Midea Group Co., Ltd.
The 2019 Annual Report
30 April 2020
Section I Important Statements, Contents and DefinitionsThe Board of Directors, the Supervisory Committee, directors, supervisors and seniormanagement of Midea Group Co., Ltd. (hereinafter referred to as the “Company”)hereby guarantee that the information presented in this report is free of anymisrepresentations, misleading statements or material omissions, and shall togetherbe wholly liable for the truthfulness, accuracy and completeness of its contents.
All directors of the Company attended the Board meeting to review this Annual Report.
There are no directors, supervisors, or senior management who do not warrant or
who dispute the truthfulness, accuracy and completeness of the contents of this
Annual Report.
The financial statements for 2019 have been audited by PricewaterhouseCoopers
China (LLP) and have obtained an unqualified audit report.
Mr. Fang Hongbo, Chairman of the Board and CFO of the Company and Ms. Zhong
Zheng, Director of Finance of the Company, have represented and warranted that the
financial statements in this report are true and complete.
The Board has considered and approved the following dividend payout plan for the
year 2019: based on the 6,957,181,058 shares at the disclosure date of this report (the
total share capital of 6,999,467,315 shares minus the repurchased 42,286,257 shares
in the repo securities account at that date), it is proposed that the Company should
distribute a cash dividend of RMB16 (tax inclusive) per 10 shares to all the
shareholders and should not convert capital surplus into share capital. When the
profit distribution plan is implemented, if any change occurs to the total shares
eligible for profit distribution, the profit distribution plan shall be based on the total
shares eligible for profit distribution at the book closure date of the profit distribution,
and the dividend per share shall be adjusted under an unchanged total distribution
amount.
The future plans and some forward-looking statements mentioned in this report shall
not be considered as virtual promises of the Company to investors. Therefore,
investors are kindly reminded to pay attention to possible investment risks.
This report has been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese version
shall prevail.
Letter to Shareholders
While a heart-shaking fight against the pandemic is now on globally, this once-in-a-century
“black swan” incident has casted tremendous changes to the lives of everyone. We sincerely
hope everyone stays safe and healthy. And we have strong belief that the haze will
eventually disappear and there will always be bright light.
In this nationwide operation, Midea was amongst the first companies to respond and
participate in frequent support missions, reflecting the heritage of utmost importance from
Midea's development history of 50 years—taking rapid actions amid crises and changes,
bearing responsibilities amid challenges and chaos.
Now, as the world is faced with changes that have not been seen for a century, history-
making global economic fluctuations and a continuous stream of uncertainties come thick
and fast. In light of this unprecedented time, by committing to its unhesitating strategies and
responsibilities, Midea has managed to maintain steady growth in business performance. In
2019, Midea achieved revenue of RMB279.381 billion, marking a year-on-year increase of
6.71%; and achieved RMB24.211 billion in net profit attributable to shareholders of the
Company, recording a year-on-year increase of 19.68%. Midea was ranked 312th among
Fortune Global 500 in 2019, moving up by 169 places since its debut in 2016. As for Fortune
China 500, Midea was ranked 36th, topping the industry chart for 5 consecutive years. In
addition, Midea was ranked 33rd among BrandZ? Top 100 Most Valuable Chinese Brands
in 2019 with an increase of brand value by 20%. Midea ranked 27th on the list of Brand
Finance Tech 100 in 2019, moving up 16 places in comparison to the year before, leading
its industry peers throughout the country.
2019 was yet another year that gave us the feeling that time flies. As market iteration cycles
become more rapid, one may say this is a tempestuous era with so many tides. Things
change drastically, yet vision, dreams, perspectives and ambitious setup will always persist.
No one could stay young forever, but young people will always be there. Companies decline
and fall, but there are always some firms which are thriving. For us, nothing is more critical
than upholding our long-term perspective mindset and adapting to external uncertainties
with determined strategic focus.
We are devoted to the three strategic focuses of "Product Leadership, Efficiency Driven,
Global Operations" to continue to set the stage for our business. Today, such three strategic
focuses have already become our guidelines for daily business and operations. Business
performance is, therefore, said to be continuously improving. Moreover, we increased
investments in weaker product categories and made bold moves on new product categories
and new business models in 2019. Whereas our international layout increases in clarity over
time, we do look forward to business prosperity in the days to come.
We uphold our user-centric strategy and promote business reforms. We continued to break
through stereotype in 2019 and placed interests and needs of users first in the top-down
systematic and comprehensive business model reforms across the Group to enhance
connections between our services and products and users.
We are committed to building future-oriented innovation capabilities and R&D scaling
advantages. In 2019, we kicked off our plan to build a global R&D network of “4+2” ,
promoting the Shanghai Global Innovation Center, Midea America Research Center, Midea
Germany Research Center and Midea Japan Research Center as comprehensive
technology R&D centers, and Midea Milan Design Center as Industrial Design Center. We
progressed in promoting global R&D resources integration and enhancing the world’s R&D
layout plus innovation mechanisms.
We insist that human capital is the most essential component for an enterprise, taking further
steps to strengthen employee rights and interests and invest in employee care. Over the
past year, the core management and all employees have maintained an excellent fighting
spirit, learning ability, as well as accountability. With rapid growth in the mid-level young
managers and non-stop inflow of fresh blood, we have created a diverse internal culture that
fuels the Company’s long-term development.
These long-term layouts and investments, together with the unwavering commitment to
sticking to and promoting Midea’s culture, are all Midea's wealth of tomorrow. They also
provide the confidence for us to believe in Midea’s achievement in long-term steady growth
and safeguard the interests of our shareholders.
Actually it is not the changing world, but how we interpret the changing that affects us most.
With merely past knowledge, we will never be able to reach further future. The manufacturing
industry’s underlying logic for achieving growth from the past has been profoundly altered.
The most active business pulse in the digitalization era is the speed and ability to create
value.
Like the stirring melody in a grand and complex symphony, Midea will renew and refocus
our strategies amidst the vast changing world. We will launch and strengthen the next round
transformation of comprehensive digitalization and intellectualization. As we have learned
from the past, every successful transformation requires the courage to risk life, through
devotion, persistence and perseverance. By promoting comprehensive digitalization and
intellectualization, Midea’s product models and business value chain are going to observe
groundbreaking changes, whereas Midea will evolve from a hardware-based company to a
data-driven innovative technology group that takes affirmative steps forward.
We shall strive to achieve changes in the format of products and thus transform our
traditional business of simply selling hardware to a software-driven business, intensifying
contents and services at the same time.
It is in our list to achieve changes in business methodology and promote reforms in research,
production and sales. And with digitalization tools and approaches, we are going to promote
online and offline integration, decentralization and flat management.
The goals are to foster changes in business models, achieve direct communication, direct
contact and high-frequency interaction with users, in order to uncover user value and
transform to an Internet mindset.
When the going gets tough, the tough get going. In the face of a series of challenges brought
forth by the coronavirus epidemic, we shall remain true to our original aspiration and carry
our dreams through long distances. Let us be prepared for strategic deployment, resource
investments and team building efforts—all in the long term. They do not have to be
magnificent fireworks that echo down in history but can still become the sparkling lights in
our unique stories!
Future is defined by the path we’ve been through! At this moment, Midea is flourishing and
the most shining Midea is still ahead of us and far from being achieved.
We hereby express our gratitude for all shareholders’ support all the way along.
Board of Directors, Midea Group
April 2020
Contents
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS .............................2
SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ......................................10
SECTION III BUSINESS PROFILE .........................................................................................15
SECTION IV PERFORMANCE DISCUSSION AND ANALYSIS ..............................................24
SECTION V SIGNIFICANT EVENTS ......................................................................................73
SECTION VI CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ......136
SECTION VII INFORMATION ABOUT DIRECTORS, SUPERVISORS, SENIOR
MANAGEMENT AND EMPLOYEES......................................................................................148
SECTION VIII CORPORATE GOVERNANCE ......................................................................160
SECTION IX FINANCIAL REPORT .......................................................................................167
SECTION X DOCUMENTS AVAILABLE FOR REFERENCE ................................................280
Definitions
Term Definition
The “Company”,“Midea”,“MideaGroup”orthe“Group” MideaGroupCo.,Ltd.
Midea Holding MideaHoldingCo.,Ltd.
Little Swan WuxiLittleSwanCompanyLimited
TLSC ToshibaLifestyleProducts&ServicesCorporation
KUKA KUKAAktiengesellschaft
Reporting Period 1January2019to31December2019
Section II Company Profile and Key Financial Results
1. Corporate Information
Stock abbreviation MideaGroup Stockcode 000333
Stock exchangewherethe
shares oftheCompanyare ShenzhenStockExchange
listed
Name oftheCompanyin 美的集团股份有限公司
Chinese
Abbr. oftheCompany 美的集团
name inChinese
Name oftheCompanyin MideaGroupCo.,Ltd.
English (ifany)
Abbr. oftheCompany MideaGroup
name inEnglish(ifany)
Legal representative FangHongbo
Registered address MideaHeadquartersBuilding,No.6MideaAvenue,BeijiaoTown,ShundeDistrict,Foshan
City,GuangdongProvince,China
Postal code 528311
Business address MideaHeadquartersBuilding,No.6MideaAvenue,BeijiaoTown,ShundeDistrict,Foshan
City,GuangdongProvince,China
Postal code 528311
Company website http://www.midea.com
E-mail IR@midea.com
2. Contact Us
Company Secretary RepresentativeforSecuritiesAffairs
Name JiangPeng OuYunbin
Address MideaHeadquartersBuilding,No.6MideaAvenue,BeijiaoTown,Shunde
District, FoshanCity,GuangdongProvince,China
Tel. 0757-22607708 0757-23274957
Fax 0757-26605456
E-mail IR@midea.com
3. Information Disclosure and Place Where the Annual Report Is Kept
Newspaper designatedbytheCompanyforinformation ChinaSecuritiesJournal,SecuritiesTimesandShanghai
disclosure SecuritiesNews
Website designatedbytheChinaSecuritiesRegulatory
Commission (CSRC)forthepublicationoftheAnnual http://www.cninfo.com.cn
Report
Place wheretheAnnualReportoftheCompanyiskept CompanyInvestorRelationsDepartment
4. Company Registration and Alteration
Organization code 91440606722473344C
Changes inmainbusinessactivities None
since theCompanywaslisted(ifany)
Changes ofcontrollingshareholderof None
the Company(ifany)
5. Other Relevant Information
Accounting firm engaged by the Company
Name oftheaccountingfirm PricewaterhouseCoopersChina(LLP)
Business addressoftheaccountingfirm 11/F.,PricewaterhouseCoopersCenter,2CorporateAvenue,202HuBin
Road,HuangpuDistrict,Shanghai200021,PRC
Name ofaccountantswritingsignatures HuangMeimeiandQiuXiaoying
Sponsor engaged by the Company to continuously perform its supervisory function during the Reporting
Period
□Applicable √N/A
Financial advisor engaged by the Company to continuously perform its supervisory function during the
Reporting Period
√Applicable □N/A
Nameofthefinancial Businessofficeofthefinancialadvisor Representativeofthe Supervisoryperiod
advisor financialadvisor
CITICSecuritiesTower,No.8Zhongxin WuRenjun,Chen
CITIC SecuritiesCo.,Ltd. 3rdRoad,FutianDistrict,Shenzhen, Jianjian,LiHaoran,Li 2019.6.21-2020.12.31
518048,PRC Chang,LiWeiandLiu
Kun
6. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□Yes √No
2019 2018 2019-over-2018 2017
change (%)
Operating revenue(RMB'000) 278,216,017 259,664,820 7.14% 240,712,301
Net profitattributabletoshareholdersof 24,211,222 20,230,779 19.68% 17,283,689
the Company(RMB'000)
Net profitattributabletoshareholdersof
the Companybeforenon-recurring 22,724,392 20,058,155 13.29% 15,614,103
gains andlosses(RMB'000)
Net cashflowsfromoperatingactivities 38,590,404 27,861,080 38.51% 24,442,623
(RMB'000)
Basic earningspershare(RMB/share) 3.60 3.08 16.88% 2.66
Diluted earningspershare(RMB/share) 3.58 3.05 17.38% 2.63
Weighted averageROE(%) 26.43% 25.66% 0.77% 25.88%
Changeof31
31December 31December December2019 31December
2019 2018 over31December 2017
2018
Total assets(RMB'000) 301,955,419 263,701,148 14.51% 248,106,858
Net assetsattributabletoshareholders 101,669,163 83,072,116 22.39% 73,737,437
of theCompany(RMB'000)
Total share capital of the Company on the last trading session before disclosure:
Total sharecapitaloftheCompanyonthelasttrading 6,999,467,315
session beforedisclosure(share)
Fully diluted earnings per share based on the latest share capital above:
Dividend paidtopreferenceshareholders 0
Fully dilutedearningspersharebasedonthelatest 3.46
share capitalabove(RMB/share)
7. Differences in Accounting Data under Domestic and Overseas Accounting
Standards
7.1 Differences in the net profit and net assets disclosed in the financial reports prepared under
China Accounting Standards (CAS) and International Financial Reporting Standards (IFRS)
□Applicable √N/A
No such differences for the Reporting Period.
7.2 Differences in the net profit and net assets disclosed in the financial reports prepared under
CAS and foreign accounting standards
□Applicable √N/A
No such differences for the Reporting Period.
7.3 Reasons for the differences
□Applicable √N/A
8. Key Financial Results by Quarter
RMB'000
2019Q1 2019Q2 2019Q3 2019Q4
Operating revenue 75,205,780 78,564,520 67,147,862 57,297,855
Net profitattributableto 6,129,026 9,058,043 6,128,898 2,895,255
shareholders oftheCompany
Net profitattributableto
shareholders oftheCompany 6,084,881 8,470,793 6,042,274 2,126,444
before non-recurringgainsand
losses
Net cashflowsfromoperating 11,842,782 9,945,108 8,002,389 8,800,125
activities
Whether there are any material differences between the financial indicators above or their summations
and those which have been disclosed in the Company’s quarterly or semi-annual reports
□Yes √No
9. Non-recurring Profits and Losses
√Applicable □N/A
RMB'000
Item 2019 2018 2017 Note
Profit orlossfromdisposalofnon-current -131,131 222,204 1,363,041
assets
Except foreffectivelyhedgingbusinessrelated
to normalbusinessoperationsoftheCompany,
profit orlossarisingfromthechangeinthefair
value offinancialassetsheldfortrading,
derivative financialassets,financialliabilities
held fortrading,derivativefinancialliabilities, 676,430 -842,408 77,484
other non-currentfinancialassetsand
available-for-sale financialassets,aswellas
investment profitorlossproducedfromthe
disposal oftheaforesaidfinancialassetsand
liabilities
Other non-operatingincomeandexpenses 1,347,788 1,091,473 1,094,058
except above-mentioneditems
Less: Corporateincometax 394,095 207,870 702,139
Minority interests(aftertax) 12,162 90,775 162,858
Total 1,486,830 172,624 1,669,586 --
Explain the reasons if the Company classifies an item as a recurring profit/loss item, which is defined as
a non-recurring profit/loss according to the definition in the
Information Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Profits and
Losses>, or is enumerated as a non-recurring profit/loss in the said explanatory announcement
□Applicable √N/A
No such cases for the Reporting Period.
Section III Business Profile
1. Business Scope in the Reporting Period
1.1 Summary of business scope
Midea is a global technologies group in HVAC systems, consumer appliances, robotics & industrial
automation systems, and digital business. Midea offers diversified products and services, including HVAC
centered on residential air-conditioning, commercial air-conditioning, heating & ventilation systems;
consumer appliances centered on laundry appliances, refrigerators, kitchen appliances, and various
small home appliances; robotics and industrial automation systems centered on KUKA and Guangdong
Midea Intelligent Robotics Co., Ltd.; and the digital business centered on smart supply chains, Industrial
Internet of things (IIOT) and silicon chips.
With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire Your
Future” as its mission, and “Embrace what’s next - Aspiration、Dedication、Collaboration、Innovation”
as its values, Midea integrates global resources and promotes technological innovation to create a better
life for over 400 million users, major customers and strategic partners in different areas worldwide every
year with satisfying products and services.
Midea, a global operating company, has now established a global platform with around 200 subsidiaries,
28 R&D centers, 34 major manufacturing bases, and approximately 150,000 employees. Its business
covers more than 200 countries and regions. Overseas, Midea has 18 R&D centers and 17 manufacturing
bases in more than ten countries, with over 30,000 employees. 22 currencies are used by Midea in
settlement. In addition, Midea is the majority shareholder of KUKA, a Germany-based world-leading
company in robotics and automation, with a stake of approximately 95%.
1.2 Position in the household appliance industry
Midea ranks No. 312 on the 2019 Fortune Global 500 list, moving up 169 places since its debut on the
list in 2016, and ranks No. 36 on the 2019 Fortune China 500 list, the highest-ranking among the home
appliance industry in the country for five consecutive years. It also ranks highly on the Top 500 Most
Credible Chinese Enterprises list, the Top 100 Most Credible Chinese Manufacturers list, the Top 100
Most Credible Chinese Private Enterprises list and the Top 500 Most Credible Chinese Listed Companies
list of 2018 released by the 2019 China Enterprise Credit Development Forum & the 10th Good Faith
Public Welfare Ceremony. In addition, Midea ranks No. 33 on the 2019 BrandZ? Top 100 Most Valuable
Chinese Brands list, with its brand value up 20%. Also, Midea takes the lead among domestic home
appliance makers by ranking No. 27 on the 2019 Brand Finance Tech 100 list released by Brand Finance,
a British brand assessment institution, moving up 16 places from last year. Midea has been given
excellent credit ratings by the three major international credit rating agencies, Standard & Poor’s, Fitch
Ratings and Moody’s. The ratings are in a leading position among home appliance manufacturers
worldwide as well as among Chinese non-state-owned enterprises.
According to data from AVC, Midea’s major home appliances all took up a larger share in the domestic
market 2019. Its residential air-conditioners, in particular, saw a much bigger share in all channels, with
an online market share of 30% and an offline market share of nearly 29%.
The table below shows the offline market shares and rankings of the Company’s primary home appliance
products (by retail sales) in 2019:
Product category Market share Ranking
Residential air conditioners 28.9% 2
Laundry appliances 27.4% 2
Refrigerators 12.6% 2
Ricecookers 43.9% 1
Electricpressurecookers 44.3% 1
Electric kettles 38.6% 1
Induction cookers 48.5% 1
Blender 37.7% 1
Electric fans 39.3% 1
Electric radiators 42.9% 1
Water dispensers 42.3% 1
Gaswaterheaters 11.6% 2
Water purifiers 22.2% 2
Countertop microwaveovens 44.5% 2
Countertopelectricovens 36.2% 2
Dishwashers 9.2% 3
Electric waterheaters 20.7% 3
Rangehoods 8.7% 4
Gas stoves 7.0% 4
Robot vacuumcleaners 4.6% 4
Push-rod vacuumcleaners 3.4% 4
Midea’s online retail sales during 2019 were close to RMB70 billion, up by over 30% YoY, remaining the
best-selling home appliance manufacturer on major e-commerce channels such as JD, Tmall and Suning.
The table below shows the online market shares and rankings of the Company’s primary home appliance
products (by retail sales) in 2019:
Product category Market share Ranking
Residential air conditioners 30.0% 1
Commercialair conditioners 50.0% 1
Laundry appliances 31.2% 2
Refrigerators 17.7% 2
Microwave ovens 53.0% 1
Pressure cookers 41.0% 1
Rice cookers 29.6% 1
Electricovens 22.7% 1
Induction cookers 39.0% 1
Electric waterheaters 30.6% 1
Gaswaterheaters 18.0% 1
Electric kettles 23.0% 1
Electric fans 19.2% 1
Electric radiators 16.9% 1
Vacuum cleaners 10.3% 2
Water dispensers 18.9% 2
Water purifiers 13.1% 2
Dishwashers 24.6% 2
Sterilizingcabinets 10.8% 2
Range hood + stovesuites 10.4% 4
2. Significant Changes in the Main Assets
2.1 Significant changes in the main assets
Main assets Reasonsforanysignificantchange
Construction inprogress Down42%YoY,primarilydrivenbythecompletionofconstructionprojects
Cash atbankandonhand Up154%YoY,primarilydrivenbyanincreaseinfixeddeposits
Notes receivable Down62%YoY,primarilydrivenbythereclassificationtoreceivables financing
Available-for-sale financialassets Down100%YoY,primarilydrivenbythereclassificationtofinancialassetsheld
fortradingandothernon-currentfinancialassets
Long-term receivables Up3,370%YoY,primarilydrivenbyanincreaseinfinancelease
Other non-currentassets Up799%YoY,primarilydrivenbyanincreaseinstructuraldepositswitha
maturityofoveroneyear
2.2 Main assets overseas
□Applicable √N/A
3. Core Competitiveness Analysis
3.1 As one of the leaders among the global household appliance makers and a dominator in the
major appliance sectors, Midea Group provides high-quality, one-stop home solutions through its
wide product range, complete with full specifications.
As a white goods and HVAC enterprise with a whole industrial chain and full product line, Midea Group
has developed a complete industrial chain combining R&D, manufacturing and sales of key components
and finished products, supported by an industry-leading R&D center and manufacturing technologies of
core components (such as compressors, electrical controls, magnetrons and controllers), and ultimately
based on its powerful capabilities in logistics and services. Midea is widely known as a top brand of
household appliance and HVAC in China. Its dominance in the major appliance and HVAC markets means
that it can provide a wide range of competitive product sets. It also means internal synergies in brand
awareness, price negotiation as a whole, customer needs research and R&D investments. Compatibility,
coordination and interaction among household appliances have become increasingly important since
smart home is gaining popularity. With a full product line, Midea has had a head start in providing a
combined and compatible smart home platform with integrated home solutions for customers.
3.2 Global R&D resource integration capabilities, continuing lead in R&D and technical innovation
The Group is focused on building a competitive, multi-layered global R&D system centering on user
experience and product functions, which represents world-class R&D input and strength. With close to
RMB40 billion invested in R&D over the past five years (over RMB10 billion in 2019), the Group has set
up a total of 28 research centers in 11 countries to gradually build up a “4+2” global R&D network and
gain the advantage of scale in this respect. Domestically, with the core being Midea Global Innovation
Center in Shunde District, Foshan City, Midea has also started to build a global innovation center in
Shanghai. Overseas, with Midea America Research Center, Midea Germany Research Center, Midea
Japan Research Center and Midea Milan Design Center as the cores, Midea makes use of the regional
advantages, integrates global R&D resources and refines its global R&D network. It has over 10,000 R&D
employees and over 500 senior foreign senoir experts. While establishing its own research centers
around the world, the Group has also cooperated with domestic and foreign scientific research institutions,
such as MIT, UC Berkeley, UIUC, Stanford, Purdue University, University of Maryland, The University of
Sheffield, Polytechnic University of Milan, Tsinghua University, Shanghai Jiao Tong University, Zhejiang
University, the Chinese Academy of Sciences, Harbin Institute of Technology, Xi’an Jiaotong University,
Huazhong University of Science and Technology and South China University of Technology, in order to
establish joint labs for deepening technological innovation. The Group also carries out strategic
cooperation with tech giants such as BASF and Honeywell to build a global innovation ecosystem. The
Group’s long-term focus on building technology, marketing, product, design and open innovation systems,
building a cutting-edge research system and building reserves in technology for mid/long term, has
provided a solid foundation for the Group to maintain technical superiority across the globe.
3.3 A stronger network of global operations developed and designed with Midea’s continual global
resource allocation and investments, globally-advanced manufacturing capabilities and
advantage of scale
The success of a series of global acquisitions and new business expansion moves has further solidified
Midea’s global operations and leading advantages in robotics and automation. With the world’s leading
production capacity and experience, and a wide variety of products as well as its production bases all
over the world, the Group has been able to expand rapidly into the emerging overseas markets and is
becoming a stronger competitor in those mature overseas markets. The Group is one of the biggest
manufacturers in the world for many product categories, which gives it competitive edges in efficiency
improving and cost reducing that its overseas competitors are unable to achieve. Overseas sales of the
Group accounts for more than 40% of the total sales revenue. Its products have been exported to over
200 countries and regions, and it owns 17 overseas manufacturing bases and 24 overseas operating
agencies. Midea’s global operations system has been further improved through the reform of international
business organizations changing from a platform unit to a business entity. It also increases investments
in overseas business operations, focuses on the needs of the local customers and enhances product
competitiveness in a bid to promote growth in its Own Branding & Manufacturing (OBM) business. In
addition, with a deep knowledge and understanding on product characteristics and product demands in
overseas market, Midea is promoting worldwide branding and expansion through global collaboration
and cooperation. In this way, the global competitiveness of Midea is increasing steadily.
3.4 Broad channel networks and a well-established smart supply chain system ensuring the
steady growth of Midea’s online and off-line sales
By virtue of years of development and investments, Midea Group has formed an all-dimensional market
coverage. In the mature first and second-tier markets, the Company has developed and maintained good
partnerships with large home appliance retail chains. While in the broad third and fourth-tier markets, the
Company uses flagship stores, specialty shops, traditional channels and new channels as effective
supplements. Currently, the Company has already covered the markets at all tiers. Additionally, the
Company's dominance in branding, products, offline channels and logistics distribution have also created
powerful guarantees for the Company's rapid expansion of its e-commerce business and channels.
Achieving the highest online sales among China’s household appliance manufacturers, Midea’s online
retail sales were close to RMB70 billion in 2019, up by over 30% YoY, maintaining the highest sales on
China’s mainstream e-commerce platforms such as JD, Tmall and Suning in various home appliance
categories.
Making full use of the digital technology, Annto Logistics Technology Co., Ltd. (Annto), a subsidiary of
Midea, refines its offline logistics network through the big data technology to build a smart and digital
distribution platform. Relying on nearly 140 urban distribution centers nationwide, Annto concentrates its
resources on urban distribution. It is able to provide fully visualized direct distribution services covering
every town and village of the country. It can finish the delivery to 19,692 (or 46%) towns and villages
within 24 hours and to 35,944 (or around 85%) towns and villages within 48 hours in the country.
Additionally, Annto works closely with Midea’s post-sale service network to provide one-stop services of
delivery and installation, which has effectively improved user experience.
3.5 A user experience-oriented reform of “Comprehensive Digitalization and Comprehensive
Intellectualization” to make Midea an icon in digitalization
Midea has put forward a user experience-oriented strategic objective of “Comprehensive Digitalization
and Comprehensive Intellectualization”. On one hand, it promotes deep integration of the digital
technology and business in the whole value chain, with the view to becoming an icon in digitalization. On
the other hand, with foresight, it plans for whole new products, services and business models centering
on smart technologies, products and scenes, so as to outcompete Internet companies. With continual
investment and research in artificial intelligence (AI), silicon chip, sensor, big data, cloud computing and
other new technologies, Midea has built the biggest AI team in the household appliance industry, which
is committed to enabling products, machines, production processes and systems to sense, perceive,
understand and judge, driven by the combination of big data and AI, in order to reduce obstacles for man-
machine interaction to the minimum and create smart appliances without any assistance in interaction.
Focusing on “people and their family”, Midea builds a whole value chain of IoT. Breakthroughs have been
made in user data protection, content operation for smart scenes, smart connection technology, the smart
home ecosystem, cloud platforms, the smart voice function, the big data-based cloud housekeeper
services, etc. By doing so, Midea is able to offer complete smart home solutions for users, as well as to
empower its business partners.
Upon years of a digitalized reform characterized by “One Midea, One System, One Standard”, Midea has
successfully materialized operations driven by software and data through its value chain, connecting end
to end and covering R&D, PO, scheduling, flexible manufacturing, procurement, follow-up of product
quality, logistics, installation & post-sale services, etc. The Group’s cloud platform has made come true
C2M flexible manufacturing, platform-based and modularized R&D, digitalized production techniques and
simulation, intelligent logistics, digital marketing, digital customer service, etc. “M.IoT”, the Midea IIOT
Platform, has become China’s first complete IIOT platform provider covering industrial knowledge,
software and hardware. M.IoT focuses on building the SCADA platform, the industrial cloud platform, the
industrial big data platform and the industrial SaaS service to provide the standardized, cloud-based and
platform service, including C2M, supply coordination and solutions. It has developed over 20 platform
products so far. In addition to applying these IIOT platform solutions to its manufacturing bases across
the world and various products, the Group has also provided these solutions for over 200 customers in
different industries. Therefore, it is safe to say that Midea has built a solid foundation regarding IIOT
systems.
3.6 Sound corporate governance mechanism and effective incentive mechanism to provide a solid
foundation for Midea’s sustained and steady development
Paying close attention to the construction of a governance framework, regarding its corporate control,
centralization and decentralization systems, the Group formed a mature management system for
professional managers. The divisional system has been in operation for many years, and its performance-
oriented evaluation and incentive mechanism featuring full decentralization has become a training and
growth platform for the Group's professional managers. The Group's primary senior management team
consists of professional managers who have been trained and forged in the operational practices of Midea
Group. They have been working for Midea on average for more than 15 years, all with rich professional
and industrial experience, deep understanding of the home appliance industry throughout both China and
the world, and accurate understanding of the industry environment and corporate operations
management. The Company's advantages in such systems and mechanisms have laid a solid foundation
for the efficient and effective business operations, as well as the promising, stable and sustainable future
development of the Company. At present, the Company has launched six Stock Option Incentive
Schemes, three Restricted Share Incentive Schemes, five Global Partner Stock Ownership Schemes and
two Business Partner Stock Ownership Schemes for key managerial and technical personnel, marking
the establishment of a governance structure aligning the interests of senior management and core
business backbones with that of all shareholders, as well as the formulation of an incentive scheme
comprising long and short-term incentives and restrains.
Section IV Performance Discussion and Analysis
1. Overview
1.1 Industry Overview
A. Home Appliance Industry
According to the statistics published by the China Household Electric Appliance Research Institute
(CHEARI) and the National Household Electrical Appliance Industry Information Center, in 2019, the
domestic retail sales of home appliances was RMB803.2 billion, down 2.2% year-on-year; and the exports
of home appliances reached RMB303.4 billion, up 0.9% year on year. This was primarily driven by internal
and external factors such as a steep slowdown in global economic and trade growth, the full-scale
escalation of the China-U.S. trade conflict, a slowdown in domestic economic growth and the sluggish
real estate market. Affected by the COVID-19 outbreak, 2020 is expected to see increasing uncertainties
and fluctuations at home and abroad. Nevertheless, in the medium and long run, upgrading of the
industrial structure, stable increase of household income, diversified consumption, the national policy
support for the green and smart industries, as well as upgrading of the standards for home appliances
will create new opportunities and growth points. According to the 2019 Annual Report of China’s
Household Electrical Appliance Industry published by CHEARI and the National Household Electrical
Appliance Industry Information Center together, in terms of market size, the growth of traditional
categories of home appliances slowed down while new categories were still burgeoning. Manufacturers
continued to pursue high-end, smart and healthy home appliances in upgrading their products. Meanwhile,
consumer needs for healthy home appliances were intensified because of the COVID-19 outbreak. Air
purifiers and fresh air systems, washing machines with sterilization and drying function, as well as
dishwashers and light-wave stoves with an emphasized function of sterilization, etc. gained increasing
market attention.
In 2019, the domestic retail sales of air conditioners was RMB191.2 billion, down 3.4% year-on-year. In
terms of product performance, the market shares of variable-frequency and high energy-efficiency air
conditioners kept growing. On one hand, the market share of variable-frequency air conditioners rose to
over 85%, among which the market share of variable-frequency air conditioners with AFP Level I Energy
Efficiency increased by 8% to reach 57.3%. On the other hand, the higher energy efficiency standards in
2020 will boost energy efficiency upgrading and integration in the air conditioning industry.
In 2019, the domestic retail sales of laundry appliances was RMB70.5 billion, up 1.2% year-on-year. The
slight growth was attributed to significant product upgrading. In regard to product performance, the market
share of high-end products was increasing in a steady way, of which the market share of laundry
appliances with a unit price of above RMB6,000 was beyond 23%; clothes dryers were gaining consumer
attention, of which heat-pump clothes dryers took up a much bigger share in retail sales.
In 2019, the domestic retail sales of refrigerators was RMB95.7 billion, down 1.2% year-on-year.
Nevertheless, product upgrading was prominent. The sales of multi-door refrigerators continued to grow
with the market share being over 50% for the first time, and the functions such as sterilization, fresh-
keeping and odor-removing attracted attention in the industry. In the background of full-scale consumption
upgrading, innovative smart refrigerators represented by Midea’s Pesticide-Residue-Free Series (the first
of its kind in the world) that can degrade pesticide residue, Odor-Free Series that feature fast odor
removal and sterilization, and Micro-Crystalline Series are leading the market towards high-end, high-
quality and smart refrigerators.
In 2019, the domestic retail sales of kitchen appliances was RMB175.9 billion, down 0.6% year-on-year.
By product category, the sales of traditional products such as range hoods, stoves and water heaters
declined, while dishwashers excelled in sales. Driven by policies, the sales of kitchen waste disposers
rose evidently with great growth potential. The retail sales of dishwashers amounted to RMB6.8 billion,
up 21.5%, of which the built-in dishwashers were the mainstream with the function upgraded from
"cleaning" to "cleaning and drying". Functions such as "sterilization" and "drying" have emerged as the
new upgrading trends. Although the retail sales of water heaters slightly went down 1.7%, the
technological upgrading trend was still prominent. For instance, the remote control function of electric
water heaters and the zero cold water function of gas water heaters, among others, have become
increasingly popular on the market.
In 2019, the domestic retail sales of small domestic appliances was RMB128.9 billion, up 3.6% year-on-
year. As new product categories kept popping up, the overall sales of small domestic appliances
maintained a steady growth. Vacuum cleaners, rice cookers and blenders increased 3.2%, 3.5% and 1.4%
respectively in retail sales from last year. Meanwhile, both online and offline retail sales of handheld
vacuum cleaners recorded growth in the technological re-upgrading trend featuring intelligent recognition,
intelligent display and sweeping-mopping integration. With people’s increasing awareness for a healthy
life, the sales of hair-related and personal-care appliances also saw a remarkable growth.
In 2019, the online sales of home appliances continued to expand and squeeze the offline sales.
According to the data from the National Household Electrical Appliance Industry Information Center, the
online retail sales of home appliances in China amounted to RMB310.8 billion, up 4.2% year-on-year,
accounting for a market share of 38.7%; while the offline retail sales amounted to RMB492.4 billion, down
5.8% year-on-year, accounting for 61.3%. In light of the changes in the channel retail sales, most product
categories achieved growth in the online market, while various categories declined in the offline market.
Therefore, the online market is playing an important role in the consumer market of China. However, the
offline market still has superiority for high-end products and product suites, and remains the mainstream
channel for air conditioners, refrigerators, laundry appliances, kitchen and bathroom appliances, etc.
While e-commerce platforms are setting up offline physical stores one after another, traditional offline
channels are trying to develop their own business through e-commerce. The accelerated integration of
online and offline channels will gradually form a relatively stable channel structure.
B. Robotics and Industrial Automation Industry
According to the World Robotics Report 2019 published in September 2019 by the International
Federation of Robotics (IFR), global installations of industrial robotics slowed down in growth in 2018 for
the first time since 2012 and installations in 2019 were expected to be flat with the level in 2018.
Meanwhile, analyzing from distribution in different countries and regions, China remained the largest
market of industrial robotics, accounting for 36% of global installations, which was more than the
installations in Europe and America combined. Installations in the U.S. reached a record high for the
eighth consecutive year, with the installations in 2018 up 22% year-on-year. In 2018, the installations in
Germany, the fifth largest robotics market in the world, increased 26%. By product category, installations
of AGV robotics were up by 60% from the 111,000 units in 2018. And installations of medical robotics also
rose 50% year-on-year. Although there may be fluctuations in the global market of industrial robotics in
the short run, IFR predicts that the total installations of industrial robotics worldwide will increase by 12%
per year from 2020 to 2022 and reach up to 584,000 units in 2022 with the growing trend of automation
and technological upgrading.
According to GGII, the output of industrial robotics reached 186,900 units in China in 2019, down 6.1%
year-on-year. It is worth mentioning that the operating environment for the manufacturing industry has
improved and China’s output of industrial robotics kept increasing for the three months of Q4 2019, ending
a string of year-on-year declines in the last 13 months. By product category, delta robotics grew nearly
20% in unit sales in 2019, with breakthroughs in food, pharmaceuticals, household chemicals, logistics
and other industries; and collaborative robotics saw a growth of approximately 30% in unit sales against
the headwind in 2019. In terms of policy support, MIIT issued the 2019 Work Plan for the Task Force of
Industrial Internet to further promote the popularization and application of industrial internet and intelligent
manufacturing technology; NDRC and the Ministry of Commerce issued the Catalogue of Encouraged
Industries for Foreign Investment (2019) on June 30, in which the manufacturing sector remains a key
orientation for encouraging foreign investment, with more than 80% of added or amended items in the
national catalogue being within the manufacturing sector, and foreign investment in high-end, intelligent
and green manufacturing is encouraged. On November 15, 15 government departments including the
National Development and Reform Commission jointly released the Implementation Opinions on
Deepening the Integrated Development of Advanced Manufacturing and Modern Service Industries, with
the objectives of fostering new business models by integrating the two said industries, propelling the
construction of smart factories, accelerating innovative application of the Industrial Internet and promoting
flexible customization while at the same time deepening the integrated development of the manufacturing,
service and Internet industries, as well as promoting efficient integration of modern logistics and
manufacturing.
According to the latest statistics of IFR, in terms of industrial robotic density (the average number of
industrial robotics per 10,000 workers), Singapore ranks No.1 in the world with 831 robotics while South
Korea drops to second place. The robotic density of China has risen to 140, up 30% compared with that
in 2017 and far beyond the global average of 99, indicating great potential and prospects. Supported by
diverse factors such as flexible demands of the manufacturing sector, declining demographic dividend,
emerging markets and the development of innovative technologies, industrial robotics will be applied to
more and more areas.
1.2 Analysis of the Company’s Main Business
In 2019, guided by the core strategic objectives of “Leading Products, Efficiency Driven and Global
Operations” in a complicated political and economic environment at home and abroad, Midea focused on
improving products, implementing the core strategy of “Comprehensive Digitalization and Comprehensive
Intellectualization”, promoting high-performance operations in the whole value chain, continuously
optimizing its product mix according to the consumption upgrade trends, and constructing sustainable
competitiveness for the future through internal growth. As a result, the business objectives set for 2019
were successfully fulfilled, with higher profitability, further improving indicators such as own funds and
channel inventories, better product quality and reputation, as well as strengthened competitiveness in
various product categories and global operation synergies. For 2019, Midea achieved, on a consolidated
basis, total revenue of RMB279.381 billion, up 6.71% YoY; and a net profit attributable to shareholders of
the Company of RMB24.211 billion, up 19.68% YoY.
In 2019, the Company carried out the following main tasks:
A. Focused on users, developed innovative products and improved user experience,
strengthened product competitive advantages
In order to bring about the “customer-oriented” strategic reform, Midea focuses on product, service and
market touchpoints for users and markedly improves user experience in all the links. It builds a customer-
oriented innovative R&D system, involves customers in the whole R&D process, taps potential demand
of customers in different scenes, and offers customers better-than-expected product experience through
innovation. A digital user experience management system and an experience information platform have
been put in place to connect experience information and data at all touchpoints of a product life cycle,
boost customer satisfaction and loyalty, and achieve leadership in product experience. The system of
customers with membership has been reformed. Through continual online and offline operation of
customer groups, Midea encourages its existing customers to introduce new customers as a way to
achieve fission expansion of the customer base. Online platforms provide individualized shopping
experience by way of refining shopping paths and improving online consultation, while offline stores adopt
new retail, electronic and smart technologies to build whole-new flagship, home decoration, combo, new
retail and other stores. Meanwhile, by means of digital service, as well as platform-based and modularized
R&D and production, Midea takes the lead to explore the C2M model for its home appliance products,
offering single product customization and product suite customization for the whole house with the house
decoration considered. In terms of service, with the help of Internet tools, Midea goes beyond the
traditional service model to build a “service + Internet” platform, enhance the entire service team and
improve smart product experience, so as to increase customer satisfaction. In terms of innovation in
industrial design, Midea won a total of 93 international design awards during 2019, including 27 Red Dot
Awards, 34 iF Awards, 20 IDEA Awards and 12 G-mark Awards.
—— Residential Air Conditioners: Midea DF Air Conditioner Series, characterized by Dual Flow Tech
- counter-rotating airflow technology originating from aviation turbine, is another major innovative
breakthrough in the breezeless technology field, which has won the 2019 AWE Top Award. Through a
study on user demands for breezeless air experience tailored to “multiple family members and large
residential space”, and based on the application of three unique technologies, including disrotatory
turbine multi-vector softened disturbance, double-layer distance circulating air, and rectification and
supercharging, it achieves lower power consumption than conventional air conditions, free adjustment of
breezeless zones, and uniform room temperature up to 20 meters. Midea Freshness Air Conditioner
Series offers coziness in four dimensions, namely, air temperature, sensation, cleanness and freshness.
This product features intelligent dual washing technology and dual hybrid power new wind technology,
which enable the dust intercepted by the natural water dust filter to go through the dual cleaning by
washing and brushing, so as to keep the filter clean and achieve intelligent control of the room air quality;
it achieves large-range circulation of indoor air and enables room temperature to reach the set degree
quickly by using a high-performance heat exchanger system and carrying an independent double duct
structure; and it ensures slightly higher indoor air pressure than outdoor by adopting an innovative micro
positive pressure new wind approach to prevent outdoor air from coming into the room without being
processed. In 2019, Midea launched the first All-Time (Offline) Voice-Based Floor-Standing Air
Conditioner without a remote controller. Equipped with the pioneering Edge Intelligence Interaction (EII)
technology, this product can be controlled and connected through Local Area Network (LAN) when the
Internet is off, with a response time of only 1/4 of the industry average.
——Commercial Air Conditioners: As a leading HVAC provider worldwide, Midea Commercial Air
Conditioners is a leader in R&D strength, product technology and market performance. And the largest
domestic market share remained with Midea Commercial Air Conditioners in 2019 according to
ChinaIOL.com and the Mechanical and Electrical Information-Central Airconditioning Market magazine.
In recent years, Midea Commercial Air Conditioners have won the bids for a significant number of major
programmes. These programmes include the Beijing Daxing International Airport, Terminal 3 of Beijing
Capital International Airport, Terminal 2 of Guangzhou Baiyun International Airport, Shanghai Metro, Jilin
Railway Station, etc.
In 2019, Midea Commercial Air Conditioners showcased in Shanghai its technological innovation
achievements in the green airport area. Midea SR Residential Central Air Conditioner unveiled at the
same time has multiple industry-wide advanced key indicators, improving user experience with its key
functions of fast warm air, strong heating, temperature and humidity control, cozy wind sensation, strong
coolness in a high temperature and convenient control. In April 2019, Midea Commercial Air Conditioners
completed the production of its homegrown Maglev Variable Frequency Centrifugal Unit, which makes
Midea the first AC maker in China who is able to manufacture the maglev bearing, the maglev compressor
and the high power inverter all by itself. This marks the industrialization of yet another independent
innovation achievement by Midea Commercial Air Conditioners. In October 2019, Midea unveiled MDV7
Series All DC Variable Frequency Smart Cloud VRF featuring the first adoption of a homegrown large-
displacement DC variable-frequency enhanced vapor injection scroll compressor. This means that Midea
has once again broken the technology monopoly of foreign brands over key components of high-end
commercial VRF. In addition, Midea Commercial Air Conditioners’ “Wide-Ambient-Temperature Energy-
Efficient Air-Source Heat Pump Technology and Its Industrialization” won China Machinery Industry
Federation Sci-Tech Progress Award (Second Prize), “Efficient Air-Source Heat Pump-Based Heating
System and Its Application” won Ministry of Education of the People’s Republic of China Scientific
Progress Award (First Prize), “Research and Application of the Energy-Efficient Technology for the Midea
Building Management System (M-BMS)” won China Energy Conservation Association Sci-Tech Progress
Award in Energy Conservation and Emission Reduction (Second Prize), “Efficient Centrifugal Heat Pump
Unit” and “Research of the Dual-Tube Heating and Heat Recovery Technology and Its Application to VRF”
are both recognized as “Innovation Achievement in the HVAC and Refrigeration Industry at the 70th
Anniversary of the Founding of the People’s Republic of China” by Chinese Association of Refrigeration.
Midea is also given an Outstanding Contribution Award in the air-source heat pump industry during the
“Clean Winter Heating” program for its excellent performance in the heat pump market. In addition, by
virtue of its outstanding product and technological strength and market influence, Midea wins the title of
the “First-Choice Central Air-Conditioner Brand for Procurement by Chinese Real Estate Enterprises”.
——Laundry Appliances: Little Swan under Midea has launched Water Magic Cube II Washing Machine,
which adopts the unique “Ultra Fine Bubble” technology. Its unique Ultra Fine Bubble generator
transforms water and air into billions of nano bubbles, which permeate into fiber and release huge energy
to peel off dirt. This approach helps reduce the consumption of chemical detergent through greater
micromechanical force while removing dirt in an efficient and fast manner. It has been proved by an
authoritative national testing institution to be able to save around 50% detergent. Little Swan has
launched the “One-Tub Tech (OTT)” Top-Loading Washing Machine, featuring the revolutionary “One-
Tub Tech (OTT)” + “No-Hanger-Rod Damping Pyramid System”. The no-outer-tub design goes beyond
the inner-and-outer-tub structure of a conventional top-loading washing machine, offers a big capacity in
a compact size, and saves energy and 30% water for the same capacity. With the entire inner tub made
from stainless steel, the no-outer-tub design, the UV sterilization technology and the nano silver ion
technology, it creates a 100% clean washing environment. As the first of its kind in China, Beverley Heat
Pump Washer-Dryer adopts intelligent sterilization breathing light technology and has passed the
authoritative certification of SGS, a world-leading testing and certification institution. The ultra low
temperature heat pump washing-drying technology applied in this product has passed the German VDE
certification, which is considered the Nobel Prize in the electrical appliance sector. It offers professional
washing of clothes made from high-end fabrics. Beverly Household Washing Care Center is the world’s
first heat pump intelligent washing care center with separate drying and washing sections and the washer-
dryer with the largest capacity (12KG for the upper dryer+ 12KG for the lower washer). While the upper
dryer is a maximum heat pump washer-dryer that works efficiently, saves water, performs drying in low
temperature and effectively removes acarids and bacteria, the lower washer adopts the “Ultra Fine Bubble”
technology. Midea Chujian Front-Loading Washing Machine Series adopts the revolutionary ventilation,
Toshiba direct drive and micro steam air washing technologies to solve consumers’ pain point of being
unable to wear the clothes immediately after washing. Meanwhile, the Water Magic Cube cold washing
technology protects clothes from wear and tear through smart control of the washing pace, and can
automatically put in the right amount of detergent by sensing the water volume and the weight of clothes
in a smart manner.
——Refrigerators: In June 2019, Midea unveiled three whole-new refrigerator series. The Micro-
Crystalline Series adopts the V-Tech Smart Fresh-Keeping Chip, as well as the “Five-Dimensional Radar
Temperature Sensing” and “Light Freezing Smart Cool Air Distribution” technologies. Meanwhile, the
upgraded micro-crystalline technology it carries can do better in freshness preservation for different food
characteristics. It also features better technique and quality, as well as a more stylish appearance,
satisfying different needs of more families. The Pesticide-Residue-Free Series is the first refrigerator with
both functions of fresh keeping and pesticide residue degradation. It adopts the core technologies of
“Space Deep UV Light Wave” and “Titanium Photolyase” with massive active photoions to achieve
thorough degradation of pesticide residue. It can remove hundreds of pesticides in 13 major categories.
According to the laboratory test result of the authoritative institution SGS, it can degrade 98.5% pesticide
residue at the most. The Ultra Odor-Free Series features the globally pioneering PST + super magnetic
electrolysis odor-free technology, which is the third-generation technology of its kind jointly developed by
Midea and a research institute of China State Shipbuilding Co., Ltd. It releases more active ions to quickly
degrade and kill odor and bacteria with a groundbreaking super magnetic induction electrolysis device,
and quickens the degradation of odor through high-activity metal catalyst, which takes only 19 minutes.
——Kitchen Appliances: In 2019, Midea Variable Frequency Smart Smoke Control Series Range Hood
(E62S/E88) made its debut in China. Its Smart Smoke Control system can automatically identify smoke
changes and provide a right exhaust mode, saving the trouble of manual operation in the middle of
cooking. Also, the AI chip it carries is able to automatically adjust the fan system to reduce the noise
based on its smoke curve algorithm, so as to offer a better cooking environment. Meanwhile, Midea has
launched the first smart gas stove featuring automatic cooking in China. It can automatically fry, make
soup, steam, etc. The technology to match the right duration and degree of heating with the food, together
with the before-boiling heating switch and bipolar emulsion technologies, can help increase nutritional
content such as protein, amino acid and sarcosine in the food. Midea Storm Series P30 Dishwasher is
the first smart combo of washing, sterilization, drying and storage with a large capacity. Supported by key
patented technologies such as hot air drying and silver ion anti-bacteria storage, its 72-hour anti-bacteria
storage function is VDE certified. Midea has successfully developed a universal global dishwasher
platform with the pioneering 5MAX deep cleaning system, as well as key innovative technologies
including separate washing, UV multi-sterilization, double-pump hot air drying, long-term anti-bacteria
storage of tableware, etc. This platform is dedicated to developing Chinese-style dishwashers integrating
washing, sterilization, drying and storage. Midea MRO1890-600G Reverse Osmosis Water Purifier with
the pioneering “Large-Capacity Integrated Filter Technology” features a 5-times larger capacity,
representing another technological breakthrough subsequent to the small-capacity integrated filter
technology. Also, it can show water quality, distribution and the status of filter life, as well as automatically
change the filter without interrupting the normal water purification process. It has won the Annual
Technological Innovation Award at the 15th China Household Appliances Innovation Award. The industry’s
first Purifier-Dishwasher E500B with the micro nano bubble function released by Midea uses a double
pressure transducer system to generate pure physical micro nano bubble water, which removes dirt and
pesticide residue from fruits and vegetables in a more thorough manner. Its tank-free large capacity of
500 gallons satisfies the whole family’s demand for healthy water. Midea MNF1979-50G, the first
countertop pump-free power-free water purifier, adopts the ultra-low pressure hydrophilic film that needs
no power. It also features an innovative 180°rotatable base, super-low noise, convenient installation, a
super-large capacity of 2.5L, etc. Midea Magnetic Purification Water Heater 32QE6 is the first of its kind
to have a full-star certificate. It displays the inner tank cleaning time on the screen in real time and reminds
of timely cleaning. Meanwhile, its function of intelligent power conservation of 40% is VDE certified. Midea
T3 Series Gas Water Heater is the first water heater with a dual-duty pump that enables instant heating.
In addition to instant heating, it features smart pressurization, which solves the waiting and not enough
hot water problems for users in a disruptive manner. It has won China Household Appliance Industry
Jinshi Award. Beverly Constant Temperature I8 Water Heater can maintain a constant water temperature
during a shower with its temperature buffering technology. It also features TFT big-screen smart control
and an outstanding appearance. It has won the AWE Product Award and the IFA Technical Innovation
Award. Midea Intelligent Micro Combi Steamer PG2310 Cooking Oven has been released into market
integrating the functions of microwave, steamer and oven. The ZOPPAS direct-spray steam technology
it uses enables quick generation of plentiful steam and the five-switch intelligent variable frequency
heating technology brings precision heating. It also carries a smart menu. On top of the aforesaid, Midea
has been making breakthroughs in key component technologies including the magnetron, the heater-
vent-air module and the steam generator.
——Small Domestic Appliances: In 2019, Midea unveiled a variety of disruptive lifestyle appliances
with the brand value concept of “technology, fashion, convenience and durability”. The products include
the industry’s first low-sugar rice cooker specifically designed for people with hyperglycemia, which is
certified by China Household Electric Appliances Research Institute (CHEAR). It adopts the innovative
sugar leaching technology to reduce the reducing sugar by 50%. The fuzzy logic algorithm technique
based on precise temperature control and the multi-staged pressure regulation technology based on
precise pressure control carried in this product help offer a healthy cooking system. Midea High-Speed
Variable Pressure Boiling Series Pressure Cooker with Midea’s innovative maglev air compressing
technology offers 12 pressure choices to enable continuous boiling under different pressures for different
food. Midea’s unique Ultra Thin Noise-Free Blender carries three key technologies, namely, eccentric
blending (a homegrown technology that has won the China Patent Gold Award), smart frequency blending
and high-power three-dimensional uniform heating. It blends food ingredients thoroughly and finely to
help release more nutrition. Midea Seasons Fan Heater is an innovative combo of fan, humidifier and
heater for all seasons. It is equipped with the patented heating-and-cooling switching technology. It can
cover a large space and rapidly increase the sensible temperature by over 20% through
“heating+humidification” and a wide-angle swing. Meanwhile, supported by the Archimedes spiral air
channel and a 90mm ultra-large cross-flow rotor, it can reach a speed of 185m/min, which is five times
faster than the ordinary fan heaters. The humid wind enabled by its humidification function can bring
much more coolness than an ordinary tower fan. Midea P6 Wireless Handheld Vacuum Cleaner adopts
a high-power digital motor and a large-capacity lithium battery pack to enable it to continuously work for
60 minutes. The exclusive fallout system in the dirt cup equipped with the patented two-stage single-cone
filtration technology can apply micropressure on the indrawn dust and hair so that they will fall on the
bottom of the dirt cup instead of intertwining. Midea Smart Robot Cleaner i5E features a strong suction
of 4000Pa, G-SLAM autonomous path planning, a wet-mopping function with three water volumes, anti-
bumping, anti-falling and automatic recharging. Carrying a 360° HD camera, it is capable of smart control,
video recording and voice communication through a mobile App for smart cleaning planning for the entire
house.
B. Continued to invest in R&D to build a global R&D platform and a responsive innovatoin R&D
system
Midea continued to invest in R&D, made innovations with respect to mechanism, and developed more
leading products through both excellent user experience and differentiated technologies. It kept reforming
its product development model according to the strategic objective of “Leading Products”. An innovative
R&D model of “Three Generations” has been put in place, namely, “Generation I product development,
Generation II platform research, Generation III technologies and product concepts research”. Innovation
research is carried out on innovative product development, cutting-edge platforms, key components,
differentiated selling points and basic product performance improvement. Through development of
product groups across the world and building of a global product platform, Midea is building “Leading
Products”.
While carrying out the core technology research, Midea has attached great importance to the
transformation of R&D achievements. In 2019, 25 scientific and technological achievements made under
the leadership of Midea were all certified as “Internationally Advanced” upon authoritative technical review,
including “the Research and Industrialization of Key Technology of Body Sensing and Interaction of Room
Air Conditioners”, a key R&D project under the national 13th Five-Year Plan - “the Integrated Technology
of High Seasonal Energy Efficiency Heat Pump Room Air Conditioners for Areas with Hot Summers and
Cold Winters and the Application”, “the Research and Application of the Monolithic Highly-Integrated
Intelligent Power Module”, “the Research and Application of Key Technology of the R290 Room Air
Conditioner Working in an Ultra-High Temperature”, “the Research and Application of Key Technology of
Breezy Room Air Conditioners”, “the Research and Application of Key Technology of Smart Cleaning and
Ventilation of Room Air Conditioners”, “the Research and Application of Technology of High Efficiency
Opposed Variable Frequency Centrifugal Compressors”, “the Research and Application of Micro Channel
Refrigerant Heat Dissipation Variable Frequency Technology”, “the Research and Industrial Application
of the Big-Inch Integral Axial Flow Fan for Central AC”, “the Research of the Three-Tube Heating and
Heat Recovery Technology and Its Application to VRF”, “Midea Vandelo Strong-Drive Fast-Cleaning
Front-Loading Washing Machine”, “the Research and Industrial Application of Key Technology of Cooking
Healthy Food to Control Blood Sugar”, “the Research on the Precision Diet Management System and its
Application in Intelligent Household Appliances”, “the Application of Electromagnetic Isolation Technology
in Power Frequency Microwaves”, “the Application of Micro Perforated Plate Noise Reduction Technology
in Household Appliances”, “the Research and Application of Key Technology of Vision Inspection and
Clothes Washing of Smart Washing Machines”, “the Research and Application of the Food Sensing and
Directed Heating Technologies of Smart Ovens”, “the Research and Application of the Voice Interaction
Technology of Smart Household Appliances”, “the Research of Galvano-Cautery Inhibition Technology
for Bearings of Brushless DC Motor”, “the Research and Application of the Energy-Efficient Technology
Featuring Self-Learning Based on Water Using Habits for Household Electric Water Heaters”, “The
Research of the Electronic Thermostatic Technology and Its Application to Household Electric Water
Heaters”, “the Research and Application of Key Technology for Exhausting Steam, Removing Fog and
Reducing Humidity in Steaming, Baking and Cooking Products”, “the Research and Application of
Vacuum Cleaner High Speed BLDC Drive Technology and Integrated Master Controller”, “the Research
and Application of Technology for the Quality of Microwaved Food”, and “the Research and Application
of Miniaturized Hot Air Technology Based on Baking Uniformity”. Additionally, Midea has 12 scientific
research projects winning the China Light Industry Association Sci-Tech Progress Award, the China
Association for Promotion of Private Sci-Tech Enterprises Sci-Tech Progress Award, the China Machinery
Industry Federation Sci-Tech Progress Award, the China Energy Conservation Association Sci-Tech
Progress Award in Energy Conservation and Emission Reduction, the Ministry of Education of the
People’s Republic of China Sci-Tech Progress Award, and certain provincial sci-tech awards. At the 41st
Meeting of the Parties to the Montreal Protocol in July 2019, the UN agency highly praised Midea’s R290
air conditioner technology for promoting the implementation of the Kigali Amendment, which has made
important contributions towards enhancing the role of the air conditioner industry in global environmental
protection.
In 2019, against the backdrop of the patent quality improvement campaign, the Company focused on the
quality instead of quantity in terms of patents and achieved remarkable results. 2,704 invention patents
were granted to Midea by the Chinese patent office during the year, the largest number among home
appliance makers. Also in the year, Midea lodged 13,525 patent applications at home and abroad, of
which over 50% were invention-related and overseas applications more than doubled the number of last
year. By the end of 2019, the total number of patent applications of Midea (inclusive of TLSC) exceeded
140,000 and 57,000 patents were granted. As shown in the “Public Announcement on the Results of the
21st China Patent Awards” issued in 2019, Midea’s “High-Frequency Fast Cooling and Heating AC
Technology” won a China Patent Gold Award. In addition, the “Intelligent Power Module” and other
technologies of Midea won 2 China Patent Silver Awards and 15 China Patent Excellence Awards, as
well as 2 Invention Gold Awards at the 6th Guangdong Patent Awards. These awards signify that Midea’s
strong capability of innovation is widely recognized.
Midea Group has been sticking to the double drivers of “product innovation + standard innovation” and
making active steps towards contributing to the standardization of industrial technologies. In 2019, Midea
Group took part in the formulation/revision of 554 standards, including 21 international standards, 213
national standards, 128 industry standards and 192 group standards. These standards include the
national standard of the Minimum Allowable Value of the Energy Efficiency and Energy Efficiency Grades
for Room Air Conditioners which brings about a new round of energy efficiency upgrade in the air
conditioning industry, as well as national and industry standards such as the Interoperability of Smart
Household Appliances System—Parts 1~5, the Technical Specifications of Voice Module, the Technical
Specifications of WiFi Module, the Safe Service Life Standard for Air Conditioners, the Installation Rules
for Protective Tubes of Room Air Conditions, the Clothes Washing Machines for Household Use -
Methods for Measuring the Performance (IEC 60456), the Tumble Dryers for Household Use-Methods
for Measuring the Performance (GB/T 20292-2019), the Micro-Bubble Washing Machine (T/CAS 367-
2019), the Technical Requirement and Test Method for Low Temperature Washing Performance of
Washing Machines (T/CAQI 84—2019), the Technical Requirement and Test Method for Non-Washing
Pesticide Residue Removing Appliances, the Technical Requirement and Test Method for Freshness
Preservation in High Humidity in the Freezing Chamber of Refrigerator, the Requirement and Test Method
for Freshness Preservation of Meat in Refrigerator, the Proposal on Electric Dishwashers for Household
Use–Methods for Measuring the Performance for Asian Tableware (IEC 60436), the Household Electric
Cooking Appliances—Part 2 (GB/T 38051.2-2019), the Residential Gas-Fired Heating and Hot Water
Appliances with Auxiliary Energy (GB/T 38350-2019), the Minimum Allowable Values of the Energy, Water
Consumption and Grades for Dishwashers (GB 38383-2019), and the Technical Requirements and Test
Methods of Household and Similar Saving Water Dishwasher (QB/T 5428-2019). Meanwhile, Midea
works with China Electric Apparatus Research Institute to establish an IEC/TC72/WG13 smart home
appliance controller workgroup to push forward the formulation and implementation of the relevant
international standards. Additionally, Midea and China Household Electric Appliances Research Institute
together have completed the upgrade and implementation of the new technical specifications for the
certification of breezeless air conditioner.
C. Deepened the channel transformation, further improved the channel efficiency and rebuilt the
retail service ability
Midea continued to promote channel reform and transformation, flatten offline channel hierarchies,
propelled the optimized integration and empowerment of distributors, firmly continued to reduce
inventories, optimize structure and streamline SKU, and substantially improve channel efficiency. It
strengthened the synergy of domestic sales of full product categories; Midea has established over 30
regional market operation centers nationwide; by carrying out more precise joint promotional activities for
diverse categories, it drove the synergy of domestic sales towards improvements and upgrading and
reinforced the long-term sustainable development capacity of channels. Midea strove to expand the sales
in the engineering channel and enhance its B2B competitiveness. To better cater to the needs of
corporate users, it has established long-term strategic cooperation for procurement with the domestic top
50 companies in the real estate industry, long-term leasing apartment chain operators and financial and
insurance companies. Midea aims to provide corporate customers with one-stop smart product solutions.
At the same time, Midea attaches great importance to improving the service quality of strategic
procurement projects. Through the systemic management of “Selection, Appointment, Cultivation and
Retainment” over regional service providers, Midea builds a localized service network for all of its product
categories covering the entire China. It integrates installation service resources, identifies user needs in
an accurate manner, boosts customer satisfaction and builds up its core competitiveness for the B2B
business.
With the rising of different consumer circles and fragmented communication, online and offline markets
integrate at a faster speed, and Midea rebuilds its retail and service capabilities to meet different user
needs. With user demands driving the retail transformation, Midea speeds up the integration of online
and offline networks, focuses on the demands of different user groups, and restructures the retail
operations system. This mainly involves three aspects. Firstly, it provides one-stop, intelligent product
and service solutions for users with house decoration demands. It has opened more than 260 Midea
Smart Life Experience Centers in China and upgraded over 770 flagship stores into Midea Smart Life
Experience Centers, providing products and services for more than 200,000 families. Secondly, Midea
studies the whole new lifestyles of young consumers and develops a more efficient service delivery
approach for the Millennial Generation. It provides products featuring both good experience and functions
by better understanding user demands through data platforms. Meanwhile, it focuses on user data
analysis, opens up the channel for converting entrance products to related products through
advertisement placement on new media, steadily increases the ratio of packaged purchase, and builds
the ability to market home appliance packages. Thirdly, by identifying the characteristics of different
markets and distributing more resources, Midea builds a full-coverage and high-penetration retail network
targeting users in different cities and regions to enhance the retail service experience, renew and upgrade
its retail system and extend the reach of its network. Specifically, on one hand, it promotes the project of
deep collaboration of supply chains together with e-commerce platforms, achieves accurate prediction,
intelligent distribution of inventory and automatic restocking through data support and system connectivity,
and develops smart supply chains for fast response to user demands. On the other hand, in terms of the
offline channels, it brings one-stop services to users by closely cooperating with large chains and
shopping malls in various first- and second-tier cities. In the vast third- and fourth-tier cities, in addition to
providing full-category products and services through flagship store and exclusive store systems, Midea
builds over 1,000 new multi-category exclusive stores to further improve the market coverage of its retail
system. In less developed markets, it offers convenient products and services to users through a network
of nearly 100,000 retail stores.
Midea enhances the quality of its user service system. On one hand, it builds an operations platform
internally based on user data assets, develops a layered operations system facing users, links online and
offline data, unifies Midea members’ identity, entitlement and assets, establishes unified member profiles,
provides more member privilege services and strengthens members’ identity awareness. Different
operations for different levels and scenes are made possible based on user data integration, and joint
services for multiple scenes are realized through targeted introduction of customers and acquisition of
customers by way of live streaming. In 2019, the cumulative number of Midea members exceeded 35
million, contributing over RMB5.5 billion of sales. On the other hand, it further improves the delivery-
installation integrated service network, which offers users one-stop after-sales service solutions in respect
of all household appliances. By 2019, it has completed the delivery-installation integrated service network
which covers over 2,600 districts and counties across the country. In addition to the existing traditional
door-to-door service and delivery-installation service, Midea has also launched various individualized
services including send-for-repair, exchange and pick-an-engineer-for-door-to-door-service in an effort to
satisfy differentiated needs of customers in different scenes. Meanwhile, it beefs up its effort in eliminating
poor services by publicizing service standards and fees and establishing channels for user
communication and feedback to ensure fast response to and closed-loop processing of user needs.
In 2019, under the background of Midea Group promoting the T+3 business model deep reform, Annto
further promoted the logistics reform and completed the implementation of the unified warehousing and
distribution strategy across the country, which has provided a strong support for the improvement of
circulation efficiency of the sales channels. Focusing on the construction of the e-commerce logistics
network, Annto established 99 pre-warehouses for e-commerce and completed the basic work for an
online and offline stock sharing system, which has greatly improved its distribution capability. In terms of
business expansion outside Midea Group, Annto closely focused on its core business of integrated
warehousing and distribution services. With warehousing networks at different levels being connected,
Annto can distribute from one warehouse and multiple warehouses to anywhere in the country for clients
outside Midea Group. A logistics service platform covering various industries, product categories and
scenes has been put in place. Meanwhile, client service experience has further improved through
enhancing direct purchase of transport capacity. In 2019, the urban distribution and home distribution
business scale of Annto saw a year-on-year increase of nearly 350%, with a steadily increasing market
share. During its engagement in the Double 11 project of Tmall, Annto ranked among the top large piece
delivery cooperators of Cainiao in the ratings by Tmall buyers, ranked first among these large piece
delivery cooperators of Cainiao in all the five service indicators, and won the “Double 11 Top Award”. In
addition, due to its excellent services, Annto was granted the 2019 Red-Top Award—“Excellent High-End
Home Appliances Logistics Service Provider”.
D. Steadily promoted Midea’s globalized business layout, enhanced localized operations
overseas and accelerated the cooperative integration of Toshiba Project
Midea further promoted its global business layout to solidify its global competency. It formulated a global
supply cooperative mechanism, strengthened localized operations overseas, and promoted product
globalization. Its overseas business spans more than 200 countries and regions in North America, South
America, Europe, Asia, Africa and Oceania. Meanwhile, guided by the market and focusing on users,
Midea builds a global user research network with foresight. Midea Germany Research Center is newly
established to strengthen research on the needs of European users. And more resources have been
provided for user research centers in the U.S., Italy, Brazil, India and Singapore. In 2019, Midea continued
to advance international corporate governance by adjusting measures to local conditions, reinforced the
integration of R&D, production and sales systems in regional markets, and further strengthened cohesion
effects. Midea proactively expanded and reasonably planned overseas production layout, beefed up the
management of overseas production bases and the enhancement of efficiency, enriched the product
portfolio for overseas markets, improved local manufacturing capacity to deal with uncertainties in global
trade. Meanwhile, it strengthened its ability of allocating resources to production bases worldwide
according to global trade changes. Continuous efforts were made to expand marketing channels and
reinforce the retail capability. The number of retail outlets overseas has surpassed 30,000. Meanwhile,
digital management has been achieved at the retail end through the IRMS system and shopping guides
have been trained for 12,000 person-times cumulatively, with an increasing retail channel share. A
portfolio of Midea’s own brands for overseas markets comprising COLMO, TOSHIBA, MIDEA and
COMFEE has been established. Each brand has their positioning, target users and product portfolio.
They enter major markets and channels, boost consumer recognition and expand their influence in the
overseas markets. The construction of the overseas e-commerce network was completed, and the
middle- and back-end systems have taken shape. Midea keeps working on the traditional American and
European markets, carries out planning for emerging markets in a swift manner and fully prepares for
development in the overseas e-commerce market. Midea has successfully launched popular products for
all major categories of home appliances, some of which have become the most popular of their respective
kinds and have been granted the “Bestseller” and “Amazon Choice” marks. Based on the “International
632 Project”, Midea integrated overseas business systems and processes to build a digital data platform
for operating decision-making, which can help improve the abilities to seize business opportunities and
identify risks through data connection and sharing on the platform. It strengthened the consistency of
such processes as the PSI (Purchase Sales Inventory) management model, the management of product
life cycle, and spare parts management and services of overseas branches and promoted the consistency
and collaboration of Midea’s commercial languages and systems to increase its operational efficiency. It
set up the global service platform and accelerated the building of overseas service capacity. A global
platform integrating the call center, service quality tracking, spare parts deployment and technical training
has been put in place as a way to improve the global service response capability and the proactive service
capability.
In 2019, TLSC continued to focus on the core white goods business, promoted the synergy and unification
of value chains with the business divisions of Midea Group on all fronts, optimized product structure to
increase gross profits and continually improved profitability. It recorded a considerable year-on-year
growth in the profit before tax and a profit for two consecutive years. In particular in the Japanese market
with fierce competition, TLSC saw continual increases in its market shares of air conditioners,
refrigerators and washing machines. It implements a business division system to further simplify
functional departments, boost management flexibility and enhance the matching of powers and
responsibilities. Meanwhile, it works with relevant business divisions of Midea in global market planning
and strengthens their synergistic effects in brand building, channel development, R&D and innovation,
integration of supply chain and quality improvement. The revenue generated by these cooperation
projects worldwide saw a remarkable growth in 2019.
E. Stepped up the industrial internet and digitalization programmes to thoroughly improve
operational efficiency of the whole value chain
Focusing on users and user experience, Midea continued to promote industrial digitalization, deepened
C2M and the T+3 business model in the whole value chain, promoted innovation synergy of 5G and the
Industrial Internet platform “M.IoT”, and built iconic Industrial Internet factories. It kept promoting digital
transformation in the 3D digital model, Digital Twin, intelligent scheduling, self-developed MRP, intelligent
logistics, EHS, energy management, etc. M.IoT supports equipment access, protocol analysis and edge
data processing through the SCADA system to provide data support for production management,
production process refinement, equipment maintenance, etc. Based on the 5G, intelligent gateway and
other technologies, M.IoT simplifies the underlying connection to be accessible to industrial equipment in
various scenes. A digital closed-loop management system—TPM has been put in place to enable fast
response and upgrade, automatically analyze malfunctions, improve the fault database, effectively
reduce the abnormal downtime of equipment, monitor the equipment status in real time, automatically
remind about maintenance plans as well as the turn-on-and-off time, and increase the uptime and output
rate of equipment. So far, the M.IoT platform has been applied to Midea’s AC, laundry product and
microwave oven production lines, among others.
Midea continued to optimize and extend the applications of the Channel Collaboration System (CCS) 2.0,
the Midea Cloud Sales and the Retail Management System (RMS) in its direct supply to retailers in
counties and towns, KA/TOP, e-commerce platforms, home decoration stores, etc., so as to support the
T+3 business model reform program. The WeChat mini app of “Midea Home Delivery” provides offline
stores with an instrument of online channeling, terminal sales and member operation, in order to facilitate
the digital transformation of terminal stores. Multiple digital system tools are used to support the retail
coordination program and improve user experience in every link. Transparent and uniform rates of
installation and repair are made possible by deepening the smart customer service application in a bid to
improve customer service experience. Meanwhile, to encourage repeat purchases, a “backpacker” model
is promoted in after-sales service through the WeChat mini app of “Midea Home Delivery”. The Company
introduces house decoration design software, develops the suite design capacity of household scenario,
and builds an app for one-stop buying needs of various household appliances to provide consumers with
all household appliance solutions and one-stop shopping experience. In the user experience reform
program, relying on tools such as CMS, big data, the Midea Engine app and CSS, Midea focuses on
home decoration store transformation, shopping guide reform and retail system building, after-sales
service innovation, product suite sales, and integration of the entire chain, so as to improve the business
model. Based on inventory transparency and synergy of physical goods on the whole channel, Midea
opens up the information flow of synergistic warehouse, establishes whole-channel inventory sharing and
digestion rules, and enables the automatic adjustment system of the channel inventory level, so as to
implement shared inventory management and increase inventory turnover ratio.
Midea continues with international digitalization. With the “International 632 Project” as the core, full
digitalization support is provided for finance, R&D, the supply chain, marketing, after-sales service and
operation. The “International 632 Project” was promoted in 17 overseas operating units in 2019 to boost
the efficiency of the whole value chain. Closed-loop management and budget control have been achieved
in all the financial systems across the world, and financial and accounting standards in different regions
have been connected. Empowerment of overseas channels has been accelerated, with the channel
management system covering over 1,000 distributors overseas. The global big-data-based analysis
platform helps monitor more than 50 indicators in 8 major areas, which breaks the boundaries of space
and time to provide operating service support around the clock. Meanwhile, the global order processing
mechanism (OPM) was launched for test. Based on visualized production capacity, the mechanism can
carry out order scheduling through multi-dimensional computing and distribute orders to manufacturing
bases across the world in a smart, efficient and accurate manner. It can also effectively connect overseas
marketing and manufacturing in a digitalized and visualized manner.
Midea continues to further promote the business application of AI by fully covering the business scenarios
of intelligent manufacturing, intelligent operations and intelligent offices based on the three AI platforms
of quality testing, facial recognition and optical character recognition (OCR). While rapidly reproducing
and promoting such pilot projects as PCB testing and ink-jet testing, it proactively explores the application
of vocal print quality testing and digital fool-proof of accessories. The quality testing platform has
optimized the efficiency and accuracy of quality testing through visual and auditory simulations. The facial
recognition platform has incubated a number of individualized applications, including multi-person
recognition sensor-free door access control, gate machine access control, key post recognition, intelligent
conference room and facial recognition payment, empowering Midea’s business innovation in buildings,
logistics and marketing. The OCR platform enables document digitization and office automation, in which
only a few employees are required to efficiently and accurately process the notes that used to be
processed by over 300 office centers nationwide, saving massive resources and manpower.
Midea continues to deepen data application. It sets up the Group’s data decision-making center by
combining internal data and external internet data, and develops the digital operation platform and the
operations analysis module at the mobile terminal. It builds the data consistency platform for the entire
group. Following the white paper for data operation, a data driven closed-loop system has been put in
place, which covers business breakdown, early warning, improvement and resumption. Midea achieves
the visualization of whole-range operations data through the digital operation platform to identify
operational problems immediately. Meanwhile, it establishes the early warning and urging mechanism to
provide a powerful data driven tool for operation and management.
Midea fully promotes the application of cloud computing. Through its platform cloud program, Midea
formulates clouds of Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a
Service (SaaS) to support its strategy of digital transformation. Through the building of container cloud
and hybrid cloud, with container cloud providing unified software delivery standards as well as the
separated application and running environment, the IaaS platform is able to transfer business applications
seamlessly among container services of Nanhai Data Center and public clouds. As a result, multi-cloud
services are formed to reduce costs, increase stability and enhance the capacity of processing massive
data flow during business peak periods such as “Double 11” and “618”. Upon the integration and
refinement of Midea’s IT system technology and business capability, the PaaS platform with a uniform
microservice framework and gateway, provides uniform services of 22 technology components and 11
business components for Midea’s internal systems, which has successfully helped reduce costs and
improve quality. While extending to more components, the PaaS cloud also starts to provide service
externally through a developer program. The SaaS platform targets corporate customers. Based on IaaS
and PaaS, the SaaS platform provides complete management of applications through their entire life
cycles and full customer service. It lowers the threshold for small- and medium-sized enterprises to gain
cloud access. It also provides a one-touch function to active business applications. With purchasing cloud
as a trial program, Midea has provided SRM cloud, sourcing cloud, risk control cloud and other SaaS
services for over 3,000 corporate customers.
F. In view of consumption stratification, launched multiple new brands and product suites to
empower retail sales, enhanced the retail performance
Since late 2018, Midea has launched a number of new brands, including COLMO targeting high-end
consumers, BUGU targeting online consumers, WAHIN targeting young consumers. Integrating cutting-
edge technology and rational aesthetics, COLMO launched multiple new products for high-end customers
in 2019. It released the BLANC product suite at Appliance&electronics World Expo (AWE) in March 2019,
new AI-powered home appliances for various scenes including the TURING Air Conditioner, the Mantle
Lava Series Refrigerator and the Phase Change Water Heater at Internationale Funkausstellung Berlin
(IFA) in September 2019, and the TURING Commercial AC in Shanghai in November 2019. Cumulatively,
COLMO has launched 23 new products for the high-end market, covering living room, laundry, kitchen
and bathroom scenes to create a new smart life of connected home appliances for high-end consumers.
COLMO equips its products with advanced technologies. All the five products of the BLANC product suite
are certified by China’s Ministry of Light Industry as internationally advanced, of which the BLANC
Washing Machine has won the first Wu Wen Jun AI Science & Technology Award in the washing machine
industry, the top AI award. In 2019, COLMO won a significant number of design and technological
innovation awards at home and abroad, including the iF Award, the Red Dot Award, the AWE Product
Award, the AWE Innovation Award, the IDG Technical Innovation Gold Award, the IDEA Award, the Good
Design Award and the Red Star Award. At the 2019 World Artificial Intelligence Conference (WAIC),
COLMO unveiled the White Paper on AI-Powered Home Appliances, initiating a reform of the “AI-
Powered Future”. In terms of channel expansion, COLMO made active efforts to explore online and offline
new retail models in 2019. For online channels, it has established flagship stores on various platforms.
For offline channels, it has put in place a national network with focus on the first- and second-tier cities,
which comprises nearly 2,000 outlets including exclusive stores and flagship stores. By the end of 2019,
these outlets had a total of nearly 100,000 members in approximately 80,000 families. In branding,
COLMO keeps working on its target customers. Through sports event sponsorship and commercial
events, it aims to build a high-end brand image and convey its brand spirit. In 2020, upholding the brand
philosophy of “Technology Serve the Nature of Life and Design Maximize the Value of Rationalism”,
COLMO will, on the basis of AI-powered home appliances, place more emphasis on design with rational
aesthetics and launch whole new product suites.
To meet the needs of modern users in the Internet era, the internet brand BUGU was unveiled at AWE
Shanghai in March 2019, with its first batch of products launched in Beijing in April 2019. Upholding the
brand philosophy of “Technological Aesthetics, Smart and Fun-Filled Life”, BUGU builds up smart eco-
scenes primarily comprising three life scenes and two professional scenes. In order to expand the product
portfolio and ecosystem, BUGU carries out strategic cooperation with Honor to jointly build smart life
scenes, and gradually introduces more quality resources to improve the eco-chain of scenes. BUGU
persists in taking the joint creation with users as its core strategy. Through the joint creation platform—
the “BUGU Research Institute”, users can take part in the whole product process from conceptual design
to public testing. It continues to win recognition for its product design in the industry. The Intelligent IH
Rice Cooker, Aesthetic Electric Kettle and Intelligent Sweeping and Mopping Robot of BUGU all won the
iF Award 2020, and the Aesthetic Electric Kettle, which is a bestseller, was granted the DFA Design for
Asia Excellence Award. In 2019, BUGU products achieved a remarkable market performance and were
chosen for the 2019 Tmall “Emerging Brands” Program. During the 618 Shopping Festival in 2019, BUGU
Intelligent Dishwasher ranked among the top ten list of dishwashers on JD.com; on JD.com’s Appliances
Higou Day on June 10, BUGU Intelligent Dishwasher won double championships in both sales volume
and sales, and BUGU Intelligent Rice Cooker (3L) ranked among the top ten in rice cooker sales; on June
11, BUGU Intelligent Electric Fan won the championship in sales among electric fan products with a price
of above RMB300; on June 16, BUGU achieved over RMB1 million in sales on the Taobao shopping
system, and BUGU Intelligent Electric Fan ranked among the top three among electric fan products with
a price of above RMB199. On its first “Double 11” shopping festival, BUGU saw a single day record sales
of over RMB10 million, users increase by 50,000, limited star products sold out in 12 seconds, and sales
exceed RMB10 million in the first 24 hours.
Unveiled in 2019, WAHIN dedicates to offering surprises to young people with “Trendy Designs, Practical
Functions and Fun Interactions”. It establishes connections through a diversity of marketing activities with
the young circles characterized by AGC and pop cultures. The brand stands out with its performances in
sales. Since its launch, WAHIN has been focusing on online channels. In 2019, WAHIN expanded
cooperation from just one e-commerce platform to all the major e-commerce platforms. Its AC sales
exceeded RMB400 million in the year, and ranked 7th and 6th on JD.com during the “618” and “Double
11” shopping festivals respectively.
G. Promoted innovation in robotic product development, accelerated integration and expansion
of the robotics business for the China market
KUKA, a subsidiary of Midea, is the first robotic manufacturer in the world to introduce sensitive
lightweight robots into the production plant, as well as the first manufacturer with a product range covering
cooperative robots, mobile robots and industrial heavy-duty robots. In the automotive sector, KUKA
continues to maintain its advantages and unveiled the world’s first industrial robot with digital motion
model - the new-generation high-load versatile robot KR QUANTEC-2 in 2019. The robot can effectively
reduce costs for customers and offers substantially enhanced performances, precision and speed. At
AMTS 2019, KUKA demonstrated its one-stop solutions consisting of electric drive assembly and testing
model lines, square shell battery assembly model lines, LBR iiwa cell loading and testing, KUKA Connect
big data and virtual image systems. Meanwhile, it’s worth mentioning that KUKA took part in a large-scale
joint research platform program of Germany—ARENA2036 in 2019 for the first time. It is responsible for
developing and testing streamline production techniques of Industry 4.0 to explore streamline car
factories for the future. In the general industrial sector, KUKA has newly launched the KR IONTEC Series
robots with a load ranging from 30 kg to 70 kg, which can be used in traditional and digital production
environments. In addition to the largest working range of its kind (3,100 mm), it takes less floor space
and interference contours, as well as boasts the lowest maintenance cost of its kind (average malfunction
interval: about 400,000 running hours). Meanwhile, at K-Show 2019, KUKA showcased its KR10 R900-2
robot designed to work with an injection molder and the robot-assisted thermoplastic elastomer (TPE)
extrusion solution. In the logistics sector, targeting the industrial status where an increasing number of
orders are placed online, the new-generation robot-based order sorting solution ItemPiQ, as a perfect
example of the integration of know-hows by KUKA and Swisslog, combines new robotic technology and
intelligent visual system and features efficient sorting performances and machine-learning functions. With
regard to human-robot collaboration, KUKA’s Cobot LBR iisy is a sensitive, precise and easy-to-use robot
with more intuitive automation design, which has developed a new field for human-robot collaboration. In
the electronics sector, KUKA launched a chip carrying solution in a clean-room environment in semi-
conductor manufacturing, which is the world’s first one-stop solution for automatic carrying of semi-
conductor boxes. In the medical sector, KUKA’s LBR Med Series robots have yielded remarkable results.
Carrying LBR Med, medical devices Cold Ablation and Robot-guided Laser Ostetome developed by the
Swiss company Advanced Osteotomy Tools AG were put into clinical practice for the first time, which is
the first robot-based osteotomy in the world. Additionally, equipped with the integrated sensitive seven-
axis robot of KUKA’s LBR Med Series, SculpturaTM, a mobile robot assistance system developed by the
American company Sensus Healthcare, is the only medical device with which a doctor can apply targeted
radiation to the tumor during a surgery. Additionally, KUKA makes active steps to explore robot application
in new areas. The Brazilian company Bionicook uses KUKA’s KR3 AGILUS robot to cook, which can
finish an order in three minutes and 100 orders in an hour at the most. KUKA won a significant number
of awards and honors in 2019, including the renowned iF Award 2019 for KUKA LBR iisy and KUKA KMP
1500, the German Design Award 2019 for KUKA smartPAD, KUKA AGILUS and LBR iisy, the 2019
German Innovation Award and the Robotics Award (at HANNOVER MESSE 2019) for the car charging
assistant robot of which KUKA took part in the development, and the “Excellent Partner Award” granted
by Faw-Volkswagen as the customer’s recognition of KUKA for its persistence in providing efficient and
stable products and automation solutions on a long-term basis.
According to IFR statistics, 2019 saw a harsher market for the global industrial robotics industry as
compared with 2018. However, KUKA performed rather stable and continued to make breakthroughs in
new areas. In 2019, KUKA received an order of tens of millions of euros from Faw-Volkswagen involving
assembly lines used to manufacture MEB platform batteries, which is KUKA’s first whole battery line order
in the Chinese market. In addition, KUKA obtained orders of automatic production equipment of welding
robots used in electric vehicle production lines respectively from SAIC Volkswagen and Donghee Group
(South Korea), with the respective amounts reaching tens of millions of euros and millions of euros. In
the fourth quarter of 2019, KUKA won a contract worth as much as tens of millions of euros to supply a
batter assembly line, which will be used to produce battery systems for high-end electric vehicles. KUKA
also received an order worth millions of euros from Guangdong Shaoneng Group for 300 units of KR
QUANTEC Series robots and an automated handling solution for mechanical equipment. Furthermore, it
secured an order of 22 units of KMP 1,500 mobile platform equipment used to process body in white from
an automobile manufacturer. In the healthcare sector, KUKA received an order from the North American
customer Restoration Robotics to supply LBR Med lightweight robots for their intelligent repair and hair
transplant system. In 2019, KUKA’s Swisslog business continued to expand, with an order of
approximately 43 million euros from the Malaysian customer IKEA Supply Malaysia Sdn Bhd for an
automated logistics solution, and an order from the Finland customer Broman Group for an automated
logistics system and the related software.
The integration of KUKA’s robotics business in China has been accelerated. On one hand, under KUKA’s
new organizational structure, the KUKA China Division was established in 2019, covering robotics,
flexible systems, general industrial automation, intelligent logistics automation and intelligent medical
automation. On the other hand, the collaborative advantages of Midea and KUKA have started to show
in various aspects, including development of business opportunities, technology sharing, customer
service, purchase collaboration and management improvement, laying a foundation for the fast growth of
the industrial automation business on all fronts. In 2019, the KUKA China Division formulated the business
development planning for the next five years and established a 432+X product system for the domestic
market, i.e. 4 product families, 3 digital platforms, 2 production lines for fast iteration and the whole new
business layout. With regard to business expansion, KUKA China maintains its leadership in the auto
sector and takes active steps to explore new areas including general industrial manufacturing, electronics,
medical care and logistics, services, etc. Concerning internal management, it concentrates on R&D,
supply chain management, high-performance operations and digitalization, among others, as well as
commits more resources to build the core competitiveness of Midea’s robotics and industrial automation
business in a faster manner. In 2019, KUKA China further improved its organizational structure by
connecting the R&D, production and marketing departments. It has put in place a “customer-oriented”
system to promote high-performance operations in the whole value chain. Its R&D department focused
on new product development, product upgrade, localization, software development and digitalization. And
an OKR management tool has been introduced to build a matrix structure based on professionalism.
Meanwhile, KUKA China completed the construction of the Product R&D and Testing Center covering an
area of nearly 5,000 ㎡, which has been put into operation to support R&D and testing.
As an industrial robotic brand trusted by many auto makers around the world, KUKA China continued to
see the highest unit sales in the auto sector of China in 2019. In addition to continued cooperation with a
significant number of foreign-funded, Sino-foreign jointly funded and domestic traditional auto makers, it
secured orders from multiple renowned makers of new energy vehicles at home and abroad, further
enlarging the market share. In the general industrial sector, automation orders kept increasing from the
food and beverage industry, the household chemicals and pharmaceuticals industry and other industries,
and there were new customers from the glass industry. With respect to medical robotics, 2019 saw a
year-on-year growth of 200% and dozens of new customers in need of surgical robotics mostly.
Concerning logistics automation, KUKA won the logistics renovation projects of several notable
companies, the fifth AutoStore system launched to e-commerce customers proved a great help in their
business development, and KUKA is currently the only robotics maker in the area of logistics automation
who can integrate the six-axis mechanical arm with a mobile robot, with noticeable technological
superiority. In 2019, KUKA enhanced development of localized products for the China market. It launched
the AC-fin tube-inserting machine, and its homegrown fully automated bathroom appliance assembly line,
which is the first of its kind in China, has been put into operation. KUKA’s application development team
launched a packaged robot polishing application and a packaged 3D sighted robot shoe-sole gumming
application. And its Swisslog team has secured the first batch of orders of nearly RMB20 million for the
piler that the team has developed for the local market. Servotronix released a new rotary servo product—
BDHD2, and a new linear servo product—CDHD2 STD. Mass production of both has commenced. In
addition, KUKA has effectively helped enhance Midea Group’s intelligent manufacturing level. As of now,
the robot density of Midea has exceeded 220 units per 10,000 persons. In the coming three years, this
number is expected to surpass 300 units per 10,000 persons.
H. Created a new smart lifestyle with the MSmartLife App as the gateway
Capitalizing on the Group’s advantage of various household appliance categories, Midea IoT is able to
cover various smart scenes. 68 smart scenes have been launched on Midea MSmartLife App, including
whole-house scenes such as “Secure Home”, “Healthy Home”, “Convenient Home” and “Personalized
Home”. “Healthy Home” provides complete smart healthy life solutions from three major aspects, namely,
healthy food, healthy washing and healthy air. Supported by the AI technology, MSmartLife App 6.0 has
introduced 18 new functions including AI-based voice control and recipe pictures and videos, built the
first smart-scene AI-based interaction platform in the industry, and realized multi-screen smart voice
interaction. Up to the end of 2019, Midea Group has sold a total of over 70,000,000 smart household
appliances across the globe. Tens of millions of household users receive smart services through the
MSmartLife App, with interaction on smart equipment and cloud exceeding one trillion times. Meanwhile,
Midea Smart Cloud Housekeeper App, which is based on the big data technology, is making home
appliances smarter through AI algorithms. It has provided more than ten million times of spontaneous
smart services for users.
Midea IoT keeps building its cloud capability. Upon system architecture refinement, hybrid cloud
deployment, multi-address disaster preparedness, etc., its cloud platforms have reached an industry-wide
advanced level in availability and can be connected to more than 100 million pieces of devices. Meanwhile,
the Company jointly develops chips for household appliances, and launches high-performance low-cost
smart connection modules together with solutions. It joined hands with Ziroom, a notable long-term rental
apartment operator, in user operation and commercial promotion. Also, it cooperates with Alibaba, JD,
Huawei, OPPO, VIVO, Baidu, Tencent, Google, Amazon, Apple, Skyworth, Bull, etc. to offer whole-house
smart solutions supported by a brand ecosystem.
With respect to technological innovation in smart home, in order to solve pain points such as the difficulties
in network distribution and a long connecting time of smart appliances, Midea IoT has independently
developed a series of connection modules including Wi-Fi, Bluetooth and NB-IoT. As such, it is the first
to shorten the time used from network distribution to a successful connection to 4.62 seconds. On top of
that, it has materialized more stable connection and more efficient development through M-Smart
agreement refinement, code refactoring, fixing compatibility bugs, etc. It also takes the lead in launching
home appliances that can be directly connected to the 5G network. Protecting user privacy and data
security is a top priority in the application of smart technologies. Midea IoT takes the lead to pass the
TRUSTe certification with respect to privacy data compliance. It also complies with the EU General Data
Protection Regulation (“GDPR”) and other data protection regulations. Meanwhile, with regard to overall
information security management, Midea IoT has passed the ISO27001 Certification for Information
Security Management Systems (ISMS). And the MSmartLife App App has been certified by the globally
recognized ePrivacyApp due to the multiple layers of protection of user privacy data. Therefore, Midea
has reached an internationally advanced level in user data protection.
I. Deepened the long-term incentive and protected the interests of shareholders
In 2019, Midea continued to encourage the core management to take responsibility for the Company’s
long-term development and growth by further enhancing its long-term incentive schemes. In this year,
Midea launched the Sixth Stock Option Incentive Scheme, the Third Restricted Share Incentive Scheme,
the Fifth Global Partner Stock Ownership Scheme and the Second Business Partner Stock Ownership
Scheme, which have helped, in a more effective manner, to align the long-term interests of senior
management and core business backbones with that of all shareholders.
Midea Group protects its shareholders’ interests by ensuring a consistent dividend policy. It shares its
growth with shareholders by putting forward cash dividend plans with a total amount of as much as
RMB46.8 billion (2019 profit distribution plan included) since Group listing in 2013. In addition to the
consistent dividend payouts, the Company has carried out a string of share repurchase plans.
Subsequent to a share repurchase of RMB4 billion in 2018, to further stabilize the market capitalization
and protect the shareholders’ interests, the Company launched another share repurchase plan in 2019.
And the repurchased shares would be used for equity incentive schemes and/or employee stock
ownership schemes. As of 31 December 2019, Midea has used approximately RMB3.1 billion for the
share repurchase.
2. Analysis of Main Business
2.1 Overview
Same with the contents presented in “1. Overview” of this section
√Yes □No
See “1. Overview” of this section.
2.2 Revenues and Costs
2.2.1 Breakdown of operating revenue
Unit: RMB’000
2019 2018
As apercentageof Asapercentageof YoYChange(%)
Amount totaloperating Amount totaloperating
revenue(%) revenue(%)
Total 278,216,017 100% 259,664,820 100% 7.14%
By businesssegment
Manufacturing 254,286,134 91.40% 238,065,376 91.68% 6.81%
By productcategory
HVAC 119,607,379 42.99% 109,394,649 42.13% 9.34%
Consumer 109,486,791 39.35% 102,992,803 39.66% 6.31%
appliances
Robotics and
automation 25,191,964 9.05% 25,677,924 9.89% -1.89%
systems
By geographicalsegment
PRC 161,432,313 58.02% 149,257,311 57.48% 8.16%
Outside PRC 116,783,704 41.98% 110,407,509 42.52% 5.78%
Note: Consumer appliances in the table above primarily include refrigerators, laundry appliances, kitchen appliances and
small domestic appliances.
2.2.2 Business segments, products or geographical segments contributing over 10% of the
operating revenue or profit
√Applicable □N/A
Unit: RMB’000
Operating Grossprofit YoYchangeof YoYchangeof YoYchangeof
Revenue Costofsales margin operating costofsales grossprofit
revenue (%) (%) margin(%)
By businesssegment
Manufacturing 254,286,134 176,594,422 30.55% 6.81% 4.71% 1.39%
By productcategory
HVAC 119,607,379 81,626,941 31.75% 9.34% 7.56% 1.12%
Consumer 109,486,791 75,014,044 31.49% 6.31% 2.82% 2.33%
appliances
Robotics and
automation 25,191,964 19,953,437 20.79% -1.89% 0.72% -2.06%
systems
By geographicalsegment
PRC 161,432,313 110,867,529 31.32% 8.16% 6.93% 0.79%
Outside PRC 116,783,704 87,046,399 25.46% 5.78% 3.04% 1.98%
Under the circumstances that the statistical standards for the Company's main business data adjusted in
the Reporting Period, the Company's main business data in the recent year is calculated based on
adjusted statistical standards at the end of the Reporting Period
□Applicable √N/A
2.2.3 Whether revenue from physical sales is higher than service revenue
√Yes □No
Businesssegment Item Unit 2019 2018 YoYChange(%)
Sales Inthousand 456,680.20 416,926.40 9.53%
units/sets
Home appliances Output Ditto 465,063.30 421,938.40 10.22%
Inventory Ditto 59,169.30 50,972.20 16.08%
Note: The aforementioned statistics about output, sales and inventory were calculated based on internal standards.
Lighting products and robotics and automation systems are excluded.
Reason for any over 30% YoY movements in the data above
□Applicable √N/A
2.2.4 Execution of significant sales contracts in the Reporting Period
□Applicable √N/A
2.2.5 Breakdown of cost of sales
By business segment
Unit: RMB’000
2019 2018
Business Item Asapercentage Asapercentage YoYChange
segment Amount oftotalcostof Amount oftotalcostof (%)
sales (%) sales(%)
Rawmaterials 134,231,337 85.69% 127,402,508 85.59% 5.36%
Home Laborcosts 9,711,741 6.20% 9,154,016 6.15% 6.09%
appliances Depreciation 2,673,507 1.71% 2,599,999 1.75% 2.83%
Energy 2,255,630 1.44% 2,188,033 1.47% 3.09%
2.2.6 Changes in the scope of the consolidated financial statements for the Reporting Period
√Yes □No
For the main subsidiaries included in the consolidated financial statements of the current year, please
refer to Note 5 and Note 6 to the Financial Statements in “Section IX Financial Report”. For the newly
consolidated companies, see Note 5, 5.1, (a), and they primarily include: Midea Electrics Egypt, Anhui
Welling Auto Parts Co. , Ltd., Wuxi Little Swan Electric Co., Ltd., Guangdong Swisslog Technology Co.,
Ltd., Guangdong Yueyun Industrial Internet Innovation Technology Co., Ltd., Midea Refrigeration
Equipment (Thailand) Co., Ltd. and Tianjin Midea Commercial Factoring Co., Ltd. For the companies
deconsolidated in the current year, see Note 5, 5.1, (b).
2.2.7 Major changes in the business, products or services in the Reporting Period
□Applicable √N/A
2.2.8 Main customers and suppliers
Major customers of the Company
Totalsalestotopfivecustomers(RMB'000) 35,762,605
Totalsalestotopfivecustomersasapercentageofthe 12.86%
total salesfortheyear(%)
Totalsalestorelatedpartiesamongtopfivecustomers 0
as apercentageofthetotalsalesfortheyear(%)
Information on top five customers
No. Customer Salesrevenue(RMB'000) Asapercentageofthetotalsales
revenue(%)
1 CustomerA 19,971,771 7.18%
2 CustomerB 8,257,101 2.97%
3 CustomerC 2,950,842 1.06%
4 CustomerD 2,450,884 0.88%
5 CustomerE 2,132,007 0.77%
Total -- 35,762,605 12.86%
Major suppliers of the Company
Totalpurchasesfromtopfivesuppliers(RMB'000) 9,916,145
Totalpurchasesfromtopfivesuppliersasapercentageofthe 5.42%
total purchasesfortheyear(%)
Totalpurchasesfromrelatedpartiesamongtopfivesuppliers 0
as apercentageofthetotalpurchasesfortheyear(%)
Information on top five suppliers of the Company
No. Supplier Purchase(RMB'000) Asapercentageofthetotalpurchases
(%)
1 SupplierA 3,134,243 1.71%
2 SupplierB 1,730,001 0.95%
3 SupplierC 1,717,144 0.94%
4 SupplierD 1,671,119 0.91%
5 SupplierE 1,663,638 0.91%
Total -- 9,916,145 5.42%
2.3 Expense
Unit: RMB'000
2019 2018 YoYChange(%) Reasonforanysignificantchange
Selling anddistribution 34,611,231 31,085,879 11.34%
expenses
General and
administrative 9,531,361 9,571,639 -0.42%
expenses
Finance costs -2,231,636 -1,823,040 -22.41%
Research and 9,638,137 8,377,201 15.05%
development expenses
2.4 R&D investment
√Applicable □N/A
The Group is focused on building a competitive, multi-layered global R&D system centering on user
experience and product functions, which represents world-class R&D input and strength. With close to
RMB40 billion invested in R&D over the past five years (over RMB10 billion in 2019), the Group has set
up a total of 28 research centers in 11 countries including China to gradually build up a “4+2” global R&D
network and gain advantage of scale in this respect. Domestically, with the core being Midea Global
Innovation Center at the company headquarters in Shunde District, Foshan City, Midea has also started
to build the Shanghai Global Innovation Center. Overseas, with R&D Center in Louisville, USA, R&D
Center in Stuttgart, Germany, R&D Center in Osaka, Japan and Design Center in Milan, Italy as the cores,
Midea makes use of the regional advantages, integrates global R&D resources and refines its global R&D
network. It has over 10,000 R&D employees and over 500 senior foreign experts. While establishing its
own research centers around the world, the Group has also cooperated with domestic and foreign
scientific research institutions, such as MIT, UC Berkeley, UIUC, Stanford, Purdue University, University
of Maryland, The University of Sheffield, Polytechnic University of Milan, Tsinghua University, Shanghai
Jiao Tong University, Zhejiang University, the Chinese Academy of Sciences, Harbin Institute of
Technology, Xi’an Jiaotong University, Huazhong University of Science and Technology and South China
University of Technology, in order to establish joint labs for deepening technological innovation. The
Group also carries out strategic cooperation with tech giants such as BASF and Honeywell to build a
global innovation ecosystem. The Group’s long-term focus on building technology, marketing, product,
design and open innovation systems, building a cutting-edge research system and building reserves in
technology for mid/long term, has provided a solid foundation for the Group to maintain technical
superiority across the globe.
Information about R&D investment
2019 2018 YoYChange(%)
Number ofR&Dpersonnel 13,727 12,321 11.41%
R&D personnelasa
percentage oftotal 10.18% 10.74% -0.56%
employees
R&D expense(RMB’000) 9,638,137 8,377,201 15.05%
R&D expenseasa
percentage ofoperating 3.46% 3.23% 0.23%
revenue
Note: The R&D personnel in the table above exclude those of KUKA.
2.5 Cash flow
Unit: RMB'000
Item 2019 2018 YoYChange(%)
Subtotal ofcashinflowsfromoperatingactivities 252,123,178 226,341,706 11.39%
Subtotal ofcashoutflowsduetooperatingactivities 213,532,774 198,480,626 7.58%
Net cashflowsfromoperatingactivities 38,590,404 27,861,080 38.51%
Subtotal ofcashinflowsfrominvestingactivities 89,004,610 67,998,046 30.89%
Subtotal ofcashoutflowsduetoinvestingactivities 112,112,311 86,640,334 29.40%
Net cashflowsfrominvestingactivities -23,107,701 -18,642,288 -23.95%
Subtotal ofcashinflowsfromfinancingactivities 20,015,594 5,237,681 282.15%
Subtotal ofcashoutflowsduetofinancingactivities 23,289,195 18,624,845 25.04%
Net cashflowsfromfinancingactivities -3,273,601 -13,387,164 75.55%
Net increaseincashandcashequivalents 12,489,478 -3,879,371 421.95%
Explanation of why the data above varied significantly
√Applicable □N/A
a. Primarily driven by an increase in cash received from sales of goods or rendering of services, net cash
flows from operating activities increased 38.51% from last year.
b. Primarily driven by an increase in cash received from borrowings, net cash flows from financing
activities increased 75.55% from last year.
c. Primarily driven by increases in net cash flows from operating and financing activities, net increase in
cash and cash equivalents increased 421.95% from last year.
Explanation of main reasons leading to the material difference between net cash flows from operating
activities during the Reporting Period and net profit for the year
□ Applicable √ N/A
3. Analysis of Non-Core Business
□Applicable √N/A
4. Assets and Liabilities
4.1 Material changes of asset items
The Company first adopted the new accounting standards governing financial instruments in 2019 and
adjusted the relevant financial statement items at the beginning of the year accordingly.
Unit: RMB'000
31December2019 1January2019
As a Asa Changein Explanationaboutany
Amount percentageof Amount percentageof percentage(%) materialchange
totalassets totalassets
(%) (%)
Cash atbank 70,916,841 23.49% 27,888,280 10.58% 12.91%
and onhand
Accounts 18,663,819 6.18% 18,641,979 7.07% -0.89%
receivable
Inventories 32,443,399 10.74% 29,645,018 11.24% -0.50%
Other current 65,011,027 21.53% 74,952,820 28.42% -6.89%
assets
Investment 399,335 0.13% 391,765 0.15% -0.02%
properties
Long-term 2,790,806 0.92% 2,713,316 1.03% -0.11%
equity
investments
Fixed assets 21,664,682 7.17% 22,437,212 8.51% -1.34%
Construction in 1,194,650 0.40% 2,077,621 0.79% -0.39%
progress
Short-term 5,701,838 1.89% 870,390 0.33% 1.56%
borrowings
Long-term 41,298,377 13.68% 32,091,439 12.17% 1.51%
borrowings
4.2 Assets and liabilities measured at fair value
√Applicable □N/A
Unit: RMB'000
Profitor Cumulati Amount
lossfrom vefair provided
Opening changein value for Purchased Soldinthe Other Closing
Item balance fairvalue change impairment inthe period changes balance
during charged inthe period
the toequity period
period
Financial assets
1. Financialassetheld
for trading(excluding 2,654,045 -742 - - 3,706,340 5,272,795 503 1,087,351
derivative financial
assets)
2. Derivativefinancial 259,019 32,877 -24,718 - 30,417 - -1,611 295,984
assets
3. Receivables 2,254,950 - - - 5,310,826 - - 7,565,776
financing
4. Othernon-current 784,269 418,219 - - 593,234 68,418 22,803 1,750,107
financial assets
5. Otherinvestments - 491,232 - - 62,310,000 12,243,714 - 50,557,518
Sub-total offinancial 5,952,283 941,586 -24,718 - 71,950,817 17,584,927 21,695 61,256,736
assets
Investment properties
Productive livingassets
Others
Sub-total oftheabove 5,952,283 941,586 -24,718 - 71,950,817 17,584,927 21,695 61,256,736
Financial liabilities 902,795 -729,771 -145,568 - - - -324 27,132
Whether there were any material changes on the measurement attributes of major assets of the Company
during the Reporting Period
□ Yes √ No
4.3 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 the
Company were sealed, distrained, frozen, impawned, pledged or limited in any other way.
5. Investment made
5.1 Total investment amount
√Applicable □N/A
TotalinvestmentamountofReporting Totalinvestmentamountoflastyear YoYChange(%)
Period(RMB’000) (RMB’000)
112,112,311 86,640,334 29.40%
5.2 Significant equity investment made in the Reporting Period
□Applicable √N/A
5.3 Significant non-equity investments ongoing in the Reporting Period
□Applicable √N/A
5.4 Financial investments
5.4.1 Securities investments
√Applicable □N/A
Unit: RMB’000
Cod Mea Openin Profitor Cumulati Profit
e of Abbreviat Initial sure g loss vefair Purch Sold or Closing Fund
Typeof sec ionof investme men carryin from value ased inthe lossin carrying Accounting ing
securities uriti securities ntcost t g change change inthe period the amount title sour
es met amount infair charged period period ce
hod value toequity
during
the
period
Fair
Overseas 181 XIAOMI- 1,272,58 valu 1,122,6 - Financial Own
listed 0 W 4 e 09 186,754 503 - - -936,358 assetheld fund
stock met fortrading s
hod
Fair
Domestic 688 Espressif valu 56,34 Financial Own
ally listed 018 Systems 14,625 e - 94,653 - 0 - -150,993 assetheld fund
stock met fortrading s
hod
Total 1,287,20 -- 1,122,6 -92,101 503 56,34 - - 1,087,3 - --
9 09 0 51
5.4.2 Derivatives investments
√Applicable □N/A
Unit: RMB'000Closing
Rel Amou investme
atio Purch Sold nt nt
nshi Rel Type Initial Opening ased in provid Closing amount Actual
Opera p ated of investme Starting Ending investme in Repor edfor investme asa gain/lossin
ting with tran deriva nt date date nt Repor ting impair nt percenta Reporting
party the sact tive amount amount ting Perio ment amount geofthe Period
Co ion Perio d (if Company
mpa d any) ’sclosing
ny net
assets
Futur Futur
es No No es 27601/01/20 31/12/2 276 - - - 1,377 0.001% 8,683
comp contra 19 019
any cts
FX 01/01/20 31/12/2 30,41
Bank No No deriva -644,052 19 019 -644,052 7 - - 267,475 0.263% -419,519
tives
Total -643,776 -- -- -643,776 30,41 - - 268,852 0.264% -410,836
7
Source ofderivatives AllfromtheCompany’sownfunds
investment funds
Litigation involved(if N/A
applicable)
Disclosure dateofthe
announcement about
the board’sconsentfor 20/04/2019
the derivative
investment (ifany)
Disclosure dateofthe
announcement about
the generalmeeting’s 14/05/2019
consent forthe
derivative investment(if
any)
For thesakeofeliminatingthecost riskoftheCompany'sbulkpurchasesofrawmaterialsasa
result ofsignificantfluctuationsinrawmaterialprices,theCompanynotonlycarriedoutfutures
business for some of the materials, but also made use of bank financial instruments and
promoted forexfundsbusiness,withthepurposeofavoidingtherisksofexchangeandinterest
rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex
liabilities, aswellasachievinglocked-incosts.TheCompanyhasperformedsufficientevaluation
and control against derivatives investment and position risks,details of which are describedas
follows:
Risk analysis of 1. Legal risk:The Company's futures business and forex funds businesses shall be conducted
positions held in in compliance with laws and regulations, with clearly covenanted responsibility and obligation
derivatives during the relationshipbetweentheCompanyandtheagencies.
Reporting Period and Controlmeasures:TheCompanyhasdesignatedrelevantresponsibledepartmentstoenhance
explanation of control learningoflawsandregulationsandmarketrules,conductedstrictexaminationandverification
measures (Includingbut of contracts, defined responsibility and obligation well, and strengthened compliance check, so
not limited to market as to ensure that the Company's derivatives investment and position operations meet the
risk, liquidity risk, credit requirementsofthelawsandregulationsandinternalmanagementsystemoftheCompany.
risk, operational risk, 2.Operationalrisk:Imperfectinternalprocess,staff,systemsandexternalissuesmaycausethe
legal risk,etc.) Companytosufferfromlossduringthecourseofitsfuturesbusinessandforexfundsbusiness.
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-makingandtradingprocesses.
3. Marketrisk: Uncertaintiescausedbychangesinthepricesofbulkcommodity andexchange
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 inforexfundsoperationsbeingunabletobecreditedintoaccountcouldalsoresult
in lossanddefaultrisks.
Control measures:ThefuturesbusinessandforexfundsbusinessoftheCompanyshallalways
be conducted by adhering to prudent operation principles. For futures business, the futures
transaction volumeandapplicationhavebeendeterminedstrictlyaccordingtotherequirements
of production & operations, and the stop-loss mechanism has been implemented. Besides, to
determine thepreparedmarginamountwhichmayberequiredtobesupplemented,thefutures
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.Asforforexfundsbusiness,ahierarchicalmanagementmechanismhasbeen
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, evaluatethepossiblegreatestrevenueandloss,andreportthegreatestacceptablemargin
ratio or total margin amount, so that the Company can update operating status of the funds
business onatimelybasistoensureproperfundsarrangementbeforetheexpirydates.
Changes inmarket
prices orfairvalueof
derivative products
during theReporting 1.GainfromfuturescontractsduringtheReportingPeriodwasRMB8,683,000.
Period, specific 2.LossfromFXderivativesduringtheReportingPeriodwasRMB-419,519,000.
methods usedand
relevant assumption 3. Public quotations in futures market or forward forex quotations announced by the Bank of
and parametersettings Chinaareusedintheanalysisofderivativesfairvalue.
shall bedisclosedfor
analysis offairvalueof
derivatives
Explanation of
significant changesin
accounting policiesand
specific financial
accounting principlesin
respect ofthe Nochange
Company's derivatives
for theReportingPeriod
as comparedtothe
previous Reporting
Period
Special opinions The Company's independent directors are of the view that the futures hedging business is an
expressed by effective instrument for the Company to eliminate price volatility and implement risk prevention
independent directors measuresthroughenhancedinternalcontrol,therebyimprovingtheoperationandmanagement
concerning the of the Company; the Company's foreign exchange risk management capability can be further
Company's derivatives improved throughthe forexfunds business,soas tomaintainandincrease thevalueof foreign
investment andrisk exchange assets and the abovementioned investment in derivatives can help the Company to
control fully bring out its competitive advantages. Therefore, it is practicable for the Company to carry
out derivativesinvestmentbusiness,and therisksarecontrollable.
5.5 Use of funds raised
□ Applicable √ N/A
No such cases in the Reporting Period.
6. Sale of Major Assets and Equity Interests
6.1 Sale of major assets
□Applicable √N/A
No such cases in the Reporting Period.
6.2 Sale of major equity interests
□ Applicable √ N/A
7. Analysis of Major Subsidiaries
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
Total Net Operating Operating Netprofit
Company name Company Business Registere assets(in assets(in revenue(in profit(in (inRMB
type scope dcapital RMB RMB RMB RMB million)
million) million) million) million)
Guangdong Midea Manufacturin USD72
Kitchen Appliances Subsidiary gofhome million 12,783.83 4,637.34 12,895.01 2,071.61 1,791.33
Manufacturing Co.,Ltd. appliances
GD MideaAir- Manufacturin RMB854
Conditioning Equipment Subsidiary gofair million 33,719.06 4,363.47 44,243.11 664.31 610.71
Co.,Ltd. conditioners
Foshan ShundeMidea Manufacturin
Electrical Heating Subsidiary gofhome USD42 11,916.97 6,290.75 11,233.27 1,784.25 1,547.26
Appliances appliances million
Manufacturing Co.,Ltd.
Wuhu MideaKitchen& Manufacturin RMB60
Bath AppliancesMfg. Subsidiary gofwater million 10,348.48 1,303.52 11,860.65 1,245.40 1,084.87
Co., Ltd. heaters
Acquisition and disposal of subsidiaries during the Reporting Period
√Applicable □N/A
For the main subsidiaries included in the consolidated financial statements of the current year, please
refer to Note 5 and Note 6 to the Financial Statements in “Section IX Financial Report”. For the newly
consolidated companies, see Note 5, 5.1, (a), and they primarily include: Midea Electrics Egypt, Anhui
Welling Auto Parts Co. , Ltd., Wuxi Little Swan Electric Co., Ltd., Guangdong Swisslog Technology Co.,
Ltd., Guangdong Yueyun Industrial Internet Innovative Technology Co., Ltd., Midea Refrigeration
Equipment (Thailand) Co., Ltd. and Tianjin Midea Commercial Factoring Co., Ltd. For the companies
deconsolidated in the current year, see Note 5, 5.1, (b).
8. Structured Bodies Controlled by the Company
□Applicable √N/A
9. Outlook for the Future Development of the Company
9.1 Development strategies of the Company
With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire your
Future” as its mission, and “Embrace What’s Next - Aspiration、Dedication、Collaboration、Innovation”
as its values, Midea adheres to its strategic objectives and focuses on the strategy of “Comprehensive
Digitalization and Intellectualization”. It integrates global resources, deepens its transformation, as well
as keeps developing leading products based on the customer’s needs by way of technological innovation
and quality improvement. It will promote efficiency driven growth by improving management,
manufacturing and asset efficiency to create more cost efficiency. It will also promote global operations
and try to lay a solid foundation in this regard through promoting its own branded products and
strengthening compliance management. Additionally, it will strengthen its robotics and industrial
automation operations to build new business platform and growth points. Meanwhile, it will deepen its
digital business to improve operation and management through digitalization of the entire value chain, so
as to construct its own IIoT ecosystem.
9.2 Key operation points in 2020
a. Midea will firmly increase R&D investment in basic technologies, digitalization and intellectualization in
particular. Driven by technology as the fundamental approach, it will beef up product innovation and
efficiency improvement, and put in place a customer-oriented value chain system. It will deepen the R&D
model of “Three Generations” and implement the strategy of “being the Number One or the Only One” to
build product leadership. In the meantime, top talent will be brought in to help refine the R&D
organizational structure and build up an R&D-centric management model.
b. Midea will keep a high-quality development direction and stick to internal, sustained and effective
organic growth. It 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-sales service, so as to increase profitability.
In order to win in competition, it is important to develop high-end products to refine the product mix. It will
also maintain effective investments, control non-operating expenses, increase labor productivity, improve
human resource allocation efficiency, promote lean management and provide fresh impetus for continual
growth through relentless innovation.
c. For the domestic market, Midea will enhance the basic systems to set up a unified business language
and rules, strengthen “One Midea, One System, One Standard”, make use of the advantages of synergies,
reinforce the result-oriented process control and improve operating efficiency. It will also promote
transformation in domestic marketing to rebuild a user-oriented retail system, set up a standardized store
management system and improve the ability of offline stores to attract customers. it will enhance product
synergies, focus on the end market, lower the inventory level, streamline the channel hierarchy, and
promote better channel efficiency. By promoting interactive marketing ways based on scenes and
experience, as well as enhancing the operation of star products, it strives to build better recognition of
the Midea brand among users. Making use of multi-category synergistic advantages, it will continuously
deepen the channel layout, further promote e-commerce channel optimization and integration, work on
social e-commerce, and proactively expand and build new retail channels. It will promote the
transformation of sales agents towards operators, and in the meantime materialize transparent and
visualized information through the whole trading process. It will also improve the after-sales service
experience, optimize the delivery-installation integration service, and improve the member service system.
Meanwhile, it will continue to increase the efficiency of the supply chain system, enhance the advantage
of Midea’s all-channels coverage, rebuild business processes and push forward the construction of a
shared inventory system.
d. For the overseas market, Midea will adhere to the strategies of being user-oriented and product
leadership. Leveraging its advantageous global R&D and user research networks, as well as
benchmarking to other top brands across the globe, Midea will continue to launch differentiated and
innovative products to solve users’ painpoints, enlarge the mainstream market share and give play to its
advantage of various product categories. It will continue to improve the ability to operate multiple brands
in the overseas market, refine the differentiated product portfolios of the brands, and carry out global and
regional branding activities through digital marketing to boost the brands’ presence and reputation. Also,
it will promote retail transformation, further expand channels, improve the brand image and consumer
experience at the retail end, empower the retail end with digital tools, enable real-time tracking of retail
data, and improve the retail performance. A global system comprising the professional global
headquarters, the coordinative regional hubs and the aggressive enterprises in various countries will be
put in place, with clear responsibilities and positioning for each organization, as well as effective teamwork
among them. Meanwhile, Midea will improve its overseas infrastructure, and build the four major global
delivery systems of manufacturing, services, components and logistics, so as to enable adequate contract
fulfillment and service on a global basis. Both approaches of “China-Based Supply for the World” and
“Local Supply” will help boost the competitiveness of Midea’s supply chain and its ability to deal with
uncertainties in the market. Midea will also firmly promote transformation of TLSC’s business, focus on
the Japan market, as well as carry on with the work in user research, product development, channel
reform, organizational management, etc.
e. Midea will improve its multi-brand system according to different needs from different consumer groups.
COLMO, the brand targeting high-end consumers, will launch whole new product suites and expand its
channel network in the first- and second-tier cities. BUGU, the brand targeting online consumers, will
integrate internal and external resources to provide individualized experience for users, and establish all-
scene ecosystem cooperation with external manufacturers to create innovative marketing and business
models. Additionally, Midea will give play to its multi-category synergistic advantages and improve its
product suites and families, including the real-estate before-market product suites, to provide customized
and integrated home solutions with full categories of the household appliances.
f. Midea will strengthen the building of Midea as a digitalized enterprise by improving the digital
operational methods and systems to support the integration of every link of Midea’s value chain and
optimize efficiency, value creation and the fulfillment of operating objectives, as well as by further building
and optimizing digitalized industrial Internet factories. And it will continue to promote and optimize the
International 632 program to strengthen digital support for the “Global Operations” strategy.
g. Following the integration of KUKA’s robotics business in China, Midea will beef up localized operations
in China, increase investment in the development and application of robotics, foster R&D innovation of
core components and software systems, as well as promote the “432+X” product system. In terms of
marketing, Midea will maintain leadership in the auto sector and take active steps to explore new areas
including general industrial manufacturing, electronics, medical care and logistics, services, etc.
Concerning internal management, it will concentrate on R&D, supply chain management, high-
performance operations and digitalization, among others, so as to build the core competitiveness of the
robotics and industrial automation business in a faster manner.
h. Midea will continue to increase its investment in the R&D of IoT basic technology to improve user
experience and security. In the meantime, guided by the strategy of “Comprehensive Intellectualization”,
it will build up a cooperation ecosystem to keep improving the performance of its smart home IoT modules
through cooperating with external parties. Guided by users’ thinking model, Midea will connect to more
users through its MSmartLife App, carry out lean operations and provide safe, convenient and smart life
experience for users. Meanwhile, it will promote smart products by providing smart scene experience,
upgrading the store network, providing training in relation to smart products, increasing the percentage
of smart home appliances, etc.
9.3 Key capital expenditure plan in future
To adapt to changes in the industry environment, the Company will focus its 2020 investments on
technological innovation, product quality improvement, robotics and industrial automation systems,
digitalization, e-commerce channel expansion and new retail channels construction, new brand marketing,
global operations capability improvement and the smart home strategy. Meanwhile, the Company will
strictly control investment in infrastructure and capacity expansion, as well as non-operating expenditures.
The capital expenditures will primarily come from the Company’s own funds.
9.4 Main risks in future development
a. Risk associated with the COVID-19 outbreak
Domestic consumption and production are expected to be affected to some degree in the short run by
the COVID-19 outbreak in early 2020. Therefore, the offline retail stores of the Company are expected to
see lower footfall in the short run. Meanwhile, the COVID-19 has been spreading overseas since late
February 2020. Should the epidemic last for a long time, the Company could face a challenge in 2020.
b. Risk of macro economy fluctuation
The market demand for the Company’s consumer appliances and HVAC equipment, among other
products, can be easily affected by the economic situation and macro control. If the global economy
encounters a heavy hit, or the domestic economy or consumer demand slows down in growth, the growth
of the household appliance industry, to which the Company belongs, will slow down accordingly, and as
a result, this may affect the product sales of Midea Group.
c. Risks in the fluctuation of production factors
The raw materials required by Midea Group to manufacture its consumer appliances and core
components primarily include different grades of copper, steel, aluminum, and plastics. At present, the
household appliance manufacturing sector belongs to a labor intensive industry. If the price of raw
materials 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 the
cost reduction resulted from lean production and improved efficiency, as well as the sale prices of end
products cannot offset the total effects of cost fluctuations, the Company’s business will be influenced to
some degree.
d. Risk in global asset allocation and overseas market expansion
Internationalization and global operations is a long-term strategic goal of the Company. The Company
has built joint-venture manufacturing bases in many countries around the world. Progress has been made
day by day regarding the Company’s overseas operations and new business expansion. However, its
efforts in global resource integration may not be able to produce expected synergies; and in overseas
market expansion, there are still unpredictable risks such as local political and economic situations,
significant changes in law and regulation systems, and sharp increases in production costs.
e. Risk in product export and foreign exchange losses caused by exchange rate fluctuation
As Midea carries on with its overseas expansion plan, its export revenue has accounted for more than
40% of the total revenues. Any sharp exchange rate fluctuation might not only bring negative effects on
the export of the Company, but could also lead to exchange losses and increase its finance costs.
f. Market risks brought by trade frictions and tariff barriers
Due to the rise of anti-globalization and trade protectionism, China will see more uncertainties in export
in 2020. The trade barriers and frictions of some major markets will affect the export business in the short
run, as well as marketing planning and investment in the medium and long run. Political and compliance
risks are rising in international trade. These can mainly be seen on compulsory safety certificates,
international standards and requirements, and product quality and management systems certification,
energy-saving requirements, the call for increasingly strict environmental protection requirements, as well
as with rigorous requirements for recycling household appliances waste. Trade frictions caused by anti-
dumping measures implemented by some countries and regions aggravate the burden in costs and
expenses for household appliance enterprises, and have brought about new challenges to market
planning and business expansion for enterprises.
In face of the complicated and changeable environment and risks at home and abroad, Midea will strictly
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 system so as
to effectively prevent and control various risks and ensure its sustained, steady and healthy development.
10. Visits Paid to the Company for Purposes of Research, Communication, Interview,
etc.
10.1 In the Reporting Period
√Applicable □N/A
Dateofvisit Wayofvisit Typeofvisitor Indextomaininquiryinformation
14-15 January2019 One-on-one Institution LogSheetofInvestorRelationsActivitiesfor14-15
meeting January2019disclosedonwww.cninfo.com.cn
17 January2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor17
January2019disclosedonwww.cninfo.com.cn
21-22 February2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor21-22
February2019disclosedonwww.cninfo.com.cn
15 May2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor15May
2019disclosedonwww.cninfo.com.cn
17 May2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor17May
2019disclosedonwww.cninfo.com.cn
23 May2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor23May
2019disclosedonwww.cninfo.com.cn
19 June2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor19June
2019disclosedonwww.cninfo.com.cn
27-28 June2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor27-28
June2019disclosedonwww.cninfo.com.cn
4-5 July2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor4-5July
2019disclosedonwww.cninfo.com.cn
22-26 July2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor22-26
July2019disclosedonwww.cninfo.com.cn
17-18 September2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor17-18
September2019disclosedonwww.cninfo.com.cn
24 September2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor24
September2019disclosedonwww.cninfo.com.cn
20-21 November2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor20-21
November2019disclosedonwww.cninfo.com.cn
4 December2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor4
December2019disclosedonwww.cninfo.com.cn
19 December2019 Ditto Ditto LogSheetofInvestorRelationsActivitiesfor19
December2019disclosedonwww.cninfo.com.cn
Times ofvisit 240
Number ofvisitinginstitutions 2,540
Number ofvisitingindividuals 130
Number ofothervisitors 0
Significant undisclosedinformationdisclosed,revealedorleaked No
Section V Significant Events
1. Profit Distribution and Converting Capital Surplus into Share Capital for Common
Shareholders
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, for
common shareholders in the Reporting Period
□Applicable √N/A
Plans (or preliminary plans) for profit distribution and converting capital surplus into share capital for
common shareholders for the past three years (including the Reporting Period)
a. For 2017, based on the total share capital of 6,584,022,574 shares, the Company distributed a cash
dividend of RMB12 (tax inclusive) per 10 shares to all the shareholders. The book closure day was 3 May
2018 and the ex-dividend day 4 May 2018.
b. For 2018, based on the 6,585,838,349 shares at the disclosure date of the 2018 Annual report (the
total share capital minus the then repurchased shares in the repo securities account), it was proposed
that the Company should distribute a cash dividend of RMB13 (tax inclusive) per 10 shares to all the
shareholders and should not convert capital surplus into share capital. When the profit distribution plan
was implemented, if any change occurred to the total shares eligible for profit distribution, the profit
distribution plan should be based on the total shares eligible for profit distribution at the book closure date
of the profit distribution, and the dividend per share should be adjusted under an unchanged total
distribution amount.
When the profit distribution plan was implemented, based on 6,565,827,689 shares (the then
repurchased 40,014,998 shares in the special securities account for repurchase subtracted from the total
share capital of 6,605,842,687 shares), under an unchanged total distribution amount, the Company
distributed a cash dividend of RMB13.039620 (tax inclusive) per 10 shares to all the shareholders. The
book closure day was 29 May 2019 and the ex-dividend day 30 May 2019.
c. For 2019, based on the 6,957,181,058 shares at the disclosure date of this report (the total share
capital of 6,999,467,315 shares minus the repurchased 42,286,257 shares in the repo securities account
at that date), it is proposed that the Company should distribute a cash dividend of RMB16 (tax inclusive)
per 10 shares to all the shareholders and should not convert capital surplus into share capital. When the
profit distribution plan is implemented, if any change occurs to the total shares eligible for profit distribution,
the profit distribution plan shall be based on the total shares eligible for profit distribution at the book
closure date of the profit distribution, and the dividend per share shall be adjusted under an unchanged
total distribution amount.
Cash dividend to common shareholders in the past three years (including the Reporting Period)
Unit: RMB
Ratioof
total
Ratio of Ratioof cash
cash cash dividend
dividen dividend s
ds to sinother (inclusiv
net formsto eof
Netprofit profit netprofit thosein
attributableto attributa Cash attributa other
common bleto dividendsin bleto Totalcash forms)to
Year Cashdividends(tax shareholdersof commo otherforms common dividends netprofit
included) theCompanyin n (suchasshare sharehol (inclusiveofthose attributa
theconsolidated shareho repurchase) dersin inotherforms) bleto
statementinthe ldersin the common
year the consolid sharehol
consoli ated dersin
dated statemen the
stateme tinthe consolid
nt inthe year ated
year stateme
ntinthe
year
2019 11,131,489,692.80 24,211,222,000.00 45.98% - - 11,131,489,692.80 45.98%
2018 8,561,589,853.70 20,230,779,000.00 42.32% 4,000,000,000 19.77% 12,561,589,853.70 62.09%
2017 7,900,827,088.80 17,283,689,000.00 45.71% - - 7,900,827,088.80 45.71%
The Company made a profit in the Reporting Period and the profit distributable to common shareholders
of the Company (without subsidiaries) was positive, but it did not put forward a preliminary plan for cash
dividend distribution to its common shareholders
□Applicable √N/A
2. Preliminary Plan for Profit Distribution and Converting Capital Surplus into Share
Capital for the Reporting Period
√ Applicable □ N/A
Bonus sharesforevery10shares(share) 0
Dividend forevery10shares(RMB)(taxincluded) 16
Additional sharesconvertedfromcapitalsurplus 0
for every10shares(share)
Totalsharesasthebasisforthepreliminaryplan 6,957,181,058
for profitdistribution(share)
Cash dividends(RMB)(taxinclusive) 11,131,489,692.80
Cash dividendsinotherforms(suchasshare 0
repurchase) (RMB)
Totalcashdividends(inclusiveofthoseinother 11,131,489,692.80
forms) (RMB)(taxinclusive)
Distributable profits(RMB) 23,249,372,000.00
Percentage oftotalcashdividends(inclusiveof
those inotherforms)inthetotaldistributedprofit 100%
(%)
Details aboutthepreliminaryplanforprofitdistributionandconvertingcapitalsurplusintosharecapital
As auditedbyPricewaterhouseCoopersChina(LLP),theCompanyrealizedanetprofitofRMB13,685,619,000for2019.
Pursuant totherelevantprovisionsundertheArticlesofAssociation,itprovided10%asstatutorysurplusreserve,namely
RMB1,368,562,000. Plus undistributed profits at the beginning of the year of RMB19,486,212,000 and minus the profit
distributed intheyearofRMB8,553,897,000,theactualdistributableprofitwouldbeRMB23,249,372,000.
For 2019,basedonthe6,957,181,058sharesatthedisclosuredateofthisreport(thetotalsharecapitalof6,999,467,315
shares minus the repurchased 42,286,257 shares in the repo securities account at that date), it is proposed that the
Company should distribute a cash dividend of RMB16 (tax inclusive) per 10 shares to all the shareholders and should
not convert capital surplus into share capital. When the profit distribution plan is implemented, if any change occurs to
the totalshareseligibleforprofitdistribution,theprofitdistributionplanshallbebasedonthetotalshareseligiblefor profit
distribution at the book closure date of the profit distribution, and the dividend per share shall be adjusted under an
unchanged totaldistributionamount.
The saidplanshallbesubmittedtotheCompany’s2019annualgeneralmeetingofshareholdersforfurtherconsideration.
3. Performance of Undertakings
3.1 Undertakings of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other
commitment makers fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable □ N/A
Undertaki Underta Typeof Undertakin
ng king undertaki Detailsofundertaking gdate Term Particularsontheperformance
giver ng
1. MideaHoldingandHeXiangjianhaveundertakenasfollows:
Controll HeXiangjian,MideaHoldingandtheircontrolledenterpriseswill
ing remain independentfromMideaGroupinrespectofpersonnel,
sharehoMaintena finance, assets, business and institutions, in accordance with
lderand nceof relevant laws and regulations and regulatory documents. They 28/03/2013 Long-standing 1.Therehasbeennoviolationofthis
Undertaki actual independ will faithfully fulfill the above undertaking, and assume the undertaking.
ng made controll ence corresponding legal liability. If they fail to fulfill their obligations
in offering er andresponsibilitiesconferredbytheundertaking,they willbear
document the corresponding legal liabilities according to relevant laws,
s or rules,regulationsandregulatorydocuments.
sharehold 2. In order to avoid possible competition within the industry
ing between Midea Group and Midea Holding and its controlled
alternatio Controll enterprises as well as He Xiangjian, his immediate family and
n ing Avoiding hiscontrolledcompanies,MideaHoldingandHeXiangjianhave
document shareho competiti undertakenasfollows: 2.Therehasbeennoviolationofthis
s lderand onwithin 28/03/2013 Long-standing undertaking.
actual the (1)Noneoftheentitiesorindividualsmentionedaboveisorwill
controll industry beengagedinthesameorsimilarbusinessastheexistingmain
er businessofMideaGroupanditscontrolledcompanies.Theyare
not orwillnotbeengagedorparticipateinsuchbusinessthatis
competitive to the existing main business of Midea Group and
its controlled companies by controlling other economic entities,
institutions oreconomicorganizations;
(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 isstilltheactualcontrollerofMideaGroup,andMidea
Holding the controlling shareholder, they will agree on solving
the problemofcompetition within theindustry arisingtherefrom
within areasonableperiod;
(3) If Midea Group and its controlled companies expand their
business scopeonthebasisoftheexistingonestothosewhere
the above mentioned related subjects have not gone into
production oroperation,aslongasHeXiangjianisstilltheactual
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 documentsofPeople'sRepublicofChina,aslongas
Midea Holding is identified as the controlling shareholder of
Midea Group, and He Xiangjian the actual controller, they will
not changeorterminatethisundertaking.
(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,regulationsandregulatorydocuments.
3. In order to regulate matters of related transactions that may
occur inthefuturebetweenMideaGroupandMideaHoldingand
its controlledcompaniesaswellasHeXiangjian,hisimmediate
family and his controlled companies, Midea Holding and He
Xiangjian haveundertakenasfollows:
(1) TheywillregulateanyrelatedtransactionswithMideaGroup
and itscontrolledcompaniesusingtheirutmosteffortstoreduce
them. For unavoidable related transactions with Midea Group
and its controlled companies, including but not limited to
commodity trading,providingservicestoeachotherorasagent,
Controll theywillsignlegalnormativeagreementswithMideaGroup,and
ing Regulatio go through approval procedures in accordance with related
shareho nof laws, regulations, rules, other regulatory documents, and 3.Therehasbeennoviolationofthis
lderand related relevantprovisionsoftheArticlesofAssociationofMideaGroup. 28/03/2013 Long-standing undertaking.
actual transactio They guarantee to offer fair prices for related transactions, and
controll ns fulfill the information disclosure obligations in respect of the
er relatedtransactionsaccordingtorelatedlaws,regulations,rules,
other regulatory documents, and relevant provisions of the
Articles ofAssociationofMideaGroup.Theyalsoguaranteenot
to illegally transfer the funds or profits from Midea Group, or
damage the interests of its shareholders at their advantages
during therelatedtransactions.
(2) Theyshallfulfilltheobligationofwithdrawingfromvotingthat
involves the above mentioned related transactions at the
general meetingofMideaGroup;
(3) TherelatedsubjectmentionedaboveshallnotrequireMidea
Group to offer more favorable conditions than those to any
independent thirdpartyinanyfairmarkettransactions.
(4) In accordance with effective laws, regulations or other
regulatory documentsofPeople'sRepublicofChina,aslongas
Midea Holding is identified as the controlling shareholder of
Midea Group, and He Xiangjian theactual controller, theyshall
not changeorterminatethisundertaking.
(5) MideaHoldingandHeXiangjianwillfaithfullyfulfilltheabove
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
responsibilitiesaccordingtorelevantlaws,rules,regulationsand
regulatory documents.
4. On4January2001,theMideaTradeUnionCommitteesigned
the "Equity Transfer Contract" with five people, namely He
On Midea Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and
Trade Liang Jieyin, where it transferred all its limited equity of Midea
Controll Union Group(22.85%)respectivelytothosefivepeople.Accordingto
ing Committe the confirmation letter issued by members of the Midea Trade
shareho e Union Committee at that time, the equity transfer price was 4.Sofar,thisshareholdingtransferhasnot
lderand transferri determined after mutual discussion on the basis of their true 28/03/2013 Long-standing broughtaboutanylosscausedbyanydispute
actual ngits opinions,thereforetherewasnodisputeorpotentialdispute. orpotentialdisputes.Therehasbeenno
controll limited On 28 June 2013, Foshan Shunde Beijiao General Union, violationofthisundertaking.
er equityof superiordepartmentofMideaTradeUnionCommittee,issueda
Midea confirmation letter to the fact that the Midea Trade Union
Group Committee funded the establishment of Midea Group Co., Ltd.
In addition the letter also confirmed that the council of Midea
Trade UnionCommitteeisentitledtodisposeanypropertyofthe
committee, and such property disposal does not need any
agreement fromallstaffcommitteemembers.
Midea Holding and He Xiangjian, respectively the controlling
shareholder andactualcontrollerofMideaGroupCo.,Ltd.have
undertaken asfollows: For any loss to Midea Groupcaused by
any disputeorpotentialdisputearisingfromthemattersofequity
transfer mentionedabove,theyarewillingtoassumefullliability
for suchloss.
Issues
about
Payment 5.MideaHoldingandHeXiangjianhaveundertakentobeliable
of the for (1) paying such expenses and related expenses on time
Controll Staff based on the requirements of relevant state departments if
ing Social Midea Group is required to be liable for the payment of staff 5.Sofar,thepaymentofthestaffsocial
shareho Insurance social insurance, housing provident fund and the payment insuranceandthehousingprovidentfundhas
lderand andthe required by relevant state authorities prior to this merger, (2) 28/03/2013 Long-standing notbroughtaboutanycontroversyorpotential
actual Housing paying corresponding compensation for all direct and indirect disputes.Therehasbeennoviolationofthis
controll Provident losses incurredbyMideaGroupanditssubsidiaries duetothis undertaking.
er Fund merger,(3)indemnifyingandholdingharmlessMideaGroupand
involved its subsidiariesin time from suchexpenses when MideaGroup
in Midea anditssubsidiariesarerequiredtopaytheminadvance.
Group's
Overall
Listing
Controll Issues 6.Sofar,theissuesaboutassetalteration,
about 6.Undertakingsonissuesaboutassetalteration,assetflawanding assetflawandhouseleasingofMideaGroup
sharehoasset houseleasingofMideaGroupanditssubsidiaries 28/03/2013 Long-standing anditssubsidiarieshavenotbroughtabout
lderand alteration, MideaHoldingandHeXiangjianhaveundertakenasfollows: anycontroversyorpotentialdisputes.There
actual asset hasbeennoviolationofthisundertaking.And
controll flawand (1) Midea Holding will do its utmost to assist and urge Midea MideaHoldingshallhonorthisundertaking
er house Group (including its subsidiaries) to complete renaming beforeitsexpiration.
leasingof procedures of related assets, such as land, housing,
Midea trademarks,patentsandstockrights,declaredintherelatedfiles
Group ofthismerger.MideaHoldingwillbeliableforallcompensations
andits of losses caused by issues about renaming procedures of
subsidiari relatedassetsmentionedabovetoMideaGroup.
es (2) Midea Holding shall do its utmost to assist Midea Group
(including its subsidiaries) to apply for ownership certificates of
land and housing or property declared in related files of this
merger.
(3) Midea Holding shall assist Midea Group (including its
subsidiaries) to re-apply for corresponding construction
procedures andapplyfortheirownershipcertificatesforhouses
without completeprocedures,ashappenedinthepast,toapply
for the ownership certificate. If the competent authorities
requires MideaGrouptodismantlebuildingsthatcannotacquire
the re-applicationfor realestateregistrationprocedures,Midea
Holding shall do its utmost to provide assistance and be liable
for any related expensesused in dismantlingsuch buildingsby
Midea Group(includingitssubsidiaries).
(4) Under any circumstances that Midea Group suffers from
losses incurred from no longer using these properties or
presently usingthelandor houseaboveduetofailingtoobtain
or collectintimetheownershipcertificatesofthelandorhouse
above or any losses caused by any other reasons, Midea
Holding shallcompensateanylossforthesereasonsintimeand
in full. Midea Holding shall compensate the actual loss Midea
Group suffers from any circumstances above resulting in
penalties subjected to from competent authorities or through
claims fromanyotherthirdparty.
(5) Based on issues of defective house leasing declared in
related filesofthismerger,MideaHoldingshallprovidesufficient
compensations foralleconomiclossesincurredbyMideaGroup
(including its subsidiaries) where the leasehold relations above
become invalid or other disputes occur, which are caused by
rights claimsfromathirdpartyorbymeansofanadministrative
authority exercisingarightandthereforeresultsinanyeconomic
losses due to eviction from rental houses, or any penalties
subjected to by competent government departments or any
recourse fromrelatedparties.
(6) Based on the issues of defective land leasing declared in
related files of this merger, when leasehold relations become
invalid causedbydefectsoflandleasingorwhenotherdisputes
occur, resulting in any economic losses to Midea Group
(including itssubsidiaries)orthroughanypenaltiesadministered
by competent government departments. Likewise if the lessor
cannot compensateforlossescausedbysuchdefectiveleasing,
Midea HoldingshallcompensateMideaGroupforlossescaused
by suchdefectivelandleasing.
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 andMideaGrouphassufferedanylosstherefrom,Midea
Holding shallcompensateincashormakeupforMideaGroup’s
loss upon Midea Group’s notice in writing within 30 days when
the lossoccursandthelossamountisdefinite.
The
Opinion
in
Principle 1.Iagreetothismergerinashareswapinprinciple.
on the
Merger in 2.IdonotplantoandwillnotreducemyshareholdinginMidea
a Share Group and/or Little Swan during the period from the share
Actual Swap& tradingresumptiondatetothecompletiondateofthismergerin
controll the ashareswap. 23/10/2018 23/10/2018- Thisundertakinghasbeenfulfilledandthere
er Statemen 3. I’m legally bound by this commitment letter since the date of 21/06/2019 hasbeennoviolationofthisundertaking.
t and my signature. Where any loss occurs to Midea Group or Little
Commitm Swanduetomeviolatinganycontentsofthiscommitmentletter,
Undertaki entLetter I shall bear the corresponding compensation liability according
ng made onany tolaw.
in timeof Sharehol
asset ding
restructur Reductio
ing nPlan
The
Opinion 1. The company agrees to this merger in a share swap in
in principle.
Principle 2. The company does not plan to and will not reduce its
Controll onthe shareholding in Midea Group during the period from the share
ing Mergerin tradingresumptiondatetothecompletiondateofthismergerin 23/10/2018- Thisundertakinghasbeenfulfilledandthere23/10/2018
sharehoaShare ashareswap. 21/06/2019 hasbeennoviolationofthisundertaking.
lder Swap&
the 3.Thecompanyislegallyboundbythiscommitmentlettersince
Statemen the date of signature. Where any loss occurs to Midea Group
t and due to the company violating any contents of this commitment
Commitm letter,thecompanyshallbearthe corresponding compensation
ent Letter liabilityaccordingtolaw.
on any
Sharehol
ding
Reductio
n Plan
Statemen Up to the issue dateof this statement, none of the companyor
t on any of its incumbent senior management personnel received
Irregularit any administrative or criminal punishment (exclusive of those
ies not related to the securities market), or was involved in any 23/10/2018 23/10/2018- Thisundertakinghasbeenfulfilledandthere
Committe material civil lawsuit or arbitration in relation to any economic 21/06/2019 hasbeennoviolationofthisundertaking.
d inthe dispute, in the past five years; or is being investigated by a
Past Five judicial authority for involvement in any criminal case or by the
Years ChinaSecuritiesRegulatoryCommissionforanyirregularity.
1. The Company does not plan to and will not reduce its
shareholding in Little Swan during the period from the share
trading resumptiondatetothecompletiondateofthismergerin
Statemen a share swap.The shares held by the Company in Little Swan
t onany will be retired upon the completion of this merger in a share
Sharehol swap. 23/10/2018- Thisundertakinghasbeenfulfilledandthere23/10/2018
The ding 21/06/2019 hasbeennoviolationofthisundertaking.
Compa Reductio 2.TheCompanyislegallyboundbythiscommitmentlettersince
ny nPlan thedateofsignature.WhereanylossoccurstoLittleSwandue
to theCompanyviolatinganycontentsofthiscommitmentletter,
the Company shall bear the corresponding compensation
liability accordingtolaw.
Commitm The Company will provide relevant information to the 23/10/2018- Thisundertakinghasbeenfulfilledandthere
ent Letter intermediaryagencieshiredforthismergerinashareswapina 23/10/2018 21/06/2019 hasbeennoviolationofthisundertaking.
on the timely manner; warrant that the information provided is true,
Truthfuln accurate, complete and free of any misrepresentations,
ess, misleadingstatementsormaterialomissions;andshalltogether
Accuracy bewhollyliableforthetruthfulness,accuracyandcompleteness
and ofsuchinformation.Where anyloss occurstoanyinvestordue
Complete to any misrepresentations, misleading statements or material
ness of omissions in the information provided, the Company shall bear
the thecorrespondingcompensationliabilityaccordingtolaw.
Informati
on
Provided
1. Up to the issue date of this statement, the Company is not
being investigated by a judicial authority for involvement in any
criminal caseorbytheChinaSecuritiesRegulatoryCommission
Statemen foranyirregularity.
t on 2.Uptotheissuedateofthisstatement,theCompanyreceived
Punishm no administrative or criminal punishments (exclusive of those
ents notrelatedtothesecuritiesmarket)andwasnotinvolvedinany 23/10/2018- Thisundertakinghasbeenfulfilledandthere23/10/2018
Received material civil lawsuit or arbitration in relation to any economic 21/06/2019 hasbeennoviolationofthisundertaking.
and dispute; nor did it receive any administrative supervision
Credibility measuresfromtheChinaSecuritiesRegulatoryCommissionor
Issues disciplinary punishments from the stock exchange for failing to
repay any debt of a large amount on time or fulfill any
commitment, or have any other material credibility issue,in the
past fiveyears.
Whether
the Yes
undertaki
ng is
fulfilled
on time
Specific
reasons
for failing
to fulfill
any N/A
undertaki
ng and
plan for
the next
step
3.2 Where any earnings forecast was made for any of the Company’s assets or projects and the
Reporting Period is still within the forecast period, the Company shall explain whether the
performance of the asset or project reaches the earnings forecast and why
□Applicable √N/A
4. Occupation of the Company’s Capital by the Controlling Shareholder or Its Related
Parties for Non-Operating Purposes
□Applicable √N/A
No such cases in the Reporting Period.
5. Explanation of the Board of Directors, the Supervisory Committee and Independent
Directors (If Any) Regarding the "Non-standard Audit Opinion" for the Reporting
Period
□Applicable √N/A
6. Reason for Changes in Accounting Policies, Accounting Estimates and Accounting
Methods as Compared to the Financial Report for the Prior Year
√ Applicable □ N/A
For changes in accounting policies, accounting estimates and accounting methods, see Note 2, (32) in
“Section IX Financial Report” of this report.
7. Reason for Retrospective Restatement of Major Accounting Errors during the
Reporting Period
□Applicable √N/A
No such cases in the Reporting Period.
8. Reason for Changes in Scope of the Consolidated Financial Statements as
Compared to the Financial Report for the Prior Year
√ Applicable □ N/A
For the main subsidiaries included in the consolidated financial statements of the current year, please
refer to Note 5 and Note 6 to the Financial Statements in “Section IX Financial Report”. For the newly
consolidated companies, see Note 5, 5.1, (a), and they primarily include: Midea Electrics Egypt, Anhui
Welling Auto Parts Co. , Ltd., Wuxi Little Swan Electric Co., Ltd., Guangdong Swisslog Technology Co.,
Ltd., Guangdong Yueyun Industrial Internet Innovative Technology Co., Ltd., Midea Refrigeration
Equipment (Thailand) Co., Ltd. and Tianjin Midea Commercial Factoring Co., Ltd. For the companies
deconsolidated in the current year, see Note 5, 5.1, (b).
9. Engagement and Disengagement of CPA Firm
CPA firm at present
Name ofthedomesticCPAfirm PricewaterhouseCoopersChina(LLP)
The Company’spaymenttothedomesticCPAfirm RMB8.965million
Consecutive yearsoftheauditserviceprovidedbythe Fiveyears
domestic CPAfirm
Names ofthecertifiedpublicaccountantsfromthe HuangMeimeiandQiuXiaoying
domestic CPAfirm
Consecutive yearsoftheauditserviceprovidedbythe Fiveyears
certified publicaccountantsfromthedomesticCPAfirm
Whether the CPAs firm was changed in the current period
□Yes √No
Engagement of any CPAs firm for internal control audit, financial advisor or sponsor
√ Applicable □ N/A
The Company appointed PricewaterhouseCoopers China (LLP) as the internal control auditor for the
current year. The total amount paid by the Company to PricewaterhouseCoopers China (LLP) for its
financial statement and internal control audit services for 2019 was RMB8.965 million.
Midea Group appointed CITIC Securities Co., Ltd. to be the independent financial advisor for its merger
with Little Swan in a share swap via A-share offering and the related transaction. On 21 June 2019, the
total 323,657,476 new shares issued by the Company for this merger were allowed for public trading at
the Shenzhen Stock Exchange. Upon the completion of this merger, Little Swan would be delisted and
de-registered as a corporate body, and Midea Group or its wholly-owned subsidiary would take over all
the assets, liabilities, business, personnel, contracts and all the other rights and obligations of Little Swan.
10. Possibility of Listing Suspension and Termination after Disclosure of this Annual
Report
□Applicable √N/A
11. Bankruptcy and Reorganization
□Applicable √N/A
No such cases in the Reporting Period.
12. Material Litigation and Arbitration
□Applicable √N/A
No such cases in the Reporting Period.
13. Punishments and Rectifications
□Applicable √N/A
No such cases in the Reporting Period.
14. Credit Conditions of the Company as well as Its Controlling Shareholder and
Actual Controller
□Applicable √N/A
15. Implementation of any Equity Incentive Scheme, Employee Stock Ownership
Scheme or Other Incentive Measures for Employees
√Applicable □N/A
A. Overview of the First Stock Option Incentive Scheme
a. The Company convened the 10th Meeting of the 3rd Board of Directors on 18 April 2019, at which the
Proposal for the Retirement of Unexercised Stock Options upon Expiry was reviewed and approved. As
the First Stock Option Incentive Scheme expired on 17 February 2019, the Company agreed to retire the
56,250 and 90,000 stock options that had been previously granted to Chen Lingzhi and Yang Hui
respectively but was unexercised upon expiry.
During the Reporting Period, 2,666,976 shares were exercised under the First Stock Option Incentive
Scheme.
B. Overview of the Second Stock Option Incentive Scheme
a. The Company disclosed the Announcement on the 2018 Annual Profit Distribution on 23 May 2019.
Based on the total 6,565,827,689 shares eligible for profit distribution (the total share capital of
6,605,842,687 shares minus the repurchased 40,014,998 shares), and in accordance with the principle
of an unchanged total profit amount to be distributed, the Company would distribute RMB13.039620 in
cash per 10 shares to shareholders. The record date was 29 May 2019 and the ex-date was 30 May
2019.
b. The Company convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the
Proposal for the Adjustments to the Exercise Price for the Second Stock Option Incentive Scheme was
reviewed and approved. As the 2018 Annual Profit Distribution had been carried out, the exercise price
for the Second Stock Option Incentive Scheme was revised from RMB17.36 to RMB16.06 per share.
During the Reporting Period, 17,546,786 shares were exercised under the Second Stock Option Incentive
Scheme.
C. Overview of the Third Stock Option Incentive Scheme
a. The Company convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the
Proposal for the Adjustments to the Exercise Price for the Third Stock Option Incentive Scheme was
reviewed and approved. As the 2018 Annual Profit Distribution had been carried out, the exercise price
for the Third Stock Option Incentive Scheme was revised from RMB19.15 to RMB17.85 per share.
b. The Company convened the 13th Meeting of the 3rd Board of Directors on 1 July 2019, at which the
Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the Third
Stock Option Incentive Scheme was reviewed and approved. As such, it was agreed to adjust the
incentive receivers and their exercisable stock options for the Third Stock Option Incentive Scheme due
to the departure, positional changes, low performance appraisals or other factors of some incentive
receivers. Upon the adjustments, the number of incentive receivers decreased from 848 to 735, and the
number of locked-up stock options granted to them was also reduced from 38,070,000 to 32,905,000.
The Proposal for Matters Related to the Stock Option Exercise for the Third Exercise Period of the Third
Stock Option Incentive Scheme was also considered and approved. Because the exercise conditions
have grown mature for the third exercise period, a total of 735 incentive receivers who have been verified
for the Third Stock Option Incentive Scheme have been allowed to exercise 32,905,000 stock options in
the third exercise period (ended 27 June 2021).
The Proposal for the Retirement of Unexercised Stock Options upon Expiry was also reviewed and
approved. As the first exercise period of the Third Stock Option Incentive Scheme expired, the Company
agreed to retire the 59,999 and 65,000 stock options that had been previously granted to Yang Hui and
Yuan Dong respectively but was unexercised upon expiry.
During the Reporting Period, 33,192,625 shares were exercised under the Third Stock Option Incentive
Scheme.
D. Overview of the Fourth Stock Option Incentive Scheme
a. The Company convened the 12rd Meeting of the 3rd Board of Directors on 30 May 2019, at which the
Proposal for the Adjustments to the Exercise Price, Incentive Receivers and Their Exercisable Stock
Options for the Fourth Stock Option Incentive Scheme was reviewed and approved. As the 2018 Annual
Profit Distribution had been carried out, the exercise price for the Fourth Stock Option Incentive Scheme
was revised from RMB31.52 to RMB30.22 per share. Meanwhile, it was agreed to adjust the incentive
receivers and their exercisable stock options for the Fourth Stock Option Incentive Scheme due to the
departure, positional changes, low individual or business division performance appraisals or other factors
of some incentive receivers. Upon the adjustments, the number of incentive receivers decreased from
1,354 to 1,196, and the number of locked-up stock options granted to them was also reduced from
60,676,000 to 51,122,200.
b. The Proposal for Matters Related to the Stock Option Exercise for the Second Exercise Period of the
Fourth Stock Option Incentive Scheme was also considered and approved. Because the exercise
conditions have grown mature for the second exercise period, a total of 1,152 incentive receivers who
have been verified for the Fourth Stock Option Incentive Scheme have been allowed to exercise
24,382,200 stock options in the first exercise period (ended 11 May 2020).
During the Reporting Period, 29,308,811 shares were exercised under the Fourth Stock Option Incentive
Scheme.
E. Overview of the Fifth Stock Option Incentive Scheme
a. In light of the authorization given at the 2017 Annual General Meeting of Shareholders, the Company
convened the 8th Meeting of the 3rd Board of Directors on 11 March 2019, at which the Proposal on
Grant of the Reserved Stock Options of the Fifth Stock Option Incentive Scheme to Incentive Receivers
was reviewed and approved. As such, the Company agreed to grant 5,540,000 reserved stock options to
100 incentive receivers on 11 March 2019 at the exercise price of RMB47.17 per share.
The Company originally intended to grant 5,540,000 reserved stock options to 100 incentive receivers.
However, due to two incentive receivers failing to open a securities account on time and one incentive
receiver’s departure from the Company before the registration of the grant, they were no longer eligible
for the Fifth Stock Option Incentive Scheme. Therefore, the number of incentive receivers who were
registered for the reserved stock options of the Fifth Stock Option Incentive Scheme was 97, down from
100, with 5,340,000 stock options, down from 5,540,000. On 10 May 2019, the Company completed the
registration of the grant of reserved stock options under the Fifth Stock Option Incentive Scheme.
b. The Company convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the
Proposal for the Adjustments to the Exercise Price for the Fifth Stock Option Incentive Scheme was
reviewed and approved. As the 2018 Annual Profit Distribution had been carried out, the exercise price
for the first phase of the grant was revised from RMB56.34 to RMB55.04 per share, and the exercise
price for the reserved stock options from RMB47.17 to RMB45.87 per share.
F. Overview of the Sixth Stock Option Incentive Scheme
a. On 18 April 2019, the Sixth Stock Option Incentive Scheme (Draft) of Midea Group Co., Ltd (hereinafter
referred to as the “Sixth Stock Option Incentive Scheme (Draft)”) and its abstract were reviewed and
approved at the 10th Meeting of the 3rd Board of Directors, and the incentive receiver list for the Sixth
Stock Option Incentive Scheme (Draft) was examined at the 7th Meeting of the 3rd Supervisory
Committee.
b. On 13 May 2019, the Company convened the 2018 Annual General Meeting of Shareholders, at which
the Proposal on the Sixth Stock Option Incentive Scheme (Draft) and Its Abstract, the Proposal on the
Implementation and Appraisal Measures for the Sixth Stock Option Incentive Scheme, the Proposal for
Asking the Meeting of Shareholders to Authorize the Board to Handle Mattes Related to the Sixth Stock
Option Incentive Scheme and other relevant proposals were reviewed and approved.
For this Incentive Scheme, the Company intended to grant 47,240,000 stock options to 1,150 incentive
receivers with the exercise price being RMB54.17 per share.
c. In light of the authorization given at the 2018 Annual General Meeting of Shareholders, the Company
convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the Proposal for the
Adjustments to the Exercise Price, Incentive Receiver List and Number of Stock Options to Be Granted
for the Sixth Stock Option Incentive Scheme, the Proposal for the Determination of the Grant Date for the
Sixth Stock Option Incentive Scheme and the Proposal for the Grant-Related Matters for the Sixth Stock
Option Incentive Scheme were reviewed and approved. As such, the Company agreed to grant
47,140,000 stock options to 1,146 incentive receivers on 30 May 2019 with the exercise price revised
from RMB54.17 per share to RMB52.87 per share.
The Company originally intended to grant 47,140,000 stock options to 1,146 incentive receivers. However,
due to 15 incentive receivers’ departure from the Company or position change, they were no longer
eligible for the Sixth Stock Option Incentive Scheme. Therefore, the Board adjusted the number of
incentive receivers from 1,146 to 1,131, and the number of stock options from 47,140,000 to 46,540,000.
On 5 July 2019, the Company completed the registration of the grant of stock options under the Sixth
Stock Option Incentive Scheme.
G. Overview of the 2017 Restricted Share Incentive Scheme
a. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017 and 2018
Restricted Share Incentive Schemes was approved at the 5th Meeting of the 3rd Board of Directors on
21 January 2019. As such, it was agreed to repurchase and retire 1,775,917 restricted shares that had
been granted to 30 personnel but were still in lockup under the 2017 Restricted Share Incentive Scheme,
for the reasons of their departure from the Company, violation of company rules, business unit’s 2017
performance appraisal result being “just so-so”, position change or other factors.
Also, the Proposal on the Satisfaction of the Conditions for the First Unlocking Period for the Reserved
Restricted Shares of the 2017 Restricted Share Incentive Scheme was approved at the aforesaid meeting.
A total of 50 personnel were eligible for this unlocking, with 1,629,000 restricted shares unlocked and
allowed for public trading on 20 February 2019.
b. The Company submitted the application to China Securities Depository and Clearing Co., Ltd.
(Shenzhen branch) (hereinafter referred to as “CSDC Shenzhen”) for the retirement of the 1,775,917
restricted shares under the 2017 Restricted Share Incentive Scheme that had been granted but were still
in lockup. On 3 April 2019, as confirmed by CSDC Shenzhen, the retirement of the said restricted shares
had been completed.
c. The Company convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the
Proposal for the Adjustments to the Repurchase Price for the 2017 Restricted Share Incentive Scheme
was reviewed and approved. As the 2018 Annual Profit Distribution had been carried out, the repurchase
price for the first phase of the grant was revised from RMB14.66 to RMB13.36 per share, and the
repurchase price for the reserved restricted shares from RMB26.79 to RMB25.49 per share.
Also, the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017
Restricted Share Incentive Scheme was approved at the said meeting. As such, it was agreed to
repurchase and retire 1,580,750 restricted shares that had been granted to 35 personnel but were still in
lockup, for the reasons of their departure from the Company, business unit’s 2018 performance appraisal
result being “just so-so” or “bad”, position change, individual performance appraisal result being
“substandard” or other factors.
Also, the Proposal on the Satisfaction of the Conditions for the Second Unlocking Period for the First
Phase of the 2017 Restricted Share Incentive Scheme was approved at the aforesaid meeting. A total of
100 personnel were eligible for this unlocking, with 5,564,583 restricted shares unlocked and allowed for
public trading on 28 June 2019.
d. The Company submitted the application to CSDC Shenzhen for the retirement of the 1,580,750
restricted shares under the 2017 Restricted Share Incentive Scheme that had been granted but were still
in lockup. On 23 July 2019, as confirmed by CSDC Shenzhen, the retirement of the said restricted shares
had been completed.
H. Overview of the 2018 Restricted Share Incentive Scheme
a. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017 and 2018
Restricted Share Incentive Schemes was approved at the 5th Meeting of the 3rd Board of Directors on
21 January 2019. As such, it was agreed to repurchase and retire 2,237,500 restricted shares that had
been granted to 47 personnel but were still in lockup under the 2018 Restricted Share Incentive Scheme,
for the reasons of their departure from the Company, position change or other factors.
b. The Company submitted the application to CSDC Shenzhen for the retirement of the 2,237,500
restricted shares under the first phase of the 2018 Restricted Share Incentive Scheme that had been
granted but were still in lockup. On 3 April 2019, as confirmed by CSDC Shenzhen, the retirement of the
said restricted shares had been completed.
c. In light of the authorization given at the 2017 Annual General Meeting of Shareholders, the Company
convened the 8th Meeting of the 3rd Board of Directors on 11 March 2019, at which the Proposal on
Grant of 2018 Reserved Restricted Shares to Incentive Receivers was reviewed and approved. As such,
the Company agreed to grant 2,560,000 reserved restricted shares to 34 incentive receivers on 11 March
2019 at the price of RMB23.59 per share.
d. The Company had intended to grant 2,560,000 reserved restricted shares to 34 incentive receivers.
However, after the date of grant, two incentive receivers gave up subscription and the 140,000 reserved
restricted shares that had been granted to them were cancelled. As such, the Company actually granted
2,420,000 reserved restricted shares to 32 incentive receivers. Zhonghui Certified Public Accountants
LLP issued on 27 April 2019 the Capital Verification Report ZHKY [2019] No. 2446, verifying the
corresponding increases in the Company’s registered capital and share capital and the payments thereof
as of 23 April 2019, which resulted from the private placement of restricted A-shares as reserved restricted
shares to 32 personnel under the 2018 Restricted Share Incentive Scheme. As verified, as of 23 April
2019, the Company had received RMB57,087,800.00 from 32 incentive receivers for reserved restricted
share subscription, representing an increase of RMB2,420,000.00 in share capital and an increase of
RMB54,667,800.00 in capital reserves.
e. As per the CSRC’s Measures for the Administration of Equity Incentives of Listed Companies, and as
confirmed by the Shenzhen Stock Exchange and CSDC Shenzhen, the reserved shares in the
Company’s 2018 Restricted Share Incentive Scheme had been registered and were allowed for public
trading on 10 May 2019.
f. The Proposal on the Cancellation of the Remaining Reserved Restricted Shares for 2018 was approved
at the 10th Meeting of the 3rd Board of Directors on 18 April 2019. The Company decided to cancel the
remaining 240,000 such shares as there were no other personnel that met the conditions for the restricted
share incentives within the effective period.
g. The Company convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the
Proposal for the Adjustments to the Repurchase Price for the 2018 Restricted Share Incentive Scheme
was reviewed and approved. As the 2018 Annual Profit Distribution had been carried out, the repurchase
price for the first phase of the grant was revised from RMB27.57 to RMB26.27 per share, and the
repurchase price for the reserved restricted shares from RMB23.59 to RMB22.29 per share.
Also, the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018
Restricted Share Incentive Scheme was approved at the said meeting. As such, it was agreed to
repurchase and retire 1,238,500 restricted shares that had been granted to 21 personnel but were still in
lockup, for the reasons of their departure from the Company, position change or other factors.
h. The Company submitted the application to CSDC Shenzhen for the retirement of the 1,238,500
restricted shares under the first phase of the 2018 Restricted Share Incentive Scheme that had been
granted but were still in lockup. On 23 July 2019, as confirmed by CSDC Shenzhen, the retirement of the
said restricted shares had been completed.
I. Overview of the 2019 Restricted Share Incentive Scheme
a. On 18 April 2019, the Proposal on the 2019 Restricted Share Incentive Scheme (Draft) and Its Abstract
(hereinafter referred to as the “2019 Restricted Share Incentive Scheme (Draft)”) was reviewed and
approved at the 10th Meeting of the 3rd Board of Directors, and the incentive receiver list for the 2019
Restricted Share Incentive Scheme (Draft) was examined at the 7th Meeting of the 3rd Supervisory
Committee.
b. On 13 May 2019, the Company convened the 2018 Annual General Meeting of Shareholders, at which
the Proposal on the 2019 Restricted Share Incentive Scheme (Draft) and Its Abstract, the Proposal on
the Implementation and Appraisal Measures for the 2019 Restricted Share Incentive Scheme, the
Proposal for Asking the Meeting of Shareholders to Authorize the Board to Handle Mattes Related to the
2019 Restricted Share Incentive Scheme and other relevant proposals were reviewed and approved. For
this scheme, the Company intended to grant 30,350,000 restricted shares to 451 incentive receivers with
the price being RMB27.09/share.
c. In light of the authorization given at the 2018 Annual General Meeting of Shareholders, the Company
convened the 12th Meeting of the 3rd Board of Directors on 30 May 2019, at which the Proposal for the
Adjustments to the Grant Price of the 2019 Restricted Share Incentive Scheme, the Proposal for the
Determination of the Grant Date for the 2019 Restricted Share Incentive Scheme and the Proposal for
the Grant-Related Matters for the 2019 Restricted Share Incentive Scheme were reviewed and approved.
As such, the Company agreed to grant 30,350,000 restricted shares to 451 incentive receivers on 30 May
2019 under the said scheme with the price revised from RMB27.09 per share to RMB25.79 per share.
d. The Company had intended to grant 30,350,000 restricted shares to 451 incentive receivers. However,
after the date of grant, 28 incentive receivers left the Company, experienced position change or gave up
subscription, and the 1,790,000 restricted shares that had been granted to them were cancelled. As such,
the Company actually granted 28,560,000 restricted shares to 423 incentive receivers. Zhonghui Certified
Public Accountants LLP issued on 25 June 2019 the Capital Verification Report ZHKY [2019] No. 3970,
verifying the payments as of 24 June 2019 by the 423 incentive receivers for share subscription under
the 2019 Restricted Share Incentive Scheme. As verified, as of 24 June 2019, the Company had received
RMB736,562,400.00 from the 423 incentive receivers for restricted share subscription. After the grant,
the total share capital of the Company remained the same, and the restricted shares rose by 28,560,000
due to the equity incentive and the unrestricted public shares decreased by 28,560,000.
e. As per the CSRC’s Measures for the Administration of Equity Incentives of Listed Companies, and as
confirmed by the Shenzhen Stock Exchange and CSDC Shenzhen, the shares under the Company’s
2019 Restricted Share Incentive Scheme had been registered and were allowed for public trading on 10
July 2019.
J. Overview of the First Global Partner Stock Ownership Scheme
a. The Proposal on the Extended Duration of the First Global Partner Stock Ownership Scheme was
approved at the 7th Meeting of the 3rd Board of Directors on 22 February 2019. As proposed by the
administrative committee of this scheme, the Board agreed to extend the duration of this scheme from
four years to five years, i.e. to 21 April 2020.
b. The Company disclosed on 2 July 2019 the Announcement on the Completion of Share Clearing &
Early Termination of the First Global Partner Stock Ownership Scheme. As per the relevant provisions of
the First Core Management and Global Partner Stock Ownership Scheme of Midea Group Co., Ltd.
(Draft), this scheme was completed and terminated ahead of schedule.
K. Overview of the Second Global Partner Stock Ownership Scheme
a. The Company disclosed the Reminder of the Completion of Vesting under the Second Global Partner
Stock Ownership Scheme on 30 April 2019. As such, the final 30% installment of shares under the Second
Global Partner Stock Ownership Scheme had been vested, marking the completion of this scheme. A
total of 1,684,540 shares had been vested in the Company’s incumbent senior management (Fang
Hongbo, Yin Bitong, Gu Yanmin, Wang Jianguo and Wang Jinliang), and a total of 1,179,170 shares had
been vested in other incentive receivers, totaling 2,863,710 shares. The remaining unvested 1,010,880
shares and the corresponding dividends (if any) had been taken back by the administrative committee of
this scheme for no compensation, and would be sold at a proper timing before this scheme expired. The
earnings on the sale would belong to the Company.
L. Overview of the Third Global Partner Stock Ownership Scheme
a. The Company disclosed the Announcement on the Share Allocation and Vesting under a Partner Stock
Ownership Scheme on 22 May 2019. As such, the second 30% installment of shares under the Third
Global Partner Stock Ownership Scheme was vested. A total of 478,724 shares were vested in the
Company’s incumbent senior management (Fang Hongbo, Yin Bitong, Gu Yanmin, Wang Jianguo, Xiao
Mingguang and Wang Jinliang), and a total of 215,640 shares were vested in other incentive receivers.
Due to certain incentive receivers’ position change or departure from the Company before the second
vesting period, the unvested 138,005.5 shares of the second installment of shares under the Third Global
Partner Stock Ownership Scheme and the corresponding dividends (if any) had been taken back by the
administrative committee of this scheme for no compensation, and would be sold at a proper timing before
this scheme expired. The earnings on the sale would belong to the Company.
M. Overview of the Fourth Global Partner Stock Ownership Scheme
a. The Company’s performance requirement for the Fourth Global Partner Stock Ownership Scheme is
a weighted average ROE not lower than 20% for 2018. According to the 2018 Annual Auditor’s Report for
Midea Group Co., Ltd. issued by PricewaterhouseCoopers China (LLP), this ROE requirement has been
met at 25.66%.
b. The Company disclosed the Announcement on the Share Allocation and Vesting under a Partner Stock
Ownership Scheme on 22 May 2019. A total of 3,318,540 of the Company’s shares were purchased for
this scheme. As per the Fourth Global Partner Stock Ownership Scheme (Draft), the administrative
committee of this scheme confirmed the number of shares to be granted to each partner, with the total
shares to be granted being 2,714,700 shares (1,564,200 shares for senior management Fang Hongbo,
Yin Bitong, Gu Yanmin, Wang Jianguo and Wang Jinliang, and the other 1,150,500 shares for other core
management personnel).
c. Due to certain incentive receivers’ position change or departure from the Company in the duration of
the Fourth Global Partner Stock Ownership Scheme, there are remained 603,840 shares unallocated
under this scheme. As per the Fourth Global Partner Stock Ownership Scheme (Draft), these unallocated
shares and the corresponding dividends (if any) had been taken back by the administrative committee of
this scheme for no compensation, and would be sold at a proper timing before this scheme expired. The
earnings on the sale would belong to the Company.
N. Overview of the First Business Partner Stock Ownership Scheme
a. The Company’s performance requirement for the First Business Partner Stock Ownership Scheme is
a weighted average ROE not lower than 20% for 2018. According to the 2018 Annual Auditor’s Report for
Midea Group Co., Ltd. issued by PricewaterhouseCoopers China (LLP), this ROE requirement has been
met at 25.66%.
b. The Company disclosed the Announcement on the Share Allocation and Vesting under a Partner Stock
Ownership Scheme on 22 May 2019. A total of 1,779,300 of the Company’s shares were purchased for
this scheme. As per the First Business Partner Stock Ownership Scheme (Draft), the administrative
committee of this scheme confirmed the number of shares to be granted to each partner, with the total
shares to be granted being 1,151,687 shares (182,566 shares for senior management Zhang Xiaoyi, Xiao
Mingguang, Hu Ziqiang, Liu Min and Jiang Peng, and the other 969,121 shares for other core
management personnel).
c. Due to certain incentive receivers’ position change or departure from the Company in the duration of
the First Business Partner Stock Ownership Scheme, there are remained 627,613 shares unallocated
under this scheme. As per the First Business Partner Stock Ownership Scheme (Draft), these unallocated
shares and the corresponding dividends (if any) had been taken back by the administrative committee of
this scheme for no compensation and belonged to the Company. In this case, the Company still had to
return the performance bonuses corresponding to these unallocated shares under this scheme to the
relevant senior management.
O. Overview of the Fifth Global Partner Stock Ownership Scheme
a. The Fifth Core Management and Global Partner Stock Ownership Scheme was approved at the 10th
Meeting of the 3rd Board of Directors on 18 April 2019 and the 2018 Annual General Meeting of
Shareholders on 13 May 2019. The shares for this scheme would be obtained from the Company’s
securities account for repurchase in a non-transaction transfer and put into the securities account of
“Midea Group Co., Ltd.—the Fifth Employee Stock Ownership Scheme” for management.
b. As of 30 June 2019, the Company cumulatively repurchased 40,014,998 shares (0.5764% of the
Company’s total share capital as of that date) through centralized bidding in its securities account for
repurchase at an average price of RMB49.79/share (RMB1,992,451,807.06 in total, exclusive of trading
fees), which was funded by the Company’s special fund of RMB185.82 million for this scheme. With the
said average repurchase price as the price for transferring the shares in the repurchase securities account
to the securities account of the Fifth Global Partner Stock Ownership Scheme, the shares to be
transferred would be 3,732,075.
c. According to the Confirmation of Securities Transfer received by the Company from CSDC Shenzhen
on 9 July 2019, 3,732,075 shares (0.0537% of the Company’s total share capital) had been transferred
from the Company’s securities account for repurchase to the securities account of “Midea Group Co.,
Ltd.—the Fifth Employee Stock Ownership Scheme” in a non-transaction transfer on 8 July 2019. As
required by the Fifth Global Partner Stock Ownership Scheme (Draft), the shares transferred shall be
locked up for no less than 12 months from the disclosure date of the announcement on the completion of
the transfer from the Company’s securities account for repurchase. Therefore, the shares transferred to
the securities account of the Fifth Global Partner Stock Ownership Scheme would be locked up from 11
July 2019 to 10 July 2020.
P. Overview of the Second Business Partner Stock Ownership Scheme
a. The Second Core Management and Business Partner Stock Ownership Scheme was approved at the
10th Meeting of the 3rd Board of Directors on 18 April 2019 and the 2018 Annual General Meeting of
Shareholders on 13 May 2019. The shares for this scheme would be obtained from the Company’s
securities account for repurchase in a non-transaction transfer and put into the securities account of
“Midea Group Co., Ltd.—the Sixth Employee Stock Ownership Scheme” for management.
b. The Second Business Partner Stock Ownership Scheme was funded by the Company’s special fund
and the performance bonuses for senior management of RMB93 million. With the average repurchase
price as the price for transferring the shares in the repurchase securities account to the securities account
of the Second Business Partner Stock Ownership Scheme, the shares to be transferred would be
1,867,845.
c. According to the Confirmation of Securities Transfer received by the Company from CSDC Shenzhen
on 15 July 2019, 1,867,845 shares (0.0269% of the Company’s total share capital) had been transferred
from the Company’s securities account for repurchase to the securities account of “Midea Group Co.,
Ltd.—the Sixth Employee Stock Ownership Scheme” in a non-transaction transfer on 12 July 2019. As
required by the Second Business Partner Stock Ownership Scheme (Draft), the shares transferred shall
be locked up for no less than 12 months from the disclosure date of the announcement on the completion
of the transfer from the Company’s securities account for repurchase. Therefore, the shares transferred
to the securities account of the Second Business Partner Stock Ownership Scheme would be locked up
from 16 July 2019 to 15 July 2020.
16. Significant Related Transactions
16.1 Related transactions arising from routine operation
√Applicable □N/A
Proporti Obtaina
on in ble
Transacti thetotal Ove market Index
Related Typeof Content Pricin Trans on amount Approved r Modeof price Disclos tothe
transac Relatio the softhe g action amount sof transaction app settlem forthe ure disclo
tion n transac transac princip price (RMB’000 transact line rov ent transac date sed
party tion tion le ) ionof (RMB’000) ed tionof inform
the line the ation
same same
kind kind
(%)
Controll
Infore edby
Environ family
ment membe Procure Payme www.
Techno rof Procure mentof Marke - 1,163,650 0.64% 1,500,000 No ntafter - 2019-4- cninfo
logy Compa ment goods tprice delivery 20 .com.
Group ny’s cn
Co., actual
Ltd. controll
er
Controll
ed by
family
Orinko membe Procure Payme www.
Plastics rof Procure mentof Marke - 1,159,700 0.63% 1,700,000 No ntafter - 2019-4- cninfo
Group Compa ment goods tprice delivery 20 .com.
ny’s cn
actual
controll
er
Controll
Midea edby www.
Real Compa Saleof Marke Payme 2019-4- cninfo
Estate ny’s Sale goods tprice 105,380 0.04% 150,000 No ntafter - 20 .com.
Holding actual delivery cn
Limited controll
er
Total -- -- 2,428,730 -- 3,350,000 -- -- -- --
Details ofanysalesreturnofa Zero
large amount
Give theactualsituationinthe
Reporting Period(ifany)wherea ThelineforroutinerelatedtransactionsbetweentheCompanyandtherelated
forecast hadbeenmadeforthe partiesandtheirsubsidiariesdidnotexceedthetotalamountofroutinerelated
total amountsofroutinerelated- transactionsestimatedbytheCompanybytype.
party transactionsbytypeto
occur inthecurrentperiod
Reason foranysignificant
difference betweenthe N/A
transaction priceandthemarket
reference price(ifapplicable)
16.2 Related transactions regarding purchase or sales of assets or equity interests
□Applicable √N/A
No such cases in the Reporting Period.
16.3 Related transactions arising from joint investments in external parties
□Applicable √N/A
No such cases in the Reporting Period.
16.4 Credits and liabilities with related parties
□Applicable √N/A
No such cases in the Reporting Period.
16.5 Other significant related transactions
√Applicable □N/A
a. The Proposal for Related Transactions Regarding Making Deposits in and Obtaining Loans from
Shunde Rural Commercial Bank in 2019 was reviewed and approved at the 10th Meeting of the 3rd Board
of Directors held on 18 April 2019 and later at the 2018 Annual General Meeting of Shareholders held on
13 May 2019.
In 2019, the deposit balance of the Company in Shunde Rural Commercial Bank shall not exceed RMB5
billion and neither shall the credit balance provided by the bank to the Company exceed RMB5 billion.
b. In order to diversify the Group’s portfolio of long-term assets, as well as promote technological
innovation and development in emerging industries, Midea Innovation Investment Co., Ltd., a wholly-
owned subsidiary of the Company, took part in the establishment of an industry investment fund,
Guangdong Midea Smart Technology Industry Investment Fund (LLP), in January 2019 as one of the
limited partners.
In order to further optimize its business layout, foster quality programs for its strategies and business,
and boost its comprehensive competitiveness, the Company intended to increase the subscribed capital
contribution by RMB300 million via Midea Innovation Investment, bringing the cumulatively subscribed
capital contribution to the aforesaid industry investment fund to RMB600 million.
Index to the announcement about the said related transactions disclosed
Title ofannouncement Disclosuredate Disclosurewebsite
AnnouncementonRelatedTransactionsRegardingMaking
Deposits inandObtainingLoansfromShunde 20/04/2019 www.cninfo.com.cn
RuralCommercialBankin2019
Announcement onAWholly-Owned SubsidiaryTakingPartin
the EstablishmentofanIndustryInvestmentFundandthe 09/01/2019 www.cninfo.com.cn
RelatedTransaction
AnnouncementonAWholly-Owned SubsidiaryIncreasingthe
Subscribed CapitalContributiontoanIndustryInvestment 11/01/2020 www.cninfo.com.cn
FundandtheRelatedTransaction
17. Significant Contracts and Their Execution
17.1 Trusteeship, contracting and leasing
17.1.1 Trusteeship
□Applicable √N/A
No such cases in the Reporting Period.
17.1.2 Contracting
□Applicable √N/A
No such cases in the Reporting Period.
17.1.3 Leasing
□Applicable √N/A
No such cases in the Reporting Period.
17.2 Major Guarantees
√Applicable □N/A
17.2.1 Guarantees provided
Unit: RMB'000
Guarantees providedbytheCompanyanditssubsidiariesforexternalparties(excludingthoseforsubsidiaries)
Disclosure Actual Guar
date ofthe occurrence Term antee
guarantee Lineof date(date Actual Typeof of Due fora
Guaranteedparty line guarantee of guarantee guarantee guara ornot relate
announce agreement amount ntee d
ment signing) party
ornot
No suchcases
Total externalguaranteelineapprovedduring Totalactualexternal
the ReportingPeriod(A1) 0 guaranteeamountduring 0
theReportingPeriod(A2)
Totalactualexternal
Totalapprovedexternalguaranteelineatthe 0 guaranteebalanceatthe 0
end oftheReportingPeriod(A3) endoftheReportingPeriod
(A4)
Guarantees providedbytheCompanyforitssubsidiaries
Disclosure Actual Guar
date ofthe occurrence Term antee
guarantee Lineof date(date Actual Typeof of Due fora
Guaranteedparty line guarantee of guarantee guarantee guara ornot relate
announce agreement amount ntee d
ment signing) party
ornot
Midea GroupFinanceCo.,Ltd. 2019-4-20 9,900,000 - - Jointliability One No No
year
GD MideaAir-Conditioning 2019-4-20 12,426,000 2019-1-10 1,147,910 Jointliability One No No
Equipment Co.,Ltd. year
Guangzhou HualingRefrigerating 2019-4-20 1,163,000 - - Jointliability One No No
Equipment Co.,ltd. year
Foshan MideaCarrierAir- 2019-4-20 418,000 - - Jointliability One No No
Conditioning EquipmentCo.,Ltd. year
Guangdong MideaPrecision 2019-4-20 98,400 - - Jointliability One No No
Molding TechnologyCo.,Ltd. year
Guangdong MideaKitchen 2019-4-20 3,854,000 2019-1-10 756,060 Jointliability One No No
Appliances ManufacturingCo.,Ltd. year
Guangdong WitolVacuumElectroni 2019-4-20 120,000 2019-1-16 16,470 Jointliability One No No
c ManufactureCo.,Ltd year
Guangdong DeYiJieAppliances 2019-4-20 360,000 - - Jointliability One No No
Co., Ltd. year
GD MideaHeating&Ventilating 2019-4-20 1,789,800 2019-1-9 117,840Jointliability One No No
Equipment Co.,Ltd. year
Guangdong Midea-SIIXElectronics 2019-4-20 172,000 2019-1-31 70 Jointliability One No No
Co., Ltd. year
Guangdong MideaCommercialAir- 2019-4-20 200,000 - - Jointliability One No No
Conditioning EquipmentCo.,Ltd. year
Guangdong MideaConsumer 2019-4-20 385,000 2019-1-10 267,360 Jointliability One No No
Electric ManufacturingCo.,Ltd. year
Foshan ShundeMideaElectrical One
Heating AppliancesManufacturing 2019-4-20 540,000 2019-1-23 589,430 Jointliability year No No
Co., Ltd.
GD MideaEnvironmentAppliances 2019-4-20 752,000 2019-1-10 1,630 Jointliability One No No
Mfg. Co.,Ltd. year
Guangdong MideaCuchen 2019-4-20 54,000 - - Jointliability One No No
Company Ltd. year
GD MideaCaffitalyCoffeeMachine 2019-4-20 30,000 - - Jointliability One No No
Manufacturing Co.,Ltd. year
Main PowerInnoTech(Shenzhen) 2019-4-20 24,000 - - Jointliability One No No
Manufacturing Co.,Ltd. year
Foshan ShundeMideaWashing 2019-4-20 2,080,000 2019-1-10 120,070 Jointliability One No No
Appliances ManufacturingCo.,Ltd. year
Guangdong MideaKitchen&Bath 2019-4-20 24,000 - - Jointliability One No No
Appliances ManufacturingCo.,Ltd. year
Foshan ShundeMideaWater One
Dispenser ManufacturingCompany 2019-4-20 694,000 2019-3-5 2,430 Jointliability year No No
Limited
Foshan MideaChunghoWater 2019-4-20 81,000 - - Jointliability One No No
Purification Equipment.Co.,Ltd. year
Guangdong MeizhiCompressor 2019-4-20 150,000 2019-1-16 1,700 Jointliability One No No
Limited year
Guangdong MeizhiPrecision- 2019-4-20 80,000 2019-1-10 1,127,220 Jointliability One No No
Manufacturing Co.,Ltd year
Guangdong WellingMotor 2019-4-20 192,000 2019-1-4 412,470 Jointliability One No No
Manufacturing Co.,Ltd. year
Foshan WellingWasherMotor 2019-4-20 222,000 2019-2-19 13,730 Jointliability One No No
Manufacturing Co.,Ltd. year
Guangdong MideaEnvironmental 2019-4-20 46,000 - - Jointliability One No No
TechnologiesCo.,Ltd. year
Guangdong WellingAutoParts 2019-4-20 40,000 - - Jointliability One No No
Co. ,Ltd. year
Ningbo MideaUnitedMaterials 2019-4-20 924,000 2019-1-25 147,330 Jointliability One No No
Supply Co.Ltd. year
Guangzhou KaizhaoCommercial 2019-4-20 70,400 - - Jointliability One No No
and TradingCo.,Ltd year
Guangdong MideaIntelligent 2019-4-20 50,000 - - Jointliability One No No
Robotics Co.,Ltd. year
Servotronix MotionTechnology 2019-4-20 10,000 - - Jointliability One No No
Development (Shenzhen)Ltd. year
Midea GroupE-CommerceCo.,Ltd. 2019-4-20 130,000 - - Jointliability One No No
year
Annto LogisticsTechnologyCo., 2019-4-20 70,000 2019-2-19 63,580 Jointliability One No No
Ltd. year
Guangdong MideaSmartLink 2019-4-20 9,200 - - Jointliability One No No
TechnologiesCo.,Ltd. year
GD MideaGroupWuhuAir- 2019-4-20 2,000,000 2019-1-29 500,720 Jointliability One No No
Conditioning EquipmentCo.,Ltd. year
Wuhu MatyAir-Conditioning 2019-4-20 326,000 - - Jointliability One No No
Equipment Co.,Ltd year
Wuhu MideaKitchenAppliances 2019-4-20 164,000 - - Jointliability One No No
Manufacturing Co.,Ltd. year
Hefei HualingCo.,Ltd. 2019-4-20 914,000 2019-4-30 - Jointliability One No No
year
Hubei MideaRefrigeratorCo.,Ltd. 2019-4-20 250,800 2019-5-21 - Jointliability One No No
year
Hefei MideaRefrigeratorCo.,Ltd. 2019-4-20 920,000 - - Jointliability One No No
year
Guangzhou MideaHualingRefriger 2019-4-20 1,154,000 - - Jointliability One No No
ator Co.,Ltd. year
Hefei MideaHeating&Ventilating 2019-4-20 548,000 2019-3-28 - Jointliability One No No
Equipment Co.,Ltd. year
Hefei Midea-SIIXElectronics 2019-4-20 230,000 2019-1-29 - Jointliability One No No
Co.,Ltd. year
Hefei M&BAirConditioning 2019-4-20 40,800 - - Jointliability One No No
Equipment Co.,Ltd. year
Wuhu MideaLifeAppliancesMfg 2019-4-20 200,000 - - Jointliability One No No
Co., Ltd. year
Wuhu MideaKitchen&Bath 2019-4-20 1,761,600 2019-3-1 5,900 Jointliability One No No
Appliances Mfg.Co.,Ltd. year
Anhui MeizhiCompressorCo.,Ltd. 2019-4-20 30,000 2019-4-22 - Jointliability One No No
year
Anhui MeizhiPrecision 2019-4-20 72,000 2019-2-2 14,580 Jointliability One No No
Manufacturing Co.,Ltd. year
Welling (Wuhu)Motor 2019-4-20 24,000 - - Jointliability One No No
Manufacturing Co.,Ltd. year
Wuhu WellingMotorSalesCo.,Ltd. 2019-4-20 1,200,000 - - Jointliability One No No
year
Wuxi LittleSwanCompanyLimited 2019-4-20 3,109,600 2019-6-19 490 Jointliability One No No
year
Hefei MideaLaundryApplianceCo., 2019-4-20 1,598,960 2019-3-15 269,180 Jointliability One No No
Ltd. year
Jiangsu MideaCleaningAppliances 2019-4-20 510,000 2019-1-1 3,000 Jointliability One No No
Co., Ltd year
Midea GroupWuhanRefrigeration 2019-4-20 7,200 - - Jointliability One No No
Equipment Co.,Ltd. year
Handan MideaAir-Conditioning 2019-4-20 120,000 2019-2-22 1,830 Jointliability One No No
Equipment Co.,Ltd. year
Chongqing MideaGeneral 2019-4-20 148,000 2019-4-16 1,860 Jointliability One No No
Refrigeration EquipmentCo.,Ltd. year
Midea IntelligentLighting&Controls 2019-4-20 250,000 2019-3-28 580 Jointliability One No No
TechnologyCo.,Ltd. year
Changzhou WellingMotor 2019-4-20 24,000 - - Jointliability One No No
Manufacturing Co.,Ltd. year
Huaian WellingMotor 2019-4-20 20,000 2019-2-2 - Jointliability One No No
Manufacturing Co.,Ltd. year
Zhejiang MeizhiCompressorCo., 2019-4-20 2,000,000 2019-1-10 - Jointliability One No No
Ltd. year
Ningbo AnntoLogisticsCo.,Ltd. 2019-4-20 15,000 - - Jointliability One No No
year
Reis Robotics(Kunshan)Co.,Ltd. 2019-4-20 120,750 - - Jointliability One No No
year
KUKA Systems(China)CO.,Ltd. 2019-4-20 145,000 - - Jointliability One No No
year
KUKA RoboticsManufacturing 2019-4-20 115,000 - - Jointliability One No No
China Co.,Ltd year
KUKA Robotics(Shanghai)Co.,Ltd. 2019-4-20 115,000 - - Jointliability One No No
year
Shanghai SwisslogHealthcareCo., 2019-4-20 8,000 - - Jointliability One No No
Ltd. year
Swisslog (Shanghai)Co.,Ltd. 2019-4-20 110,000 - - Jointliability One No No
year
Shanghai SwisslogLogistics 2019-4-20 60,000 - - Jointliability One No No
Automation Co.Ltd. year
Midea InternationalCorporation 2019-4-20 11,480,000 2019-4-23 6,312,120 Jointliability One No No
Company Limited year
Midea InternationalTrading 2019-4-20 2,222,430 2019-1-1 279,670 Jointliability One No No
Company Limited year
Midea InvestmentDevelopment 2019-4-20 4,900,000 2019-1-1 4,575,160 Jointliability One No No
Company Limited year
Welling InternationalHongKongLtd 2019-4-20 126,000 - - Jointliability One No No
year
Midea ElectricTrading(Singapore) 2019-4-20 5,384,000 2019-1-3 634,490 Jointliability One No No
Co.,Pte. Ltd. year
ToshibaLifestyleProducts& One
Services Corporationandits 2019-4-20 4,608,000 2019-1-1 593,500 Jointliability year No No
subsidiaries
Midea ConsumerElectricVietnam 2019-4-20 112,000 2019-2-13 41,540 Jointliability One No No
year
Concepcion MideaInc. 2019-4-20 112,000 - - Jointliability One No No
year
Midea ItaliaS.r.l. 2019-4-20 140,000 - - Jointliability One No No
year
Midea Scott&EnglishElectronics 2019-4-20 206,500 - - Jointliability One No No
Sdn. Bhd. year
Midea Mexico,S.DER.L.DEC.V. 2019-4-20 105,000 - - Jointliability One No No
year
Midea ElectricTrading(Thailand) 2019-4-20 105,000 - - Jointliability One No No
Co., Ltd. year
Midea AmericaCorp 2019-4-20 669,000 - - Jointliability One No No
year
Pt. MideaPlanetIndonesia 2019-4-20 56,000 - - Jointliability One No No
year
Midea ElectricsEgypt 2019-4-20 175,000 - - Jointliability One No No
year
Midea EuropeGmbH 2019-4-20 70,000 - - Jointliability One No No
year
Servotronix MotionControlLtd. 2019-4-20 34,000 - - Jointliability One No No
year
Midea AustriaGmbH 2019-4-20 35,000 - - Jointliability One No No
year
Clivet SPA 2019-4-20 73,500 - - Jointliability One No No
year
Clivet MideastFzco 2019-4-20 31,500 - - Jointliability One No No
year
Midea ElectricNetherland(I) 2019-4-20 29,600,000 - - Jointliability One No No
year
Totalactualguarantee
Totalguaranteelineforsubsidiariesapproved 115,715,440amountforsubsidiaries 42,090,640
during theReportingPeriod(B1) duringtheReportingPeriod
(B2)
Totalactualguarantee
Total approvedguaranteelineforsubsidiariesat 115,715,440balanceforsubsidiariesat 40,506,410
the endoftheReportingPeriod(B3) theendoftheReporting
Period (B4)
Guaranteesbetweensubsidiaries
Disclosure Actual Guar
date ofthe occurrence Term antee
guarantee Lineof date(date Actual Typeof of Due fora
Guaranteedparty line guarantee of guarantee guarantee guara ornot relate
announce agreement amount ntee d
ment signing) party
ornot
No suchcases
Totalguaranteeamount(totaloftheabove-mentionedthreekindsofguarantees)
Totalactualguarantee
Total guaranteelineapprovedduringthe 115,715,440amountduringthe 42,090,640
Reporting Period(A1+B1+C1) ReportingPeriod
(A2+B2+C2)
Totalactualguarantee
Totalapprovedguaranteelineattheendofthe 115,715,440balanceattheendofthe 40,506,410
Reporting Period(A3+B3+C3) ReportingPeriod
(A4+B4+C4)
Proportion ofthetotalactualguaranteeamount(A4+B4+C4)innet 39.84%
assets oftheCompany
Of which:
Amount ofguaranteesprovidedforshareholders,theactualcontroller 0
and theirrelatedparties(D)
Amount ofdebtguaranteesprovideddirectlyorindirectlyforentitieswith 33,472,060
a liability-to-assetratioover70%(E)
Portion ofthetotalguaranteeamountinexcessof50%ofnetassets(F) 0
Totalamountofthethreekindsofguaranteesabove(D+E+F) 33,472,060
Joint responsibilitiespossiblyborneforundueguarantees(ifany) N/A
Provision ofexternalguaranteesinbreachoftheprescribedprocedures N/A
(if any)
17.2.2 Illegal provision of guarantees for external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
17.3 Entrusted cash management
17.3.1 Entrusted asset management
□ Applicable √ N/A
No such cases in the Reporting Period.
17.3.2 Entrusted loans
□ Applicable √ N/A
No such cases in the Reporting Period.
17.4 Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
18. Social Responsibility (CSR)
18.1 Measures taken to fulfill CSR commitment
The Company has voluntarily disclosed its CSR work. Attaching great importance to protecting the legal
rights and interests of its shareholders, employees, consumers and business partners, as well as the
government, the community and other stakeholders, the Company sticks to harmonious common growth
with them, honors its commitments, abides by law and moral principles, and continue to contribute to the
sustainable development of the society and the environment. For further information, see the Company’s
Corporate Social Responsibility Report 2019 released on www.cninfo.com.cn.
18.2 Measures taken for targeted poverty alleviation
A. Summary of the work done for targeted poverty alleviation during the year
In 2019, the decisive year for the battle against poverty, Midea Group readily responded to the
government’s poverty alleviation policy and took targeted poverty alleviation as the top priority in fulfilling
its social responsibility.
In January 2019, Midea donated RMB10 million to the Beijiao Charity Federation for the 10th consecutive
year, which were used for poverty alleviation, education and other charitable activities in the local
community.
In June 2019, Midea made another donation of RMB10 million for improving education, medical care and
housing in poor villages of Guangdong Province. This was the 10th consecutive year of Midea’s
participation in this event since the “Guangdong Poverty Alleviation Day” was founded in 2010.
In June 2019, in a charity event held by China Social Welfare Foundation and ShenZhen Dream
Inspiration Foundation, Midea made a donation of RMB200,000 to the “Support Education Project” to
equip schools in the poor areas of Guizhou Province with professional teachers, with a view to alleviating
the shortage of educational resources in remote villages.
B. Targeted poverty alleviation plans for the coming future
In 2020, in order to win the decisive battle against poverty, Midea Group will readily respond to the call
of the CPC Committee and the Government of Guangdong Province to make further efforts with greater
determination and devotion, overcome the impact of the COVID-19 outbreak in a continuous and serious
manner, and help accomplish the great cause of poverty alleviation, which is of enormous significance to
the Chinese people and even all mankind. Midea Group will donate yet another RMB10 million to the
Beijiao Charity Federation to improve education, medical care, housing, etc. for the impoverished people.
18.3 Environmental protection
Whether the Company or any of its subsidiaries is declared a heavily polluting business by the environmental protection authorities
√hYes □ N/A
Name of Concentration Approve
the Major Numberof Distributionofdischarge ofthe Pollutantdischarge Total dtotal Excess
Company pollutants Dischargemethod discharge outlets discharge standards discharge discharg discharge
or outlets (unit:mg/m3) (ton) e(ton)
subsidiary
Foshan COD Thesouthernsideof2# 52 Thedischargelimitsof 0.22 0.228 No
Shunde SS Dischargeafterbeingtreatedby plantintheWashingand 24 waterpollutantsin 0.10 / No
Midea wastewatertreatmentsystemand 1
Washing BOD5 reachingthestandard SterilizingAppliances 16 Guangdong （DB44/26- 0.07 / No
Park 2001）
Appliances Petroleum 3.5 0.1 / No
Manufactur Benzene 0.36 0.04 / No
ingCo., Toluene
Ltd. (the andxylene Highaltitudedischargeafterbeing Thesouthernsideof2# 5.98 Emissionstandardof 0.62 / No
Washing plantintheWashingand volatileorganiccompounds
and treatedbywastegastreatment 1 SterilizingAppliances forfurnituremanufacturing
Sterilizing station Park （DB44/814-2010）
VOCS 19.2 1.11 No
Appliances
Park)
Foshan COD 61 Thedischargestandardof 0.72 2.41 No
Dischargetothemunicipalsewage Thenortheasternsideof
Shunde SS systemafterbeingtreatedby 1 2#plantintheThird 11 waterpollutantsfor 0.13 / No
Midea BOD5 wastewatertreatmentsystem IndustrialZone 20 electroplatingin 0.26 / No
Washing Petroleum 0.3 Guangdong(DB441597- 0.003 / No
Appliances Ammonia 2015)
Manufactur nitrogen 0.5 0.04 0.45 No
ingCo., Benzene 0.10 0.008 / No
Ltd. (the
Range Toluene 3.43 Emissionstandardofair 0.25 / No
Hoodand andxylene pollutantsforindustrialkiln
Stove VOCS Highaltitudedischargeafterbeing Thenorthernandeastern 10.9 andfurnace(GB-9078- 0.63 / No
Park) Soot treatedbywastegastreatment 4 sidesof2#plantinthe 8.1 1996)/Theemissionlimit 0.03 / No
Sulfur station ThirdIndustrialZone Lessthanthe ofgaspollutantsin No
dioxide limitof3 Guangdong（DB-44/27- 0.01 0.114
2007)
Nitrogen 24 0.13 0.726 No
oxide
COD 198 1,1642.61 No
Ammonia Dischargeafterbeingtreatedby Integratedwastewater
nitrogen wastewatertreatmentsystemand 1 WesterngateoftheWuhu 1.35 dischargestandard 11.20 / No
plant
BOD5 reachingthestandard 48 （GB8978-1996） 398.21 / No
Wuhu Petroleum 0.26 2.16 / No
Midea
Kitchen& Soot <20 666.20 / No
Bath Sulfur <50 Emissionstandardofair 476.90 1,658 No
Appliances dioxide 15mhighaltitudedischarge pollutantsforboiler
Mfg.Co., （GB13271-2014）Nitrogen
Ltd. oxide 45 Plants <150 1,532.20 4,074.5 No
Soot Highaltitudedischargeafterbeing <50 Integratedemission 3,361.24 35,049 No
Xylene treatedbywastegastreatment <10 standardsforatmospheric 174.16 / No
station pollutants（GB16297-
VOCs <20 1996） 224.90 29,650 No
Dischargeafterbeingtreatedby Implementationofthe
COD wastewatertreatmentsystemand 97 takeoverstandardsofthe 955 3,920 No
reachingthestandard Theeasternsideof1# WesternHefeiGroup
1 wastewatertreatmentplant
Ammonia Dischargeafterbeingtreatedby plant andintegratedwastewater
nitrogen wastewatertreatmentsystemand 19.7 dischargestandard 380 390 No
Hefei reachingthestandard (GB8978-1996)third-level
Midea Nitrogen
Heating& oxide 1 2#plant 5 98 / No
Ventilating
Equipment 3outletsat1#plant,4
Co., Ltd. NMHC Highaltitudedischargeafterbeing 11 outletsat2#plant,2 28.97 Integratedemission 968 / No
treated bywastegastreatment outletsat3#plantand2 standardsforatmospheric
station outletsat4#plant pollutants（GB16297-
3outletsat1#plant,4 1996）
Soot 11 outletsat2#plant,2 101.5 3,400 / No
outlets at3#plantand2
outletsat4#plant
Hefei Theeasternsideof Implementationofthe
Midea COD wastewatertreatment 107 takeoverstandardsofthe 36,000 58,150 No
Laundry Dischargeafterbeingtreatedby station WesternHefeiGroup
Appliance wastewatertreatmentstation 1 Theeasternsideof wastewatertreatmentplant
Co., Ltd. Ammonia andintegratedwastewater
(monitored nitrogen wastewatertreatment 8.48 dischargestandard 1,800 / No
by the station (GB8978-1996)third-level
municipal 15mhighaltitudedischargeafter
governmen Particles beingtreatedbycyclone+filter 2 1outletat2#plant,1 ＜20 3,168 / No
t) cartridgedustcollector outletat6#plant
Particles 15mhighaltitudedischargeafter ＜20 1,267.2 / No
being treatedbywaterspraying+ 1 1outletat3#plant
NMHC dedusting+UVphotolysis+ 1.46 92.51 / No
activated carbon
15mhighaltitudedischargeafter
NMHC beingtreatedbywastegas 3 3outletsat2#plant 2.25 Integratedemission 1,995.84 / No
treatment station standardsforatmospheric
pollutantsGB16297-1996
15mhighaltitudedischargeafter second-level
NMHC beingtreatedbywastegas 6 6outletsat6#plant 1.11 3692.30 / No
treatment station
15mhighaltitudedischargeafter 1outletat1#plant,1
NMHC beingtreatedbylow-temperature 2 outletat5#plant 2.215 122.80 / No
plasma
15mhighaltitudedischargeafter
NMHC beingtreatedbyphotocatalystand 1 1outletat3#plant 1.27 140.82 / No
activated carbon
COD 46 10.00 9,590 No
GDMidea Thedischargestandardof
Air- Ammonia waterpollutantsfor No
nitrogen Dischargeafterbeingtreatedby Thesoutheasternsideof 0.22 0.05 1,510
Conditionin wastewatertreatmentstation 1 4#plant electroplating(DB441597-
g SS 28 2015)chart2PRD 6.05 / No
Equipment Petroleum 1.55 standard 0.33 / No
Co.,Ltd.
COD Dischargeafterbeingtreatedby 1 Theeasternsideof2# 87 Thedischargelimitsof 3.90 1,160 No
SS wastewatertreatmentstation plant 25 waterpollutants（DB44/26- 0.90 / No
LAS 0.18 2001） 0.06 / No
Petroleum 1.84 0.61 / No
Emission standardof No
VOCs 15mhighaltitudedischargeafter volatileorganiccompounds
(dusting） beingtreatedbyspraytower+ 3 4#plant 20 forfurnituremanufacturing 548.00
activated carbon (DB44/814-2010)the
second timeperiod 5,930
VOCs Emissionstandardof No
（screen 15mhighaltitudedischargeafter 4 1#,5#,9#,11#plants 4.6 volatileorganiccompounds 312.00
printing） beingtreatedbygreenfacilities forprintingindustry
（DB44/815-2010)
NMHC /
（evaporat 15mhighaltitudedischargeafter
or& beingtreatedbygreenfacilities 6 2#，5#plants 10 Emissionlimitsofair 590.00 No
condenser pollutants（DB44/27-
） 2001）thesecondtime
NMHC 15mhighaltitudedischargeafter period /
（electroni beingtreatedbycatalytic 2 10#plant 6.2 134.00 No
c) combustion
Wuhu COD Dischargeafterbeingtreatedby 2 82.5 12403.7 / No
MatyAir- wastewatertreatmentstation Thenorthernsideofthe Integratedwastewater
Conditionin SS Dischargeafterbeingtreatedby 2 MatyPark,theeastern 21.5 dischargestandard 3232.5 / No
g wastewatertreatmentstation sideoftheSheetMetal （GB8978-1996）chart4
Equipment Dischargeafterbeingtreatedby Park third-level No
Co.,Ltd BOD wastewatertreatmentstation 2 29.5 4435.3 /
Ammonia Dischargeafterbeingtreatedby 2 8.9 1338.1 / No
nitrogen wastewatertreatmentstation
Petroleum Dischargeafterbeingtreatedby 2 1.81 272.1 / No
wastewatertreatmentstation
2#plantoftheMatyPark, Integratedemission No
Particles 15mhighaltitudedischargeafter 6 1#plantoftheSheet <20 standardsforatmospheric 1.55 /
being treatedbygreenfacilities MetalPark pollutants（GB16297-
1996）
Emission ControlStandard No
16mhighaltitudedischargeafter 2#and3#plantsofthe forIndustrialEnterprises
VOCs beingtreatedbygreenfacilities 8 MatyPark,1#plantofthe 4.34 VolatileOrganic 0.31 /
SheetMetalPark Compounds(DB13-2322-
2016)
Nox 17mhighaltitudedischargeafter 2 1#plantoftheSheet 142 Integratedemission 10.92 / No
being treatedbygreenfacilities MetalPark standardsforatmospheric
SO2 18mhighaltitudedischargeafter 2 2#plantoftheSheet 19 pollutants（GB16297- 1.53 / No
being treatedbygreenfacilities MetalPark 1996）
Foshan CODcr 47.9 Thedischargestandardof 4,190.16 106,520 No
Dischargeafterbeingtreatedby Wastewatertreatment
Shunde Petroleum wastewatertreatmentsystemand 2 stations1and2of3# 0.77 waterpollutantsfor 67.30 / No
Midea electroplating（DB44/1597-Ammoniareachingthestandard plant
3.1 2015） 278.38 21,300 NoElectricalnitrogen
Heating Highaltitudedischargeafterbeing Wastegassprayers1and Table1oftheDischarge
Appliances Toluene treatedbywastegastreatment 7 2at3#plant,outlets1,2 1.4 StandardofVolatile 57.62 / No
Manufactur andxylene station and3forwastegasfrom OrganicChemical
ingCo., wave-soldering,painting Compoundsinthe
Ltd. anddryingat6#plant, FurnitureMakingIndustry
High altitudedischargeafterbeing outlets1and2forwaste (DB44/814-2010):
VOCs treatedbywastegastreatment gasfromreflowsoldering 8.11 DischargeLimitsforVOCs 333.02 / No
station at6#plant throughExhaustFunnel/for
TimePeriodII
Outletofinjectionmolding Table4oftheEmission
High altitudedischargeafterbeing wastegasinthesouth StandardsofIndustrial
NMHC treatedbywastegastreatment 2 sideof1#plant,outletof 3.98 PollutantsintheSynthetic 109.49 / No
station injectionmoldingwaste ResinIndustry(GB31572-
gasinthesouthsideof 2015):EmissionLimitsof
9# plant AirPollutants
Outlets1and2of
sanding wastegasat3# Table2oftheEmission
Particles Pulsedjetclothfiltering 4 plant,outlets1and2of Notdetected LimitsofAirPollutants - / No
polishingwastegasat3# (DB44/27-2001):Emission
plant LimitsofIndustrialWaste
Sulfur Highaltitudedischargeafterbeing Oxidationwireroofof3# Notdetected Gas(TimePeriod2),Level - No
dioxide treatedbywastegastreatment 2 plant 2 585.95
station Dryingfurnaceof3#plant Notdetected - No
Cooking Dischargeafterbeingtreatedby Southandeastsection EmissionStandardof
fume wastegastreatmentstation 2 canteens 1.13 CookingFume(Trial)（GB 41.4 / No
18483-2001）
Guangdon CODcr Dischargeafterbeingtreatedby 68 Thedischargestandardof 4,917 48,000 No
Wastewatertreatment
g Midea Petroleum wastewatertreatmentsystemand 1 station 0.4125 waterpollutantsfor 29.81 / No
Consumer reachingthestandardss 20 electroplating（DB44/1597- 1,450 / No
Electric Ammonia 2015）
Manufactur nitrogen 7.2875 526.7 9,600 No
ingCo., Highaltitudedischargeafterbeing
Ltd. Benzene treatedbywastegastreatment 0.5 50 / No
station
High altitudedischargeafterbeing Table1oftheDischarge
Toluene treatedbywastegastreatment 0.137 StandardofVolatile 13.7 / No
station OrganicChemical
High altitudedischargeafterbeing Sprayingwastegasoutlet Compoundsinthe
Xylene treatedbywastegastreatment 1 at1#plant 0.914 FurnitureMakingIndustry 91.4 / No
station (DB44/814-2010):
High altitudedischargeafterbeing DischargeLimitsforVOCs
Toluene treatedbywastegastreatment 1.05 throughExhaustFunnel/for 105 / No
and xylene station TimePeriodII
High altitudedischargeafterbeing
VOCs treatedbywastegastreatment 15 1,500 / No
station
Injectionmoldingwaste Table4oftheEmission
High altitudedischargeafterbeing gasoutletinthesouthern StandardsofIndustrial
NMHC treatedbywastegastreatment 2 sideof2#plant,injection 2.81 PollutantsintheSynthetic 758.7 / No
station moldingwastegasoutlet ResinIndustry(GB31572-
inthenorthernsideof2# 2015):EmissionLimitsof
plant AirPollutants
Sandingwastegasoutlet Table2oftheEmission
Particles Pulsedjetclothfiltering 2 at1#plant,polishing 1.47 LimitsofAirPollutants 2.94 / No
waste gasoutletat1# (DB44/27-2001):Emission
plant LimitsofIndustrialWaste
Sulfur Highaltitudedischargeafterbeing Gas(TimePeriod2),Level
dioxide treatedbywastegastreatment 3 2 300 / No
station
1 Dryingfurnaceat1#plant
Nitrogen Highaltitudedischargeafterbeing
oxide treatedbywastegastreatment 19 1,900 / No
station
Cooking Dischargeafterbeingtreatedby EmissionStandardof
fume wastegastreatmentfacility 1 Canteenof1#plant 1.2 CookingFume(Trial)（GB 1.61 / No
18483-2001）
Guangdon Nearthewastewater Thedischargelimitsof
g Meizhi COD 1 treatmentstationinthe 26.15 waterpollutantsin 11,525 19,880 No
Precision- Dischargeafterbeingtreatedby northsideoftheplant GuangdongDB-44/26-2001
Manufactur wastewatertreatmentstation Nearthewastewater
ingCo., Ammonia 1 treatmentstationinthe 1.04 thesecondtimeperiod 476 2,210 No
Ltd nitrogen northsideoftheplant first-level
Dischargeafterbeingtreatedby Nearthewastewater Thedischargestandardof
Guangdon COD wastewatertreatmentstation 1 treatmentstationinthe 49 waterpollutantsfor 1,073 1,152 No
g Meizhi northsideoftheplant electroplatingDB-441597-
Compress Nearthewastewater
orLimited Ammonia Dischargeafterbeingtreatedby 1 treatmentstationinthe 0.375 2015,before1September 224 230.4 No
nitrogen wastewatertreatmentstation northsideoftheplant 2012
Anhui COD Dischargeafterbeingtreatedby 1 Nearthewastewater 128 Implementationofthe 16,027 30,708 No
Meizhi wastewatertreatmentsystemand treatmentstationinthe takeoverstandardsofthe
Compress reachingthestandard northsideoftheplant WesternHefeiGroup
or Co.,Ltd. Ammonia wastewatertreatmentplant
nitrogen 0.9 andintegratedwastewater 361 1,770 No
discharge standard
(GB8978-1996)third-level
No. 1workshopwelding
soot dischargeoutletfor <20 Integratedemission No
waste gas standardsforatmospheric
No. 3workshopwelding pollutants（GB16297-
1#-8#dischargeoutletfor <20 1996） No
theweldingwastegas
No.2workshop1#Chugai
furnaceand2#Chugai <20 No
furnace dischargeoutlet Emissionstandardofair
for wastegas pollutantsforindustrialkiln
Particles Collectedbygastraphood+15m 14 No.2workshop4#Chugai andfurnace（GB9078- 9,547 12,820
highexhaustcylinder furnaceandSamchully 1996）
furnace dischargeoutlet <20 No
for wastegas
No. 4workshop3#
Chugaifurnacedischarge
outlet forwastegasand Integratedemission
die-casting molten <20 standardsforatmospheric No
aluminumI/J/Fdischarge pollutants（GB16297-
outletforwastegas 1996）
combined witha
discharge outlet
No.4workshopBAB
boilerdischargeoutletfor <20 No
waste gas
No.2workshopdie-
castingmoltenaluminum <20 No
A/B/Edischargeoutletfor
waste gas
No.2workshopdie-
castingmoltenaluminum <20 Emissionstandardofair No
C/D dischargeoutletfor pollutantsforindustrialkiln
waste gas andfurnace（GB9078-
No. 4workshop 1996）
centrifugalpouringG/H
androtorfurnace <20 No
combined witha
discharge outlet
Thetailof3#and4#
stator furnaceandthe
general dischargeoutlet <20 No
of fourmeltingaluminum
furnace
Furnace1#-3#discharge <20 No
outletforwastegas
Sulfur Emissionstandardofair
dioxide Collectedbygastraphood+15m Furnace1#-3#discharge 10.07 pollutantsforboiler 330 4,120 No
3 （GB13271-2014）
Nitrogen highexhaustcylinder outletforwastegas 108 3,548 9,000 No
oxide
No.1workshopof
dischargeoutletfordrying 7.38 No
waste gas
Direct-firedwastegas No.3workshop1# Integratedemission No
VOCs incinerator+15mhighexhaust 3 dischargeoutletfordrying 8.65 standardsforatmospheric 702 5,740
cylinder wastegas pollutants（GB16297-
1996）
No.3 workshop2# No
dischargeoutletfordrying 8.4
waste gas
COD Dischargetothemunicipalsewage Theeasternsideof 40 Thedischargelimitsof 14,159.60 22,770 No
waterpollutantsin
Ammonia systemafterbeingtreatedby 1 wastewatertreatment 3.77 Guangdong(DB-44/26- 724.60 4,554 No
nitrogen wastewatertreatmentsystem stationinMalongbase 201)
Particles 32.2 20,164.06 / No
Guangdon Sulfur 32 17.88 1,055 No
g Midea dioxide 20mhighaltitudedischarge
Kitchen Nitrogen 26outletsatA1plant,50 Emissionstandardofair
Appliances oxide outletsatA2plant,21 17 pollutantsforindustrialkiln 458.88 10,314 No
Manufactur outletsatB2plant,9 andfurnace（GB-9078-
ingCo., Benzene 116 outletsatC2plant,2 0.773 1996）/Theemissionlimit 52.63 / No
Toluene outletsatC3plant,1Ltd. ofgaspollutantsin
and Highaltitudedischargeafterbeing outletatwastewater 13.5 Guangdong（DB-44/27- 5,557.60 / No
Xylene treatedbywastegastreatment treatmentstationand7 2007)
VOCs station outletsatcanteen 67.6 28,564.34 / No
NMHC 6.3 2,453.60 / No
Styrene 0.396 72.45 / No
Fume 1.46 214.56 / No
Emission standardof
Activatedcarbon+UVphotolysis+ Wastegasoutletnear2# volatileorganiccompounds
Benzene catalyticcombustion 3 plant 0.03 forfurnituremanufacturing 15.5013 / No
(DB44/814-2010) the
Foshan secondtimeperiod
Welling Emissionstandardof
Washer Toluene Activatedcarbon+UVphotolysis+ Wastegasoutletnear2# volatileorganiccompounds
Motor andxylene catalyticcombustion 3 plant 4.25 forfurnituremanufacturing 1,420.3 / No
Manufactur (DB44/814-2010)the
ingCo., secondtimeperiod
Ltd. Emissionstandardof
Activatedcarbon+UVphotolysis+ Wastegasoutletnear2# volatileorganiccompounds
VOCs catalyticcombustion 3 plant 22.5 forfurnituremanufacturing 5,810 / No
(DB44/814-2010) the
second timeperiod
Integratedemission
Welling Particles Collectedbygastraphood+dust 1 Exhaustfunnel1formold <20 standardsforatmospheric 1,200 7,200 No
(Wuhu) collector+15mhighexhaust injection pollutants（GB16297-
Motor cylinder 1996）
Manufactur Emissionstandardofair
ingCo., Wastegasoutlets1-4of pollutantsforindustrialkiln
Ltd. VOCs Collectedbygastraphood+15m 4 thediecastingworkshop <20 andfurnace（GB9078- 2,400 14,400 No
highexhaustcylinder 1996）
Integratedemission
VOCs Collectedbygastraphood+ 1 Wastegasoutlets1-4of 2 standardsforatmospheric 352 1,200 No
activated carbon+15mhigh thediecastingworkshop pollutants（GB16297-
exhaustcylinder 1996）
Integratedemission
VOCs Collectedbygastraphood+ 1 Exhaustfunnel2formold 2.2 standardsforatmospheric 39.6 160 No
activated carbon+15mhigh injection pollutants（GB16297-
exhaustcylinder 1996）
GDMidea
Group EmissionControlStandard
WuhuAir- 15mhighaltitudedischargeafter Thesouthsideof1#plant forIndustrialEnterprises
Conditionin VOCs beingtreatedbyenvironmental 3 andthenorthsideof2# 1.72 VolatileOrganic 151 / No
g protectionfacilities plant CompoundsDB13-2322-
Equipment 2016
Co.,Ltd.
COD 61 20,115 33,000 No
Ammonia ThesouthsideofBuilding 0.052 Integratedwastewater 17 3,300 No
nitrogen Dischargeafterbeingtreatedby 6fornightshiftatthe dischargestandard
Anhui wastewatertreatmentsystemand 1
Meizhi BOD reachingthestandard northsideoftheplant 15.5 （gb8978-1996）,chart4, 511 16,500 No
Precision SS area 14 level3 4,616 16,500 No
Manufactur Petroleum 0.14 46 6,600 No
ingCo., 1-8#weldingwastegas 120（Integratedemission
Ltd. <20
Particles Collectedbygastraphood+21m 9 outlets standardsforatmospheric 11,330 36,000 No
highexhaustcylinder 9#-10#weldingwastegas pollutantsGB16297-1996,
outlets <20 chart2,level2）
2# outletofstator+rotor <20
heat-treating furnace
3#outletof2#stator <20
heat-treating furnace
1# outletofstator+rotor <20
heat-treating furnace
Outlet attheheadof3# <20
statorfurnace 200（Emissionstandardof
Outlets attheheadof2# airpollutantsforindustrial 322 No
stator furnaceand4# <20 kilnandfurnaceGB9078-
rotor furnace 1996,chart2,level2）
Outletsatthetailof3#
and4#statorfurnaces
andcomprehensiveoutlet <20
for4aluminummelting
furnaces
Wastegasoutletof <20
aluminummeltingfurnace
2# outletofstator+rotor 28
heat-treating furnace
3#outletof2#stator 40 850（Emissionstandardof
Sulfur Collectedbygastraphood+21m 7 heat-treatingfurnace airpollutantsforindustrial 4,145 20,000 No
dioxide highexhaustcylinder 1#outletofstator+rotor kilnandfurnaceGB9078-
heat-treating furnace Notdetected 1996,chart2,level2）
Outlet attheheadof3# 128
statorfurnace
Outlets attheheadof2#
rotorfurnaceand4# 35
statorfurnace
Outletsatthetailof3#
and4#statorfurnaces
andcomprehensiveoutlet 24
for4aluminummelting
furnaces
Wastegasoutletof 34
aluminummeltingfurnace
2# outletofstator+rotor 154
heat-treating furnace
Nitrogen Collectedbygastraphood+21m 3 3#outletof2#stator 95 8,553 18,000 No
oxide highexhaustcylinder heat-treatingfurnace
1# outletofstator+rotor 206
heat-treating furnace
1-4#outletsforwastegas 7.4
fromdrying 120（Integratedemission
Direct-firedwastegas 5-8#outletsforwastegas standardsforatmospheric
VOCs incinerator+21mhighexhaust 3 fromdrying 43.8 pollutantsGB16297-1996, 3,033 5,000 No
cylinder chart2,level2）
9-10#outletsforwaste 25.3
gas fromdrying
The construction of pollution prevention facilities and their operation
During the Reporting Period, all subsidiaries have strictly abided by the laws and regulations related to environment protection, and no major
environmental pollution incidents occurred. All subsidiaries have set up reliable waste water and gas treatment systems. Through regular monitoring,
supervision and inspection mechanisms, as well as third-party testing, it is ensured that the discharge of waste water, waste gas and solid waste during
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. The specific treatments for waste water, waste gas and solid wastes are
as follows:
A. Waste water treatments: The waste water from subsidiaries is classified as household waste water and industrial waste water. Household waste
water is discharged to the municipal waste water treatment network and waste water treatment plants after being pre-treated in septic tanks, etc. And
industrial waste water is discharged to the municipal waste water treatment network and waste water treatment plants after being pre-treated in the
subsidiaries’ waste water treatment stations. Meanwhile, the rain sewage diversion system is promoted in old factories and the existing production
processes are improved to reduce waste water.
B. Waste gas treatments: The waste gas from the subsidiaries is mainly the industrial waste gas and dust produced in the production process.
Corresponding waste gas treatment systems have been set up for different types of waste gas. For example, waste gas from screen printing line is
treated with spraying, defogging, UV photolysis and activated carbon adsorption devices, and organic waste gas from oil spray lines for metal working
and plastic injection is treated with molecular sieve wheel adsorption and RCO catalytic combustion devices. Waste gas is discharged at a high altitude
after emission concentration of benzene, toluene, xylene and VOCs in it is up to the Emission Limits of Air Pollutants, a local standard. Dust producing
equipment operates in a closed environment, with a fully automatic dust sucker or powder dust collector treating powder dust without discharging it
outwards.
C. Prevention and control of noise pollution: Noise produced in the operating process of the main noise equipment in the production processes of
various factories including punching machines, powder spray coating line, oil spray line, plastic injection machine, wire winding machine, waste water
and gas treatment facilities is 60～90dB (A). The company has taken the following preventive and control measures: 1) Select environmentally friendly
low noise equipment, deploy various equipment in the workshop rationally and take basic shock absorption and enclosed sound insulation measures
for the equipment; 2) Ensure sound insulation by making use of factory buildings and doors and windows, and especially in the air fan room with big
noise, doors and windows with good sound insulation effect are recommended being set; 3) Forestation in the factory area and on the border of projects
is strengthened and green plants are set rationally there, which both beautify the environment and assist in noise adsorption and sound insulation. After
taking the above noise prevention and control measures, noise in the factory area can be up to third-level standard in the Emission Standard for Industrial
Enterprises noise at Boundary(GB12348-2008): ≤65dB（A）at daytime and ≤55dB（A）at nighttime.
D. Solid waste treatments: The solid waste from subsidiaries is classified into general solid waste, hazardous solid waste, and household solid waste.
Hazardous solid waste, according to laws and regulations, is required to be treated by qualified treatment institutions; general solid waste, after being
classified at the subsidiaries, is collected and treated by resource recycling plants; and household solid waste is treated by the local sanitation
administration, which is in compliance with the relevant regulations.
The environmental effect evaluation of construction projects and other administrative permits in relation to environmental protection
All subsidiaries strictly observe the laws and regulations governing environmental protection, and all construction projects are in compliance with the
environmental effect requirements and other rules, with no misdeeds during the Reporting Period. Once a construction project is finished, a third-party
testing institution is hired to examine indexes including waste water, waste gas and noise, and the compilation and approval of the environmental effect
evaluation report is finished in time.
Contingency plans for environmental accidents
All subsidiaries have finished the compilation and approval of their contingency plans for environmental accidents. Emergency mechanisms for
environmental pollution accidents have been established and improved, and the subsidiaries’ ability to deal with environmental pollution accidents has
been enhanced, so as to maintain social stability, protect the lives, health and properties of the public, protect the environment, and promote a
comprehensive, coordinated and sustainable development of the society.
According to the accident levels, subsidiaries have formulated rules covering working principles, contingency plans, risk prevention measures,
commanding departments, responsibilities and labor division, and have filed these contingency plans with the government.
Environment self-monitoring plans
All the subsidiaries have formulated their own environment self-monitoring plans according to China’s relevant laws and regulations, , which include: 1)
Waste gas pollution source monitoring: Sampling points are set at various discharge ports of waste gas for monitoring on a quarterly basis; 2) Waste
water pollution source monitoring: Samples are fetched at intake and outlet ports of waste water treatment stations to monitor changes of pollution
source of waste water and up-to-standard emission of waste water after being treated at the waste water treatment stations. Monitoring items include
CODcr, SS and petroleum, etc. The data is uploaded to the governmental monitoring authority online and the government authority conducts real-time
monitoring; 3) Noise monitoring: Noise monitoring points are set at noise sensitive points and on the border of factories. Noise is monitored once in
spring and summer respectively and at daytime and at nighttime respectively each time; 4) Solid waste pollution source monitoring: Hazardous waste
produced from the subsidiaries is handed over to the units with qualifications for treatment, monitoring systems are established, and related management
forms and accounts are set up. Meanwhile, 11 factories have been equipped with an online waste water monitoring system, and such a system is
underway for other operations.
Other environment-related information that should be made public
According to the national and local laws and regulations, information including pollutant discharge information, the construction and operation of pollution
prevention facilities, environmental effect evaluations of construction projects and other administrative permits in relation to environmental protection,
contingency plans for environmental accidents, and environment self-monitoring results is all made public through the official WeChat account on a
regular basis.
Other environment-related information
None
19. Other Significant Events
√Applicable □N/A
Midea’s merger with Little Swan in a share swap via A-share offering and the related transaction
A. On 12 March 2019, the Company received the CSRC Reply on the Approval of the Merger of Midea
Group Co., Ltd. with Wuxi Little Swan Company Limited (ZJXK [2019] No. 352), approving the issuance
of 342,130,784 shares by Midea Group to merge with Little Swan.
B. On 22 April 2019, the Company received the Reply of the Foshan Central Sub-Branch of the State
Administration of Foreign Exchange on the Foreign Exchange Affairs in Midea Group Co., Ltd.’s Merger
with Wuxi Little Swan Company Limited in a Share Swap via A-share Offering (FHF [2019] No. 1),
according to which the Board of the Company would assist investors in handling the relevant foreign
exchange affairs.
C. Trading in the Company’s stock was suspended from 8 May 2019 for the implementation of the
appraisal rights of dissenting shareholders. During the declaration period for the appraisal rights (15 May
2019 to 21 May 2019), no investor declared the exercise of appraisal rights.
D. As Little Swan and Midea Group conducted profit distribution before the completion of the merger, the
following adjustments were made:
The swap prices for a Little Swan-A share and a Little Swan-B share were adjusted to RMB46.91 and
RMB38.07, respectively. The issue price of a Midea Group share was adjusted from RMB42.04 to
RMB40.74. The respective swap ratios for Little Swan-A and Little Swan-B shares became 1:1.15144821
and 1:0.93446244. And the shares to be issued by Midea Group for this merger became 323,657,476.
E. On 21 June 2019, the total 323,657,476 new shares issued by the Company for this merger were
allowed for public trading at the Shenzhen Stock Exchange. Upon the completion of this merger, Little
Swan would be delisted and de-registered as a corporate body, and Midea Group or its wholly-owned
subsidiary would take over all the assets, liabilities, business, personnel, contracts and all the other rights
and obligations of Little Swan.
20. Significant Events of Subsidiaries
□Applicable √N/A
Section VI Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
Before Increase/decreaseinReportingPeriod(+/-) After
Sha
res
as Shares
divi as
den dividen
Perce d d Perc
Shares ntage Newissue con convert Other Subtotal Shares enta
(%) vert edfrom ge
ed capital (%)
from reserve
retai s
ned
earn
ings
1. Restrictedshares 147,174,760 2.22 33,359,376 -15,131,623 18,227,753 165,402,513 2.37
1.1 Sharesheldbythe
state
1.2 Sharesheldby
state-owned
corporations
1.3 Sharesheldby
other domestic 145,424,760 2.19 32,539,376 -14,594,623 17,944,753 163,369,513 2.34
investors
Among which:Shares
held bydomestic 0 0 2,363,601 2,363,601 2,363,601 0.03
corporations
Shares
held bydomestic 145,424,760 2.19 30,175,775 -14,594,623 15,581,152 161,005,912 2.31
individuals
1.4 Sharesheldby 1,750,000 0.03 820,000 -537,000 283,000 2,033,000 0.03
foreign investors
Among which:Shares
held byforeign
corporations
Shares
held byforeign 1,750,000 0.03 820,000 -537,000 283,000 2,033,000 0.03
individuals
406,007,37 - 290,641,31 6,806,497,06 97.6
2. Non-restrictedshares 6,515,855,746 97.79 4 115,366,05 5 1 3
9
2.1 RMBcommon 406,007,37 - 290,641,31 6,806,497,06 97.6
shares 6,515,855,746 97.79 4 115,366,05 5 1 3
9
2.2 Domesticallylisted
shares forforeign
investors
2.3 Overseaslisted
shares forforeign
investors
2.4 Other
439,366,75 - 308,869,06 6,971,899,57
3. Totalshares 6,663,030,506 100 0 130,497,68 8 4 100
2
Reasons for the changes in shares
√Applicable □N/A
a. As the conditions for the first unlocking period for the reserved restricted shares of the 2017 Restricted
Share Incentive Scheme had been satisfied, the 1,629,000 restricted shares of a total of 50 eligible
employees were unlocked and allowed for public trading on 20 February 2019, including 60,000 restricted
shares of foreign employees.
b. As the conditions for the second unlocking period for the first phase of the 2017 Restricted Share
Incentive Scheme had been satisfied, the 5,564,583 restricted shares of a total of 100 eligible employees
were unlocked and allowed for public trading on 28 June 2019, including 150,000 restricted shares of
foreign employees.
c. For the reason of certain incentive receivers’ departure from the Company, violation of company rules,
business unit’s 2017 performance appraisal result being “just so-so”, position change or other factors, the
Company repurchased and retired 1,775,917 shares of 30 incentive receivers under the 2017 Restricted
Share Incentive Scheme on 3 April 2019, and 2,237,500 shares of 47 incentive receivers under the 2018
Restricted Share Incentive Scheme, totaling 4,013,417 restricted shares.
d. 2,420,000 reserved restricted shares were granted to 32 employees for the Company’s 2018 Restricted
Share Incentive Scheme. These shares would be allowed for public trading on 10 May 2019.
e. The Company issued a total of 323,657,476 new A-shares for the merger with Little Swan in a share
swap, including 321,278,100 non-restricted public shares and 2,379,376 restricted public shares
(inclusive of such shares held by senior management). These shares would be allowed for public trading
on 21 June 2019.
f. 28,560,000 restricted shares (repurchased shares) were granted to 423 employees for the Company’s
2019 Restricted Share Incentive Scheme, with no change to the total share capital of the Company.
These shares would be allowed for public trading on 10 July 2019.
g. For the reason of certain incentive receivers’ departure from the Company, business unit’s 2018
performance appraisal result being “just so-so”, individual performance appraisal result of 2018 being
“substandard” or other factors, the Company repurchased and retired 1,580,750 shares of 35 incentive
receivers under the 2017 Restricted Share Incentive Scheme on 23 July 2019, and 1,238,500 shares of
21 incentive receivers under the 2018 Restricted Share Incentive Scheme, totaling 2,819,250 restricted
shares.
h. In 2019, the incentive receivers of stock options chose to exercise 84,729,274 shares, which have
been registered into the Company’s share capital.
i. In 2019, locked-up shares held by senior management decreased by 1,089,598 shares.
Approval of share changes
√ Applicable □ N/A
On 12 March 2019, the Company received the CSRC Reply on the Approval of the Merger of Midea
Group Co., Ltd. with Wuxi Little Swan Company Limited (ZJXK [2019] No. 352), approving the issuance
of 342,130,784 shares by Midea Group to merge with Little Swan.
Transfer of share ownership
□ Applicable √ N/A
Progress of any share repurchase
√ Applicable □ N/A
a. The Proposal on the Plan for the Repurchase of Some Public Shares (hereinafter referred to as the
“2019 Repurchase Plan”) was approved at the 7th Meeting of the 3rd Board of Directors on 22 February
2019. As such, the Company was agreed to repurchase, with its own funds, no less than 60,000,000
shares and no more than 120,000,000 shares by way of centralized bidding at a price not exceeding
RMB55/share within 12 months starting from the approval of the repurchase plan by the Board of
Directors. All the repurchased shares would be used for the Company’s equity incentive schemes and/or
employee stock ownership schemes. As disclosed in the Announcement on the Expiry of the Repurchase
Period & the Completion of the Implementation of the Repurchase Plan dated 22 February 2019, during
the repurchase period, the Company cumulatively repurchased 62,181,122 shares by way of centralized
bidding. With the highest trading price being RMB55.00/share and the lowest being RMB45.62/share, the
total payment amounted to RMB3,200,329,932.45 (exclusive of trading fees). The 2019 Repurchase Plan
has expired and the number of shares repurchased has reached the lower limit of the repurchase plan.
Therefore, the implementation of the repurchase plan has been completed. So far, cumulatively
34,159,920 repurchased shares have been transferred.
b. The Proposal on the Plan for the Repurchase of Some Public Shares (hereinafter referred to as the
“2020 Repurchase Plan”) was approved at the 18th Meeting of the 3rd Board of Directors on 21 February
2020. As such, the Company was agreed to repurchase, with its own funds, no less than 40,000,000
shares and no more than 80,000,000 shares by way of centralized bidding at a price not exceeding
RMB65/share within 12 months starting from the approval of the repurchase plan by the Board of
Directors. All the repurchased shares would be used for the Company’s equity incentive schemes and/or
employee stock ownership schemes. As disclosed in the Announcement on the Share Repurchase
Progress dated 2 April 2020, as of 31 March 2020, the Company had repurchased 14,265,055 shares
(0.2038% of the Company’s total share capital as of that date) by way of centralized bidding. With the
highest trading price being RMB54.18/share and the lowest being RMB46.30/share, the total payment
amounted to RMB701,292,302.13 (exclusive of trading fees). The repurchase was in line with the
requirements of applicable laws and regulations, as well as the repurchase plan of the Company.
Progress of any repurchased share reduction through centralized price bidding
□ Applicable √ N/A
Effects of changes in shares on basic EPS, diluted EPS, net assets per share attributable to common
shareholders of the Company and other financial indexes over the last year and the last Reporting Period
□Applicable √N/A
Other contents that the Company considers necessary or is required by the securities regulatory
authorities to disclose
□Applicable √N/A
1.2 Changes in restricted shares
√Applicable □N/A
Unit: share
Opening Unlockedin Increasedin Closing
Name ofshareholder restricted current current restricted Reasonforchange Dateofunlocking
shares period period shares
Incentive receiversof
2017 RestrictedShare 14,380,000 5,564,583 0 6,140,000 Lockupaccordingto 28June2019
Incentive Scheme(first theScheme
phase) ①
Incentive receiversof
reserved restricted Lockupaccordingto
shares under2017 5,235,000 1,629,000 0 2,924,750 theScheme 20February2019
Restricted Share
Incentive Scheme ②
Incentive receiversof
2018 RestrictedShare 20,570,000 0 0 17,094,000Lockupaccordingto 21June2020
Incentive Scheme(first theScheme
phase) ③
Incentive receiversof
reserved restricted Lockupaccordingto
shares under2018 0 0 2,420,000 2,420,000 theScheme 10May2021
Restricted Share
Incentive Scheme
Incentive receiversof Lockupaccordingto
2019 RestrictedShare 0 0 28,560,000 28,560,000theScheme 10July2021
Incentive Scheme
Restricted shares Lockupbefore
before ShareOffering 0 0 2,363,601 2,363,601 ShareOffering -
④
Lockupforsenior
Zhang Xiaoyi 138,100 0 135,775 273,875 management -
position
Lockupforsenior
Jiang Peng 566,250 107,775 0 458,475 management -
position
Lockupforsenior
Xiao Mingguang 0 0 66,250 66,250management -
position
Lockupofnew
Zhong Zheng 0 0 11,152 11,152sharesforsenior -
management
position
Unlockingoflocked-
Li Feide 1,195,000 1,195,000 0 0 upsharesofformer 26March2019
seniormanagement
Lockupofallthe
sharesheldbya
formersenior
Zhu Fengtao ⑤ 765,300 255,100 255,100 765,300 managementwithin 26March2022
thehalfyearfrom
hisdeparturefrom
theCompany
Total 42,849,650 8,751,458 33,811,878 61,077,403 -- --
Notes: ① 2,675,417 restricted shares for the first phase of the 2017 Restricted Share Incentive Scheme
that had been granted but were still in lockup were retired on 3 April and 23 July 2019, reducing the
closing restricted shares by 2,675,417 shares.
② 681,250 reserved restricted shares under the 2017 Restricted Share Incentive Scheme that had been
granted but were still in lockup were retired on 3 April and 23 July 2019, reducing the closing restricted
shares by 681,250 shares.
③ 3,476,000 restricted shares for the first phase of the 2018 Restricted Share Incentive Scheme that
had been granted but were still in lockup were retired on 3 April and 23 July 2019, reducing the closing
restricted shares by 3,476,000 shares.
④ These are new restricted shares before share offering upon the share swap in Midea Group’s merger
with Little Swan via A-share offering.
⑤ Zhu Fengtao quit as a Director and Vice President of the Company on 22 March 2019. Therefore, all
the shares held by him in the Company were locked up within the half year from his departure.
2. Issuance and Listing of Securities
2.1 Securities (excluding preference shares) issued in the Reporting Period
√ Applicable □ N/A
Nameof Issueprice Dateof Number Dateof
stockorits Issuedate (orinterest Issue public allowedfor terminat Indextodisclosed Disclosure
derivative rate) number trading public ionof information date
securities trading trading
Stock
AnnouncementofMidea
GroupCo.,Ltd.ontheA-
shareOfferingforthe
Midea MergerwithWuxiLittle
Group 21June RMB40.74/ 323,657,47 21June 323,657,47 - SwanCompanyLimited 19June
（000333） 2019 share 6 2019 6 inaShareSwap&the 2019
Implementationofthe
Related-Party
Transaction&theListing
of NewShares
2.2 Changes in total shares of the Company and the shareholder structure, as well as the asset
and liability structures
√ Applicable □ N/A
The total shares of the Company were 6,663,030,506 at the beginning of the Reporting Period. During
the Reporting Period, 84,729,274 awarded stock options were exercised and registered; 95,105,015
repurchased shares were retired in early 2019; 2,420,000 reserved restricted shares were granted to 32
incentive receivers under the 2018 Restricted Share Incentive Scheme, which were allowed for public
trading on 10 May 2019; 323,657,476 new shares were issued for the merger with Little Swan in a share
swap via A-share offering, which were allowed for public trading on 21 June 2019; and a total of 6,832,667
restricted shares under the 2017 and 2018 Restricted Share Incentive Schemes were repurchased and
retired. As such, total shares are 6,971,899,574 at the end of the Reporting Period.
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
Totalnumberof
Totalnumberof Totalnumberof preference
Total number common preference shareholders
of common shareholdersat shareholders withresumed
shareholders 172,279 thepriormonth- 246,617 withresumed 0 votingrightsat 0
at theendof endbeforethe votingrightsat thepriormonth-
the Reporting disclosuredate theperiod-end(if endbeforethe
Period oftheannual any) disclosuredate
report oftheannual
report(ifany)
5% orgreatercommonshareholdersortop10commonshareholders
Shareh Increase/dec Numberof Numberof Pledgedorfrozen
Name of Natureof olding Totalcommon reaseduring restricted non-restricted shares
shareholder shareholde percent sharesheldat the common common Statu
r age(%) theperiod-end Reporting sharesheld sharesheld s Shares
Period
Domestic
Midea Holding non-state- 31.73% 2,212,046,613 0 0 2,212,046,613 Pledg 215,000,000
Co., Ltd. owned ed
corporation
Hong Kong Foreign
Securities corporation 16.89% 1,177,308,444 277,188,277 0 1,177,308,444
Clearing
Company
Limited
China Securities State-
Finance Co., owned 2.84% 198,145,134 0 0 198,145,134
Ltd. corporation
Fang Hongbo Domestic 1.96% 136,990,492 0 102,742,869 34,247,623
individual
Canada Pension
Plan Investment Foreign
Board－ own corporation 1.73% 120,379,067 19,371,811 0 120,379,067
funds (stock
exchange)
Central Huijin State-
Asset owned 1.29% 90,169,354 11,694,454 0 90,169,354
Management corporation
Ltd.
Huang Jian Domestic 1.26% 88,032,200 25,100 0 88,032,200
individual
Merrill Lynch Foreign 0.84% 58,830,294 58,830,294 0 58,830,294
International corporation
Yuan Liqun Domestic 0.76% 52,873,570 254,270 0 52,873,570 Pledg 15,884,900
individual ed
Li Jianwei Foreign 0.74% 51,700,000 -91,941 0 51,700,000
individual
Strategic investorsorgeneral
corporations becomingtop-
ten commonshareholders N/A
due toplacingofnewshares
(if any)(seenote3)
Related-parties oracting-in-
concert partiesamongthe N/A
shareholders above
Top 10non-restrictedcommonshareholders
Nameofshareholder Numberofnon-restrictedcommonshares Typeofshares
held attheperiod-end Type Shares
Midea HoldingCo.,Ltd. 2,212,046,613 RMBcommonstock 2,212,046,613
Hong KongSecuritiesClearing 1,177,308,444 RMBcommonstock 1,177,308,444
Company Limited
China SecuritiesFinanceCo.,Ltd. 198,145,134 RMBcommonstock 198,145,134
Canada PensionPlanInvestment 120,379,067 RMBcommonstock 120,379,067
Board－ ownfunds(stock
exchange)
Central HuijinAssetManagement 90,169,354 RMBcommonstock 90,169,354
Ltd.
Huang Jian 88,032,200 RMBcommonstock 88,032,200
Merrill LynchInternational 58,830,294 RMBcommonstock 58,830,294
Yuan Liqun 52,873,570 RMBcommonstock 52,873,570
Li Jianwei 51,700,000 RMBcommonstock 51,700,000
He Xiangjian 45,008,871 RMBcommonstock 45,008,871
Related-parties oracting-in-concert
parties amongthetoptennon-
restricted commonshareholders HeXiangjianisthecontrollingshareholderofMideaHoldingCo.,Ltd.,which
and betweenthetoptennon- makesthempartiesactinginconcert.
restricted commonshareholders
and thetoptencommon
shareholders
1. TheCompany’sshareholderHuangJianholds88,022,200sharesinthe
Company throughhiscommonsecuritiesaccountand10,000sharesinthe
Explanation onthetop10common Companythroughhisaccountofcollateralsecuritiesformargintrading,
shareholders participatingin representingatotalholdingof88,032,200sharesintheCompany.
securities margintrading(ifany) 2.TheCompany’sshareholderYuanLiqunholds43,028,290sharesinthe
(see note4) Companythroughhercommonsecuritiesaccountand9,845,280sharesinthe
Company throughheraccountofcollateralsecuritiesformargintrading,
representing atotalholdingof52,873,570sharesintheCompany.
Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the
Company conduct any promissory repurchase during the Reporting Period
□Yes √No
No such cases in the Reporting Period.
3.2 Controlling shareholder
Legal Dateof
Nameofcontrolling representativ establishm Credibilitycode Mainbusinessscope
shareholder e/company ent
principal
Manufactureandcommerceinvestment;
domesticcommerceandmaterialssupply
andmarketingindustry(excludingstate-
designatedmonopoly);CPsoftwareand
hardwaredevelopment;industrialproduct
Midea HoldingCo.,Ltd. HeXiangjian 2002-08-05 914406067429989733 design;informationtechnologyconsulting
services,providinginvestmentconsultant
andconsultingservices;installation,
maintenanceandafter-salesserviceof
electricappliances;realestate
intermediaryserviceandforwardingagent
service.
Shareholdings ofthe
controlling shareholder
in othercontrolledor ApartfromadirectcontrolovertheCompany,MideaHoldingdoesnotdirectlycontrolorhave
non-controlled listed sharesinotherlistedcompaniesathomeorabroad.
companies athomeor
abroad duringthe
Reporting Period
Change of the controlling shareholder during the Reporting Period
□Applicable √N/A
No such cases in the Reporting Period.
3.3 Actual controller and acting-in-concert parties thereof
Name oftheactualcontroller Relationshipwith Nationality Rightofresidenceinothercountriesor
the actualcontroller regions
HeXiangjian Actualcontroller ThePeople's No
himself RepublicofChina
Main occupationandduty IncumbentboardchairmanofMideaHoldingCo.,Ltd.
Used-to-be-holding listed MideaGroup(000333.SZ),KUKA(KU2.DE),LittleSwan(A:000418.SZ;B:200418)
companies homeandabroadin (delistedin2019),andWellingHolding(00382.HK)(delistedin2018)
the last10years
Change of the actual controller during the Reporting Period
□Applicable √N/A
No such cases in the Reporting Period.
Ownership and control relations between the actual controller and the Company
He Xiangjian
94.55%
0.65%
Midea Holding Co., Ltd.
31.73%
Midea Group Co., Ltd.
The actual controller controls the Company via trust or other ways of asset management
□Applicable √N/A
3.4 Other corporate shareholders with a shareholding percentage above 10%
□Applicable √N/A
3.5 Limits on the Company’s shares held by its controlling shareholder, actual controller,
reorganizer and other commitment subjects
□Applicable √N/A
Section VII Information about Directors, Supervisors, Senior
Management and Employees
1. Changes in Shareholdings of Directors, Supervisors and Senior Management
Shares Shares
increas decreas
Incum Starting Ending Sharesheld edat edat Other Sharesheld
Name Officetitle bent/ Gen Age dateof dateof attheyear- the the increase/ attheperiod-
Forme der tenure tenure begin Reporti Reporti decrease end(share)
r (share) ng ng (share)
Period Period
(share) (share)
Chairman
Fang ofthe Incum Mal 53 2012-8-25 2021-9-25 136,990,492 0 0 0 136,990,492
Hongbo Boardand bent e
CEO
He Director Incum Mal 53 2012-8-25 2021-9-25 0 0 0 0 0
Jianfeng bent e
Yin Director Incum Mal
Bitong andVice bent e 52 2016-12-16 2021-9-25 2,109,655 0 0 0 2,109,655
President
Gu Director Incum Mal
Yanmin andVice bent e 57 2014-4-21 2021-9-25 0 0 0 0 0
President
Yu Gang Director Incum Mal 61 2018-9-26 2021-9-25 0 0 0 0 0
bent e
Xue Independe Incum Mal 56 2018-9-26 2021-9-25 0 0 0 179,914 179,914
Yunkui ntDirector bent e
Guan Independe Incum Mal 43 2018-9-26 2021-9-25 0 0 0 0 0
Qingyou ntDirector bent e
Han Jian Independe Incum Fem 48 2018-9-26 2021-9-25 0 0 0 0 0
ntDirector bent ale
Chairman
ofthe Incum Fem
Liu Min Supervisor bent ale 43 2016-2-1 2021-9-25 0 0 0 0 0
y
Committee
Zhao Jun Supervisor Incum Mal 45 2014-4-21 2021-9-25 0 0 0 0 0
bent e
Liang Employee Incum Fem 37 2017-3-30 2021-9-25 0 0 0 0 0
Huiming Supervisor bent ale
Wang Vice Incum Mal 44 2017-12-15 2021-9-25 0 0 0 0 0
Jianguo President bent e
Zhang Vice Incum Mal 47 2018-4-23 2021-9-25 470,800 0 0 115,775 586,575
Xiaoyi President bent e
Vice Incum
Xiao President bent Mal 2019-3-22 2021-9-25
Minggua 50 280,000 0 0 75,000 355,000
ng Directorof Forme e 2016-7-16 2019-3-22
Finance r
Hu Vice Incum Mal 63 2014-8-18 2021-9-25 0 0 0 0 0
Ziqiang President bent e
Wang Vice Incum Mal 53 2014-8-18 2021-9-25 0 0 0 120,000 120,000
Jinliang President bent e
Helmut Chief Incum Mal
Zodl Financial bent e 47 2019-10-22 2021-9-25 0 0 0 0 0
Officer
Zhong Directorof Incum Fem 38 2019-3-22 2021-9-25 0 0 0 201,152 201,152
Zheng Finance bent ale
Jiang Board Incum Mal 47 2013-10-30 2021-9-25 611,300 0 152,700 0 458,600
Peng Secretary bent e
Zhu Director Forme Mal
Fengtao andVice r e 52 2014-4-21 2019-3-22 1,020,400 0 0 0 1,020,400
President
Total -- -- -- -- -- -- 141,482,647 0 152,700 691,841 142,021,788
2. Changes in Directors, Supervisors and Senior Management
√Applicable □N/A
Name Officetitle Typeofchange Date Reason
Zhu Fengtao DirectorandVice Resigned 2019-3-22 Personalreason
President
XiaoMingguang DirectorofFinance Dismissed 2019-3-22 Jobchange
3. Brief Biographies
Professional backgrounds, main work experience and current responsibilities in the Company of the
incumbent directors, supervisors and senior management
Mr. Fang Hongbo, male, holder of a Master's degree, is the Chairman and CEO of the Company. He
joined Midea in 1992 and previously served as the General Manager of Midea Air-Conditioning Business
Unit, CEO of Midea Refrigeration Electric Appliances Group, Chairman and CEO of GD Midea Holding
Co., Ltd.
Mr. He Jianfeng, male, holder of a Bachelor's degree, is a Director of Midea Group. He is also the
Chairman of the Board and President of Infore Investments Holding Group Co., Ltd.
Mr. Yin Bitong, male, a Master's graduate, joined Midea in 1999 and served as GM Assistant and
Marketing Director of the Residential Air Conditioning Division as well as GM and Director of Wuxi Little
Swan Co. Ltd. He is now a Director and Vice President of Midea Group and the President of Midea
Residential Air Conditioning Division.
Mr. Gu Yanmin, male, holder of a Doctoral degree, joined Midea in 2000 and has functioned as the Head
of Planning & Investment, Head of Overseas Strategy & Development, Vice President and Head of
Overseas Business Development of Midea Air-Conditioning & Refrigeration Group, Head of Overseas
Strategy of Midea Group. Currently he is a Director, Vice President of the Company as well as the
Chairman of the Supervisory Board of KUKA.
Mr. Yu Gang, male, holder of a Doctoral degree given by the Wharton School of the University of
Pennsylvania, is the Honorary Chairman and a co-founder of YHD.COM. He once served as the Global
Supply Chain Vice President of Amazon and the Global Procurement Vice President of Dell. He is now
the Executive Chairman of the Board of Directors and a co-founder of 111, Inc., as well as a Director of
Midea Group.
Mr. Xue Yunkui, male, is a holder of a Doctoral degree given by the Southwest University and a holder
of a Post-Doctoral degree given by the Shanghai University of Finance and Economics. He used to be
the associate dean and a doctoral supervisor at the School of Accountancy of Shanghai University of
Finance and Economics, a Founding Vice President of Shanghai National Accounting Institute and
Cheung Kong Graduate School of Business, the Secretary-General of China Association of Accounting
Professors, a Vice Chairman of the Steering Committee of the National Accounting Institute under the
Ministry of Finance, etc. He is now an accounting professor of Cheung Kong Graduate School of Business,
and an Independent Director of Midea Group.
Mr. Guan Qingyou, male, is a holder of a Doctoral degree in economics given by the Chinese Academy
of Social Sciences and a holder of a Post-Doctoral degree given by the Tsinghua University. He once
worked as a Vice President and the Director of the Research Institute of Minsheng Securities. Currently,
he serves as the President and Chief Economist of the Reality Institute of Advanced Finance (an
independent research institute), an Independent Director of Midea Group, a senior researcher at China
Society of Economic Reform, a special expert in the Fiscal Reform and Development Think Tank under
the Ministry of Finance, a member of the Expert Advisory Committee on Industrial Economic Operation
under the Ministry of Industry and Information Technology, a member of the Think Tank Committee of the
All-China Federation of Industry and Commerce, etc.
Ms. Han Jian, female, holder of a Doctoral degree given by the Cornell University, is an associate
professor of management in China Europe International Business School, a co-director of the Sino
European Innovation Institute in China and the Sino European Digital Economy and Intelligent Enterprise
Research Center, as well as an Independent Director of Midea Group.
Ms. Liu Min, female, a Master’s degree graduate, joined Midea in 1998. She used to be the General
Manager of the Overseas Marketing Company under Midea’s Residential Air-Conditioning Division and
the Director of Midea Executive Office. She is now the Chairman of the Supervisory Committee, Director
of HR Department of Midea as well as a member of KUKA’s Supervisory Board.
Mr. Zhao Jun, male, a Master's degree graduate, joined Midea in 2000 and has functioned as the Director
and the CFO of GD Midea Holding Co., Ltd. He is now a Supervisor of the Company, a Vice President
and the Director of Finance in Midea Holding Co., Ltd., as well as a Non-Executive Director of Midea Real
Estate Holding Limited.
Ms. Liang Huiming, female, is a holder of a Bachelor’s degree. Joining Midea in 2007, she used to serve
as the Chief Business Administration Commissioner in Midea Group’s Administration and Human
Resources Department. She is now the Employee Supervisor of Midea Group.
Mr. Wang Jianguo, male, a Master’s degree holder, joined Midea in 1999. He was once the Director of
the Supply Chain Management Department of Midea Group’s Residential Air Conditioner Division, the
Director of the Administration and Human Resources Department of Midea Group, and the General
Manager of Midea Group’s Refrigeration Division. Currently, he is a Vice President of Midea Group and
the President of Midea International Business.
Mr. Zhang Xiaoyi, male, is a holder of a Master’s degree. Joining Midea Group in 2010, he used to serve
as the head of the overseas process IT system, the head of the supply chain system of Midea Group, etc.
He is now a Vice President, the Chief Information Officer and IT Director of Midea Group.
Mr. Xiao Mingguang, male, a holder of a Master’s degree, joined Midea in 2000. He once was the Deputy
Director of the Financial Management Department and the Director of the Operational Management
Department of Midea Group, the Director of the Audit and Supervision Department and a Director of GD
Midea Holding Co., Ltd., as well as the Director of Finance of Midea Group, etc. He is now a Vice
President of Midea Group.
Mr. Hu Ziqiang, male, holder of a Doctoral degree, joined Midea in 2012, and has formerly worked for
GE and Samsung and as a Vice GM in Wuxi Little Swan Co., Ltd. At present he is a Vice President and
the CTO of the Company.
Mr. Wang Jinliang, male, holder of a Master’s degree, joined Midea in 1995 and previously worked as
the Vice President of China Marketing in the Company, and was GD Midea Holding’s Vice President and
Marketing Head. He is now a Vice President of the Company.
Mr. Helmut Zodl, male, holder of a Master’s degree, joined Midea in 2019. For the period from 2000 to
2005, he worked in IBM as the Financial Manager for the Austrian operations, as well as the Director of
Finance for the European, Middle East and African operations. For the period from 2005 to 2017, he
served in Lenovo as the Director of Finance, the Vice President and Chief Financial Officer for the Asia
Pacific and Latin American operations, the Vice President and Chief Financial Officer for the Global
Commercial Business and the American operations, the Vice President and Chief Financial Officer for
the Global Service Business. For the period from 2017 to 2019, he was the Senior Vice President of
Financial Affairs in Advance Auto Parts Inc. And he is now the Chief Financial Officer of Midea Group and
a member of the Supervisory Board of KUKA.
Ms. Zhong Zheng, female, a holder of a Master’s degree, joined Midea in 2002. She once was the
Financial Manager of the factory in Guangzhou of the Residential Air Conditioner Division and of domestic
and overseas marketing subsidiaries, the Director of Finance of the Financial Center and the Component
Division, as well as the Audit Director of Midea Group, etc. She is now the Director of Finance of Midea
Group.
Mr. Jiang Peng, male, holder of a Master’s degree, joined Midea in 2007 and used to be the
Representative for Securities Affairs and Board Secretary for GD Midea Holding Co., Ltd. He is now the
Board Secretary and Director of Investor Relations of Midea Group.
Posts held in shareholding entities
√Applicable □N/A
Beginning Endingdateof Allowancefrom
Name Shareholdingentity Position dateofoffice officeterm theshareholding
term entity
He Jianfeng MideaHoldingCo.,Ltd. President 2016-01 - No
Director ofFinance 2012-09 -
Zhao Jun MideaHoldingCo.,Ltd. Yes
VicePresident 2015-12
Note N/A
Posts held in other entities
√Applicable □N/A
Name Otherentity Position Beginningdate Endingdateof Allowancefrom
of officeterm officeterm theentity
Member ofthe
FangHongbo KUKA Supervisory 2017-03 2019-05 Yes
Board
He Jianfeng InforeInvestmentsHoldingGroup Chairmanofthe 1995-06 - Yes
Co.,Ltd. Boardand
President
Chairmanofthe
GuYanmin KUKA Supervisory 2017-01 2024-06 Yes
Board
Executive
YuGang 111,Inc. Chairmanofthe 2011-04 - Yes
Board
AeonLifeInsuranceCompany,Ltd. Independent 2019-01 2022-01 Yes
Director
Independent
XueYunkui OuyeelCo.,Ltd. Director 2019-08 2022-08 Yes
Dalian Wanda Commercial Independent 2020-02 2023-02 Yes
ManagementGroupCo.,Ltd. Director
Beijing Rushi Research Information Chairmanofthe 2017-12 - Yes
ConsultingServiceCo.,Ltd. Board
Guan Qingyou ShaanxiInternationalTrustCo.,Ltd. Independent 2019-07 2022-07 Yes
Director
NanhuaFuturesCo.,Ltd. Independent 2019-02 2022-02 Yes
Director
Member ofthe
Liu Min KUKA Supervisory 2017-01 2024-06 Yes
Board
Member ofthe
Helmut Zodl KUKA Supervisory 2020-01 2024-06 Yes
Board
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
4. Remuneration of Directors, Supervisors and Senior Executives
The following describes the decision-making procedures, grounds on which decisions are made and
actual remuneration payment of directors, supervisors and senior executives.
The decision-making remuneration procedure for directors, supervisors and senior executives: The
remuneration is proposed by the Board Compensation Committee and approved by the Board. Decisions
are made finally after the deliberation of shareholders' meeting.
The remuneration of directors, supervisors and senior executives consist of basic annual payments and
performance-related annual payments according to the Salary Management System for the Directors,
Supervisors and Senior Executives which has been approved by the Company. Basic payment is
determined based on the responsibility, risk and pressure of directors, supervisors and senior executives.
The basic annual payment remains stable. Performance-related annual payment is related to the
completion rate of corporate profit, the assessment result of target responsibility system and the
performance evaluation structure of their own department. The remuneration system for directors,
supervisors and senior executives serves the Company's strategy, and shall be adjusted with the
Company's operating conditions in order to meet the Company’s development requirements. The basis
for adjusting the remuneration of directors, supervisors and senior executives are as follows:
a. Wage growth in the industry
b. Inflation
c. Corporate earnings
d. Organizational structure adjustment
e. Individual adjustment due to a change in position
Remuneration of directors, supervisors and senior executives during the Reporting Period
Unit: RMB'000
Totalbefore-tax Remuneration
Name Position Gender Age Incumbent/ remuneration fromrelated
Former fromthe partiesofthe
Company Company
Fang Hongbo ChairmanoftheBoard Male 53 Incumbent 9,630
andCEO
HeJianfeng Director Male 53 Incumbent - Yes
Yin Bitong DirectorandVice Male 52 Incumbent 7,650
President
Gu Yanmin DirectorandVice Male 57 Incumbent 3,480
President
YuGang Director Male 61 Incumbent 450
XueYunkui IndependentDirector Male 56 Incumbent 450
GuanQingyou IndependentDirector Male 43 Incumbent 450
HanJian IndependentDirector Female 48 Incumbent 450
LiuMin Chairmanofthe Female 43 Incumbent 2180
SupervisoryBoard
ZhaoJun Supervisor Male 45 Incumbent - Yes
LiangHuiming EmployeeSupervisor Female 37 Incumbent 210
WangJianguo VicePresident Male 44 Incumbent 4,340
Zhang Xiaoyi VicePresident Male 47 Incumbent 4,460
Hu Ziqiang VicePresident Male 63 Incumbent 4,710
WangJinliang VicePresident Male 53 Incumbent 4,120
Xiao Mingguang VicePresident Male 50 Incumbent 3,270
HelmutZodl ChiefFinancialOfficer Male 47 Incumbent 2,200
Zhong Zheng DirectorofFinance Female 38 Incumbent 2,400
Jiang Peng BoardSecretary Male 47 Incumbent 2,410
ZhuFengtao DirectorandVice Male 52 Former 4,940
President
Total -- -- -- -- 57,800 --
Share incentives for directors, supervisors and senior executives in the Reporting Period
√Applicable □N/A
Exercise
pricefor Market Restricted Grant Restricted
Exercisab Exercise exercised priceat shares Unlocked Restricted priceof shares
leshare dshare share theendof heldat sharesin shares the heldat
Name Officetitle options options optionsin the the the grantedin restricted theendof
for the inthe the Reporting beginning Reporting the shares the
Reporting Reportin Reporting Period ofthe Period Reporting (RMB/sha Reporting
Period gPeriod Period (RMB/ Reporting Period re) Period
(RMB/ share) Period
share)
Wang Vice 0 0 - 58.25 0 0 120,000 25.79 120,000
Jinliang President
Hu Vice 0 0 - 58.25 200,000 100,000 0 15.86 100,000
Ziqiang President 100,000 0 0 27.57 100,000
Xiao Vice 100,000 0 0 27.57 100,000
Minggu President 245,000 35,000 17.85 58.25 150,000 50,000 0 27.99 100,000
ang
Zhong Directorof 116,000 41,000 19.15 58.25 120,000 60,000 0 15.86 60,000
Zheng Finance 80,000 0 27.57 80,000
Zhang Vice 180,000 90,000 17.36 58.25 140,000 70,000 0 15.86 70,000
Xiaoyi President 10,000 16.06 58.25 100,000 0 0 27.57 100,000
Total -- 541,000 176,000 -- -- 990,000 280,000 120,000 -- 830,000
Note (ifany) N/A
5. Staff in the Company
5.1 Number, functions and educational backgrounds of the staff
Number ofin-servicestaffoftheCompany 1,491
Number ofin-servicestaffofmainsubsidiaries 133,406
Totalnumberofin-servicestaff 134,897
Total numberofstaffwithremunerationintheperiod 134,897
Number ofretireestowhomtheCompanyoritsmain 2,280
subsidiaries needtopayretirementpension
Functions
Function Numberofstaff
Production 110,568
Sales 7,424
Technical/R&D 13,727
Financial 1,783
Administrative 1,395
Total 134,897
Educational backgrounds
Educationalbackground Numberofstaff
Master anddoctor 4,422
Bachelor 26,867
College,technicalsecondaryschool 51,855
Others 51,753
Total 134,897
Note: The data above have not yet included the staff of KUKA, which are around 14,000.
5.2 Staff remuneration policy
Staff remuneration shall be paid on time according to the Salary Management System. The Company
decides the regular salary of the employees according to the position’s value and evaluation
performances and decides the variable salary according to the Company's and employee’s performance.
The remuneration distribution shows more consideration for strategic talent and ensures the market
competitiveness in the salary of core talent. The Company shall make dynamic adjustments to the staff
remuneration policy according to regional differences, number of employees, staff turnover, environment
changes in the industry and paying ability of the Company.
5.3 Staff trainings
The attendances at internal training sessions were 637,007 in the Reporting Period, of which 27,411 were
management personnel, 283,869 technical and marketing personnel and 325,727 operational personnel.
The trainings included:
a. Building Leadership Development Programs such as the Sailor-Voyager-Pilot program and a High-
Potential Leaders Training system to facilitate talent management and training.53 talent training programs
were carried out, where 2,916 highly skilled managerial staff were trained for a total of 54,288 man-hours.
b. Building a professionalism promotion system. 817 such programs were carried out, where 344,920
staff were trained for a total of 2,862,836.5 man-hours.
c. Providing channels for common skill improvement. 662 such programs such as the Lecture for Staff
and language trainings were launched, where 71,482 staff were trained for a total of 252,402 man-hours.
d. Improving individual comprehensive ability. 151 external trainings for individuals at junior, middle and
senior levels were organized, where 655 staff were trained for a total of 10,926 man-hours.
e. In order to help new graduates develop themselves fast and foster a new power for the Company, 72
relevant programs such as the Re-Education of New Graduates and the Training Camp for New
Graduates were organized, where 10,310 new graduates were trained for a total of 273,922 man-hours.
f. Facilitating organizational learning. 1,368 internal sharing sessions were held, where 50,511 employees
were trained for 89,909 man-hours. With the addition of 860 new internal trainers, annual teaching time
reached 7,231.3 hours in total. And a total of 920 courses were designed in the year.
g. 13,217 key technical staff and working team leaders were trained for a total of 278,189 hours.
h. 54,965 staff visited M-Learning, a mobile app developed by Midea for online training, for a total of
228,232 times in 2019.
5.4 Labor outsourcing
□Applicable √N/A
Section VIII Corporate Governance
1. Basic Situation of Corporate Governance
Any incompliance with the regulatory documents issued by the CSRC governing the governance of listed
companies
□Yes √No
The Company is constantly improving its corporate governance in strict accordance with the Company
Law, the Securities Law and the relevant regulations of the China Securities Regulatory Commission.
There are four special committees under the Board, namely the Strategy Committee, the Auditing
Committee, the Nomination Committee as well as the Remuneration and Appraisal Committee. They
were designed to provide consultation and advice to the Board and validate the professionalization and
efficiency of discussions and decision-making. The Company has established clear rules of procedure
for its shareholders' general meeting, board of directors, Supervisory Committee and special committees
under the board, as well as the Work Rules for Company Secretary. It has also established a set of
standard documents including Information Disclosure Management System, Funds Raising Management
System, Connected Transaction Management System, Wealth Management Entrustment Management
System, Insider Registration System, External Guaranty Decision-making System, Foreign Investment
Management System, and Management System for Finance Flow with Connected Parties, Internal
Auditing System. The shareholders' meeting, the Board, Supervisory Committee and operations
management departments have clear authority and responsibility. Each performs its own functions and
maintains its stability effectively. Their scientific decision-making and coordinated operations have laid a
firm foundation for the sustained, healthy and steady development of the Company.
The Company has also launched core management team shareholding plans and equity incentive plans
for core research, quality control, technical, production and management staff, which helps to develop a
sound shareholding structure for the future growth of the Company.
In 2019, the Company won the following honors:
No. 312 of “2019 Fortune Global 500”; No. 253 of “The World’s 2,000 Largest Public Companies”
released by the Forbes; No. 33 of the “BrandZ? Top 100 Most Valuable Chinese Brands” jointly
released by WPP and Kantar Millward Brown; No. 149 of the “2019 Brand Finance Global 500 ”; the
“Best Responsibility Advancement Award” at “China ESG Golden Awards 2019” presented by
finance.sina.com.cn; and “The Enterprise with Excellent Governance” at “The Golden Round Table
Awards 2019” presented by the Directors & Boards magazine.
2. Independency of businesses, personnel, assets, organizations, and finance which
are separate from the controlling shareholder
The Company is totally autonomous with respect to business, personnel, assets, organizations, and
finance from Midea Holding Co., Ltd., the controlling shareholder of the Company, therefore maintaining
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 distinct
purchase and sales system, and an independent and comprehensive business operation capability.
2.2 Personnel independence:
The Company is completely autonomous from the controlling shareholder regarding its personnel. The
labor, personnel and remuneration management of the company are totally unrelated. All senior
management members received remuneration from the Company except those that hold only a director’s
position in the controlling shareholder.
2.3 Asset integrity:
The Company has its own independent production system as well as ancillary production systems and
facilities. Intangible assets such as industrial rights, trademark ownership and non-patent technology are
held by the Company.
2.4 Organization independence:
The Company has set up an independent organizational structure which maintains its independent
operation. The Company has the right to appoint or remove any personnel so there is no overlapping with
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 bank
accounts and independently makes financial decisions and pays its own taxes according to relevant laws.
3. Horizontal Competition
□Applicable √N/A
4. Annual Meeting of Shareholders and Special Meetings of Shareholders Convened
during the Reporting Period
4.1 Meetings of shareholders convened during the Reporting Period
Investor
Meeting Type participation Conveneddate Disclosuredate Disclosureindex
ratio
2019 FirstSpecial Special AnnouncementNo.
Meeting of meetingof 55.2068% 15February2019 16February2019 2019-020,disclosedon
Shareholders shareholders www.cninfo.com.cn
2018 Annual Annual AnnouncementNo.
Meeting of meetingof 57.1694% 13May2019 14May2019 2019-071,disclosedon
Shareholders shareholders www.cninfo.com.cn
2019 Second Special AnnouncementNo.
Special Meeting meetingof 51.6877% 18November2019 19November2019 2019-127,disclosedon
of Shareholders shareholders www.cninfo.com.cn
4.2 Special meetings of shareholders convened at the request of preference shareholders with
resumed voting rights
□Applicable √N/A
5. Performance of Independent Directors during the Reporting Period
5.1 Attendance of independent directors in Board meetings and meetings of shareholders
AttendanceofindependentdirectorsinBoardmeetings
Presencedue Presenceby Presence Absencefor
Independent inthe Presenceon telecommunicat throughaproxy Absence two
director Reporting site(times) ion(times) (times) (times) consecutive
Period(times) times
Xue Yunkui 12 1 11 0 0 No
Guan Qingyou 12 1 11 0 0 No
Han Jian 12 1 11 0 0 No
Presence ofindependentdirectors 1
in meetingsofshareholders(times)
5.2 Objections from independent directors on related issues of the Company
Were there any objections on related issues of the Company from independent directors
□Yes √No
No such cases in the Reporting Period.
5.3 Other details about the performance of duties by independent directors
Were there any suggestions from independent directors adopted by the Company
√Yes □No
Details about advice of independent directors accepted or not accepted by the Company
During the Reporting Period, independent directors strictly followed related rules, regulations and the
Articles of Association. They focused on the Company operation, carried out their duties independently
and imparted lots of professional advice on perfecting the Company’s systems, daily operations and
decisions. They provided fair advice during the Reporting Period and played an effective role in improving
the Company supervisory systems and protecting the legal rights of the Company and the shareholders
as a whole.
6. Performance of Duties by Special Committees under the Board during the
Reporting Period
6.1 The Audit Committee under the Board convened four meetings in the Reporting Period, at which the
following proposals were considered and approved: The 2018 Final Account Report, The 2018 Annual
Report & Its Abstract, The Report of the Audit Committee on Concluding and Appraising the 2018 Annual
Audit Work, The Proposal for Appointing an Auditor for the 2019 Annual Result, The Proposal for
Appointing an Auditor for the Internal Control in 2019, The Proposal for Writing off Asset Impairment
Provisions, The Report on the First Quarter of 2019, The 2019 Semi-Annual Report and The Report on
the Third Quarter of 2019.
6.2 The Remuneration and Appraisal Committee under the Board convened three meetings in the
Reporting Period, at which the following proposals were considered and approved: The Proposal on the
Repurchase and Retirement of Certain Incentive Shares under the 2017 and 2018 Restricted Share
Incentive Schemes, The Proposal on the Satisfaction of the Conditions for the First Unlocking Period for
the Reserved Restricted Shares of the 2017 Restricted Share Incentive Scheme, The Proposal for
Matters Related to the Stock Option Exercise for the Second Exercise Period of the Fourth Stock Option
Incentive Scheme, The Proposal on the Satisfaction of the Conditions for the Second Unlocking Period
for the First Phase of the 2017 Restricted Share Incentive Scheme, and The Proposal for Matters Related
to the Stock Option Exercise for the Third Exercise Period of the Third Stock Option Incentive Scheme.
6.3 The Nomination Committee under the Board convened two meetings in the Reporting Period, at which
the following proposals were considered and approved: The Proposal for Vice President Appointment,
The Proposal for the Appointment of Director of Finance and The Proposal for the Appointment of Chief
Financial Officer.
7. Performance of Duties by the Supervisory Committee
Were there any risks to the Company identified by the Supervisory Committee when performing its
duties during the Reporting Period
□Yes √No
The Supervisory Committee of the Company had no objection to the matters of supervision during the
Reporting Period.
8. Assessment and Incentive Mechanism for the Senior Management
The Company established an appraisal system on the basis of its target-oriented responsibility system
and adopted an appraisal agreement for senior management members, which determines the appraisal
criterion, appraisal method and measures taken based on the appraisal result. During the Reporting
Period, the Company has carried out appraisals of senior management members on the basis of its
target-oriented responsibility system and the appraisal result was reflected in the annual performance-
based incentive rewards. Meanwhile, the Company promoted the unification of interests between
managers and shareholders through high-level staff and core management teams' shareholding schemes
as well as multiple stock option or restricted share incentive schemes, laying a good foundation for the
future growth of the Company.
9. Internal Control
9.1 Serious internal control defects found in the Reporting Period
□Yes √No
9.2 Self-evaluation report on internal control
Disclosure dateoftheinternalcontrolself-evaluationreport 30April2020
Fordetails,pleaserefertothe2019Self-Evaluation
Index tothedisclosedinternalcontrolself-evaluationreport ReportonInternalControl,whichhasbeendisclosed
onwww.cninfo.com.cn
Ratio ofthetotalassetsoftheappraisedentitiestothe 70%
consolidated totalassets
Ratio oftheoperatingrevenueoftheappraisedentitiestothe 70%
consolidated operatingrevenue
Defect identificationstandards
Type Financial-reportrelated Non-financial-reportrelated
Fordetails,pleasereferto“(c)Basisfor Fordetails,pleasereferto“(c)Basisfor
internalcontrolevaluationand internalcontrolevaluationand
Nature standard identificationstandardsforinternalcontrol identificationstandardsforinternalcontrol
defects”underSectionIIIofThe2019 defects”underSectionIIIofThe2019
Self-EvaluationReportonInternalControl Self-EvaluationReportonInternalControl
disclosedonwww.cninfo.com.cndated30 disclosedonwww.cninfo.com.cndated30
April2020. April2020.
Fordetails,pleasereferto“(c)Basisfor Fordetails,pleasereferto“(c)Basisfor
internalcontrolevaluationand internalcontrolevaluationand
identificationstandardsforinternalcontrol identificationstandardsforinternalcontrol
Quantitative standard defects”underSectionIIIofThe2019 defects”underSectionIIIofThe2019
Self-EvaluationReportonInternalControl Self-EvaluationReportonInternalControl
disclosedonwww.cninfo.com.cndated30 disclosedonwww.cninfo.com.cndated30
April2020. April2020.
Number ofseriousfinancial- 0
report-related defects
Number ofseriousnon-financial- 0
report-related defects
Number ofimportantfinancial- 0
report-related defects
Number ofimportantnon- 0
financial-report-related defects
10. Auditor’s Report on Internal Control
√Applicable □N/A
Opinionparagraphintheauditor’sreportoninternalcontrol
The internalcontrolauditorholdstheviewthaton31December2019,MideaGroupmaintainedaneffectiveinternal
control ofafinancialreportinallsignificantaspectsbasedontheGeneralSpecificationsofCompanyInternalControl
and relevantspecifications.
Auditor’s reportoninternalcontrol Disclosedonwww.cninfo.com.cn
disclosed ornot
Date ofdisclosingthefulltextofthe 30April2020
auditor’s reportoninternalcontrol
Index tothedisclosedfulltextofthe Fordetails,pleaserefertothe2019Auditor’sReportonInternalControl,which
auditor’s reportoninternalcontrol hasbeendisclosedonwww.cninfo.com.cn
Type oftheauditor’sopinion Standard&unqualified
Serious non-financial-report-related No
defects
Whether any modified opinions are expressed by the accounting firm in its auditor’s report on the
Company’s internal control
□ Yes √ No
Whether the auditor’s report on the Company’s internal control issued by the accounting firm is consistent
with the self-evaluation report of the Board
√ Yes □ No
Section IX Financial Report
1. Auditor’s report
Type oftheauditor’sopinion Unqualifiedopinion
Signing dateoftheauditor’sreport 28April2020
Name oftheauditor PricewaterhouseCoopersChina(LLP)
No. oftheauditor’sreport PwCZTShenZi(2020)No.10017
Names ofcertifiedpublicaccountants HuangMeimeiandQiuXiaoying
[English Translation for Reference Only]
Auditor’s Report
PwC ZT Shen Zi (2020) 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 2019;
? 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 2019, 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:
? Recognition of revenue from sales of household appliances
? Impairment testing of goodwill
PwC ZT Shen Zi (2020) No. 10017
(Page 2 of 6)
KeyAuditMatters(Cont’d) HowourauditaddressedtheKeyAuditMatters
Recognition of revenue from Regarding the Group’s revenue from sales of household
salesofhouseholdappliances appliances,weperformedproceduresasfollows:
Please refertoNote 2(26)(a) “Revenue We interviewed management from operation and financial
- sales of goods” and Note 4(42) departments in terms of sales processes of all distribution
“Operating revenue” to the financial channels to understand and evaluate the internal control of
statements. processes relating to the revenue from sale of household
appliancesdesignedbymanagementandtestedtheoperating
Revenue is recognised when it’s effectivenessofkeycontrols;
probable that the economic benefits
associated with the transaction will We checked the household appliance sales contract template
flow to the Group, the related revenue entered into by and between the Group and the clients from
can be reliably measured, and the all distribution channels, and analysed and evaluated the
specific criteria of revenue recognition Group’s accounting policies on the revenue from sales of
have been met for each type of the household appliances based on our interview with
Group’sactivities.In2019,theGroup’s management,understanding oftheGroup’s sellingoperation
consolidated operating revenue was andauditexperience.
RMB278,216,017,000 and the revenue
from sales of household appliances Regarding the sales of household appliances through all
accounted for over 80% of the distribution channels, we performed the procedures as
consolidated operatingrevenue. follows:
1. We performed such risk assessment procedures as
We focused on recognition of revenue analysis of fluctuation in revenue from sales of
from sales of household appliances householdappliancesonamonthlybasisandanalysis
mainly due to the Group’s numerous offluctuationingrossprofitrates;
clients and big sales volume at home
and abroad achieved by its varied 2. We checked supporting documents relevant to
distributionchannels. recognition of revenue from sales of household
appliances onsamplebasis,includingsalescontracts,
orders, sales invoices, shipping orders,
acknowledgement of goods receipts signed by
customers, billingagreements withcustomers,etc.;
3. We checked the amount of revenue by sending
confirmations tocustomersonasamplingbasis;
4. We checked revenue from sales of household
appliances recognised around the balance sheet date
against acknowledgementofgoodsreceiptssignedby
customers, billing agreements with customers or
other supporting documents to evaluate if the
revenue wasrecognisedoverappropriateperiod.
Weconcluded that the Group’s recognition of revenue from
sales of household appliances complied with its applicable
accountingpoliciesbasedontheauditproceduresperformed.
PwC ZT Shen Zi (2020) No. 10017
(Page 3 of 6)
KeyAuditMatters(Cont’d) HowourauditaddressedtheKeyAuditMatters
Impairment testingofgoodwill Regardingtheimpairmenttestingofgoodwillarisingfromthe
acquisition of KUKA Group and TLSC, we performed the
PleaserefertoNote4(17)“Goodwill”to proceduresasfollowings:
thefinancialstatements.
1. We understood and evaluated the internal controls
As at 31 December 2019, the goodwill relevant to the impairment testing of goodwill, and
recorded in the consolidated balance tested the operating effectiveness of key control,
sheet of the Group amounted to including review and approval of key assumptions
RMB28,207,065,000, including applied and internal control of calculation of the
RMB22,240,132,000 and recoverable amounts of the asset groups containing
RMB2,984,110,000 arising from theallocatedgoodwill.
business acquisition of KUKA
Aktiengesellschaft (“KUKA Group”) 2. We evaluated the appropriateness of methodologies
and Toshiba Lifestyle Products & of impairment testing of goodwill adopted by
Services Corporation (“TLSC”), management with the assistance of internal valuers,
respectively. Management believed and evaluated and recalculated the discount rates
that it was not necessary to make adopted in the test by comparing industry or market
impairment provision for the goodwill data;
based on the impairment testing
prepared in accordance with the 3. We tested the accuracy of arithmetic applied in the
accountingpoliciesstatedinNote2(19) calculating process during the impairment testing of
to the consolidated financial goodwill;
statements. The impairment testing is
performedbyassessingtherecoverable 4. We evaluated the accuracy of historical estimates on
amount of the groups of assets future cash flows by comparing the actual financial
containingtherelevantgoodwill,based performance of current year with the forecasts of
on the present value of cash flows prioryear, so as to checkwhether there was any bias
forecasts. Key assumptions adopted in from management during the evaluation of the
the impairment testing of goodwill impairmenttestingofgoodwill;
included expected revenue growth
rates, EBITDA margins, perpetual 5. Weevaluatedthereasonableness ofkeyassumptions
annual growth rates, discount rates, on expected revenue growth rates, EBITDA margins,
etc. which required key accounting perpetual annual growth rates, discount rates, etc.
estimatesandjudgement. adopted in the impairment testing of goodwill by
interviewing with management and considering the
We focused on the impairment risk of marketdevelopments.
the goodwill totalling
RMB25,224,242,000 arising from the Weconcludedthattheauditevidencewehaveobtainedcould
business acquisition of KUKA Group support the accounting estimates and judgement applied by
and TLSC because the amount is management in the evaluation of impairment testing of
significant and the impairment testing goodwillbasedontheauditproceduresperformed.
of goodwill involved key accounting
estimatesandjudgements.
PwC ZT Shen Zi (2020) No. 10017
(Page 4 of 6)
Other Information
Management of the Group is responsible for the other information. Other information comprises all the
information included in the 2019 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.
PwC ZT Shen Zi (2020) 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 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 consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
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.
PwC ZT Shen Zi (2020) No. 10017
(Page 6 of 6)
Auditor’s Responsibilities for the Audit of the Financial Statements (Cont’d)
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 Signing CPA
---------------------------
Huang MeiMei
(Engagement Partner)
Shanghai , the People’s Republic of China Signing CPA
28 April 2020 ---------------------------
Qiu XiaoYing
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
31 December 31 December 31 December 31 December
ASSETS Note 2019 2018 2019 2018
Consolidated Consolidated Company Company
Current assets
Cash at bank and on hand 4(1) 70,916,841 27,888,280 52,291,056 15,361,626
Financial assets held for trading 4(2) 1,087,351 —— - ——
Derivative financial assets 197,412 220,197 - -
Notes receivable 4(3) 4,768,520 12,556,294 - -
Accounts receivable 4(4) 18,663,819 19,390,174 - -
Receivables financing 4(6) 7,565,776 —— - ——
Advances to suppliers 4(7) 2,246,177 2,215,888 36,877 55,069
Loans and advances 4(8) 10,869,396 11,328,392 - -
Other receivables 4(5),17(1) 2,712,974 2,971,368 18,369,865 11,593,020
Inventories 4(9) 32,443,399 29,645,018 - -
Other current assets 4(10) 65,011,027 76,473,827 42,665,884 55,052,256
Total current assets 216,482,692 182,689,438 113,363,682 82,061,971
Non-current assets
Available-for-sale financial assets —— 1,906,878 —— 56,579
Long-term receivables 4(11) 1,208,079 34,815 - -
Loans and advances 4(8) 790,101 - - -
Long-term equity investments 4(12),17(2) 2,790,806 2,713,316 52,605,859 28,236,295
Other non-current financial
assets 4(13) 1,750,107 —— 487,564 ——
Investment properties 399,335 391,765 518,828 560,954
Fixed assets 4(14) 21,664,682 22,437,212 878,239 1,056,790
Construction in progress 4(15) 1,194,650 2,077,621 155,681 51,872
Intangible assets 4(16) 15,484,179 16,186,675 700,836 712,454
Goodwill 4(17) 28,207,065 29,100,390 - -
Long-term prepaid expenses 4(18) 1,267,127 1,191,373 123,548 174,684
Deferred tax assets 4(19) 5,768,993 4,421,313 189,888 202,703
Other non-current assets 4(20) 4,947,603 550,352 4,359,507 4,576
Total non-current assets 85,472,727 81,011,710 60,019,950 31,056,907
TOTAL ASSETS 301,955,419 263,701,148 173,383,632 113,118,878
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)
AS AT 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
LIABILITIES AND OWNERS' 31 December 31 December 31 December 31 December
EQUITY Note 2019 2018 2019 2018
Consolidated Consolidated Company Company
Current liabilities
Short-term borrowings 4(23) 5,701,838 870,390 4,550,064 575,000
Borrowings from the Central
Bank - 99,754 - -
Customer deposits and deposits
from banks and other financial
institutions 62,477 44,386 - -
Derivative financial liabilities 27,100 756,299 - -
Notes payable 4(24) 23,891,600 23,325,115 - -
Accounts payable 4(25) 42,535,777 36,901,626 - -
Advances from customers 4(26) 16,231,854 16,781,666 - -
Employee benefits payable 4(27) 6,436,109 5,788,004 566,861 573,632
Taxes payable 4(28) 5,096,267 3,875,298 1,059,246 280,499
Other payables 4(29) 3,800,568 3,346,129 103,624,998 74,714,012
Current portion of non-current
liabilities 4(30) 1,460,117 7,122,712 - -
Other current liabilities 4(31) 39,074,777 31,319,709 19,539 44,414
Total current liabilities 144,318,484 130,231,088 109,820,708 76,187,557
Non-current liabilities
Long-term borrowings 4(32) 41,298,377 32,091,439 4,000,000 -
Long-term payables 33,646 88,890 - -
Provisions 353,269 268,887 - -
Deferred income 617,155 647,583 - -
Long-term employee benefits
payable 4(33) 2,418,563 2,480,318 - -
Deferred tax liabilities 4(19) 4,556,002 4,422,074 59,032 -
Other non-current liabilities 4(34) 863,826 1,016,352 - -
Total non-current liabilities 50,140,838 41,015,543 4,059,032 -
Total liabilities 194,459,322 171,246,631 113,879,740 76,187,557
Shareholders' equity
Share capital 4(35) 6,971,900 6,663,031 6,971,900 6,663,031
Capital surplus 4(37) 19,640,313 18,451,307 26,592,959 10,615,389
Less: Treasury stock 4(36) (3,759,732) (4,918,427) (3,759,732) (4,918,427)
Other comprehensive income 4(38) (711,554) (1,332,153) 1,735 6,020
General risk reserve 366,947 366,947 - -
Surplus reserve 4(39) 6,447,658 5,079,096 6,447,658 5,079,096
Undistributed profits 4(40) 72,713,631 58,762,315 23,249,372 19,486,212
Total equity attributable to
shareholders of the Company 101,669,163 83,072,116 59,503,892 36,931,321
Minority interests 5,826,934 9,382,401 - -
Total shareholders' equity 107,496,097 92,454,517 59,503,892 36,931,321
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 301,955,419 263,701,148 173,383,632 113,118,878
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting: Head of accounting department:
Fang Hongbo Zhong Zheng Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2019 2018 2019 2018
Item Note Consolidated Consolidated Company Company
Total revenue 279,380,506 261,819,635 1,767,902 1,767,161
Including: Operating revenue 4(42),17(3) 278,216,017 259,664,820 1,767,902 1,767,161
Interest income 4(43) 1,163,180 2,154,392 - -
Fee and commission
income 1,309 423 - -
Less: Cost of sales 4(42) (197,913,928) (188,164,557) (45,823) (39,632)
Interest costs 4(43) (122,618) (189,490) - -
Fee and commission expenses (11,633) (3,214) - -
Taxes and surcharges 4(44) (1,720,616) (1,617,566) (37,481) (40,601)
Selling and distribution
expenses 4(45) (34,611,231) (31,085,879) - -
General and administrative
expenses 4(46) (9,531,361) (9,571,639) (579,072) (879,563)
Research and development
expenses 4(47) (9,638,137) (8,377,201) - -
Financial income 4(48) 2,231,636 1,823,040 1,974,379 975,062
Including: Interest expenses (880,703) (703,991) (1,402,376) (758,024)
Interest income 3,807,136 2,155,862 3,363,003 1,780,258
Add: Other income 4(54) 1,194,665 1,316,904 464,034 421,377
Investment income 4(52),17(4) 164,132 907,326 10,384,466 9,720,094
Including: Investment income
from associates 506,225 349,321 272,089 239,418
Profit or loss arising
from derecognition
of financial assets
measured at
amortised costs (709) —— - ——
Gains/(Losses) on changes
in fair value 4(51) 1,361,163 (810,450) 162,565 -
Credit impairment losses 4(50) (96,446) —— (418) ——
Asset impairment losses 4(49) (871,909) (447,864) - (6,051)
(Losses)/Gains on disposal
of assets 4(53) (131,131) (34,934) (1,040) 45,614
Operating profit 29,683,092 25,564,111 14,089,512 11,963,461
Add: Non-operating income 613,310 434,756 39,832 6,419
Less: Non-operating expenses (367,288) (225,809) (22,741) (4,124)
Total profit 29,929,114 25,773,058 14,106,603 11,965,756
Less: Income tax expenses 4(55) (4,651,970) (4,122,639) (420,984) 2,881
Net profit 25,277,144 21,650,419 13,685,619 11,968,637
(1) Classified by continuity of
operations
Net profit from continuing
operations 25,277,144 21,650,419 13,685,619 11,968,637
Net profit from discontinued
operations - - - -(2) Classified by ownership of the
equity
Attributable to shareholders of
the Company 24,211,222 20,230,779 13,685,619 11,968,637
Minority interests 1,065,922 1,419,640 - -MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS (CONT’D)
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2019 2018 2019 2018
Item Note Consolidated Consolidated Company Company
Other comprehensive income, net
of tax 348,040 (1,215,825) (4,285) (27,439)
Other comprehensive income
attributable to shareholders of the
Company, net of tax 283,152 (1,087,461) (4,285) (27,439)
(1) Other comprehensive income
items which will not be
reclassified subsequently to
profit or loss (142,753) (1,023) - -
1) Changes arising from
remeasurement of
defined benefit plan (142,753) (1,023) - -
(2) Other comprehensive income
items which will be
reclassified subsequently to
profit or loss 425,905 (1,086,438) (4,285) (27,439)
1) Other comprehensive
income that will be
transferred
subsequently to profit
or loss under the
equity method (6,590) 51,924 (4,285) 39,5202) Changes in fair value of
available-for-sale
financial assets —— (489,228) —— (66,959)3) Effective portion of cash
flow hedging gains or
losses 113,890 (424,417) - -4) Translation of foreign
currency financial
statements 318,605 (224,717) - -
Other comprehensive income
attributable to minority
shareholders, net of tax 64,888 (128,364) - -
Total comprehensive income 25,625,184 20,434,594 13,681,334 11,941,198
Attributable to shareholders of the
Company 24,494,374 19,143,318 13,681,334 11,941,198
Minority interests 1,130,810 1,291,276 - -
Earnings per share
Basic earnings per share
(RMB Yuan) 4(56) 3.60 3.08 Not applicable Not applicable
Diluted earnings per share
(RMB Yuan) 4(56) 3.58 3.05 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:
Fang Hongbo Zhong Zheng Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2019 2018 2019 2018
Item Note Consolidated Consolidated Company Company
1. Cash flows from operating activities
Cash received from sales of goods or rendering of services 238,815,589 211,230,723 - -
Net decrease in loans and advances - 864,209 - -
Net increase in customer deposits and deposits from banks and
other financial institutions 18,091 - - -
Net decrease in deposits with the Central Bank 693,023 708,879 - -
Net increase in borrowings from the Central Bank - 99,754 - -
Cash received from interest, fee and commission 1,315,921 2,174,661 - -
Refund of taxes and surcharges 6,271,733 5,705,259 - -
Cash received relating to other operating activities 4(57)(a) 5,008,821 5,558,221 30,809,036 19,248,174
Sub-total of cash inflows 252,123,178 226,341,706 30,809,036 19,248,174
Cash paid for goods and services (130,099,497) (127,367,813) - -
Net increase in loans and advances (318,859) - - -
Net decrease in customer deposits and deposits from banks and
other financial institutions - (64,540) - -
Net decrease in deposits with the Central Bank (99,754) - - -
Cash paid for interest, fee and commission (134,251) (198,761) - -
Cash paid to and on behalf of employees (26,851,139) (24,709,578) (52,269) (298,323)
Payments of taxes and surcharges (14,897,513) (13,739,262) (133,421) (102,575)
Cash paid relating to other operating activities 4(57)(b) (41,131,761) (32,400,672) (6,818,472) (2,986,732)
Sub-total of cash outflows (213,532,774) (198,480,626) (7,004,162) (3,387,630)
Net cash flows from operating activities 4(57)(c) 38,590,404 27,861,080 23,804,874 15,860,544
2. Cash flows from investing activities
Cash received from disposal of investments 84,852,601 65,711,622 56,920,222 27,315,231
Cash received from returns on investments 4,026,590 2,097,948 12,812,869 11,075,864
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 125,419 164,070 1,040 1,825
Net cash received from disposal of subsidiaries and other
business units - 24,406 - -
Sub-total of cash inflows 89,004,610 67,998,046 69,734,131 38,392,920
Cash paid to acquire fixed assets, intangible assets and other
long-term assets (3,451,856) (5,611,851) (183,326) (715,778)
Cash paid to acquire investments (108,457,398) (80,713,830) (88,883,737) (59,593,512)
Net cash paid to acquire subsidiaries and other business units (203,057) (314,653) - -
Sub-total of cash outflows (112,112,311) (86,640,334) (89,067,063) (60,309,290)
Net cash flows from investing activities (23,107,701) (18,642,288) (19,332,932) (21,916,370)
3. Cash flows from financing activities
Cash received from capital contributions 2,897,917 2,713,366 2,777,490 2,098,273
Including: Cash received from capital contributions by minority
shareholders of subsidiaries 120,427 615,092 - -
Cash received from borrowings 17,117,677 2,524,315 11,059,564 1,000,000
Sub-total of cash inflows 20,015,594 5,237,681 13,837,054 3,098,273
Cash repayments of borrowings (8,643,875) (3,378,492) (3,084,500) (425,000)
Cash payments for interest expenses and distribution of
dividends or profits (11,055,769) (9,303,222) (9,740,298) (8,385,248)
Including: Cash payments for dividends or profit to minority
shareholders of subsidiaries (1,651,504) (815,998) - -
Cash payments relating to other financing activities (3,589,551) (5,943,131) (3,257,482) (4,028,808)
Sub-total of cash outflows (23,289,195) (18,624,845) (16,082,280) (12,839,056)
Net cash flows from financing activities (3,273,601) (13,387,164) (2,245,226) (9,740,783)
4. Effect of foreign exchange rate changes on cash and cash
equivalents 280,376 289,001 - -
5. Net increase/(decrease) in cash and cash equivalents 12,489,478 (3,879,371) 2,226,716 (15,796,609)
Add: Cash and cash equivalents at beginning of year 17,952,282 21,831,653 10,181,934 25,978,543
6. Cash and cash equivalents at end of year 4(57)(d) 30,441,760 17,952,282 12,408,650 10,181,934
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting: Head of accounting department:
Fang Hongbo Zhong Zheng Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Item Equity attributable to shareholders of the Company
Other Total
Share Capital Less: comprehensive General Surplus Undistributed Minority shareholders’
capital surplus Treasury stock income reserve reserve profits interests equity(Note 4(35)) (Note 4(37)) (Note 4(36))
Balance at 31 December 2017 6,561,053 15,911,504 (366,842) (244,692) 366,947 3,882,232 47,627,235 9,187,734 82,925,171
Movements for the year ended 31
December 2018
Total comprehensive income
Net profit - - - - - - 20,230,779 1,419,640 21,650,419
Other comprehensive income, net
of tax - - - (1,087,461) - - - (128,364) (1,215,825)Total comprehensive income - - - (1,087,461) - - 20,230,779 1,291,276 20,434,594Capital contribution and withdrawal
by shareholders
Ordinary shares invested by
shareholders 103,679 2,596,878 (717,841) - - - - 615,092 2,597,808
Business combinations - - - - - - - 345,657 345,657
Share-based payment included in
shareholders' equity - 356,412 - - - - - 117,423 473,835
Others (1,701) (397,777) (3,833,744) - - - - (1,450,682) (5,683,904)
Profit distribution
Appropriations to general risk
reserve - - - - - - - - -
Appropriation to surplus reserve - - - - - 1,196,864 (1,196,864) - -
Profit distribution to shareholders - - - - - - (7,898,785) (819,804) (8,718,589)
Transfer from capital surplus to share
capital - - - - - - - - -
Others - (15,710) - - - - (50) 95,705 79,945
Balance at 31 December 2018 6,663,031 18,451,307 (4,918,427) (1,332,153) 366,947 5,079,096 58,762,315 9,382,401 92,454,517
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Item Equity attributable to shareholders of the Company
Other Total
Share Capital Less: comprehensive General Surplus Undistributed Minority shareholders'
capital surplus Treasury stock income reserve reserve profits interests equity(Note 4(35)) (Note 4(37)) (Note 4(36))
Balance at 31 December 2018 6,663,031 18,451,307 (4,918,427) (1,332,153) 366,947 5,079,096 58,762,315 9,382,401 92,454,517
Changes in accounting policies (Note
2(32)(b)(i)) - - - 337,447 - - (337,447) - -
Balance at 1 January 2019 6,663,031 18,451,307 (4,918,427) (994,706) 366,947 5,079,096 58,424,868 9,382,401 92,454,517
Movements for the year ended 31
December 2019
Total comprehensive income
Net profit - - - - - - 24,211,222 1,065,922 25,277,144
Other comprehensive income, net
of tax - - - 283,152 - - - 64,888 348,040Total comprehensive income - - - 283,152 - - 24,211,222 1,130,810 25,625,184Capital contribution and withdrawal
by shareholders
Ordinary shares invested by
shareholders 87,150 2,426,916 (57,088) - - - - 120,427 2,577,405
Share-based payment included in
shareholders' equity - 144,287 - - - - - 82,268 226,555
Others 221,719 (1,221,661) 1,215,783 - - - - (3,231,072) (3,015,231)
Profit distribution
Appropriations to general risk
reserve - - - - - - - - -
Appropriation to surplus reserves - - - - - 1,368,562 (1,368,562) - -
Profit distribution to shareholders - - - - - - (8,553,897) (1,670,654) (10,224,551)
Transfer from capital surplus to share
capital - - - - - - - - -
Others - (160,536) - - - - - 12,754 (147,782)
Balance at 31 December 2019 6,971,900 19,640,313 (3,759,732) (711,554) 366,947 6,447,658 72,713,631 5,826,934 107,496,097
The accompanying notes form an integral part of these financial statements.
Legal representative:Fang Hongbo Principal in charge of accounting:Zhong Zheng Head of accounting department:Chen Lihong
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Other Total
Capital Less: Treasury comprehensive Surplu Undistributed shareholders’
Item Share capital surplus stock income sreserve profits equity
Balance at 31 December 2017 6,561,053 7,726,237 (366,842) 33,459 3,882,232 16,613,224 34,449,363
Movements for the year ended 31
December 2018
Total comprehensive income
Net profit - - - - - 11,968,637 11,968,637
Other comprehensive income, net of
tax - - - (27,439) - - (27,439)Total comprehensive income - - - (27,439) - 11,968,637 11,941,198Capital contribution and withdrawal by
shareholders
Ordinary shares invested by
shareholders 103,679 2,596,878 (717,841) - - - 1,982,716
Share-based payment included in
shareholders' equity - 312,656 - - - - 312,656
Others (1,701) (27,109) (3,833,744) - - - (3,862,554)
Profit distribution
Appropriation to surplus reserve - - - - 1,196,864 (1,196,864) -
Profit distribution to shareholders - - - - - (7,898,785) (7,898,785)
Transfer from capital surplus to share
capital - - - - - - -
Others - 6,727 - - - - 6,727
Balance at 31 December 2018 6,663,031 10,615,389 (4,918,427) 6,020 5,079,096 19,486,212 36,931,321
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Other Total
Capital Less: Treasury comprehensive Surplus Undistributed shareholders’
Item Share capital surplus stock income reserve profits equity
Balance at 31 December 2018 6,663,031 10,615,389 (4,918,427) 6,020 5,079,096 19,486,212 36,931,321
Changes in accounting policies - - - - - - -
Balance at 1 January 2019 6,663,031 10,615,389 (4,918,427) 6,020 5,079,096 19,486,212 36,931,321
Movements for the year ended 31
December 2019
Total comprehensive income
Net profit - - - - - 13,685,619 13,685,619
Other comprehensive income, net
of tax - - - (4,285) - - (4,285)Total comprehensive income - - - (4,285) - 13,685,619 13,681,334Capital contribution and withdrawal by
shareholders
Ordinary shares invested by
shareholders 87,150 2,426,916 (57,088) - - - 2,456,978
Share-based payment included in
shareholders' equity - 226,556 - - - - 226,556
Others 221,719 13,372,750 1,215,783 - - - 14,810,252
Profit distribution
Appropriation to surplus reserve - - - - 1,368,562 (1,368,562) -
Profit distribution to shareholders - - - - - (8,553,897) (8,553,897)
Transfer from capital surplus to share
capital - - - - - - -
Others - (48,652) - - - - (48,652)
Balance at 31 December 2019 6,971,900 26,592,959 (3,759,732) 1,735 6,447,658 23,249,372 59,503,892
The accompanying notes form an integral part of these financial statements.
Legal representative:Fang Hongbo Principal in charge of accounting:Zhong Zheng Head of accounting department:Chen Lihong
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
1 General information
The principal business activities of MIDEA GROUP CO., LTD. (hereinafter referred to as
“the Company”) and its subsidiaries (hereinafter collectively referred to as “the Group”)
include heating & ventilation, as well as air-conditioner (hereinafter referred to as “HVAC”)
centred on household air-conditioner, central air-conditioner, heating and ventilation
systems; consumer appliances centred on kitchen appliances, refrigerators, washing
machines and various small appliances; robotics and automation system centred on KUKA
Aktiengesellschaft (hereinafter referred to as “KUKA”) and its subsidiaries (hereinafter
referred to as “KUKA Group”), and other robots business of Midea Group. Other services
include service platform with Annto Logistics Technology Co., Ltd. providing the smart supply
chain integrated solutions; sale, wholesale and processing of raw materials of household
electrical appliances; and financial business involved in 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., and was
registered in Market Safety Supervision Bureau of Shunde District, Foshan on 7 April 2000,
with its headquarters located in Foshan, Guangdong. On 30 August 2012, the Company
was transformed into a limited liability company. On 29 July 2013, the Company was
approved to merge and acquire Guangdong Midea Electric Co., Ltd., which was listed on
Shenzhen Stock Exchange. On 18 September 2013, the Company’s shares listed on
Shenzhen Stock Exchange
As at 31 December 2019, the Company's share capital is RMB 6,971,899,574, and the total
number of shares in issue is 6,971,899,574, of which 165,402,513 shares are restricted
tradable A shares and 6,806,497,061 shares are unrestricted tradable A shares. In 2019,
the increasing of Company’s share capital are mainly from shares in exchange for the equity
of Wuxi Little Swan Company Limited (hereinafter referred to as “Little Swan”) (Note 4 (35),
(41)).
The detailed information of major subsidiaries included in the consolidation scope in current
period is set out in Notes 5 and 6. Entities newly included in the consolidation scope in
current year include Midea Electrics Egypt, Anhui Welling Auto Parts Co., Ltd., Wuxi Little
Swan Electric Co., Ltd., Guangdong Swisslog Technology Co., Ltd., Guangdong Yueyun
Industrial Internet Innovation Technology Co. ,Ltd., Midea Refrigeration Equipment
(Thailand) Co., Ltd and Tianjin Midea Commercial Factoring Co., Ltd. Please refer to Note
5(1)(a) for details. The detailed information of subsidiaries no longer included in the
consolidation scope in current year is set out in 5(1)(b).
These financial statements were authorised for issue by the Company’s Board of Directors
on 28 April 2020.
2 Summary of significant accounting policies and accounting estimates
The Group determines specific accounting policies and accounting estimates based on the
features of production and operation, mainly including the measurement of expected credit
loss (ECL) on accounts receivable (Note 2(9(a))), valuation method of inventory (Note
2(11)), depreciation of fixed assets and amortisation of intangible assets (Note 2(14), (17)),
impairment of long-term assets (Note 2(19)) and recognition of revenue (Note 2(26)).
Critical judgements applied by the Group in determining significant accounting policies are
set out in Note 2(31).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard for
Business Enterprises - Basic Standard, and the specific accounting standards and other
relevant regulations issued by the Ministry of Finance on 15 February 2006 and in
subsequent periods (hereinafter collectively referred to as the “Accounting Standards for
Business Enterprises” or “CAS”) and the disclosure requirements in the Preparation
Convention of Information Disclosure by Companies Offering Securities to the Public No. 15
– General Rules on Financial Reporting issued by the China Securities Regulatory
Commission (“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 2019 are in
compliance with the Accounting Standards for Business Enterprises, and truly and
completely present the consolidated and the Company’s financial position of the Company
as at 31 December 2019 and their financial performance, cash flows and other information
for the year then ended.
(3) Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
(4) Functional currency
The functional currency of the Company is Renminbi (“RMB”). The subsidiaries determine
their functional currency based on the primary economic environment in which the business
is operated, mainly including EUR, JPY, USD and HKD. The financial statements are
presented in RMB.
(5) Business combinations
(a) Business combinations involving enterprises under common control
The consideration paid and net assets obtained by the absorbing party in a business
combination are measured at the carrying amount. If the absorbing party was bought by the
ultimate controller from a third party in prior years, the value of its assets and liabilities
(including goodwill generated due to the combination) are based on the carrying amount in
the ultimate controller’s consolidated financial statements. The difference between the
carrying amount of the net assets obtained from the combination and the carrying amount
of the consideration paid for the combination is treated as an adjustment to capital surplus
(share premium). If the capital surplus (share premium) is not sufficient to absorb the
difference, the remaining balance is adjusted against retained earnings. Costs directly
attributable to the combination are included in profit or loss in the period in which they are
incurred. Transaction costs associated with the issue of equity or debt securities for the
business combination are included in the initially recognised amounts of the equity or debt
securities.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(5) Business combinations (Cont’d)
(b) Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the acquirer in a business
combination are measured at fair value at the acquisition date. Where the cost of the
combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net
assets, the difference is recognised as goodwill; where the cost of combination is lower than
the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference
is recognised in profit or loss for the current period. Costs directly attributable to the
combination are included in profit or loss in the period in which they are incurred. Transaction
costs associated with the issue of equity or debt securities for the business combination are
included in the initially recognised amounts of the equity or debt securities.
For business combinations achieved by stages involving enterprises not under common
control, previously-held equity in the acquiree is remeasured at its fair value at the
acquisition dates, and the difference between its fair value and carrying amount is included
in investment income for the current period in consolidated financial statements. Where the
previously-held equity in the acquiree involves other comprehensive income under equity
method and shareholders’ equity changes other than those arising from the net profit or loss,
other comprehensive income and profit distribution, the related other comprehensive
income and other shareholders' equity changes are transferred into income for the current
period to which the acquisition dates belong, excluding those arising from changes in the
investee's remeasurements of net liability or net asset related to the defined benefit plan.
The excess of the sum of fair value of the previously-held equity and fair value of the
consideration paid at the acquisition dates over share of fair value of identifiable net assets
acquired from the subsidiary is recognised as goodwill.
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company
and 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 a
business combination involving enterprises under common control, it is included in the
consolidated financial statements from the date when it, together with the Company, comes
under common control of the ultimate controlling party. The portion of the net profits realised
before the combination date is presented separately in the consolidated income statement.
In preparing the consolidated financial statements, where the accounting policies and the
accounting periods of the Company and subsidiaries are inconsistent, the financial
statements of the subsidiaries are adjusted in accordance with the accounting policies and
the accounting period of the Company. For subsidiaries acquired from business
combinations involving enterprises not under common control, the individual financial
statements of the subsidiaries are adjusted based on the fair value of the identifiable net
assets at the acquisition date.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(6) Preparation of consolidated financial statements (Cont’d)
All significant intra-group balances, transactions and unrealised profits are eliminated in the
consolidated financial statements. The portion of subsidiaries’ equity and the portion of a
subsidiaries’ net profits and losses and comprehensive income for the period not attributable
to Company are recognised as minority interests and presented separately in the
consolidated financial statements under equity, net profits and total comprehensive income
respectively. Unrealised profits and losses resulting from the sale of assets by the Company
to its subsidiaries are fully eliminated against net profit attributable to owners of the parent.
Unrealised profits and losses resulting from the sale of assets by a subsidiary to the
Company are eliminated and allocated between net profit attributable to owners of the
parent and minority interests in accordance with the allocation proportion of the parent in
the subsidiary. Unrealised profits and losses resulting from the sale of assets by one
subsidiary to another are eliminated and allocated between net profit attributable to owners
of the parent and minority interests in accordance with the allocation proportion of the parent
in the subsidiary. If the accounting treatment of a transaction which considers the Group as
an accounting entity is different from that considers the Company or its subsidiaries as an
accounting entity, it is adjusted from the perspective of the Group.
(7) Recognition criteria of cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on
demand, and short-term and highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
(8) Foreign currency translation
(a) Foreign currency transaction
Foreign currency transactions are translated into RMB using the exchange rates prevailing
at the dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translated
into the functional currency using the spot exchange rates on the balance sheet date.
Exchange differences arising from these translations are recognised in profit or loss for the
current period, except for those attributable to foreign currency borrowings that have been
taken out specifically for the acquisition or construction of qualifying assets, which are
capitalised as part of the cost of those assets. Non-monetary items denominated in foreign
currencies that are measured at historical costs are translated at the balance sheet date
using the spot exchange rates at the date of the transactions. The effect of exchange rate
changes on cash is 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 at
the spot exchange rates on the balance sheet date. Among the shareholders’ equity items,
the items other than “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 are translated at the spot exchange rates of the transaction dates. The
differences arising from the above translation are presented in other comprehensive income.
The cash flows of overseas operations are translated at the spot exchange rates on the
dates of the cash flows. The effect of exchange rate changes on cash is presented
separately in the cash flow statement.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity. A financial asset or a financial liability
is recognised when the Group becomes a party to the contractual provisions of the
instrument.
(a) Financial assets
(i) Classification and measurement
Based on the business model for managing the financial assets and the contractual cash
flow characteristics of the financial assets, financial assets are classified as: (1) financial
assets at amortised cost; (2) financial assets at fair value through other comprehensive
income; (3) financial assets at fair value through profit or loss.
The financial assets are measured at fair value at initial recognition. Related transaction
costs that are attributable to the acquisition of the financial assets are included in the initially
recognised amounts, except for the financial assets at fair value through profit or loss, the
related transaction costs of which are recognised directly in profit or loss for the current
period. Accounts receivable or notes receivable arising from sales of products or rendering
of services (excluding or without regard to significant financing components) are initially
recognised at the consideration that is entitled to be charged by the Group as expected.
(i-1) Debt investments
The debt instruments held by the Group refer to the instruments that meet the definition of
financial liabilities from the perspective of the issuer, and are measured in the following
three ways:
Measured at amortised cost:
The objective of the Group’s business model is to hold the financial assets to collect the
contractual cash flows, and the contractual cash flow characteristics are consistent with a
basic lending arrangement, which gives rise on specified dates to the contractual cash flows
that are solely payments of principal and interest on the principal amount outstanding. The
interest income of such financial assets is recognised using the effective interest method.
Such financial assets mainly comprise cash at bank and on hand, loans and advances,
notes receivable, accounts receivable, other receivables, structural deposits, debt
investments and long-term receivables, etc. Debt investments and long-term receivables
that are due within one year (inclusive) as from the balance sheet date are included in the
current portion of non-current assets; debt investments with maturities of no more than one
year (inclusive) at the time of acquisition are included in other current assets.
Measured at fair value through other comprehensive income:
The objective of the Group’s business model is to hold the financial assets to both collect
the contractual cash flows and sell such financial assets, and the contractual cash flow
characteristics are consistent with a basic lending arrangement. Such financial assets are
measured at fair value through other comprehensive income, except for the impairment
gains or losses, foreign exchange gains and losses, and interest income calculated using
the effective interest method which are recognised in profit or loss for the current period.
Such financial assets are mainly included in receivables financing, other debt investments;
other debt investments that are due within one year (inclusive) as from the balance sheet
date are included in the current portion of non-current assets; other debt investments with
maturities no more than one year (inclusive) at the time of acquisition are included in other
current assets.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont'd)
(a) Financial assets (Cont’d)
(i) Classification and measurement (Cont’d)
(i-1) Debt investments (Cont’d)
Measured at fair value through profit or loss:
Debt instruments held by the Group that are not divided into those at amortised cost, or
those measured at fair value through other comprehensive income, are measured at fair
value through profit or loss and included in financial assets held for trading. At initial
recognition, Group designates a portion of financial assets as at fair value through profit or
loss to eliminate or significantly reduce an accounting mismatch. Financial assets that are
due over one year as from the balance sheet date and are expected to be held over one
year are included in other non-current financial assets.
(i-2) Equity investments
Investments in equity instruments, over which the Group has no control, joint control or
significant influence, are measured at fair value through profit or loss under financial assets
held for trading; investments in equity instruments expected to be held over one year as
from the balance sheet date are included in other non-current financial assets.
(i -3) Derivative financial instruments
The derivative financial instruments held or issued by the Group are mainly used in
controlling risk exposures. Derivative financial instruments are initially recognised at fair
value on the day when derivatives transaction contract was signed, and subsequently
measured at fair value. The derivative financial instruments are recorded as assets when
they have a positive fair value and as liabilities when they have a negative fair value.
The recognition of changes in fair value of derivative financial instruments depends on
whether such derivative financial instruments are designated as hedging instruments and
meet requirements for hedging instruments, and depends on the nature of hedged items in
this case. For derivative financial instruments that are not designated as hedging
instruments and fail to meet requirements on hedging instruments, including those held for
the purpose of providing hedging against specific risks in interest rate and foreign exchange
but not conforming with requirements of hedge accounting, the changes in fair value are
recorded in gains or losses arising from changes in fair value in the consolidated income
statement.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont'd)
(a) Financial assets (Cont’d)
(i) Classification and measurement (Cont’d)
(i-3) Derivative financial instruments (Cont'd)
Cash flow hedge
The effective portion of gains or losses on hedging instruments is recognised in other
comprehensive income as cash flow hedging reserve, while the ineffective portion is
recognised in profit or loss for the current period. Where the hedge is a forecast transaction
which subsequently results in the recognition of a non-financial asset or liability, the amount
originally recognised in other comprehensive income 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 other comprehensive income is transferred and
included in profit or loss for the current period during the same time in which the profit or
loss is influenced by the hedged expected cash flow. However, if all or part of net loss
recognised directly in other comprehensive income will not be recovered in future
accounting periods, the amount not expected to be recovered should be transferred to profit
or loss for the current period. When the Group revokes the designation of a hedge, a hedging
instrument expires or is sold, terminated or exercised, or the hedge no longer meets the
criteria for hedge accounting, the Group will discontinue the hedge accounting treatments
prospectively. Where the Group discontinues the hedge accounting treatment for cash flow
hedging, for hedged future cash flows that will still happen, the accumulated gains or losses
that have been recognised in other comprehensive income are retained and subject to
accounting treatment under the subsequent treatment method of aforesaid cash flow
hedging reserve; for hedged future cash flows that the forecast transaction will never
happen, the accumulated gains or losses that have been recognised in other comprehensive
income are transferred immediately and included in profit or loss for the current period.
(ii) Impairment
Loss provision for financial assets at amortised cost, investments in debt instruments at fair
value through other comprehensive income, as well as financial guarantee contracts is
recognised on the basis of ECL.
Giving consideration to reasonable and supportable information on past events, current
conditions and forecasts of future economic conditions, and weighted by the risk of default,
the Group recognises the ECL as the probability-weighted amount of the present value of
the difference between the cash flows receivable from the contract and the cash flows
expected to collect.
As at each balance sheet date, the expected credit losses of financial instruments at
different stages are measured respectively. 12-month ECL provision is recognised for
financial instruments in Stage 1 that have not had a significant increase in credit risk since
initial recognition; lifetime ECL provision is recognised for financial instruments in Stage 2
that have had a significant increase in credit risk yet without credit impairment since initial
recognition; and lifetime ECL provision is recognised for financial instruments in Stage 3 that
have had credit impairment since initial recognition.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont'd)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
For the financial instruments with lower credit risk on the balance sheet date, the Group
assumes there is no significant increase in credit risk since initial recognition and recognises
the 12-month ECL provision.
For the financial instruments in Stage 1, Stage 2 and with lower credit risk, the Group
calculates the interest income by applying the effective interest rate to the gross carrying
amount (before deduction of the impairment provision). For the financial instrument in Stage
3, the interest income is calculated by applying the effective interest rate to the amortised
cost (after deduction of the impairment provision from the gross carrying amount).
For notes receivable, accounts receivable, and receivables financing arising from sales of
goods or rendering of services in the ordinary course of business, the Group recognises the
lifetime ECL provision regardless of whether there exists a significant financing component.
In case the ECL of an individually assessed financial asset cannot be evaluated with
reasonable cost, the Group divides the receivables into certain groupings based on credit
risk characteristics, then pursuant to which, calculates the ECL. Basis and provision method
for determining groupings are as follows:
Notes receivable - bank acceptance notes Bank credit risk grouping
Accounts receivable Domestic/overseas business grouping
Other receivables Security deposit/guarantee payables grouping
Long-term receivables Finance lease payable grouping
Loans and advances Loans business grouping
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculates the
ECL of notes receivable and receivables financing that are classified into groupings with
consideration to historical credit losses experience, current conditions and forecasts of
future economic conditions.
With consideration to historical credit loss experience, current conditions and forecasts of
future economic conditions, the Group prepares the cross-reference between the number
of overdue days of accounts receivable and the lifetime ECL rate, and calculates the ECL
of accounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime ECL rate,
calculates the ECL of other receivables, loans and advances, and long-term receivables that
are classified into groupings with consideration to historical credit losses experience, the
current conditions and forecasts of future economic conditions.
The Group recognises the loss provision made or reversed into profit or loss for the current
period. For debt instruments held at fair value through other comprehensive income, the
Group adjusts other comprehensive income while the impairment loss or gain is recognised
in profit or loss for the current period.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont'd)
(a) Financial assets (Cont’d)
(iii) Derecognition of financial assets
A financial asset is derecognised when: (i) the contractual rights to the cash flows from the
financial asset expire, (ii) the financial asset has been transferred and the Group transfers
substantially all the risks and rewards of ownership of the financial asset to the transferee,
or (iii) the financial asset has been transferred and the Group has not retained control of the
financial asset, although the Group neither transfers nor retains substantially all the risks
and rewards of ownership of the financial asset.
When a financial asset is derecognised, the difference between the carrying amount and
the sum of the consideration received and the cumulative changes in fair value that are
previously recognised directly in other comprehensive income is recognised in profit or loss
for the current period, except for those as investments in other equity instruments, the
difference aforementioned is recognised in retained earnings instead.
(b) Financial liabilities
Financial liabilities are classified as financial liabilities at amortised cost and financial
liabilities 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 and debentures
payable, customer deposits and deposits from banks and other financial institutions,
borrowings from the Central Bank, long-term payables, etc. Such financial liabilities are
initially recognised at fair value, net of transaction costs incurred, and subsequently
measured using the effective interest method. Financial liabilities that are due within one
year (inclusive) are classified as current liabilities; those with maturities over one year but
are due within one year (inclusive) as from the balance sheet date are classified as current
portion of non-current liabilities. Others are classified as non-current liabilities.
A financial liability is derecognised or partly derecognised when the underlying present
obligation is discharged or partly discharged. The difference between the carrying amount
of the derecognised part of the financial liability and the consideration paid is recognised in
profit or loss for the current period.
(c) Determination of fair value of financial instruments
The fair value of a financial instrument that is traded in an active market is determined at
the quoted price in the active market. The fair value of a financial instrument that is not
traded in an active market is determined by using a valuation technique. In valuation, the
Group adopts valuation techniques applicable in the current situation and supported by
adequate available data and other information, selects inputs with the same characteristics
as those of assets or liabilities considered in relevant transactions of assets or liabilities by
market participants, and gives priority to the use of relevant observable inputs. When
relevant observable inputs are not available or feasible, unobservable inputs are adopted.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(10) Receivables
Receivables comprise accounts receivable, other receivables, notes receivable, long-term
receivables, loans and advances, etc. Accounts receivable arising from sale of goods or
rendering of services are initially recognised at fair value of the contractual payments from
the buyers or service recipients, and subsequently measured at amortised cost less
provision for impairment using the effective interest method. Provision for impairment of
receivables are set out in Note 2(9)(a).
(11) Inventories
(a) Classification of inventories
Inventories, including raw materials, consigned processing materials, low value
consumables, work in progress, completed but unsettled products and finished goods, etc.,
are measured at the lower of cost and net realisable value.
The amount of completed but unsettled works is determined on the basis of individual
contract at the cost of contract incurred plus profits thereof and less losses recognised and
amount settled. It is recognised as assets when the balance is positive and recognised as
liabilities when the balance is negative.
(b) Costing of inventories
Other than completed but unsettled products, cost is determined using the first-in, first-out
method when issued. The cost of finished goods and work in progress comprises raw
materials, direct labour and systematically allocated 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 realisable
value.
Net realisable value is determined based on the estimated selling price in the ordinary
course of business, less the estimated costs to completion and estimated costs necessary
to make the sale and related taxes.
Provision for decline in the value of inventories is determined at the excess amount of the
cost as calculated based on the classification of inventories over their net realisable value,
and are recognised in profit or loss for the current period.
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of related
assets or in profit or loss for the current period.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in its
subsidiaries, and the Group’s long-term equity investments in its associates and joint
venture.
Subsidiaries are the investees over which the Company is able to exercise control. A joint
venture is a joint arrangement which is structured through a separate vehicle over which the
Group has joint control together with other parties and only has rights to the net assets of
the arrangement based on legal forms, contractual terms and other facts and circumstances.
Associates are the investees that the Group has significant influence on their financial and
operating policies.
Investments in subsidiaries are presented in the Company’s financial statements using the
cost method, and are adjusted to the equity method when preparing the consolidated
financial statements. Investments in a joint venture and associates are accounted for using
the equity method.
(a) Determination of investment cost
For long-term equity investments acquired through a business combination: for long-term
equity investments acquired through a business combination involving enterprises under
common control, the investment cost shall be the absorbing party’s share of the carrying
amount of equity of the party being absorbed in the consolidated financial statements of the
ultimate controller at the combination date; for long-term equity investment acquired through
a business combination involving enterprises not under common control, the investment
cost shall be the combination cost.
For business combinations achieved by stages involving enterprises not under common
control, the initial investment cost accounted for using the cost method is the sum of carrying
amount of previously-held equity investment and additional investment cost. For previously-
held equity accounted for using the equity method, the accounting treatment of related other
comprehensive income from disposal of the equity is carried out on a same basis with the
investee's direct disposal of related assets or liabilities. Shareholders' equity, which is
recognised due to changes in investee’s shareholders’ equity other than those arising from
the net profit or loss, other comprehensive income and profit distribution, is accordingly
transferred into profit or loss in the period in which the investment is disposed.
For investment in previously-held equity accounted for using the recognition and
measurement standards of financial instruments, the initial investment cost accounted for
using the cost method is the sum of carrying amount of previously-held equity investment
and additional investment cost. The difference between the fair value and carrying amount
for investment in previously-held equity and the accumulated changes in fair value
previously included in other comprehensive income are transferred to profit or loss for the
current period accounted for using the cost method.
For long-term equity investments acquired not through a business combination: for long-
term equity investment acquired by payment in cash, the initial investment cost shall be the
purchase price actually paid; for long-term equity investments acquired by issuing equity
securities, the initial investment cost shall be the fair value of the equity securities issued.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(b) Subsequent measurement and recognition of related profit and loss
For long-term equity investments accounted for using the cost method, they are measured
at the initial investment costs, and cash dividends or profit distribution declared by the
investees are recognised as investment income in profit or loss.
For long-term equity investments accounted for using the equity method, where the initial
investment cost of a long-term equity investment exceeds the Group’s share of the fair value
of the investee’s identifiable net assets at the acquisition date, the long-term equity
investment is measured at the initial investment cost; where the initial investment cost is
less than the Group’s share of the fair value of the investee’s identifiable net assets at the
acquisition date, the difference is included in profit or loss and the cost of the long-term
equity investment is adjusted upwards accordingly.
For long-term equity investments accounted for using the equity method, the Group
recognises 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 the
carrying amounts of the long-term equity investment together with any long-term interests
that in substance form part of the investor’s net investment in the investee are reduced to
zero. However, if the Group has obligations for additional losses and the criteria with respect
to recognition of provisions under the accounting standards on contingencies are satisfied,
the Group continues recognising the investment losses and the provisions. The changes of
the Group’s share of the investee’s owner's equity other than those arising from the net profit
or loss, other comprehensive income and profit distribution, are recognised in the Group’s
equity and the carrying amounts of the long-term equity investment are adjusted accordingly.
The carrying amount of the investment is reduced by the Group’s share of the profit
distribution or cash dividends declared by an investee. The unrealised profits or losses
arising from the transactions between the Group and its investees are eliminated in
proportion to the Group’s equity interest in the investees, based on which the investment
gain or losses are recognised. Any losses resulting from transactions between the Group
and its investees attributable to asset impairment losses are not eliminated.
(c) Basis for determining existence of control, joint control, significant influence over investees
Control is the power to govern an investee and obtain variable returns from participating the
investee'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 relevant
economic activity can be arranged upon the unanimous approval of the Group and other
participants sharing of control rights.
Significant influence is the power to participate in the financial and operating policy decisions
of the investee, but is not control or joint control over those policies.
(d) Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint venture and
associates are reduced to the recoverable amounts when the recoverable amounts are
below their carrying amounts (Note 2(19)).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(13) Investment properties
Investment properties, including land use rights that have already been leased out, buildings
that are held for the purpose of leasing and buildings that are being constructed or
developed for future use for leasing, are measured initially at cost. Subsequent expenditures
incurred in relation to an investment property are included in the cost of the investment
property when it is probable that the associated economic benefits will flow to the Group
and their costs can be reliably measured; otherwise, the expenditures are recognised in
profit or loss in the period in which they are incurred.
The Group adopts the cost model for subsequent measurement of investment properties.
Buildings and land use rights are depreciated or amortised to their estimated net residual
values over their estimated useful lives. The estimated useful lives, the estimated net
residual values that are expressed as a percentage of cost and the annual depreciation
(amortisation) rates of investment properties are as follows:
Estimated Estimated net Annual depreciation
useful lives residual values (amortisation) rates
Buildings 20 to 40 years 5% 2.38% to 4.75%
Land use rights 40 to 50 years - 2% to 2.5%
When an investment property is transferred to owner-occupied properties, it is reclassified
as fixed asset or intangible asset at the date of the transfer. When an owner-occupied
property is transferred out for earning rentals or for capital appreciation, the fixed asset or
intangible asset is reclassified as investment properties at its carrying amount at the date of
the transfer. At the time of transfer, the property is recognised based on the carrying amount
before transfer.
The investment properties' estimated useful lives, the estimated net residual values and the
depreciation (amortisation) methods applied are reviewed and adjusted as appropriate at
each year-end.
An investment property is derecognised on disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its
disposal. The net amount of proceeds from sale, transfer, retirement or damage of an
investment property after its carrying amount and related taxes and expenses is recognised
in profit or loss for the current period.
(14) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, overseas land, machinery and equipment, motor vehicles,
electronic equipment and others.
Fixed assets are recognised when it is probable that the related economic benefits will flow
to the Group and the costs can be reliably measured. The initial cost of purchased fixed
assets include purchase price, related taxes and expenditures that are attributable to the
assets incurred before the assets are ready for their intended use. The initial cost of self-
constructed fixed assets is determined based on Note 2(15).
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset
when it is probable that the associated economic benefits will flow to the Group and the
related cost can be reliably measured. The carrying amount of the replaced part is
derecognised. All the other subsequent expenditures are recognised in profit or loss in the
period in which they are incurred.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(14) Fixed assets (Cont’d)
(b) Depreciation methods for fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets
to their estimated net residual values over their estimated useful lives. For the fixed assets
that have been provided for impairment loss, the related depreciation charge is prospectively
determined based upon the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated net residual values expressed as a percentage of
cost and the annual depreciation rates of the Group's fixed assets are as follows:
Estimated Estimated net Annual
Categories useful lives residual values depreciation rates
Buildings 15 to 50 years 0% to 10% 6.7% to 1.8%
Machinery and
equipment 2 to 18 years 0% to 10% 50% to 5.0%
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 N/A N/A
The estimated useful lives and the estimated net residual values of the Group's fixed assets
and the depreciation methods applied to the assets are reviewed, and adjusted as
appropriate at each year-end.
(c) Basis for identification of fixed assets held under finance leases and related measurement
A lease that transfers substantially all the risks and rewards incidental to ownership of an
asset is a finance lease. The leased asset is recognised at the lower of the fair value of the
leased asset and the present value of the minimum lease payments. The difference between
the recorded amount of the leased asset and the minimum lease payments is accounted for
as unrecognised finance charge.
Fixed assets held under a finance lease is depreciated on a basis consistent with the
depreciation policy adopted for fixed assets that are self-owned. When a leased asset can
be reasonably determined that its ownership will be transferred at the end of the lease term,
it is depreciated over the period of expected use; otherwise, the leased asset is depreciated
over the shorter period of the lease term and the period of expected use.
(d) The carrying amount of a fixed asset is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(19)).
(e) Disposal of fixed assets
A fixed asset is derecognised on disposal or when no future economic benefits are expected
from its use or disposal. The amount of proceeds from disposal on sales, transfer, retirement
or damage of a fixed asset net of its carrying amount and related taxes and expenses is
recognised in profit or loss for the current period.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(15) Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises construction
costs, installation costs, borrowing costs that are eligible for capitalisation and other costs
necessary to bring the fixed assets ready for their intended use. Construction in progress is
transferred to fixed assets when the assets are ready for their intended use, and
depreciation begins from the following month. The carrying amount of construction in
progress is reduced to the recoverable amount when the recoverable amount is below the
carrying amount (Note 2(19)).
(16) Borrowing costs
The borrowing costs that are directly attributable to the acquisition and construction of a
fixed asset that needs a substantially long period of time for its intended use commence to
be capitalised and recorded as part of the cost of the asset when expenditures for the asset
and borrowing costs have been incurred, and the activities relating to the acquisition and
construction that are necessary to prepare the asset for its intended use have commenced.
The capitalisation of borrowing costs ceases when the asset under acquisition or
construction becomes ready for its intended use and the borrowing 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 or construction of an asset is interrupted
abnormally and the interruption lasts for more than 3 months, until the acquisition or
construction is resumed.
For the specific borrowings obtained for the acquisition or construction of a fixed asset
qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is
determined by deducting any interest income earned from depositing the unused specific
borrowings in the banks or any investment income arising on the temporary investment of
those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed asset
qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is
determined by applying the weighted average effective interest rate of general borrowings,
to the weighted average of the excess amount of cumulative expenditures on the asset over
the amount of specific borrowings. The effective interest rate is the rate at which the
estimated future cash flows during the period of expected duration of the borrowings or
applicable shorter period are discounted to the initial amount of the borrowings.
(17) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademark
rights, trademark use rights, royalties and others, and are measured at cost.
(a) Land use rights
Land use rights are amortised on the straight-line basis over their approved use period of
40 to 50 years. If the acquisition costs of the land use rights and the buildings located
thereon cannot be reasonably allocated between the land use rights and the buildings, all
of the acquisition costs are recognised as fixed assets.
(b) Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, the period
as stipulated by contracts or the beneficial period.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(17) Intangible assets (Cont’d)
(c) Trademark rights
The trademark rights is measured at cost when acquired and is amortised over the
estimated useful life of 30 years. The cost of trademark rights obtained in the business
combinations involving enterprises not under common control is measured at fair value. As
some of the trademarks are expected to attract net cash inflows injected into the Group, the
management considers that these trademarks have an indefinite useful lives and are
presented based upon the carrying amounts after deducting the provision for impairment
(Note 4(16)).
(d) Trademark use rights
The trademark use rights is measured at cost when acquired. The cost of trademark use
rights obtained in the business combinations involving enterprises not under common
control is measured at fair value, and is amortised over the estimated useful life of 40 years.
(e) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisation
method is performed at each year-end, with adjustment made as appropriate.
(f) Research and development (“R&D”)
The expenditure on an internal research and development project is classified into
expenditure on the research phase and expenditure on the development phase based on
its nature and whether there is material uncertainty that the research and development
activities can form an intangible asset at the end of the project.
Expenditure on the planned investigation, evaluation and selection for the research of
production processes or products is categorised as expenditure on the research phase, and
it is recognised in profit or loss when it is incurred. Expenditure on design and test for the
final application of the development of production processes or products before mass
production is categorised as expenditure on the development phase, which is capitalised
only if all of the following conditions are satisfied:
? The development of production processes or products has been fully justified by
technical team;
? The budget on the development of production processes or products has been
approved by the management;
? There is market research analysis that demonstrates the product produced by the
production process or product has the ability of marketing;
? There are sufficient technical and financial resources to support the development of
production processes or products and subsequent mass production; and
? Expenditure attributable to the development of production processes or products
can be reliably measured.
Other development expenditures that do not meet the conditions above are recognised in
profit or loss in the period in which they are incurred. Development costs previously
recognised as expenses are not recognised as an asset in a subsequent period. Capitalised
expenditure on the development phase is presented as development costs in the balance
sheet and transferred to intangible assets at the date that the asset is ready for its intended
use.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(17) Intangible assets (Cont’d)
(g) Impairment of intangible assets
The carrying amounts of intangible assets are reduced to the recoverable amounts when
the recoverable amounts are below their carrying amounts (Note 2(19)).
(18) Long-term prepaid expenses
Long-term prepaid expenses include the expenditure for improvements to fixed assets held
under operating leases, and other expenditures that have been incurred but should be
recognised as expenses over more than one year in the current and subsequent periods.
Long-term prepaid expenses are amortised on the straight-line basis over the expected
beneficial period and are presented at actual expenditure net of accumulated amortisation.
(19) Impairment of long-term assets
Fixed assets, construction in progress, intangible assets with finite useful lives, investment
properties measured using the cost model and long-term equity investments in subsidiaries,
a joint venture and associates are tested for impairment if there is any indication that the
assets may be impaired at the balance sheet date. Intangible assets not ready for their
intended use and overseas land are tested at least annually for impairment, irrespective of
whether there is any indication that it may be impaired. If the result of the impairment test
indicates that the recoverable amount of an asset is less than its carrying amount, a
provision for impairment and an impairment loss are recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and the present value of the future cash
flows expected to be derived from the asset. Provision for asset impairment is determined
and recognised on the individual asset basis. If it is not possible to estimate the recoverable
amount of an individual asset, the recoverable amount of a group of assets to which the
asset belongs is determined. A group of assets is the smallest group of assets that is able
to generate independent cash inflows.
Goodwill that is separately presented in the financial statements is tested at least annually
for impairment, irrespective of whether there is any indication that it may be impaired. In
conducting the test, the carrying value of goodwill is allocated to the related asset groups or
groups of asset groups which are expected to benefit from the synergies of the business
combination. If the result of the test indicates that the recoverable amount of an asset groups
or a group of asset groups, including the allocated goodwill, is lower than its carrying
amount, the corresponding impairment loss is recognised. The impairment loss is first
deducted from the carrying amount of goodwill that is allocated to the asset groups or group
of asset groups, and then deducted from the carrying amounts of other assets within the
asset groups or group of asset groups in proportion to the carrying amounts of assets other
than goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the value
recovered in the subsequent periods.
(20) Employee benefits
Employee benefits include short-term employee benefits, post-employment benefits,
termination benefits and other long-term employee benefits provided in various forms of
consideration in exchange for service rendered by employees or compensations for the
termination of employment relationship.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(20) Employee benefits (Cont’d)
(a) Short-term employee benefits
Short-term employee benefits include employee wages or salaries, bonus, allowances and
subsidies, staff welfare, premiums or contributions on medical insurance, work injury
insurance and maternity insurance, housing funds, union running costs and employee
education costs, short-term paid absences. The employee benefit liabilities are recognised
in the accounting period in which the service is rendered by the employees, with a
corresponding charge to the profit or loss for the current period or the cost of relevant assets.
Employee benefits which are non-monetary benefits are measured at fair value.
(b) Post-employment benefits
The Group classifies post-employment benefit plans as either defined contribution plans or
defined benefit plans. Defined contribution plans are post-employment benefit plans under
which the Group pays fixed contributions into a separate fund and will have no obligation to
pay further contributions; and defined benefit plans are post-employment benefit plans other
than defined contribution plans. During the reporting period, the Group's defined contribution
plans mainly include basic pensions and unemployment insurance, while the defined benefit
plans are Toshiba Lifestyle Products & Services Corporation (“TLSC”), and KUKA Group,
the Group’s subsidiaries, 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 by
local authorities of Ministry of Human Resource and Social Security. Monthly payments of
premiums on the basic pensions are calculated according to prescribed bases and
percentage by the relevant local authorities. When employees retire, the relevant local
authorities are obliged to pay the basic pensions to them. The amounts based on the above
calculations are recognised as liabilities in the accounting period in which the service has
been rendered by the employees, with a corresponding charge to the profit or loss for the
current period or the cost of relevant assets.
Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans is
the present value of the defined benefit obligation at the end of the reporting period less the
fair value of plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method at the interest rate of treasury
bonds with similar obligation term and currency. The charges related to the supplemental
retirement benefits (including current service costs, past-service costs and gains or losses
on settlement) and net interest costs are recognised in the statement of profit or loss or
included in the cost of an asset, and the changes of remeasurement in net liabilities or net
assets arising from the benefit plan are charged or credited to equity in other comprehensive
income.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(20) Employee benefits (Cont’d)
(c) Termination benefits
The Group provides compensation for terminating the employment relationship with
employees before the end of the employment contracts or as an offer to encourage
employees to accept voluntary redundancy before the end of the employment contracts.
The Group recognises a liability arising from compensation for termination of the
employment relationship with employees, with a corresponding charge to profit or loss at
the earlier of the following dates: 1) when the Group cannot unilaterally withdraw the offer
of termination benefits because of an employment termination plan or a curtailment
proposal; 2) when the Group recognises costs or expenses related to the restructuring that
involves the payment of termination benefits.
Early retirement benefits
The Group offers early retirement benefits to those employees who accept early retirement
arrangements. The early retirement benefits refer to the salaries and social security
contributions to be paid to and for the employees who accept voluntary retirement before
the normal retirement date prescribed by the State, as approved by the management. The
Group pays early retirement benefits to those early retired employees from the early
retirement date until the normal retirement date. The Group accounts for the early retirement
benefits in accordance with the treatment for termination benefits, in which the salaries and
social 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 corresponding
charge to the profit or loss for the current period. The differences arising from the changes
in the respective actuarial assumptions of the early retirement benefits and the adjustments
of 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 date
are classified as current liabilities.
(21) General risk reserve
General risk reserve is the reserve appropriated from undistributed profits to cover part of
unidentified potential losses, on the basis of the estimated potential risk value of risk assets
assessed by the standardised approach, which is deducted from recognised provision for
impairment losses on loans. Risk assets include loans and advances, long-term equity
investments, deposits with banks and other financial institutions and other receivables of
subsidiary engaged in financial business.
(22) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved by
the shareholders’ meeting.
(23) Provisions
Provisions for product warranties, onerous contracts, etc. are recognised when the Group
has a present obligation, it is probable that an outflow of economic benefits will be required
to settle the obligation, and the amount of the obligation can be measured reliably.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(23) Provisions (Cont’d)
A provision is initially measured at the best estimate of the expenditure required to settle the
related present obligation. Factors surrounding a contingency, such as the risks,
uncertainties and the time value of money, are taken into account as a whole in reaching
the best estimate of a provision. Where the effect of the time value of money is material, the
best estimate is determined by discounting the related future cash outflows. The increase in
the discounted amount of the provision arising from passage of time is recognised as
interest expense.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted to
reflect the current best estimate.
The provisions expected to be settled within one year since the balance sheet date are
classified as current liabilities.
(24) Share-based payments
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employees
as consideration for equity instruments of the entity or by incurring liabilities for amounts
based on the equity instruments. Equity instruments include equity instruments of the
Company, its parent company or other accounting entities of the Group. Share-based
payments are divided into equity-settled and cash-settled payments. The Group’s share-
based payments are equity-settled payments.
Equity-settled share-based payment
The Group’s equity-settled share-based payment contains share option incentive plan,
restricted share plan and employee stock ownership plan. These plans are measured at the
fair value of the equity instruments at grant date and the equity instruments are tradable or
exercisable when services in vesting period are completed or specified performance
conditions are met. In the vesting period, the services obtained in current period are included
in relevant cost and expenses at the fair value of the equity instruments at grant date based
on the best estimate of the number of tradable or exercisable equity instruments, and capital
surplus is increased accordingly. If the subsequent information indicates the number of
tradable or exercisable equity instruments differs from the previous estimate, an adjustment
is made and, on the exercise date, the estimate is revised to equal to the number of actual
vested equity instruments.
(b) Determination of the fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which is
Black - Scholes option pricing model.
The fair value of other equity instruments are based on the share prices, which excluded
the price that incentive objects pay, and the number of the shares on the grant date, taking
into account the effects of clause of the Group’s relevant plans.
(c) Basis for determining best estimate of tradable or exercisable equity instruments
At the end of each reporting period, the group revises its estimates of the number of options
that are expected to vest based on the non-marketing performance and service conditions.
On the exercise or desterilisation date, the final number of estimated exercisable or tradable
equity instruments is consistent with the number of exercised or tradable equity instruments.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Treasury stock
The Group’s treasury stock mainly comes from the repurchase of equity instruments and
the issuance of restricted shares and so on.
Consideration and transaction costs paid by the Group for repurchasing equity instruments
are deducted from equity and not recognised as financial assets. The considerations and
the related transaction costs paid by the Group for repurchasing equity instruments are
measured as treasury stock.
On the deregistration day of shares, relevant share capital and treasury stock are reversed
with the difference included in capital surplus (share premium) based on actual
deregistration results.
On the grant day of restricted shares, the Group recognise bank deposits when receiving
subscription from the employees and measures the repurchase obligation as liability. On
the day of release of restricted shares, relevant treasury stocks, liabilities and capital surplus
recognised in the vesting period are reversed based on the actual vesting results.
(26) Revenue
The amount of revenue is determined in accordance with the fair value of the consideration
received or receivable for the sales of goods and services in the ordinary course of the
Group’s activities. Revenue is stated net of discounts, rebates and returns.
Revenue is recognised when it’s probable that the economic benefits associated with the
transaction will flow to the Group, the related revenue can be reliably measured, and the
specific criteria of revenue recognition have been met for each type of the Group’s activities
as described below:
(a) Sales of products
The Group are principally engaged in the manufacturing and sales of home appliances
(mainly comprises HVAC and consumer appliances), and robotics and automation system
(mainly comprises robotics and automation system).
Revenue from domestic sales is recognised when 1) the goods are delivered to buyers by
the Group pursuant to contracts; 2) the amount of revenue is confirmed; 3) payments for
goods are collected or receipts are acquired; and 4) the related economic benefits will flow
to the Group; and the related costs can be measured reliably. Upon confirming the
acceptance, the buyer has the right to sell the products at its discretion and takes the risks
of any price fluctuations and obsolescence and loss of the products.
Revenue from overseas sales is recognised when 1) the goods have been declared to the
customs and shipped out of the port; 2) the amount of revenue is confirmed; 3) payments
for goods are collected or obtain related receipts; and 4) the related economic benefits will
flow to the Group and the related costs can be measured reliably.
Revenue from sales of robotics and automation system is recognised when 1) the goods
are delivered to buyers by the Group pursuant to contracts; 2) the amount of revenue is
confirmed; 3) payments for goods are collected or receipts are acquired; and 4) the related
economic benefits will flow to the Group; and the related costs can be measured reliably.
(b) Rendering of services
Revenue from transportation service, distribution service and installation service as
provided by the Group is recognised when the services are completed.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont’d)
(b) Rendering of services (Cont’d)
Revenue from providing automation system business, intelligent logistics integration
solution and storage service is recognised according to the percentage of completion.
(c) Construction contract
Where the outcome of a construction contract can be estimated reliably, revenue and costs
thereof are recognised using the “percentage-of-completion” method as at the balance
sheet date. The stage of completion is measured by reference to the contract costs incurred
up to the end of the reporting period as a percentage of total estimated costs for each
contract.
The outcome of a construction contract can be estimated reliably when all of the following
conditions are concurrently met: (1) the total contract revenue can be measured reliably; (2)
it is highly probable that the economic benefits associated with the contract will flow to the
enterprise; (3) the contract costs incurred thus far can be clearly identified and measured
reliably; (4) both the stage of completion and the costs necessary to complete the contract
can be reliably measured.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue
is recognised to the extent that contract costs can be recovered actually. Contract costs are
recognised as expenses in the period in which they are incurred. Otherwise, contract costs
are recognised as expenses immediately, not as contract revenue. If the unexpected factors
no longer exist which make construction contract unable to be estimated reliably, revenue
and costs are recognised using the percentage-of-completion method.
When it is probable that total contract costs will exceed total contract revenue, the expected
loss is recognised as an expense immediately.
As at the balance sheet date, the actual total contract revenue multiply the percentage of
completion less the total contract revenue recognised in previous accounting periods should
be recognised as the revenue for the current period. Similarly, the total contract costs
multiply the percentage of completion incurred less the total contract costs recognised in
previous accounting periods should be recognised as the expenses for the current period.
(d) Interest income
Interest income from financial instruments is calculated by effective interest method and
recognised in profit or loss for the current period. Interest income comprises premiums or
discounts, or the amortisation based on effective rates of other difference between the initial
carrying amount and the due amount of interest-earning assets.
The effective interest method is a method of calculating the amortised cost of a financial
asset or liability and the interest income or expense based on effective rates. Actual interest
rate is the rate at which the estimated future cash flows during the period of expected
duration of the financial instruments or applicable shorter period are discounted to the
current carrying amount of the financial instruments. When calculating the effective interest
rate, the Group estimates cash flows by considering all contractual terms of the financial
instrument (e.g. early repayment options, similar options, etc.), but without considering
future credit losses. The calculation includes all fees and interest paid or received that are
an integral part of the effective interest rate, transaction costs, and all other premiums or
discounts.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont’d)
(d) Interest income (Cont’d)
Interest income from impaired financial assets is calculated at the interest rate that is used
for discounting estimated future cash flow when measuring the impairment loss.
(e) Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(f) Rental income
Rental income from investment prosperities is recognised in the income statement on a
straight-line basis over the lease period.
(g) Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when the
service is provided. The Group defers the initial charge income or commitment fee income
arising from the forming or acquisition of financial assets as the adjustment to effective
interest rate. If the loans are not lent when the loan commitment period is expired, related
charges are recognised as fee and commission income.
(27) Government grants
Government grants are transfers of monetary or non-monetary assets from the government
to the Group at nil consideration, including refund of taxes and financial subsidies, etc.
A government grant is recognised when the conditions attached to it can be complied with
and the government grant can be received. For a government grant in the form of transfer
of monetary assets, the grant is measured at the amount received or receivable. For a
government 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 an enterprise and used
for acquisition, construction or forming long-term assets in other ways. Government grants
related to income are government grants other than government grants related to assets.
Government grants related to assets are recorded as deferred income reasonably and
systematically amortised to profit or loss over the useful life of the related asset.
For government grants related to income, where the grant is a compensation for related
expenses or losses to be incurred by the Group in the subsequent periods, the grant is
recognised as deferred income, and included in profit or loss over the periods in which the
related costs are recognised; where the grant is a compensation for related expenses or
losses already incurred by the Group, the grant is recognised immediately in profit or loss
for the current period.
The same kind of government grants are presented with the same method.
Those related to ordinary activities are recorded into operating profit while other in non-
operating income and expenses.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(27) Government grants (Cont’d)
Loans to the Group at political preferential rate are recorded at the actual amount received,
and the related loan expenses are calculated based on the principal and the political
preferential rate. Finance discounts directly received offset related loans expenses.
(28) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities are calculated and recognised based on the
differences arising between the tax bases of assets and liabilities and their carrying amounts
(temporary differences). Deferred income tax asset is recognised for the tax losses that can
be carried forward to subsequent years for deduction of the taxable profit in accordance with
the tax laws. No deferred tax liability is recognised for a temporary difference arising from
the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognised
for the temporary differences resulting from the initial recognition of assets or liabilities due
to a transaction other than a business combination, which affects neither accounting profit
nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and
deferred tax liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled.
Deferred tax assets are only recognised for deductible temporary differences, deductible tax
losses and tax credits to the extent that it is probable that taxable profit will be available in
the future against which the deductible temporary differences, deductible tax losses and tax
credits can be utilised.
Deferred tax liabilities are recognised for temporary differences arising from investments in
subsidiaries, associates and joint ventures, except where the Group is able to control the
timing of reversal of the temporary difference, and it is probable that the temporary difference
will not reverse in the foreseeable future. When it is probable that the temporary differences
arising from investments in subsidiaries, associates and joint ventures will be reversed in
the foreseeable future and that the taxable profit will be available in the future against which
the temporary differences can be utilised, the corresponding deferred tax assets are
recognised.
Deferred tax assets and liabilities are offset when:
? the deferred taxes are related to the same tax payer within the Group and the same
taxation authority; and,
? that tax payer within the Group has a legally enforceable right to offset current tax
assets against current tax liabilities.
(29) Leases
(a) Operating leases
Rental expenses for assets held under operating leases are recognised as the cost of
relevant assets or expenses on a straight-line basis over the lease period. Contingent
rentals are recognised as profit and loss for the current period when incurred.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(29) Leases (Cont’d)
(a) Operating leases (Cont’d)
Fixed assets leased out under operating leases, other than investment prosperities (Note
2(13), are depreciated in accordance with the depreciation policy stated in Note 2(14(b) and
provided for impairment loss in accordance with the policy stated in Note 2(19). Rental
income from operating leases is recognised as revenue on a straight-line basis over the
lease period. Initial direct costs in large amount arising from assets leased out under
operating leases are capitalised when incurred and recognised as profit and loss for the
current period over the lease period on a same basis with revenue recognition; initial direct
costs in small amount are directly recognised as profit and loss for the current period.
Contingent rentals are recognised as profit and loss for the current period when incurred.
(b) Finance leases
The leased asset is recognised at the lower of the fair value of the leased asset and the
present value of the minimum lease payments. The difference between the recorded amount
of the leased asset and the minimum lease payments is accounted for as unrecognised
finance charge and is amortised using the effective interest method over the period of the
lease. A long-term payable is recorded at the amount equal to the minimum lease payments
less the unrecognised finance charge.
(30) Segment information
The Group identifies operating segments based on the internal organisation structure,
management requirements and internal reporting system, and discloses segment
information 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 following
conditions: (1) the component is able to earn revenue and incur expenses from its ordinary
activities; (2) whose operating results are regularly reviewed by the Group’s management
to make decisions about resources to be allocated to the segment and to assess its
performance, and (3) for which the information on financial position, operating results and
cash flows is available to the Group. Two or more operating segments that have similar
economic characteristics and satisfy certain conditions can be aggregated into one single
operating segment.
(31) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgements
applied based on historical experience and other factors, including expectations of future
events that are believed to be reasonable.
Critical accounting estimates and key assumptions
The critical accounting estimates and key assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next
accounting year are outlined below:
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(31) Critical accounting estimates and judgements (Cont’d)
(i) Provision for impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment. The recoverable
amount of the asset groups and the combination of asset groups that contain the
apportioned goodwill is determined by the higher value between the use value and the net
value that is calculated by the fair value less the disposal costs. Accounting estimate is
required for the calculation of the recoverable amount. The impairment testing is performed
by assessing the recoverable amount of the groups of assets containing the relevant
goodwill, based on the present value of cash flows forecasts. Key assumptions adopted in
the impairment testing of goodwill included expected revenue growth rates, EBITDA
margins, perpetual annual growth rates, discount rates, etc. which involved critical
accounting estimates and judgement.
(ii) Income tax
The Group is subject to income taxes in numerous jurisdictions. There are many
transactions and events for which the ultimate tax determination is uncertain during the
ordinary course of business. Significant judgement is required from the Group in determining
the provision for income taxes in each of these jurisdictions. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the period in which such determination
is made.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies
The Ministry of Finance released the revised CAS 22 - Recognition and Measurement of Financial Instruments, CAS 23 - Transfer of Financial
Assets, CAS 24 - Hedge Accounting and CAS 37 - Presentation of Financial Instruments (hereinafter collectively referred to as “the new financial
instruments standards”) in 2017, and released the Circular on the Amendment to the Formats of Corporate Financial Statements for the Year of
2019 (Cai Kuai [2019] No. 6), the revised CAS 7 - Exchange of Non-monetary Assets (hereinafter the “exchange of non-monetary assets standard”)
and the revised CAS 12 - Debt Restructuring (hereinafter the “debt restructuring standard”) in 2019. The financial statements for the year ended 31
December 2019 are prepared in accordance with the above standards and circular. The revised standards for exchange of non-monetary assets
and debt restructuring had no significant impacts on the Group and the Company, and impacts of other revisions on financial statements of the
Group and the Company are as follows:
(a) Revisions based on the circular on the amendment to the formats of corporate financial statements
Impacts on the consolidated balance sheet are as follows:
The nature and the reasons of the
changes in accounting policies The line items affected 31 December 2018 1 January 2018
Before The amounts After Before The amounts Afteradjustment affected adjustment adjustment affected adjustmentThe Group split notes and Accounts receivable - 19,390,174 19,390,174 - 17,528,717 17,528,717accounts receivables into Notes receivable - 12,556,294 12,556,294 - 10,854,226 10,854,226accounts receivable and notes Notes and accounts
receivable. receivables 31,946,468 (31,946,468) - 28,382,943 (28,382,943) -
The Group split notes and Accounts payable - 36,901,626 36,901,626 - 35,144,777 35,144,777
accounts payables into accounts Notes payable - 23,325,115 23,325,115 - 25,207,785 25,207,785
payable and notes payable. Notes and accounts
payables 60,226,741 (60,226,741) - 60,352,562 (60,352,562) -
Except for the above items, amounts of other items as at 31 December 2018 and 1 January 2018 were not affected.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies (Cont’d)
(b) Revisions based on the new financial instruments standards
Accordance with relevant provisions of the new financial instruments standards, the Group and the Company recognised the cumulative effect of
initially applying the standard as an adjustment to the opening balance of retained earnings in 2019 and other relevant line items in the financial
statements. The comparatives were not restated.
(i) As at 1 January 2019, the financial assets represented in the Group's consolidated financial statements were disclosed and measured in accordance
with the old/new financial instruments standards as follows:
Old financialinstrumentsstandards Newfinancialinstrumentsstandards
Carrying Carrying
Lineitem Measurement amount Lineitem Measurement amount
Cashatbankandonhand Amortisedcost 27,888,280 Cashatbankandonhand Amortisedcost 27,888,280
Notes receivable Amortisedcost 11,049,539
Fair valuethroughothercomprehensive
Notesreceivable Amortisedcost 12,556,294 Receivablesfinancing income 1,506,755
Accounts receivable Amortisedcost 18,641,979
Fair valuethroughothercomprehensive
Accountsreceivable Amortisedcost 19,390,174 Receivablesfinancing income 748,195
Other receivables Amortisedcost 2,960,939
Otherreceivables Amortisedcost 2,971,368 Financialassetsheldfortrading Fairvaluethroughprofitorloss 10,429
Fair valuethroughothercomprehensive Fairvaluethroughothercomprehensive
income (hedginginstruments) 38,822 Othercurrentassets income 38,822
Fair valuethroughothercomprehensive
income (wealthmanagementproducts) 1,521,007 Financialassetsheldfortrading Fairvaluethroughprofitorloss 1,521,007
Othercurrentassets Amortisedcost(structuraldeposits) 70,402,509 Othercurrentassets Amortisedcost 70,402,509
Derivativefinancialassets Fairvaluethroughprofitorloss 220,197 Derivativefinancialassets Fairvaluethroughprofitorloss 220,197
Loansandadvances Amortisedcost 11,328,392 Loansandadvances Amortisedcost 11,328,392
Long-termreceivables Amortisedcost 34,815 Long-termreceivables Amortisedcost 34,815
Fair valuethroughothercomprehensive Financialassetsheldfortrading Fairvaluethroughprofitorloss 1,122,609
Available-for-salefinancial income(equityinstruments)(Note) 1,184,859 Othernon-currentfinancialassets Fairvaluethroughprofitorloss 62,250
assets Cost(equityinstruments) 722,019 Othernon-currentfinancialassets Fairvaluethroughprofitorloss 722,019
(Note) As at 31 December 2018, the Group’s financial assets held for trading measured at fair value through other comprehensive income amounted
to RMB 1,184,859,000. As at 1 January 2019, such equity instruments were measured at fair value through profit or loss after the implementation of
the new financial instruments standards. Correspondingly, the Group transferred RMB 337,447,000 of equity instruments measured at fair value
through other comprehensive income in prior years to the opening balance of undistributed profit.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies (Cont’d)
(b) Revisions based on the new financial instruments standards (Cont’d)
(ii) As at 1 January 2019, the financial assets of represented in the Company's financial statements were disclosed and measured in accordance with
the old/new financial instruments standards as follows:
Old financial instruments standards New financial instruments standards
Carrying Carrying
Line item Measurement amount Line item Measurement amount
Cash at bank and on
hand Amortised cost 15,361,626 Cash at bank and on hand Amortised cost 15,361,626
Other receivables Amortised cost 11,593,020 Other receivables Amortised cost 11,593,020
Fair value through other
comprehensive income (wealth Financial assets held for
management products) 1,521,007 trading Fairvalue through profit or loss 1,521,007
Amortised cost (structural
Other current assets deposits) 53,164,300 Other current assets Amortised cost 53,164,300
Available-for-sale Other non-current financial
financial assets Cost (equity instruments) 56,579 assets Fairvalue through profit or loss 56,579
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies (Cont’d)
(b) Revisions based on the new financial instruments standards (Cont’d)
(iii) As at 1 January 2019, for the Group and the Company, the carrying amount of financial
assets is reconciled from the old financial instruments standards to the new financial
instruments standards based on the new measurement:
Measurement under the new financial instruments standards
Financial assets at amortised cost Table 1
Financial assets at fair value through profit or loss Table 2
Financial assets at fair value through other
comprehensive income Table 3
Table 1: Financial assets at amortised cost under the new financial instruments standards
Carrying amountConsolidated CompanyCash at bank and on hand
31 December 2018 27,888,280 15,361,626
Less: Disclosure and measurement under the new
financial instruments standards - -
1 January 2019 27,888,280 15,361,626
Receivables (including notes receivable, accounts
receivable, other receivables, and long-term
receivables)
31 December 2018 34,952,651 11,593,020
Less: Transfer to financial assets at fair value
through other comprehensive income (2,254,950) -
Less: Transfer to financial assets at fair value
through profit or loss (10,429) -
1 January 2019 32,687,272 11,593,020
Loans and advances
31 December 2018 11,328,392 -
Less: Disclosure and measurement under the new
financial instruments standards - -
1 January 2019 11,328,392 -
Other current assets - Structural deposits
31 December 2018 70,402,509 53,164,300
Less: Disclosure and measurement under the new
financial instruments standards - -
1 January 2019 70,402,509 53,164,300
Total financial assets measured at amortised cost
(under the new financial instruments standards) as
at 1 January 2019 142,306,453 80,118,946
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies (Cont’d)
(b) Revisions based on the new financial instruments standards (Cont’d)
(iii) As at 1 January 2019, for the Group and the Company, the carrying amount of financial
assets is reconciled from the old financial instruments standards to the new financial
instruments standards based on the new measurement: (Cont’d)
Table 2: Financial assets at fair value through profit or loss under the new financial
instruments standards
Carrying amountConsolidated CompanyFinancial assets held for trading
31 December 2018 - -
Add:Transferred from other current assets -
available-for-sale financial assets - wealth
management products 1,521,007 1,521,007Add:Transferred from available-for-sale financial
assets 1,122,609 -Add:Transferred from other receivables 10,429 -1 January 2019 2,654,045 1,521,007Derivative financial instruments
31 December 2018 220,197 -
Less: Disclosure and measurement under the new
financial instruments standards - -
1 January 2019 220,197 -
Other non-current financial assets
31 December 2018 - -
Add:Transferred from available-for-sale financial
assets 784,269 56,579
1 January 2019 784,269 56,579
Total financial instruments at fair value through profit
or loss (under the new financial instruments
standards) as at 1 January 2019 3,658,511 1,577,586
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies (Cont’d)
(b) Revisions based on the new financial instruments standards (Cont’d)
(iii) As at 1 January 2019, for the Group and the Company, the carrying amount of financial
assets is reconciled from the old financial instruments standards to the new financial
instruments standards based on the new measurement: (Cont’d)
Table 3: Financial assets at fair value through other comprehensive income under the new
financial instruments standards
Carrying amountConsolidated CompanyReceivables financing
31 December 2018 - -
Add: Transfer from notes receivables (under the old
financial instruments standards) 1,506,755 -Add:Transfer from accounts receivables (under the
old financial instruments standards) 748,195 -
1 January 2019 2,254,950 -
Other current assets - Hedging instruments
31 December 2018 38,822 -
Less: Disclosure and measurement under the new
financial instruments standards - -
1 January 2019 38,822 -
Total financial instruments at fair value through profit
or loss (under the new financial instruments
standards) as at 1 January 2019 2,293,772 -
(iv) As at 1 January 2019, the Group’s reconciliation from the provision for impairment of
financial assets under the old financial instruments standards and provisions recognised
according to accounting standards on contingencies to loss provision under the new financial
instruments standards is as below:
Loss provision under the
old financial instruments Loss provision
standards/provisions under the new
recognised according to financial
accounting standards on instruments
Measurement contingencies Reclassification Remeasurement standards
Financial assets at amortised
cost -
Provision for bad debts of
accounts receivable 982,109 - - 982,109
Provision for impairment of
loans and advances 154,006 - - 154,006
Provision for bad debts of
other receivables 42,730 - - 42,730
Provision for bad debts of
long-term receivables - - - -
Financial assets at fair value
through other comprehensive
income -
Provision for impairment of
available-for-sale financial
assets 2,287 (2,287) - -
Total 1,181,132 (2,287) - 1,178,845
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
32 Significant changes in accounting policies (Cont’d)
(b) Revisions based on the new financial instruments standards (Cont’d)
(v) As at 1 January 2019, the Company’s reconciliation from the provision for impairment of
financial assets under the old financial instruments standards and provisions recognised
according to accounting standards on contingencies to loss provision under the new
financial instruments standards is as below:
Loss provision under the
old financial instruments Loss provision
standards/provisions under the new
recognised according to financial
accounting standards on instruments
Measurement contingencies Reclassification Remeasurement standards
Financial assets at amortised
cost -
Provision for bad debts of
other receivables 6,840 - - 6,840
Total 6,840 - - 6,840
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 Note (b)
calculated using the taxable sales amount
multiplied by the applicable tax rate less
deductible VAT input of the current period)
City maintenance and The amount of VAT paid 5% or 7%
construction tax
Educational surcharge The amount of VAT paid 3% or 5%
Local educational The amount of VAT paid 2%
surcharge
Property tax Price-based property is subject to a 1.2% tax rate1.2% or 12%
after a 30% cut in the original price of property;
rental-based property is subject to a 12% tax rate
for the rental income.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont’d)
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
(a-1) The following subsidiaries of the Company are subject to an enterprise income tax rate of
15% in 2019 as they qualified as high-tech enterprises and obtained the High-tech
Enterprise Certificate:
No. of the High-tech Dates of Term of
Name of taxpayer Enterprise Certificate issuance validity
Jiangsu Midea Cleaning Appliances GR201732001675 17 November 3 years
Co., Ltd. 2017
GD Midea Environment Appliances GR201944000430 2 December 3 years
Mfg. Co., Ltd. 2019
Midea Intelligent Lighting & Controls GR201736000187 23 August 2017 3 years
Technology Co., Ltd.
Guangdong Midea Kitchen Appliances GR201844000250 28 November 3 years
Manufacturing Co., Ltd. 2018
Guangdong Witol Vacuum Electronic GR201744000489 9 November 3 years
Manufacture Co., Ltd 2017
Foshan Shunde Midea Washing GR201744002837 9 November 3 years
Appliances Manufacturing Co., Ltd. 2017
Foshan Shunde Midea Electrical GR201844010373 28 November 3 years
Heating Appliances Manufacturing 2018
Co., Ltd.
Guangdong Midea Precision Molding GR201944004780 2 December 3 years
Technology Co., Ltd. 2019
Foshan Shunde Midea Electric GR201944000317 2 December 3 years
Science and Technology Co., Ltd. 2019
GD Midea Heating & Ventilating GR201844008219 28 November 3 years
Equipment Co., Ltd. 2018
Hefei Midea Heating & Ventilating GR201934001163 9 September 3 years
Equipment Co., Ltd. 2019
Anhui Meizhi Precision Manufacturing GR201834000890 24 July 2018 3 years
Co., Ltd.
Guangzhou Midea Hualing Refrigerat GR201944009238 2 December 3 years
or Co., Ltd. 2019
Guangdong Welling Motor GR201744002062 9 November 3 years
Manufacturing Co., Ltd. 2017
Foshan Welling Washer Motor GR201744001025 9 November 3 years
Manufacturing Co., Ltd. 2017
Huaian Welling Motor Manufacturing GR201932010033 6 December 3 years
Co., Ltd. 2019
Annto Logistics Technology Co., Ltd. GR201834001306 24 July 2018 3 years
Little Swan GR201832001394 24 October 2018 3 years
Wuxi Filin Electronics Co., Ltd. GR201832001053 24 October 2018 3 years
Wuxi Little Swan General Appliance GR201832001100 24 October 2018 3 years
Co., Ltd.
GD Midea Air-Conditioning Equipment GR201744000337 9 November 3 years
Co., Ltd. 2017
Handan Midea Air-Conditioning GR201713000957 27 October 2017 3 years
Equipment Co., Ltd.
Midea Group Wuhan Refrigeration GR201742002075 30 November 3 years
Equipment Co., Ltd. 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont'd)
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
(Cont’d)
(a-1) The following subsidiaries of the Company are subject to an enterprise income tax rate of
15% in 2019 as they qualified as high-tech enterprises and obtained the High-tech
Enterprise Certificate (Cont’d):
No. of the High-tech Dates of Term of
Name of taxpayer Enterprise Certificate issuance validity
Guangzhou Hualing Refrigerating GR201744010610 11 December 3 years
Equipment Co., Ltd. 2017
Wuhu Maty Air-Conditioning GR201734001246 7 November 3 years
Equipment Co., Ltd. 2017
Chongqing Midea General GR201751100113 28 December 3 years
Refrigeration Equipment Co., Ltd. 2017
Guangdong Meizhi Compressor GR201744000895 9 November 3 years
Limited 2017
Hubei Midea Refrigerator Co., Ltd. GR201742001255 28 November 3 years
2017
Guangdong Midea Consumer Electric GR201744006141 11 December 3 years
Manufacturing Co., Ltd. 2017
Anhui Meizhi Compressor Co., Ltd. GR201934000046 9 September 3 years
2019
Foshan Shunde Midea Water GR201744008471 11 December 3 years
Dispenser Manufacturing Co., Ltd. 2017
Midea Welling Motor Technology GR201731001731 23 November 3 years
(Shanghai) Co., Ltd. 2017
Welling (Wuhu) Motor Manufacturing GR201834001144 24 July 2018 3 years
Co., Ltd.
Hefei Midea Laundry Appliance Co., GR201834000882 24 July 2018 3 years
Ltd.
Hefei Hualing Co., Ltd. GR201834000552 24 July 2018 3 years
Foshan Midea Chungho Water GR201844007089 28 November 3 years
Purification Equipment. Co., Ltd. 2018
Toshiba HA Manufacturing (Nanhai) GR201844007107 28 November 3 years
Co., Ltd. 2018
Guangdong Meizhi Precision- GR201844006181 28 November 3 years
Manufacturing Co., Ltd. 2018
Wuhu Midea Kitchen & Bath GR201834000818 24 July 2018 3 years
Appliances Mfg. Co., Ltd.
Guangdong Midea Intelligent GR201844003941 28 November 3 years
Technologies Co., Ltd. 2018
(a-2) The application for enterprise income tax preferential treatment by Chongqing Midea Air-
Conditioning Equipment Co., Ltd. the Company's subsidiary, was approved by the State
Administration of Taxation of Chongqing Economical and Technological Development Zone
on 3 June 2014. The subsidiary is subject to enterprise income tax at the rate of 15% in
2019.
(a-3) The Company's subsidiaries in Mainland China other than those mentioned in (a-1) and (a-
2) are subject to enterprise income tax at the rate of 25%.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont'd)
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
(Cont’d)
(a-4) In August 2008, Midea Electric Trading (Singapore) Co.,Pte. Ltd., the Company's subsidiary,
was awarded with the Certificate of Honour for Development and Expansion (No. 587) by
the Singapore Economic Development Board, which approves that qualified income
exceeding a certain amount is subject to enterprise income tax at the rate of 5% from 1
August 2008 to 31 July 2018, and subject to enterprise income tax at the rate of 5.5% from
1 August 2018 to 31 July 2023, . Midea Singapore Trading Co Pte Limited. and Little Swan
International (Singapore) Co., Pte. LTD., the Company's subsidiaries, are subject to
enterprise income tax at the rate of 17%.
(a-5) 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, Midea
International Corporation Company Limited, Midea Home Appliances Investments (Hong
Kong) Co., Limited, Century Carrier Residential Air-conditioning Equipment Co., Limited,
Midea Refrigeration (Hong Kong) Limited, Welling Holding Limited, Welling International
Hong Kong Ltd, and Midea Investment (Asia) Company Limited.
(a-6) The Company's subsidiaries in BVI and Cayman Islands are exempted from enterprise
income tax. Such subsidiaries include Mecca International (BVI) Limited, Titoni Investments
Development Ltd., Midea Investment Holding (BVI) Limited, Midea Electric Investment (BVI)
Limited, Welling Holding (BVI) Ltd, Midea Holding (Cayman Islands) Limited and Midea
Investment Development Company Limited.
(a-7) Springer Carrier Ltd., the Company's subsidiary in Brazil, is subject to Brazil enterprise
income tax at the rate of 34%.
(a-8) TLSC, the Company's subsidiary in Japan, and its subsidiaries (“TLSC Group”), are subject
to Japan enterprise income tax at the rate of 33.80%.
(a-9) Clivet S.P.A and Clivet Espa?a S.A.U. (“Clivet”), the Company's subsidiaries in Italy, are
subject to Italy enterprise income tax at the rate between 20% and 31.4%.
(a-10) KUKA Group, the Company's subsidiary in Germany, is subject to Germany enterprise
income tax at the rate of 32%.
(a-11) Servotronix Motion Control Ltd. (hereinafter referred to as “SMC”), the Company's
subsidiary in Israel, is subject to Israel enterprise income tax at the rate of 23%.
(a-12) Misr Refrigeration and Air Conditioning Manufacturing Company, S.A.E., the Company's
subsidiary in Egypt, is subject to Egyptian enterprise income tax at the rate of 22.5%.
(b) Notes to the VAT rate of the principal tax payers with different tax rates
(b-1) Pursuant to the Announcement on Relevant Policies for Deepening the Value-Added Tax
Reform (Announcement [2019] No. 39) issued by the Ministry of Finance, the State Taxation
Administration and the General Administration of Customs, the applicable tax rate of
revenue arising from sales of goods and rendering of repairing and replacement services of
the Company’s certain subsidiaries is 13% from 1 April 2019, while it was 16% before then.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont'd)
(b) Notes to the VAT rate of the principal tax payers with different tax rates (Cont'd)
(b-2) Pursuant to the Announcement on Relevant Policies for Deepening the Value-Added Tax
Reform (Announcement [2019] No. 39) issued by the Ministry of Finance, the State Taxation
Administration and the General Administration of Customs, the applicable tax rate of
revenue arising from rendering of real estate leasing and transportation services of the
Company’s certain subsidiaries is 9% from 1 April 2019, while it was 10% before then.
(b-3) Financial services, consulting services and storage services provided by the Company and
certain subsidiaries are subject to VAT at the rate of 6%.
(b-4) Rental revenue of Hefei Midea Laundry Appliance Co., Ltd., which is a subsidiary of the
Company, is subject to easy levy of VAT at the rate of 5%.
(b-5) Pursuant to the Announcement on Relevant Policies for Deepening the Value-Added Tax
Reform (Announcement [2019] No. 39) issued by the Ministry of Finance, the State Taxation
Administration and the General Administration of Customs, certain subsidiaries of the
Company engaged in the production service sector, are eligible for a 10% additional VAT
deduction based on deductible input VAT in the current period from 1 April 2019 to 31
December 2021.
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
31 December 2019 31 December 2018
Cash on hand 3,128 3,803
Cash at bank (a) 49,012,677 15,857,413
Other cash balances (b) 153,022 123,197
Statutory reserve deposits with the Central
Bank (c) 433,149 1,126,172
Surplus reserve with the Central Bank 355,471 204,073
Deposits with banks and other financial
institutions (d) 20,562,160 10,573,622
Accrued interest 397,234 ——
70,916,841 27,888,280
Including: Total amounts deposited with banks
overseas (including Hong Kong,
China, Macau, China, Singapore,
Japan, Italy, Brazil and Germany,
etc.) 5,270,085 6,316,807
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(1) Cash at bank and on hand (Cont'd)
(a) As at 31 December 2019, cash at bank included fixed deposits with the term of over three
months, amounting to RMB 39,491,676,000 (31 December 2018: RMB 5,686,629,000)
(b) Other cash balances mainly include letters of guarantee, bank acceptance notes and letters
of credit.
(c) Statutory reserve with the Central Bank represents the statutory reserve deposited in
People’s Bank of China by the financial enterprise in accordance with relevant regulations,
which are calculated at 6% and 5% for eligible RMB deposits and foreign currency deposits,
respectively, and are not available for use in the Group’s daily operations.
(d) As at 31 December 2019, deposits with banks and other financial institutions included no
fixed deposits with the term of over three months (31 December 2018: RMB 3,000,000,000).
(2) Financial assets held for trading
31 December 1 January 31 December
2019 2019 2018
Financial assets held for trading 1,087,351 2,654,045 ——
(a) As at 31 December 2019, financial assets held for trading are equity investments in listed
companies, measured at fair value through profits or losses.
(3) Notes receivable
31 December 1 January 31 December
2019 2019 2018
Bank acceptance notes 4,768,520 11,049,539 12,556,294
Less: Provision for bad debts - - -
4,768,520 11,049,539 12,556,294
(a) Provision for bad debts
For notes receivable of the Group arising from sales of goods or rendering of services in the
ordinary course of business, the Group recognises the lifetime ECL provision regardless of
whether there exists a significant financing component. As at 31 December 2019, bad debts
risk was relatively low.
(4) Accounts receivable
31 December 1 January 31 December
2019 2019 2018
Accounts receivable 19,631,644 19,624,088 20,372,283
Less: Provision for bad debts (967,825) (982,109) (982,109)
18,663,819 18,641,979 19,390,174
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable (Cont’d)
(a) The ageing of accounts receivable is analysed as follows:
31 December 1 January 31 December
2019 2019 2018
Within 1 year 19,168,694 19,242,068 19,990,263
1 to 2 years 301,554 187,071 187,071
2 to 3 years 101,643 88,294 88,294
3 to 5 years 42,106 84,069 84,069
Over 5 years 17,647 22,586 22,586
19,631,644 19,624,088 20,372,283
As at 31 December 2019, the Group had no significant overdue accounts receivable.
(b) Under the new financial instruments standards, the Group measures the loss provision for
accounts receivable according to the lifetime ECL.
As at 31 December 2019, accounts receivable for which the related provision for bad debts
was provided on the individual basis were analysed as follows:
Lifetime Provision for
Book balance ECL rate bad debts Reason
Domestic customers 2,998 100% (2,998) The debtor
encountered
financial
Overseas customers 4,767 100% (4,767) difficulties
7,765 (7,765)
As at 31 December 2019, accounts receivable for which the related provision for bad debts
was provided on the grouping basis were analysed as follows:
31 December 2019
Book balance Provision for bad debts
Lifetime
Amount ECL rate Amount
Domestic business grouping 7,908,831 5.53% (437,578)
Overseas business grouping 11,715,048 4.46% (522,482)
19,623,879 (960,060)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable (Cont’d)
(c) The provision for bad debts in current year amounted to RMB 215,902,000 (31 December
2018: RMB 334,946,000). The provision for bad debts reversed in current year amounted
to RMB 145,990,000 (31 December 2018: RMB 137,346,000).
The accounts receivable written off by the Group for the current year were arising from
transactions with third parties and there were no written-off accounts receivable that are
individually significant.
(d) As at 31 December 2019, the five largest accounts receivable aggregated by debtors were
summarised and analysed as follows:
Provision for % of total
Amount bad debts balance
Total amount of the five largest
accounts receivable 2,021,879 (47,562) 10.30%
(5) Other receivables
31 December 1 January 31 December
2019 2019 2018
Other receivables 2,766,098 3,003,669 3,014,098
Less: Provision for bad debts (53,124) (42,730) (42,730)
2,712,974 2,960,939 2,971,368
(a) Other receivables mainly include deposits, receivables related to share options, current
accounts, petty cash to staff, and interest.
The ageing of other receivables is analysed as follows:
31 December 1 January 31 December
2019 2019 2018
Within 1 year 2,643,584 2,795,057 2,805,486
1 to 2 years 69,490 118,049 118,049
2 to 3 years 16,555 60,259 60,259
3 to 5 years 25,773 20,900 20,900
Over 5 years 10,696 9,404 9,404
2,766,098 3,003,669 3,014,098
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont’d)
(b) Provision for bad debts and changes in book balance statements
Stage 1 Stage 3
12-month ECL 12-month ECL Lifetime ECL
(Grouping) (Individual) (Credit impaired) Sub-total
Provision Provision Provision ProvisionBook for bad Book for bad Book for bad for badbalance debts balance debts balance debts debts31 December 2018 2,844,783 42,730 169,315 - - - 42,730Changes in accounting
policies (10,429) - - - - - -
1 January 2019 2,834,354 42,730 169,315 - - - 42,730
Transfer to stage 3 (3,832) (1,533) - - 3,832 1,533 -
Net (decrease)/increase
in current year (128,884) 8,511 (108,212) - (475) 1,809 10,320
Including: Written-off in
current year - - - - (475) (475) (475)
Derecognition - - - - - - -
Differences on translation
of foreign currency
financial statements - 59 - - - 15 74
31 December 2019 2,701,638 49,767 61,103 - 3,357 3,357 53,124
As at 31 December 2019, the Group had no other receivables at stage 2.
(c) As at 31 December 2019, the Group’s other receivables at stage 1 and stage 3 were
analysed as follows:
(i) As at 31 December 2019, other receivables for which the related provision for bad debts
was provided on the individual basis were analysed as follows:
ECL rate in the
following 12 Provision for bad
Book balance months debts Reason
Relatively low
Stage 1 61,103 0% - bad debt risks
ECL rate in the
following 12 Provision for bad
Book balance months debts Reason
The debtor
encountered
financial
Stage 3 3,357 100% (3,357) difficulties
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont’d)
(c) As at 31 December 2019, the Group’s other receivables at stage 1 and stage 3 were
analysed as follows (Cont’d):
(ii) As at 31 December 2019, other receivables at stage 1 for which the related provision for
bad debts was provided on the grouping basis were analysed as follows:
31 December 2019
Book balance Provision for bad debts
Amount Amount Provision ratio
Security deposit/guarantee
payables grouping 2,701,638 (49,767) 1.84%
(iii) The provision for bad debts in current year amounted to RMB 19,276,000 (31 December
2018: RMB 13,508,000). The provision for bad debts reversed in current year amounted to
RMB 8,481,000 (31 December 2018: 21,166,000).
For the year ended 31 December 2019, no other receivables with significant amounts were
written off.
(d) As at 31 December 2019, the five largest other receivables aggregated by debtors were
summarised and analysed as follows:
Provision for bad % of total
Amount debts balance
Total amount of the five largest
other receivables 222,226 (6,779) 8.03%
(e) As at 31 December 2019, the Group did not recognise significant government grants at
amounts receivable.
(6) Receivables financing
31 December 1 January 31 December
2019 2019 2018
Receivables financing 7,565,776 2,254,950 ——
The Group’s receivables financing were mainly bank acceptance notes and account
receivables transferred, discounted and endorsed for the purpose of daily treasury
management and were qualified for derecognition.
No provision for bank acceptance notes was individually provided. As at 31 December 2019,
the Group measured bad debts based on the lifetime ECL and expected that there was no
significant credit risk associated with its bank acceptance notes and did not expect that there
will be any significant losses from non-performance by these banks.
As at 31 December 2019, the Group's transferred account receivables and notes
receivables endorsed or discounted but not matured were as follows:
Derecognised Recognised
Receivables financing 20,946,601 -
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(7) Advances to suppliers
31 December 2019 31 December 2018
Prepayments for raw materials and
others 2,246,177 2,215,888
(a) The ageing of advances to suppliers is analysed as follows:
31 December 2019 31 December 2018
Amount % of total balance Amount % of total balance
Within 1 year 2,176,110 96.88% 2,112,343 95.33%
1 to 2 years 26,925 1.20% 78,764 3.55%
2 to 3 years 22,895 1.02% 11,870 0.54%
Over 3 years 20,247 0.90% 12,911 0.58%
2,246,177 100.00% 2,215,888 100.00%
As at 31 December 2019, advances to suppliers over 1 year with a carrying amount of RMB
70,067,000 (31 December 2018: RMB 103,545,000) were mainly unsettled prepayments for
raw materials.
As at 31 December 2019, the five largest advances to suppliers aggregated by debtors were
summarised and analysed as follows:
Amount % of total balance
Total amount of the five largest
advances to suppliers 494,085 22.00%
(8) Loans and advances to customers
(a) By individual and corporation:
31 December 2019 31 December 2018
Loans and advances measured at
amortised cost
Loans and advances to individuals 1,110,127 894,392
Loans and advances to corporations 10,708,289 10,588,006
Including: Loans 9,558,953 4,702,308
Discounted bills 1,149,336 5,885,698
11,818,416 11,482,398
Less: Provision for bad debts (158,919) (154,006)
11,659,497 11,328,392
As at 31 December 2019, loans and advances to customers over 1 year amounted to RMB
790,101,000 (31 December 2018: Nil).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(8) Loans and advances to customers (Cont’d)
(b) By type of collateral held
31 December 2019 31 December 2018
Unsecured loans 1,075,217 814,657
Guaranteed loans 1,476,273 614,688
Pledged loans 9,266,926 10,053,053
11,818,416 11,482,398
Less: Provision for bad debts (158,919) (154,006)
11,659,497 11,328,392
(c) For the year ended 31 December 2019, the Group’s provision for bad debts was RMB
68,617,000, bad debts written-off were RMB 10,826,000 and reversal of bad debts was
52,878,000 (Note 4(21)).
(d) As at 31 December 2019, the Group’s loans and advances for bad debt provision amounting
to RMB 1,036,154,000, of which the bad debt provision is RMB 219,000.
(9) Inventories
(a) Inventories are summarised by categories as follows:
31 December 2019 31 December 2018
Provision for Provision for
declines in declines in
Book the value of Carrying Book the value of Carrying
balance inventories amount balance inventories amount
Finished goods 22,046,730 (407,598) 21,639,132 18,600,407 (320,022) 18,280,385
Raw materials 5,009,197 (67,875) 4,941,322 5,181,916 (60,822) 5,121,094
Work in progress 1,596,042 - 1,596,042 2,040,228 - 2,040,228
Consigned
processing
material 219,542 - 219,542 239,741 - 239,741
Low value
consumables 38,185 - 38,185 38,763 - 38,763
Projects
completed but
unsettled 4,009,176 - 4,009,176 3,924,807 - 3,924,807
32,918,872 (475,473) 32,443,399 30,025,862 (380,844) 29,645,018
(b) Provision for decline in the value of inventories are analysed as follows:
Differences
on translation
Increase in Decrease in of foreign
current year current year currency
31 December Reversal or financial 31 December
2018 Provision written-off statements 2019
Finished goods 320,022 311,801 (227,739) 3,514 407,598
Raw materials 60,822 11,434 (5,826) 1,445 67,875
380,844 323,235 (233,565) 4,959 475,473
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(9) Inventories (Cont’d)
(c) Provision for decline in the value of inventories is as follows:
Reason for the reversal or written-
Specific basis for determining off of provision for decline in the
net realisable value value of inventoriesStated at the lower of cost
Finished goods and net realisable value Sales
Projects completed but Stated at the lower of cost
unsettled and net realisable value Settled
Stated at the lower of cost
Raw materials,etc. and net realisable value Requisition for production
(10) Other current assets
31 December 1 January 31 December
2019 2019 2018
Wealth management products —— —— 1,521,007
Structural deposits (a) 60,038,855 70,402,509 70,402,509
VAT input to be deducted 3,159,794 2,803,315 2,803,315
Prepaid expenses 875,451 647,648 647,648
Others 936,927 1,099,348 1,099,348
65,011,027 74,952,820 76,473,827
(a) As at 31 December 2019, structural deposits represented deposits in financial instruments
due within one year, mostly measured at fair value through profits or losses.
(11) Long-term receivables
31 December 2019 31 December 2018
Long-term receivables 1,208,079 34,815
Less: Provision for bad debts - -
1,208,079 34,815
The Group’s long-term receivables are presented in net amount of finance lease receivables
after offsetting the unrealised financing income.
(12) Long-term equity investments
Long-term equity investments are classified as follows:
31 December 2019 31 December 2018
Investment in associates (a) 2,790,806 2,713,316
Less: Provision for impairment of long-
term equity investments - -
2,790,806 2,713,316
(a) Investment in associates mainly refers to the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies by the
Group.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(13) Other non-current financial assets
31 December 1 January 31 December
2019 2019 2018
Measured at fair value
- Equity of unlisted companies 1,750,107 784,269 ——
(14) Fixed assets
Machinery Electronic
Overses and Motor equipment
Buildings land equipment vehicles and others Total
Cost
31 December 2018 17,396,391 1,289,251 18,935,114 747,441 4,151,719 42,519,916
Increase in current year
Purchase 272,034 - 1,342,838 23,357 698,159 2,336,388
Transfers from construction
in progress 553,985 - 88,850 - 45,707 688,542
Decrease in current year
Disposal and retirement (63,025) (2,080) (702,214) (65,032) (396,824) (1,229,175)
Others (277,682) - - - (1,675) (279,357)
Differences on translation of
foreign currency financial
statements 18,900 9,322 37,540 1,937 13,652 81,351
31 December 2019 17,900,603 1,296,493 19,702,128 707,703 4,510,738 44,117,665
Accumulated depreciation
31 December 2018 6,561,909 - 10,235,762 477,072 2,774,680 20,049,423
Increase in current year
Provision 872,098 - 1,676,581 88,793 718,348 3,355,820
Decrease in current year
Disposal and retirement (44,650) - (521,472) (57,140) (364,657) (987,919)
Others (29,841) - - - (1,497) (31,338)
Differences on translation of
foreign currency financial
statements 3,119 - 14,643 748 9,000 27,510
31 December 2019 7,362,635 - 11,405,514 509,473 3,135,874 22,413,496
Provision for impairment loss
31 December 2018 6,674 5,849 20,107 206 445 33,281
Increase in current year
Provision - - - - 8,466 8,466
Decrease in current year
Disposal and retirement (26) - (2,635) - (17) (2,678)
Differences on translation of
foreign currency financial
statements 98 58 241 4 17 418
31 December 2019 6,746 5,907 17,713 210 8,911 39,487
Carrying amount
31 December 2019 10,531,222 1,290,586 8,278,901 198,020 1,365,953 21,664,682
31 December 2018 10,827,808 1,283,402 8,679,245 270,163 1,376,594 22,437,212
(a) In 2019, the depreciation of fixed assets amounted to RMB 3,355,820,000 (2018: RMB
3,362,075,000) and was included in the income statement in full amount.
(b) As at 31 December 2019, the Company was still in the course of obtaining the ownership
certificate for the fixed asset with a carrying amount of RMB 219,475,000 (31 December
2018: RMB 503,717,000).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(15) Construction in progress
(a) Movement of significant projects of construction in progress
31 December Differences on 31 December
2018 Transfer to fixed Transfer to long- foretirgannscluartiroenncoyf 2019 Accaummouulanttivoef BorrowIinncglucdoinstgs: rateCoafpbiotarrlioswatiinogn
Increase in assets in current term receivables financial capitalised capitalised in costs in current
Carrying amount current year year in current year statements Carrying amount borrowing costs current year year Source of funds
Kuka Toledo Production
Operations 1,152,820 151,170 - (1,285,005) (18,985) - - - - Self-financing
Media Kuka Intelligent
Manufacturing Plant 173,549 51,102 (224,651) - - - - - - Self-financing
Indian Science &
Technology Park 20,545 258,736 (4,531) - (321) 274,429 - - - Self-financing
Other projects 730,707 675,840 (459,360) (25,419) (1,547) 920,221 - - - Self-financing
2,077,621 1,136,848 (688,542) (1,310,424) (20,853) 1,194,650 - - -
As at 31 December 2019, the Group believed that there was no need to make provision for impairment of construction in progress with the Carrying
amount consistent with the carrying amount; and the cost of construction in progress matched the budget amount. The projects were carried out on
schedule.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(16) Intangible assets
Patents and
Land use non-patent Trademark Trademark
rights technologies rights use rights Others Total
Cost
31 December 2018 4,586,857 2,061,849 5,005,403 2,601,880 4,721,765 18,977,754
Increase in current year
Purchase 98,367 8,756 - - 78,777 185,900
Others - 21,793 - - 297,490 319,283
Decrease in current year
Disposal (30,174) (11,300) - - (167,698) (209,172)
Differences on translation of foreign
currency financial statements 223 7,694 (12,010) 87,207 90,844 173,958
31 December 2019 4,655,273 2,088,792 4,993,393 2,689,087 5,021,178 19,447,723
Accumulated amortisation
31 December 2018 819,030 488,412 75,176 168,088 1,228,235 2,778,941
Increase in current year
Provision 99,342 96,237 33,883 64,402 950,106 1,243,970
Decrease in current year
Disposal (6,510) (11,300) - - (94,675) (112,485)
Differences on translation of foreign
currency financial statements 151 5,389 (131) 6,224 28,842 40,475
31 December 2019 912,013 578,738 108,928 238,714 2,112,508 3,950,901
Provision for impairment loss
31 December 2018 - 10,951 - - 1,187 12,138
Differences on translation of foreign
currency financial statements - 461 - - 44 505
31 December 2019 - 11,412 - - 1,231 12,643
Carrying amount
31 December 2019 3,743,260 1,498,642 4,884,465 2,450,373 2,907,439 15,484,179
31 December 2018 3,767,827 1,562,486 4,930,227 2,433,792 3,492,343 16,186,675
In 2019, the amortisation of intangible assets amounted to RMB 1,243,970,000 (2018: RMB
1,034,945,000) and was included in the income statement in full amount.
(17) Goodwill
The Group’s goodwill had been allocated to the asset groups and groups of asset groups at
the acquisition date, and the allocation is as follows:
31 December 2019 31 December 2018
Goodwill -
KUKA Group 22,240,132 22,330,623
TLSC Group 2,984,110 2,881,760
Little Swan 1,361,306 1,361,306
Others 2,173,765 2,526,701
28,759,313 29,100,390
Less: Provision for impairment (552,248) -
28,207,065 29,100,390
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(17) Goodwill (Cont’d)
When making an impairment testing of goodwill for assets, the Group compares the carrying
amount of the relevant assets or portfolios of asset groups (including goodwill) with their
recoverable amount. If the recoverable amount is lower than the carrying amount, the
difference shall be included in profit or loss for current period. The Group’s allocation of
goodwill was not changed in 2019.
As at 31 December 2019, the Group tested whether goodwill has suffered any impairment.
The recoverable amount of asset groups with goodwill is calculated using discounted future
cash flows determined according to the budget approved by management (the budget
period is 5 to 6 years). The future cash flows beyond the budget periods are calculated
based on the estimated perpetual annual growth rates. The perpetual annual growth rates
(approx. 1%-2%) applied by management are consistent with the estimates of the industry,
and do not exceed the long-term average growth rates of each product. Management
determines expected revenue growth rates (approx. 2.27%-11.90%) and EBITDA margins
(approx. 2.65%-11.30%) based on past experience and forecast on future market
development. The discount rates (approx. 9.35%-15.43%) used by management are the
pre-tax rates that are able to reflect the risks specific to the related asset groups.
Management analyses the recoverable amount of each asset group based on these
assumptions. As at 31 December 2019, the Group made a provision for impairment in
amount of RMB 552,248,000 of the SMC asset group, and no provision for impairment was
necessary for the goodwill of asset groups.
(18) Long-term prepaid expenses
The long-term prepaid expenses mainly include expenses prepaid for software and project
reconstruction.
(19) Deferred tax assets and deferred tax liabilities
(a) Deferred tax assets before offsetting
31 December 2019 31 December 2018
Deductible Deductible
temporary temporarydifferences and Deferred tax differences and Deferred taxdeductible losses assets deductible losses assetsDeductible losses 1,457,853 416,248 1,844,308 558,896Provision for asset
impairments 1,489,044 291,763 1,332,124 272,227
Employee benefits payable 1,394,921 337,172 1,371,756 330,923
Other current liabilities 24,574,237 4,767,558 16,549,427 3,572,039
Others 6,408,056 1,484,817 5,201,746 1,087,280
35,324,111 7,297,558 26,299,361 5,821,365
Including:
Expected to be recovered
within one year (inclusive) 6,073,311 4,755,720
Expected to be recovered
after one year 1,224,247 1,065,645
7,297,558 5,821,365
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(19) Deferred tax assets and deferred tax liabilities (Cont’d)
(b) Deferred tax liabilities before offsetting
31 December 2019 31 December 2018
Taxable Taxable
temporary Deferred temporary Deferred
differences tax liabilities differences tax liabilities
Changes in fair value 827,153 162,129 49,939 11,131
Business combination
involving enterprise not
under common control 11,785,555 3,474,098 12,533,188 3,663,691
Others 9,644,666 2,448,340 8,308,900 2,147,304
22,257,374 6,084,567 20,892,027 5,822,126
Including:
Expected to be recovered
within one year (inclusive) 1,145,971 1,194,871
Expected to be recovered
after one year 4,938,596 4,627,255
6,084,567 5,822,126
(c) The net balances of deferred tax assets and liabilities after offsetting are as follows:
31 December 2019 31 December 2018Balance after offsetting Balance after offsettingDeferred tax assets 5,768,993 4,421,313Deferred tax liabilities 4,556,002 4,422,074(20) Other non-current assets
31 December 2019 31 December 2018
Structural deposits (a) 4,355,799 -
Others 591,804 550,352
4,947,603 550,352
(a) As at 31 December 2019, structural deposits represented deposits in financial instruments
due for more than one year, mostly measured at fair value through profits or losses.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(21) Details of provision for asset impairments
Decrease in current year Differences on
Changes in translation of foreign
31 December accounting 1 January Increase in Charge- currency financial 31 December
2018 policies 2019 current year Reversal off/Written-off statements 2019
Provision for bad debts 1,178,845 - 1,178,845 303,795 (207,349) (108,649) 13,226 1,179,868
Including: Provision for bad debts of
accounts receivable 982,109 - 982,109 215,902 (145,990) (97,348) 13,152 967,825
Provision for bad debts of
loans and advances 154,006 - 154,006 68,617 (52,878) (10,826) - 158,919
Provision for bad debts of
other receivables 42,730 - 42,730 19,276 (8,481) (475) 74 53,124
Provision for decline in the value of
inventories 380,844 - 380,844 323,235 (12,040) (221,525) 4,959 475,473
Provision for impairment of available-for-
sale financial assets 2,287 (2,287) —— —— —— —— —— ——
Provision for impairment of fixed assets 33,281 - 33,281 8,466 - (2,678) 418 39,487
Provision for impairment of intangible
assets 12,138 - 12,138 - - - 505 12,643
Provision for impairment of investment
properties 12,576 - 12,576 - - - - 12,576
Provision for impairment of goodwill - - - 552,248 - - - 552,248
1,619,971 (2,287) 1,617,684 1,187,744 (219,389) (332,852) 19,108 2,272,295
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(22) Assets with use rights restricted
As at 31 December 2019, assets with use rights restricted were as follows:
31 December 2019 31 December 2018
Cash at bank and on hand
Including: Cash at bank (Note 4(1)) 39,491,676 5,686,629
Other cash balances
(Note 4(1)) 153,022 123,197
Legal reserves with the
Central Bank (Note 4(1)) 433,149 1,126,172
Deposits with banks and
other financial institutions
(Note 4(1)) - 3,000,000
40,077,847 9,935,998
(23) Short-term borrowings
31 December 2019 31 December 2018
Unsecured 5,665,756 807,097
Guaranteed borrowings 36,082 63,293
5,701,838 870,390
As at 31 December 2019, the annual interest rate range of short-term borrowings was 0.57%
to 9.40% (31 December 2018: 0.63% to 11.63%).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(24) Notes payable
31 December 2019 31 December 2018
Bank acceptance notes 23,891,600 23,325,115
(25) Accounts payable
31 December 2019 31 December 2018
Materials cost payable 39,528,815 32,605,437
Others 3,006,962 4,296,189
42,535,777 36,901,626
As at 31 December 2019, accounts payable with ageing over 1 year amounted to RMB
886,355,000 (31 December 2018: RMB 803,286,000), mainly representing unsettled
accounts payable for materials.
(26) Advances from customers
31 December 2019 31 December 2018
Advances on sales 14,054,839 14,521,809
Settled but not completed 2,177,015 2,259,857
16,231,854 16,781,666
As at 31 December 2019, advances from customers with ageing over 1 year amounted to
RMB 467,780,000 (31 December 2018: RMB 410,800,000), mainly representing unsettled
advances on sales.
(27) Employee benefits payable
31 December 2019 31 December 2018
Short-term employee benefits
payable(a) 6,118,722 5,624,918
Others 317,387 163,086
6,436,109 5,788,004
(a) Short-term employee benefits
31 December Increase in Decrease in 31 December
2018 current year current year 2019
Wages and salaries, bonus,
allowances and subsidies 5,057,019 22,470,846 (21,813,181) 5,714,684
Staff welfare 407,405 1,343,272 (1,494,776) 255,901
Social security contributions 101,292 1,793,935 (1,805,624) 89,603
Including: Medical insurance 98,652 1,718,795 (1,730,274) 87,173
Work injury insurance 1,933 23,671 (24,301) 1,303
Maternity insurance 707 51,469 (51,049) 1,127
Housing funds 30,631 425,791 (427,977) 28,445
Labour union funds and employee
education funds 19,310 135,965 (134,914) 20,361
Other short-term employee benefits 9,261 214,772 (214,305) 9,728
5,624,918 26,384,581 (25,890,777) 6,118,722
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(28) Taxes payable
31 December 2019 31 December 2018
Enterprise income tax payable 2,985,670 2,530,018
Unpaid VAT 900,204 853,187
Others 1,210,393 492,093
5,096,267 3,875,298
(29) Other payables
31 December 2019 31 December 2018
Other payables 3,800,568 3,346,129
(a) Other payables are mainly restricted share repurchase obligation, deposit and security
deposit payable, reimbursed logistics expense, manufacturing equipment expense, dividend
payable,etc.
(b) As at 31 December 2019, other payables with ageing over 1 year with a carrying amount of
RMB 765,092,000 (31 December 2018: RMB 821,240,000) were mainly those recognised
for performing equity incentive plan and deposit and security deposit payable, which were
unsettled for related projects that were uncompleted.
(30) Current portion of non-current liabilities
31 December 2019 31 December 2018
Current portion of debentures payable - 4,797,644
Current portion of long-term borrowings
(Note 4(32)) 1,230,966 2,166,041
Current portion of long-term payables 39,426 159,027
Current portion of equity purchase
payables 189,725 -
1,460,117 7,122,712
(31) Other current liabilities
31 December 2019 31 December 2018
Accrued sale rebates 26,175,014 19,583,366
Others 12,899,763 11,736,343
39,074,777 31,319,709
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(32) Long-term borrowings
31 December 2019 31 December 2018
Mortgage borrowings (a) 28,892,783 29,049,580
Guaranteed borrowings (b) 6,569,414 2,126,618
Unsecured 7,067,146 3,081,282
42,529,343 34,257,480
Less: Current portion of mortgage
borrowings (Note 4(30)) (39,078) (39,236)
Current portion of guaranteed
borrowings (Note 4(30)) - (2,126,618)
Current portion of unsecured
(Note 4(30)) (1,191,888) (187)
41,298,377 32,091,439
(a) As at 31 December 2019, a cost of mortgage borrowings of EUR 3,696,857,000, equivalent
to RMB 28,892,783,000 (31 December 2018: a cost of EUR 3,701,857,000, equivalent to
RMB 29,049,580,000) was pledged by 81.04% equity of KUKA Group, which was acquired
by the subsidiary of the Company. Interest is paid on a semi-annual basis, and the
borrowings are due on August 2022.
(b) Guaranteed borrowings of EUR 271,000,000, equivalent to RMB 2,118,000,000 was
guaranteed by the Company on 31 December 2019. Guaranteed borrowings of JPY
69,460,000,000, equivalent to RMB 4,451,414,000 was guaranteed by the Company on 31
December 2019. Interest is paid once a month, until May 2024.
(c) As at 31 December 2019, the annual interest rate range of long-term borrowings was 0.5%
to 5.5% (31 December 2018: 0.4% to 5.5%).
(33) Long-term employee benefits payable
31 December 2019 31 December 2018
Supplementary retirement benefits (a) 2,267,015 2,329,652
Others 151,548 150,666
2,418,563 2,480,318
(a) Supplementary retirement benefits
Supplementary retirement benefits obligation of the Group recognised in the balance sheet
date is calculated using the projected unit credit method, and reviewed by external
independent actuary institution.
(i) The Group’s supplementary retirement benefits liabilities:
31 December 2019 31 December 2018
Defined benefit obligation 3,896,591 4,034,998
Less: Fair value of planned assets (1,629,576) (1,705,346)
Liabilities of defined benefit obligation 2,267,015 2,329,652
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(33) Long-term employee benefits payable (Cont’d)
(a) Supplementary retirement benefits (Cont’d)
(ii) The actuarial assumptions used to determine the present value of defined benefit obligation
31 December 2019
Discount rate 0.06%-7.10%
Inflation rate 0.93%
Expected return on assets 0.75%-7.10%
Salary growth rate 0.00%-6.00%
Benefit growth rate 0.00%-10.50%
(34) Other non-current liabilities
Other non-current liabilities are mainly payable for equity acquisition.
(35) Share capital
Movements in the current year
Share-based
payment
31 December incentive plan Share Repurchases 31 December
2018 (a) Desterilisation issuance (b) and written-offs Sub-total 2019
RMB-denominated
ordinary shares -
RMB-denominated
ordinary shares
subject to trading
restriction 147,175 30,980 (8,298) 2,379 (6,833) 18,228 165,403
RMB-denominated
ordinary shares
not subject to
trading restriction 6,515,856 56,170 8,298 321,278 (95,105) 290,641 6,806,497
6,663,031 87,150 - 323,657 (101,938) 308,869 6,971,900
Movements in the previous year
Share-based
31 December payment Share Repurchases 31 December
2017 incentive plan Desterilisation issuance and written-offs Sub-total 2018
RMB-denominated
ordinary shares -
RMB-denominated
ordinary shares
subject to trading
restriction 212,023 25,955 (89,102) - (1,701) (64,848) 147,175
RMB-denominated
ordinary shares
not subject to
trading restriction 6,349,030 77,724 89,102 - - 166,826 6,515,856
6,561,053 103,679 - - (1,701) 101,978 6,663,031
(a) In 2019, the share-based payment incentive plan increased the share capital to 87,150,000
shares (2018: 103,679,000 shares). Some of the restricted shares have not met unlock
condition at end of year, and the Company regarded them as treasury stock and recognised
related liabilities for repurchase obligation.
(b) In 2019, the Company issued 323,657,000 A shares in exchange for the equity of Little Swan
(Note 4 (41)).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(36) Treasury stock
31 December Increase in Decrease in 31 December
2018 current year current year 2019
Restricted shares locked 918,171 3,157,236 (315,675) 3,759,732
Repurchased shares that
have not yet written off 4,000,256 - (4,000,256) -
4,918,427 3,157,236 (4,315,931) 3,759,732
31 December Increase in Decrease in 31 December
2018 current year current year 2019
Restricted shares locked 366,842 717,841 (166,512) 918,171
Repurchased shares that
have not yet written off - 4,000,256 - 4,000,256
366,842 4,718,097 (166,512) 4,918,427
In 2019, the group’s repurchased shares amounting to RMB 3,100,149,000 including RMB
1,701,167,000 granted restricted shares and employee stock ownership plan (Note
10(2)(a)). On 31 December 2019, treasury stock mainly comprised restricted shares
amounting to RMB 2,360,750,000 that have not met unlock condition and unallocated
repurchased shares of RMB 1,398,982,000 pursuant to the employee stock ownership
plans, amounting to RMB 3,759,732,000 in total (31 December 2018: RMB 4,918,427,000).
(37) Capital surplus
31 December Increase in Decrease in 31 December
2018 current year current year 2019
Share premium (a) 14,478,244 5,260,907 (4,055,652) 15,683,499
Share-based payment
incentive plan (b) 1,299,655 733,330 (589,043) 1,443,942
Others (c) 2,673,408 10,806 (171,342) 2,512,872
18,451,307 6,005,043 (4,816,037) 19,640,313
31 December Increase in Decrease in 31 December
2017 current year current year 2018
Share premium 11,908,475 2,596,878 (27,109) 14,478,244
Share-based payment
incentive plan 943,243 825,330 (468,918) 1,299,655
Others 3,059,786 21,902 (408,280) 2,673,408
15,911,504 3,444,110 (904,307) 18,451,307
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(37) Capital surplus (Cont’d)
(a) The increase in share premium arose from the exercise of share options with the amount of
RMB 2,372,248,000, restricted shares subscription with amount of RMB 54,668,000 and
newly issued shares with the amount of RMB 2,833,991,000 for merge with Little Swan
through share swap (Note 4(41)), and the decrease in share premium arose from the written-
off for the repurchased restricted shares with the amount of RMB 150,501,000 and the
repurchased public shares with the amount of RMB 3,905,151,000.
(b) The increase of share-based payment incentive plan arose from expenses attributable to
shareholders' equity of the parent company in the share-based payment incentive plan with
the amount of RMB 733,330,000, while the decrease arose from the transfer of RMB
589,043,000 to share premium due to the share-based payment incentive plan.
(c) Other decreases in capital surplus were mainly due to the Group's acquisition of equity held
by the minority shareholders of SMC, a subsidiary, at a premium.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(38) Other comprehensive income
Other comprehensive income in the income statement for the year ended 31 December
Other comprehensive income in the balance sheet 2019
Less:
Reclassification of
Attributable to Amount previous other Attributable to Attributable to
Changes in the parent arising comprehensive the parent minority
31 December accounting 1 January company after 31 December before income to profit or Less: Income company after shareholders
2018 policies 2019 tax 2019 income tax loss tax expenses tax after tax
Other comprehensive income items which will not be reclassified
to profit or loss
Changes arising from remeasurement of defined benefit plan 50,068 - 50,068 (142,753) (92,685) (160,406) - 10,017 (142,753) (7,636)
Other comprehensive income items which will be reclassified to
profit or loss
Share of the other comprehensive income of the investee
accounted for using equity method which will be
reclassified to profit and loss (59,146) - (59,146) (6,590) (65,736) (6,580) - - (6,590) 10
Gains or losses arising from changes in fair value of available-
for-sale financial assets (337,447) 337,447 —— —— —— ——- —— —— —— ——
Effective portion of gains or losses on hedging instruments in
a cash flow hedge (101,270) - (101,270) 113,890 12,620 13,175 107,675 (2,511) 113,890 4,449
Differences on translation of foreign currency financial
statement (884,358) - (884,358) 318,605 (565,753) 386,670 - - 318,605 68,065
(1,332,153) 337,447 (994,706) 283,152 (711,554) 232,859 107,675 7,506 283,152 64,888
Other comprehensive income in the balance sheet Other comprehensive income in the income statement for the year ended 31 December 2018
Less:Reclassification
of previous
Attributable to other Attributable to
the parent comprehensive the parent
31 December company after 31 December Amount arising income to profit Less: Income company after Attributable to minority
2017 tax 2018 before income tax or loss tax expenses tax shareholders after tax
Other comprehensive income items which will not be reclassified
to profit or loss
Changes arising from remeasurement of defined benefit plan 51,091 (1,023) 50,068 (8,397) - 5,194 (1,023) (2,180)
Other comprehensive income items which will be reclassified to
profit or loss
Share of the other comprehensive income of the investee
accounted for using equity method which will be
reclassified to profit and loss (111,070) 51,924 (59,146) 51,701 - - 51,924 (223)
Gains or losses arising from changes in fair value of available-
for-sale financial assets 151,781 (489,228) (337,447) (343,741) (175,256) 9,287 (489,228) (20,482)
Effective portion of gains or losses on hedging instruments in
a cash flow hedge 323,147 (424,417) (101,270) (107,675) (358,980) 31,750 (424,417) (10,488)
Differences on translation of foreign currency financial
statement (659,641) (224,717) (884,358) (319,708) - - (224,717) (94,991)
(244,692) (1,087,461) (1,332,153) (727,820) (534,236) 46,231 (1,087,461) (128,364)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(39) Surplus reserve
31 December Increase in 31 December
2018 current year 2019
Statutory surplus reserve 5,079,096 1,368,562 6,447,658
31 December Increase in 31 December
2017 current year 2018
Statutory surplus reserve 3,882,232 1,196,864 5,079,096
In accordance with the Company Law and the Company’s Articles of Association, the
Company should appropriate 10% of net profit for the year to the statutory surplus reserve,
and the Company can cease appropriation when the statutory surplus reserve accumulated
to more than 50% of the registered capital. The statutory surplus reserve can be used to
make up for the loss or increase the share capital after approval from the appropriate
authorities. According to the resolution at the Board of Directors’ meeting, the Company
appropriated 10% of net profit, amounting to RMB 1,368,562,000 in 2019 (2018: 10% of net
profit, amounting to RMB 1,196,864,000) to the statutory surplus reserve.
(40) Undistributed profits
2019 2018
Undistributed profits at beginning of year 58,762,315 47,627,235
Changes in accounting policies (337,447) -
Add: Net profit attributable to shareholders of the
parent company for current year 24,211,222 20,230,779Less: Ordinary share dividends payable (a) (8,553,897) (7,898,785)
Appropriation to general reserve (b) - -
Appropriation to statutory surplus reserve
(Note 4(39)) (1,368,562) (1,196,864)
Others - (50)Undistributed profit at end of year 72,713,631 58,762,315(a) Ordinary share dividends distributed in current year
In accordance with the resolution at the shareholders’ meeting, dated on 13 May 2019, the
Company distributed a cash dividend to the shareholders at RMB 1.30 per share, amounting
to RMB 8,561,590,000 calculated by 6,585,838,349 issued shares. As 40,014,998 public
shares did not participate in dividend distribution of total amount of 6,605,842,687 shares at
the time, 6,565,827,689 shares were actually entitled to distribution, and based on the
principle that the total dividend remains unchanged, it was actually RMB 1.304 per share.
Besides, 6,833,000 repurchased incentive shares in the restricted shares incentive plan
were written off (Note 4(35)), and cash dividend amounting to RMB 7,693,000 was
cancelled. The actual cash dividends distributed in current year amounted to RMB
8,553,897,000.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(40) Undistributed profits (Cont’d)
(b) General reserve
In 2019, according to the Administrative Measures for the Provision of Reserves of Financial
Enterprises issued by the Ministry of Finance (MOF), no provision for general reserve was
required (2018: Nil) at 1.5% of the balance of financial enterprise risk assets net of
recognised loan impairment provision.
(41) Transactions with minority shareholders
In 2019, transactions with minority shareholders were mainly the Company issued A shares
in exchange for the 47.33% equity held by minority shareholders of Little Swan on 21 June
2019. In this transaction, the Company issued 323,657,000 RMB-denominated ordinary
shares with RMB 53.29 per share, amounting to a total consideration of RMB
17,247,707,000, and share premium amounting to RMB 2,833,991,000. As at 31 December
2019, the Company held 100% equity of Little Swan .
(42) Operating revenue and cost of sales
2019 2018
Revenue from main operations 257,059,725 240,980,548
Revenue from other operations 21,156,292 18,684,272
278,216,017 259,664,820
2019 2018
Cost of sales from main operations 179,314,385 171,493,579
Cost of sales from other operations 18,599,543 16,670,978
197,913,928 188,164,557
(a) Revenue and cost of sales from main operations
2019 2018
Revenue from Cost of sales Revenue from Cost of sales
main from main main from mainoperations operations operations operationsHeating & ventilation, as
well as air-conditioner 119,607,379 81,626,941 109,394,649 75,886,326
Consumer appliances 109,486,791 75,014,044 102,992,803 72,959,466
Robotics and automation
System 25,191,964 19,953,437 25,677,924 19,809,997
Others 2,773,591 2,719,963 2,915,172 2,837,790
257,059,725 179,314,385 240,980,548 171,493,579
For the year ended 31 December 2019, 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 (31 December 2018: over 80%).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(42) Operating revenue and cost of sales (Cont’d)
(b) Revenue and cost of sales from other operations
2019 2018
Revenue from Cost of sales Revenue from Cost of sales
other from other other from otheroperations operations operations operationsRevenue from sales of
material 18,933,525 17,997,520 16,573,666 16,130,032
Others 2,222,767 602,023 2,110,606 540,946
21,156,292 18,599,543 18,684,272 16,670,978
For the year ended 31 December 2019, cost of sales from other operations was mainly
material costs, which accounts for over 80% of total cost of sales from other operations (31
December 2018: over 80%).
(43) Interest income and interest expenses
Interest income and expenses arising from financial business are presented as follows:
2019 2018
Interest income from loans and advances 1,058,536 844,382
Including: Interest income from loans and advances
to corporations and individuals 730,885 403,407
Interest income from note discounting 327,651 440,975
Interest income from deposits with banks, other
financial institutions and the Central Bank 104,644 1,310,010
Interest income 1,163,180 2,154,392
Interest expenses (122,618) (189,490)
1,040,562 1,964,902
(44) Taxes and surcharges
2019 2018
City maintenance and construction tax 699,256 695,858
Educational surcharge 508,523 505,347
Others 512,837 416,361
1,720,616 1,617,566
(45) Selling and distribution expenses
2019 2018
Selling and distribution expenses 34,611,231 31,085,879
For the year ended 31 December 2019, selling and distribution expenses were mainly
maintenance and installation expenses, advertisement and promotion fee, transportation
and storage fee, employee benefits and rental expenses, which accounted for over 80% of
total selling and distribution expenses (31 December 2018: over 80%).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(46) General and administrative expenses
2019 2018
General and administrative expenses 9,531,361 9,571,639
For the year ended 31 December 2019, general and administrative expenses were mainly
employee benefits, expenses of depreciation and amortisation, technical maintenance
expenses, administrative office expenses, rental expenses and property management
expenses, which accounted for over 70% of total general and administrative expenses (31
December 2018: over 70%).
(47) Research and development expenses
2019 2018
Research and development expenses 9,638,137 8,377,201
For the year ended 31 December 2019, research and development expenses were mainly
employee benefits, expenses of depreciation and amortisation, trial products and material
inputs expenses, which accounted for over 80% of total research and development
expenses (31 December 2018: over 80%).
(48) Financial income
The Group's financial income, other than those arising from financial business (Note 4(43)),
are presented as follows:
2019 2018
Interest expenses (880,703) (703,991)
Less: Interest income 3,807,136 2,155,862
Exchange gains or losses (531,088) 485,298
Others (163,709) (114,129)
2,231,636 1,823,040
(49) Asset impairment losses
2019 2018
Losses on bad debts —— 189,942
Losses on decline in the value of inventories
(Note 4(9)) 311,195 260,031
Impairment losses on fixed assets (Note 4(14)) 8,466 11,539
Reversal of impairment of loans and advances —— (13,648)
Impairment losses on goodwill (Note 4(17)) 552,248 -
871,909 447,864
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(50) Credit impairment losses
2019 2018
Losses on bad debts of accounts receivable (Note
4(4)) 69,912 ——
Losses on bad debts of other receivables (Note 4(5)) 10,795 ——
Impairment losses on loans and advances (Note 4(8)) 15,739 ——
96,446 ——
(51) Gains/(Losses) on changes in fair value
2019 2018
Derivative financial assets and liabilities 707,527 (810,450)
Other financial assets 653,636 ——
1,361,163 (810,450)
(52) Investment income
2019 2018
Investment income from wealth management
products 91,359 504,556
Losses on disposition of derivative financial assets
and liabilities (357,265) (31,958)
Investment income from associates 506,225 349,321
Derecognized gains on financial assets measured at
amortized cost (709) ——
Others (75,478) 85,407
164,132 907,326
There is no significant restriction on recovery of investment income of the Group.
(53) Losses on disposal of assets
2019 2018
Gains on disposal of non-current assets 48,152 82,425
Losses on disposal of non-current assets (179,283) (117,359)
(131,131) (34,934)
(54) Other income
Asset related/
2019 2018 Income related
Special subsidy 1,194,665 1,316,904 Income related
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(55) Income tax expenses
2019 2018
Current income tax calculated based on tax law and
related regulations 5,865,722 4,096,331
Deferred income tax (1,213,752) 26,308
4,651,970 4,122,639
The reconciliation from income tax calculated based on the applicable tax rates and total
profit presented in the consolidated financial statements to the income tax expenses is listed
below:
2019 2018
Total profit 29,929,114 25,773,058
Income tax calculated at tax rate of 25% 7,482,279 6,443,265
Effect of different tax rates applicable to subsidiaries (2,418,377) (1,792,394)
Effect of income tax annual filing for prior periods (132,198) (91,527)
Income not subject to tax (225,015) (189,499)
Costs, expenses and losses not deductible for tax
purposes 435,334 385,662
Utilisation of previous temporary differences or
deductible losses not realised as deferred tax
assets (52,064) (2,255)
Others (437,989) (630,613)
Income tax expenses 4,651,970 4,122,639
(56) Calculation of basic and diluted earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing consolidated net profit attributable to
ordinary shareholders of the Company by the weighted average number of ordinary shares
outstanding:
Unit 2019 2018
Consolidated net profit attributable to
ordinary shareholders of the parent
company RMB’000 24,211,222 20,230,779
Less: Dividends payable to restricted
shares RMB’000 (41,095) (23,538)
24,170,127 20,207,241
Weighted average number of outstanding Thousands
ordinary shares shares 6,707,294 6,561,297
RMB
Basic earnings per share Yuan/share 3.60 3.08
Including:
- Basic earnings per share from continuing
operations: 3.60 3.08
- Basic earnings per share for discontinued
operations: - -
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(56) Calculation of basic and diluted earnings per share (Cont’d)
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the parent company by the diluted weighted average number of
outstanding ordinary shares:
Unit 2019 2018
Consolidated net profit attributable to
ordinary shareholders of the Company RMB’000 24,211,222 20,230,779
Weighted average number of outstanding Thousands
ordinary shares shares 6,707,294 6,561,297
Weighted average number of ordinary
shares increased from share-based Thousands
payment shares 64,256 69,395
Weighted average number of diluted Thousands
outstanding ordinary shares shares 6,771,550 6,630,692
RMB
Diluted earnings per share Yuan/share 3.58 3.05
(57) Notes to the cash flow statement
(a) Cash received relating to other operating activities
2019 2018
Other income 1,218,555 1,327,455
Other operating revenue 2,116,396 2,284,317
Non-operating income 612,867 418,984
Financial income - interest income 339,475 323,352
Others 721,528 1,204,113
5,008,821 5,558,221
(b) Cash paid relating to other operating activities
2019 2018
Selling and distribution expenses (excluding
employee benefits and taxes and surcharges) 30,246,514 22,942,704
General and administrative expenses and research
and development expenses (excluding employee
benefits and taxes and surcharges) 9,601,758 8,971,922
Others 1,283,489 486,046
41,131,761 32,400,672
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(57) Notes to the cash flow statement (Cont'd)
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flow from operating activities is as follows:
2019 2018
Net profit 25,277,144 21,650,419
Add: Losses on asset impairment 871,909 447,864
Credit impairment losses 96,446 ——
Depreciation and amortisation 5,168,262 4,817,456
Losses on disposal of assets 131,131 34,934
(Gains)/Losses on changes in fair value (1,361,163) 810,450
Financial income (2,847,411) (1,265,831)
Investment income (164,132) (907,326)
Share options expenses 815,598 942,753
Increase in deferred tax assets (1,347,604) (360,724)
Increase in deferred tax liabilities 149,942 478,982
Increase in inventories (2,670,712) (77,387)
Increase in operating receivables (1,445,679) (17,867,374)
Increase in operating payables 15,916,673 19,156,864Net cash flows from operating activities 38,590,404 27,861,080Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at end of year 30,441,760 17,952,282
Less: Cash and cash equivalents at beginning of
year (17,952,282) (21,831,653)
Net increase/(decrease) in cash and cash
equivalents 12,489,478 (3,879,371)
(d) Composition of cash and cash equivalents
31 December 2019 31 December 2018
Cash on hand 3,128 3,803
Cash at bank that can be readily drawn on
demand 9,521,001 10,170,784
Deposits with the Central Bank that can be
readily drawn on demand 355,471 204,073
Deposits with banks and other financial
institutions that can be readily drawn on
demand 20,562,160 7,573,622
Cash and cash equivalents at end of year 30,441,760 17,952,282
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Monetary items denominated in foreign currencies
31 December 2019
Foreign currency
balance Exchange rate RMB balance
Cash at bank and on hand
USD 317,624 6.9762 2,215,810
JPY 5,212,777 0.0641 334,139
HKD 100,593 0.8958 90,111
EUR 180,362 7.8155 1,409,618
BRL 150,491 1.7308 260,469
VND 377,386,667 0.0003 113,216
Other currencies Not applicable Not applicable 1,309,279
Sub-total 5,732,642
Accounts receivable
USD 872,897 6.9762 6,089,502
JPY 14,299,236 0.0641 916,581
HKD 24,233 0.8958 21,708
EUR 345,216 7.8155 2,698,038
BRL 578,855 1.7308 1,001,883
VND 1,233,736,667 0.0003 370,121
Other currencies Not applicable Not applicable 1,982,229
Sub-total 13,080,062
Other receivables
USD 118,625 6.9762 827,551
JPY 2,392,309 0.0641 153,347
HKD 11,071 0.8958 9,917
EUR 88,187 7.8155 689,229
BRL 99,705 1.7308 172,569
Other currencies Not applicable Not applicable 146,583
Sub-total 1,999,196
Total 20,811,900
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Monetary items dominated in foreign currency (Cont’d)
31 December 2019
Foreign currency
balance Exchange rate RMB balance
Short-term borrowings
EUR 159,081 7.8155 1,243,298
BRL 54,530 1.7308 94,380
Other currencies Not applicable Not applicable 164,160
Sub-total 1,501,838
Accounts payable
USD 230,576 6.9762 1,608,545
JPY 7,697,192 0.0641 493,390
HKD 73,082 0.8958 65,467
EUR 183,248 7.8155 1,432,176
BRL 262,096 1.7308 453,636
Other currencies Not applicable Not applicable 1,191,342
Sub-total 5,244,556
Other payables
USD 31,148 6.9762 217,296
JPY 6,349,314 0.0641 406,991
HKD 73,628 0.8958 65,956
EUR 8,944 7.8155 69,899
Other currencies Not applicable Not applicable 105,353
Sub-total 865,495
Current portion of non-current
liabilities
USD 9,987 6.9762 69,674
EUR 176,223 7.8155 1,377,267
Other currencies Not applicable Not applicable 13,176
Sub-total 1,460,117
Long-term borrowings
USD 148,000 6.9762 1,032,475
EUR 4,070,228 7.8155 31,810,870
JPY 69,444,836 0.0641 4,451,414
Other currencies Not applicable Not applicable 3,618
Sub-total 37,298,377
Total 46,370,383
Monetary items denominated in foreign currencies above present all foreign currencies
except RMB.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Monetary items dominated in foreign currency (Cont’d)
31 December 2018
Foreign currency
balance Exchange rate RMB balance
Cash at bank and on hand
USD 1,395,190 6.8632 9,575,470
JPY 2,338,433 0.0619 144,749
HKD 260,111 0.8762 227,909
EUR 120,307 7.8473 944,084
BRL 209,297 1.7714 370,748
VND 123,516,667 0.0003 37,055
Other currencies Not applicable Not applicable 1,010,028
Sub-total 12,310,043
Accounts receivable
USD 932,695 6.8632 6,401,272
JPY 24,107,916 0.0619 1,492,280
HKD 16,236 0.8762 14,226
EUR 336,710 7.8473 2,642,265
BRL 524,032 1.7714 928,271
VND 1,148,340,000 0.0003 344,502
Other currencies Not applicable Not applicable 1,477,430
Sub-total 13,300,246
Other receivables
USD 124,888 6.8632 857,132
JPY 2,067,932 0.0619 128,005
HKD 18,648 0.8762 16,339
EUR 74,408 7.8473 583,899
BRL 15,827 1.7714 28,036
Other currencies Not applicable Not applicable 156,264
Sub-total 1,769,675
Total 27,379,964
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Monetary items dominated in foreign currency (Cont’d)
31 December 2018
Foreign currency
balance Exchange rate RMB balance
Short-term borrowings
USD 22,169 6.8632 152,148
EUR 27,744 7.8473 217,714
BRL 92,000 1.7714 162,969
Other currencies Not applicable Not applicable 219,956
Sub-total 752,787
Accounts payable
USD 300,761 6.8632 2,064,186
JPY 24,045,751 0.0619 1,488,432
HKD 57,062 0.8762 49,998
EUR 213,116 7.8473 1,672,382
BRL 106,504 1.7714 188,662
Other currencies Not applicable Not applicable 664,097
Sub-total 6,127,757
Other payables
USD 21,765 6.8632 149,379
JPY 5,035,719 0.0619 311,711
HKD 153,811 0.8762 134,769
EUR 21,064 7.8473 165,293
Other currencies Not applicable Not applicable 70,231
Sub-total 831,383
Current portion of non-current
liabilities
USD 699,039 6.8632 4,797,644
EUR 276,024 7.8473 2,166,041
Other currencies Not applicable Not applicable 159,027
Sub-total 7,122,712
Long-term borrowings
USD 162,918 6.8632 1,118,139
EUR 3,946,464 7.8473 30,969,089
BRL 846 1.7714 1,499
Other currencies Not applicable Not applicable 2,712
Sub-total 32,091,439
Total 46,926,078
Monetary items denominated in foreign currencies above present all foreign currencies
except RMB.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
5 Changes of consolidation scope
(1) Changes of consolidation scope due to other reasons
(a) Increase of consolidation scope
The Company’s wholly-owned subsidiaries, Midea Electric Trading (Singapore) Co. Pte. Ltd.
and Midea Electrics Netherlands B.V., established Midea Electric by cash of EGP 250,000
in March 2019, holding 99% and 1% of equity respectively.
The Company's wholly-owned subsidiary Guangdong Welling Auto Parts Co., Ltd.
established Anhui Welling Auto Parts Corporation Limited in May 2019 by cash of RMB
100,000,000, holding 100% of its equity.
The Company established Wuxi Little Swan Electric Co., Ltd. in May 2019, holding 100% of
its equity.
The Company’s wholly-owned subsidiary Guangdong Midea Electric Co., Ltd. and, its
subsidiary, Swisslog AG established Guangdong Swisslog Technology Co., Ltd. in August
2019, holding 50% and 50% of its equity respectively.
The Company and Guangdong Meicloud Technology Co.，Ltd. (wholly-owned subsidiary) .
South China Intelligent Robotics Innovation Research Institute (a third-party company)
Guangdong Newpearl Ceramics Group, and Guangdong Robotics Institute Venture Capital
Co., Ltd. established Guangdong Yueyun Industrial Internet Innovation Technology Co. ,Ltd.
in September 2019, holding 62%, 22%, 3%, 10% and 3% of its equity, respectively.
The Company’s wholly-owned subsidiaries, Midea Electric Trading (Singapore) Co., Pte.
Ltd., Midea International Corporation Company Limited and Midea Home Appliances
Investments (Hong Kong) Co., Limited, established Midea Refrigeration Equipment
(Thailand) Co., Ltd. in November 2019, holding 100% of its equity.
The Company's wholly-owned subsidiary Foshan Shunde Midea Household Appliances
Industry Co., Ltd. established Tianjin Midea Commercial Factoring Co., Ltd. in December
2019, holding 100% of its equity.
(b) Decrease of consolidation scope
In 2019, decrease of consolidation scope mainly includes deregistration of subsidiaries,
details are as follows:
Disposal method of Disposal time-point of
Name of company the equity the equity
Main Power Electrical Appliances (Guiyang)
Limited Deregistration January 2019
Wuhu Midea Household Appliance
Consultation Service Co., Ltd. Deregistration February 2019
Shenzhen Qianhai Midea Asset Management
Co., Ltd. Deregistration March 2019
Midea Financial Holding (Shenzhen) Co., Ltd. Deregistration April 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
6 Interests in other entities
(1) Interests in subsidiaries
(a) Composition of significant subsidiaries
Major business Place of
Subsidiaries location registration Nature of business Shareholding (%) Acquisition method
Direct Indirect
Business combination involving
GD Midea Air-Conditioning Equipment Co., Manufacture and sales enterprise not under common
Ltd. Foshan, PRC Foshan, PRC of air conditioner 73% 7% control
Business combination involving
GD Midea Group Wuhu Air-Conditioning Manufacture and sales enterprise not under common
Equipment Co., Ltd. Wuhu, PRC Wuhu, PRC of air conditioner 73% 7% control
Midea Group Wuhan Refrigeration Equipment Manufacture of air
Co., Ltd. Wuhan, PRC Wuhan , PRC conditioner 73% 7% Establishment
Wuhu Maty Air-Conditioning Equipment Co., Manufacture of air
Ltd. Wuhu, PRC Wuhu, PRC conditioner 87% 13% Establishment
GD Midea Heating & Ventilating Equipment Manufacture of air
Co., Ltd. Foshan, PRC Foshan, PRC conditioner 90% 10% Establishment
Manufacture of air
Zhejiang Meizhi Compressor Co., Ltd. Ningbo, PRC Ningbo, PRC conditioner 100% - Establishment
Business combination involving
Manufacture of enterprise not under common
Hefei Midea Refrigerator Co., Ltd. Hefei, PRC Hefei, PRC refrigerator 75% 25% control
Business combination involving
Manufacture of enterprise not under common
Hefei Hualing Co., Ltd. Hefei, PRC Hefei, PRC refrigerator 75% 25% control
Guangdong Midea Kitchen Appliances Manufacture of small
Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC household appliances - 100% Establishment
Foshan Shunde Midea Electrical Heating Manufacture of small
Appliances Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC household appliances - 100% Establishment
Wuhu Midea Kitchen & Bath Appliances Mfg. Manufacture of small Business combination involving
Co., Ltd. Wuhu, PRC Wuhu, PRC household appliances 90% 10% enterprises under common control
Manufacture of washing Business combination involving
Little Swan Wuxi, PRC Wuxi, PRC machine 85% 15%enterprise not under common control
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
6 Interests in other entities (Cont'd)
(1) Interests in subsidiaries (Cont'd)
(a) Composition of significant subsidiaries (Cont'd)
Major business Place of
Subsidiaries location registration Nature of business Shareholding (%) Acquisition method
Direct Indirect
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
Business combination
involving enterprise not
Midea Microfinance Co., Ltd. Wuhu, PRC Wuhu, PRC Petty loan 5% 95% under common control
British Virgin British Virgin
Mecca International (BVI) Limited Islands Islands Investment holding - 100% Establishment
Midea International Corporation Company
Limited Hong Kong Hong Kong Investment holding 100% - Establishment
Manufacture of small
household
Wuhu Midea Life Appliances Mfg Co., Ltd. Wuhu, PRC Wuhu, PRC appliances 100% - Establishment
Midea Electric Netherlands (I) B.V. Netherlands Netherlands Investment holding - 100% Establishment
Business combination
Manufacture of home involving enterprise not
Toshiba Consumer Marketing Corporation Japan Japan appliances - 100% under common control
Business combination
Manufacture of home involving enterprise not
TLSC Japan Japan appliances - 100% under common control
Business combination
Manufacture and involving enterprise not
KUKA Germany Germany sales of robots - 94.55% under common control
Shenzhen,
Midea Commerical Factoring Co., Ltd. Shenzhen, PRC PRC Factoring - 100% Establishment
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
6 Interests in other entities (Cont'd)
(2) Interest in associates
The Group’s associates have no significant influence on the Group and are summarised as
follows:
2019 2018
Aggregated carrying amount of investments 2,790,806 2,713,316
Aggregate of the following items in proportion
Net profit (i) 506,225 349,321
Other comprehensive income (i) (9,378) 51,924
Total comprehensive income 496,847 401,245
(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 joint ventures and associates and the unification of accounting policies
adopted by the joint ventures and the associates to those adopted by the Company.
7 Segment information
The reportable segments of the Group are the business units that provide different products
or service, or operate in the different areas. Different businesses or areas require different
technologies and marketing strategies, the Group, therefore, separately manages the
production and operation of each reportable segment and evaluates their operating results
respectively, in order to make decisions about resources to be allocated to these segments
and 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 measured by reference to selling prices to third parties.
The assets are allocated based on the operations of the segment and the physical location
of the asset. The liabilities are allocated based on the operations of the segment. Expenses
indirectly attributable to each segment are allocated to the segments based on the
proportion 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 administrative
expenses, research and development expenses and financial income.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
8 Segment reporting
(a) Information on the profit or loss, assets and liabilities of reported segment
Segment information as at and for the year ended 31 December 2019 is as follows:
Heating &ventilation, as
well as air- Consumer Robotics and Other segments
conditioner appliances automation system and unallocated Elimination Total
Revenue from external customers 135,470,711 114,367,462 25,356,999 4,185,334 - 279,380,506
Inter-segment revenue 2,227,043 756,506 163,663 7,408,736 (10,555,948) -
Operating expenses (124,219,498) (101,665,999) (25,955,822) (9,771,544) 10,294,975 (251,317,888)
Segment profit 13,478,256 13,457,969 (435,160) 1,822,526 (260,973) 28,062,618
Other profit or loss 1,866,496
Total profit 29,929,114
Total assets 121,176,656 103,888,887 37,236,774 121,317,404 (81,664,302) 301,955,419
Total liabilities 81,518,812 74,715,832 27,386,386 99,888,660 (89,050,368) 194,459,322
Long-term equity investments in
associates 210,811 91,779 83,964 2,404,252 - 2,790,806
Investment income from associates 160,908 4,035 (25,831) 367,113 - 506,225
Increase in non-current assets (excluding
long-term equity investments, financial
assets, goodwill and deferred tax
assets) 2,221,732 1,205,818 847,053 242,998 - 4,517,601
Asset impairment losses 64,814 245,923 560,382 790 - 871,909
Losses on/(Reversal of) credit
impairment 102,545 54,637 (75,990) 100,895 (85,641) 96,446
Depreciation and amortisation 1,780,289 1,565,812 1,157,866 664,295 - 5,168,262
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
8 Segment reporting (Cont’d)
(a) Information on the profit or loss, assets and liabilities of reported segment (Cont’d)
Segment information as at and for the year ended 31 December 2018 is as follows:
Heating &ventilation, as
well as air- Consumer Robotics and Other segments
conditioner appliances automation system and unallocated Elimination Total
Revenue from external customers 123,750,494 106,076,743 25,767,137 6,225,261 - 261,819,635
Inter-segment revenue 1,517,400 637,021 70,421 6,496,010 (8,720,852) -
Operating expenses (113,818,159) (95,177,469) (26,076,871) (10,847,195) 8,733,188 (237,186,506)
Segment profit 11,449,735 11,536,295 (239,313) 1,874,076 12,336 24,633,129
Other profit or loss 1,139,929
Total profit 25,773,058
Total assets 107,186,255 104,567,409 32,248,141 94,734,450 (75,035,107) 263,701,148
Total liabilities 71,901,268 71,644,039 26,081,586 86,771,167 (85,151,429) 171,246,631
Long-term equity investments in
associates 130,668 82,038 111,212 2,389,398 - 2,713,316
Investment income from associates 72,022 (13,897) (18,003) 309,199 - 349,321
Increase in non-current assets (excluding
long-term equity investments, financial
assets, goodwill and deferred tax
assets) 2,172,033 1,734,086 2,226,302 899,271 - 7,031,692
Losses on asset impairment 126,987 166,013 203,390 122,744 (171,270) 447,864
Depreciation and amortisation 1,554,330 1,719,693 1,019,462 523,971 - 4,817,456
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
8 Segment reporting (Cont’d)
(b) Geographical area information
The Group’s revenue from external customers domestically and in foreign countries or
geographical areas, and the total non-current assets other than long-term equity
investments, financial assets, goodwill and deferred tax assets located domestically and in
foreign countries or geographical areas (including Germany, Hong Kong, Macau, Singapore,
Japan, Italy, South America, etc.) are as follows:
Revenue from external customers 2019 2018
Domestic 162,596,802 151,412,126
In other countries/geographical areas 116,783,704 110,407,509
279,380,506 261,819,635
Total non-current assets 31 December 2019 31 December 2018
Domestic 22,206,308 22,966,699
In other countries/geographical areas 18,395,469 19,903,114
40,601,777 42,869,813
In 2019 and 2018, revenue from each individual customer is lower than 10% of the Group’s
total 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
Controlling Shunde District,
Midea Holding Co., Ltd. shareholder 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 2019 and
31 December 2018
Midea Holding Co., Ltd. 330,000
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
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 2019 31 December 2018
Voting Voting
Shareholding (%) rights Shareholding (%) rights
Direct Indirect (%) Direct Indirect (%)
Midea Holding Co., Ltd. 31.73% - 31.73% 33.20% - 33.20%
(2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of the Company’s main subsidiaries.
(3) Information of other related parties
Name of other related parties Relationship
Under the common control of the direct
Guangdong Wellkey Electrician Material Co., relatives of the Company’s ultimate
Ltd. controlling shareholder
Under the common control of the direct
relatives of the Company’s ultimate
Anhui Wellkey Electrician Material Co., Ltd. controlling shareholder
Under the common control of the direct
relatives of the Company’s ultimate
Guangdong Infore Material-Tech Co., Ltd. controlling shareholder
Under the common control of the direct
relatives of the Company’s ultimate
Orinko New Material Co., Ltd. controlling shareholder
Guangdong Ruizhu Intelligent Technoloy Under the common control of the Company’s
Co.,ltd. ultimate controlling shareholder
Foshan Micro Midea Filter Mfg. Co., Ltd Associates of the Company
Guangdong Shunde Rural Commercial Bank
Co., Ltd. Associates of the Company
(4) Information of related party transactions
The following primary related party transactions with major related parties are conducted in
accordance with normal commercial terms or relevant agreements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
9 Related parties and significant related party transactions (Cont’d)
(4) Information of related party transactions (Cont'd)
(a) Purchase of goods:
Pricing
Content of policies of
related party related party
Related parties transactions transactions 2019 2018
Guangdong Wellkey Electrician Purchase of
Material Co., Ltd. goods Agreed price 851,608 813,655
Foshan Micro Midea Filter Mfg. Co., Purchase of
Ltd goods Agreed price 298,143 227,593
Anhui Wellkey Electrician Material Purchase of
Co., Ltd. goods Agreed price 312,038 316,102
Purchase of
Orinko New Material Co., Ltd. goods Agreed price 1,159,702 332,991
2,621,491 1,690,341
(b) Selling of goods
Content of Pricing policies
related party of related party
Related parties transactions transactions 2019 2018
Guangdong Ruizhu
Intelligent Technoloy Selling of
Co.,ltd. goods Agreed price 105,382 10,812
(c) Remuneration of key management
2019 2018
Remuneration of key management 57,800 41,590
(5) Receivables from and payables to related parties
Receivables from related parties:
Items Related parties 31 December 2019 31 December 2018
Cash at bank and Guangdong Shunde Rural
on hand Commercial Bank Co., Ltd. 3,058,300 88,084
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
9 Related parties and significant related party transactions (Cont’d)
(5) Receivables from and payables to related parties (Cont’d)
Payables to related parties:
31 December 31 December
Items Related parties 2019 2018
Guangdong Wellkey Electrician
Accounts payable Material Co., Ltd. 201,956 169,592
Foshan Micro Midea Filter Mfg. Co.,
Ltd 68,258 60,885
Anhui Wellkey Electrician Material
Co., Ltd. 60,373 59,011
Orinko New Material Co., Ltd. 80,121 25,321
410,708 314,809
10 Share-based payment
(1) Share option incentive plan
(a) Pursuant to the fifth reserved share option incentive plan (the “Fifth Reserved Share Option
Incentive Plan”) approved at the eighth meeting of the third Board of Directors held during
the year 2019, the Company granted 5,340,000 share options with exercise price of RMB
47.17 to 97 employees. Under the circumstance that the Company meets expected
performance, 1/4 of the total share options granted will become effective after 2 years, 3
years, 4 years and 5 years respectively since 11 March 2019.
Determination method for fair value of share options at the grant date
Exercise price of options: RMB 47.17
Effective period of options: 6 years
Current price of underlying shares: RMB 46.58
Estimated fluctuation rate of share price: 37.02%
Estimated dividend rate: 2.95%
Risk-free interest rate within effective period of options: 2.42%
The fair value of the Fifth Share Option Incentive Plan calculated pursuant to the above
parameters is: RMB 46,628,000.
Pursuant to the sixth share option incentive plan (the “Sixth Share Option Incentive Plan”)
approved at the shareholders’ meeting for 2018 held during the year 2019, the Company
granted 46,540,000 share options with exercise price of RMB 52.87 to 1,131 employees.
Under the circumstance that the Company meets expected performance, 1/4 of the total
share options granted will become effective after 2 years, 3 years, 4 years and 5 years
respectively since 30 May 2019.
Determination method for fair value of share options at the grant date
Exercise price of options: RMB 52.87
Effective period of options: 6 years
Current price of underlying shares: RMB 49.45
Estimated fluctuation rate of share price: 37.04%
Estimated dividend rate: 2.62%
Risk-free interest rate within effective period of options: 2.68%
The fair value of the Sixth Share Option Incentive Plan calculated pursuant to the above
parameters is: RMB 417,556,000.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
10 Share-based payment (Cont'd)
(1) Share option incentive plan (Cont'd)
(b) Movements in share options during the year
2019
(Share in thousands)
Share options issued at beginning of year 229,836
Share options granted during the year 51,880
Share options exercised during the year (84,730)
Share options lapsed during the year (14,081)
Share options issued at end of year 182,905
As at 31 December 2019, the residual contractual maturity date of the Second Share Option
Incentive Plan is on 27 May 2020. The residual contractual maturity date of the Third Share
Option Incentive Plan is on 27 June 2021. The residual contractual maturity date of the
Fourth Share Option Incentive Plan is on 11 May 2021. The residual contractual maturity
date of the Fifth Share Option Incentive Plan is on 6 May 2024. The residual contractual
maturity date of the Fifth Reserved Share Option Incentive Plan is on 10 March 2025. The
residual contractual maturity date of the Sixth Share Option Incentive Plan is 29 May 2025.
(2) Restricted share plan
(a) Pursuant to the reserved restricted share incentive plan for 2018 approved at the eighth
meeting of the third Board of Directors held during the year 2019 (the "Reserved Restricted
Share Incentive Plan for 2018"), the Company granted 2,420,000 restricted shares with
exercise price of RMB 23.59 to 32 employees. Under the circumstance that the Company
meets expected performance, 1/4 of the total restricted shares granted will be unlocked after
2 years, 3 years, 4 years and 5 years, respectively, since 11 March 2019.
Pursuant to the restricted share incentive plan for 2019 (the “Restricted Share Incentive
Plan for 2019”) approved at the shareholders’ meeting for 2018 held during the year 2019,
the Company granted 28,560,000 restricted shares with exercise price of RMB 25.79 to 423
employees. Under the circumstance that the Company meets expected performance, 1/4 of
the total restricted shares granted will be unlocked after 2 years, 3 years, 4 years and 5
years, respectively, since 30 May 2019.
(b) Movements in restricted shares during the year
2019
(Share in thousands)
Restricted shares issued at beginning of year 40,185
Restricted shares granted during the year 30,980
Restricted shares unlocked during the year (7,193)
Restricted shares lapsed during the year (6,833)
Restricted shares issued at end of year 57,139
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
10 Share-based payment (Cont'd)
(3) Employee stock ownership plan
Pursuant to the fifth stock ownership plan of the Midea Global Partner Plan (the “Fifth Global
Partner Plan”) approved at the shareholders' meeting for the year ended 31 December 2019
held during the year 2019, The Company would purchase a total of 3,732,075 shares of
Midea Group from the secondary market, with an average purchase price of RMB 49.79 per
share and the purchase fund was the special fund of RMB 185,820,000 accrued by the
Company. The Company then entrusted China International Capital Corporation Limited
(“CICC”) to provide an asset management plan. The lock-up period of shares under this plan
is from 11 July 2019 to 10 July 2020.
Pursuant to the second stock ownership plan of the Midea Business Partner Plan (the
“Second Business Partner Plan”) approved at the shareholders' meeting for the year ended
31 December 2018 held during the year 2019. The Company would purchase a total of
1,868,000 shares of Midea Group from the secondary market, with an average purchase
price of RMB 49.79 per share. The purchase fund was the special fund and part of
performance bonus for management of RMB 93,000,000 in total accrued by the Company.
The Company then entrusted CICC to provide an asset management plan. The lock-up
period of shares under this plan is from 16 July 2019 to 15 July 2020.
(4) The total expenses due to the above share-based payment incentive plan, which were
granted, recognised for the year ended 31 December 2019 were RMB 815,598,000. As at
31 December 2019, the balance relating to the share-based payment incentive and accrued
from capital surplus was RMB 1,443,942,000.
11 Contingencies
As at 31 December 2019, the amount in tax disputes involving Brazilian subsidiary with 51%
interests held by the Company is about BRL 698 million (equivalent to RMB 1,207 million)
(Some cases have lasted for more than 10 years. The above amount includes the principal
and interest). As at 31 December 2019, relevant cases are still at court. Original
shareholders of Brazilian subsidiary have agreed to compensate the Company according to
verdict results of the above tax disputes. The maximum compensation amount is about BRL
157 million (equivalent to RMB 272 million). With reference to judgements of third-party
attorneys, management believes that the probability of losing lawsuits and making
compensation is small, and expects no significant risk of tax violation.
12 Commitments
(1) Capital commitments
Capital expenditures contracted for by the Group but are not yet necessary to be recognised
on the balance sheet as at the balance sheet date are as follows:
31 December 2019 31 December 2018
Buildings, machinery and equipment 1,433,420 639,689
(2) Operating lease commitments
The Group has no significant operating lease commitments at the balance sheet date.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
13 Events after the balance sheet date
(1) Significant non-adjusting events
(a) Outbreak of Coronavirus Empidemic 2019 (“COVID-2019”)
Under the outbreak of COVID-2019 in early 2020, domestic consumption and production
have been affected in the short run. Started from the end of February, the development of
the COVID-2019 outbreak is having increasing impacts overseas. The Group is consistently
working on the preventation and control work of the COVID-2019 spreading. As at the date
on which the financial statements were authorised for issue, the Group’s revenues and
profits had a certain degree of decline under the influences of the epedimic.The duration of
the COVID-2019 development will probably challenge the Group’s financial position and
operating results in the year 2020.
(b) Repurchased shares
Pursuant to the Proposal on the Scheme for the Repurchase of Certain Social Public Shares
approved at the eighteenth meeting of the third Board of Directors dated 21 February 2020,
the Company is allowed to use its own funds to repurchase some of the Company’s shares
through centralised price bidding, with number of shares to be repurchased ranging from 40
million to 80 million and purchase price not exceeding RMB 65 per share. The expected
total amount for repurchases is no more than RMB 5,200 million. The scheme is to be
implemented within 12 months from the date of approval by the Board of Directors. As at
the date on which the financial statements were authorised for issue, the Group has
repurchased 14.27million shares, and purchase price was RMB 700 million.
(c) Debt Financing
Pursuant to the Proposal on the Application for Registration and Issuance of Debt Financing
Instruments approved at the first interim shareholders’ meeting in 2020 dated 13 March
2020, the total amount of the debt financing instruments to be registered is no more than
RMB 20 billion (inclusive), of which the ultra-short-term financing bonds not more than
RMB10 billion (inclusive) and the medium-term notes not more than 10 billion (inclusive).
As at the date on which the financial statements were authorised for issue, the event was
approved at the shareholders’ meeting and published named SCP Short Commercial Paper
for 2 billion.
(2) Overview of profit distribution
On 28 April 2020, the company has total existing 6,999,467,315 shares. As 42,286,257
public shares did not participate in dividend distribution of total amount of 6,999,467,315
shares at the time, 6,957,181,058 shares were actually entitled to distribution. The Board of
Directors proposed a distribution of cash dividends of approximately RMB 11,131,490,000
at RMB 16 every 10 shares (including tax). Such proposal is pending for approval at the
shareholders’ meeting. The cash dividends distributed after the balance sheet date were not
recognised as liabilities at the balance sheet date.
14 Financial risk
The Group is exposed to various financial risks in the ordinary course of business, mainly
including:
? Market risk (mainly including foreign exchange risk, interest rate risk and price risk)
? Credit risk
? Liquidity risk
The following mainly relates to the above risk exposures and relevant causes, objectives,
policies and process of risk management, method of risk measurement, etc.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
14 Financial risk (Cont'd)
The objective of the Group's risk management is to seek balance between risk and income,
minimising the adverse impact of financial risks on the Group's financial performance.
Pursuant to the risk management objective, the Group has made risk management policies
to identify and analyse the risks it is exposed to and set appropriate risk resistant level and
design relevant internal control procedures to monitor the Group’s risk level. The Group
reviews regularly these risk management policies and relevant internal control systems to
adapt to changes in market condition or its operating activities.
(1) Market risk
(a) Foreign exchange risk
The Group mainly operates in China, Europe, America, Asia, South America and Africa for
the manufacturing, sales, investments and financing activities. Any foreign currency
denominated monetary assets and liabilities other than in RMB would subject the Group to
foreign exchange exposure.
The Group’s finance department at its headquarters has a professional team to manage
foreign exchange risk, with approach of the natural hedge for settling currencies, signing
forward foreign exchange hedging contracts and controlling the scale of foreign currency
assets and liabilities, to minimise foreign exchange risk, and to reduce the impact of
exchange rate fluctuations on business performance.
(b) Interest rate risk
The Group's interest rate risk arises from interest bearing borrowings including long-term
borrowings and debentures payable. Financial liabilities issued at floating rates expose the
Group to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the
Group to fair value interest rate risk. The Group determines the relative proportions of its
fixed rate and floating rate contracts depending on the prevailing market conditions. As at
31 December 2019, the Group’s long-term interest bearing borrowings at floating rates
amounting to RMB 971,090,000 (31 December 2018: Nil) (Note 4(32)).
The Group’s finance department at its headquarters continuously monitors the interest rate
position of the Group. Increases in interest rates will increase the cost of new borrowing and
the interest expenses with respect to the Group’s outstanding floating rate borrowings, and
therefore could have a material adverse effect on the Group’s financial performance. The
Group makes adjustments timely with reference to the latest market conditions and may
enter into interest rate swap agreements to mitigate its exposure to interest rate risk.
As at 31 December 2019, if the borrowing rate rises or falls 50 base points while other
factors remain constant, the group’s profit before tax would increase or decrease amounting
to RMB 206,492,000 (31 December 2018: RMB 160,457,000).
(c) Other price risk
The Group's other price risk arises mainly from financial assets held for trading (Note 4(2))
and other non-current financial assets (Note 4(13)) measured at fair value. As at 31
December 2019, if expected price of the investments held by the Group fluctuated, the
Group's gains or losses on changes in fair value would be affected accordingly.
As at 31 December 2019, if the Group’s expected price of equity instruments investment
rises or falls by 10% while other factors remain constant, the Group would have an increase
or decrease profit before tax amounting to RMB 283,746,000 (31 December 2018: RMB
190,688,000), other comprehensive income amounting to RMB 0 (31 December 2018:Nil).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
14 Financial risk (Cont'd)
(2) Credit risk
Credit risk is managed on the grouping basis. Credit risk mainly arises from cash at bank,
deposits with the Central Bank, deposits with banks and other financial institutions, notes
receivable, accounts receivable, loans and advances, other receivables and structural
deposits in other current assets and non-current assets.
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 since
they are deposited at state-owned banks and other medium or large size listed banks.
Management does not expect that there will be any significant losses from non-performance
by these counterparties.
In addition, the Group has policies to limit the credit exposure on notes receivable, accounts
receivable, loans and advances, other receivables and structural deposits in other current
assets and non-current assets. The Group assesses the credit quality of and sets credit
limits on its customers by taking into account their financial position, the availability of
guarantee from third parties, their credit history and other factors such as current market
conditions. The credit history of the customers is regularly monitored by the Group. In
respect of customers with a poor credit history, the Group will use written payment
reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group
is limited to a controllable extent.
As at 31 December 2019, the Group has no significant collateral or other credit
enhancements held as a result of the debtor's mortgage.
(3) Liquidity risk
Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the
Group’s finance department in its headquarters. The Group’s finance department at its
headquarters monitors rolling forecasts of the Group's short-term and long-term liquidity
requirements to ensure it has sufficient cash and securities that are readily convertible to
cash to meet operational needs, while maintaining sufficient headroom on its undrawn
committed borrowing facilities from major financial institutions so that the Group does not
breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term
and long-term liquidity requirements. As at 31 December 2019, monetary assets held by the
Group, including cash at bank and on hand, notes receivable, notes receivable included in
loans and advances, discounted assets, notes receivable included in receivables financing
and wealth management funds and structural deposits included in other current assets and
other non-current assets amounted to RMB144,026,331,000.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
14 Financial risk (Cont'd)
(3) Liquidity risk (Cont'd)
The financial liabilities of the Group at the balance sheet date are analysed by their maturity
dates below at their undiscounted contractual cash flows:
31 December 2019
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Short-term borrowings
(including interest) 5,840,214 - - - 5,840,214
Customer deposits and
deposits from banks and
other financial institutions 62,521 - - - 62,521
Notes payable 23,891,600 - - - 23,891,600
Accounts payable 42,535,777 - - - 42,535,777
Other payables 3,800,568 - - - 3,800,568
Derivative financial liabilities 27,100 - - - 27,100
Other current liabilities 12,899,763 - - - 12,899,763
Current portion of non-current
liabilities (including interest) 1,471,468 - - - 1,471,468
Long-term borrowings
(including interest) 512,262 4,425,755 37,467,552 - 42,405,569
Long-term payables - 29,256 4,390 - 33,646
Other non-current liabilities - - 863,826 - 863,826
91,041,273 4,455,011 38,335,768 - 133,832,052
31 December 2018
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Short-term borrowings
(including interest) 897,699 - - - 897,699
Borrowings from the Central
Bank (including interest) 100,260 - - - 100,260
Customer deposits and
deposits from banks and
other financial institutions 44,386 - - - 44,386
Notes payable 23,325,115 - - - 23,325,115
Accounts payable 36,901,626 36,901,626
Other payables 3,346,129 - - - 3,346,129
Derivative financial liabilities 756,299 - - - 756,299
Other current liabilities 11,736,343 - - - 11,736,343
Current portion of non-current
liabilities (including interest) 6,967,940 - - - 6,967,940
Long-term borrowings
(including interest) 390,253 1,609,425 31,453,442 - 33,453,120
Long-term payables - 49,866 39,024 - 88,890
Other non-current liabilities - 190,496 159,844 666,012 1,016,352
84,466,050 1,849,787 31,652,310 666,012 118,634,159
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
15 Fair value estimates
The level in which fair value measurement is categorised is determined by the level of the
fair value hierarchy of the lowest level input that is significant to the entire fair value
measurement:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
(1) Assets and liabilities measured at fair value on a recurring basis
As at 31 December 2019, the assets and liabilities measured at fair value on a recurring
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 1,087,351 - - 1,087,351
Derivative financial assets - 197,412 - 197,412
Receivables financing - 7,565,776 - 7,565,776
Other current assets – hedging
instruments - 98,572 - 98,572
Structural deposits - 50,557,518 - 50,557,518
Other non-current financial assets - - 1,750,107 1,750,107
Total assets 1,087,351 58,419,278 1,750,107 61,256,736
Financial liabilities measured at fair
value -
Derivative financial liabilities - 27,100 - 27,100
Other financial liabilities – hedging
instruments - 32 - 32
Total liabilities - 27,132 - 27,132
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
15 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont'd)
As at 31 December 2018, the assets and liabilities measured at fair value on a recurring
basis by the above three levels are analysed below:
Level 1 Level 2 Level 3 Total
Financial assets measured at fair
value -
Derivative financial assets - 220,197 - 220,197
Other current assets - hedging
instruments - 38,822 - 38,822
Available-for-sale financial assets -
Other current assets - wealth
management products - - 1,521,007 1,521,007
Available-for-sale financial assets 1,122,609 - 62,250 1,184,859
Total assets 1,122,609 259,019 1,583,257 2,964,885
Financial liabilities measured at fair
value -
Derivative financial liabilities - 756,299 - 756,299
Other financial liabilities - hedging
instruments - 146,496 - 146,496
Total liabilities - 902,795 - 902,795
The Group takes the date on which events causing the transfers between the levels take
place as the timing specific for recognising the transfers. There was no significant transfer
of fair value measurement level of the above financial instruments among the three levels.
The fair value of financial instruments traded in an active market is determined at the quoted
market price; and the fair value of those not traded in an active market is determined by the
Group using valuation technique. The valuation models used mainly comprise discounted
cash flow model and market comparable corporate model. Inputs of valuation technique
mainly comprise risk-free interest rate, estimated interest rate and estimated annual yield.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
15 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont'd)
There was no change in the valuation technique for the fair value of the Group’s financial
instruments in current year.
The changes in Level 3 financial assets are analysed below:
Financial assets held for trading and
other non-current financial assets
31 December 2018 1,583,257
Impact of changes in standards 732,448
1 January 2019 2,315,705
Increase 4,232,805
Decrease (5,274,444)
Transfer out from Level 3 (56,340)
Total gains of current period
Investment income recognised in the income
statement 509,578
Gains recognised in other comprehensive
income 22,803
31 December 2019 1,750,107
The changes in Level 3 financial assets are analysed below:
Available-for-sale financial assets
1 January 2018 22,174,966
Increase 1,576,579
Decrease (22,660,142)
Total gains of current period
Income recognised in the income statement 519,042
Gains recognised in other comprehensive
income (27,188)
31 December 2018 1,583,257
(a) The fair value of this part of other non-current financial assets is measured using discounted
cash flows approach. The judgement of Level 3 of the fair value hierarchy is based on the
materiality of unobservable inputs towards calculation of whole fair value. Significant
unobservable inputs mainly include the financial data of targeted company and risk adjusted
discount rates.
Assets and liabilities subject to Level 2 fair value measurement are mainly structural
deposits, receivables financing and forward exchange contracts and are evaluated by
market approach and income approach.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
15 Fair value estimates (Cont'd)
(2) Assets and liabilities not measured at fair value but disclosed
The Group's financial assets and financial liabilities measured at amortised cost mainly
include: cash at bank and on hand, deposits with the Central Bank, deposits with banks and
other financial institutions, notes receivable, accounts receivable, loans and advances, other
receivables, other current assets (excluding those mentioned in Note 15(1)), notes payable,
accounts payable, short-term borrowings, borrowings from the Central Bank, long-term
borrowings, current portion of non-current liabilities, customer deposits and deposits from
banks and other financial institutions, other payables, other current liabilities, etc.
Carrying amounts of the Group’s derecognized gains on financial assets and financial
liabilities measured at amortized cost as at 31 December 2019 and 31 December 2018
approximated to their fair value.
16 Capital management
The Group’s capital management policies aim to safeguard the Group’s ability to continue
as a going concern in order to provide returns for shareholders and benefits for other
stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, refund capital to shareholders, issue new shares or sell
assets to reduce debts.
The Group is not subject to external mandatory capital requirements, and monitors capital
structure on the basis of gearing ratio (total liabilities divide total assets).
As at 31 December 2019 and 31 December 2018, the Group's gearing ratio is as follows:
31 December 2019 31 December 2018
Total liabilities 194,459,322 171,246,631
Total assets 301,955,419 263,701,148
Gearing ratio 64.40% 64.94%
17 Notes to the parent company’s financial statements
(1) Other receivables
31 December 2019 31 December 2018
Other receivables 18,377,123 11,599,860
Less: Provision for bad debts (7,258) (6,840)
18,369,865 11,593,020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(1) Other receivables (Cont'd)
(a) Other receivables are analysed by ageing as follows:
31 December 2019 31 December 2018
Within 1 year 18,356,942 11,574,080
1 to 2 years 19,000 21,110
2 to 3 years 1,181 4,670
18,377,123 11,599,860
(b) Provision for bad debts and changes in book balance statements
Stage 1 Stage 3
Expected credit losses Expected credit losses in
in the following 12 the following 12 months Lifetime expected credit
months (grouping) (individual) losses (credit impaired) Sub-total
Provision Provision Provision ProvisionBook for bad Book for bad Book for bad for badbalance debts balance debts balance debts debts31 December 2018 557,395 6,840 11,042,465 - - - 6,840Changes in - -
accounting policies - - - - -
1 January 2019 557,395 6,840 11,042,465 - - - 6,840
Transfer to stage 3
in current year (58) (35) - - 58 35 -
Net increase in
current year 175,171 395 6,602,092 - - 23 418
Including: Written-off
in current year - - - - - - -
Derecognition - - - - - - -
21 December 2019 732,508 7,200 17,644,557 - 58 58 7,258
As at 31 December 2019, the Company did not have other receivables in stage 2.
(c) As at 31 December 2019, the Group’s other receivables at stage 1 and stage 3 were
analysed as follows:
(i) As at 31 December 2019, other receivables for which the related provision for bad debts
was provided on the individual basis were analysed as follows:
ECL rate in the
following 12 Provision for
Book balance months bad debts Reason
Relatively low bad
Stage 1 17,644,557 0% - debt risks
ECL rate in the
following 12 Provision for
Book balance months bad debts Reason
The debtor
encountered
Stage 3 58 100.00% (58) financial difficulties
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(1) Other receivables (Cont'd)
(c) As at 31 December 2019, the Group’s other receivables at stage 1 and stage 3 were
analysed as follows (Cont'd):
(ii) As at 31 December 2019, other receivables at stage 1 for which the related provision for
bad debts was provided on the grouping basis were analysed as follows:
31 December 2019
Book balance Provision for bad debts
Amount Amount Provision ratio
Security deposit/guarantee
payables grouping 732,508 (7,200) 0.98%
(d) As at 31 December 2019, other receivables from the top five debtors are analysed as below:
% of total Provision for
Nature Balance Ageing balance bad debts
Company A Current accounts 12,868,000 Within 1 year 70.02% -
Company B Current accounts 4,001,000 Within 1 year 21.77% -
Company C Current accounts 272,890 Within 1 year 1.48% -
Company D Current accounts 220,857 Within 1 year 1.20% -
Company E Current accounts 150,000 Within 1 year 0.82% -
17,512,747 95.29% -
(2) Long-term equity investments
Long-term equity investments are classified as follows:
31 December 2019 31 December 2018
Subsidiaries (a) 51,025,905 26,586,165
Associates (b) 1,579,954 1,650,130
52,605,859 28,236,295
Less: Provision for impairment - -
52,605,859 28,236,295
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries
Movements in current year
Provision for Cash dividends
impairment loss attributable to the parent
31 December Increase in Decrease in Provision for 31 December company declared in
2018 investment investment impairment Others 2019 Ending balance current year
Little Swan 2,822,571 - - - 17,295,265 20,117,836 - 955,792
Guangdong Midea Electric Co., Ltd. 1,000 4,999,000 - - - 5,000,000 - -
Midea Group Finance Co., Ltd. 3,354,009 - - - 4,103 3,358,112 - -
Foshan Shunde Midea Household
Appliances Industry Co., Ltd. 2,949,000 - - - - 2,949,000 - -
Guangdong Midea Microwave Oven
Manufacturing Co., Ltd. 1,880,041 - - - - 1,880,041 - -
GD Midea Air-Conditioning Equipment Co.,
Ltd. 1,436,506 - - - 226,131 1,662,637 - 435,132
Guangdong Midea Consumer Electric
Manufacturing Co., Ltd. 1,073,448 - - - 35,658 1,109,106 - -
Hefei Midea Heating & Ventilation
Equipment Co., Ltd. 1,065,941 - - - 5,518 1,071,459 - 1,132,080
Guangdong Midea Intelligent Technologies
Co., Ltd. 50,319 1,000,000 - - 692 1,051,011 - -
Hubei Midea Refrigerator Co., Ltd. 843,928 - - - 3,562 847,490 - 660,341
Wuhu Maty Air-Conditioning Equipment
Co., Ltd. 753,225 - - - 4,106 757,331 - 1,063,279
GD Midea Heating & Ventilating Equipment
Co., Ltd. 645,564 - - - 54,664 700,228 - 1,305,613
Hefei Midea Refrigerator Co., Ltd. 500,247 - - - 12,673 512,920 - -
Ningbo Midea United Materials Supply Co.,
Ltd. 491,350 - - - 4,069 495,419 - 593,117
GD Midea Group Wuhu Air-Conditioning
Equipment Co., Ltd. 352,041 - - - - 352,041 - -
Hefei Hualing Co., Ltd. 174,228 - - - 38,624 212,852 - -
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries (Cont’d)
Movements in current year
Provision for Cash dividends
impairment loss attributable to the parent
31 December Increase in Decrease in Provision for 31 December company declared in
2018 investment investment impairment Others 2019 Ending balance current year
Midea International Corporation Company
Limited 176,974 - - - - 176,974 - -
Wuhu Midea Kitchen & Bath Appliances
Mfg. Co., Ltd. 137,244 - - - 23,941 161,185 - 715,213
Midea Group Wuhan Refrigeration
Equipment Co., Ltd. 97,602 - - - 5,357 102,959 - 234,498
Zhejiang Meizhi Compressor Co., Ltd. 63,030 - - - 2,624 65,654 - 644,182
Midea Microfinance Co., Ltd. 55,594 - - - 738 56,332 - -
Wuhu Midea Life Appliances Mfg Co., Ltd. 56,223 - - - - 56,223 - 8,121
Others (i) 7,606,080 68,600 (151,648) - 806,063 8,329,095 - 1,889,958
26,586,165 6,067,600 (151,648) - 18,523,788 51,025,905 - 9,637,326
(i) In 2019, other changes in long-term equity investments movements is mainly from shares in exchange for the equity of Little Swan.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(2) Long-term equity investments (Cont’d)
(b) Associates
Investments in associates are mainly the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies.
(3) Operating revenue
Operating revenue mainly comprises other operating revenue including the trademark
royalty income, rental income, management fee income, etc. obtained by the Company
from the subsidiaries.
(4) Investment income
2019 2018
Income from long-term equity investments under
cost method 9,637,326 9,168,299
Investment income from wealth management
products purchased from financial institutions 91,359 388,942
Investment income from associates 272,089 239,418
Others 383,692 (76,565)
10,384,466 9,720,094
There is no significant restriction on repatriation of the Company's investment income.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
1 Details of non-recurring profit or loss
2019 2018
Gains or losses on disposal of non-current assets (131,131) 222,204
Except for the effective hedging activities related to the
Company’s ordinary activities, profit or loss arising from
changes in fair value of financial assets held for trading,
derivative financial assets, financial liabilities held for
trading, derivative financial liabilities, other non-current
financial assets, financial assets available for sale 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 and financial assets available for
sale. 676,430 (842,408)
Others (mainly including government grants, compensation
income, penalty income and other non-operating income
and expenses) 1,347,788 1,091,473
1,893,087 471,269
Less: Effect of income tax (394,095) (207,870)
Effect of minority interests (after tax) (12,162) (90,775)
1,486,830 172,624
Basis of preparation of details of non-recurring profit or loss:
Under the requirements of the Explanatory Announcement No. 1 on Information Disclosure
by Companies Offering Securities to the Public – Non-recurring Profit or Loss [2008] from
CSRC, non-recurring profit or loss refers to that arises from transactions and events that are
not 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 Return on net assets and earnings per share
The Group's return on net asset and earnings per share calculated pursuant to the
Compilation Rules for Information Disclosure of Companies Offering Securities to the Public
No. 9 - Calculation and Disclosure of Return on Net Asset and Earnings per Share (revised
in 2010) issued by CSRC and relevant requirements of accounting standards are as follows:
Weighted average Earnings per share (in RMB Yuan)
Return on net Basic earnings per Diluted earnings per
assets (%) share share
2019 2018 2019 2018 2019 2018
Net profit attributable to
shareholders of the
Company 26.43% 25.66% 3.60 3.08 3.58 3.05
Net profit attributable to
shareholders of the
Company net of non-
recurring profit or loss 24.80% 25.44% 3.38 3.05 3.36 3.03
Section X Documents Available for Reference
1. The original of The 2019 Annual Report of Midea Group Co., Ltd. signed by the
legal representative;
2. The financial statements signed and stamped by the legal representative, the
Director of Finance and the accounting supervisor;
3. The original of the auditor’s report with the seal of the accounting firm, and signed
and stamped by CPAs;
4. The originals of all company documents and announcements that are disclosed to
the public via newspaper designated for information disclosure during the Reporting
Period; and
5. The electronic version of The 2019 Annual Report that is released on
http://www.cninfo.com.cn.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
30 April 2020
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