900) | (6,237,729) | ||
| Current portion of pledged and mortgage borrowings | (39,773) | (10,755) | ||
| 46,138,736 | 50,685,948 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 79 -
4 Notes to the consolidated financial statements (Cont’d)
(37) Long-term borrowings (Cont'd)
(a) As at 31 December 2023, bank guaranteed borrowings mainly included: (i) guaranteed
borrowings equivalent to RMB 2,129,843,000 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 4,490,432,000 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 1,185,644,000 guaranteed by theCompany, interest is calculated at a floating rate with interest paid every month, which willbe due in June 2025; and (iv) After deducting the bank fee, guaranteed borrowingsequivalent to RMB 24,157,339,000 guaranteed by the Company, interest is calculated at afloating rate with interest paid every quarter, which will be due in August 2025. (v)3,929,600,000 guaranteed by the Company, interest is calculated at a fixed rate with interestpaid every quarter, which will be due in May 2025
As at 31 December 2022, bank guaranteed borrowings mainly included: (i) guaranteedborrowings equivalent to RMB 2,011,606,000 guaranteed by the Company, interest iscalculated at a fixed rate with interest paid every quarter, which will be due in April 2024; (ii)guaranteed borrowings equivalent to RMB 4,415,556,000 guaranteed by the Company,interest is calculated at a floating rate with interest paid every month, which will be due 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.
(b) As at 31 December 2023, the Group had no overdue long-term borrowings with annual
interest rates mainly ranging from 0.30% to 4.50% (31 December 2022: 0.30% to 5.99%).
(c) In 2022, the Group purchased cross-currency interest rate swap to mitigate the cash flow
risk associated with the above-mentioned guaranteed borrowings ((a)(iv)) equivalent to USD3,419,058,000 of principal. Under the swap, a nominal amount of USD 3,419,058,000 wasconverted into EUR at an agreed exchange rate, and the USD floating rate (SOFR+0.55%p.a.) was converted into the agreed EUR fixed rate. The agreed swap period was scheduledto start in August 2022 and end in August 2025. The Group designated such borrowings asthe hedged item, and the change in the value of cross-currency interest rate swap (afterexcluding the foreign currency basis spread) as the hedging instrument for cash flow hedge.There was an economic relationship between the hedging instrument and the hedged item.The cross-currency interest rate swap matched the currency, amount and other major termsof financial liabilities denominated in USD.
In 2023, 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(45)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 80 -
4 Notes to the consolidated financial statements (Cont’d)
(38) Debentures payable
| 31 December 2022 | Business combination | Interest accrued on par value | Amortisation of premium/discount | Repayment in the current year | Differences on translation of foreign currency financial statements | 31 December 2023 | |||||||
| Debentures denominated in USD (a) | 3,163,616 | 91,309 | 704 | (89,177) | 51,517 | 3,217,969 | |||||||
| Corporate bonds in 2022 (b) | - | 522,497 | 5,500 | 2,003 | (530,000) | - | - | ||||||
| 3,163,616 | 522,497 | 96,809 | 2,707 | (619,177) | 51,517 | 3,217,969 |
| (a) | The information of debentures is as follows: | ||||||||||||
| Par value | Nominal interest rate | Issuance date | Maturity | Issuance amount | Default or not | ||||||||
| Debentures denominated in USD | 2,848,500 | 2.88% | 16 February 2022 | 5 years | 2,848,500 | No | |||||||
| 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. |
| (b) | The information of debentures is as follows: | ||||||||||||
| Par value | Nominal interest rate | Issuance date | Maturity | Issuance amount | Default or not | ||||||||
| Corporate bonds in 2022 | 500,000 | 6.00% | 5 August 2022 | 2 years | 500,000 | No | |||||||
| This bond is a corporate bond issued by Clou Electronics Co., Ltd., subsidiary of the Company. The interest of such bond was calculated by adopting the simple interest method on an annual basis at an annual coupon rate of 6.00%, payable annually. The bond was redeemed in advance on 7 August 2023. |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 81 -
4 Notes to the consolidated financial statements (Cont’d)
| (39) | Lease liabilities |
| 31 December 2023 | 31 December 2022 | ||||
| Lease liabilities | 3,214,220 | 2,499,622 | |||
| Less: Current portion of non-current liabilities (Note 4(35)) | (1,166,901) | (992,142) | |||
| 2,047,319 | 1,507,480 |
(i) As at 31 December 2023, the future minimum lease payments of short-term leases and low
value asset leases adopting the practical expedient totalled RMB 123,890,000 (31December 2022: RMB 151,531,000) which should be paid within one year.
(40) Deferred income
| 31 December 2022 | Increase in the current year | Decrease in the current year | 31 December 2023 | |||||
| Government grants | 1,721,092 | 220,391 | (206,551) | 1,734,932 |
| 31 December 2022 | Increase in the current year | Decrease in the current year | 31 December 2023 | |||||
| Government grants related to industrial upgrading | 1,394,882 | 164,746 | (160,335) | 1,399,293 | ||||
| Other government grants | 326,210 | 55,645 | (46,216) | 335,639 | ||||
| 1,721,092 | 220,391 | (206,551) | 1,734,932 |
(41) Long-term employee benefits payable
| 31 December 2023 | 31 December 2022 | |||
| Supplementary retirement benefits (a) | 1,302,495 | 1,368,513 | ||
| Others | 131,379 | 119,943 | ||
| 1,433,874 | 1,488,456 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 82 -
4 Notes to the consolidated financial statements (Cont’d)
(41) Long-term employee benefits payable (Cont’d)
(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 2023 | 31 December 2022 | |||
| Defined benefit obligation | 3,208,084 | 3,209,466 | ||
| Less: Fair value of planned assets | (1,905,589) | (1,840,953) | ||
| Liabilities of defined benefit obligation | 1,302,495 | 1,368,513 |
(ii) The actuarial assumptions used to determine the present value of defined benefit obligation
| 31 December 2023 | |||
| Discount rate | 0.22%~10.00% | ||
| Inflation rate | 1.23% | ||
| Salary growth rate | 0.00%~6.20% | ||
| Pension replacement rate | 1.10%~2.50% | ||
| Early retirement rate | 0.00%~11.60% | ||
| Rate of changes in cost of medical services | 8.25% |
(42) Share capital
| Movements in the current year | ||||||||
| 31 December 2022 | Share-based payment incentive plan (a) | Desterilisation | Additional issuance | Repurchases and write-offs | Sub-total | 31 December 2023 | ||
| RMB-denominated ordinary shares subject to trading restriction | 143,615 | 18,325 | (18,383) | - | (9,994) | (10,052) | 133,563 | |
| RMB-denominated ordinary shares not subject to trading restriction | 6,853,658 | 20,165 | 18,383 | - | - | 38,548 | 6,892,206 | |
| 6,997,273 | 38,490 | - | - | (9,994) | 28,496 | 7,025,769 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 83 -
4 Notes to the consolidated financial statements (Cont’d)
(42) Share capital (Cont’d)
| 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 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 | ||
(a) In 2023, the share-based payment incentive plan increased the share capital by 38,490,000
shares (2022: 18,602,000 shares).
(43) Treasury stock
| 31 December 2022 | Increase in the current year | Decrease in the current year | 31 December 2023 | |||||
| Treasury stock used for share-based payment incentive plan | 14,933,944 | - | (2,062,206) | 12,871,738 |
| 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 |
In 2023, the Group did not repurchase treasury stock, and the restricted shares and stockownership schemes granted in 2023 were approximately RMB 2,089,493,000. As at 31December 2023, treasury stock mainly comprised treasury stock of approximately RMB8,748,331,000 used for share-based payment incentive plan, as well as restricted sharesand stock ownership schemes amounting to approximately RMB 4,123,407,000 that havenot met unlock condition, amounting to approximately RMB 12,871,738,000 in total (31December 2022: RMB 14,933,944,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 84 -
4 Notes to the consolidated financial statements (Cont’d)
(44) Capital surplus
| 31 December 2022 | Increase in the current year | Decrease in the current year | 31 December 2023 | |||||
| Share premium (a) | 15,507,577 | 3,348,091 | (1,473,445) | 17,382,223 | ||||
| Share-based payment incentive plan (b) | 2,279,108 | 1,208,095 | (1,466,598) | 2,020,605 | ||||
| Others (c) | 1,906,454 | 43,684 | (109,810) | 1,840,328 | ||||
| 19,693,139 | 4,599,870 | (3,049,853) | 21,243,156 |
| 31 December 2021 | Increase in the current year | Decrease in the current year | 31 December 2022 | |||||
| Share premium | 14,944,914 | 1,771,809 | (1,209,146) | 15,507,577 | ||||
| Share-based payment incentive plan | 2,161,354 | 983,367 | (865,613) | 2,279,108 | ||||
| Others | 3,410,662 | 41,636 | (1,545,844) | 1,906,454 | ||||
| 20,516,930 | 2,796,812 | (3,620,603) | 19,693,139 |
(a) The increase in share premium arose from the exercise of stock options with the amount of
approximately RMB 2,317,783,000, the unlocking or invalid sales of restricted shares andstock ownership schemes with the amount of approximately RMB 1,030,308,000; Thereduction in the equity premium is from the repurchase cancellation of restricted shares, therelease of restricted shares and the release or lapsed sale of stock ownership schemes.
(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 1,208,095,000, while the decrease arose from thetransfer of approximately RMB 1,466,598,000 to share premium due to exercise of share-based payment incentive plan.
(c) The decrease of others mainly included the Group’s capital contribution to the non-wholly-
owned subsidiaries of Guangdong Meicloud Technology Co., Ltd.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 85 -
4 Notes to the consolidated financial statements (Cont’d)
(45) Other comprehensive income
| Other comprehensive income in the balance sheet | Other comprehensive income in the income statement for the year ended 31 December 2023 | ||||||||||
| 31 December 2022 | Attributable to the parent company after tax | Other comprehensive income transferred to retained earnings | 31 December 2023 | 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 | 220,387 | (87,280) | - | 133,107 | (84,660) | - | (3,357) | (87,280) | (737) | ||
| Changes in fair value of investments in other equity instruments | (1,490) | 1,516 | - | 26 | (1,025) | - | - | 1,516 | (2,541) | ||
| Other comprehensive income items which will be reclassified to profit or loss | |||||||||||
| Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | (71,822) | 7,751 | - | (64,071) | 8,031 | (280) | - | 7,751 | - | ||
| Cash flow hedging reserve (Note 4(37)) | 699,961 | (135,204) | - | 564,757 | (414,173) | 286,257 | (11,794) | (135,204) | (4,506) | ||
| Differences on translation of foreign currency financial statements | (808,629) | (84,307) | - | (892,936) | (53,489) | - | - | (84,307) | 30,818 | ||
| Others (Note 4(37)) | 69,882 | 25,033 | - | 94,915 | 135,911 | (110,878) | - | 25,033 | - | ||
| 108,289 | (272,491) | - | (164,202) | (409,405) | 175,099 | (15,151) | (272,491) | 23,034 | |||
| 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 | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 86 -
4 Notes to the consolidated financial statements (Cont’d)
(46) Surplus reserve
| 31 December 2022 | 31 December 2023 | ||||
| Increase in the current year | |||||
| Statutory surplus reserve | 10,702,928 | - | 10,702,928 | ||
| 31 December 2021 | Increase in the current year | 31 December 2022 | |||
| Statutory surplus reserve | 9,449,901 | 1,253,027 | 10,702,928 |
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 the resolution of the Board ofDirectors, the Company appropriated 10% of net profit in 2022, amounting to approximatelyRMB 1,253,027,000. As at 31 December 2023, the Company’s statutory surplus reservehad reached 50% of the registered capital.
(47) Undistributed profits
| 2023 | 2022 | |||
| Undistributed profits at the beginning of the year | 119,679,202 | 102,982,763 | ||
| Add: Net profit attributable to shareholders of the parent company for the current year | 33,719,935 | 29,553,507 | ||
| Other comprehensive income transferred to retained earnings | - | (1,351) | ||
| Others | - | 1,412 | ||
| Less: Ordinary share dividends payable (a) | (17,144,264) | (11,652,025) | ||
| Appropriation to general risk reserve (b) | (19,678) | - | ||
| Reversal of general risk reserve (b) | 49,152 | 47,923 | ||
| Appropriation to statutory surplus reserve (Note 4(46)) | - | (1,253,027) | ||
| Undistributed profits at the end of the year | 136,284,347 | 119,679,202 |
(a) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of Shareholders’ meeting, dated 19 May 2023,the Company distributed a cash dividend to the shareholders at RMB 2.50 per share,amounting to approximately RMB 17,188,858,000 calculated by 6,875,543,263 issuedshares less those repurchased; 9,994,000 repurchased incentive shares in the restrictedshare incentive schemes plan were written off (Note 4(42)), and cash dividend amountingto approximately RMB 44,594,000 was cancelled. The actual cash dividend distributed inthe current year amounted to approximately RMB 17,144,264,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 87 -
4 Notes to the consolidated financial statements (Cont’d)
(47) Undistributed profits (Cont’d)
(b) General risk reserve
In 2023, according to the Notice on Strengthening the Supervision and Administration ofCommercial Factoring Enterprises issued by China Banking and Insurance RegulatoryCommission and the Administrative Measures for the Provision of Reserves of FinancialEnterprises issued by the Ministry of Finance, certain subsidiaries of the Group providedgeneral risk reserve approximately RMB 19,678,000, reversed general risk reserveamounting to approximately RMB 49,152,000 (2022: reserved general risk reserveamounting to approximately RMB 47,923,000).
(48) Operating revenue and cost of sales
| 2023 | 2022 | |||
| Revenue from main operations | 344,132,712 | 316,464,774 | ||
| Revenue from other operations | 27,904,568 | 27,452,757 | ||
| 372,037,280 | 343,917,531 | |||
| 2023 | 2022 | |||
| Cost of sales from main operations | 248,945,077 | 237,007,098 | ||
| Cost of sales from other operations | 24,536,296 | 23,531,603 | ||
| 273,481,373 | 260,538,701 |
(a) Revenue and cost of sales from main operations
| 2023 | 2022 | |||||||
| Revenue from main operations | Cost of sales from main operations | Revenue from main operations | Cost of sales from main operations | |||||
| HVAC | 161,110,843 | 119,912,866 | 150,634,586 | 116,234,025 | ||||
| Consumer appliances | 134,691,669 | 90,239,157 | 125,284,737 | 87,449,080 | ||||
| Robotics and automation system | 33,016,554 | 25,226,852 | 29,927,674 | 23,664,772 | ||||
| Others | 15,313,646 | 13,566,202 | 10,617,777 | 9,659,221 | ||||
| 344,132,712 | 248,945,077 | 316,464,774 | 237,007,098 | |||||
In 2023, 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 (2022: over 80%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 88 -
4 Notes to the consolidated financial statements (Cont’d)
(48) Operating revenue and cost of sales (Cont’d)
(b) Revenue and cost of sales from other operations
| 2023 | 2022 | |||||||
| 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 | 24,410,046 | 23,089,716 | 24,114,807 | 22,329,521 | ||||
| Others | 3,494,522 | 1,446,580 | 3,337,950 | 1,202,082 | ||||
| 27,904,568 | 24,536,296 | 27,452,757 | 23,531,603 | |||||
In 2023, cost of sales from other operations was mainly material costs, which accounted forover 80% of total cost of sales from other operations (2022: over 80%).
(c) In 2023, among the Group’s revenue from main operations, the amount recognised at a
point in time accounted for above 90% (2022: 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 main revenue fromother operations was recognised at a point in time.
(d) The Group had no significant contract changes or adjustments to transaction prices.
(49) Interest income and interest costs
The Group’s interest income and expenses arising from financial business are presented asfollows:
| 2023 | 2022 | |||
| Interest income from loan receivables | 1,435,539 | 1,614,497 | ||
| Including: Interest income from loan receivables to corporations and individuals | 1,340,766 | 1,565,168 | ||
| Interest income from note discounting | 94,773 | 49,329 | ||
| Interest income from deposits with banks, other financial institutions and the Central Bank | 236,369 | 175,957 | ||
| Interest income | 1,671,908 | 1,790,454 | ||
| Interest costs | (31,660) | (49,461) | ||
| 1,640,248 | 1,740,993 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 89 -
4 Notes to the consolidated financial statements (Cont’d)
(50) Taxes and surcharges
| 2023 | 2022 | |||
| City maintenance and construction tax | 756,551 | 543,225 | ||
| Educational surcharge | 565,534 | 406,480 | ||
| Others | 494,417 | 616,179 | ||
| 1,816,502 | 1,565,884 |
(51) Selling and distribution expenses
| 2023 | 2022 | |||
| Selling and distribution expenses | 34,880,875 | 28,716,121 |
In 2023, selling and distribution expenses were mainly advertisement and promotion fee,after-sale services expenses, employee benefits, E-commerce service fee, storage servicefee and property management expenses, which accounted for over 80% of total selling anddistribution expenses (2022: over 80%).
(52) General and administrative expenses
| 2023 | 2022 | |||
| General and administrative expenses | 13,476,908 | 11,582,664 |
In 2023, general and administrative expenses were mainly employee benefits, depreciationand amortisation expenses, technical maintenance expenses, administrative officeexpenses, which accounted for over 80% of total general and administrative expenses (2022:
over 80%).
(53) R&D expenses
| 2023 | 2022 | |||
| R&D expenses | 14,583,311 | 12,618,506 |
In 2023, 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 (2022: over 90%).
In 2023, 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, advertisement and promotion fee, which accounted for over 80% of totalcost of sales, selling and distribution expenses, general and administrative expenses andR&D expenses (2022: over 80%)
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 90 -
4 Notes to the consolidated financial statements (Cont’d)
(54) Financial income
The Group’s financial income, other than those arising from financial business (Note 4(49)),are presented as follows:
| 2023 | 2022 | |||
| Interest expenses (a) | (2,808,104) | (1,830,915) | ||
| Less: Interest income | 6,951,446 | 5,837,713 | ||
| Exchange gains or losses | (904,738) | (507,081) | ||
| Others | 23,052 | (112,226) | ||
| 3,261,656 | 3,387,491 |
(a) In 2023, interest costs on lease liabilities of the Group amounted to approximately RMB
151,334,000 (2022: RMB 111,773,000).
(55) Asset impairment losses
| 2023 | 2022 | |||
| Losses on decline in the value of inventories (Note 4(10)) | 325,376 | 448,591 | ||
| Impairment losses on intangible assets (Note 4(20)) | 25,642 | 48,593 | ||
| Impairment losses on contract assets | 36,378 | 24,422 | ||
| Impairment losses on property, plant and equipment (Note 4(17)) | 33,950 | 5,578 | ||
| Impairment losses on construction in progress (Note 4(18)) | 18,431 | - | ||
| Impairment losses of long-term equity investments | - | 6,179 | ||
| 439,777 | 533,363 |
(56) Reversal of credit impairment
| 2023 | 2022 | |||
| Losses on bad debts of accounts receivable (Note 4(4)) | 187,694 | 475,357 | ||
| Losses on/(Reversal of) bad debts of other receivables (Note 4(5)) | 23,030 | (2,776) | ||
| Losses on bad debts of notes receivable (Note 4(3)) | 3,846 | 30,132 | ||
| (Reversal of)/Losses on Impairment of loan receivables (Note 4(9)) | (126,001) | 11,202 | ||
| Losses on/(Reversal of)/ impairment of long-term receivables (Note 4(14)) | 110,055 | (229) | ||
| 198,624 | 513,686 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 91 -
4 Notes to the consolidated financial statements (Cont’d)
(57) Losses on changes in fair value
| 2023 | 2022 | |||
| Derivative financial instruments | 161,457 | (815,922) | ||
| Structural deposits | 6,300 | 44,562 | ||
| Investments in equity instruments | 58,735 | 1,022,531 | ||
| 226,492 | 251,171 |
(58) Investment income
| 2023 | 2022 | |||
| Share of profit of associates and joint ventures | 680,759 | 608,278 | ||
| Investment income from holding of financial assets held for trading | 213,095 | 167,002 | ||
| Investment losses from disposal of derivative financial assets and liabilities | (356,081) | (519,923) | ||
| Others (b) | (74,212) | (47,303) | ||
| 463,561 | 208,054 |
(a) There is no significant restriction on recovery of investment income of the Group.
| (b) | Others mainly included gains/losses from disposal the long-term equity investments, losses on discounted notes receivable that have been derecognised(Note 4(3)(b),) and deem disposal gains arising from the remeasurement of a associate at fair value when the associate become a subsidiary. |
(59) Losses on disposal of assets
| 2023 | 2022 | |||
| Gains on disposal of non-current assets | 100,775 | 72,397 | ||
| Losses on disposal of non-current assets | (161,643) | (132,251) | ||
| (60,868) | (59,854) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 92 -
4 Notes to the consolidated financial statements (Cont’d)
(60) Other income
| 2023 | 2022 | |||
| Special subsidy | 1,831,461 | 1,896,113 | ||
| Additional deduction of input VAT | 250,921 | - | ||
| 2,082,382 | 1,896,113 |
(61) Income tax expenses
| 2023 | 2022 | |||
| Current income tax calculated based on tax law and related regulations | 8,474,651 | 7,500,259 | ||
| Deferred income tax | (1,942,840) | (2,354,559) | ||
| 6,531,811 | 5,145,700 |
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:
| 2023 | 2022 | |||
| Total profit | 40,277,163 | 34,955,931 | ||
| Income tax calculated at tax rate of 25% | 10,069,291 | 8,738,983 | ||
| Effect of different tax rates applicable to subsidiaries | (2,932,107) | (2,302,968) | ||
| Effect of income tax annual filing for prior periods | 36,833 | (45,762) | ||
| Income not subject to tax | (387,848) | (544,607) | ||
| Costs, expenses and losses not deductible for tax purposes | 642,991 | 486,777 | ||
| Utilisation of previous temporary differences or deductible losses for which no deferred tax assets were recognised in prior periods | (304,850) | (106,106) | ||
| Others | (592,499) | (1,080,617) | ||
| Income tax expenses | 6,531,811 | 5,145,700 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 93 -
4 Notes to the consolidated financial statements (Cont’d)
(62) 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 | 2023 | 2022 | |||
| Consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 33,719,935 | 29,553,507 | ||
| Less: Dividends payable to restricted shares | RMB’000 | (66,155) | (63,556) | ||
| 33,653,780 | 29,489,951 | ||||
| Weighted average number of outstanding ordinary shares | Thousand shares | 6,824,100 | 6,790,926 | ||
| Basic earnings per share | RMB Yuan/share | 4.93 | 4.34 | ||
| Including: | |||||
| - Basic earnings per share from continuing operations: | 4.93 | 4.34 | |||
| - Basic earnings per share for discontinued operations: | - | - |
(b) Diluted earnings per share
Diluted earnings per share are calculated by dividing consolidated net profit attributable toordinary shareholders of the parent company by the diluted weighted average number ofoutstanding ordinary shares:
| Unit | 2023 | 2022 | |||
| Adjusted consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 33,712,852 | 29,553,248 | ||
| Weighted average number of outstanding ordinary shares | Thousand shares | 6,824,100 | 6,790,926 | ||
| Weighted average number of ordinary shares increased from share-based payment | Thousand shares | 25,141 | 28,297 | ||
| Weighted average number of diluted outstanding ordinary shares | Thousand shares | 6,849,241 | 6,819,223 | ||
| Diluted earnings per share | RMB Yuan/share | 4.92 | 4.33 |
(63) Notes to the cash flow statement
| The significant cash flow items are presented as follows: |
(a) Cash received relating to other operating activities
| 2023 | 2022 | |||
| Revenue from other operations | 3,303,721 | 3,190,182 | ||
| Other income | 2,705,256 | 2,566,471 | ||
| Financial income - interest income | 997,711 | 765,716 | ||
| Non-operating income | 369,337 | 378,645 | ||
| Others | 345,727 | 394,943 | ||
| 7,721,752 | 7,295,957 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 94 -
4 Notes to the consolidated financial statements (Cont’d)
(63) Notes to the cash flow statement (Cont’d)
(b) Cash paid relating to other operating activities
| 2023 | 2022 | |||
| Selling and distribution expenses (excluding employee benefits and taxes and surcharges) | 25,907,963 | 22,884,362 | ||
| General and administrative expenses and R&D expenses (excluding employee benefits and taxes and surcharges) | 10,464,563 | 10,504,557 | ||
| Others | 4,561,853 | 1,076,588 | ||
| 40,934,379 | 34,465,507 |
| (c) | Cash received from disposal of investments | |||
| 2023 | 2022 | |||
| Cash received from disposal of wealth management products and fixed deposits | 97,988,091 | 87,932,257 | ||
| Cash received from disposal of financial assets held for trading | 17,664,542 | 10,481,901 | ||
| Others | 422,060 | 150,558 | ||
| 116,074,693 | 98,564,716 | |||
| (d) | Cash paid to acquire investments | |||
| 2023 | 2022 | |||
| Cash paid for wealth management products and fixed deposits | 131,537,892 | 99,924,986 | ||
| Cash paid for financial assets held for trading | 15,439,694 | 7,930,989 | ||
| Others | 20,588 | 293,220 | ||
| 146,998,174 | 108,149,195 | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 95 -
4 Notes to the consolidated financial statements (Cont’d)
(63) Notes to the cash flow statement (Cont’d)
(e) Cash paid relating to other financing activities
| 2023 | 2022 | |||
| Payment of lease liabilities | 1,553,852 | 1,198,421 | ||
| Restricted share repurchase obligation | 257,576 | 194,524 | ||
| Acquisition of minority interests | 36,357 | 2,773,676 | ||
| Repurchase of outstanding shares | - | 2,637,021 | ||
| Others | 416,091 | 129,877 | ||
| 2,263,876 | 6,933,519 |
| (f) | Movements in liabilities arising from financing activities |
| Bank borrowings and others (including the current portion) | Debentures payable (including the current portion) | Lease liabilities (including the current portion) | Total | |||||
| 31 December 2022 | 62,350,510 | 3,163,616 | 2,499,622 | 68,013,748 | ||||
| Net cash flows from financing activities | 1,274,059 | (500,000) | (1,430,001) | (655,942) | ||||
| Interest on borrowings paid in the current year | (2,002,477) | (119,177) | - | (2,121,654) | ||||
| The impact of combinations | 3,425,076 | 522,497 | 56,876 | 4,004,449 | ||||
| Interest accrued in the current year | 2,559,961 | 96,809 | 151,334 | 2,808,104 | ||||
| Other non-cash changes (i) | 880,697 | 54,224 | 1,936,389 | 2,871,310 | ||||
| 31 December 2023 | 68,487,826 | 3,217,969 | 3,214,220 | 74,920,015 |
(i) Other non-cash changes mainly include differences on translation of foreign currency
financial statements of borrowings in 2023, as well as lease liabilities arising from new leasecontracts.
| (g) | Non-cash receipts and payments | |||
| 2023 | 2022 | |||
| Purchase of inventories and long-term assets in bank acceptance notes | 65,413,361 | 55,682,577 | ||
| Increase in right-of-use assets | 2,284,630 | 1,273,326 | ||
| 67,697,991 | 56,955,903 | |||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 96 -
4 Notes to the consolidated financial statements (Cont’d)
(63) Notes to the cash flow statement (Cont’d)
(h) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flows from operating activities is as follows:
| 2023 | 2022 | |||
| Net profit | 33,745,352 | 29,810,231 | ||
| Add: Asset impairment losses | 439,777 | 533,363 | ||
| Credit impairment losses | 198,624 | 513,686 | ||
| Depreciation and amortisation | 7,348,921 | 6,507,920 | ||
| Losses on disposal of assets | 60,868 | 59,854 | ||
| Losses on changes in fair value | 226,492 | 251,171 | ||
| Financial income | (3,134,637) | (3,226,913) | ||
| Investment income | (463,561) | (208,054) | ||
| Increase in deferred tax assets | (1,865,724) | (1,896,424) | ||
| Decrease in deferred tax liabilities | (65,601) | (424,557) | ||
| Decrease/(Increase) in inventories | 206,064 | (423,933) | ||
| Increase in operating receivables | (9,747,941) | (19,423,895) | ||
| Increase in operating payables | 29,692,141 | 21,556,429 | ||
| Share-based payments and others | 1,261,836 | 1,028,950 | ||
| Net cash flows from operating activities | 57,902,611 | 34,657,828 | ||
| Net increase/(decrease) in cash and cash equivalents: | ||||
| Cash and cash equivalents at the end of the year | 59,887,260 | 51,131,968 | ||
| Less: Cash and cash equivalents at the beginning of the year | (51,131,968) | (40,550,039) | ||
| Net increase in cash and cash equivalents | 8,755,292 | 10,581,929 |
(i) Composition of cash and cash equivalents
| 31 December 2023 | 31 December 2022 | |||
| Cash on hand | 1,603 | 1,645 | ||
| Cash at bank that can be readily drawn on demand | 27,673,419 | 26,670,319 | ||
| Deposits with the Central Bank that can be readily drawn on demand | 147,971 | 172,394 | ||
| Deposits with banks and other financial institutions that can be readily drawn on demand | 32,064,267 | 24,287,610 | ||
| Cash and cash equivalents at the end of the year | 59,887,260 | 51,131,968 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 97 -
4 Notes to the consolidated financial statements (Cont’d)
(64) Monetary items denominated in foreign currencies
| 31 December 2023 | ||||||
| Foreign currency balance | Exchange rate | RMB balance | ||||
| Cash at bank and on hand | ||||||
| USD | 1,807,580 | 7.0827 | 12,802,549 | |||
| JPY | 67,585,697 | 0.0502 | 3,392,802 | |||
| HKD | 4,708,629 | 0.9062 | 4,266,960 | |||
| EUR | 125,066 | 7.8592 | 982,921 | |||
| BRL | 123,194 | 1.4630 | 180,233 | |||
| VND | 525,993,333 | 0.0003 | 157,798 | |||
| Other currencies | Not applicable | Not applicable | 4,167,818 | |||
| Sub-total | 25,951,081 | |||||
| Accounts receivable | ||||||
| USD | 1,438,670 | 7.0827 | 10,189,665 | |||
| JPY | 13,985,060 | 0.0502 | 702,050 | |||
| HKD | 58,968 | 0.9062 | 53,437 | |||
| EUR | 552,957 | 7.8592 | 4,345,803 | |||
| BRL | 1,201,854 | 1.4630 | 1,758,313 | |||
| VND | 1,553,600,000 | 0.0003 | 466,080 | |||
| Other currencies | Not applicable | Not applicable | 2,811,931 | |||
| Sub-total | 20,327,279 | |||||
| Other receivables | ||||||
| USD | 20,097 | 7.0827 | 142,344 | |||
| JPY | 1,357,410 | 0.0502 | 68,142 | |||
| HKD | 2,224 | 0.9062 | 2,015 | |||
| EUR | 19,016 | 7.8592 | 149,454 | |||
| BRL | 75,956 | 1.4630 | 111,123 | |||
| Other currencies | Not applicable | Not applicable | 272,520 | |||
| Sub-total | 745,598 | |||||
| Short-term borrowings | ||||||
| USD | 149,915 | 7.0827 | 1,061,802 | |||
| EUR | 264,869 | 7.8592 | 2,081,659 | |||
| HKD | 738,351 | 0.9062 | 669,094 | |||
| Other currencies | Not applicable | Not applicable | 74,093 | |||
| Sub-total | 3,886,648 | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 98 -
4 Notes to the consolidated financial statements (Cont’d)
(64) Monetary items denominated in foreign currencies (Cont’d)
| 31 December 2023 | ||||||
| Foreign currency balance | Exchange rate | RMB balance | ||||
| Accounts payable | ||||||
| USD | 263,926 | 7.0827 | 1,869,310 | |||
| JPY | 5,454,183 | 0.0502 | 273,800 | |||
| HKD | 21,812 | 0.9062 | 19,766 | |||
| EUR | 221,088 | 7.8592 | 1,737,572 | |||
| BRL | 191,699 | 1.4630 | 280,456 | |||
| Other currencies | Not applicable | Not applicable | 2,031,534 | |||
| Sub-total | 6,212,438 | |||||
| Other payables | ||||||
| USD | 5,773 | 7.0827 | 40,892 | |||
| JPY | 5,429,602 | 0.0502 | 272,566 | |||
| HKD | 2,249 | 0.9062 | 2,038 | |||
| EUR | 7,696 | 7.8592 | 60,485 | |||
| Other currencies | Not applicable | Not applicable | 247,037 | |||
| Sub-total | 623,018 | |||||
| Current portion of non-current liabilities | ||||||
| EUR | 314,039 | 7.8592 | 2,468,095 | |||
| Other currencies | Not applicable | Not applicable | 4,626,072 | |||
| Sub-total | 7,094,167 | |||||
| Long-term borrowings | ||||||
| USD | 3,410,753 | 7.0827 | 24,157,339 | |||
| Other currencies | Not applicable | Not applicable | 5,118,109 | |||
| Sub-total | 29,275,448 | |||||
| Debentures payable | ||||||
| USD | 454,342 | 7.0827 | 3,217,969 | |||
| Lease liabilities | ||||||
| EUR | 102,338 | 7.8592 | 804,298 | |||
| JPY | 974,661 | 0.0502 | 48,928 | |||
| Other currencies | Not applicable | Not applicable | 281,608 | |||
| Sub-total | 1,134,834 | |||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 99 -
4 Notes to the consolidated financial statements (Cont’d)
(64) Monetary items denominated in foreign currencies (Cont’d)
| 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 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 100 -
4 Notes to the consolidated financial statements (Cont’d)
(64) 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 | |||||
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 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 101 -
| 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 |
(i) Acquisition of Shenzhen Clou
Listed on the Shenzhen Stock Exchange, Shenzhen Clou is a leading integrated serviceprovider in the energy sector in China, mainly covering smart grid and new electrochemicalenergy storage. The group previously held 8.95% equity interest in Shenzhen Clou and wasable to exert significant influence over it and account for it as an associate.
In May 2023, the Company purchased an additional 13.84% equity interest in ShenzhenClou for a cash consideration of RMB828,094,000. Upon completion of the transaction, theCompany's equity interest in Shenzhen Clou increased to 22.79% and Shenzhen Cloubecame a subsidiary of the Company.
The cost of the merger is the sum of the above cash consideration and the fair value of theequity held prior to the purchase date amounting to approximately RMB1,810,002,000.
The fair value of the identifiable net assets acquired at the purchase date is approximatelyRMB3,298,913,000, minority shareholders' equity is approximately RMB 2,563,373,000 andgoodwill formed is approximately RMB1,074,462,000.
From the date of purchase to the end of the year, Shenzhen Clou's operating income wasapproximately RMB 3,090,363,000; Net loss of approximately RMB 433,904,000.
The net cash outflow resulting from the acquisition of Shenzhen was approximately RMB463,137,000.
Except for the above acquisition, other acquisitions have no significant impact on theGroup's consolidated financial statement.
| (2) | Changes of consolidation scope due to other reasons |
| (a) | Increase of consolidation scope |
Midea Electric Trading (Singapore) Co. Pte. Ltd. and Midea Electrics Netherlands B.V.,wholly-owned subsidiaries of the Company, established Midea Electrical ManufacturingMéxico S. de R.L. de C.V. in June 2023, holding 99% and 1% of the shares respectively.
Hiconics Eco-energy Technology Co., Ltd., a wholly-owned subsidiary of the Company,established Hefei Midea Hiconics Energy Technology Co., Ltd. in July 2023, holding 100%of the shares.
Hefei Midea Hiconics Energy Technology Co., Ltd., a wholly-owned subsidiary of theCompany and Wang Shizhen, established Hefei Midea Hiconics Photovoltaic TechnologyCo., Ltd. in July 2023, holding 80% and 20% of the shares respectively
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 102 -
| 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) |
In August 2023, Shenzhen Clou, a subsidiary of the Company, established Foshan CLOUEss, Ltd., holding 100% of the shares.
Midea Electric Trading (Singapore) Co. Pte. Ltd. and Midea Electrics Netherlands B.V.,wholly-owned subsidiaries of the Company, established MG LAND MEXICO, S. de R.L. deC.V in August 2023, holding 99% and 1% of the shares respectively.
Clivet S.p.A., a wholly-owned subsidiary of the Company, established CLIVET SOUTHEAST D.O.O. in September 2023, holding 100% of the shares.
In September 2023, Beijing Wandong Medical Technology Co., LTD., a subsidiary of theCompany, established Shanghai Wandong Yingrui Medical Technology Co., LTD., holding100% of the shares.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Zhejiang Midea Refrigeration TechnologyCo., Ltd. in October 2023, holding 95% and 5% of the shares respectively.
Swisslog Holding AG, a wholly-owned subsidiary of the Company, established Swisslog A/Sand Swisslog Oy in October 2023, holding 100% of the shares.
Midea Home Appliances Investments (Hong Kong) Co., Limited and Midea Electric Trading(Singapore) Co. Pte. Ltd., wholly-owned subsidiaries of the Company, established PT JayaRefrigeration Equipment in November 2023, holding 95% and 5% of the shares respectively.
Kuka Deutschland GmbH, a wholly-owned subsidiary of the Company, established KUKARobotics Czech s.r.o., KUKA Robotics Hungary Kft. and KUKA Robotics d.o.o. Beograd inNovember 2023, holding 100% of the shares.
KUKA Deutschland GmbH and KUKA Aktiengesellschaft, wholly-owned subsidiaries of theCompany, established KUKA Robotics Slovakia s.r.o. in November 2023, holding 97.5% and
2.5% of the shares respectively.
In November 2023, the Company's subsidiary Beijing Wandong Medical Technology Co.,Ltd. established Suzhou Wanying Medical Technology Co.,Ltd., holding 100% of the shares.
KUKA Deutschland GmbH, a wholly-owned subsidiary of the Company, established KukaRobotics Romania s.r.l. in December 2023, holding 100% of the shares.
KUKA Deutschland GmbH and KUKA CEE GmbH, wholly-owned subsidiaries of theCompany, established KUKA Polska sp. z.o.o. in December 2023, holding 99.9% and 0.1%of the shares respectively.
Swisslog Holding AG, a wholly-owned subsidiary of the Company, established SwisslogFrance SAS in December 2023, holding 100% of the shares.
Midea Electric Trading (Singapore) Co. Pte. Ltd. and Midea International CorporationCompany Limited, wholly-owned subsidiaries of the Company, established Midea IntelligentManufacturing (Thailand) Co., LTD in December 2023, holding 99% and 1% of the sharesrespectively.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 103 -
| 5 | Changes of consolidation scope (Cont’d) |
| (b) | Decrease of consolidation scope(Cont’d) |
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 |
| Swisslog Technology Center Netherlands B.V. | Deregistration | January 2023 |
| Taiyuan Andesuihua Logistics Co., Ltd. | Deregistration | January 2023 |
| Foshan Shunde Bainian Tongchuang Plastictic Industrial Co., Ltd. | Deregistration | January 2023 |
| Guangzhou Hualing Air-Conditioning & Equipment Co., Ltd. | Deregistration | February 2023 |
| Shenzhen Hiconics Motor System Co., Ltd. | Change of equity | March 2023 |
| Wuhu Aixili Technology Co., Ltd. | Change of equity | May 2023 |
| KUKA Aerospace Holdings LLC | Deregistration | May 2023 |
| Reis Holding GmbH | Change of equity | June 2023 |
| KUKA lndustries GmbH & Co. KG | Change of equity | June 2023 |
| Guangdong Midea Electromechanical Technology Co., Ltd. | Deregistration | June 2023 |
| KUKA S-Base s.r.o. i.L. | Deregistration | August 2023 |
| Shanxi Clou New Energy Co., Ltd. | Deregistration | August 2023 |
| Western-style Electric Products Company | Change of equity | September 2023 |
| Hangzhou Long-termism Tech Co., Ltd. | Change of equity | September 2023 |
| Swisslog Healthcare Netherlands B.V. | Deregistration | September 2023 |
| Nanjing Wandong Medical Equipment Co., Ltd. | Deregistration | September 2023 |
| Midea Middle East | Deregistration | September 2023 |
| Shenzhen Helu Energy Co., Ltd | Deregistration | September 2023 |
| Shenzhen Luxin Energy service Co., LTD | Deregistration | September 2023 |
| Fujian Lurun Energy Co., Ltd | Deregistration | September 2023 |
| Main Power Inno Tech (Shenzhen) Manufacturing Co., Ltd. | Deregistration | October 2023 |
| Kangbao Ruikai new energy development Co., LTD | Deregistration | October 2023 |
| Guangdong Shunyi Electrical Insulation Equipment Co., Ltd | Deregistration | October 2023 |
| Ningxia Tongxin Sunrise Photovoltaic Power Generation Co., Ltd | Deregistration | November 2023 |
| Beijing Clou New Energy Investment Co., LTD | Deregistration | November 2023 |
| Zhejiang Clou Electricity Sales Co., Ltd | Deregistration | November 2023 |
| Wuxi Lujin New Energy Technology Co., LTD | Deregistration | December 2023 |
| Yixing Tongde energy Technology Co., LTD | Deregistration | December 2023 |
| Hebei Zide new energy development Co., LTD | Deregistration | December 2023 |
| Reis Robotics USA Inc. | Deregistration | December 2023 |
| KUKA Robotics OOO | Change of equity | December 2023 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 104 -
6 Interests in other entities
(1) Interests in subsidiaries
(a) Composition of principal 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 household 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 household air conditioner | 93% | 7% | Business combinations involving enterprises not under common control |
| 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 household 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 and sales of air conditioner parts | 100% | - | Establishment |
| Hefei Midea Refrigerator 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 Washing Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | 75% | 25% | Establishment |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 90% | 10% | Business combinations involving enterprises under common control |
| Wuxi Little Swan Electric Co., Ltd. | Wuxi, PRC | Wuxi, PRC | Manufacture of laundry appliance | 100% | - | Establishment |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture and sales of air conditioner | 99% | 1% | Establishment |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | Guangzhou, PRC | Guangzhou, PRC | Manufacture and sales of household air conditioner | 75% | 25% | Establishment |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of small household appliances | 100% | - | Establishment |
| Midea Electric Trading (Singapore) Co., Pte. Ltd. | Singapore | Singapore | Export trade | - | 100% | Establishment |
| Midea Group Finance Co., Ltd. | Foshan, PRC | Foshan, PRC | Financial industry | 95% | 5% | Establishment |
| Foshan Shunde Midea Household Appliances Industry Co., Ltd. | Foshan, PRC | Foshan, PRC | Investment holding | 100% | - | Establishment |
| Midea International Corporation Company Limited | Hong Kong | Hong Kong | Investment holding | 100% | - | Establishment |
| Midea Electric Netherlands (I) B.V. | Netherlands | Netherlands | Investment holding | - | 100% | Establishment |
| Toshiba Consumer Marketing Corporation | Japan | Japan | Manufacture of household appliances | - | 100% | Business combinations involving enterprises not under common control |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 105 -
6 Interests in other entities (Cont’d)
(1) Interests in subsidiaries (Cont’d)
(a) Composition of principal subsidiaries (Cont’d)
| Subsidiaries | Major business location | Place of registration | Nature of business | Shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| TLSC | Japan | Japan | Manufacture of household appliances | - | 100% | Business combinations involving enterprises not under common control |
| KUKA | Germany | Germany | Manufacture and sales of robots | - | 100% | Business combinations involving enterprises not under common control |
| Ningbo Midea United Materials Supply Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Wholesale and retail | 100% | - | Establishment |
| Annto Logistics Supply Chain Technology Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Logistics | - | 74% | Establishment |
| Wuhu Midea Annto Logistics Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Logistics | - | 74% | Establishment |
| Midea Capital Corporation Limited. | Foshan, PRC | Foshan, PRC | Investment | 95% | 5% | Business combinations involving enterprises not under common control |
| Midea Innovation Investment Co., Ltd. | Shenzhen, PRC | Shenzhen, PRC | Investment | 85% | 15% | Establishment |
| Midea Group (Shanghai) Co. Ltd. | Shanghai, PRC | Shanghai, PRC | Manufacture and sales of intelligent household appliances | 90% | 10% | Establishment |
| Midea Investment Development Company Limited | British Virgin Islands | British Virgin Islands | Investment | - | 100% | Establishment |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture and sales of air conditioner parts | 95% | 5% | Establishment |
| Hubei Midea Refrigerator Co., Ltd. | Jingzhou, PRC | Jingzhou, PRC | Manufacture of refrigerator | 97% | 3% | Establishment |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 106 -
6 Interests in other entities (Cont’d)
(2) Interests in associates and joint ventures
The Group’s associates and joint ventures have no significant influence on the Group andare summarised as follows:
| 2023 | 2022 | |||
| Aggregated carrying amount of investments | 4,976,109 | 5,188,817 |
| Aggregate of the following items in proportion | ||||
| Net profit (i) | 680,759 | 608,278 | ||
| Other comprehensive income (i) | 8,031 | 17,391 | ||
| Total comprehensive income | 688,790 | 625,669 |
| (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 joint ventures and the unification of accounting policies adopted by the associates and joint ventures 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 physicallocations of the assets. The liabilities are allocated based on the operations of thesegments. Expenses indirectly attributable to the segments are allocated based on theproportion of each segment’s revenue.
Operating expenses include cost of sales, interest costs, fee and commission expenses,taxes and surcharges, selling and distribution expenses, general and administrativeexpenses, R&D expenses and financial income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 107 -
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 2023 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 | 177,572,832 | 145,857,207 | 33,408,425 | 16,871,340 | - | 373,709,804 | |
| Inter-segment revenue | 4,509,170 | 1,042,635 | 416,740 | 7,224,604 | (13,193,149) | - | |
| Operating costs and expenses | (161,702,897) | (130,269,783) | (33,235,551) | (22,669,546) | 12,865,232 | (335,012,545) | |
| Segment profit | 20,379,105 | 16,630,059 | 589,614 | 1,426,398 | (327,917) | 38,697,259 | |
| Other profit or loss | 1,579,904 | ||||||
| Total profit | 40,277,163 | ||||||
| Total assets | 201,061,725 | 192,503,082 | 42,735,142 | 244,913,804 | (195,175,569) | 486,038,184 | |
| Total liabilities | 144,034,536 | 147,021,198 | 35,887,893 | 221,726,906 | (236,931,998) | 311,738,535 | |
| Long-term equity investments in associates and joint ventures | 648,200 | 130,710 | 13,371 | 4,183,828 | - | 4,976,109 | |
| Share of profit of associates and joint ventures | 460,163 | 11,392 | 349 | 208,855 | - | 680,759 | |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 4,710,263 | 2,381,335 | 1,588,442 | 8,286,200 | - | 16,966,240 | |
| (Reversal of)/Losses on asset impairment | (45,838) | 226,500 | 219,068 | 40,047 | - | 439,777 | |
| Losses/(Reversal of) on credit impairment | 58,756 | 82,463 | 114,763 | (159,449) | 102,091 | 198,624 | |
| Depreciation and amortisation expenses | 2,395,076 | 1,814,210 | 1,396,549 | 1,745,599 | (2,513) | 7,348,921 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 108 -
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 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 and joint ventures | 396,327 | 113,029 | 39,183 | 4,640,278 | - | 5,188,817 | |
| Investment income/(losses) from associates and joint ventures | 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 and amortisation expenses | 2,208,139 | 1,825,681 | 1,275,870 | 1,205,750 | (7,520) | 6,507,920 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
- 109 -
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 | 2023 | 2022 | ||
| Domestic | 222,804,120 | 203,063,764 | ||
| In other countries/geographical areas | 150,905,684 | 142,644,942 | ||
| 373,709,804 | 345,708,706 | |||
| Total non-current assets | 31 December 2023 | 31 December 2022 | ||
| Domestic | 43,020,433 | 34,458,577 | ||
| In other countries/geographical areas | 18,617,238 | 17,914,192 | ||
| 61,637,671 | 52,372,769 |
In 2023 and 2022, 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 2023 and 31 December 2022 | |
| Midea Holding Co., Ltd. | 330,000 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 110 -
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 2023 | 31 December 2022 | |||||||||
| Shareholding (%) | Voting rights (%) | Shareholding (%) | Voting rights (%) | |||||||
| Direct | Indirect | Direct | Indirect | |||||||
| Midea Holding Co., Ltd. | 30.87% | - | 30.87% | 31.00% | - | 31.00% | ||||
(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 Hekang Medical Management Co., Ltd. | Controlled by the Company’s ultimate controlling shareholder |
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Controlled by the Company’s ultimate controlling shareholder |
(4) Information of related party transactions
Other significant related party transactions of the Company other than those alreadymentioned in this report are as follows
(a) Pricing strategy
The following primary related party transactions are conducted in accordance with normalcommercial terms at agreed price by reference to the market price.:
(b) Purchase of goods
| Related parties | 2023 | 2022 | |||
| Content of related party transactions | |||||
| Orinko Advanced Plastics Co., Ltd. | Purchase of goods | 1,419,679 | 1,399,675 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 111 -
9 Related parties and significant related party transactions (Cont’d)
(4) Information of related party transactions (Cont’d)
(c) Sales of goods
| Related parties | 2023 | 2022 | |||
| Content of related party transactions | |||||
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Sales of goods | 242,513 | 197,787 | ||
| Guangdong Hekang Medical Management Co., Ltd. | Sales of goods | 165,188 | 14,952 | ||
| 407,701 | 212,739 |
(d) Remuneration of key management (including share payment)
| 2023 | 2022 | |||
| Remuneration of key management | 247,191 | 211,681 |
Remuneration of key management includes stock option incentive plan, restricted stockschemes and stock ownership schemes.
(5) Balances with related parties
Other significant related party transactions of the Company other than those alreadymentioned in this report are as follows:
| 31 December 2023 | 31 December 2022 | ||||
| Accounts payable | Orinko Advanced Plastics Co., Ltd. | 181,281 | 93,665 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 112 -
10 Share-based payment
(1) Stock option incentive plan
(a) Pursuant to the ninth stock option incentive plan (the “Ninth stock option incentive plan”)
approved at the 2021 annual shareholders’ meeting in 2022, the Company actually granted107,693,000 stock options with exercise price of RMB 54.61 to 2,813 employees. Under thecircumstance that the Company meets expected performance, 30%, 30% and 40% of thetotal stock options granted will become effective after 2 years, 3 years and 4 yearsrespectively since 8 June 2022.
Determination method for fair value of stock options at the grant date
| Ninth stock option | |
| Exercise price of options: | RMB 54.61 |
| Effective period of options: | 5 years |
| Current price of underlying shares: | RMB 52.99 |
| Estimated fluctuation rate of share price: | 35.70% |
| Estimated dividend rate: | 2.17% |
| Risk-free interest rate within effective period of options: | 2.00% |
The fair value of the Ninth Stock Option Incentive Plan calculated pursuant to the aboveparameters is: RMB 1,334,978,000.
(b) Movements in stock options during the year ended 31 December 2023
| 2023 | 2022 | |||
| (Share in thousands) | (Share in thousands) | |||
| stock options issued at the beginning of the year | 275,548 | 198,770 | ||
| stock options granted during the year | - | 107,693 | ||
| stock options exercised during the year | (38,490) | (18,602) | ||
| stock options lapsed during the year | (48,900) | (12,313) | ||
| stock options issued at the end of the year | 188,158 | 275,548 |
As at 31 December 2023, the residual contractual maturity date of the Fifth Stock OptionIncentive Plan is on 6 May 2024. The residual contractual maturity date of the Fifth ReservedStock Option Incentive Plan is on 10 March 2025. The residual contractual maturity date ofthe Sixth Stock Option Incentive Plan is on 29 May 2025. The residual contractual maturitydate of the Seventh Stock Option Incentive Plan is on 4 June 2024. The residual contractualmaturity date of the Eighth Stock Option Incentive Plan is on 3 June 2026. The residualcontractual maturity date of the Ninth Stock Option Incentive Plan is on 7 June 2027.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 113 -
10 Share-based payment (Cont’d)
(2) Restricted Share Incentive Schemes
(a) Pursuant to the restricted share incentive schemes for 2023 (the “Restricted Share Incentive
Schemes for 2023”) approved at the 2022 annual shareholders’ meeting in 2023, theCompany granted 18,325,000 restricted shares with exercise price of RMB 25.89 to 415incentive recipients. Under the circumstance that the Company meets expectedperformance, 40%, 30% and 30% of the total restricted shares granted will be unlocked after1 year, 2 years and 3 years respectively since 20 June 2023. The listing date for the grantedrestricted shares of this scheme is 14 July 2023.
Pursuant to the restricted share incentive schemes for 2022 (the “Restricted Share IncentiveSchemes for 2022”) approved at the 2021 annual shareholders’ meeting in 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 2022. The listing date for the grantedrestricted shares of this scheme is 13 July 2022.
(b) Movements in restricted shares during the year ended 31 December 2023
| 2023 | 2022 | |||
| (Share in thousands) | (Share in thousands) | |||
| Restricted shares issued at the beginning of the year | 50,211 | 62,267 | ||
| Restricted shares granted during the year | 18,325 | 12,153 | ||
| Restricted shares unlocked during the year | (18,639) | (16,316) | ||
| Restricted shares lapsed during the year | (9,994) | (7,893) | ||
| Restricted shares issued at the end of the year | 39,903 | 50,211 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 114 -
10 Share-based payment (Cont’d)
(3) Stock ownership schemes
Pursuant to the Midea Group stock ownership schemes for 2023 (the “stock ownershipschemes for 2023”) approved at the 2022 annual shareholders’ meeting in 2023, theCompany granted 9,946,276 shares to employees, and the exercise periods of the grantedshares are one year, two years and three years from the date of grant. Based on theCompany’s performance appraisal and individual performance appraisal, 40%, 30% and30% of the stock ownership schemes will be granted, respectively.
Pursuant to the eighth stock ownership schemes of the Midea Global Partner Plan (the“Eighth Global Partner Plan”) approved at the 2021 annual shareholders’ meeting in 2022 ,the Company granted 3,770,433 shares to employees, and the exercise periods of thegranted shares are 1 year, 2 years and 3 years from the date of grant. Based on theCompany’s performance appraisal and individual performance appraisal, 40%, 30% and30% of the stock ownership schemes will be granted, respectively.
Pursuant to the fifth stock ownership schemes of the Midea Business Partner Plan (the “FifthBusiness Partner Plan”) approved at the 2021 annual shareholders’ meeting in 2022, theCompany granted 2,826,759 shares to employees, and the exercise periods of the grantedshares are 1 year, 2 years and 3 years from the date of grant. Based on the Company’sperformance appraisal and individual performance appraisal, 40%, 30% and 30% of thestock ownership schemes will be granted, respectively.
Shares granted under the stock ownership schemes are repurchased from the secondarymarket through the company’s dedicated securities account. The fair value of the stockgranted under the ESOP is determined by the market closing price of the outstanding shareson the date the equity instrument is granted less the exercise price.
In 2023, the fair value of shares granted under the stock ownership scheme was RMB564,849,000.
(4) The total expenses due to the above share-based payment incentive plan, which were
granted, recognised for the year ended 31 December 2023 were approximately RMB1,245,456,000 (2022: RMB 1,028,950,000). As at 31 December 2023, the balance relatingto the share-based payment incentive plan and accrued from capital surplus wasapproximately RMB 2,020,605,000 (31 December 2022: RMB 2,279,108,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 115 -
11 Contingencies
As at 31 December 2023, the maximum potential loss amount in tax disputes involvingBrazilian subsidiary with 51% interests held by the Company was about BRL 735 million(equivalent to RMB 1080 million) (Some cases have lasted for more than 10 years. Theabove amount included the principal, penalties and interest). Original shareholders of theBrazilian subsidiary have agreed to compensate the Company according to verdict resultsof the above tax disputes. The maximum compensation amount is about BRL 157 million(equivalent to RMB 230 million).As at the date on which the financial statements wereauthorised 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 makingcompensation is small, and has correspondingly accrued provisions based on the probabilityof making compensation.
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 2023 | 31 December 2022 | |||
| Buildings, machinery and equipment | 4,005,911 | 5,145,982 |
13 Events after the balance sheet date
(1) Overview of profit distribution
On 26 March 2024, on the basis of the total shares 6,920,391,836 to be distributed (total6,968,950,724 shares net of repurchased 48,558,888 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 20,761,175,508 at RMB 30 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 116 -
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 2023 | 31 December 2022 | ||
| Within 1 year | 79,835 | 62,028 | |
| 1 to 2 years | 73,144 | 62,643 | |
| 2 to 3 years | 70,872 | 56,275 | |
| 3 to 4 years | 68,363 | 58,624 | |
| 4 to 5 years | 63,130 | 57,669 | |
| Over 5 years | 429,492 | 471,342 | |
| 784,836 | 768,581 |
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 price
risk)? Credit risk? Liquidity risk
The following mainly relates to the above risk exposures and relevant causes, objectives,policies and process of risk management, method of risk measurement, etc.
The objective of the Group's risk management is to seek balance between risk and income,minimising the adverse impact of financial risks on the Group's financial performance.Pursuant to the risk management objective, the Group has made risk management policiesto identify and analyse the risks it is exposed to and set appropriate risk resistant level anddesign relevant internal control procedures to monitor the Group’s risk level. The Groupreviews regularly these risk management policies and relevant internal control systems toadapt to changes in market condition or its operating activities.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 117 -
15 Financial instruments and risks (Cont’d)
(1) Market risk (Cont’d)
(a) Foreign exchange risk (Cont’d)
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.
As at 31 December 2023, for the financial assets and financial liabilities held by subsidiarieswhose functional currency is not denominated in USD, if the functional currency hadappreciated or depreciated by 5% against the USD and other factors remain unchanged,the Group will increase or reduce its pre-tax profit by approximately RMB 1,051,858,000 (31December 2022: approximately RMB 607,437,000).
As at 31 December 2023, for the financial assets and financial liabilities held by subsidiarieswhose functional currency is not denominated in EUR, if the functional currency hadappreciated or depreciated by 5% against the EUR and other factors remain unchanged,the Group will increase or reduce its pre-tax profit by approximately RMB 27,850,000 (31December 2022: approximately RMB 39,468,000).
As at 31 December 2023, for the financial assets and financial liabilities held by subsidiarieswhose functional currency is not denominated in RMB, if the functional currency hadappreciated or depreciated by 5% against the RMB and other factors remain unchanged,the Group will increase or reduce its pre-tax profit by approximately RMB 317,553,000 (31December 2022: approximately RMB 266,658,000).
(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.
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.
As at 31 December 2023, after taking into account the interest rate swap arrangements, theGroup had no floating rate borrowings (31 December 2022: interest rates had risen/fallenby 50 basis points while holding all other variables constant, the Group’s profit before taxwould have decreased/increased by approximately RMB 1,739,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 118 -
15 Financial instruments and risks (Cont’d)
(1) Market risk (Cont’d)
(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 2023, 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 2023, 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 606,750,000, and an increase or decrease in other comprehensiveincome amounting to approximately RMB 3,787,000.
(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, loan receivables, 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.
Other debt investments held by the Group mainly consist of transferable certificates ofdeposit. The Group controls its credit risk exposure by setting overall investment limits,which are reviewed and approved annually. The Group regularly monitors the credit riskexposure of debt investments, changes in credit ratings of debt investments and otherrelevant information to ensure the overall credit risk is limited to a controllable extent.
The Group has policies to limit the credit exposure on notes receivable, accounts receivable,contract assets, loan receivables, 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 119 -
15 Financial instruments and risks (Cont’d)
(2) Credit risk (Cont’d)
In addition, the amount and type of collateral required for loan receivables depend on anassessment of the credit risk of the counterparty. The collaterals pledged for pledged loansare 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.
In addition, financial guarantee obligations and loan commitments may give rise to risks asa result of defaults by counterparties. The Group has set stringent application and approvalrequirements for financial guarantee obligations and loan commitments, takes into accountinternal and external credit ratings and other information, and continuously monitors creditrisk exposure, changes in the credit ratings of counterparties and other relevant informationto ensure that the overall credit risk is limited to a controllable extent.
As at 31 December 2023, the Group had no significant collateral or other creditenhancements held as a result of the debtor's mortgage (31 December 2022: Nil).
(3) Liquidity risk
Cash flow forecasting is performed by each subsidiary of the Group and aggregated by theGroup’s finance department in its headquarters. The Group’s finance department at itsheadquarters monitors rolling forecasts of the Group's short-term and long-term liquidityrequirements to ensure it has sufficient cash and securities that are readily convertible tocash to meet operational needs, while maintaining sufficient headroom on its undrawncommitted borrowing facilities from major financial institutions so that the Group does notbreach borrowing limits or covenants on any of its borrowing facilities to meet the short-termand long-term liquidity requirements.
At the balance sheet date, the Group's undiscounted contractual cash flows are consistentwith its carrying amount and financial liabilities within one year include notes payable,accounts payable, other payables, financial liabilities held for trading, derivative financialliabilities and other current liabilities; The remaining financial liabilities are presented asundiscounted contract cash flows by maturity date as follows:
| 31 December 2023 | ||||||||||
| On demand or within a year | 1 to 2 years | 2 to 5 years | Over 5 years | Total | ||||||
| Short-term borrowings (including interest) | 8,870,346 | - | - | - | 8,870,346 | |||||
| Customer deposits and deposits from banks and other financial institutions (including interest) | 89,022 | - | - | - | 89,022 | |||||
| Current portion of non-current liabilities (including interest) | 13,549,559 | - | - | - | 13,549,559 | |||||
| Long-term borrowings (including interest) | 611,563 | 38,259,251 | 7,812,923 | 154,216 | 46,837,953 | |||||
| Debentures payable (including interest) | 91,792 | 91,792 | 3,324,903 | - | 3,508,487 | |||||
| Lease liabilities (including interest) | - | 815,583 | 1,069,277 | 446,468 | 2,331,328 | |||||
| Other non-current liabilities | - | 2,218 | 36,947 | - | 39,165 | |||||
| 23,212,282 | 39,168,844 | 12,244,050 | 600,684 | 75,225,860 | ||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 120 -
15 Financial instruments and risks (Cont’d)
(3) Liquidity risk (Cont’d)
| 31 December 2022 | ||||||||||
| On demand or within a 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 | |||||
| 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 | |||||
| 13,509,613 | 13,480,031 | 41,174,783 | 312,797 | 68,477,224 | ||||||
(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 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 121 -
16 Fair value estimates (Cont’d)
(1) Assets and liabilities measured at fair value on a recurring basis
As at 31 December 2023, 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 | 1,726,584 | 64,004 | - | 1,790,588 | ||||
| Derivative financial assets | - | 1,278,161 | - | 1,278,161 | ||||
| Receivables financing | - | 13,330,008 | - | 13,330,008 | ||||
| Other current assets - hedging instruments and transferable certificate of deposit | - | 422,593 | - | 422,593 | ||||
| Other debt investments (including the current portion) | - | 10,983,476 | - | 10,983,476 | ||||
| Investments in other equity instruments | - | - | 37,874 | 37,874 | ||||
| Other non-current financial assets | - | 2,082,347 | 5,687,591 | 7,769,938 | ||||
| Total assets | 1,726,584 | 28,160,589 | 5,725,465 | 35,612,638 | ||||
| Financial liabilities measured at fair value - | ||||||||
| Financial liabilities held for trading | - | - | 1,346,674 | 1,346,674 | ||||
| Derivative financial liabilities | - | 257,668 | - | 257,668 | ||||
| Other current liabilities - hedging instruments | - | 155,554 | - | 155,554 | ||||
| Other current liabilities | - | 2,282 | - | 2,282 | ||||
| Total liabilities | - | 415,504 | 1,346,674 | 1,762,178 |
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 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 122 -
16 Fair value estimates (Cont’d)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont’d)
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, volatility,financial data of target companies, market multiple of comparable companies and discountfor lack of marketabilities, etc.
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 2023 | 6,389,915 | (1,580,771) | ||||
| Increase | 172,008 | - | ||||
| Decrease | (282,046) | 364,272 | ||||
| Transfer out of Level 3 | (375,466) | - | ||||
| Total gains for the current period | ||||||
| Investment losses recognised in the income statement | (199,037) | (130,175) | ||||
| Gains recognised in other comprehensive income | 20,091 | - | ||||
| 31 December 2023 | 5,725,465 | (1,346,674) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 123 -
16 Fair value estimates (Cont’d)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont’d)
| The changes in Level 3 assets and liabilities are analysed below (Cont’d): |
| 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 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) |
(a) Financial assets and liabilities subject to Level 3 fair value hierarchy are included unlisted
equity investments at fair value of other non-current financial assets, investments in otherequity instruments and trading financial liabilities. The valuation techniques using marketapproach, net asset value and other pricing models. These assumptions are based onunobservable inputs, including risk-free interest rate, floating rate, financial data of targetcompany, market multiple of comparable companies, discount for lack of marketabilities andrecent market data (such as subsequent adjustments for observable price changes resultingfrom recent financing transactions executed by the investment company).
Financial assets and liabilities subject to Level 2 fair value hierarchy are includedreceivables financing, structured deposits, transferable certificate of deposits andderivatives (including cross currency interest rate swap contracts), which are valued usingdiscounted cash flow method, market approach and income method.
(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, notes receivable, accounts receivable, contract assets,loan receivables, other receivables, long-term receivables, current portion of non-currentassets (excluding other debt investments due within one year mentioned in Note 4(11)),other current assets (excluding those mentioned in Note 16(1)), notes payable, accountspayable, contract liabilities, short-term borrowings, lease liabilities, long-term borrowings,debentures payable, current portion of non-current liabilities, customer deposits anddeposits from banks and other financial institutions, other payables and other currentliabilities.
Carrying amounts of the Group’s financial assets and financial liabilities measured atamortised cost as at 31 December 2023 and 31 December 2022 approximated to their fairvalue.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 124 -
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 2023 and 31 December 2022, the Group's debt-to-asset ratio is asfollows:
| 31 December 2023 | 31 December 2022 | |||
| Total liabilities | 311,738,535 | 270,631,465 | ||
| Total assets | 486,038,184 | 422,555,267 | ||
| Debt-to-asset ratio | 64.14% | 64.05% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 125 -
18 Notes to the Company’s financial statements
(1) Other receivables
| 31 December 2023 | 31 December 2022 | |||
| Other receivables | 19,621,009 | 26,182,925 | ||
| Less: Provision for bad debts | (6,650) | (7,824) | ||
| 19,614,359 | 26,175,101 | |||
The Company has no amounts that are aggregated with other parties and included in otherreceivables as a result of centralised fund management.
(a) Other receivables are analysed by ageing as follows:
| 31 December 2023 | 31 December 2022 | |||
| Within 1 year | 19,277,501 | 26,069,074 | ||
| 1 to 2 years | 340,449 | 110,631 | ||
| Over 2 years | 3,059 | 3,220 | ||
| 26,182,925 |
(b) Provision for losses and changes in book balance statement
| 31 December 2023 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | % of total balance | Amount | Provision ratio | |||
| Provision for bad debts on an individual basis (i) | 152,756 | 0.78% | - | 0.00% | ||
| Provision for bad debts on a grouping basis (ii) | 19,468,253 | 99.22% | (6,650) | 0.03% | ||
| 19,621,009 | 100.00% | (6,650) | ||||
| 31 December 2022 | ||||||
| Book balance | Provision for bad debts | |||||
| Amount | % of total balance | Amount | Provision ratio | |||
| Provision for bad debts on an individual basis (i) | 67,959 | 0.26% | - | 0.00% | ||
| Provision for bad debts on a grouping basis (ii) | 26,114,966 | 99.74% | (7,824) | 0.03% | ||
| 26,182,925 | 100.00% | (7,824) | ||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 126 -
18 Notes to the Company’s financial statements (Cont’d)
(1) Other receivables (Cont’d)
(b) Provision for losses and changes in book balance statement (Cont’d)
| Stage 1 | |||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | Sub-total | |||
| Book balance | Provision for bad debts | Book balance (i) | Provision for bad debts | Provision for bad debts | |
| 31 December 2022 | 26,114,966 | 7,824 | 67,959 | - | 7,824 |
| Transfer to Stage 3 in the current year | - | - | - | - | - |
| Net (decrease)/increase in the current year | (6,646,713) | (1,174) | 84,797 | - | (1,174) |
| Including: Write-off in the current year | - | - | - | - | - |
| Derecognition | - | - | - | - | - |
| 31 December 2023 | 19,468,253 | 6,650 | 152,756 | - | 6,650 |
(i) As at 31 December 2023 and 31 December 2022, the Company had no other receivables
at Stage 2 or Stage 3:
(c) Provision for bad debts
As at 31 December 2023 and 31 December 2022, other receivables of the Company atStage 1 are analysed as follows:
(i) As at 31 December 2023, 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 | 152,756 | 0.00% | - | Relatively low bad debt risks |
As at 31 December 2022, 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 | 67,959 | 0.00% | - | Relatively low bad debt risks |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 127 -
18 Notes to the Company’s financial statements (Cont’d)
(1) Other receivables (Cont’d)
(c) Provision for losses and changes in book balance statement (Cont’d)
(ii) As at 31 December 2023 and 31 December 2022, 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 2023 | 31 December 2022 | ||||||||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | ||||||||
| Amount | Amount | Provision ratio | Amount | Amount | Provision ratio | ||||||
| Related parties and security deposit/guarantee payables grouping | 19,468,253 | (6,650) | 0.03% | 26,114,966 | (7,824) | 0.03% | |||||
(d) As at 31 December 2023, 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 | 17,071,391 | Within 1 year | 87.00% | (5,660) | |
| Company B | Current accounts | 1,088,000 | Within 1 year | 5.54% | (361) | |
| Company C | Current accounts | 339,172 | Within 1 year | 1.73% | (112) | |
| Company D | Current accounts | 254,700 | Within 1 year | 1.30% | (84) | |
| Company E | Current accounts | 155,998 | Within 1 year | 0.80% | (52) | |
| 18,909,261 | 96.37% | (6,269) |
(2) Long-term equity investments
Long-term equity investments are classified as follows:
| 31 December 2023 | 31 December 2022 | |||
| Subsidiaries (a) | 72,398,113 | 69,705,046 | ||
| Associates (b) | 3,559,731 | 3,398,523 | ||
| 75,957,844 | 73,103,569 | |||
| Less: Provision for impairment | - | - | ||
| 75,957,844 | 73,103,569 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 128 -
18 Notes to the Company’s financial statements (Cont’d)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries
| Movements in the current year | |||||||||||||
| 31 December 2022 | Increase in investment | Decrease in investment | Provision for impairment | Others | 31 December 2023 | Provision for impairment | Cash dividends attributable to the parent company declared in the current year | ||||||
| Ending balance | |||||||||||||
| Wuxi Little Swan Electric Co., Ltd. | 20,313,623 | - | - | - | 62,108 | 20,375,731 | - | 1,815,850 | |||||
| Foshan Shunde Midea Household Appliances Industry Co., Ltd. | 5,950,999 | - | - | - | 1,053 | 5,952,052 | - | - | |||||
| Guangdong Midea Electric Co., Ltd. | 5,001,072 | - | - | - | 2,070 | 5,003,142 | - | - | |||||
| Beijing Wandong Medical Technology Co., Ltd. | 4,349,003 | - | - | - | 4,199 | 4,353,202 | - | 38,350 | |||||
| Midea Group Finance Co., Ltd. | 3,363,479 | - | - | - | 1,844 | 3,365,323 | - | - | |||||
| Midea Innovation Investment Co., Ltd. | 2,135,000 | - | - | - | - | 2,135,000 | - | - | |||||
| GD Midea Air-Conditioning Equipment Co., Ltd. | 1,987,281 | - | - | - | 98,294 | 2,085,575 | - | 174,382 | |||||
| Guangdong Midea Microwave Oven Manufacturing Co., Ltd. | 1,880,041 | - | - | - | - | 1,880,041 | - | 554,117 | |||||
| Guangdong Midea Intelligent Technologies Co., Ltd. | 1,860,540 | - | - | - | 1,671 | 1,862,211 | - | - | |||||
| Guangdong Meizhi Compressor Limited | 1,418,863 | - | - | - | 534,882 | 1,953,745 | - | 576,730 | |||||
| Shenzhen CLOU Electronics Co., Ltd. | - | 828,094 | - | - | 833,580 | 1,661,674 | - | - | |||||
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 1,201,861 | - | - | - | 19,880 | 1,221,741 | - | - | |||||
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 1,083,420 | - | - | - | 4,196 | 1,087,616 | - | 1,706,052 | |||||
| Hainan Midea Building Technology Co., Ltd. | 921,500 | - | - | - | - | 921,500 | - | - | |||||
| Midea Group (Shanghai) Co. Ltd. | 920,427 | - | - | - | 26,178 | 946,605 | - | - | |||||
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 899,435 | - | - | - | 54,982 | 954,417 | - | 1,016,476 | |||||
| Hubei Midea Refrigerator Co., Ltd. | 885,138 | - | - | - | 28,042 | 913,180 | - | 1,475,941 | |||||
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 834,812 | - | - | - | 3,906 | 838,718 | - | - | |||||
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 776,756 | - | - | - | 4,025 | 780,781 | - | 1,404,750 | |||||
| Guangdong Midea Building Technology Co., Ltd. | 769,430 | - | - | - | - | 769,430 | - | - | |||||
| Wuhu Xinhe Technology Co., Ltd. | 742,684 | - | - | - | - | 742,684 | - | - | |||||
| Guangdong Meizhi Precision- Manufacturing Co., Ltd. | 625,877 | - | - | - | 14,853 | 640,730 | - | - | |||||
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 595,045 | - | - | - | 31,636 | 626,681 | - | - | |||||
| Hefei Midea Refrigerator Co., Ltd. | 556,199 | - | - | - | 6,479 | 562,678 | - | - | |||||
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 533,343 | - | - | - | 9,509 | 542,852 | - | - | |||||
| Ningbo Midea United Materials Supply Co., Ltd. | 503,420 | - | - | - | 2,565 | 505,985 | - | 689,901 | |||||
| Guangdong Midea Electromechanical Technology Co., Ltd. | 500,000 | - | - | - | (500,000) | - | - | - | |||||
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 481,769 | - | - | - | - | 481,769 | - | - | |||||
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 444,415 | - | - | - | 20,473 | 464,888 | - | - | |||||
| GD Midea Environment Appliances Mfg. Co., Ltd. | 417,382 | - | - | - | 10,679 | 428,061 | - | - | |||||
| Others | 7,752,232 | 60,949 | (30,246) | - | 557,166 | 8,340,101 | - | 6,294,849 | |||||
| 69,705,046 | 889,043 | (30,246) | - | 1,834,270 | 72,398,113 | - | 15,747,398 | ||||||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
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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., and Hefei Royalstar Motor Co., Ltd. and other companies bythe Company.
The equity movements of the Group’s investment in associates are as follows:
| 31 December 2022 | Increase in investment and transfers in | Decrease in investment and transfers out | Share of net profit/(loss) under equity method | Share of other comprehensive income | Share of other changes in equity | Cash dividends or profits declared | Others | 31 December 2023 | ||
| 3,398,523 | 942,444 | (832,614) | 157,844 | (960) | (1,455) | (104,051) | - | 3,559,731 | ||
(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
| 2023 | 2022 | |||
| Income from long-term equity investments under equity method | 15,747,398 | 10,279,124 | ||
| Investment income from associates | 157,844 | 260,651 | ||
| Investment income from holding of financial assets held for trading | 77,581 | 95,277 | ||
| Others | (13,933) | 282,904 | ||
| 15,968,890 | 10,917,956 |
There is no significant restriction on repatriation of the Company's investment income.
MIDEA GROUP CO., LTD.
SUPPPLEMENTARY INFORMATION(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 1 -
1 Details of non-recurring profit or loss for the year ended 31 December 2023
| 2023 | |||
| Gains or losses on disposal of non-current assets | (233,657) | ||
| 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. | (345,146) | ||
| 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) | 1,345,521 | ||
| 766,718 | |||
| Less: Effect of income tax | (143,692) | ||
| Effect of minority interests (after tax) | 122,001 | ||
| 745,027 |
| (1) | Basis of preparation of details of non-recurring profit or loss for the year ended 31 December 2023 |
| The China Security Regulatory Commission (“CSRC”) issued the Explanatory Announcement No. 1 on Information Disclosure by Companies Offering Securities to the Public - Non-recurring Profit or Loss (Revised in 2023) (“No. 1 Explanatory Announcement of the 2023 Version”) in 2023, which has come into effect since the date of issuance. The Group prepares the details of non-recurring profit or loss for the year ended 31 December 2023 in accordance with the requirements of No. 1 Explanatory Announcement of the 2023 Version. | |
| Under the requirements of the No. 1 Explanatory Announcement of the 2023 Version, non-recurring profit or loss refers to that arises from transactions and events that are not directly relevant to ordinary activities, or that is relevant to ordinary activities, but is extraordinary and not expected to recur frequently that would have an influence on users of financial statements making economic decisions on the financial performance and profitability of an enterprise. | |
| (2) | Impact of the implementation of No. 1 Explanatory Announcement of the 2023 Version on non-recurring profit or loss for the year ended 31 December 2022 |
| Under the relevant requirements of the Explanatory Announcement No. 1 on Information Disclosure by Companies Offering Securities to the Public - Non-recurring Profit or Loss (2008), (“No. 1 Explanatory Announcement of the 2008 Version”), government grants included as non-recurring profit or loss for the year ended 31 December 2022 by the Group include government grants related to assets of RMB105,573,000. As the subsidy is relevant to normal operating business and conforms to national industrial policies, the Group is entitled to the subsidy in accordance with established standards and the subsidy has a continuing impact on the Group’s profit or loss over the useful life of the asset. Therefore, according to the relevant requirements of the No. 1 Explanatory Announcement of the 2023 Version, the above subsidy of RMB105,573,000 shall be included as recurring profit or loss. |
MIDEA GROUP CO., LTD.
SUPPPLEMENTARY INFORMATIONFOR THE YEAR ENDED 31 DECEMBER 2023(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
- 2 -
2 Details of non-recurring profit or loss for the year ended 31 December 2022
| 2022 | ||||
| Gains or losses on disposal of non-current assets | (59,854) | |||
| 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) | |||
| 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 | |||
| 1,112,803 | ||||
| Less: Effect of income tax | (103,624) | |||
| Effect of minority interests (after tax) | (63,645) | |||
| 945,534 |
The Group prepares the details of non-recurring profit or loss for the year ended 31December 2022 in accordance with relevant requirements of No. 1 ExplanatoryAnnouncement of the 2008 Version.
3 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:
| Weighted average return on net assets (%) | Earnings per share (in RMB Yuan) | |||||||||||
| Basic earnings per share | Diluted earnings per share | |||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||
| Net profit attributable to ordinary shareholders of the Company | 22.23% | 22.21% | 4.93 | 4.34 | 4.92 | 4.33 | ||||||
| Net profit attributable to ordinary shareholders of the Company, net of non-recurring profit or loss | 21.74% | 21.50% | 4.82 | 4.20 | 4.81 | 4.20 | ||||||
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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
28 March 2024