Midea Group Co., Ltd.
Semi-Annual Report 2019
August 2019
Midea Group Co., Ltd. Semi-Annual Report 2019
Section I Important Statements, Contents and Definitions
The Board of Directors, the Supervisory Committee, directors, supervisors and senior
management of Midea Group Co., Ltd. (hereinafter referred to as the “Company”) hereby
guarantee that the information presented in this report is free of any misrepresentations,
misleading statements or material omissions, and shall together be wholly liable for the
truthfulness, accuracy and completeness of its contents.
All directors of the Company attended the Board meeting to review this report.
The Company plans not to distribute cash dividends or bonus shares or convert capital
reserves into share capital for the first half of 2019.
Mr. Fang Hongbo, Chairman of the Board and President 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, accurate and complete.
The financial statements in this report are unaudited by a CPAs firm.
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.
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Midea Group Co., Ltd. Semi-Annual Report 2019
Contents
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS . 1
SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ........... 4
SECTION III BUSINESS PROFILE ............................................................... 7
SECTION IV PERFORMANCE DISCUSSION AND ANALYSIS .................. 15
SECTION V SIGNIFICANT EVENTS .......................................................... 51
SECTION VI CHANGES IN SHARES AND INFORMATION ABOUT
SHAREHOLDERS....................................................................................... 97
SECTION VII PREFERENCE SHARES .................................................... 104
SECTION VIII INFORMATION ABOUT DIRECTORS, SUPERVISORS AND
SENIOR MANAGEMENT .......................................................................... 105
SECTION IX CORPORATE BONDS ......................................................... 107
SECTION X FINANCIAL REPORT ........................................................... 108
SECTION XI DOCUMENTS AVAILABLE FOR REFERENCE ................... 199
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Midea Group Co., Ltd. Semi-Annual Report 2019
Definitions
Term Definition
The “Company”, “Midea”, “Midea Group” or the
Midea Group Co., Ltd.
“Group”
Midea Holding Midea Holding Co., Ltd.
Little Swan Wuxi Little Swan Company Limited
TLSC Toshiba Lifestyle Products & Services Corporation
KUKA KUKA Aktiengesellschaft
Reporting Period 1 January 2019 to 30 June 2019
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Midea Group Co., Ltd. Semi-Annual Report 2019
Section II Company Profile and Key Financial Results
1. Corporate Information
Stock abbreviation Midea Group Stock code 000333
Stock exchange where the
shares of the Company are Shenzhen Stock Exchange
listed
Name of the Company in
美的集团股份有限公司
Chinese
Abbr. of the Company name in
美的集团
Chinese
Name of the Company in
Midea Group Co., Ltd.
English (if any)
Abbr. of the Company name in
Midea Group
English (if any)
Legal representative Fang Hongbo
2. Contact Us
Company Secretary Representative for Securities Affairs
Name Jiang Peng Ou Yunbin
Midea Headquarters Building, No. 6 Midea Headquarters Building, No. 6
Midea Avenue, Beijiao Town, Shunde Midea Avenue, Beijiao Town, Shunde
Address
District, Foshan City, Guangdong District, Foshan City, Guangdong
Province, China Province, China
Tel. 0757-22607708 0757-23274957
Fax 0757-26605456
E-mail IR@midea.com
3. Other Information
3.1 Ways to Contact the Company
Changes to the registered address, office address and their zip codes, website address and email
address of the Company in the Reporting Period:
□ Applicable √ N/A
No such changes in the Reporting Period. The said information can be found in the 2018 Annual Report.
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Midea Group Co., Ltd. Semi-Annual Report 2019
3.2 Information Disclosure and Place Where the Semi-Annual Report Is Kept
Changes to the media for information disclosure and the place where materials carrying disclosed
information such as this Report were kept in the Reporting Period:
□ Applicable √ N/A
The newspapers designated by the Company for information disclosure, the website designated by the
CSRC for disclosing this Report and the place where materials carrying disclosed information such as
this Report were kept did not change in the Reporting Period. The said information can be found in the
2018 Annual Report.
4. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□ Yes √ No
H1 2019 H1 2018 Change (%)
Operating revenue (RMB'000) 153,770,300 142,623,837 7.82%
Net profit attributable to shareholders
15,187,069 12,936,846 17.39%
of the Company (RMB'000)
Net profit attributable to shareholders
of the Company before non-recurring 14,555,674 12,500,253 16.44%
gains and losses (RMB'000)
Net cash flows from operating activities
21,787,890 7,613,688 186.17%
(RMB'000)
Basic earnings per share (RMB/share) 2.32 1.97 17.77%
Diluted earnings per share
2.30 1.94 18.56%
(RMB/share)
Weighted average ROE (%) 16.97% 16.43% 0.54%
30 June 2019 31 December 2018 Change (%)
Total assets (RMB'000) 284,033,825 263,701,148 7.71%
Net assets attributable to shareholders
92,588,979 83,072,116 11.46%
of the Company (RMB'000)
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Midea Group Co., Ltd. Semi-Annual Report 2019
5. Differences in Accounting Data under Domestic and Overseas Accounting
Standards
5.1 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.
5.2 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.
6. Non-recurring Profits and Losses
√ Applicable □ N/A
RMB'000
Item H1 2019 Note
Profit or loss from disposal of non-current assets -13,705
Profit or loss from fair-value changes in trading and derivative
financial assets and liabilities and other non-current financial
assets & income from disposal of trading and derivative financial
-74,312
assets and liabilities and other non-current financial assets
(exclusive of the effective portion of hedges that arise in the
Company’s ordinary course of business)
Other 944,851
Less: Corporate income tax 227,883
Minority interests (after tax) -2,444
Total 631,395 --
Explain the reasons if the Company classifies an item as a non-recurring profit/loss according to the
definition in the , or classifies any non-recurring
profit/loss item mentioned in the said explanatory announcement as a recurring profit/loss item
□Applicable √ N/A
No such cases for the Reporting Period.
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Midea Group Co., Ltd. Semi-Annual Report 2019
Section III Business Profile
1. Business Scope in the Reporting Period
1.1 Summary of business scope
Midea is a technologies group in HVAC systems, consumer appliances, robotics & industrial automation
systems, and smart supply chain (logistics). Midea offers diversified products and services, including
HVAC centered on residential air-conditioning, commercial air-conditioning, heating & ventilation systems;
consumer appliances centered on kitchen appliances, refrigerators, laundry appliances, and various
small home appliances; robotics and industrial automation systems centered on KUKA and Guangdong
Midea Intelligent Robotics Co., Ltd.; and integrated smart supply chain solutions with Annto Logistics
Technology Co., Ltd. as the service platform.
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 300 million users, major clients 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 15 overseas
manufacturing bases, around 33,000 overseas employees, 24 operating agencies, covering more than
200 countries and regions with 22 settlement currencies. Additionally, it 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
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Midea Group Co., Ltd. Semi-Annual Report 2019
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. 138 and No. 27 respectively on the 2019 Top 500 Most Valuable Brands
list and the Top 100 Most Valuable Tech Brands list released by Brand Finance, a British brand
assessment institution. 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 in the first half of 2019. Its residential air-conditioners, in particular, saw a much bigger share in
all channels, with an online market share of 29.5% and an offline market share of 27.2%.
The table below shows the offline market shares and rankings of the Company’s primary home appliance
products (by retail sales) in the first half of 2019:
Product category Market share Ranking
Air conditioners 27.2% 2
Laundry appliances 26.9% 2
Refrigerators 11.9% 2
Microwave ovens 44.3% 2
Rice cookers 44% 1
Food processors 38.8% 1
Pressure cookers 45.9% 1
Electric fans 39.7% 1
Water purifiers 22.6% 2
Water heaters 15.9% 3
Range hoods 8.4% 4
Midea’s online sales during the first half of 2019 exceeded RMB32 billion, up by over 30% YoY, remaining
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Midea Group Co., Ltd. Semi-Annual Report 2019
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 the first half of 2019:
Product category Market share Ranking
Air conditioners 29.5% 1
Laundry appliances 31.1% 2
Refrigerators 17.0% 2
Electric water heaters 33.4% 1
Gas water heaters 18.5% 1
Range hoods 16.7% 1
Water dispensers 25.0% 1
Water purifiers 16.4% 1
Microwave ovens 48.5% 1
Rice cookers 31.7% 1
Induction cookers 44.7% 1
Electric pressure cookers 41.3% 1
Electric fans 21.4% 1
Gas stoves 12.3% 2
2. Significant Changes in the Main Assets
2.1 Significant changes in the main assets
Main assets Reasons for any significant change
Down 32.36% YoY, primarily driven by the transfer of construction in progress out
Construction in progress
of this item upon completion
Short-term borrowings Up 53.76% YoY, primarily driven by an increase in such borrowings obtained
Down 90.06% YoY, primarily driven by the changes in the fair value of derivative
Derivative financial liabilities
financial instruments
Current portion of non-current
Down 98.38% YoY, primarily driven by the repayment of the current portion of
liabilities
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Midea Group Co., Ltd. Semi-Annual Report 2019
bonds payable and long-term borrowings
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 and magnetrons), 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 e-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 more than
RMB30 billion invested in R&D over the past five years (around 10 billion in 2018), the Group has set up
a total of 20 research centers in nine countries including China, with its R&D employees over 10,000 and
senior foreign experts over 500. At present, Midea has filed for over 100,000 patents, of which more than
50,000 have been granted. According to Clarivate Analytics, Midea holds the most invention patents in
the global home appliance industry for many consecutive years. While establishing its own research
centers around the world, the Group has also cooperated with domestic and foreign scientific research
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Midea Group Co., Ltd. Semi-Annual Report 2019
institutions, such as MIT, UC Berkeley, UIUC, Stanford, Purdue University, University of Maryland,
Politecnico di Milan, Tsinghua University and the Chinese Academy of Sciences, in order to establish joint
labs and build a global innovation ecosystem. The Group’s long-term focus on building technology,
marketing, product 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 15 overseas manufacturing bases and 24 overseas operating
agencies. Midea’s global operation 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-branded 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
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Midea Group Co., Ltd. Semi-Annual Report 2019
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
sales exceeded RMB32 billion in the first half of 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.
With advanced smart technologies, Annto Logistics Technology Co., Ltd. (Annto), a subsidiary of Midea,
has possessed core competitiveness and advantages in logistics automation. Annto has established an
efficient, customer-oriented and quick response nationwide warehouses and direct distribution network,
featuring a smooth flow of order data between the manufacturing end and the retail end through the
logistics information system, as well as the fast delivery of small orders through the flexible main line
transportation capacity. Relying on over 100 urban distribution centers nationwide, Annto concentrates
its resources on urban distribution. Meanwhile, supported by its self-developed information technology
system and nationwide distribution network, Annto is able to provide fully visualized direct distribution
services covering every town and village of the country. It can finish the delivery to 19,956 towns and
villages within 24 hours and to 16,511 towns and villages within 24-48 hours, as well as to 87.6% of the
country’s towns and villages within 48 hours.
3.5 A solid foundation for digitalization-driven Industrial Internet operations
Midea has been promoting a strategy of “Smart Home + Smart Manufacturing”. With continual research
and investment in artificial intelligence (AI), 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
make decision, driven by the combination of big data and AI, in order to reduce intermediaries for man-
machine interaction to the minimum and create truly smart appliances without any assistance in
interaction.
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Midea Group Co., Ltd. Semi-Annual Report 2019
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
Industrial Internet Platform, has become China’s first complete industrial Internet 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 industrial SaaS service to provide
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 industrial Internet platform
solutions to its manufacturing bases across the world and tens of thousands of its products, the Group
has also provided these solutions for over 150 customers in different industries. Therefore, it is safe to
say that Midea has built a solid foundation regarding industrial internet 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 industrial and
professional 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
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Midea Group Co., Ltd. Semi-Annual Report 2019
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 management and shareholders, as well as the formulation
of an incentive scheme comprising long and short-term incentives and restrains.
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Midea Group Co., Ltd. Semi-Annual Report 2019
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 the first half of
2019, the domestic sales of home appliances was RMB412.5 billion, down 2.1% year-on-year. This was
primarily driven by changes in the macroeconomic environment and the weakening factors of real estate
and population that had previously driven strong growth in the home appliance industry. But there were
also positive factors, such as the stabilizing economic environment and economic indicators as well as
the development of the consumer market and the expansion of consumer needs creating new
opportunities and growth points. Exports of home appliances maintained a growing trend, with the total
exports in the first half of 2019 reaching RMB163.6 billion, representing a growth of 5.5% year on year.
According to the 2019 Semi-Annual Report of China’s Household Electrical Appliance Industry published
by CHEARI and the National Household Electrical Appliance Industry Information Center together,
traditional home appliances with new technologies were favored by consumers, such as multi-door
refrigerators, energy-efficient air conditioners and washer-driers. Consumption upgrading will continue
on the traditional home appliance market. The home appliance market will continue to develop towards
the diversification of categories, dimensions and levels in the future.
In the first half of 2019, the domestic retail sales of air conditioners was RMB127.2 billion, down 3.7%
year-on-year. In terms of product performance, on one hand, high-end products which are energy-efficient,
comfortable and intelligent took up a larger market share, with the market share of air conditioners with
Level I Energy Efficiency rising to 55.1%; on the other hand, with higher energy efficiency standards for
the industry, the average market prices went down due to faster clearance sale of high energy
consumption products.
In the first half of 2019, the domestic retail sales of laundry appliances was RMB35.8 billion, up 2.7%
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Midea Group Co., Ltd. Semi-Annual Report 2019
year-on-year. The upgrading trend of laundry appliance industry remained marked, with washing-drying
becoming an important selling point, and front-loading products, high-capacity products and washer-dryer
combo products becoming the mainstream. Analyzing from the type of products, the market share of
washer-dryer front-loading washing machines increased by more than five percentage to 35.6%; in
addition, the market shares of both twin-tub front-loading washing machines and air washing machines
further increased.
In the first half of 2019, the domestic retail sales of refrigerators was RMB46 billion, down 1% year-on-
year. Product upgrading was particularly obvious in the refrigerator industry, with multi-door products
maintaining growth and the anti-bacteria, freshness preservation and odor-free selling points well
received on the market. The market share of multi-door refrigerators increased to nearly 50%, with the
retail market shares of cross four-door refrigerators and five-door refrigerators rising to 25.5% and 8.9%
respectively. On the backdrop of major consumption upgrading, represented by Midea Veg-Fruit
Purification Refrigerator Series, the world’s first refrigerator that is able to remove pesticide residue from
fruits and vegetables, production innovation in the refrigerator industry is moving towards high-end, high
quality and intelligent products.
In the first half of 2019, the domestic retail sales of kitchen appliances was RMB76.7 billion, up 0.4%
year-on-year. The overall size growth of the industry was weak while new product categories was able to
maintain growth. Analyzing from products, the retail sales of water heaters, range hoods and gas stoves
all decreased, whereas the retail sales of new product categories such as dishwashers, water purifiers
and integrated stoves increased 24.4%, 5.9% and 52.4% respectively. In addition, driven by policies,
kitchen waste processors skyrocketed.
In the first half of 2019, the domestic retail sales of small appliances was RMB56.7 billion, up 4.5% year-
on-year. The sales of some products rose at a very high speed, including vacuum cleaners, food
processors and rice cookers, which increased 2.4%, 4.8% and 5.9% respectively from the corresponding
period of last year. Among vacuum cleaners, both the online and offline retail sales of robot and pusher
products achieved steady growth. With people’s increasing awareness for a healthy life and the rising
demand in this respect, the market demand for healthy tea kettles grew over 35% in the first half of 2019,
with the retail sales reaching RMB1.7 billion.
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Midea Group Co., Ltd. Semi-Annual Report 2019
In the first half of 2019, the online retail sales of home appliances accounted for over 35% of the sales
through all channels, and the online market became an indispensable channel in the home appliance
industry. In light of the changes in the channel retail sales, most product categories achieved growth in
the online market, while all categories other than washing machines declined in the offline market. So far,
concentration has become an increasingly evident trend in the online market, with the industry’s top three
accounting for a more than 92% market share. Although the overall offline market size shrank due to the
impact of the online market, it remained the mainstream channel for air conditioners, refrigerators,
washing machines, and kitchen appliances. From a long-term perspective, the deep integration of online
and offline channels will be a major trend. 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
In July 2019, the latest statistics published by the International Federation of Robotics (IFR) showed that
global installations of industrial robots that had maintained high speed growth since 2012 slowed down
in 2018 with a growth of less than 1%. Meanwhile, analyzing from distribution in different countries and
regions, China remained far ahead, with installations of industrial robots in 2018 reaching 133,200 units,
exceeding the total of Japan, the U.S. and South Korea ranking second, third and fourth respectively with
installations of 52,400 units, 38,100 units and 37,600 units. According to IFR, global installations of
industrial robots increased from 159,000 units in 2012 to 384,000 in 2018, with the latter more than double
the former in six years.
According to GGII, in the first half of 2019, China’s industrial robot output reached 75,400 units,
decreasing 10.1% from the corresponding period in the last year; imports of industrial robots reached
5,035 units, declining 34.75% from the corresponding period in the last year; exports reached 1,434 units,
sliding 18.62% from the corresponding period in the last year. According to GGII’s survey, despite the
overall weakening industrial robot market, the sales volumes of DELTA and collaborative robots in China’s
market in the first half of 2019 saw growth against the trend with growth speeds exceeding 30% and 20%
respectively. In the first half of 2019, 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
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Midea Group Co., Ltd. Semi-Annual Report 2019
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.
In addition, the IFR statistics show that analyzing from the use of industrial robots per 10,000 persons,
South Korea ranks top with 710 industrial robots, followed by Singapore with 658 units. China uses 97
industrial robots per 10,000 persons, slightly higher than the Asian average of 75 units. The European
average is 106 units while that of Americas is 91 units. In light of its huge labor market, China has great
potential for the use of industrial robots at present. Furthermore, coupled with diverse factors such as
flexible demands of the manufacturing sector, declining demographic dividend, emerging markets and
the development of innovative technologies, industrial robots will have a very promising prospect and the
application fields and development space of them will be expanded. According to IFR’s estimation,
China’s market size of industrial robots will further increase to US$9.35 billion by 2020.
1.2 Analysis of the Company’s Main Business
In the first half of 2019, guided by the three core strategies of “Leading Products, Operational Efficiency
and Global Operations” in a complicated political and economic environment at home and abroad, Midea
focused on improving products, promoting lean management and high-performance operations in the
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 H1 2019 were successfully fulfilled, with higher profitability, further improving indicators
such as owned funds and channel inventories, better product quality and reputation, as well as
strengthened competitiveness in various product categories and global operation synergies. For H1 2019,
Midea achieved, on a consolidated basis, total revenue of RMB154.3 billion, up 7.37% YoY; and net profit
attributable to Midea Group shareholders of RMB15.2 billion, up 17.39% year-on-year.
In H1 2019, the Company carried out the following tasks:
A. Focused on users, provided innovative products and user experience, and steadily improved
product competitive advantages
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Midea Group Co., Ltd. Semi-Annual Report 2019
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. Through user insight
and technological innovation, users are provided with better-than-expected product experience. 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 e-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 product design, Midea won a total of 58 design awards during H1 2019, including
24 Red Dot Awards and 34 iF 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 Gold 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 counter-rotating
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 LXZ 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
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processed. The DX Air Conditioner Series released by TLSC in Tokyo, Japan, features WiFi intelligent
control module and breezeless technology, avoiding the discomfort and fatigue brought by direct cold
wind from ordinary air conditioners. In addition, it is equipped with the self-cleaning function, which
enables it to keep the machine clean and air fresh all the time.
——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. In recent years,
Midea Commercial Air Conditioners are increasingly being seen in iconic international key programmes,
including 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.
According to the data from ChinaIOL.com, Midea Commercial Air Conditioners topped the domestic
market for the past five years in a row with a market share of nearly 20%. And the largest domestic market
share remained with Midea Commercial Air Conditioners in H1 2019 according to the Mechanical and
Electrical Information-Central Airconditioning Market magazine. Appearing in more and more iconic
international key programmes, Midea Commercial Air Conditioners have won increasing recognition from
consumers. The application of Midea Variable Frequency Direct Drive Centrifuge in the machine room
renovation project of Shanghai Metro is recognized as an “Energy Saving and Emission Reduction
Demonstration Project of Shanghai” in the refrigeration and air conditioning industry. Midea is also given
an Outstanding Contribution Award in the air-source heat pump industry during the 2018 “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”. Midea
Commercial Air Conditioners has become an icon for “Made in China”.
In April 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, solving users’ pain points 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, as well as improving experience for users across
the world. In the same month, Midea Commercial Air Conditioners started to produce for the first batch
of orders for its homegrown Maglev Variable Frequency Centrifugal Unit, marking the industrialization of
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yet another independent innovation achievement by Midea Commercial Air Conditioners.
— — Laundry Appliances: Little Swan under Midea has launched Water Magic Cube II Front-
Loading/Top-Loading 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 physical cleaning approach helps
reduce the consumption of chemical detergent 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 for the same washing effect. Beverly under Little Swan has launched the One Drum Washing
Machine, featuring the no-outer-drum and tower vibration absorption technology, which is pioneering
worldwide. The no-outer-drum design goes beyond the inner-and-outer-drum structure of a
conventional top-loading washing machine, offers a big capacity in a small size, and saves energy and
30% water for the same capacity. With the entire inner drum made from stainless steel, and featuring
UV and nano silver ion sterilization, it inhibits the breeding of bacteria and realizes healthy washing. 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. In addition to performing professional washing of luxurious clothes made from
precious materials, it is equipped with the function of easily removing dander and residue. Beverly
Household Washing Care Center, 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), adopts a built-in design with mirror coated glass and offers
dual control on one screen. 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 integrates the unique new breathing technology with the micro steam care of
direct air washing. The fresh air helps remove odor and solve consumers’ pain point of being unable to
wear the clothes immediately after washing. Two Toshiba Front-Loading Washer-Dryers featuring the
“Ultra Fine Bubble W” technology have won the “Heisei 30” Annual Award for Energy Conservation in
Japan. The nano ultra fine bubbles generated allow enhanced washing and
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rinsing performances without having to increase water consumption or operation time.
— — Refrigerators: In June 2019, Midea unveiled three whole-new refrigerator series. The Micro-
Crystalline Series with the upgraded micro-crystalline technology to deal with different food characteristics
can do better in freshness preservation. It also features better technique and quality, as well as a more
stylish appearance, satisfying different needs of more families. The Veg-Fruit Purification Series 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
remove 90% pesticide residue within two hours. The Ultra Odor-Free Series features the globally
pioneering PST + super magnetic electrolysis odor-free technology, which 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. As a result, the product
achieves double purification and fast odor-free effects within 19 minutes and leads the industry into a
“fast, clean and new era” of refrigerators. TLSC has launched the industry’s first 60cm wide slim
refrigerator with 501L capacity, which maintains insulation performances and strength with a slimmer
exterior through high performance insulation materials.
——Kitchen Appliances: In the first half of 2019, Midea AI Range Hood + Stove Suite (E80\E62+Q80Pro)
was released in China, the first of its kind in the country. The combination of AI and scenario interactions
helps realize intelligent application in the kitchen. The range hood in the product suite is equipped with a
powerful variable frequency motor that intelligently senses duct resistance. In addition, the smart home
automatic sensor and gesture intelligent control functions not only absorb fume thoroughly, but also solve
the problems of reverse flow of fume on high residential floors and fume obstruction on low residential
floors. Midea Intelligent Chef Stove Q80 Pro20 breaks through industrial barriers and achieves real
precise control of time. Whether it is in steaming, boiling, cooking or frying, this product is able to
automatically switch off with absolute precision, and offers a buzzing alert after the switch-off. Its 5.0KW
high-fire cooking and whole-new energy concentrating cap helps shorten cooking time and retain
freshness and nutrition. Midea Anti-Bacteria Intelligent Dishwasher Silver Wing H4 is equipped with high
pressure spray washing, pioneering hot air drying technology and deep UV sterilization technology. It is
the industry’s first dishwasher of its kind integrating washing, sterilization, drying and storage. It also
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features the AI washing model, which autonomously selects the best washing mode by recognizing the
degree of contamination, making it a representative of intelligent dishwashers. The industry’s first Purifier-
Dishwasher E500B with the micro nano bubble function released by Midea uses a double pressure
transducer system to dissolve air in water and 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’s first dome-
shaped product G50 Series Embedded Combi Steamer features a dome design without water dripping
and variable frequency HM direct-spray steam, which generates steam instantly and retains freshness
quickly. It saves more space while offering a super large capacity of 50L. The enamel cavity processed
through seamless welding makes it easier to clean. The 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. Midea 32QE6
Electric Water Heater is the first healthy water product with intelligent power conservation of 40%. It
displays the inner tank cleaning time on the screen in real time and reminds of timely cleaning.
——Lifestyle Appliances: In the first half of 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. It adopts the innovative sugar leaching technology to reduce the reducing sugar by 50%
while making rice fragrant, soft and tasty with the built-in titanium tank and the micro pressure braising
valve. Midea’s new black technology product “Intelligent Stir-Fry Robot” performs stir-fry automatically
with its two wings, and is able to control cooking temperature and cook without fume with 1800W IH high
fire. Midea’s unique Ultra Thin Noise-Free Blender features the industry’s thinnest 77mm body with a
1800W ultra thin variable frequency motor. The unique ultra noise-free blender system + 4D eccentric
system blends food ingredients thoroughly and finely, which helps release more nutrition. Midea has
launched the first intelligent bladeless fan to bring better user experience for Chinese consumers. In 2019,
Midea was the first in the industry to put forward the “Techwind” concept and developed seven types of
different wind shapes to fully meet users’ different demands. For example, Midea’s “Little Monster” offers
multi-directional wind through double-layer blades and blows wind to two spaces at the same time; and
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its “Xiaoqingyu” series blows quiet, soft wind and is free from the noise of conventional fans.
B. Continued to invest in R&D to build a global R&D platform and a responsive and innovative
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 “Leading Products” strategy. 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, so as to build up the competence of “Leading
Products”.
While carrying out the core technology research, Midea has attached great importance to the
transformation of R&D achievements. In 2019, 14 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 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 Key Technology of Cooking Healthy Food to Control Blood Sugar”, “the Research and Application of
Key Technology for the Comfort of Intelligent Bladeless Fans”, “the Research and Application of Key
Technology for the Full Power Enhanced Heat Transfer of Oil-Filed Electric Heaters”, “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 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
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Quality of Microwaved Food”, and “the Research and Application of Miniaturized Hot Air Technology
Based on Baking Uniformity”. Additionally, Midea has another eight scientific research projects winning
the Progress Award of China Light Industry Association (CLIA), the Sci-Tech Progress Award of China
Association for Promotion of Private Sci-Tech Enterprises, and the Sci-Tech Progress Award of
Guangdong Province. 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 H1 2019, Midea filed 5,719 patent applications in total and were granted 7,068 patents, including 1,649
inventions. As at 30 June 2019, the number of patent applications of Midea has exceeded 100,000 in
total and over 52,000 patents have been granted, making Midea the home appliance maker with the most
patents in the world for four consecutive years. 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 H1 2019, the national standard of the Energy Efficiency
Limits and Levels of Room Air Conditioner of which Midea took part in the drafting was approved, which
brings about a new round of energy efficiency upgrade in the air conditioning industry. The national or
industrial standards of which Midea led in the drafting or revision include the IEC 60705 Household
Microwave Ovens - Method for Measuring Performance, the GB/T 36934-2018 Guidelines for Designing
Household Appliances for the Elderly, the GB/T 36947-2018 Standards for Designing User Interface of
Household Appliances for the Elderly, the QB/T 5366-2019 Commercial Microwave Ovens, the QB/T
5363-2019 Dust Mite Controller, among others. Meanwhile, Midea also 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.
C. Deepened the channel transformation, further improved the channel efficiency and rebuilt the
retail service ability
Midea continued to promote channel reform and transformation, flaten 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
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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. It has established long-term strategic
cooperation for procurement with the domestic top 20 companies in the real estate industry, the top 20
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 uses a digital project management system to conduct 360-degree appraisals in order to build 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. First, it provides one-stop, intelligent product and
service solutions for users with house decoration demands. In the first half of 2019, it opened more than
150 Midea Smart Life Experience Centers in China and upgraded over 250 flagship stores into Midea
Smart Life Experience Centers, providing products and services for more than 100,000 families. Second,
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, and steadily increases the ratio of large-order packaged
purchase, with the total order value per customer increasing over 20%. Third, 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 old 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
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restocking through data support and system connectivity, and develops smart supply chains for fast
response to user demands. On the other hand, 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, it provides full-category products and services through flagship store and franchised store
systems. In towns and villages, 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, in an effort to
carry out new retail, efficiently introduce online users, and promote user flow between online and offline
stores. At the same time, through light operation of online communities, it enhances activity, gets closer
to users, understands their demands and propels offline all household appliances experience purchase
and house decoration purchase. On the other hand, it improves the delivery-installation integrated
network, which offers users one-stop after-sales service solutions in respect of all household appliances.
Over 2,500 delivery-installation integrated service outlets have been set up nationwide and 1,500 Midea
flagship stores have been equipped with the delivery-installation service capabilities. 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 closed-loop processing of user complaints. In
the first half of 2019, the ratio of confirmation by installation users reached 97% and the after-sales service
platform for full category was successfully launched. In addition, Midea cracks down on irregularities
through multiple mechanisms such as secret visits to mysterious users.
Annto highly focuses on core capacity building. Under the background of Midea Group promoting the T+3
business model reform, Annto upgrades the national direct distribution network on all fronts, vigorously
integrates warehouse resources and increases the density of warehouses, with its warehouse density
ranking top in the industry. Furthermore, it plans to set up comprehensive home appliances/FMCG
distribution centers in nearly 140 cities by 2019. It expedites the layout of automatic warehousing towards
the goal of completing 40,000-square-meter automatic warehouses in the next two years to substantially
increase the operational efficiency in the logistics link. At the same time, to accommodate and satisfy
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automatic management requirements, it continues to optimize and upgrade the logistics IT system. It
proactively tries new external business models and engages in the origin warehouse cooperation model
with e-commerce platforms to jointly build an end-to-end logistics network of warehouses, trunk lines,
branch lines and distribution based on the inventory sharing model. It takes active steps to build core
capacity, develops new transport capacity resource models and fully introduces stable vehicle resources,
in a bid to directly control terminal transport capacity, stabilize the structure of transport capacity, improve
distribution service quality and efficiency, and effectively enhance end customers’ service experience. It
focuses resources on urban distribution. In the first half of 2019, the urban distribution and home
distribution business scale of Annto saw a year-on-year increase of 65%. Meanwhile, supported by its
self-developed information technology system and nationwide distribution network, Annto is able to
provide fully visualized direct distribution services covering every town and village of the country. It can
finish the delivery to 19,956 towns and villages within 24 hours and to 16,511 towns and villages within
24-48 hours, as well as to 87.6% of the country’s towns and villages within 48 hours.
D. Stepped up the industrial internet and digitalization 2.0 programmes to thoroughly improve
operational efficiency of the entire value chain
To accelerate the transformation towards a world’s leading technologies group and further advance
digitalization, based on its software advantages, manufacturing experience and robot and automation
technologies, Midea has built a pilot industrial Internet factory at the production base in Nansha,
Guangzhou, and unveiled its industrial Internet platform, “M.IoT”. Since 2013, Midea has invested a total
of more than RMB8 billion in digitalization. On one hand, Midea proactively explored and implemented
the application of the C2M model in various product categories. Through digital upgrading in the whole
value chain of R&D, production and sales and with a focus on key projects such as digital planning,
platform-based and modular development, process simulation, flexible manufacturing and intelligent
marketing, Midea implemented the business model of individualization and customization for household
appliances oriented by users’ real demands. On the other hand, it took further steps to promote the T+3
model and carried out reforms with a focus on driving the whole supply-demand value chain as an active
response to users’ demands and sore points. Midea performed in-depth reforms in synergy of production
and sales, transparency of delivery time, offline direct delivery and synergy of suppliers, and a complete
set of reversed forcing mechanism and a supply-demand model driven by market terminals are
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established.
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, home decoration stores, e-commerce platforms, 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. The Company introduces house
decoration design software, develops the suite design capacity of household scenario and provides
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 by fully promoting the “International 632” global model
project. The digitalization of six overseas operating units was completed in H1 2019. While promoting IT
application and digitalization, Midea also improves its business processes and systems by enhancing the
business control ability and operating efficiency. It assists TLSC to improve its overall business, as well
as promotes the connectivity and expansion of KUKA’s businesses in China. In order to adapt to changes
on the international market and help achieve the strategic goal of global production capacity planning,
Midea has launched a pilot global order platform featuring smart distribution of orders to manufacturing
bases, order scheduling and transparent delivery time, which increases the efficiency and accuracy of
order distribution.
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
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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 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 operations cockpit and the
operations analysis module at the mobile terminal. It builds the data consistency platform for the entire
group to unify the top-down data standards of the Group and all business units, and achieves the
visualization of whole-range operations data through the operations cockpit 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’s cloud computing mainly offers support services to digital transformation through open source
components and hybrid cloud structures. Open source components build an open source ecosystem on
cloud through the combination of open source and self-development to gradually separate business
systems from commercialized software and upload them on cloud, which reduces the costs of using
software and enhances software controllability. 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, hybrid cloud structures are able to transfer business applications seamlessly
among container services of private cloud, Alibaba Cloud and Tencent Cloud. As a result, multi-cloud
services are formed to reduce cloud computing costs and enhance the capacity of processing massive
data flow during business peak periods such as “Double 11” and “618”.
E. Steadily promoted Midea’s globalized business layout and accelerated the cooperative
integration of Toshiba Project.
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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 has also established 20 global R&D centers in 9 countries, including the U.S., Italy, Germany, India
and Singapore, to work on future products and technologies with foresight.
Under a unified global macro framework in the first half of 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 and improved local manufacturing
capacity to deal with uncertainties in global trade. Meanwhile, it intensified analysis and research and
formulated long-term plans according to global trade changes. Midea continued to expand sales channels
and polished the image of its self-owned brands in overseas markets. It issued brand brochures for Midea
and Toshiba and the standards for store image, set up or upgraded about 600 overseas brand retail stores
and conducted training on more than 6,000 overseas shopping guides. As a result, a steady increase
was seen in its retail channel shares and consumers’ recognition of its brands. It sped up the expansion
of overseas e-businesses and made business breakthroughs in key markets and key e-business
platforms. So far it has expanded to 12 markets overseas and ranked top for the sales of multiple product
categories on the e-commerce platforms of core markets, such as the U.S., the UK, Russia and Germany.
Midea optimized its overseas operations data platforms, connected the data of overseas sales systems
and developed a number of data analysis systems in a bid to improve its business analysis and operation
capabilities. 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 by establishing comprehensive service networks in North
America, including call centers, spare parts management and product maintenance. The coverage of the
American service network has reached 95%, and the Egypt Call Center has developed into a regional
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call center that covers Middle East, Africa and Europe and offers multiple language services, including
English, Arabian, Italian and German. On top of that, the global service information system has been
launched in countries such as Thailand and Italy, with Midea’s global service management capacity being
improved continuously.
In the first half of 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. In particular in the Japanese
market with fierce competition, TLSC saw varying increases in its market shares of air conditioners,
washing machines and microwaves. TLSC strengthened and implemented synergistic effects with
relevant business divisions of Midea in brand building, channel layout, R&D and innovation, integration
of supply chain and quality improvement. In the first half of 2019, while promoting business synergy and
integration and deepening reforms, TLSC made structural adjustments mainly in four aspects: (1) With a
focus on users and markets, improved operations by further increasing spending on user research and
product planning at the product side, strengthened cooperation with external parties, defined the image
of high-end users, rebuilt its brand positioning at the market end, increased placement of advertisements
and brand promotion, optimized the release pace of new products, and improved product mix; (2)
Following the completed integration of manufacturing platforms in 2018, further reinforced the integration
of the R&D platforms of TLSC and relevant business divisions of Midea Group, especially the
collaboration of platform development, technology sharing and product testing; (3) Continued to connect
business processes, systems and policies; at the beginning of 2019, TLSC launched the second phase
of its “632” business system project, in which it targeted Japan’s local business reorganization, sales and
finance processes to develop a digital operation and management system and introduce Midea’s
appraisal system with an emphasis on performance orientation to motivate corporate vitality; (4)
Substantially cut down costs and expenses; through the promotion of staffing optimization, the recovery
of some outsourced businesses and the strict control over expenditure in the first half of 2019, costs are
expected to decrease by approximately RMB200 million throughout the year; in addition, TLSC further
focused on the development of core businesses by selling some non-white goods businesses.
F. In view of consumption stratification, launched multiple new brands and product suites to
empower retail sales
32
Midea Group Co., Ltd. Semi-Annual Report 2019
Since October 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 released the BLANC product suite comprising six
products at Appliance&electronics World Expo (AWE) in March 2019, covering the four scenarios of living
room, kitchen, bathroom and laundry. All the products in the suite have won Germany’s iF Award, with
the washing machine also winning the Red Dot Award. Furthermore, BLANC Washing Machine’s image
technology and washing-drying technology, the BLANC product suite’s voice solution, and the oven’s
image technology and oriented heating technology are all recognized as “Internationally Advanced”. In
terms of channel expansion, the full-process smart scenario experience center developed by COLMO
started soft opening at Shanghai Magnolia Plaza in March 2019. So far COLMO products have entered
nearly 700 home decoration stores, TOP stores, 3C stores and online flagship stores. To meet young
users’ demands, the internet brand BUGU was unveiled at AWE Shanghai in March 2019, with its first
batch of products launched in Beijing in April 2019. BUGU persists in taking the joint creation with users
as its core strategy, and builds up smart eco-scenarios primarily comprising three life scenarios and two
professional scenarios. BUGU’s first batch of products achieved outstanding performances. 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. 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. It has made continuous breakthroughs
by cooperating with platforms such as JD.com. In the first half of 2019, WAHIN achieved cumulative sales
of RMB160 million from air conditioners on JD.com. In June, WAHIN Air Conditioner ranked in the top ten
in sales on JD.com, with a sales of more than RMB55 million on the 618 Shopping Festival alone, ranking
7th on JD.com.
33
Midea Group Co., Ltd. Semi-Annual Report 2019
In view of individualized demands of different target consumer groups for home appliance design, Midea
capitalizes on the synergies of various product categories to integrate core innovative technologies and
plan for product families. It has developed Midea PRO Appliances Collection, Midea Youth Appliances
Collection and product suites for Real Estate Market to form a product matrix of suite design. Consisting
of 12 products and targeting middle and high-end consumers, Midea PRO Appliances Collection is
characterized by healthiness, comfort, intelligent interactions and high quality, and will be released to the
market in the second half of 2019. Consisting of 24 products, Midea Youth Appliances Collection is
featured with youthful Zen design, easy operation of intelligent household appliances, smart look and
minimalism. It has achieved 166,000 units in sales volume for the first half of 2019. Product suites for real
estate market are customized products developed for real estate developers and long-term leasing
apartment operators in the real estate, and at the end of 2018, they were launched in the market one
after another.
G. Promoted innovation in robotic product development and accelerated integration and
expansion of the robotics business for the China market
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, based on the three joint ventures founded by Midea and KUKA in 2018,
the collaborative advantages of the two companies 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 the first half of 2019, the data published by the National Bureau of Statistics
showed that the sales volume of industrial robotics in China decreased 10% year on year, whereas that
of KUKA increased against the trend. The production base (phase I) in the Shunde Technology Park in
Guangdong Province is ready for production, covering the R&D, production and sales of different
categories of products, including industrial robotics, intelligent logistics and industrial automation. Six
industrial robot production lines in the park are expected to be completed by the end of 2019 with a
capacity for diverse models.
KUKA’s business continues to expand with a flood of orders, including an order of tens of millions of
34
Midea Group Co., Ltd. Semi-Annual Report 2019
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. 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.
KUKA continues to make innovations in robotic product development and application. It 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 the first half of 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. In the
general industrial sector, KUKA released the brand new application software package for the biggest
application field “arc welding” of robots. 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. KUKA beefs up the development of application targeting the Chinese market.
Through robot application packages, SimPro’s simulation of customers’ processes and production lines
and KUKA Connect cloud data collection and analysis, it provides end customers with more and better
one-stop solutions, such as polishing and gumming applications in electronics and shoe production
sectors, and the mobile platform KMR production line logistics solutions in the semiconductor sector.
Additionally, KUKA makes active steps to explore robot application in new areas and took the initiative to
demonstrate the concept of smart store (unmanned bubble tea store) in March 2019. KUKA won a number
35
Midea Group Co., Ltd. Semi-Annual Report 2019
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, 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.
Midea continued to promote the integration and expansion of its business platforms of industrial
automation and motion control. The industrial automation business platform is engaged in the automation
of production process, automation of logistics and robot services. It has completed more than 50
automation projects for the business divisions of Midea. It has been widely used in welding, handling,
stowing and visual inspection involving over 20 mainstream systems, which has effectively enhanced
Midea Group’s intelligent manufacturing level. The robot density is planned to be increased to the level
of developed countries at 625 units per 10,000 persons. Midea’s motion control business platform is
dedicated to the R&D and innovation of core components and software products. By acquiring and
integrating Servotronix, the Israeli hi-tech company with more than thirty years of experience in motion
control, the platform now owns a series of comprehensive and industry leading motion control products
including multi-axis motion controllers, servo drivers, servo motors and encoders. It has also implemented
localization and domestication in R&D and manufacturing. Furthermore, it is capable of providing
comprehensive system solutions for the industries of robotics, numerical control, lithium batteries, 3C,
semiconductors, packaging and printing. In H1 2019, in order to meet the high accuracy, high speed and
high efficiency needs for application in high-end areas such as laser cutting, numerically-controlled
machine tools, semi-conductor, medical care and precision testing, the CDHD2 High-Performance Servo
Driver was equipped with the homegrown advanced control algorithm and strong mechanical design
capability to significantly improve its performance and satisfy needs arising from various scenarios. In
terms of rotary servo system development, the newly launched PRHD2 Servo Motor characterized by
high overload capacity, low temperature-rise and low cogging torque has passed the American UL
certification and the EU CE certification. In the future, more BDHD2 Rotary Servo Drivers will be launched,
which will be easier to use and have more functions to meet various needs arising from different
application markets. With wide application in multiple industries, this will further enhance the presence of
Servotronix in the rotary servo market.
H. Deepened the industrial layout for Smart Home Appliance and promote the implementation of
36
Midea Group Co., Ltd. Semi-Annual Report 2019
Smart Home Appliance Strategy
In 2019, upon the integration of its Smart Home Appliance business, Midea continued to optimize the
Cloud Platform, Meiju APP, intelligent connection modules, big data and after-sales services, networked
the Group’s business divisions and operating units, and kept increasing user satisfaction. The Company
planned and implemented intelligent scenarios, built the highly usable, strongly interactive and standard
IoT platform, promoted the stable connection between users and devices, improved users’ experience in
using intelligent products, vigorously propelled external cooperation for ecological expansion and the
building of developers’ platform, and facilitated the development of the Group’s Smart Home Appliance
business. As of June 2019, Midea Group has sold over 60 million smart home appliances across the
world and more than 36 million people are using Midea’s smart home appliances and services.
Internally, Midea focuses on user experience improvement, significantly reduces user operations and
optimizes the average Internet distribution time for users by more than three times. While optimizing the
M-Smart agreement, the IoT company works with chip makers to develop IoT chips for smart home. It
also integrates 36 Midea mobile apps into the Meiju App 5.0 and connects it with hundreds of smart
products. Serving as an e-commerce platform, a customer service center and a user community, it is an
industry-leading whole-house smart home appliances service management platform. In terms of data
application of smart products, active user service is materialized through smart warning based on real-
time big data technology; products are capable of self-learning with the data-based AI model, which helps
provide smarter product experience and save more energy; and the Smart Eyes analysis platform
continues to provide data support for product improvement. Additionally, benchmarking itself against the
international IoT security standards and practices, the IoT Company enhances security in all links
including design, production, development, testing and after-sales patch update to build a more secure
smart home IoT.
Externally, the IoT Company continues to promote ecosystem cooperation with external parties and build
a platform of developers, improve the market competitiveness of intelligent household appliance products,
enlarge the connection entrance and enhance the value of user services. In June 2019, Midea IoT
Developer Platform was launched to provide standardized access for external partners. This platform
helps expand and deepen Midea’s cooperation with Huawei, Alibaba, OPPO, VIVO and JD in smart home.
Meanwhile, Midea plays an active role in the formulation of international standards for IoT by initiating a
37
Midea Group Co., Ltd. Semi-Annual Report 2019
task group on user experience within the Wi-Fi Alliance.
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
RMB35.7 billion since its group listing in 2013. Meanwhile, in response to the internal and external
complexities and fluctuations in market value in 2018, Midea Group launched the biggest-ever
repurchase plan in the history of China’s A-stock market and repurchased shares with approximately
RMB4 billion, maintaining a stable market capitalization and protecting shareholders’ interests. In 2019,
it launched another share repurchase plan for its equity incentive schemes and/or employee stock
ownership schemes. As of 31 July 2019, Midea has used over RMB3 billion for the share repurchase.
Midea’s main work plans for H2 2019 are summarized as follows:
A. Midea will stick to the three core strategies and fully implement the intelligent and digital transformation
strategies. It will firmly increase R&D investment in basic technologies and digital and intelligent
transformation in particular. Driven by technology as the fundamental approach, it will enhance product
strength, beef up product innovation, and put in place a customer-oriented value chain system. It will
further adopt the CDOC approach and implement the R&D model of “Three Generations”. In the
meantime, outside 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
growth. It will promote the T+3 business model reform and excellent performance through the 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
38
Midea Group Co., Ltd. Semi-Annual Report 2019
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. 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 the
domestic marketing to improve user-oriented domestic retail marketing, 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 scenario and experience, 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, and proactively expand and build new retail channels. Meanwhile, it will
continue to increase the efficiency of the supply chain system, enhance the advantage of to Midea’s all-
channels coverage, rebuild business processes and push forward the construction of a shared inventory
system.
D. Midea will improve its multi-brand system according to different needs from different consumer groups.
In terms of its Internet brands, Midea will integrate internal and external resources to provide
individualized experience for users, and establish all-scenario 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 integrated home solutions with full categories of the
household appliances.
E. 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.
F. Midea will establish and improve overseas institutions, enhance employee skills and operating
39
Midea Group Co., Ltd. Semi-Annual Report 2019
efficiency, ensure the establishment of systems for the three key goals of retail transformation,
performance orientation and compliance, and at the same time ensure rising profitability of TLSC. In order
to promote overseas channel and retail reform, Midea will enhance physical store investment, put in place
a market survey and customer visit mechanism for management, and strengthen the execution of sales
promotion activities and shopping guide training. Regular analysis will be carried out on the operations of
overseas branches, particularly on products and channels, as a way to help improve operating quality.
Guided by user and market needs, Midea will enhance the overseas product manager mechanism,
improve the product management system, establish product suite design norms, and increase the
competitiveness of its own brands. Meanwhile, it will increase operating efficiency by means of enhancing
global production and marketing synergy and logistics capability building, so as to provide strong support
for sales growth of its own-branded products.
G. The integration of KUKA’s robotics business in China, as well as its localized operations will be beefed
up. Relentless effort will be devoted to the development and application of robotics, as well as to the R&D
and innovation of key components and software, so as to offer competitive products and services.
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 all-round intelligent transformation strategy, 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 Meiju app, carry out lean operations and provide smart life experience for users.
Meanwhile, it will promote smart products in its offline stores by providing smart scenario experience,
upgrading the store network, providing training in relation to smart products, increasing the percentage
of smart home appliances, etc.
2. Analysis of Main Business
Same with the contents presented in “1. Overview” of this section
√ Yes □ No
See “1. Overview” of this section.
YoY changes in key financial data:
Unit: RMB’000
40
Midea Group Co., Ltd. Semi-Annual Report 2019
YoY Change
H1 2019 H1 2018 Main reasons for change
(%)
Operating revenue 153,770,300 142,623,837 7.82%
Operating costs 108,441,289 103,881,438 4.39%
Selling expenses 19,529,822 16,892,503 15.61%
Administrative expenses 4,110,125 3,335,291 23.23%
Finance costs -1,435,645 -984,113 -45.88% Increased interest on deposits
Corporate income tax 2,829,592 2,614,882 8.21%
R&D expenses 4,534,760 3,899,229 16.30%
Net cash flows from operating Increased cash received from sales
21,787,890 7,613,688 186.17%
activities of goods or rendering of services
Net cash flows from investing Increased deposits with a term of
-18,030,748 -8,943,677 -101.60%
activities over three months
Net cash flows from financing Increased borrowings
-6,828,689 -10,166,609 32.83%
activities
Net increase in cash and cash Increased net cash flows from
-3,055,102 -11,404,259 73.21%
equivalents operating activities
Major changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable √ N/A
No such cases in the Reporting Period.
Breakdown of Midea’s main business:
Unit: RMB'000
YoY change of YoY change of YoY change of
Operating Gross profit
Operating cost operating operating cost gross profit
revenue margin
revenue (%) (%) margin (%)
By business segment
Manufacturing 141,814,013 97,953,313 30.93% 7.72% 4.16% 2.36%
By product category
HVAC 71,439,403 48,518,866 32.08% 11.84% 8.91% 1.83%
Consumer
58,350,984 40,096,559 31.28% 5.56% 0.13% 3.72%
appliances
Robotics and
12,023,626 9,337,888 22.34% -3.83% -1.16% -2.09%
automation systems
By geographical segment
PRC 91,664,118 62,719,932 31.58% 9.05% 7.99% 0.67%
Outside PRC 62,106,182 45,721,357 26.38% 6.04% -0.18% 4.58%
41
Midea Group Co., Ltd. Semi-Annual Report 2019
3. Analysis of Non-Core Business
□ Applicable √ N/A
4. Assets and Liabilities
4.1 Material changes of asset items
Unit: RMB'000
30 June 2019 31 December 2018
As a As a Change in
Explanation about any
percentage of percentage of percentage
Amount Amount material change
total assets total assets (%)
(%) (%)
Cash at bank
35,890,088 12.64% 27,888,280 10.58% 2.06%
and on hand
Accounts
23,017,823 8.10% 19,390,174 7.35% 0.75%
receivable
Inventories 24,106,604 8.49% 29,645,018 11.24% -2.75%
Investment
380,579 0.13% 391,765 0.15% -0.02%
properties
Long-term
equity 2,619,985 0.92% 2,713,316 1.03% -0.11%
investments
Fixed assets 21,508,572 7.57% 22,437,212 8.51% -0.94%
Construction in
1,405,351 0.49% 2,077,621 0.79% -0.30%
progress
Short-term
1,338,324 0.47% 870,390 0.33% 0.14%
borrowings
Long-term
42,490,036 14.96% 32,091,439 12.17% 2.79%
borrowings
4.2 Assets and liabilities measured at fair value
√ Applicable □ N/A
Unit: RMB'000
Profit or Cumulative
Purchased
Opening loss from fair value Sold in the Closing
Item Other in the
balance changes in changes period balance
period
fair value charged to
42
Midea Group Co., Ltd. Semi-Annual Report 2019
during the equity
period
Financial assets
1. Trading financial assets
(excluding derivative financial 2,654,045 -171,835 - 806 2,650,000 1,699,615 3,433,401
assets)
2. Derivative financial assets 259,019 -168,098 -10,233 -1,408 - - 79,280
3. Investments in other debt
2,254,950 - - - 398,392 - 2,653,342
obligations
4. Investments in other equity
784,269 84,188 - 3,162 550,646 1,849 1,420,416
instruments
Sub-total of financial assets 5,952,283 -255,745 -10,233 2,560 3,599,038 1,701,464 7,586,439
Investment properties
Productive living assets
Others
Sub-total of the above 5,952,283 -255,745 -10,233 2,560 3,599,038 1,701,464 7,586,439
Financial liabilities 902,795 -553,436 -50,051 722 - - 300,030
Whether there were any material changes on the measurement attributes of major assets of the Company
during the Reporting Period
√ Yes □ No
Due to the adoption of new accounting standards governing financial instruments by the Company, the
measurement attributes of relevant assets and liabilities have changed. For further information, please
refer to Item 2 of the Notes to the Financial Statements, (34), (ii).
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
Total investment amount of the Total investment amount of the same
YoY Change (%)
Reporting Period (RMB’000) period of last year (RMB’000)
43
Midea Group Co., Ltd. Semi-Annual Report 2019
45,708,198 41,811,802 9.32%
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
Prof
Mea Profit or
Abbre Cumulative Sold it or
Code sure loss from Purcha Fund
Type of viatio Initial Opening fair value in loss Closing
of men changes in sed in Accountin ing
securiti n of investment carrying changes the in carrying
securi t fair value the g title sour
es securi cost amount charged to peri the amount
ties met during the period ce
ties equity od peri
hod period
od
Domest Fair
ically/O valu Trading Own
XIAO 1,122,6
verseas 1810 1,272,584 e -250,054 -231 - - - 872,324 financial Fund
MI-W 09
listed met assets s
stock hod
1,122,6
Total 1,272,584 -- -250,054 -231 - - - 872,324 - --
09
5.4.2 Derivatives investments
√ Applicable □ N/A
Unit: RMB'000
Rela Purch Sold Closing
Rel Typ Amount Actual
tions Opening ased in Closing investme
Oper ated e of Initial provided gain/loss
hip Starting Ending investme in Repor investme nt
ating tran deri investment for in
with date date nt Repor ting nt amount
party sact vati amount impairme Reportin
the amount ting Perio amount as a
ion ve nt (if any) g Period
Com Perio d percenta
44
Midea Group Co., Ltd. Semi-Annual Report 2019
pany d ge of the
Company
’s closing
net
assets
Futu
Futur
res
es 01/01/2 31/12/2
No No cont 276 276 - - - -1,067 -0.0012% 61,656
comp 019 019
ract
any
s
For
war
d
fore 01/01/2 31/12/2
Bank No No -644,052 -644,052 - - - -219,683 -0.2373% -234,837
x 019 019
cont
ract
s
Total -643,776 -- -- -643,776 - - - -220,750 -0.2385% -173,181
Source of derivatives
All from the Company’s own funds
investment funds
Litigation involved (if
N/A
applicable)
Disclosure date of the
announcement about
the board’s consent 20/04/2019
for the derivative
investment (if any)
Disclosure date of the
announcement about
the general meeting’s
14/05/2019
consent for the
derivative investment
(if any)
Risk analysis of
For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a
positions held in
result of significant fluctuations in raw material prices, the Company not only carried out futures
derivatives during the
business for some of the materials, but also made use of bank financial instruments and promoted
Reporting Period and
forex funds business, with the purpose of avoiding the risks of exchange and interest rate
explanation of control
fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities,
measures (Including
as well as achieving locked-in costs. The Company has performed sufficient evaluation and control
but not limited to
against derivatives investment and position risks, details of which are described as follows:
market risk, liquidity
risk, credit risk, 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted in
45
Midea Group Co., Ltd. Semi-Annual Report 2019
operational risk, legal compliance with laws and regulations, with clearly covenanted responsibility and obligation
risk, etc.) relationship between the Company and the agencies.
Control measures: The Company has designated relevant responsible departments to enhance
learning of laws and regulations and market rules, conducted strict examination and verification of
contracts, defined responsibility and obligation well, and strengthened compliance check, so as to
ensure that the Company's derivatives investment and position operations meet the requirements
of the laws and regulations and internal management system of the Company.
2. Operational risk: Imperfect internal process, staff, systems and external issues may cause the
Company to suffer from loss during the course of its futures business and forex funds business.
Control measures: The Company has not only developed relevant management systems that
clearly defined the assignment of responsibility and approval process for the futures business and
forex funds business, but also established a comparatively well-developed monitoring mechanism,
aiming to effectively reduce operational risk by strengthening risk control over the business,
decision-making and trading processes.
3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange
rate fluctuations in foreign exchange market could lead to greater market risk in the futures
business and forex funds business. Meanwhile, inability to timely raise sufficient funds to establish
and maintain hedging positions in futures operations, or the forex funds required for performance
in forex funds operations being unable to be credited into account could also result in loss and
default risks.
Control measures: The futures business and forex funds business of the Company shall always
be conducted by adhering to prudent operation principles. For futures business, the futures
transaction volume and application have been determined strictly according to the requirements
of production & operations, and the stop-loss mechanism has been implemented. Besides, to
determine the prepared margin amount which may be required to be supplemented, the futures
risk measuring system has been established to measure and calculate the margin amount
occupied, floating gains and losses, margin amount available and margin amount required for
intended positions. As for forex funds business, a hierarchical management mechanism has been
implemented, whereby the operating unit which has submitted application for funds business
should conduct risk analysis on the conditions and environment affecting operating profit and loss,
evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio
or total margin amount, so that the Company can update operating status of the funds business
on a timely basis to ensure proper funds arrangement before the expiry dates.
Changes in market
prices or fair value of
derivative products
1. Profit from futures contracts during the Reporting Period was RMB61,656,000.
during the Reporting
2. Loss from forward forex contracts during the Reporting Period was RMB-234,837,000.
Period, specific
3. Public quotations in futures market or forward forex quotations announced by the Bank of China
methods used and
are used in the analysis of derivatives fair value.
relevant assumption
and parameter
settings shall be
46
Midea Group Co., Ltd. Semi-Annual Report 2019
disclosed for analysis
of fair value of
derivatives
Explanation of
significant changes in
accounting policies
and specific financial
accounting principles
in respect of the
N/A
Company's
derivatives for the
Reporting Period as
compared to the
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 measures through enhanced internal control, thereby improving the operation and management
concerning the of the Company; the Company's foreign exchange risk management capability can be further
Company's improved through the forex funds business, so as to maintain and increase the value of foreign
derivatives exchange assets and the abovementioned investment in derivatives can help the Company to fully
investment and risk bring out its competitive advantages. Therefore, it is practicable for the Company to carry out
control derivatives investment business, and the risks are controllable.
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
√ Applicable □ N/A
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
Company Business Registere Total Net Operating Operating Net profit
Company name
type scope d capital assets (in assets (in revenue (in profit (in (in RMB
47
Midea Group Co., Ltd. Semi-Annual Report 2019
RMB RMB RMB RMB million)
million) million) million) million)
Guangdong Midea
Manufacturing
Kitchen Appliances USD72
Subsidiary of home 11,320.89 3,716.32 6,485.13 1,021.26 887.05
Manufacturing Co., million
appliances
Ltd.
GD Midea Air- Manufacturing
RMB854
Conditioning Subsidiary of air 34,844.42 4,709.97 29,044.64 524.09 486.25
million
Equipment Co., Ltd. conditioners
Foshan Shunde
Midea Electrical Manufacturing
USD42
Heating Appliances Subsidiary of home 9,973.83 5,528.36 5,275.78 918.05 802.17
million
Manufacturing Co., appliances
Ltd.
Wuhu Midea Kitchen Manufacturing
RMB60
& Bath Appliances Subsidiary of water 8,391.52 1,015.84 6,637.41 939.94 809.52
million
Mfg. 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 period, please
refer to Note 5 and Note 6 to the Financial Statements herein. For the newly consolidated companies,
see Note 5, 5.1, (a), and they primarily include: Midea Electrics Egypt, Anhui Welling Auto Parts
Corporation Limited and Wuxi Little Swan Electric Co., Ltd.. For the companies deconsolidated in the
current period, see Note 5, 5.1, (b).
8. Structured Bodies Controlled by the Company
□ Applicable √ N/A
9. Forecast of Business Performance from January to September in 2019
Warning about an estimated major change in the aggregate net profit from the beginning of the year to
the end of the next reporting period compared with the same period in the previous year and explanation
for the change:
□ Applicable √ N/A
48
Midea Group Co., Ltd. Semi-Annual Report 2019
10. Risks Facing by the Company and Countermeasures
A. 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 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.
B. 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.
C. 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.
D. 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.
49
Midea Group Co., Ltd. Semi-Annual Report 2019
E. 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 2019. 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.
50
Midea Group Co., Ltd. Semi-Annual Report 2019
Section V Significant Events
1. Annual and Extraordinary General Meetings of Shareholders Convened during
Reporting Period
1.1 General Meetings of Shareholders Convened during Reporting Period
Investor
Meeting Type participation Convened date Disclosure date Index to disclosed information
ratio
Announcement No. 2019-020
First Extraordinary on Resolutions of First
General Meeting of Extraordinary 55.21% 15/02/2019 16/02/2019 Extraordinary General Meeting
Shareholders of 2019 of Shareholders of 2019,
disclosed on www.cninfo.com.cn
Announcement No. 2019-071
2018 Annual General on Resolutions of 2018 Annual
Meeting of Annual 57.17% 13/05/2019 14/05/2019 General Meeting of
Shareholders Shareholders, disclosed on
www.cninfo.com.cn
1.2 Extraordinary General Meetings of Shareholders Convened at Request of Preference
Shareholders with Resumed Voting Rights
□ Applicable √ N/A
2. Preliminary Plan for Profit Distribution and Converting Capital Reserves into Share
Capital for the Reporting Period
□ Applicable √ N/A
The Company plans not to distribute cash dividends or bonus shares or convert capital reserves into
share capital for the first half of 2019.
51
Midea Group Co., Ltd. Semi-Annual Report 2019
3. 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 overdue at the period-end
√ Applicable □ N/A
Particulars on
Undertaki Type of Undertaking
Undertaking Details of undertaking Term the
ng giver undertaking date
performance
The Opinion in
1. I agree to this merger in a share swap in principle.
Principle on the
Mr. He 2. I do not plan to and will not reduce my shareholding in Midea Group and/or
Merger in a Share
Xiangjian Little Swan during the period from the share trading resumption date to the
Swap & the
(the completion date of this merger in a share swap. 23/10/2018-
Statement and 23/10/2018 Fulfilled
actual 3. I’m legally bound by this commitment letter since the date of my signature. 21/06/2019
Commitment
controller Where any loss occurs to Midea Group or Little Swan due to me violating any
Letter on any
) contents of this commitment letter, I shall bear the corresponding
Shareholding
compensation liability according to law.
Reduction Plan
Undertaking
The Opinion in
made in time 1. The company agrees to this merger in a share swap in principle.
Principle on the
of asset 2. The company does not plan to and will not reduce its shareholding in Midea
Midea Merger in a Share
restructuring Group during the period from the share trading resumption date to the
Holding Swap & the
completion date of this merger in a share swap. 23/10/2018-
Co., Ltd. Statement and 23/10/2018 Fulfilled
3. The company is legally bound by this commitment letter since the date of 21/06/2019
(the Commitment
signature. Where any loss occurs to Midea Group due to the company violating
controllin Letter on any
any contents of this commitment letter, the company shall bear the
g Shareholding
corresponding compensation liability according to law.
sharehold Reduction Plan
er) Statement on Up to the issue date of this statement, none of the company or any of its
23/10/2018-
Irregularities incumbent senior management personnel received any administrative or 23/10/2018 Fulfilled
21/06/2019
Committed in the criminal punishment (exclusive of those not related to the securities market),
52
Midea Group Co., Ltd. Semi-Annual Report 2019
Past Five Years or was involved in any material civil lawsuit or arbitration in relation to any
economic dispute, in the past five years; or is being investigated by a judicial
authority for involvement in any criminal case or by the China Securities
Regulatory Commission for any irregularity.
1. The Company does not plan to and will not reduce its shareholding in Little
Swan during the period from the share trading resumption date to the
completion date of this merger in a share swap. The shares held by the
Statement on any Company in Little Swan will be retired upon the completion of this merger in a
23/10/2018-
Shareholding share swap. 23/10/2018 Fulfilled
21/06/2019
Reduction Plan 2. The Company is legally bound by this commitment letter since the date of
signature. Where any loss occurs to Little Swan due to the Company violating
any contents of this commitment letter, the Company shall bear the
corresponding compensation liability according to law.
The Company will provide relevant information to the intermediary agencies
Commitment hired for this merger in a share swap in a timely manner; warrant that the
Letter on the information provided is true, accurate, complete and free of any
The
Truthfulness, misrepresentations, misleading statements or material omissions; and shall
Company 23/10/2018-
Accuracy and together be wholly liable for the truthfulness, accuracy and completeness of 23/10/2018 Fulfilled
21/06/2019
Completeness of such information. Where any loss occurs to any investor due to any
the Information misrepresentations, misleading statements or material omissions in the
Provided information provided, the Company shall bear the corresponding
compensation liability according to law.
1. Up to the issue date of this statement, the Company is not being investigated
by a judicial authority for involvement in any criminal case or by the China
Statement on
Securities Regulatory Commission for any irregularity.
Punishments 23/10/2018-
2. Up to the issue date of this statement, the Company received no 23/10/2018 Fulfilled
Received and 21/06/2019
administrative or criminal punishments (exclusive of those not related to the
Credibility Issues
securities market) and was not involved in any material civil lawsuit or
arbitration in relation to any economic dispute; nor did it receive any
53
Midea Group Co., Ltd. Semi-Annual Report 2019
administrative supervision measures from the China Securities Regulatory
Commission or 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 five years.
Whether the
undertaking
Yes
is fulfilled on
time
Specific
reasons for
failing to
fulfill any N/A
undertaking
and plan for
the next step
54
Midea Group Co., Ltd. Semi-Annual Report 2019
4. Engagement and Disengagement of CPAs Firm
Have the H1 2019 financial statements been audited by a CPAs firm?
□ Yes √ No
The H1 2019 financial statements are unaudited by a CPAs firm.
5. Explanation of the Board of Directors and the Supervisory Committee Regarding
the "Non-standard Audit Opinion" for the Reporting Period
□ Applicable √ N/A
6. Explanation of the Board of Directors Regarding the "Non-standard Audit Opinion"
for Last Year
□ Applicable √ N/A
7. Bankruptcy and Reorganization
□ Applicable √ N/A
No such cases in the Reporting Period.
8. Litigation
Material litigation and arbitration:
□ Applicable √ N/A
No such cases in the Reporting Period.
Other legal matters:
□ Applicable √ N/A
9. Punishments and Rectifications
□ Applicable √ N/A
No such cases in the Reporting Period.
55
Midea Group Co., Ltd. Semi-Annual Report 2019
10. Credit Conditions of the Company as well as Its Controlling Shareholder and
Actual Controller
□ Applicable √ N/A
11. 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 third exercise period of the First Stock Option Incentive Scheme expired, 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.
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 the 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.
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.
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Midea Group Co., Ltd. Semi-Annual Report 2019
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.
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
57
Midea Group Co., Ltd. Semi-Annual Report 2019
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).
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.
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
58
Midea Group Co., Ltd. Semi-Annual Report 2019
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.
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.
59
Midea Group Co., Ltd. Semi-Annual Report 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.
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
60
Midea Group Co., Ltd. Semi-Annual Report 2019
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 to go public 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
61
Midea Group Co., Ltd. Semi-Annual Report 2019
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.
62
Midea Group Co., Ltd. Semi-Annual Report 2019
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 to go public 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.
63
Midea Group Co., Ltd. Semi-Annual Report 2019
(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 30% 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. A total of 3,318,540 of the Company’s shares were purchased for this scheme. As per the Fourth Global
64
Midea Group Co., Ltd. Semi-Annual Report 2019
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 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. 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 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
65
Midea Group Co., Ltd. Semi-Annual Report 2019
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
66
Midea Group Co., Ltd. Semi-Annual Report 2019
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.
12. Significant Related Transactions
12.1 Related transactions arising from routine operation
√ Applicable □ N/A
Propo
rtion Obtaina
in the ble
total market Index
Transacti
Related Type of Content Pricin amou Approved Over price to the
Trans on Mode of Disclos
transac Relatio the s of the g nts of transaction appro for the disclo
action amount settlem ure
tion n transac transac princip transa line ved transac sed
price (RMB’000 ent date
party tion tion le ction (RMB’000) line tion of inform
)
of the the ation
same same
kind kind
(%)
Infore Controll
Environ ed by www.
Procure Payme
ment family Procure Marke 20/04/2 cninf
ment of - 609,122 0.66% 1,500,000 No nt after -
Techno membe ment t price 019 o.co
goods delivery
logy r of m.cn
Group Compa
67
Midea Group Co., Ltd. Semi-Annual Report 2019
Co., ny’s
Ltd. actual
controll
er
Controll
ed by
Orinko family
Advanc membe www.
Procure Payme
ed r of Procure Marke 20/04/2 cninf
ment of - 684,725 0.75% 1,700,000 No nt after -
Plastics Compa ment t price 019 o.co
goods delivery
Co., ny’s m.cn
LTD actual
controll
er
Total -- -- 1,293,847 -- 3,200,000 -- -- --
Details of any sales return of a
Zero
large amount
Give the actual situation in the
Reporting Period (if any) where a
The line for routine related transactions between the Company and the related
forecast had been made for the
parties and their subsidiaries did not exceed the total amount of routine related
total amounts of routine related-
transactions estimated by the Company by type.
party transactions by type to
occur in the current period
Reason for any significant
difference between the
N/A
transaction price and the market
reference price (if applicable)
12.2 Related transactions regarding purchase or sales of assets or equity interests
□ Applicable √ N/A
No such cases in the Reporting Period.
12.3 Related transitions arising from joint investments in external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
12.4 Credits and liabilities with related parties
□ Applicable √ N/A
68
Midea Group Co., Ltd. Semi-Annual Report 2019
No such cases in the Reporting Period.
12.5 Other significant related transactions
√ Applicable □ N/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.
Index to the announcement about the said related transactions disclosed
Title of announcement Disclosure date Disclosure website
Announcement on Related Transactions Regarding Making
Deposits in and Obtaining Loans from Shunde 20/04/2019 www.cninfo.com.cn
Rural Commercial Bank in 2019
13. 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.
14. Significant Contracts and Their Execution
14.1 Trusteeship, contracting and leasing
14.1.1 Trusteeship
□ Applicable √ N/A
No such cases in the Reporting Period.
14.1.2 Contracting
□ Applicable √ N/A
69
Midea Group Co., Ltd. Semi-Annual Report 2019
No such cases in the Reporting Period.
14.1.3 Leasing
□ Applicable √ N/A
No such cases in the Reporting Period.
14.2 Major Guarantees
√ Applicable □ N/A
14.2.1 Guarantees provided
Unit: RMB'000
Guarantees provided by the Company for external parties (excluding those for subsidiaries)
Disclosur Actual Guar
e date of occurrenc antee
Term
the Line of e date Actual for a
Type of of Due
Guaranteed party guarante guarante (date of guarantee relate
guarantee guara or not
e line e agreeme amount d
ntee
announce nt party
ment signing) or not
No such cases
Total actual external
Total external guarantee line approved during the
0 guarantee amount during 0
Reporting Period (A1)
the Reporting Period (A2)
Total approved external guarantee line at the end of Total actual external
the Reporting Period (A3) guarantee balance at the
0 0
end of the Reporting Period
(A4)
Guarantees provided by the Company for its subsidiaries
Disclosur Actual Guar
e date of occurrenc antee
Term
the Line of e date Actual for a
Type of of Due
Guaranteed party guarante guarante (date of guarantee relate
guarantee guara or not
e line e agreeme amount d
ntee
announce nt party
ment signing) or not
70
Midea Group Co., Ltd. Semi-Annual Report 2019
Midea Group Finance Co., Ltd.
2019-4- One
9,900,00 - - Joint liability No No
20 year
0
GD Midea Air-Conditioning Equipment 2019-4- 12,426,0 2019-1- One
1,147,910 Joint liability No No
Co., Ltd. 20 00 10 year
Guangzhou Hualing Refrigerating
2019-4- One
Equipment Co., Ltd. 1,163,00 - - Joint liability No No
20 year
0
Foshan Midea Carrier Air-Conditioning 2019-4- 418,000 One
- - Joint liability No No
Equipment Co., Ltd. 20 year
Guangdong Midea Precision Molding 2019-4- 98,400 One
- - Joint liability No No
Technology Co., Ltd. 20 year
Guangdong Midea Kitchen Appliances
2019-4- 2019-1- One
Manufacturing Co., Ltd. 3,854,00 756,060 Joint liability No No
20 10 year
0
Guangdong Witol Vacuum Electronic 2019-4- 120,000 2019-1- One
16,470 Joint liability No No
Manufacture Co.,Ltd 20 16 year
Guangdong De Yi Jie Appliances Co., 2019-4- 360,000 One
- - Joint liability No No
Ltd. 20 year
GD Midea Heating & Ventilating
2019-4- One
Equipment Co., Ltd. 1,789,80 2019-1-9 117,840 Joint liability No No
20 year
0
Guangdong Midea-SIIX Electronics Co., 2019-4- 172,000 2019-1- One
70 Joint liability No No
Ltd. 20 31 year
Guangdong Midea Commercial Air- 2019-4- 200,000 One
- - Joint liability No No
Conditioning Equipment Co., Ltd. 20 year
Guangdong Midea Consumer Electric 2019-4- 385,000 2019-1- One
267,360 Joint liability No No
Manufacturing Co., Ltd. 20 10 year
Foshan Shunde Midea Electrical Heating 2019-4- 540,000 2019-1- One
589,430 Joint liability No No
Appliances Manufacturing Co., Ltd. 20 23 year
GD Midea Environment Appliances Mfg. 2019-4- 752,000 2019-1- One
1,630 Joint liability No No
Co.,Ltd. 20 10 year
Guangdong Midea Cuchen Company 2019-4- 54,000 One
- - Joint liability No No
Ltd. 20 year
GD Midea Caffitaly Coffee Machine 2019-4- 30,000 One
- - Joint liability No No
Manufacturing Co., Ltd. 20 year
Main Power Inno Tech (Shenzhen) 2019-4- 24,000 One
- - Joint liability No No
Manufacturing Co., Ltd. 20 year
Foshan Shunde Midea Washing 2019-4- 2019-1- 120,070 Joint liability One No No
71
Midea Group Co., Ltd. Semi-Annual Report 2019
Appliances Manufacturing Co., Ltd. 20 2,080,00 10 year
0
Guangdong Midea Kitchen & Bath 2019-4- 24,000 One
- - Joint liability No No
Appliances Manufacturing Co., Ltd. 20 year
Foshan Shunde Midea Water Dispenser 2019-4- 694,000 One
2019-3-5 2,430 Joint liability No No
Manufacturing Company Limited 20 year
Foshan Midea Chungho Water 2019-4- 81,000 One
- - Joint liability No No
Purification Equipment. Co., Ltd. 20 year
Guangdong Meizhi Compressor Limited 2019-4- 150,000 2019-1- One
1,700 Joint liability No No
20 16 year
Guangdong Meizhi Precision- 2019-4- 80,000 2019-1- One
1,127,220 Joint liability No No
Manufacturing Co., Ltd 20 10 year
Guangdong Welling Motor Manufacturing 2019-4- 192,000 One
2019-1-4 412,470 Joint liability No No
Co., Ltd. 20 year
Foshan Welling Washer Motor 2019-4- 222,000 2019-2- One
13,730 Joint liability No No
Manufacturing Co., Ltd. 20 19 year
Guangdong Midea Environmental 2019-4- 46,000 One
- - Joint liability No No
Technologies Co., Ltd. 20 year
Guangdong Welling Auto Parts Co. Ltd. 2019-4- 40,000 One
- - Joint liability No No
20 year
Ningbo Midea United Materials Supply 2019-4- 924,000 2019-1- One
147,330 Joint liability No No
Co. Ltd. 20 25 year
Guangzhou Kaizhao Commercial and 2019-4- 70,400 One
- - Joint liability No No
Trading Co.,Ltd 20 year
Guangdong Midea Intelligent Robotics 2019-4- 50,000 One
- - Joint liability No No
Co., Ltd. 20 year
Servotronix Motion Technology 2019-4- 10,000 One
- - Joint liability No No
Development (Shenzhen) Ltd. 20 year
Midea Group E-Commerce Co., Ltd. 2019-4- 130,000 One
- - Joint liability No No
20 year
Annto Logistics Technology Co., Ltd. 2019-4- 70,000 2019-2- One
63,580 Joint liability No No
20 19 year
Guangdong Midea Smart Link 2019-4- 9,200 One
- - Joint liability No No
Technologies Co., Ltd. 20 year
GD Midea Group Wuhu Air-Conditioning
2019-4- 2019-1- One
Equipment Co.,Ltd. 2,000,00 500,720 Joint liability No No
20 29 year
0
Wuhu Maty Air-Conditioning Equipment 2019-4- 326,000 One
- - Joint liability No No
Co., Ltd 20 year
72
Midea Group Co., Ltd. Semi-Annual Report 2019
Wuhu Midea Kitchen Appliances 2019-4- 164,000 One
- - Joint liability No No
Manufacturing Co., Ltd. 20 year
Hefei Hualing Co., Ltd. 2019-4- 914,000 2019-4- One
- Joint liability No No
20 30 year
Hubei Midea Refrigerator Co., Ltd. 2019-4- 250,800 2019-5- One
- Joint liability No No
20 21 year
Hefei Midea Refrigerator Co., Ltd. 2019-4- 920,000 One
- - Joint liability No No
20 year
Guangzhou Midea Hualing Refrigerator C
2019-4- One
o., Ltd. 1,154,00 - - Joint liability No No
20 year
0
Hefei Midea Heating & Ventilating 2019-4- 548,000 2019-3- One
- Joint liability No No
Equipment Co., Ltd. 20 28 year
Hefei Midea-SIIX Electronics Co.,Ltd. 2019-4- 230,000 2019-1- One
- Joint liability No No
20 29 year
Hefei M&B Air Conditioning Equipment 2019-4- 40,800 One
- - Joint liability No No
Co., Ltd. 20 year
Wuhu Midea Life Appliances Mfg Co., 2019-4- 200,000 One
- - Joint liability No No
Ltd. 20 year
Wuhu Midea Kitchen & Bath Appliances
2019-4- One
Mfg. Co., Ltd. 1,761,60 2019-3-1 5,900 Joint liability No No
20 year
0
Anhui Meizhi Compressor Co., Ltd. 2019-4- 30,000 2019-4- One
- Joint liability No No
20 22 year
Anhui Meizhi Precision Manufacturing 2019-4- 72,000 One
2019-2-2 14,580 Joint liability No No
Co., Ltd. 20 year
Welling (Wuhu) Motor Manufacturing Co., 2019-4- 24,000 One
- - Joint liability No No
Ltd. 20 year
Wuhu Welling Motor Sales Co., Ltd.
2019-4- One
1,200,00 - - Joint liability No No
20 year
0
Wuxi Little Swan Company Limited
2019-4- 2019-6- One
3,109,60 490 Joint liability No No
20 19 year
0
Hefei Midea Laundry Appliance Co., Ltd. 2019-4- 1,598,96 2019-3- One
269,180 Joint liability No No
20 0 15 year
Jiangsu Midea Cleaning Appliances Co., 2019-4- 510,000 One
2019-1-1 3,000 Joint liability No No
Ltd 20 year
Midea Group Wuhan Refrigeration 2019-4- 7,200 - - Joint liability One No No
73
Midea Group Co., Ltd. Semi-Annual Report 2019
Equipment Co.,Ltd. 20 year
Handan Midea Air-Conditioning 2019-4- 120,000 2019-2- One
1,830 Joint liability No No
Equipment Co.,Ltd. 20 22 year
Chongqing Midea General Refrigeration 2019-4- 148,000 2019-4- One
1,860 Joint liability No No
Equipment Co., Ltd. 20 16 year
Midea Intelligent Lighting & Controls 2019-4- 250,000 2019-3- One
580 Joint liability No No
Technology Co., Ltd. 20 28 year
Changzhou Welling Motor Manufacturing 2019-4- 24,000 One
- - Joint liability No No
Co., Ltd. 20 year
Huaian Welling Motor Manufacturing Co., 2019-4- 20,000 One
2019-2-2 - Joint liability No No
Ltd. 20 year
Zhejiang Meizhi Compressor Co., Ltd. 2019-4- 2,000,00 2019-1- One
- Joint liability No No
20 0 10 year
Ningbo Annto Logistics Co., Ltd. 2019-4- 15,000 One
- - Joint liability No No
20 year
KUKA Industries Automation (Kunshan) 2019-4- 120,750 One
- - Joint liability No No
Co., Ltd. 20 year
KUKA Systems (China) Co., Ltd. 2019-4- 145,000 One
- - Joint liability No No
20 year
KUKA Robotics Manufacturing China 2019-4- 115,000 One
- - Joint liability No No
Co.,Ltd 20 year
KUKA Robotics (Shanghai) Co.,Ltd 2019-4- 115,000 One
- - Joint liability No No
20 year
Shanghai Swisslog Healthcare Co., Ltd. 2019-4- 8,000 One
- - Joint liability No No
20 year
Swisslog (Shanghai) Co., Ltd. 2019-4- 110,000 One
- - Joint liability No No
20 year
Shanghai Swisslog Logistics Technology 2019-4- 60,000 One
- - Joint liability No No
Co., Ltd. 20 year
Midea International Corporation 2019-4- 11,480,00 2019-4- One
6,312,120 Joint liability No No
Company Limited 20 0 23 year
Midea International Trading Company Joint liability
2019-4- One
Limited 2,222,43 2019-1-1 279,670 No No
20 year
0
Midea Investment Development Joint liability
2019-4- One
Company Limited 4,900,00 2019-1-1 4,575,160 No No
20 year
0
Welling International Hong Kong Ltd 2019-4- Joint liability One
126,000 - - No No
20 year
74
Midea Group Co., Ltd. Semi-Annual Report 2019
Midea Electric Trading (Singapore) Joint liability
2019-4- One
Co.,Pte. Ltd. 5,384,00 2019-1-3 634,490 No No
20 year
0
Toshiba Lifestyle Products & Services Joint liability
2019-4- One
Corporation and its subsidiaries 4,608,00 2019-1-1 593,500 No No
20 year
0
Midea Consumer Electric Vietnam 2019-4- 2019-2- Joint liability One
112,000 41,540 No No
20 13 year
Concepcion Midea Inc. 2019-4- Joint liability One
112,000 - - No No
20 year
Midea Italia S.r.l. 2019-4- Joint liability One
140,000 - - No No
20 year
Midea Scott & English Electronics Sdn. 2019-4- Joint liability One
206,500 - - No No
Bhd. 20 year
Midea Mexico, S. DE R.L. DE C.V. 2019-4- Joint liability One
105,000 - - No No
20 year
Midea Electric Trading (Thailand) Co., 2019-4- Joint liability One
105,000 - - No No
Ltd. 20 year
Midea America Corp 2019-4- Joint liability One
669,000 - - No No
20 year
Pt. Midea Planet Indonesia 2019-4- Joint liability One
56,000 - - No No
20 year
Midea Electrics Egypt 2019-4- Joint liability One
175,000 - - No No
20 year
Midea Europe GmbH 2019-4- Joint liability One
70,000 - - No No
20 year
Servotronix Motion Control Ltd. 2019-4- Joint liability One
34,000 - - No No
20 year
Midea Austria GmbH 2019-4- Joint liability One
35,000 - - No No
20 year
Clivet SPA 2019-4- Joint liability One
73,500 - - No No
20 year
Clivet Mideast Fzco 2019-4- Joint liability One
31,500 - - No No
20 year
Midea Electric Netherland (I) 2019-4- 29,600,0 Joint liability One
- - No No
20 00 year
Total actual guarantee
Total guarantee line for subsidiaries approved
115,715,440 amount for subsidiaries 18,891,570
during the Reporting Period (B1)
during the Reporting Period
75
Midea Group Co., Ltd. Semi-Annual Report 2019
(B2)
Total actual guarantee
Total approved guarantee line for subsidiaries at the balance for subsidiaries at
115,715,440 18,019,920
end of the Reporting Period (B3) the end of the Reporting
Period (B4)
Guarantees between subsidiaries
Disclosur Actual Guar
e date of occurrenc antee
Term
the Line of e date Actual for a
Type of of Due
Guaranteed party guarante guarante (date of guarantee relate
guarantee guara or not
e line e agreeme amount d
ntee
announce nt party
ment signing) or not
No such cases
Total guarantee amount (total of the above-mentioned three kinds of guarantees)
Total actual guarantee
Total guarantee line approved during the Reporting amount during the
115,715,440 18,891,570
Period (A1+B1+C1) Reporting Period
(A2+B2+C2)
Total actual guarantee
Total approved guarantee line at the end of the balance at the end of the
115,715,440 18,019,920
Reporting Period (A3+B3+C3) Reporting Period
(A4+B4+C4)
Proportion of the total actual guarantee amount (A4+B4+C4) in net
19.46%
assets of the Company
Of which:
Amount of guarantees provided for shareholders, the actual controller
0
and their related parties (D)
Amount of debt guarantees provided directly or indirectly for entities with
8,989,590
a liability-to-asset ratio over 70% (E)
Portion of the total guarantee amount in excess of 50% of net assets (F) 0
Total amount of the three kinds of guarantees above (D+E+F) 8,989,590
Joint responsibilities possibly borne for undue guarantees (if any) N/A
Provision of external guarantees in breach of the prescribed procedures
N/A
(if any)
14.2.2 Illegal provision of guarantees for external parties
□ Applicable √ N/A
76
Midea Group Co., Ltd. Semi-Annual Report 2019
No such cases in the Reporting Period.
14.3 Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
77
Midea Group Co., Ltd. Semi-Annual Report 2019
15. Social Responsibility
15.1 Major environmental issues
Whether the Company or any of its subsidiaries is declared a heavily polluting business by the environmental protection authorities
√ Yes □ No
Name of
Approve
the Number of Concentration Total
Major Distribution of discharge Pollutant discharge d total Excess
Company Discharge method discharge of the discharge(k
pollutants outlets standards discharg discharge
or outlets discharge g)
e (kg)
subsidiary
COD Discharge after being treated by The western side of 130 mg/L Regulations of Hubei 2,530.00 4,320 No
Hubei Ammonia wastewater treatment system and 1 wastewater treatment in Province on prevention and
12.7 mg/L 24.40 700 No
Midea nitrogen reaching the standard freezer base control of water pollution
Refrigerato NMHC 1.56 mg/m 395.97 648 No
16 refrigerator foams, 12 Emission standard of air
r Co., Ltd. 15m high altitude discharge 36 squeeze plates, 4 freezer pollutants for industrial kiln
Particles 15mg/m 308.16 7,660 No
foams, 4 freezer paintings and furnace GB-9078-1996
Guangdon Less than the
g Midea COD limit of 15,441.54 22,770 No
Discharge to the municipal sewage The eastern side of The discharge limits of
Kitchen 110mg/L
system after being treated by 1 wastewater treatment in water pollutants in
Appliances Less than the
Ammonia wastewater treatment system Malong base Guangdong DB-44/26-2001
Manufactur limit of 397.98 4,554 No
nitrogen
ing Co., 15mg/L
78
Midea Group Co., Ltd. Semi-Annual Report 2019
Ltd. Less than the No
Particles limit of 11,580.93 requirem No
200mg/m ents
Less than the
Sulfur
20m high altitude discharge limit of 17.88 1,055 No
dioxide
50mg/m
Less than the
Nitrogen
limit of 322.09 10,314 No
oxide
200mg/m
Less than the No
Benzene 26 outlets at A1 plant, 50 limit of 31.39 requirem No
Emission standard of air
outlets at A2 plant, 21 1mg/m ents
pollutants for industrial kiln
outlets at B2 plant, 9
Less than the and furnace (GB-9078- No
outlets at C2 plant, 2
Toluene 116 limit of 1996) /The emission limit of 1,109.66 requirem No
outlets at C3 plant, 1
40mg/m gas pollutants in ents
outlet at wastewater
Less than the Guangdong (DB-44/27- No
treatment station and 7
Xylene limit of 2007) 2,488.06 requirem No
outlets at canteen
High altitude discharge after being
70mg/m ents
treated by waste gas treatment
Less than the No
station
VOCs limit of 17,353.81 requirem No
30mg/m ents
Less than the No
NMHC limit of 1,149.40 requirem No
100mg/m ents
No
Styrene - 14.25 requirem No
ents
79
Midea Group Co., Ltd. Semi-Annual Report 2019
Less than the No
Fume limit of 108.52 requirem No
2mg/m ents
COD 75mg/L Standards for Pipeline 52,500 58,150 No
Access to the Western
The eastern side of
Discharge after being treated by Group Wastewater
Ammonia 1 wastewater treatment
wastewater treatment station 16.5mg/L Treatment Station in Feixi 11,550 - No
nitrogen station
County, Hefei, Anhui
Hefei
Province
Midea
Laundry 15m high altitude discharge after
1 outlet at #2 plant, 1 Less than
Appliance Particles being treated by cyclone + filter 2 4,320 - No
outlet at #6 plant 20mg/m Integrated emission
Co., Ltd. cartridge dust collector
standards for atmospheric
(monitored 15m high altitude discharge after Less than
Particles pollutants GB16297-1996 5,040 - No
by the being treated by water spraying + 1 outlet at #1 plant, 1 20mg/m
1 second-level
municipal dedusting + UV photolysis + outlet at #3 plant
governmen NMHC 3mg/m 756 - No
activated carbon
t)
3 outlets at #2 plant, 6
Emission control standard
15m high altitude discharge after outlets at #6 plant, 1
for industrial enterprises
NMHC being treated by environmental 12 outlet at #1 plant, 1 outlet 2mg/m 12,960 - No
volatile organic compounds
protection facilities at #5 plant, 1 outlet at #3
DB12/524-2014
plant
COD 84mg/L 3,603 9,590
GD Midea The discharge standard of
Air- Ammonia Discharge after being treated by water pollutants for
1 4# southeastern plant 0.773mg/L 29.81 1,510 No
Conditionin nitrogen wastewater treatment station electroplating (DB441597-
g SS 25mg/L 2015) chart 2 PRD 1,008 -
80
Midea Group Co., Ltd. Semi-Annual Report 2019
Equipment Petroleum standard
3.16mg/L 129.53 -
Co.,Ltd. products
COD 94mg/L 547.2 1,160
The discharge limits of
SS 28mg/L 165.6 -
Discharge after being treated by water pollutants in
LAS 1 2# eastern plant 1.75mg/L 6.5 - No
wastewater treatment station Guangdong (DB44/26-
Petroleum 2001)
1.88mg/L 8 -
products
Emission standard of
15m high altitude discharge after volatile organic compounds
VOCs
being treated by spray tower + 3 4# plant 20 for furniture manufacturing 1,440.00 5,930.00 No
(dusting)
activated carbon (DB44/814-2010) the
second time period
Emission standard of
VOCs
15m high altitude discharge after volatile organic compounds
(screen 4 1#, 5#, 9#, 11# plants 4.6 1,324.80 5,930.00 No
being treated by green facilities for printing industry
printing)
(DB44/815-2010)
NMHC
(evaporato Emission limits of air
15m high altitude discharge after
r& 6 2#, 5# plants 10 pollutants (DB44/27-2001) 43,200.00 - No
being treated by green facilities
condenser the second time period
)
15m high altitude discharge after Emission limits of air
NMHC
being treated by catalytic 2 10# plant 6.2 pollutants (DB44/27-2001) 267.84 - No
(electronic)
combustion the second time period
Anhui COD Discharge after being treated by 1 At the southern side of 52 mg/L Integrated wastewater 7,134 - No
81
Midea Group Co., Ltd. Semi-Annual Report 2019
Meizhi Ammonia wastewater treatment system and No.6 shift building at the discharge standard
0.168mg/L 23 - No
Precision nitrogen reaching the standard northern side of plant (GB8978-1996) chart 4
Manufactur third-level
BOD 13mg/L 1,784 - No
ing Co.,
SS 6mg/L 823 - No
Ltd.
Petroleum
0.21mg/L 29 - No
products
1-8# discharge outlet for Integrated emission
11.6mg/m
the welding waste gas standards for atmospheric
5,237 No
9#-10# discharge outlet pollutants GB16297-1996
12.8mg/m
for the welding waste gas chart 2 second-level
Waste gas outlet of 1#
10.7 mg/m
heat-treating furnace
Waste gas outlet of 2#
1.2 mg/m
heat-treating furnace
Waste gas outlet of 3#
5.1 mg/m
Collected by gas trap hood+21m heat-treating furnace
Particles 11 -
high exhaust cylinder Waste gas outlet of 4# Emission standard of air
2.6 mg/m
heat-treating furnace pollutants for industrial kiln
1,535 No
Waste gas outlet of 5# and furnace GB9078-1996
1 mg/m
heat-treating furnace chart 2 second-level
Waste gas outlet of 6#
3.5 mg/m
heat-treating furnace
Waste gas outlet of 7#
1.6 mg/m
heat-treating furnace
Waste gas outlet of 8#
1.7 mg/m
heat-treating furnace
82
Midea Group Co., Ltd. Semi-Annual Report 2019
Waste gas outlet of 9#
10.3 mg/m
heat-treating furnace
Waste gas outlet of 1#
124 mg/m
heat-treating furnace
Waste gas outlet of 2#
34 mg/m
heat-treating furnace
Waste gas outlet of 3#
5 mg/m
heat-treating furnace
Waste gas outlet of 4#
143 mg/m
heat-treating furnace
Emission standard of air
Sulfur Collected by gas trap hood+21m Waste gas outlet of 5# pollutants for industrial kiln
9 6 mg/m 25,381 - No
dioxide high exhaust cylinder heat-treating furnace and furnace GB9078-1996
chart 2 second-level
Waste gas outlet of 6#
146 mg/m
heat-treating furnace
Waste gas outlet of 7#
106 mg/m
heat-treating furnace
Waste gas outlet of 8#
4 mg/m
heat-treating furnace
Waste gas outlet of 9#
334 mg/m
heat-treating furnace
Waste gas outlet of 1#
32 mg/m
heat-treating furnace
Nitrogen Collected by gas trap hood+21m Waste gas outlet of 2#
9 32 mg/m - 9,079 - No
oxide high exhaust cylinder heat-treating furnace
Waste gas outlet of 3#
8mg/m
heat-treating furnace
83
Midea Group Co., Ltd. Semi-Annual Report 2019
Waste gas outlet of 4#
18 mg/m
heat-treating furnace
Waste gas outlet of 5#
23 mg/m
heat-treating furnace
Waste gas outlet of 6#
6 mg/m
heat-treating furnace
Waste gas outlet of 7#
44 mg/m
heat-treating furnace
Waste gas outlet of 8#
19 mg/m
heat-treating furnace
Waste gas outlet of 9#
10 mg/m
heat-treating furnace
1-4# discharge outlets for
4.64 mg/m
drying waste gas
Integrated emission
Direct-fired waste gas
5-8# discharge outlets for standards for atmospheric
VOCs incinerator+21m high exhaust 10 6.56mg/m 352 - No
drying waste gas pollutants GB16297-1996
cylinder
chart 2 second-level
9-10# discharge outlets
4.79 mg/m
for drying waste gas
Implementation of the
COD 110mg/L 6,800 14,707 No
takeover standards of the
Anhui
Discharge after being treated by The western side of Western Hefei Group
Meizhi
wastewater treatment system and 1 integrated wastewater wastewater treatment plant
Compress Ammonia
reaching the standard treatment station 1.58mg/L and integrated wastewater 340 735 No
or Co., Ltd. nitrogen
discharge standard
(GB8978-1996) third-level
84
Midea Group Co., Ltd. Semi-Annual Report 2019
No. 1 workshop welding
soot 1#~6# discharge <20mg/m
Integrated emission
outlet for waste gas
standards for atmospheric No
No. 3 workshop welding
pollutants (GB16297-1996)
1#-8# discharge outlet for <20mg/m
the welding waste gas
No.2 workshop 1#Chugai Emission standard of air
furnace and 2#Chugai pollutants for industrial kiln
<20mg/m No
furnace discharge outlet and furnace (GB9078-
for waste gas 1996)
No.2 workshop 4#Chugai Emission standard of air
furnace and Samchully pollutants for industrial kiln
Collected by gas trap hood+15m <20mg/m No
Particles 14 furnace discharge outlet and furnace (GB9078- 3,241 7,975
high exhaust cylinder
for waste gas 1996)
No. 4 workshop 3#
Chugai furnace discharge
outlet for waste gas and
Integrated emission
die-casting molten
<20mg/m standards for atmospheric No
aluminum I/J/F discharge
pollutants (GB16297-1996)
outlet for waste gas
combined with a
discharge outlet
No.4 workshop BAB Emission standard of air
boiler discharge outlet for <20mg/m pollutants for industrial kiln No
waste gas and furnace (GB9078-
85
Midea Group Co., Ltd. Semi-Annual Report 2019
No.2 workshop die- 1996)
casting molten aluminum
<20mg/m
A/B/E discharge outlet for
waste gas
No.2 workshop die-
casting molten aluminum
<20mg/m
C/D discharge outlet for
waste gas
No.4 workshop die-
casting molten aluminum
<20mg/m
I/J/F discharge outlet for
waste gas
No. 4 workshop
centrifugal pouring G/H
and rotor furnace <20mg/m
combined with a
discharge outlet
The tail of 3# and 4#
stator furnace and the
general discharge outlet <20mg/m
of four melting aluminum
furnace
Emission standard of air
Furnace 1#-3# discharge
<20mg/m pollutants for boiler No
outlet for waste gas
(GB13271-2014)
Sulfur Collected by gas trap hood+15m Furnace 1#-3# discharge Emission standard of air
3 Not detected 0 4.48 No
dioxide high exhaust cylinder outlet for waste gas pollutants for boiler
86
Midea Group Co., Ltd. Semi-Annual Report 2019
Nitrogen Collected by gas trap hood+15m Furnace 1#-3# discharge (GB13271-2014)
3 128mg/m 7.62 10.07 No
oxide high exhaust cylinder outlet for waste gas
No.1 workshop of
discharge outlet for drying 16.99mg/m
waste gas
Direct-fired waste gas No.3 workshop 1# Integrated emission
VOCs incinerator+15m high exhaust 3 discharge outlet for drying 25.17mg/m standards for atmospheric 770.4 7,766 No
cylinder waste gas pollutants (GB16297-1996)
No.3 workshop 2#
discharge outlet for drying 9.93 mg/m
waste gas
The discharge limits of
water pollutants in
Guangdon COD 28.45 mg/m Guangdong DB-44/26-2001 6,260 19,880 No
g Meizhi the second time period
Near the northern side of
Precision- Discharge after being treated by first-level
1 wastewater treatment
Manufactur wastewater treatment station The discharge limits of
station
ing Co., water pollutants in
Ammonia
Ltd. 0.83mg/ m Guangdong DB-44/26-2001 184.5 2,210 No
nitrogen
the second time period
first-level
Guangdon CODcr Discharge after being treated by Outlet of the wastewater 43.5mg/L Table 2 of the Discharge 1,357.2 2,400 No
g Midea wastewater treatment system and 1 treatment station of the Standard of Water
Consumer Petroleum reaching the standard water material plant 0.755mg/L Pollutants from 23.556 - No
87
Midea Group Co., Ltd. Semi-Annual Report 2019
Electric Electroplating
Manufactur （DB44/1597-2015）:
ing Co., Water Pollutant Discharge
Ltd. Ammonia Limits for New Projects and
6.76mg/L 210.912 480 No
nitrogen Benchmark Effluent
Volume Per Unit
Product/Discharge Limits of
the Pearl River Delta
Benzene Not detected Table 1 of the Discharge - - No
Standard of Volatile
Toluene
5.94mg/m3 Organic Chemical 317.003 - No
and xylene Outlet for waste gas from
High altitude discharge after being Compounds in the
sheet metal spraying at
treated by waste gas treatment 1 Furniture Making Industry
the southeast side of the
station (DB44/814-2010):
VOCs water material plant 17.8mg/m3 949.94 - No
Discharge Limits for VOCs
through Exhaust Funnel/for
Time Period II
Table 2 of the Emission
Limits of Air Pollutants
Outside the polishing (DB44/27-2001): Emission
Particles 1 6.4mg/ m 69.18 - No
room Limits of Industrial Waste
Gas (Time Period 2), Level
High altitude discharge after being
2
treated by waste gas treatment
Table 4 of the Emission
station
Standards of Industrial
East side of the injection Pollutants in the Synthetic
NMHC 1 3.15mg/ m 50.92 - No
molding plant Resin Industry (GB 31572-
2015): Emission Limits of
Air Pollutants
88
Midea Group Co., Ltd. Semi-Annual Report 2019
The Emission Limits of Air
Pollutants from Industrial
Particles 8.2mg/ m 437.61 - No
Furnaces (GB9078-1996)
(Level 2) (Table 2 of the
High altitude discharge after being Emission Limits of Air
West side of the sheet
treated by waste gas treatment 1 Pollutants (DB44/27-2001),
metal plant
station Guangdong Province’s
Sulfur local standard: Emission
Not detected - - No
dioxide Limits of Industrial Waste
Gas (Time Period 2) (Level
2) for nitrogen oxide)
Table 2 of the Emission
Standard of Cooking Fume
(Trial) (GB 18483-2001):
High altitude discharge after being The Upper Concentration
Cooking
treated by waste gas treatment 1 3rd floor of the canteen 0.56mg/ m Limit for Cooking Fume and 16.919 - No
fume
station the Lowest Removal Rate
of Fume Purification
Facilities/for Large Catering
Units
CODcr 47.9mg/ m 4,190.16 106,520 No
Foshan Discharge Standard of
Discharge after being treated by Waste water treatment
Shunde Petroleum 0.77mg/ m Water Pollutants from 67.298 - No
wastewater treatment system and 2 stations 1 and 2 of 3#
Midea Electroplating
Ammonia reaching the standard plant 3.1mg/ m （DB44/1597-2015） 278.38 21,300 No
Electrical nitrogen
Heating
High altitude discharge after being Spraying waste gas from Table 1 of the Discharge
Appliances Toluene
treated by waste gas treatment 4 3# plant and welding 1.4mg/ m Standard of Volatile 57.62 - No
Manufactur and xylene
station waste gas from 6# plant Organic Chemical
89
Midea Group Co., Ltd. Semi-Annual Report 2019
ing Co., Compounds in the
Ltd. Furniture Making Industry
High altitude discharge after being
(DB44/814-2010):
VOCs treated by waste gas treatment 8.11mg/ m 333.02 - No
Discharge Limits for VOCs
station
through Exhaust Funnel/for
Time Period II
Table 4 of the Emission
Standards of Industrial
High altitude discharge after being Outlet of injection molding
Pollutants in the Synthetic
NMHC treated by waste gas treatment 1 waste gas in the south 3.98mg/ m 109.49 - No
Resin Industry (GB 31572-
station side of 1# plant
2015): Emission Limits of
Air Pollutants
Oxidation wire roof of 3# Table 2 of the Emission
Not detected - 585.95 No
plant Limits of Air Pollutants
High altitude discharge after being
Sulfur (DB44/27-2001): Emission
treated by waste gas treatment 2
dioxide Limits of Industrial Waste
station Drying furnace of 3# plant Not detected - 585.95 No
Gas (Time Period 2), Level
2
Table 2 of the Emission
Standard of Cooking Fume
(Trial) (GB 18483-2001):
The Upper Concentration
Cooking Discharge after being treated by South and east section
2 1.13mg/ m Limit for Cooking Fume and 41.4 - No
fume waste gas treatment station canteens
the Lowest Removal Rate
of Fume Purification
Facilities/for Large Catering
Units
90
Midea Group Co., Ltd. Semi-Annual Report 2019
Discharge after being treated by Discharge Standard of
Guangdon COD 54 mg/L - 1,152 No
wastewater treatment station Near the wastewater Water Pollutants from
g Meizhi
1 treatment station in the Electroplating of
Compress Ammonia Discharge after being treated by
north side of the plant 1.99mg/L Guangdong Province 171 230. 4 No
or Limited nitrogen wastewater treatment station
（DB44/1597-2015）
Discharge after being treated by Implementation of the
COD wastewater treatment system and 97mg/L takeover standards of the 575 3,920 No
reaching the standard Western Hefei Group
1 East side of 1# plant wastewater treatment plant
Discharge after being treated by
Ammonia and integrated wastewater
wastewater treatment system and 19.7mg/L 192 390 No
Hefei nitrogen discharge standard
reaching the standard
Midea (GB8978-1996) third-level
Heating &
Nitrogen
Ventilating 1 2# plant 5mg/m 49.86 - No
oxide
Equipment
3 in 1# plant, 4 in 2#
Co., Ltd. High altitude discharge after being Integrated emission
NMHC 11 plant, 2 in 3# plant and 2 28.97mg/m 484.72 - No
treated by waste gas treatment standards for atmospheric
in 4# plant
station pollutants (GB16297-1996)
3 in 1# plant, 4 in 2#
Soot 11 plant, 2 in 3# plant and 2 101.5mg/m 1,695 - No
in 4# plant
COD Discharge after being treated by 80mg/L Integrated wastewater 291.84 70,898 No
Wuhu
Wastewater treatment
Midea Ammonia wastewater treatment system and 1 discharge standard
station of the plant 8.12 mg/L 29.62 2,496 No
Kitchen & nitrogen reaching the standard (GB8978-1996)
Bath Soot 15m high altitude discharge 45 Workshops of the plant <20mg/m Emission standard of air 666.20 - No
91
Midea Group Co., Ltd. Semi-Annual Report 2019
Appliances Sulfur pollutants for boiler
<50 mg/m 476.90 1,658 No
Mfg. Co., oxide (GB13271-2014)
Ltd.
Nitrogen
<150mg/m 1,532.20 4,074.5 No
oxide
Soot <50mg/m 3,361.24 35,049 No
High altitude discharge after being Integrated emission
Xylene treated by waste gas treatment <10 mg/m standards for atmospheric 174.16 - No
VOCs station <20 mg/m pollutants (GB16297-1996) 224.90 29,650 No
The construction of pollution prevention facilities and their operation
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.
B. Waste gas treatments: The waste gas from subsidiaries is mainly the industrial waste gas and dust produced during the production process.
Corresponding waste gas treatment systems have been set up for different types of waste gas. The waste gas is let out at a high altitude after being
treated in the corresponding treatment system. As for dust, the polishing machines operate in a closed environment, with a fully automated cleaner
sucking in the dust in the waste gas.
C. 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.
92
Midea Group Co., Ltd. Semi-Annual Report 2019
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 subsidiaries have formulated their own environment self-monitoring plans according to China’s relevant laws and regulations, and have entrusted
third-party qualified institutions to monitor the discharge of waste including waste water and waste gas on a regular basis. 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
93
Midea Group Co., Ltd. Semi-Annual Report 2019
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
94
Midea Group Co., Ltd. Semi-Annual Report 2019
15.2 Measures taken for targeted poverty alleviation
15.2.1 Summary of the work done for targeted poverty alleviation during the Reporting Period
Midea attaches great importance to helping those in need as a way to meet its social responsibility and
give back to society. In 2019, in response to the call of the Guangdong provincial government, Midea has
been trying to help reduce poverty through industrial development, creating more jobs and giving
donations for public welfare. It has donated RMB10 million to the Beijiao Town Charity Federation for a
10th consecutive year for poverty alleviation and public welfare. And another RMB10 million has been
given on the Guangdong Poverty Alleviation Day to improve education, medical care and housing.
15.2.2 Targeted poverty alleviation plans for the coming future
In order to implement the spirit of the 19th National Congress of the Communist Party of China, follow the
guidance of President Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, and
carry out the planning of the Guangdong Provincial CPC Committee and Government for poverty
alleviation, Midea Group will adhere to a practical and realistic principle, beef up its poverty alleviation
programs, stick to the basic strategy of targeted poverty alleviation, and ensure the implementation of
every relevant measure. Meanwhile, it will also ensure that all the donated money will be used properly,
and that the donation receiving institutions know exactly their responsibilities and how to make good use
of the donated money.
16. 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),
95
Midea Group Co., Ltd. Semi-Annual Report 2019
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 RMB 42.04 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.
17. Significant Events of Subsidiaries
□ Applicable √ N/A
96
Midea Group Co., Ltd. Semi-Annual Report 2019
Section VI Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
Before Increase/decrease in Reporting Period (+/-) After
Percenta Percenta
Shares New issue Other Subtotal Shares
ge (%) ge (%)
1. Restricted shares 147,174,760 2.22 4,799,376 -12,064,773 -7,265,397 139,909,363 2.02
1.1 Shares held by
other domestic 145,424,760 2.19 4,799,376 -11,694,773 -6,895,397 138,529,363 2.00
investors
Among which: Shares
held by domestic - - 2,363,601 - 2,363,601 2,363,601 0.04
corporations
Shares
held by domestic 145,424,760 2.19 2,435,775 -11,694,773 -9,258,998 136,165,762 1.96
individuals
1.2 Shares held by
1,750,000 0.03 -370,000 -370,000 1,380,000 0.02
foreign investors
Shares held by
1,750,000 0.03 -370,000 -370,000 1,380,000 0.02
foreign individuals
2. Non-restricted shares 6,515,855,746 97.78 373,010,835 -87,053,659 285,957,176 6,801,812,922 97.98
2.1 RMB common
6,515,855,746 97.78 373,010,835 -87,053,659 285,957,176 6,801,812,922 97.98
shares
3. Total shares 6,663,030,506 100.00 377,810,211 -99,118,432 278,691,779 6,941,722,285 100.00
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.
97
Midea Group Co., Ltd. Semi-Annual Report 2019
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. In H1 2019, the incentive receivers of stock options chose to exercise 51,732,735 shares, which have
been registered into the Company’s share capital.
g. In H1 2019, locked-up shares held by senior management decreased by 841,998 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
As of 31 July 2019, the Company has cumulatively repurchased 60,252,129 shares (0.8664% of the
98
Midea Group Co., Ltd. Semi-Annual Report 2019
Company’s total share capital as of that date) by way of centralized bidding in its securities account for
repurchase. With the highest trading price being RMB55.00/share and the lowest being RMB45.62/share,
the total payment amounted to RMB3,099,683,600.75 (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 share price 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 Unlocked in Increased in Closing
Name of shareholder restricted current current restricted Reason for change Date of unlocking
shares period period shares
Incentive receivers of
reserved restricted
Lockup according to
shares under 2018 0 0 2,420,000 2,420,000 10 May 2021
the Scheme
Restricted Share
Incentive Scheme
Incentive receivers of
reserved restricted
Lockup according to
shares under 2017 5,235,000 1,629,000 0 3,208,000 20 February 2019
the Scheme
Restricted Share
Incentive Scheme ①
99
Midea Group Co., Ltd. Semi-Annual Report 2019
Incentive receivers of
2017 Restricted Share Lockup according to
14,380,000 5,564,583 0 7,437,500 28 June 2019
Incentive Scheme (first the Scheme
phase) ②
Incentive receivers of
2018 Restricted Share Lockup according to
20,570,000 0 0 18,332,500 21 June 2020
Incentive Scheme (first the Scheme
phase) ③
Lockup for senior
Zhang Xiaoyi 138,100 0 128,275 266,375 management -
position
Lockup for senior
Jiang Peng 566,250 107,775 0 458,475 management -
position
Lockup for senior
Xiao Mingguang 0 0 66,250 66,250 management -
position
Lockup of new
shares for senior
Zhong Zheng 0 0 11,152 11,152 -
management
position
Unlocking of locked-
Li Feide 1,195,000 1,195,000 0 0 up shares of former 26 March 2019
senior management
Lockup for senior
Zhu Fengtao 765,300 0 255,100 1,020,400 management 26 March 2022
departure
Total 42,849,650 8,496,358 2,880,777 33,220,652 -- --
Notes: ① 398,000 reserved restricted shares under the 2017 Restricted Share Incentive Scheme that had been granted
but were still in lockup were retired on 3 April 2019, reducing the closing restricted shares by 398,000 shares.
② 1,377,917 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 2019, reducing the closing restricted shares by 1,377,917 shares.
③ 2,237,500 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 2019, reducing the closing restricted shares by 2,237,500 shares.
2. Issuance and Listing of Securities
√ Applicable □ N/A
100
Midea Group Co., Ltd. Semi-Annual Report 2019
Name of Number Date of
Issue price Date of
stock or its Issue allowed for terminat Index to disclosed Disclosure
Issue date (or interest public
derivative number public ion of information date
rate) trading
securities trading trading
Stock
Announcement of Midea
Group Co., Ltd. on the A-
share Offering for the
Merger with Wuxi Little
Midea
21 June RMB40.74/ 323,657,47 21 June 323,657,47 Swan Company Limited 19 June
Group -
2019 share 6 2019 6 in a Share Swap & the 2019
（000333）
Implementation of the
Related-Party
Transaction & the Listing
of New Shares
3. Total Number of Shareholders and Their Shareholdings
Unit: share
Total number of preference
Total number of common
shareholders with resumed voting
shareholders at the end of 213,103 0
rights at the period-end (if any) (see
the Reporting Period
note 8)
5% or greater common shareholders or top 10 common shareholders
Shareh Total Increase/d Number of Pledged or frozen
Number of
olding common ecrease non- shares
Name of Nature of restricted
percent shares held during the restricted
shareholder shareholder common
age at the period- Reporting common Status Shares
shares held
(%) end Period shares held
Domestic
Midea Holding Co., non-state- 2,212,046,61 2,212,046,61
31.87% 0 0 Pledged 215,000,000
Ltd. owned 3 3
corporation
Hong Kong
Foreign
Exchanges and 13.95% 968,551,080 68,430,913 0 968,551,080
corporation
Clearing Limited
State-
China Securities
owned 2.85% 198,145,134 0 0 198,145,134
Finance Co., Ltd.
corporation
Domestic 102,742,86
Fang Hongbo 1.97% 136,990,492 0 34,247,623
individual 9
101
Midea Group Co., Ltd. Semi-Annual Report 2019
Canada Pension
Plan Investment
Foreign
Board－ self- 1.73% 120,379,067 19,371,811 0 120,379,067
corporation
owned capital
(stock exchange)
State-
Central Huijin Asset
owned 1.30% 90,169,354 11,694,454 0 90,169,354
Management Ltd.
corporation
Domestic
Huang Jian 1.27% 88,043,300 36,200 0 88,043,300
individual
Hillhouse Capital
Management Foreign
0.89% 61,831,900 -9,632,700 0 61,831,900
Limited－ HCM corporation
China Fund
Domestic
Yuan Liqun 0.75% 52,038,500 -580,800 0 52,038,500 Pledged 9,044,900
individual
Domestic
Li Jianwei 0.75% 51,791,941 0 0 51,791,941
individual
Strategic investors or general
corporations becoming top-ten
common shareholders due to N/A
placing of new shares (if any)
(see note 3)
Related-parties or acting-in-
concert parties among the N/A
shareholders above
Top 10 non-restricted common shareholders
Number of non-restricted common shares held at Type of shares
Name of shareholder
the period-end Type Shares
2,212,046,6
Midea Holding Co., Ltd. 2,212,046,613 RMB common stock
13
Hong Kong Exchanges and
968,551,080 RMB common stock 968,551,080
Clearing Limited
China Securities Finance Co.,
198,145,134 RMB common stock 198,145,134
Ltd.
Canada Pension Plan
Investment Board－ self-owned 120,379,067 RMB common stock 120,379,067
capital (stock exchange)
Central Huijin Asset
90,169,354 RMB common stock 90,169,354
Management Ltd.
102
Midea Group Co., Ltd. Semi-Annual Report 2019
Huang Jian 88,043,300 RMB common stock 88,043,300
Hillhouse Capital Management
61,831,900 RMB common stock 61,831,900
Limited－ HCM China Fund
Yuan Liqun 52,038,500 RMB common stock 52,038,500
Li Jianwei 51,791,941 RMB common stock 51,791,941
GIC Private Limited 51,121,146 RMB common stock 51,121,146
Related-parties or acting-in-
concert parties among the top
ten non-restricted common
shareholders and between the N/A
top ten non-restricted common
shareholders and the top ten
common shareholders
Explanation on the top 10
common shareholders
N/A
participating in securities margin
trading (if any) (see note 4)
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.
4. Change of Controlling Shareholder or Actual Controller in the Reporting Period
Change of the controlling shareholder during the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
Change of the actual controller during the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
103
Midea Group Co., Ltd. Semi-Annual Report 2019
Section VII Preference Shares
□ Applicable √ N/A
No such cases in the Reporting Period.
104
Midea Group Co., Ltd. Semi-Annual Report 2019
Section VIII Information about Directors, Supervisors and
Senior Management
1. Changes in Shareholdings of Directors, Supervisors and Senior Management
√ Applicable □ N/A
Restricted
Shares Shares Shares Granted
Shares shares Granted
increased decrease held at Restricted
held at granted in restricted
Incumben at the d at the the shares at
Name Office title the year- the shares at the
t / Former Reporting Reporting period- the year-
begin Reporting period-end
Period Period end begin
(share) Period (share)
(share) (share) (share) (share)
(share)
Hu Vice Incumben
300,000 0 0 300,000 300,000 0 200,000
Ziqiang President t
Xiao
Vice Incumben
Mingguan 280,000 75,000 0 355,000 250,000 0 200,000
President t
g
Zhang Vice Incumben
470,800 105,775 0 576,575 240,000 0 170,000
Xiaoyi President t
Director
Zhong Incumben
of 200,000 1,152 0 201,152 200,000 0 140,000
Zheng t
Finance
Independ
Xue Incumben
ent 0 179,914 0 179,914 0 0 0
Yunkui t
Director
Total -- -- 1,250,800 361,841 0 1,612,641 990,000 0 710,000
Note: Locked-up incentive shares were unlocked for trading in the public market on 28 June 2019 during the second
unlocking period of the first phase of the 2017 Restricted Share Incentive Scheme, including 100,000 shares of Hu Ziqiang,
70,000 shares of Zhang Xiaoyi and 60,000 shares of Zhong Zheng. Locked-up incentive shares were unlocked for trading
in the public market on 20 February 2019 during the first unlocking period of the reserved restricted shares of the 2017
Restricted Share Incentive Scheme, including 50,000 shares of Xiao Mingguang.
2. Changes in Directors, Supervisors and Senior Management
√ Applicable □ N/A
105
Midea Group Co., Ltd. Semi-Annual Report 2019
Name Office title Type of change Date Reason
Zhu Fengtao Director and Vice Quitting 2019-3-22 Personal reason
President
Xiao Mingguang Director of Finance Dismissed 2019-3-22 Job change
Xiao Mingguang Vice President Appointed 2019-3-22 Job change
Zhong Zheng Director of Finance Appointed 2019-3-22 Senior management
appointment
106
Midea Group Co., Ltd. Semi-Annual Report 2019
Section IX Corporate Bonds
Does the Company have any corporate bonds publicly issued on the stock exchange, which were undue
before the date of this Report’s approval or were due but could not be redeemed in full?
□ Yes √ No
107
Midea Group Co., Ltd. Semi-Annual Report 2019
Section X Financial Report
1. Auditor’s Report
Have the H1 2019 financial statements been audited by a CPAs firm?
□ Yes √ No
The H1 2019 financial statements are unaudited by a CPAs firm.
2. Financial Statements
(All amounts in RMB'000 Yuan unless otherwise stated)
108
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
30 June 31 December 30 June 31 December
2019 2018 2019 2018
ASSETS Note Consolidated Consolidated Company Company
Current assets:
Cash at bank and on hand 4(1) 35,890,088 27,888,280 25,693,887 15,361,626
Financial assets held for
trading 4(2) 3,433,401 2,549,611
Derivative financial assets 50,847 220,197 - -
Notes receivable 4(3) 15,060,062 12,556,294 - -
Accounts receivable 4(4) 23,017,823 19,390,174 - -
Receivables financing 2,653,342 -
Advances to suppliers 4(5) 2,099,422 2,215,888 54,531 55,069
Loans and advances 4(6) 14,672,687 11,328,392 - -
Other receivables 4(4), 17(1) 2,512,193 2,971,368 13,106,026 11,593,020
Inventories 4(7) 24,106,604 29,645,018 - -
Other current assets 4(8) 75,464,791 76,473,827 59,283,778 55,052,256
Total current assets 198,961,260 182,689,438 100,687,833 82,061,971
Non-current assets:
Available-for-sale financial
assets 1,906,878 56,579
Long-term receivables 1,293,523 34,815 - -
Long-term equity
investments 4(9), 17(2) 2,619,985 2,713,316 45,525,300 28,236,295
Other non-current financial
assets 4(10) 1,420,416 476,723
Investment properties 380,579 391,765 540,592 560,954
Fixed assets 4(11) 21,508,572 22,437,212 973,766 1,056,790
Construction in progress 4(12) 1,405,351 2,077,621 84,869 51,872
Intangible assets 4(13) 15,915,894 16,186,675 708,679 712,454
Goodwill 4(14) 29,103,917 29,100,390 - -
Long-term prepaid
expenses 1,212,499 1,191,373 150,541 174,684
Deferred tax assets 4(15) 5,467,296 4,421,313 90,832 202,703
Other non-current assets 4,744,533 550,352 4,200,939 4,576
Total non-current assets 85,072,565 81,011,710 52,752,241 31,056,907
TOTAL ASSETS 284,033,825 263,701,148 153,440,074 113,118,878
Legal representative: Principal in charge of accounting: Head of accounting department:
Fang Hongbo Zhong Zheng Chen Lihong
109
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)
AS AT 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
30 June 31 December 30 June 31 December
LIABILITIES AND 2019 2018 2019 2018
OWNERS’ EQUITY Note Consolidated Consolidated Company Company
Current liabilities:
Short-term borrowings 1,338,324 870,390 529,000 575,000
Borrowings from the Central Bank 19,555 99,754 - -
Customer deposits and deposits
from banks and other financial
institutions 64,801 44,386 - -
Derivative financial liabilities 75,195 756,299 - -
Notes payable 4(18) 29,274,952 23,325,115 - -
Accounts payable 4(19) 39,004,928 36,901,626 - -
Advances from customers 4(20) 10,417,962 16,781,666 - -
Employee benefits payable 4(21) 4,758,403 5,788,004 559,335 573,632
Taxes payable 4(22) 3,918,391 3,875,298 168,384 280,499
Other payables 4(23) 3,419,347 3,346,129 94,548,901 74,714,012
Current portion of non-current
liabilities 115,704 7,122,712 - -
Other current liabilities 4(24) 41,516,316 31,319,709 8,495 44,414
Total current liabilities 133,923,878 130,231,088 95,814,115 76,187,557
Non-current liabilities:
Long-term borrowings 4(25) 42,490,036 32,091,439 4,000,000 -
Long-term payables 45,424 88,890 - -
Provisions 292,264 268,887 - -
Deferred income 587,238 647,583 - -
Long-term employee benefits
payable 4(26) 2,500,722 2,480,318 - -
Deferred tax liabilities 4(15) 4,551,299 4,422,074 56,033 -
Other non-current liabilities 1,040,961 1,016,352 - -
Total non-current liabilities 51,507,944 41,015,543 4,056,033 -
Total liabilities 185,431,822 171,246,631 99,870,148 76,187,557
Shareholders’ equity：
Share capital 4(27) 6,938,903 6,663,031 6,938,903 6,663,031
Capital surplus 4(29) 18,658,065 18,451,307 24,924,388 10,615,389
Less: Treasury stock 4(28) (2,652,334) (4,918,427) (2,652,334) (4,918,427)
Other comprehensive income 4(30) (859,738) (1,332,153) 12,775 6,020
General risk reserve 366,947 366,947 - -
Surplus reserve 4(31) 5,079,096 5,079,096 5,079,096 5,079,096
Undistributed profits 4(32) 65,058,040 58,762,315 19,267,098 19,486,212
Total equity attributable to
shareholders of the Company 92,588,979 83,072,116 53,569,926 36,931,321
Minority interests 6,013,024 9,382,401 - -
Total shareholders’ equity 98,602,003 92,454,517 53,569,926 36,931,321
TOTAL LIABILITIES AND
OWNERS’ EQUITY 284,033,825 263,701,148 153,440,074 113,118,878
Legal representative: Principal in charge of accounting: Head of accounting department:
Fang Hongbo Zhong Zheng Chen Lihong
110
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
For the six For the six For the six For the six
Item months ended months ended months ended months ended
30 June 2019 30 June 2018 30 June 2019 30 June 2018
Note Consolidated Consolidated Company Company
1. Total revenue 154,332,643 143,735,916 876,450 866,310
Including: Revenue 4(34), 17(3) 153,770,300 142,623,837 876,450 866,310
Interest income 4(35) 561,697 1,112,014 - -
Fee and commission income 646 65 - -
2. Total cost of sales (136,218,155) (128,041,762) 708,863 43,073
Including: Cost of sales 4(34) (108,441,289) (103,881,438) (24,059) (21,954)
Interest costs 4(35) (105,543) (168,235) - -
Fee and commission expenses (3,671) (1,529) - -
Taxes and surcharges 4(36) (928,590) (847,650) (11,003) (17,701)
Selling and distribution expenses 4(37) (19,529,822) (16,892,503) - -
General and administrative expenses 4(38) (4,110,125) (3,335,291) (212,140) (167,898)
Research and development expenses 4(39) (4,534,760) (3,899,229)
Financial expenses 4(40) 1,435,645 984,113 956,065 250,626
Including: Interest expenses (401,129) (304,703) (643,784) (277,458)
Interest income 2,088,716 757,815 1,594,250 530,954
Add: Other income 4(46) 661,949 626,278 143,303 184,077
Investment income 4(44), 17(4) 12,640 912,624 6,747,397 6,583,452
Including: Share of profit of associates and joint
ventures 232,596 187,245 144,453 127,081
Including: Profits or losses arising from
derecognition of financial assets
measured at amortised costs (709) -
Gains on changes in fair value 4(43) 347,862 (613,928) - -
Asset impairment losses 4(41) (144,656) (300,087) 286
Losses on credit impairment 4(42) (179,047) (1,055)
Gains on disposals of assets 4(45) (13,705) (18,759) - 263
3. Operating profit 18,799,531 16,300,282 8,474,958 7,677,461
Add: Non-operating income 150,363 150,800 30,188 4,418
Less: Non-operating expenses (60,379) (56,509) (289) (4,038)
4. Total profit 18,889,515 16,394,573 8,504,857 7,677,841
Less: Income tax expenses 4(47) (2,829,592) (2,614,882) (170,074) (7,930)
5. Net profit 16,059,923 13,779,691 8,334,783 7,669,911
(1) Classified by continuity of operations
Net profit from continuing operations 16,059,923 13,779,691 8,334,783 7,669,911
Net profit from discontinued operations - - - -
(2) Classified by ownership of the equity
Attributable to equity owners of the Company 15,187,069 12,936,846 8,334,783 7,669,911
Minority interests 872,854 842,845 - -
6. Other comprehensive income, net of tax 172,153 (586,379) 6,755 96,914
Other comprehensive income attributable to equity owners
of the Company, net of tax 134,968 (399,887) 6,755 96,914
(1) Other comprehensive income items which will not be
reclassified to profit or loss (78,752) 18,286 - -
1. Changes arising from remeasurement on defined
benefit plans (78,752) 18,286 - -
(2) Other comprehensive income items which will be
reclassified to profit or loss 213,720 (418,173) 6,755 96,914
1. Other comprehensive income that could be
reclassified to profit and loss under equity method (251) 45,974 6,755 34,306
2. Changes in fair value of available-for-sale financial
assets 14,579 - 62,608
3. Cash flow hedging reserve 34,124 (634,467) - -
4. Differences arising from translation of foreign currency
financial statements 179,847 155,741 - -
Other comprehensive income attributable minority
shareholders, net of tax 37,185 (186,492) - -
7. Total comprehensive income 16,232,076 13,193,312 8,341,538 7,766,825
Attributable to equity owners of the Company 15,322,037 12,536,959 8,341,538 7,766,825
Attributable to minority interests 910,039 656,353 - -
8. Earnings per share:
(1) Basic earnings per share 4(48) 2.32 1.97 Not applicable Not applicable
(2) Diluted earnings per share 4(48) 2.30 1.94 Not applicable Not applicable
Legal representative: Principal in charge of accounting: Head of accounting department:
Fang Hongbo Zhong Zheng Chen Lihong
111
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
For the six For the six For the six For the six
months ended months ended months ended months ended
30 June 2019 30 June 2018 30 June 2019 30 June 2018
Item Note Consolidated Consolidated Company Company
1. Cash flows from operating activities
Cash received from sales of goods or rendering of services 126,154,956 101,192,080 - -
Net increase in customer deposits and deposits from banks
and other financial institutions 20,415 - - -
Net decrease in deposits with the Central Bank and deposits
with banks and other financial institutions 398,114 - - -
Net increase in borrowings from the Central Bank - 30,367 - -
Cash received for interest, fee and commission 582,748 656,777 - -
Refund of taxes and surcharges 4,048,551 3,648,098 - -
Cash received relating to other operating activities 4(49)(a) 2,381,473 3,556,377 20,283,213 9,646,377
Sub-total of cash inflows 133,586,257 109,083,699 20,283,213 9,646,377
Cash paid for goods and services (68,459,015) (62,574,802) - -
Net increase in loans and advances (3,399,771) (3,345,537) - -
Net decrease in customer deposits and deposits from banks
and other financial institutions - (5,855) - -
Net increase in deposits with the Central Bank - (1,332,232) - -
Net decrease in borrowings from the Central Bank (80,199) - - -
Cash paid for interest, fee and commission (114,519) (169,952) - -
Cash paid to and on behalf of employees (13,696,292) (13,600,798) (22,076) (325,065)
Payments of taxes and surcharges (8,210,106) (6,994,367) (75,289) (17,702)
Cash paid relating to other operating activities 4(49)(b) (17,838,465) (13,446,468) (549,409) (1,592,701)
Sub-total of cash outflows (111,798,367) (101,470,011) (646,774) (1,935,468)
Net cash flows from operating activities 4(49)(c) 21,787,890 7,613,688 19,636,439 7,710,909
2. Cash flows from investing activities
Cash received from disposal of investments 26,879,915 31,793,113 15,451,529 13,502,964
Cash received from returns on investments 695,269 1,007,924 5,866,529 7,568,060
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 102,266 36,333 - -
Net cash received from disposal of subsidiaries and other
business units - 30,755 - -
Cash received relating to other investing activities - - - -
Sub-total of cash inflows 27,677,450 32,868,125 21,318,058 21,071,024
Cash paid to acquire fixed assets, intangible assets and other
long-term assets (1,931,628) (2,368,539) (74,831) (115,266)
Cash paid to acquire investments (43,598,143) (39,300,659) (39,801,205) (21,358,367)
Net cash paid to acquire subsidiaries and other business units (178,427) (142,604) - -
Cash paid relating to other investing activities - - - -
Sub-total of cash outflows (45,708,198) (41,811,802) (39,876,036) (21,473,633)
Net cash flows from investing activities (18,030,748) (8,943,677) (18,557,978) (402,609)
3. Cash flows from financing activities
Cash received from capital contributions 1,798,533 1,711,968 1,682,906 1,168,515
Including: Cash received from capital contributions by minority
shareholders of subsidiaries 115,627 521,351 - -
Cash received from borrowings 11,562,940 1,117,310 6,127,000 -
Sub-total of cash inflows 13,361,473 2,829,278 7,809,906 1,168,515
Cash repayments of borrowings (7,720,691) (2,493,061) (2,173,000) -
Cash payments for distribution of dividends, profits or interest
expenses (10,274,437) (8,667,397) (9,135,083) (8,093,220)
Including: Cash payments for dividends or profit to minority
shareholders of subsidiaries (1,314,282) (497,161) - -
Cash paid relating to other financing activities (2,195,034) (1,835,429) (1,992,751) (28,811)
Sub-total of cash outflows (20,190,162) (12,995,887) (13,300,834) (8,122,031)
Net cash flows from financing activities (6,828,689) (10,166,609) (5,490,928) (6,953,516)
4. Effect of foreign exchange rate changes on cash and cash
equivalents 16,445 92,339 - -
5. Net increase in cash and cash equivalents (3,055,102) (11,404,259) (4,412,467) 354,784
Add: Cash and cash equivalents at the beginning of the period 17,952,282 21,831,653 10,181,934 25,978,543
6. Cash and cash equivalents at the end of the period 14,897,180 10,427,394 5,769,467 26,333,327
Legal representative: Principal in charge of accounting: Head of accounting department:
Fang Hongbo Zhong Zheng Chen Lihong
112
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Amounts of the current period
Item Attributable to equity owners of the Company Total
Share Capital Less: Treasury Other comprehensive Surplus General Undistributed Minority shareholders’
capital surplus stock income reserve risk reserve profits interests equity
1. Balance at the end of the last year 6,663,031 18,451,307 (4,918,427) (1,332,153) 5,079,096 366,947 58,762,315 9,382,401 92,454,517
Add: Changes in accounting policies - - - 337,447 - - (337,447) - -
2. Balance at the beginning of the current year 6,663,031 18,451,307 (4,918,427) (994,706) 5,079,096 366,947 58,424,868 9,382,401 92,454,517
3. Movements for the current year 275,872 206,758 2,266,093 134,968 - - 6,633,172 (3,369,377) 6,147,486
(1) Total comprehensive income - - - 134,968 - - 15,187,069 910,039 16,232,076
(2) Capital contribution and withdrawal by
shareholders 275,872 283,662 2,266,093 - - - - (3,034,147) (208,520)
1. Capital contribution from shareholders 54,153 1,513,276 (57,088) - - - - 115,627 1,625,968
2. Business combinations - - - - - - - - -
3. Share-based payment included in
shareholders' equity - (7,953) - - - - - 45,314 37,361
4. Others 221,719 (1,221,661) 2,323,181 - - - - (3,195,088) (1,871,849)
(3) Profit distribution - - - - - - (8,553,897) (1,249,981) (9,803,878)
1. Appropriation to surplus reserve - - - - - - - - -
2. Appropriations to general risk reserve - - - - - - - - -
3. Profit distribution to shareholders - - - - - - (8,553,897) (1,249,981) (9,803,878)
4. Others - - - - - - - - -
(4) Transfer within shareholders' equity - - - - - - - - -
1. Transfer from capital surplus to paid-in capital - - - - - - - - -
2. Transfer from surplus reserves to paid-in capital - - - - - - - - -
3. Surplus reserve used to offset accumulated losses - - - - - - - - -
4. Others - - - - - - - - -
(5) Special reserve - - - - - - - - -
1. Increase in the current period - - - - - - - - -
2. Usage in the current period - - - - - - - - -
(6) Others - (76,904) - - - - - 4,712 (72,192)
4. Balance at the end of the current period 6,938,903 18,658,065 (2,652,334) (859,738) 5,079,096 366,947 65,058,040 6,013,024 98,602,003
Legal representative: Fang Hongbo Principal in charge of accounting: Zhong Zheng Head of accounting department: Chen Lihong
113
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONT’D)
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Amounts of the last year
Item
Attributable to equity owners of the Company
Other Total
Share Capital Less: Treasury comprehensive Surplus General Undistributed Minority shareholders’
capital surplus stock income reserve risk reserve profits interests equity
1. Balance at the end of the last year 6,561,053 15,911,504 (366,842) (244,692) 3,882,232 366,947 47,627,235 9,187,734 82,925,171
Add: Changes in accounting policies - - - - - - - - -
2. Balance at the beginning of the current year 6,561,053 15,911,504 (366,842) (244,692) 3,882,232 366,947 47,627,235 9,187,734 82,925,171
3. Movements for the current year 101,978 2,539,803 (4,551,585) (1,087,461) 1,196,864 - 11,135,080 194,667 9,529,346
(1) Total comprehensive income - - - (1,087,461) - - 20,230,779 1,291,276 20,434,594
(2) Capital contribution and withdrawal by shareholders 101,978 2,555,513 (4,551,585) - - - - (372,510) (2,266,604)
1. Capital contribution from shareholders 103,679 2,596,878 (717,841) - - - - 615,092 2,597,808
2. Business combinations - - - - - - - 345,657 345,657
3. Share-based payment included in shareholders'
equity - 356,412 - - - - - 117,423 473,835
4. Others (1,701) (397,777) (3,833,744) - - - - (1,450,682) (5,683,904)
(3) Profit distribution - - - - 1,196,864 - (9,095,649) (819,804) (8,718,589)
1. Appropriation to surplus reserve - - - - 1,196,864 - (1,196,864) - -
2. Appropriations to general risk reserve - - - - - - - - -
3. Profit distribution to shareholders - - - - - - (7,898,785) (819,804) (8,718,589)
4. Others - - - - - - - - -
(4) Transfer within shareholders' equity - - - - - - - - -
1. Transfer from capital surplus to paid-in capital - - - - - - - - -
2. Transfer from surplus reserves to paid-in capital - - - - - - - - -
3. Surplus reserve used to offset accumulated losses - - - - - - - - -
4. Others - - - - - - - - -
(5) Special reserve - - - - - - - - -
1. Increase in the current period - - - - - - - - -
2. Usage in the current period - - - - - - - - -
(6) Others - (15,710) - - - - (50) 95,705 79,945
4. Balance at the end of the current period 6,663,031 18,451,307 (4,918,427) (1,332,153) 5,079,096 366,947 58,762,315 9,382,401 92,454,517
Legal representative: Fang Hongbo Principal in charge of accounting: Zhong Zheng Head of accounting department: Chen Lihong
114
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Amounts of the current period
Item Share Capital Less: Treasury Other comprehensive Special Surplus Undistributed Total shareholders’
capital surplus stock income reserve reserve profits equity
1. Balance at the end of the last year 6,663,031 10,615,389 (4,918,427) 6,020 - 5,079,096 19,486,212 36,931,321
Add: Changes in accounting policies - - - - - - - -
2. Balance at the beginning of the current year 6,663,031 10,615,389 (4,918,427) 6,020 - 5,079,096 19,486,212 36,931,321
3. Movements for the current year 275,872 14,308,999 2,266,093 6,755 - - (219,114) 16,638,605
(1) Total comprehensive income - - - 6,755 - - 8,334,783 8,341,538
(2) Capital contribution and withdrawal by shareholders 275,872 14,355,340 2,266,093 - - - - 16,897,305
1. Capital contribution from shareholders 54,153 1,513,276 (57,088) - - - - 1,510,341
2. Capital contribution from owners of other equity
instruments - - - - - - - -
3. Share-based payment included in owners' equity - (26,333) - - - - - (26,333)
4. Others 221,719 12,868,397 2,323,181 - - - - 15,413,297
(3) Profit distribution - - - - - - (8,553,897) (8,553,897)
1. Appropriation to surplus reserve - - - - - - - -
2. Profit distribution to shareholders - - - - - - (8,553,897) (8,553,897)
3. Others - - - - - - - -
(4) Transfer within shareholders' equity - - - - - - - -
1. Transfer from capital surplus to paid-in capital - - - - - - - -
2. Transfer from surplus reserves to paid-in capital - - - - - - - -
3. Surplus reserve used to offset accumulated losses - - - - - - - -
4. Others - - - - - - - -
(5) Special reserve - - - - - - - -
1. Increase in the current year - - - - - - - -
2. Usage in the current year - - - - - - - -
(6) Others - (46,341) - - - - - (46,341)
4. Balance at the end of the year 6,938,903 24,924,388 (2,652,334) 12,775 - 5,079,096 19,267,098 53,569,926
Legal representative: Fang Hongbo Principal in charge of accounting: Zhong Zheng Head of accounting department: Chen Lihong
115
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONT’D)
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
Amounts of the last year
Item Other Total
Share Capital Less: Treasury comprehensive Special Surplus Undistributed shareholders’
capital surplus stock income reserve reserve profits equity
1. Balance at the end of the last year 6,561,053 7,726,237 (366,842) 33,459 - 3,882,232 16,613,224 34,449,363
Add: Changes in accounting policies - - - - - - - -
2. Balance at the beginning of the current year 6,561,053 7,726,237 (366,842) 33,459 - 3,882,232 16,613,224 34,449,363
3. Movements for the current year 101,978 2,889,152 (4,551,585) (27,439) - 1,196,864 2,872,988 2,481,958
(1) Total comprehensive income - - - (27,439) - - 11,968,637 11,941,198
(2) Capital contribution and withdrawal by
shareholders 101,978 2,882,425 (4,551,585) - - - - (1,567,182)
1. Capital contribution from shareholders 103,679 2,596,878 (717,841) - - - - 1,982,716
2. Capital contribution from owners of other equity
instruments - 312,656 - - - - - 312,656
3. Share-based payment included in owners' equity (1,701) (27,109) (3,833,744) - - - - (3,862,554)
4. Others - - - - - - - -
(3) Profit distribution - - - - - 1,196,864 (9,095,649) (7,898,785)
1. Appropriation to surplus reserve - - - - - 1,196,864 (1,196,864) -
2. Profit distribution to shareholders - - - - - - (7,898,785) (7,898,785)
3. Others - - - - - - - -
(4) Transfer within shareholders' equity - - - - - - - -
1. Transfer from capital surplus to paid-in capital - - - - - - - -
2. Transfer from surplus reserves to paid-in capital - - - - - - - -
3. Surplus reserve used to offset accumulated
losses - - - - - - - -
4. Others - - - - - - - -
(5) Special reserve - - - - - - - -
1. Increase in the current year - - - - - - - -
2. Usage in the current year - - - - - - - -
(6) Others - 6,727 - - - - - 6,727
3. Balance at the end of the year 6,663,031 10,615,389 (4,918,427) 6,020 - 5,079,096 19,486,212 36,931,321
Legal representative: Fang Hongbo Principal in charge of accounting: Zhong Zheng Head of accounting department: Chen Lihong
116
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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; robots and automation systems centred on KUKA Aktiengesellschaft (hereinafter
referred to as “KUKA”) and its subsidiaries (hereinafter referred to as “KUKA Group”) and other
robots corporations of Midea Group. Other services include service platform with Annto
Technology 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 credit, buyer’s credit and
finance lease.
The Company was set up by the Council of Trade Unions of Guangdong Midea Group Co. Ltd.,
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 registered capital is RMB 6,938,903,035 with the share
capital of RMB 6,938,903,035, and the total number of shares in issue is 6,938,903,035, of which
165,650,113 shares are restricted tradable A shares and 6,773,252,922 shares are unrestricted
tradable A shares.
The detailed information of major subsidiaries included in the consolidation scope in current
period is set out in Note 5 and Note 6. Entities newly included in the consolidation scope in the
current year include Midea Electrics Egypt, Anhui Welling Auto Parts Corporation Limited and
Wuxi Little Swan Electric Co., Ltd. Please refer to Note 5(1)(a) for details. The detailed
information of subsidiaries no longer included in the consolidation scope in the current year is set
out in 5(1)(b).
These financial statements were authorised for issue by the Company’s Board of Directors on 30
August 2019.
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 recognition method of provision for
expected credit losses on receivables (Note 2(9)), valuation method of inventory (Note 2(11)),
depreciation of fixed assets and amortisation of intangible assets (Note 2(14), (17)), impairment
of goodwill (Note 2(19)) and recognition time of revenue (Note 2(27)).
Critical judgements applied by the Group in determining significant accounting policies are set
out in Note 2(33).
(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
(hereafter 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.
117
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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 30 June
2019 and their financial performance, cash flows and other information for the six months ended
30 June 2019.
(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.
(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.
118
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 (Cont’d)
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.
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
subsidiaries’ net profits and losses and comprehensive income for the period not attributable to
the Company are recognised as minority interests 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 net profit attributed to 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.
119
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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 functional currency 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 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 owners’ 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.
(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.
120
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
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.
Debt instruments
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 with banks, 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 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.
121
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
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.
Equity instruments
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.
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.
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.
122
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
Derivative financial instruments (Cont’d)
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 expected credit losses.
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 expected credit loss ("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.
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, the Group recognises the
lifetime ECL provision regardless of whether there exists a significant financing component.
The Group divides the receivables into certain groupings based on credit risk characteristics, then
pursuant to which, calculates the expected credit losses.
The Group, on the basis of the exposure at default and the lifetime expected credit loss rate,
calculates the expected credit losses 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.
123
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
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 expected credit loss rate, and calculates the
expected credit losses of accounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime expected credit
loss rate, calculates the expected credit losses of other 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.
(iii) Derecognition
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.
124
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(b) Financial liabilities (Cont’d)
Financial liabilities of the Group mainly comprise financial liabilities at amortised cost, including
notes and accounts payables, other payables, borrowings, debentures payable, 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.
(10) Receivables
Receivables comprise accounts receivable, other receivables and notes receivable. 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).
125
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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.
126
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 joint ventures 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.
127
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 profit and loss
For long-term equity investments accounted for using the cost method, 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 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 to the extent of 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, jointly control or 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 the 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.
128
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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)).
(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 of 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 net Annual depreciation
Estimated useful lives residual values (amortisation) rates
Buildings 20 to 40 years 5% 2.38% to 4.75%
Land use rights 40 -to50 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 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 life, 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.
129
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, land with permanent ownership, machinery and equipment,
motor vehicles, computers and electronic equipment and office equipment.
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.
(b) Depreciation methods of 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 60 years 0% to 10% 6.7% to 1.5%
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 other equipment 2 to 20 years 0% to 10% 50% to 4.5%
Land Permanent N/A N/A
The estimated useful lives and the estimated net residual values of the Group’s fixed asset and
the depreciation methods applied to the asset are reviewed, and adjusted as appropriate at each
year-end.
130
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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 self-owned fixed assets. 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.
(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 is charged starting from
the following month. The carrying amount of construction in progress is reduced to the recoverable
amount when the recoverable amount is below its carrying amount (Note 2(19)).
(16) Borrowing costs
The borrowing costs that are directly attributable to the acquisition and construction of an 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 fixed 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.
131
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(16) Borrowing costs (Cont’d)
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.
(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(13)).
(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.
132
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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.
(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.
133
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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 land with permanent ownership 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.
(a) Short-term employee benefits
Short-term employee benefits include wages or salaries, bonus, allowances and subsidies, staff
welfare, premiums or contributions on medical insurance, work injury insurance 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.
134
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(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 that 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 percentages 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.
(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 for the current period 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.
135
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 (Cont’d)
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) Financial assets sold under agreements to repurchase
Assets sold under agreements to repurchase at a specific future date are not derecognised from
the balance sheet. The corresponding proceeds are recognised on the balance sheet under
“Repurchase agreements”. The difference between the sale price and the repurchase price is
treated as interest expense and is accrued over the life of the agreement using the effective
interest method.
(22) General reserve
General 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, available-for-sale
financial assets, long-term equity investments, deposits with banks and other financial
institutions and other receivables of subsidiary engaged in financial business.
(23) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved by the
shareholders’ meeting.
(24) 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.
136
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(24) 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.
(25) 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.
137
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Share-based payments (Cont’d)
(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, 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.
(26) 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 paid by the
Group for repurchasing equity instruments are measured as treasury stock and the related
transaction costs are included into owners' equity.
On the grant day of restricted shares, the Group recognise bank deposits and share capital and
capital reserves (share premium) when receiving subscription from the employees. In the
meanwhile, the Group measure the repurchase obligation as treasury stocks and liability. On the
day of release of restricted shares, relevant treasury stocks, liabilities and capital surplus
recognised in the vesting period are reverse based on the actual vesting results.
138
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Revenue
The amount of revenue is determined in accordance with the fair value of the consideration
received or receivable for the sale 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 robots and automatic system (mainly comprises
robots and automatic 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 robots and automatic 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, storage service, distribution service and installation service
as provided by the Group is recognised when the services are completed.
Revenue from providing automation system business and intelligent logistics integration solution
is recognised according to the percentage of completion.
139
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Revenue (Cont’d)
(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.
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.
140
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Revenue (Cont’d)
(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.
(28) 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.
141
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(28) Government grants (Cont’d)
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 Group applies the presentation method consistently to the similar government grants in the
financial statements.
Government grants that are related to ordinary activities are included in operating profit, otherwise,
they are recorded in non-operating income.
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.
(29) 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 tax temporary differences, deductible losses and tax credits can be
utilised.
142
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Deferred tax assets and deferred tax liabilities (Cont’d)
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 taxs 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.
(30) 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.
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.
143
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Held for sale and discontinued operations
A non-current asset or a disposal group is classified as held for sale when all of the following
conditions are satisfied: (1) the non-current asset or the disposal group is available for immediate
sale in its present condition subject only to terms that are usual and customary for sales of such
non-current asset or disposal group; (2) the Group has entered a legally enforceable sales
agreement with other party and obtained relevant approval, and the sales transaction is expected
to be completed within one year.
Non-current assets (except for financial assets, investment properties measured at fair value and
deferred tax assets) that meet the recognition criteria for held for sale are recognised at the amount
equal to the lower of the fair value less costs to sell and the carrying amount, and the excess of the
original carrying amount over the fair value less costs to sell is recognised as asset impairment loss.
Such non-current assets and assets and liabilities included in disposal groups classified as held for
sale are classified as current assets and current liabilities respectively, and are separately presented
in the balance sheet.
A discontinued operation is a component of the Group that either has been disposed of or is
classified as held for sale, and is separately identifiable and satisfies one of the following conditions:
(1) it represents a separate major line of business or geographical area of operations; (2) it is part
of a single co-ordinated plan to dispose of a separate major line of business or geographical area
of operations; and (3) it is a subsidiary acquired exclusively with a view to resale.
The net profit from discontinued operations in the income statement includes operating profit or loss
and disposal gains or losses of discontinued operations.
(32) 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.
144
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(33) 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:
(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.
145
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(34) Significant changes in accounting policies
The Ministry of Finance released 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 of the Ministry of Finance on
Revising and Issuing the Formats of Corporate Financial Statements for 2019 (Cai Kuai [2019]
No. 6) in 2019. The financial statements for the six months ended 30 June 2019 are prepared
in accordance with the above standards and circular, and impacts are as follows:
(i) As at 1 January 2019, the financial assets were classified and measured according to the
old/new accounting standards for financial instruments as follows:
The Group
Old financial instruments standards New financial instruments standards
Item Measurement Amount Item Measurement Amount
Notes receivable Amortised cost 11,049,539
Receivables Fair value through other
Notes receivable Amortised cost 12,556,294 financing comprehensive income 1,506,755
Accounts
receivable Amortised cost 18,641,979
Accounts Receivables Fair value through other
receivable Amortised cost 19,390,174 financing comprehensive income 748,195
Other receivables Amortised cost 2,960,939
Other Financial assets
receivables Amortised cost 2,971,368 held for trading Fair value through profit or loss 10,429
Measured at fair value through
Other current other comprehensive income Financial assets
assets (wealth management products) 1,521,007 held for trading Fair value through profit or loss 1,521,007
Measured at fair value through Financial assets
other comprehensive held for trading Fair value through profit or loss 1,122,609
income (equity Other non-current
Available-for- instruments) 1,184,859 financial assets Fair value through profit or loss 62,250
sale financial Measured at cost (equity Other non-current
assets instruments) 722,019 financial assets Fair value through profit or loss 722,019
The Company
Old financial instruments standards New financial instruments standards
Item Measurement Amount Item Measurement Amount
Measured at fair value through
Other current other comprehensive income Financial assets
assets (wealth management products) 1,521,007 held for trading Fair value through profit or loss 1,521,007
Available-for-
sale financial Measured at cost (equity Other non-current
assets instruments) 56,579 financial assets Fair value through profit or loss 56,579
Note: The above table only lists items with differences between the old and new standards.
(ii) As at 1 January 2019, 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:
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
146
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(34) Significant changes in accounting policies (Cont’d)
Table 1: Financial assets at amortised cost under the new financial instruments standards
Carrying amount
Cash at bank and on hand The Group The Company
31 December 2018 27,888,280 15,361,626
Less: Transfer to financial assets at fair value - -
through profit or loss
1 January 2019 27,888,280 15,361,626
Receivables
31 December 2018 34,968,549 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) -
Remeasurement: Total expected credit losses - -
1 January 2019 32,703,170 11,593,020
Loans and advances
31 December 2018 11,328,392 -
Less: Transfer to financial assets at fair value
through other comprehensive income - -
Remeasurement: Total expected credit losses - -
1 January 2019 11,328,392 -
Other current assets - Structural deposits and swap deposits
31 December 2018 70,402,509 53,164,300
Less: Transfer to financial assets at fair value
through profit or loss - -
1 January 2019 70,402,509 53,164,300
Total financial assets measured at amortised cost
(new financial instruments standards) 142,322,351 80,118,946
147
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(34) Significant changes in accounting policies (Cont’d)
Table 2: Financial assets at fair value through profit or loss under the new financial instruments standards
Carrying amount
Financial assets held for trading The Group The Company
31 December 2018 - -
Add: Transferred from derivative financial
instruments - -
Add: Transferred from other current assets -
available-for-sale financial assets - wealth
management products 1,521,007 1,521,007
Add: Transferred from available-for-sale financial
assets 1,122,609 -
Add: Transfer from other receivables 10,429 -
1 January 2019 2,654,045 1,521,007
Derivative financial instruments
31 December 2018 220,197 -
Less: Transfer to financial assets held for trading - -
1 January 2019 220,197 -
Other current assets - available-for-sale financial assets - wealth management products
31 December 2018 1,521,007 1,521,007
Less: Transfer to financial assets held for trading (1,521,007) (1,521,007)
1 January 2019 - -
Other current assets - hedging instruments
31 December 2018 38,822 -
Less: Transfer to financial assets held for trading - -
1 January 2019 38,822 -
Other non-current financial assets
31 December 2018 - -
Add: Transferred from available-for-sale financial
assets 784,269 56,579
Remeasurement: From amortised cost to fair value - -
1 January 2019 784,269 56,579
Available-for-sale financial assets
31 December 2018 1,906,878 56,579
Less: Transfer to financial assets held for trading (1,122,609) -
Less: Transfer to other non-current financial assets (784,269) (56,579)
1 January 2019 - -
Total financial instruments at fair value through
profit or loss (new financial instruments
standards) 3,697,333 1,577,586
148
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(34) Significant changes in accounting policies (Cont’d)
Table 3: Financial assets at fair value through other comprehensive income under the new financial
instruments standards
Carrying amount
Receivables financing The Group The Company
31 December 2018 - -
Add: Transfer from receivables 2,254,950 -
Remeasurement: From amortised cost to fair value - -
1 January 2019 2,254,950 -
Total financial assets at fair value through other
comprehensive income (new financial instruments
standards) 2,254,950 -
(iii) As at 1 January 2019, reconciliation from the provision for impairment of financial assets under the
old financial instruments standards to loss provision under the new financial instruments standards
is as below:
Loss provision under the old Loss provision
financial instruments under the new
standards/provisions recognised financial
according to accounting instruments
Measurement standards on 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 154,006 - - 154,006
Provision for bad debts of other
receivables 42,730 - - 42,730
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
(iv) As at 1 January 2019, reconciliation from the provision for impairment of financial assets under the
old financial instruments standards to loss provision under the new financial instruments standards
is as below:
Loss provision under the old Loss provision
financial instruments under the
standards/provisions recognised new financial
according to accounting instruments
Measurement standards on 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
The preparation of financial statements requires management to make estimates and assumptions
that affect application of accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates. The estimates and associated key
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimates are revised and in any future periods affected.
149
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
3 Taxation
(1) Main tax category and rate
Category Tax base Tax rate
Corporate income tax (a) Levied based on taxable income 5%, 15%, 16.5%, 17%, 20
to 31.5%, 32% or
34.25%
Value-added tax (“VAT”) Taxable value-added amount (Tax payable is 5%, 6%, 9%, 11%, 13%,
(b) calculated using the taxable sales amount 17% or 19%
multiplied by the applicable tax rate less
deductible input VAT 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 1.2% or 12%
rate after a 30% cut in the original price of
property. Rental-based is subject to 12%
tax rate for the rental income.
(a) Notes to the corporate income tax rate of the principal tax payers with different tax rates
(a-1) The following subsidiaries of the Company are subject to a corporate 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 Effective
Name of tax payer Enterprise Certificate Dates of issuance period
Jiangsu Midea Cleaning Appliances Company Limited GR201732001675 17 November 2017 3 years
Guangdong Midea Environment Appliances
Manufacturing Co., Ltd. GR201644002286 30 November 2016 3 years
Midea Intelligent Lighting & Controls Technology Co.,
Ltd. GR201736000187 23 August 2017 3 years
Guangdong Midea Kitchen Appliances Manufacturing
Co., Ltd. GR201844000250 28 November 2018 3 years
Guangdong Witol Vacuum Electronic Manufacture Co.,
Ltd. GR201744000489 9 November 2017 3 years
Foshan Shunde Midea Washing Appliances
Manufacturing Co., Ltd. GR201744002837 9 November 2017 3 years
Foshan Shunde Midea Electrical Heating Appliances
Manufacturing Co., Ltd. GR201844010373 28 November 2018 3 years
Guangdong Midea Precision Molding Technology Co.,
Ltd GR201644000331 30 November 2016 3 years
Foshan Shunde Midea Electric Science and Technology
Co., Ltd. GR201644000358 30 November 2016 3 years
Guangdong Midea Heating & Ventilation Equipment
Co., Ltd. GR201844008219 28 November 2018 3 years
Hefei Midea Heating & Ventilation Equipment Co., Ltd. GR201634000207 21 October 2016 3 years
Anhui Meizhi Precision Manufacturing Co., Ltd. GR201834000890 24 July 2018 3 years
Guangzhou Midea Hualing Refrigerator Co., Ltd. GR201644002925 30 November 2016 3 years
Guangdong Welling Motor Manufacturing Co., Ltd. GR201744002062 9 November 2017 3 years
Foshan Welling Washer Motor Manufacturing Co., Ltd. GR201744001025 9 November 2017 3 years
Huaian Weiling Motor Manufacturing Co., Ltd. GR201632004278 30 November 2016 3 years
Annto Logistics Technology Co., Ltd. GR201834001306 24 July 2018 3 years
Wuxi Little Swan Company Limited GR201832001394 24 October 2018 3 years
150
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 corporate 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 a corporate 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 Effective
Name of tax payer Enterprise Certificate Dates of issuance period
Wuxi Filin Electronics Co., Ltd. GR201832001053 24 October 2018 3 years
Wuxi Little Swan General Appliance Co.,
Ltd. GR201832001100 24 October 2018 3 years
Guangdong Midea Air-Conditioning
Equipment Co., Ltd. GR201744000337 9 November 2017 3 years
Handan Midea Air-Conditioning Equipment
Co., Ltd. GR201713000957 27 October 2017 3 years
Midea Group Wuhan Refrigeration
Equipment Co., Ltd. GR201742002075 30 November 2017 3 years
Guangzhou Hualing Refrigerating
Equipment Co., ltd. GR201744010610 11 December 2017 3 years
Wuhu Maty Air-Conditioning Equipment Co.,
Ltd GR201734001246 7 November 2017 3 years
Chongqing Midea General Refrigeration
Equipment Co., Ltd. GR201751100113 28 December 2017 3 years
Guangdong Meizhi Compressor Limited GR201744000895 9 November 2017 3 years
Hubei Midea Refrigerator Co., Ltd. GR201742001255 28 November 2017 3 years
Guangdong Midea Consumer Electric
Manufacturing Co., Ltd. GR201744006141 11 December 2017 3 years
Anhui Meizhi Compressor Co., Ltd. GR201634000994 5 December 2016 3 years
Foshan Shunde Midea Water Dispenser
Manufacturing Co., Ltd. GR201744008471 11 December 2017 3 years
Midea Welling Motor Technology (Shanghai)
Co., Ltd. GR201731001731 23 November 2017 3 years
Welling (Wuhu) Motor Manufacturing Co.,
Ltd. GR201834001144 24 July 2018 3 years
Hefei Midea Laundry Appliance Co., Ltd. GR201834000882 24 July 2018 3 years
Hefei Hualing Co., Ltd. GR201834000552 24 July 2018 3 years
Foshan Midea Chungho Water Purification
Equipment. Co., Ltd. GR201844007089 28 November 2018 3 years
Toshiba HA Manufacturing (Nanhai) Co.,
Ltd. GR201844007107 28 November 2018 3 years
Guangdong Meizhi Precision-Manufacturing
Co., Ltd GR201844006181 28 November 2018 3 years
Wuhu Midea Kitchen & Bath Appliances
Mfg. Co., Ltd. GR201834000818 24 July 2018 3 years
Guangdong Midea Intelligent Technologies
Co., Ltd. GR201844003941 28 November 2018 3 years
(a-2) The application for corporate 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 corporate 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 corporate income tax at the rate of 25%.
151
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 corporate 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 corporate income tax at the rate of 5% while the unqualified income
is subject to the corporate income tax at the rate of 17%. Midea Singapore Trading Co.Pte.Ltd.
and Little Swan International (Singapore) Co.,Pte Ltd., the Company's subsidiaries, are subject to
corporate 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 (Hong Kong), 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 corporate 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) Ltd. and Midea Investment Development
Company Limited.
(a-7) Springer Carrier Ltda., the Company's subsidiary in Brazil, is subject to Brazil corporate income
tax at the rate of 34%.
(a-8) TLSC, the Company's subsidiary in Japan, and its subsidiaries, are subject to Japan corporate
income tax at the rate of 30.58%.
(a-9) Clivet S.P.A and Clivet Espaa S.A.U. (“Clivet”), the Company's subsidiaries in Italy, are subject
to Italy corporate income tax at the rate between 20% and 31.4%.
(a-10) KUKA Group, the Company's subsidiary in Germany, is subject to Germany corporate income tax
at the rate of 32%.
(a-11) SMC, the Company's subsidiary in Israel, is subject to Israel corporate income tax at the rate of
23%.
(a-12) Miraco, the Company's subsidiary in Egypt, is subject to Egyptian corporate income tax at the rate
of 22.5%.
152
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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
(b-1) Pursuant to the No. 39 Notice in 2019 and related regulations jointly issued by the Ministry of
Finance, the State Administration of Taxation and the Customs Head Office, 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.
(b-2) Pursuant to the No. 39 Notice in 2019 and related regulations jointly issued by the Ministry of
Finance, the State Administration of Taxation and the Customs Head Office, 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%.
153
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
Item Ending Balance Opening Balance
Cash on hand 2,214 3,803
Cash at bank (a) 32,262,828 15,857,413
Other cash balances (b) 256,203 123,197
Statutory reserve deposits with the Central
Bank (c) 728,058 1,126,172
Surplus reserve with the Central Bank 255,357 204,073
Deposits with banks and other financial
institutions (d) 2,385,428 10,573,622
Total 35,890,088 27,888,280
Including: Total amounts deposited with
foreign banks (including Hong
Kong, Singapore, Japan, Italy,
Brazil and Germany, etc.) 4,937,131 6,316,807
(a) As at 30 June 2019, cash at bank included fixed deposits with the term of over three months,
amounting to RMB 20,008,647,000 (31 December 2018: RMB 5,686,629,000).
(b) Other cash balances mainly includes security deposits, bank acceptance note and letter 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 7% and 5% for eligible RMB deposits and foreign currency deposits, respectively,
and are not available for use in the Group’s daily operations.
(d) As at 30 June 2019, deposits with banks and other financial institutions included no time deposits
with the term of over three months (31 December 2018: RMB 3,000,000,000).
(2) Financial assets held for trading
Item Ending Balance Opening Balance
Wealth management products (a) 2,561,077 -
Equity investments and others 872,324 -
Total 3,433,401 -
(a) As at 30 June 2019, wealth management products under financial assets held for trading were
all due within one year, and mainly presented non-principal-guaranteed WMPs with floating
income (Note 15(1)).
(3) Notes receivable
Item Ending Balance Opening Balance
Bank acceptance notes 15,060,062 12,556,294
154
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(3) Notes receivable (Cont’d)
(a) As at 30 June 2019, the Group's notes receivable endorsed or discounted but not matured were
as follows:
Item Derecognised Recognised
Bank acceptance notes 22,077,062 -
(4) Receivables
(a) Accounts receivable
Item Ending Balance Opening Balance
Accounts receivable 24,056,858 20,372,283
Less: Provision for bad debts (1,039,035) (982,109)
Total 23,017,823 19,390,174
The ageing of accounts receivable is analysed as follows:
Item Ending Balance Opening Balance
Within 1 year 23,637,383 19,990,263
1 to 2 years 236,904 187,071
2 to 3 years 86,661 88,294
3 to 5 years 61,627 84,069
Over 5 years 34,283 22,586
Sub-total 24,056,858 20,372,283
Accounts receivable are analysed by categories as follows:
Ending Balance
Carrying amount Provision for bad debts
% of total Provision
Categories Amount balance Amount ratio
With amounts that are individually
significant and that the related
provision for bad debts is provided
on the individual basis - - - -
Provision for bad debts on grouping
basis using the ageing analysis
method 23,647,630 98.30% 1,013,580 4.29%
With amounts that are not
individually significant but that the
related provision for bad debts is
provided on the individual basis 409,228 1.70% 25,455 6.22%
Total 24,056,858 100.00% 1,039,035 4.32%
The expected credit losses are calculated through the exposure at default and the lifetime
expected credit loss rate. According to the calculation results of different groupings, the accounts
receivable with provision for bad debts on grouping basis using the ageing analysis method are
analysed as follows:
155
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Receivables (Cont’d)
(a) Accounts receivable (Cont’d)
Ending Balance
Carrying amount Provision for bad debts
Lifetime expected
Ageing Amount Amount credit loss rate
Within 1 year 23,273,508 838,964 3.60%
1 to 2 years 193,637 50,709 26.19%
2 to 3 years 86,641 45,705 52.75%
3 to 5 years 61,004 45,362 74.36%
Over 5 years 32,840 32,840 100.00%
Total 23,647,630 1,013,580 4.29%
For the six months ended 30 June 2019, the provision for bad debts reversed amounted to RMB
142,227,000.
For the six months ended 30 June 2019, the accounts receivable written off by the Group were
arising from transactions with third parties and there were no written-off accounts receivable that
are individually significant.
As at 30 June 2019, the five largest accounts receivable aggregated by debtors were
summarised and analysed as follows:
Item Amount Provision for bad debts % of total balance
Total amount of the five largest
accounts receivable 1,825,366 91,268 7.59%
(b) Other receivables
Item Ending Balance Opening Balance
Other receivables 2,451,958 2,838,170
Interest receivable 113,580 175,928
Sub-total 2,565,538 3,014,098
Less: Provision for bad debts (53,345) (42,730)
Total 2,512,193 2,971,368
Other receivables mainly include exercising accounts, current accounts, petty cash to staff and
deposits.
The ageing of other receivables is analysed below:
Item Ending Balance Opening Balance
Within 1 year 2,203,400 2,629,558
1 to 2 years 180,053 118,049
2 to 3 years 31,066 60,259
3 to 5 years 28,066 20,900
Over 5 years 9,373 9,404
Sub-total 2,451,958 2,838,170
156
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Receivables (Cont’d)
(b) Other receivables (Cont’d)
Provision for losses and changes in book balance statements:
Stage 1
Expected credit losses in the Expected credit losses in the
following 12 months (grouping) following 12 months (individual) Sub-total
Provision for Provision for Provision for
Item Ending balance bad debts Ending balance bad debts bad debts
31 December 2018 2,668,855 42,730 169,315 - 42,730
Changes in accounting policies - - - - -
1 January 2019 2,668,855 42,730 169,315 - 42,730
Increase in the current period - 17,192 116,046 - 17,192
Decrease in the current period (502,258) - - - -
Including: Write-off in the current
period - - - - -
Derecognition (502,258) - - - -
Reversal in the current period - (6,779) - - (6,779)
Currency translation differences - 202 - - 202
30 June 2019 2,166,597 53,345 285,361 - 53,345
As at 30 June 2019, the Group had no other receivables at stage 3.
As at 30 June 2019, other receivables with amounts that were individually significant and that the
related provision for bad debts was provided on the individual basis were analysed as follows:
Provision for bad Provision
Name of entity Ending balance debts ratio Reason
China Securities Depository and Receivables related to
Clearing Corporation Limited share options without bad
Shenzhen Branch 285,361 - - debt risks
For the six months ended 30 June 2019, the provision for bad debts reversed amounted to RMB
6,779,000.
As at 30 June 2019, the five largest other receivables aggregated by debtors were summarised
and analysed as follows:
Name of entity Amount Provision for bad debts % of total balance
Total balance of top 5 other receivables 341,174 2,791 17.84%
As at 30 June 2019, the Group' had no significant government grants recognised at amounts
receivable.
(5) Advances to suppliers
Item Ending Balance Opening Balance
Advances paid for raw materials and others 2,099,422 2,215,888
(a) The ageing of advances to suppliers is analysed below:
Ending Balance Opening Balance
Ageing Amount % of total balance Amount % of total balance
Within 1 year 1,967,498 93.72% 2,112,343 95.33%
1 to 2 years 73,349 3.49% 78,764 3.55%
2 to 3 years 46,277 2.20% 11,870 0.54%
Over 3 years 12,298 0.59% 12,911 0.58%
Sub-total 2,099,422 100.00% 2,215,888 100.00%
157
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Advances to suppliers (Cont’d)
(a) The ageing of advances to suppliers is analysed below (Cont’d):
As at 30 June 2019, advances to suppliers over 1 year with a carrying amount of RMB
131,924,000 (31 December 2018: RMB 103,545,000) were mainly unsettled advances paid for
raw materials.
As at 30 June 2019, the five largest advances to suppliers aggregated by debtors were
summarised and analysed as follows:
Item Amount % of total balance
Total balance of top five advances to
suppliers 466,259 22.21%
(6) Loans and advances
(a) Financial enterprises' loans and advances analysed by individual and corporation are as follows:
Item Ending Balance Opening Balance
Loans and advances measured at
amortised cost
Loans and advances to individuals 1,151,442 894,392
Loans and advances to corporations 13,730,727 10,588,006
Loans and advances measured at
amortised cost 14,882,169 11,482,398
Less: Provision for loan impairments (209,482) (154,006)
Total loans and advances measured
at amortised cost 14,672,687 11,328,392
Loans and advances measured at fair
value through other comprehensive
income
Loans and advances to corporations - -
Total loans and advances measured
at fair value through other
comprehensive income - -
Total 14,672,687 11,328,392
(b) Financial enterprises' loans and advances analysed by type of collateral held or other credit
enhancements are as follows:
Item Ending Balance Opening Balance
Unsecured loans 1,078,469 814,657
Guaranteed loans 1,166,228 614,688
Secured loans by monetary assets 12,637,472 10,053,053
Sub-total 14,882,169 11,482,398
Less: Loan impairment provision (209,482) (154,006)
Total 14,672,687 11,328,392
158
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Inventories
(a) Inventories are summarised by categories as follows:
Ending Balance Opening Balance
Provision for Provision for
declines in the declines in the
Carrying value of Carrying Carrying value of Carrying
Item amount inventories amount amount inventories amount
Finished goods 13,318,209 (396,346) 12,921,863 18,600,407 (320,022) 18,280,385
Raw materials 4,546,247 (86,595) 4,459,652 5,181,916 (60,822) 5,121,094
Work in progress 1,612,640 - 1,612,640 2,040,228 - 2,040,228
Consigned
processing
material 209,226 - 209,226 239,741 - 239,741
Low value
consumables 42,382 - 42,382 38,763 - 38,763
Completed but
unsettled 4,860,841 - 4,860,841 3,924,807 - 3,924,807
Total 24,589,545 (482,941) 24,106,604 30,025,862 (380,844) 29,645,018
(b) Provision for decline in the value of inventories is analysed as follows:
Decrease of reversal or
Opening Increase in the write-off in the current translation Ending
Item Balance current period period differences Balance
Finished goods 320,022 109,735 (34,642) 1,231 396,346
Raw materials 60,822 39,209 (14,736) 1,300 86,595
Total 380,844 148,944 (49,378) 2,531 482,941
(c) Provision for decline in the value of inventories is as follows:
Basis for provision for decline in the value of Reason for the write-off of provision for decline
Item inventories in the value of inventories in the current period
Stated at the lower of cost and net realisable
Finished goods value Sales
Stated at the lower of cost and net realisable
Raw materials value Requisition for production
(8) Other current assets
Item Ending Balance Opening Balance
Wealth management products - 1,521,007
Structural deposits and swap deposits 71,649,301 70,402,509
Deductible input VAT 2,011,769 2,803,315
Prepaid expenses 753,915 647,648
Others 1,049,806 1,099,348
Total 75,464,791 76,473,827
(9) Long-term equity investments
Long-term equity investments are classified as follows:
Item Ending Balance Opening Balance
Investment in associates (a) 2,619,985 2,713,316
Less: Provision for impairment of long-term
equity investments - -
Total 2,619,985 2,713,316
(a) Investment in associates mainly refers to the investments in Foshan Shunde Rural Commercial
Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies by the Group.
159
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(10) Other non-current financial assets
Item Ending Balance Opening Balance
Measured at fair value
- Equity of unlisted companies 1,420,416 -
Sub-total 1,420,416 -
Less: Provision for impairment of
assets - -
Total 1,420,416 -
(11) Fixed assets
Machinery Electronic
and Motor equipment
Item Buildings Land equipment vehicles and others Total
Original carrying amount
Opening Balance 17,396,391 1,289,251 18,935,114 747,441 4,151,719 42,519,916
Increase in the current period 29,610 - 632,865 11,313 270,479 944,267
1) Purchase 13,669 - 628,762 11,313 260,953 914,697
2) Transfers from construction in
progress 15,941 - 4,103 - 9,526 29,570
Decrease in the current period (217,033) - (179,587) (18,518) (146,080) (561,218)
1) Disposal or retirement - - (179,587) (18,518) (146,080) (344,185)
2) Others (217,033) - - - - (217,033)
Differences on translation of
foreign currency financial
statements 32,835 14,658 38,405 108 4,484 90,490
Ending Balance 17,241,803 1,303,909 19,426,797 740,344 4,280,602 42,993,455
Accumulated depreciation
Opening Balance 6,561,909 - 10,235,762 477,072 2,774,680 20,049,423
Increase in the current period 428,368 - 849,317 44,968 336,467 1,659,120
1) Depreciation charged 428,368 - 849,317 44,968 336,467 1,659,120
Decrease in the current period - - (132,125) (16,873) (127,365) (276,363)
1) Disposal or retirement - - (132,125) (16,873) (127,365) (276,363)
Differences on translation of
foreign currency financial
statements 6,115 - 14,541 30 1,023 21,709
Ending Balance 6,996,392 - 10,967,495 505,197 2,984,805 21,453,889
Provision for impairment loss
Opening Balance 6,674 5,849 20,107 206 445 33,281
Increase in the current period - - - - 77 77
1) Provision - - - - 77 77
Decrease in the current period - - (2,329) - (447) (2,776)
1) Disposal or retirement - - (2,329) - (447) (2,776)
Differences on translation of
foreign currency financial
statements 83 182 124 9 14 412
Ending Balance 6,757 6,031 17,902 215 89 30,994
Carrying amount at the end of the
period 10,238,654 1,297,878 8,441,400 234,932 1,295,708 21,508,572
Carrying amount at the beginning
of the period 10,827,808 1,283,402 8,679,245 270,163 1,376,594 22,437,212
(a) For the six months ended 30 June 2019, the depreciation of fixed assets amounted to RMB
1,659,120,000 (for the six months ended 30 June 2018: RMB 1,686,509,000) and was included in
the income statement.
(b) As at 30 June 2019, the Company is still in the course of obtaining the ownership certificate for the
fixed asset with a carrying amount of RMB 464,806,000.
160
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(12) Construction in progress
(a) Movement of significant projects of construction in progress
Including: Capitalisation
Translation of Accumulative Borrowing costs rate of
Increase in Transfer to foreign currency amount of capitalised in borrowing
Opening the current Transfer to intangible Other financial Ending capitalised the current costs in the Source of
Project name Balance period fixed assets assets decreases statements Balance borrowing costs period current period funds
Kuka Toledo
Production
Operations 1,152,820 126,102 - - (1,248,841) (29,138) 943 - - - Self-financing
Media Kuka
Intelligent
Manufacturing
Plant 173,549 41,740 - - - - 215,289 Self-financing
Other projects 751,252 493,111 (29,570) (20,435) (8,140) 2,901 1,189,119 - - - Self-financing
Total 2,077,621 660,953 (29,570) (20,435) (1,256,981) (26,237) 1,405,351 - -
As at 30 June 2019, there was no provision for impairment of construction in progress with the ending balance consistent with the carrying amount; and the
cost of construction in progress matched the budget amount. The projects were carried out on schedule.
161
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Intangible assets
Patents and
Land use non-patent Trademark Trademark
Item rights technologies rights use rights Others Total
Original carrying amount
Opening Balance 4,586,857 2,061,849 5,005,403 2,601,880 4,721,765 18,977,754
Increase in the current
period 18,875 5,162 - - 336,518 360,555
1) Purchase 18,875 5,162 - - 122,941 146,978
2) Others - - - - 213,577 213,577
Decrease in the current
period - (327) - - (173,036) (173,363)
1) Disposal - (327) - - (173,036) (173,363)
Differences on translation
of foreign currency
financial statements 595 2,539 (18,080) 81,100 6,956 73,110
Ending Balance 4,606,327 2,069,223 4,987,323 2,682,980 4,892,203 19,238,056
Accumulated
amortisation
Opening Balance 819,030 488,412 75,176 168,088 1,228,235 2,778,941
Increase in the current
period 46,299 54,310 16,373 30,478 371,495 518,955
1) Amortisation charged 46,299 54,310 16,373 30,478 371,495 518,955
Decrease in the current
period - (139) - - (10,774) (10,913)
1) Disposal - (139) - - (10,774) (10,913)
Differences on translation
of foreign currency
financial statements 30 5,494 (245) 6,428 10,862 22,569
Ending Balance 865,359 548,077 91,304 204,994 1,599,818 3,309,552
Provision for impairment
loss
Opening Balance - 10,951 - - 1,187 12,138
Increase in the current
period - 118 - - - 118
1) Depreciation charged - 118 - - - 118
Decrease in the current
period - (39) - - - (39)
1) Disposal - (39) - - - (39)
Differences on translation
of foreign currency
financial statements - 354 - - 39 393
Ending Balance - 11,384 - - 1,226 12,610
Carrying amount at the end
of the period 3,740,968 1,509,762 4,896,019 2,477,986 3,291,159 15,915,894
Carrying amount at the
beginning of the period 3,767,827 1,562,486 4,930,227 2,433,792 3,492,343 16,186,675
(a) For the six months ended 30 June 2019, the amortisation of intangible assets amounted to RMB
518,955,000 (for the six months ended 30 June 2018: RMB 529,900,000) and was included in
income statement in full amount.
(b) As at 30 June 2019, the Group had no certificates of land use right still in the process.
162
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(14) 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:
Name of investee Ending Balance Opening Balance
Wuxi Little Swan Company Limited 1,361,306 1,361,306
TLSC 2,971,561 2,881,760
KUKA Group 22,244,400 22,330,623
Others 2,526,650 2,526,701
Sub-total 29,103,917 29,100,390
Less: Provision for impairment - -
Total 29,103,917 29,100,390
(15) Deferred tax assets and deferred tax liabilities
(a) Deferred tax assets before offsetting
Ending Balance Opening Balance
Deductible Deductible
temporary temporary
differences and Deferred tax differences and Deferred tax
Item deductible losses assets deductible losses assets
Deductible losses 1,914,509 562,596 1,844,308 558,896
Provision for asset
impairments 1,445,987 251,716 1,332,124 272,227
Employee benefits
payable 1,815,584 430,481 1,371,756 330,923
Other current liabilities 23,723,344 4,730,963 16,549,427 3,572,039
Others 3,936,214 876,993 5,201,746 1,087,280
Total 32,835,638 6,852,749 26,299,361 5,821,365
(b) Deferred tax liabilities before offsetting
Ending Balance Opening Balance
Taxable Taxable
Deferred tax liabilities
temporary Deferred tax temporary Deferred tax
differences liabilities differences liabilities
Changes in fair value 270,010 63,994 49,939 11,131
Business combination
involving enterprise not
under common control 12,394,324 3,483,846 12,533,188 3,663,691
Others 8,217,215 2,388,912 8,308,900 2,147,304
Total 20,881,549 5,936,752 20,892,027 5,822,126
(c) The net balances of deferred tax assets and liabilities after offsetting are as follows:
Balance after offsetting at the Balance after offsetting at the
Item end of the period beginning of the year
Deferred tax assets 5,467,296 4,421,313
Deferred tax liabilities 4,551,299 4,422,074
163
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Details of provision for asset impairments
Increase Decrease in the
31 Changes in in the current period Currency
December accounting 1 January current translation 30 June
Item 2018 policies 2019 period Reversal Write-off differences 2019
Provision for bad debts 1,178,845 1,178,845 328,053 (149,006) (57,331) 1,301 1,301,862
Including:
Provision for bad debts
of accounts
receivable 982,109 982,109 255,385 (142,227) (57,331) 1,099 1,039,035
Provision for
impairment of loans 154,006 154,006 55,476 - - - 209,482
Provision for bad debts
of other receivables 42,730 42,730 17,192 (6,779) - 202 53,345
Provision for decline in
the value of inventories 380,844 380,844 148,944 (4,483) (44,895) 2,531 482,941
Provision for impairment
of available-for-sale
financial assets 2,287 (2,287) - - - - - -
Provision for impairment
of fixed assets 33,281 33,281 77 - (2,776) 412 30,994
Provision for impairment
of intangible assets 12,138 12,138 118 - (39) 393 12,610
Provision for impairment
of investment
properties 12,576 12,576 - - - - 12,576
Total 1,619,971 (2,287) 1,617,684 477,192 (153,489) (105,041) 4,637 1,840,983
(17) Assets with ownership or use rights restricted
As at 30 June 2019, assets with ownership restricted were as follows:
Item Ending Balance Opening Balance
Cash at bank and on hand 20,264,850 5,809,826
Balances with the Central Bank 728,058 1,126,172
Deposits with banks and other
financial institutions - 3,000,000
Total 20,992,908 9,935,998
(18) Notes payable
Item Ending Balance Opening Balance
Bank acceptance notes 29,274,952 23,325,115
(19) Accounts payable
Item Ending Balance Opening Balance
Material expenses payable 36,053,524 32,605,437
Others 2,951,404 4,296,189
Total 39,004,928 36,901,626
(a) As at 30 June 2019, accounts payable over 1 year with a carrying amount of RMB
935,194,000 (31 December 2018: RMB 803,286,000) were mainly unsettled accounts
payable for materials.
164
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(20) Advances from customers
Item Ending Balance Opening Balance
Advances for goods 7,490,301 14,521,809
Settled but not completed 2,927,661 2,259,857
Total 10,417,962 16,781,666
As at 30 June 2019, advances from customers over 1 year with a carrying amount of RMB
431,880,000 (31 December 2018: RMB 410,800,000) were mainly unsettled advances on sales.
(21) Employee benefits payable
Item Ending Balance Opening Balance
Short-term employee benefits
payable (a) 4,643,021 5,624,918
Others 115,382 163,086
Total 4,758,403 5,788,004
(a) Short-term employee benefits
Decrease in
Opening Increase in the the current Ending
Item Balance current period period Balance
Wages and salaries, bonus,
allowances and subsidies 5,057,019 10,988,930 (11,924,319) 4,121,630
Staff welfare 407,405 373,590 (387,445) 393,550
Social security contributions 101,292 852,938 (875,458) 78,772
Including: Medical insurance 98,652 826,753 (848,147) 77,258
Work injury
insurance 1,933 12,377 (12,980) 1,330
Maternity insurance 707 13,808 (14,331) 184
Housing funds 30,631 206,390 (213,315) 23,706
Labour union funds and
employee education funds 19,310 44,112 (44,140) 19,282
Other short-term employee
benefits 9,261 83,315 (86,495) 6,081
Sub-total 5,624,918 12,549,275 (13,531,172) 4,643,021
(22) Taxes payable
Item Ending Balance Opening Balance
Corporate income tax payable 2,592,269 2,530,018
Unpaid VAT 738,702 853,187
Others 587,420 492,093
Total 3,918,391 3,875,298
165
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(23) Other payables
Item Ending Balance Opening Balance
Other payables 3,296,863 3,140,082
Interest payable 86,677 94,852
Dividends payable 35,807 111,195
Total 3,419,347 3,346,129
(a) Other payables are mainly restricted share repurchase obligation, deposit and security deposit
payable, reimbursed logistics expense, manufacturing equipment expense, and refund for
energy-saving and beneficial to people.
(b) As at 30 June 2019, other payables with ageing over 1 year with a carrying amount of RMB
1,394,086,000 (31 December 2018: RMB 821,240,000) were mainly restricted share repurchase
obligation, and deposit and security deposit payable, which are unsettled for related projects that
are uncompleted.
(24) Other current liabilities
Item Ending Balance Opening Balance
Accrued sales rebate 26,133,544 19,583,366
Accrued installation and maintenance
expenses 8,057,806 5,634,323
Accrued sales promotion expenses 2,482,494 1,780,246
Accrued transportation expenses 849,309 688,536
Others 3,993,163 3,633,238
Total 41,516,316 31,319,709
(25) Long-term borrowings
Item Ending Balance Opening Balance
Mortgage borrowings (a) 28,917,871 29,049,580
Guaranteed borrowings 6,551,066 2,126,618
Unsecured borrowings 7,060,184 3,081,282
Total 42,529,121. 34,257,480.
Less: Current portion of mortgage borrowings (39,085) (39,236)
Current portion of guaranteed
borrowings - (2,126,618)
Current portion of unsecured
borrowings - (187)
Total 42,490,036 32,091,439
(a) As at 30 June 2019, a cost of mortgage borrowings of RMB 28,917,871,000 was pledged by
81.04% equity of KUKA Group (31 December 2018: RMB 29,049,580,000), which was acquired
by the subsidiary of the Company, and interest is paid on a semi-annual basis.
(b) As at 30 June 2019, the annual interest rate range of the long-term borrowings was 0.55% to
5.5% (31 December 2018: 0.4% to 5.5%).
(26) Long-term employee benefits payable
Item Ending Balance Opening Balance
Supplementary retirement benefits (a) 2,352,877 2,329,652
Others 147,845 150,666
Total 2,500,722 2,480,318
(a) Supplementary retirement benefits are produced by KUKA and TLSC.
166
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(27) Share capital
Movements for the current year
Share-based
Opening payment Share Write-offs of Ending
Item Balance incentive plan Desterilisation issuance repurchase Sub-total Balance
RMB-denominated
ordinary shares - (a)
RMB-denominated
ordinary shares subject
to trading restriction 147,175 30,980 (8,051) 2,379 (6,833) 18,475 165,650
RMB-denominated
ordinary shares not
subject to trading
restriction 6,515,856 23,173 8,051 321,278 (95,105) 257,397 6,773,253
6,663,031 54,153 - 323,657 (101,938) 275,872 6,938,903
(a) For the six months ended 30 June 2019, the share-based payment incentive plan increased the
share capital to 54,153,000 shares. Some of the restricted shares have not met unlock condition
at the end of the year, and the Company regarded them as treasury stock and recognised related
liabilities for repurchase obligation.
(28) Treasury stock
Movements for the current year
Opening Increase in the Decrease in the
Item Balance current period current period Ending Balance
Shares for share-based
incentives 918,171 2,049,839 (315,676) 2,652,334
Shares for write-offs of
repurchase 4,000,256 - (4,000,256) -
4,918,427 2,049,839 (4,315,932) 2,652,334
(29) Capital surplus
Increase in Decrease in
Opening the current the current Ending
Item Balance period period Balance
Share premium (a) 14,478,244 4,347,267 (4,055,652) 14,769,859
Share option incentive plan (b) 1,299,655 347,445 (355,398) 1,291,702
Others 2,673,408 41 (76,945) 2,596,504
Total 18,451,307 4,694,753 (4,487,995) 18,658,065
(a) The increase in share premium arose from the exercise of share options with the amount of RMB
1,458,608,000, restricted shares subscription with amount of RMB 54,668,000 and newly issued
shares with the amount of RMB 2,833,991,000 for share exchange and merge of equity held by
minority shareholders of Little Swan, and the decrease in share premium arose from the
repurchased restricted shares with the amount of RMB 150,501,000 and the write-off of the
repurchased public shares with the amount of RMB 3,905,151,000.
(b) Share-based payment incentive plan included share option incentive plan and restricted share
plan. The increase of share-based payment incentive plan arose from expenses attributable to
shareholders' equity of the parent company in the share option incentive plan and restricted share
plan with the amount of RMB 347,445,000, while the decrease arose from the transfer of RMB
355,398,000 to share premium due to exercise of share option.
167
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(30) Other comprehensive income
Other comprehensive income in the balance sheet Other comprehensive income in the income statement
Less: Reclassification
Attributable Amount of previous other Attributable to Attributable to
Changes in to the parent arising before comprehensive Less: the parent minority
31 December accounting 1 January company income tax for income to profit or Income tax company after shareholders
Item 2018 policies 2019 after tax 30 June 2019 current period loss expenses tax after tax
Other comprehensive income
items which will not be
reclassified to profit or loss
Remeasurement of changes in
defined-benefit plan 50,068 - 50,068 (78,752) (28,684) (105,602) - 22,306 (78,752) (4,544)
Other comprehensive income
items which will be reclassified
to profit or loss
Other comprehensive income
accounted for using equity
method which will be
reclassified subsequently to
profit or loss (59,146) - (59,146) (251) (59,397) (251) - - (251) -
Gains or losses arising from
changes in fair value of
available-for-sale financial
assets (337,447) 337,447 - - - - - - - -
Cash flow hedge reserves (101,270) - (101,270) 34,124 (67,146) (67,856) 107,674 (5,455) 34,124 239
Difference on translation of
foreign currency financial
statement (884,358) - (884,358) 179,847 (704,511) 221,337 - - 179,847 41,490
Total (1,332,153) 337,447 (994,706) 134,968 (859,738) 47,628 107,674 16,851 134,968 37,185
168
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(31) Surplus reserve
Opening Increase in the Decrease in the Ending
Item Balance current period current period Balance
Statutory surplus reserve 5,079,096 - - 5,079,096
(32) Undistributed profits
Item Current figure Comparative figure
Undistributed profits at the end of the
prior year 58,762,315 47,627,235
Changes in accounting policies (337,447) -
Undistributed profits at the beginning
of the current year 58,424,868 47,627,235
Add: Net profit attributable to the
parent company for the
current period 15,187,069 12,936,846
Less: Ordinary share dividends
payable (8,553,897) (7,898,785)
Appropriation to general
reserve - -
Undistributed profits at the end of the
period 65,058,040 52,665,296
(a) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of 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; 40,014,998 shares were not
subject to dividend distribution due to the repurchase of public shares and 6,565,827,689 shares
were actually subject to distribution. Based on the principle that the total dividend remains
unchanged, it was actually RMB 1.3039620 per share; 6,833,000 repurchased incentive shares
in the restricted shares incentive plan were written off (Note 4(27)), and cash dividend amounting
to RMB 7,693,000 was cancelled. The actual cash dividend distributed in the current year
amounted to RMB 8,553,897,000.
(33) Transactions with minority shareholders
The Company completed share exchange and merger of 47.33% of equity held by minority
shareholders of Wuxi Little Swan Company Limited by issuing A shares. As at 30 June 2019, the
Company held 100% of Wuxi Little Swan Company Limited’s equity
(34) Revenue and cost of sales
Item Current figure Comparative figure
Revenue from main operations 143,143,028 133,077,713
Other operating income 10,627,272 9,546,124
Sub-total 153,770,300 142,623,837
Item Current figure Comparative figure
Cost of sales from main operations 99,246,019 95,385,475
Cost of sales from other operations 9,195,270 8,495,963
Sub-total 108,441,289 103,881,438
169
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(34) Revenue and cost of sales (Cont’d)
(a) Revenue and cost of sales from main operations
Current figure Comparative figure
Product or business type Revenue Cost of sales Revenue Cost of sales
Heating & ventilation, as well as air-
conditioner 71,439,403 48,518,866 63,873,960 44,548,938
Consumer appliances 58,350,984 40,096,559 55,279,120 40,043,342
Robots and automatic system 12,023,626 9,337,888 12,502,301 9,447,728
Others 1,329,014 1,292,705 1,422,332 1,345,467
Sub-total 143,143,027 99,246,018 133,077,713 95,385,475
For the six months ended 30 June 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
(for the six months ended 30 June 2018: over 80%).
(b) Revenue and cost of sales from other operations
Current figure Comparative figure
Item Revenue Cost of sales Revenue Cost of sales
Revenue from sales of material 9,528,368 8,934,613 8,605,866 8,225,748
Others 1,098,904 260,657 940,258 270,215
Sub-total 10,627,272 9,195,270 9,546,124 8,495,963
For the six months ended 30 June 2019, cost of sales from other operations is mainly material
costs, which accounts for over 80% of total cost of sales from other operations (For the six
months ended 30 June 2018: over 80%).
(35) Interest income/(expenses)
Interest income and expenses arising from daily financial business of financial enterprises are
presented as follows:
Item Current figure Comparative figure
Interest income from loans and
advances 503,691 430,800
Interest income from deposits with
banks and other financial institutions
and Central Bank 58,006 681,214
Interest income 561,697 1,112,014
Interest expenses (105,543) (168,235)
(36) Taxes and surcharges
Item Current figure Comparative figure
City maintenance and construction
tax 400,925 377,860
Educational surcharge 292,839 274,527
Others 234,826 195,263
Total 928,590 847,650
170
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Selling and distribution expenses
Item Current figure Comparative figure
Selling and distribution expenses 19,529,822 16,892,503
For the six months ended 30 June 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 (for the six months ended 30 June 2018: over 80%).
(38) General and administrative expenses
Item Current figure Comparative figure
General and administrative expenses 4,110,125 3,335,291
For the six months ended 30 June 2019, general and administrative expenses were mainly
employee benefits, expenses of depreciation and amortisation, technical maintenance expenses
and administrative office expenses, which accounted for over 70% of total general and
administrative expenses (for the six months ended 30 June 2018: over 70%).
(39) Research and development expenses
Item Current figure Comparative figure
Research and development 4,534,760 3,899,229
expenses
For the six months ended 30 June 2019, research and development expenses were mainly
employee benefits, depreciation and amortisation and trial production and material input, which
accounted for over 80% of total research and development expenses (for the six months ended
30 June 2018: over 80%).
(40) Financial expense
The Group's financial expense, other than those arising from financial business (Note 4(35)), are
presented as follows:
Item Current figure Comparative figure
Interest costs 401,129 304,703
Less: Interest income (2,088,716) (757,815)
Add: Exchange gains or losses 160,162 (585,871)
Add: Others 91,780 54,870
Total (1,435,645) (984,113)
(41) Asset impairment losses
Item Current figure Comparative figure
(Reversal)/Loss from bad debts (Note 4(4)) - 215,759
Losses on decline in the value of inventories
(Note 4(7)) 144,461 27,045
Impairment loss on fixed assets (Note 4(11)) 77 7,079
Impairment loss on intangible assets (Note
4(13)) 118 82
(Reversal)/Loss from impairment of loans
(Note 4(6)) - 50,122
Total 144,656 300,087
171
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Losses on credit impairment
Item Current figure Comparative figure
(Reversal)/Loss from bad debts
(Note 4(4)) 123,571 -
(Reversal)/Loss from impairment of
loans (Note 4(6)) 55,476 -
Total 179,047 -
(43) Gains on changes in fair value
Item Current figure Comparative figure
Financial instruments at fair value
through profit or loss 347,862 (613,928)
(44) Investment income
Source of investment income Current figure Comparative figure
Investment income from wealth
management products purchased
from financial institutions 78,219 347,371
Investment income from disposal of
financial assets at fair value
through profit or loss (422,174) 92,213
Investment income from long-term
equity investment under equity
method 232,596 187,245
Others 123,999 285,795
Total 12,640 912,624
There is no significant restriction on recovery of investment income of the Group.
(45) Gains on disposal of assets
Item Current figure Comparative figure
Gains on disposal of non-current
assets 13,803 17,902
Losses on disposal of non-current
assets (27,508) (36,661)
Total (13,705) (18,759)
(46) Other income
Assets
related/Income
Item Current figure Comparative figure related
Special subsidy 661,949 626,278 Income related
(47) Income tax expenses
Item Current figure Comparative figure
Current income tax expenses 3,786,798 3,098,450
Deferred income tax expenses (957,206) (483,568)
Total 2,829,592 2,614,882
172
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(47) Income tax expenses (Cont’d)
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:
Item Current figure Comparative figure
Total profit 18,889,515 16,394,573
Income tax calculated at tax rate of 25% 4,722,379 4,098,643
Effect of different tax rates applicable to
subsidiaries (1,363,283) (1,018,015)
Effect of income tax annual filing for prior
periods (85,020) (88,464)
Income not subject to tax (86,580) (156,177)
Costs, expenses and losses not
deductible for tax purposes 172,898 154,906
Utilisation of previously unrecognised tax
losses (810) (83,582)
Effect of the deductible temporary
differences or deductible losses for
which no deferred tax asset was
recognised in the current period 10,633 18,168
Others (540,625) (310,597)
Income tax expenses 2,829,592 2,614,882
(48) 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:
Item Unit Current figure Comparative figure
Consolidated net profit attributable to ordinary
shareholders of the parent company RMB’000 15,187,069 12,936,846
Weighted average number of outstanding Thousands
ordinary shares shares 6,542,991 6,575,678
RMB
Basic earnings per share Yuan/share 2.32 1.97
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the Company by the diluted weighted average number of outstanding
ordinary shares:
Item Unit Current figure Comparative figure
Consolidated net profit attributable to ordinary
shareholders of the Company RMB’000 15,187,069 12,936,846
Weighted average number of outstanding Thousands
ordinary shares shares 6,542,991 6,575,678
Weighted average number of ordinary shares Thousands
increased from share options shares 47,639 95,007
Weighted average number of diluted Thousands
outstanding ordinary shares shares 6,590,630 6,670,685
RMB
Diluted earnings per share Yuan/share 2.30 1.94
173
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(49) Notes to the cash flow statement
(a) Cash received relating to other operating activities
Item Current figure Comparative figure
Non-operating income 144,360 148,745
Other income 657,717 649,291
Other operating income 1,061,576 908,034
Financial interest income 225,405 140,352
Others 292,415 1,709,955
Total 2,381,473 3,556,377
(b) Cash paid relating to other operating activities
Item Current figure Comparative figure
General and administrative expenses
and research and development
expenses (excluding employee
benefits and taxes and surcharges) 4,715,126 3,210,192
Selling and distribution expenses
(excluding employee benefits and
taxes and surcharges) 12,234,373 10,057,941
Others 888,966 178,335
Total 17,838,465 13,446,468
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flow from operating activities is as follows:
Supplementary information Current figure Comparative figure
1) Reconciliation from net profit to cash flows
from operating activities:
Net profit 16,059,923 13,779,691
Add: Provision for asset impairment 144,656 300,087
Provision for credit impairments 179,047 -
Depreciation and amortisation 2,443,803 2,431,629
Net losses on disposal of non-current
assets 13,705 18,759
Losses on changes in fair value (347,862) 613,928
Financial expenses (1,352,564) (356,164)
Investment income (12,640) (912,624)
Share-based payments 392,759 545,531
Decrease in deferred tax assets (1,027,243) (581,702)
Increase in deferred tax liabilities 139,686 105,493
Decrease in inventories 5,763,508 5,575,127
Decrease in operating receivables (12,882,038) (19,845,991)
Increase in operating payables 12,273,150 5,939,924
Net cash flows from operating activities 21,787,890 7,613,688
2) Net increase/(decrease) in cash and cash
equivalents
Cash at the end of the period 14,897,180 10,427,394
Less: Cash at the beginning of the period (17,952,282) (21,831,653)
Net increase in cash and cash equivalents (3,055,102) (11,404,259)
174
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(49) Notes to the cash flow statement (Cont’d)
(d) Composition of cash and cash equivalents
Item Current figure Comparative figure
Cash on hand 2,214 5,232
Cash at bank that can be readily
drawn on demand 12,189,067 8,748,778
Other cash balances that can be
readily drawn on demand 65,114 59,123
Deposits with the Central Bank that
can be readily drawn on demand 255,357 81,100
Deposits with banks and other
financial institutions 2,385,428 1,533,161
Cash and cash equivalents at the
end of the period 14,897,180 10,427,394
(50) Monetary items denominated in foreign currency
30 June 2019
Foreign currency
Item balance Exchange rate RMB balance
Cash at bank and on
hand
USD 726,666 6.8747 4,995,611
JPY 4,936,129 0.0638 315,004
HKD 154,016 0.8797 135,482
EURO 127,951 7.8170 1,000,193
BRL 98,498 1.7939 176,699
Other currencies Not applicable Not applicable 1,098,796
Sub-total 7,721,785
Accounts receivable
USD 1,196,162 6.8747 8,223,255
JPY 17,119,280 0.0638 1,092,484
HKD 58,136 0.8797 51,140
EURO 370,295 7.8170 2,894,596
BRL 386,485 1.7939 693,327
Other currencies Not applicable Not applicable 2,630,296
Sub-total 15,585,098
Other receivables
USD 55,570 6.8747 382,027
JPY 4,107,857 0.0638 262,147
HKD 397,221 0.8797 349,419
EURO 38,611 7.8170 301,822
BRL 96,917 1.7939 173,862
Other currencies Not applicable Not applicable 168,340
Sub-total 1,637,617
Total 24,944,500
175
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Monetary items denominated in foreign currency (Cont'd)
30 June 2019
Foreign currency
Item balance Exchange rate RMB balance
Short-term borrowings
JPY 3,000,000 0.0638 191,448
EURO 97,776 7.8170 764,315
BRL 82,640 1.7939 148,250
Other currencies Not applicable Not applicable 234,311
Sub-total 1,338,324
Accounts payable
USD 208,575 6.8747 1,433,891
JPY 10,895,967 0.0638 695,337
HKD 51,784 0.8797 45,552
EURO 243,822 7.8170 1,905,957
BRL 196,597 1.7939 352,681
Other currencies Not applicable Not applicable 1,218,137
Sub-total 5,651,555
Other payables
USD 9,813 6.8747 67,461
JPY 6,330,826 0.0638 404,008
HKD 157,693 0.8797 138,716
EURO 1,774 7.8170 13,867
Other currencies Not applicable Not applicable 75,678
Sub-total 699,730
Current portion of non-
current liabilities
EURO 7,048 7.8170 55,094
JPY 124,472 0.0638 7,943
Other currencies Not applicable Not applicable 52,667
Sub-total 115,704
Long-term borrowings
USD 149,484 6.8747 1,027,658
EURO 4,215,027 7.8170 32,948,866
JPY 69,459,994 0.0638 4,432,659
Other currencies Not applicable Not applicable 80,853
Sub-total 38,490,036
Total 46,295,349
176
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Monetary items denominated in foreign currency (Cont'd)
31 December 2018
Foreign currency
Item 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
EURO 120,307 7.8473 944,084
BRL 209,297 1.7714 370,748
Other currencies Not applicable Not applicable 1,047,083
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
EURO 336,710 7.8473 2,642,265
BRL 524,032 1.7714 928,271
Other currencies Not applicable Not applicable 1,821,932
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
EURO 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
177
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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) Monetary items denominated in foreign currency (Cont'd)
31 December 2018
Foreign currency
Item balance Exchange rate RMB balance
Short-term borrowings
USD 22,169 6.8632 152,148
EURO 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
EURO 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
EURO 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
EURO 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
EURO 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
178
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
5 Changes in the consolidation scope
(1) Changes in 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 250,000 Egyptian pounds
in March 2019, holding 99% and 1% of equity respectively. The Company's wholly-owned
subsidiary Guangdong Welling Auto Parts Corporation Limited. established Anhui Welling Auto
Parts Corporation Limited. In May 2019. The Company established Wuxi Little Swan Electric Co.,
Ltd. in May 2019.
(b) Decrease of consolidation scope
Decrease of consolidation scope mainly includes deregistration of subsidiaries. Details are as
follows:
Disposal method of the Disposal time-point of the
Name of company equity 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
179
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 Shareholding (%)
Subsidiaries location registration Nature of business Direct Indirect Method of acquisition
Business combinations involving enterprises not
Guangdong Midea Air-Conditioning Equipment Co., Ltd. Foshan, PRC Foshan, PRC Manufacture and sales of air conditioner 73% 7% under common control
Guangdong Midea Group Wuhu Air-Conditioning Equipment Business combinations involving enterprises not
Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture and sales of air conditioner 73% 7% under common control
Midea Group Wuhan Refrigeration Equipment Co., Ltd. Wuhan, PRC Wuhan, PRC Manufacture of air conditioner 73% 7% Establishment
Wuhu Maty Air-Conditioning Equipment Co., Ltd Wuhu, PRC Wuhu, PRC Manufacture of air conditioner 87% 13% Establishment
GD Midea Heating & Ventilation Equipment Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of air conditioner 90% 10% Establishment
Zhejiang Meizhi Compressor Co., Ltd. Ningbo, PRC Ningbo, PRC Manufacture of compressor 100% - Establishment
Business combinations involving enterprises not
Hefei Midea Refrigerator Co., Ltd. Hefei, PRC Hefei, PRC Manufacture of refrigerator 75% 25% under common control
Ningbo Midea United Material Supply Co., Ltd. Ningbo, PRC Ningbo, PRC Import and export of materials 100% - Establishment
Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of small household appliances - 100% Establishment
Foshan Shunde Midea Electrical Heating Appliances
Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of small household appliances - 100% Establishment
Business combinations involving enterprises not
Wuxi Little Swan Company Limited Wuxi, PRC Wuxi, PRC Manufacture of washing machine 85% 15% under common control
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 combinations involving enterprises 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
British Virgin British Virgin
Midea Investment Development Company Limited Islands Islands Investment holding - 100% Establishment
Wuhu Midea Life Appliances Mfg Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture of small household appliances 100% - Establishment
Midea Electric Netherlands (I) B.V. Netherlands Netherlands Investment holding - 100% Establishment
Business combinations involving enterprises not
Toshiba Consumer Marketing Corporation Japan Japan Manufacture of home appliances - 100% under common control
Business combinations involving enterprises not
TLSC Japan Japan Manufacture of home appliances - 100% under common control
Business combinations involving enterprises not
KUKA Germany Germany Manufacture and sales of robots - 94.55% under common control
180
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
6 Interests in other entities (Cont'd)
(2) Interests in associates and joint ventures
The Group’s associates and joint ventures have no significant influence on the Group and are
summarised as follows:
Item Current figure Comparative figure
Aggregated carrying amount of
investments 2,619,985 2,753,940
Aggregate of the following items in
proportion
Net profit (i) 232,596 187,245
Other comprehensive income (i) (251) 45,751
Total comprehensive income 232,345 232,996
(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
- Robots and automatic 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 expenses, fee and commission expenses,
taxes and surcharges, selling and distribution expenses, general and administrative expenses,
research and development expenses and financial expenses.
181
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 for the six months ended 30 June 2019 and as at 30 June 2019 is as follows:
Current figure
Heating &
ventilation, as well Consumer Robots and automatic Other segments and
Item as air-conditioner appliances system unallocated amount Offsetting Total
Revenue from external customers 79,778,444 60,426,835 12,084,387 2,042,977 - 154,332,643
Inter-segment revenue 993,792 264,787 47,256 3,661,828 (4,967,663) -
Operating expenses (71,907,225) (52,887,636) (12,140,447) (4,260,502) 4,977,655 (136,218,155)
Segment profit 8,865,011 7,803,986 (8,804) 1,444,303 9,992 18,114,488
Other profit or loss 775,027
Total profit 18,889,515
Total assets 121,477,633 103,830,902 30,350,434 94,354,997 (65,980,141) 284,033,825
Total liabilities 82,545,313 68,130,341 28,194,003 86,580,130 (80,017,965) 185,431,822
Long-term equity investments in associates
and joint ventures 188,801 86,822 95,577 2,248,785 - 2,619,985
Investment income from associates and joint
ventures 56,685 (3,690) (14,086) 193,687 - 232,596
Increase in non-current assets (excluding
long-term equity investments, financial
assets, goodwill and deferred tax assets) 859,981 586,123 385,257 186,190 - 2,017,551
Losses on/(Reversal of) asset impairment 95,918 (5,346) 51,295 2,789 - 144,656
Losses on/(Reversal of) credit impairment 240,705 92,404 (111,056) 1,406 (44,412) 179,047
Depreciation and amortisation 799,036 832,223 528,676 283,868 - 2,443,803
182
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 for the six months ended 30 June 2018 and as at 30 June 2018 is as follows:
Comparative figure
Heating &
ventilation, as well Consumer Robots and automatic Other segments and
Item as air-conditioner appliances system unallocated amount Offsetting Total
Revenue from external customers 71,054,762 57,431,088 12,527,883 2,722,183 - 143,735,916
Inter-segment revenue 683,380 169,729 27,628 3,026,975 (3,907,712) -
Operating expenses (63,576,472) (51,468,763) (12,482,078) (4,452,768) 3,938,319 (128,041,762)
Segment profit 8,161,670 6,132,054 73,433 1,296,390 30,607 15,694,154
Other profit or loss 700,419
Total profit 16,394,573
Total assets 102,561,819 91,717,760 27,920,064 95,439,400 (66,641,242) 250,997,801
Total liabilities 69,244,032 64,756,334 19,205,830 89,728,014 (79,875,011) 163,059,199
Long-term equity investments in associates
and joint ventures 328,824 65,662 114,220 2,245,234 - 2,753,940
Investment income from associates and joint
ventures 41,003 (3,538) (10,705) 160,485 - 187,245
Increase in non-current assets (excluding
long-term equity investments, financial
assets, goodwill and deferred tax assets) 731,745 932,421 1,217,350 118,287 - 2,999,803
Losses on/(Reversal of) asset impairment 206,497 (20,413) 24,230 121,847 (32,074) 300,087
Losses on/(Reversal of) credit impairment - - - - - -
Depreciation and amortisation 770,940 890,286 513,702 256,701 - 2,431,629
183
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 (excluding long-term equity investments,
financial assets, goodwill and deferred tax assets) located domestically and in foreign countries
or geographical areas (including Germany, Japan, Hong Kong, Macau, Singapore and Brazil,
etc.) are as follows:
Revenue from external customers Current figure Comparative figure
Domestic 92,226,461 85,166,057
In other countries/geographical areas 62,106,182 58,569,859
Total 154,332,643 143,735,916
Total non-current assets Current figure Comparative figure
Domestic 22,478,988 22,617,962
In other countries/geographical areas 18,488,441 18,262,671
Total 40,967,429 40,880,633
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
Name of the parent company Registered capital
Midea Holding Co., Ltd. 330,000
(c) The percentages of shareholding and voting rights in the Company held by the parent company
Ending Opening
Name of the parent Shareholding (%) Voting rights Shareholding (%) Voting rights
company Direct Indirect (%) Direct Indirect (%)
Midea Holding Co., Ltd. 31.87% - 31.87% 33.20% - 33.20%
184
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
(2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of the Company’s main subsidiaries.
(3) Other related parties
Name of other related parties Relationship
Under the common control of the direct relatives of
Guangdong Wellkey Electrician Material Co., Ltd. the Company’s ultimate controlling shareholders
Under the common control of the direct relatives of
Anhui Wellkey Electrician Material Co., Ltd. the Company’s ultimate controlling shareholders
Under the common control of the direct relatives of
Guangdong Infore Material-Tech Co., Ltd. the Company’s ultimate controlling shareholders
Under the common control of the direct relatives of
Orinko New Material Co., Ltd the Company’s ultimate controlling shareholders
Foshan Micro Midea Filter MFG Co., Ltd. Associates of the Company
Foshan Shunde Rural Commercial Bank Co., Ltd. Associates of the Company
(4) Information of related party transactions
The following related party transactions are conducted in accordance with normal commercial
terms or relevant agreements.
(a) Purchase of goods:
Nature of Pricing policies of
related party related party Comparative
Related parties transactions transactions Current figure figure
Purchase of
Orinko New Material Co., Ltd goods Agreed price 684,725 170,578
Guangdong Wellkey Purchase of
Electrician Material Co., Ltd. goods Agreed price 449,341 449,123
Foshan Micro Midea Filter Purchase of
MFG Co., Ltd. goods Agreed price 136,125 93,526
Anhui Wellkey Electrician Purchase of
Material Co., Ltd. goods Agreed price 159,781 165,746
Total 1,429,972 878,973
(5) Receivables from and payables to related parties
Receivables from related parties:
Item Related parties Ending Balance Opening Balance
Foshan Shunde Rural
Cash at bank and on hand Commercial Bank Co., Ltd. 3,000,108 88,084
Payables to related parties:
Item Related parties Ending Balance Opening Balance
Guangdong Wellkey Electrician Material
Co., Ltd. 184,128 169,592
Foshan Micro Midea Filter MFG Co., Ltd. 46,989 60,885
Orinko New Material Co., Ltd 116,023 59,011
Accounts Anhui Wellkey Electrician Material Co.,
payable Ltd. 61,722 25,321
Sub-total 408,862 314,809
185
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
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 3rd 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 Reserved 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 of 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 based on the above parameters
was: RMB 417,556,000.
186
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 of share options during the six months
For the six months ended 30 June For the six months ended 30 June
Item 2019 (share options in thousands) 2018 (share options in thousands)
Share options issued at the beginning
of the year 229,836 253,541
Share options granted during current
period 51,880 54,520
Share options exercised during
current period (51,733) (41,605)
Share options lapsed during current
period (8,916) (501)
Share options issued at the end of
the year 221,067 265,955
As at 30 June 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 on 29 May 2025.
(c) Impact of share-based payment transactions on financial position and financial performance
The total share option expenses recognised for the six months ended 30 June 2019 were RMB
224,467,000 (for the six months ended 30 June 2018: RMB 346,659,000).
(2) Restricted shares
(a) Pursuant to the reserved restricted share incentive plan for 2018 (the “Reserved Restricted Share
Incentive Plan for 2018”) approved at the eighth meeting of the 3rd Board of Directors held during
the year 2019, 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 of restricted shares during the six months (Cont’d)
For the six months ended 30 June For the six months ended 30 June
Item 2019 (share options in thousands) 2018 (share options in thousands)
Restricted shares issued at the
beginning the of the year 40,185 28,605
Restricted shares granted during
current period 30,980 20,570
Restricted shares unlocked at the
beginning of the period (7,193) (7,198)
Restricted shares lapsed during
current period (6,833) (1,876)
Restricted shares issued at the end of
the period 57,139 40,101
187
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
10 Share-based payment (Cont'd)
(2) Restricted shares (Cont’d)
(c) Impact of restricted the Company's transactions on financial position and financial performance
The total expenses on restricted share recognised for the six months ended 30 June 2019 were
RMB 168,292,000 (for the six months ended 30 June 2018: RMB 198,872,000).
11 Contingencies
As at 30 June 2019, the amount in tax disputes involving Brasilian subsidiary with 51% interests
held by the Company is about BRL 669 million (equivalent to RMB 1,201 million) (Some cases
have lasted for more than 10 years. The above amount includes the principal and interest). As at
30 June 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 282 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 debt default,
therefore, no provisions are made and appropriate disclosures are made in the financial
statements.
12 Commitments
The Group has no significant commitments at the balance sheet date.
13 Subsequent events
Nil
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 and method of risk measurement, etc.
The objective of the Group's risk management is to seek balance between risk and income,
minimising the adverse impact of financial risks on the Group's financial performance. Pursuant
to the risk management objective, the Group has made risk management policies 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.
188
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
14 Financial risk (Cont’d)
(1) Market risk
(a) Foreign exchange risk
The Group mainly operates in Mainland China, Europe, America, Asia, Brazil 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 30 June 2019, the Group had
no long-term interest bearing borrowings at floating rates (31 December 2018: nil) (Note 4(25)).
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.
(c) Other price risk
The Group's other price risk arises mainly from financial assets held for trading measured at fair
value (Note 4(2)) and other non-current financial assets (Note 4(10)) held by the Group. As at 30
June 2019, the expected price changes of the above investments held by the Group will affect
the Group’s profit or loss arising from changes in fair value.
189
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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 mainly arises from cash at bank and on hand, deposits with the Central Bank, deposits
with banks and other financial institutions, notes receivable, accounts receivable, receivables
financing, loans and advances, other receivables and derivative financial assets at fair value
through profit or loss that are not included in impairment assessment. As at the balance sheet
date, the carrying amount of the Group’s financial assets represented the largest credit exposure.
The Group didn’t provided any guarantee that made the Group possibly undertake the credit risk.
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, receivables financing, loans and advances, other receivables and other structural
deposits in 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.
(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 the balance sheet date, monetary assets held by the Group, including cash
at bank and on hand, note assets, discounted assets, wealth management funds and structural
deposits and other monetary assets amounted to RMB 136,846,044,000.
190
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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:
30 June 2019
Item Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Short-term borrowings
(including interest) 1,362,924 - - - 1,362,924
Borrowings from the Central
Bank (including interest) 19,555 - - - 19,555
Customer deposits and
deposits from banks and
other financial institutions 64,801 - - - 64,801
Notes payable 29,274,952 - - - 29,274,952
Accounts payable 39,004,928 - - - 39,004,928
Other payables 3,419,347 - - - 3,419,347
Derivative financial liabilities 75,195 - - - 75,195
Other current liabilities 15,382,772 - - - 15,382,772
Current portion of non-
current liabilities (including
interest) 116,071 - - - 116,071
Long-term borrowings
(including interest) 521,501 1,767,891 41,703,394 - 43,992,786
Other non-current liabilities 189,761 185,188 666,012 1,040,961
Sub-total 89,242,046 1,957,652 41,888,582 666,012 133,754,292
31 December 2018
Item 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
Other non-current liabilities - 190,496 159,844 666,012 1,016,352
Sub-total 84,466,050 1,799,921 31,613,286 666,012 118,545,269
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.
191
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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
As at 30 June 2019, the assets and liabilities measured at fair value on a recurring basis by the
above three levels are analysed below:
Fair value at the end of the period
Item Level 1 Level 2 Level 3 Total
Financial assets at fair value -
Financial assets held for trading 872,324 - 2,561,077 3,433,401
Derivative financial assets - 50,847 - 50,847
Receivables financing 2,653,342 2,653,342
Other current assets - hedging
instruments - 28,433 - 28,433
Other non-current financial assets - - 1,420,416 1,420,416
Total assets 872,324 2,732,622 3,981,493 7,586,439
Financial liabilities at fair value -
Derivative financial liabilities - 75,195 - 75,195
Other financial liabilities - hedging
instruments - 224,835 - 224,835
Total liabilities - 300,030 - 300,030
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:
Fair value at the beginning of the year
Item Level 1 Level 2 Level 3 Total
Financial assets 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 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.
There was no change in the valuation technique for the fair value of the Group’s financial
instruments in current period.
192
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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)
The changes in Level 3 financial assets are analysed below:
Item Amount
1 January 2019 1,583,257
Impact of changes in standards 732,448
Increase 3,200,646
Decrease (1,701,464)
Total gains of current period
Investment income recognised in the income statement 162,407
Gains recognised in other comprehensive income 4,199
30 June 2019 3,981,493
Item Amount
1 January 2018 22,174,966
Increase 1,576,579
Decrease (22,660,142)
Total gains of current period
Investment income recognised in the income statement 519,042
Gains recognised in other comprehensive income (27,188)
31 December 2018 1,583,257
Information about the Level 3 fair value measurement is as follows:
Fair value as Inputs
at 30 June Valuation Relationship Observable/
2019 technique Name Range with fair value Unobservable
Financial assets
held for trading -
Wealth management Discounting Estimated 3.0% to
products 2,561,077 cash flow annual yield 5.3% Positive Unobservable
Other non-current
financial assets (a) 1,420,416
3,981,493
(a) The Fair value of this part of available for sale 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 the Level 2 fair value measurement are mainly receivables
financing and forward exchange contracts, which are evaluated by market approach and income
approach respectively.
193
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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, long-term receivables, other non-current assets, accounts payable, notes
payable, short-term borrowings, long-term borrowings, customer deposits and deposits from
banks and other financial institutions, financial assets sold under repurchase agreements and
other current liabilities, etc.
Carrying amounts of the Group’s financial assets and financial liabilities as at 30 June 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 assets divide total liabilities).
As at 30 June 2019 and 31 December 2018, the Group’s gearing ratios were as follows:
Item Ending Balance Opening Balance
Total liabilities 185,431,822 171,246,631
Total assets 284,033,825 263,701,148
Gearing ratio 65.29% 64.94%
17 Notes to the Company’s financial statements
(1) Other receivables
Item Ending Balance Opening Balance
Other receivables 11,621,451 11,171,833
Interest receivable 102,857 117,138
Dividends receivable 1,389,613 310,889
Sub-total 13,113,921 11,599,860
Less: Provision for bad debts (7,895) (6,840)
Total 13,106,026 11,593,020
194
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the Company’s financial statements (Cont’d)
(1) Other receivables (Cont’d)
(a) Other receivables are analysed by ageing as follows:
Ageing Ending Balance Opening Balance
Within 1 year 11,541,886 11,146,053
1 to 2 years 74,876 21,110
2 to 3 years 4,689 4,670
Sub-total 11,621,451 11,171,833
Less: Provision for bad debts (7,895) (6,840)
Total 11,613,556 11,164,993
(b) Provision for losses and changes in book balance statements:
Stage 1
Expected credit losses in the Expected credit losses in the
following 12 months (grouping) following 12 months (individual) Sub-total
Provision for Provision for Provision for
Item Ending balance bad debts Ending balance bad debts bad debts
31 December 2018 129,368 6,840 11,042,465 - 6,840
Changes in accounting
policies - - - - -
1 January 2019 129,368 6,840 11,042,465 - 6,840
Increase in the current
period 17,283 1,055 432,335 - 1,055
Decrease in the current
period - - - - -
Including: Write-off in the
current
period - - - - -
Derecognition - - - - -
Reversal in the current
period - - - - -
Currency translation
differences - - -
30 June 2019 146,651 7,895 11,474,800 - 7,895
As at 30 June 2019, the Company had no other receivables at stage 3.
(c) As at 30 June 2019, the five largest other receivables aggregated by debtors were analysed as
follows:
Name of % of total Provision for
entity Nature Carrying amount Ageing balance bad debts
Company A Current accounts 6,611,700 Within 1 year 57% -
Company B Current accounts 4,000,000 Within 1 year 34% -
Company C Exercise of options 285,361 Within 1 year 2% -
Company D Current accounts 167,890 Within 1 year 1% -
Company E Current accounts 150,000 Within 1 year 1% -
Sub-total 11,214,951 95% -
(2) Long-term equity investments
Long-term equity investments are classified as follows:
Item Ending Balance Opening Balance
Subsidiaries (a) 44,059,630 26,586,165
Associates (b) 1,465,670 1,650,130
Sub-total 45,525,300 28,236,295
Less: Provision for impairment - -
Total 45,525,300 28,236,295
195
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the Company’s financial statements (Cont’d)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries
Movements for the current year
Increase in Movements from share- Decrease in Cash dividends declared
Name of investee Opening Balance investment based payments investment Others (Note) Ending Balance in the current year
Wuxi Little Swan Company Limited 2,822,571 - 27,119 - 17,247,707 20,097,397 955,792
Midea Group Finance Co., Ltd. 3,354,009 - 4,179 - - 3,358,188 -
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 -
Guangdong Midea Air-Conditioning Equipment
Co., Ltd. 1,436,506 - 107,706 - - 1,544,212 -
Hefei Midea Heating & Ventilation Equipment
Co., Ltd. 1,065,941 - 3,165 - - 1,069,106 1,132,080
Guangdong Midea Consumer Electric
Manufacturing Co., Ltd. 1,073,448 - 16,344 - - 1,089,792 -
Hubei Midea Refrigerator Co., Ltd. 843,928 - 1,545 - - 845,473 -
Anhui Meizhi Precision Manufacturing Co., Ltd. 821,916 - 2,411 - - 824,327 621,624
Wuhu Maty Air-Conditioning Equipment Co., Ltd 753,225 - 2,545 - - 755,770 -
GD Midea Heating & Ventilation Equipment Co.,
Ltd. 645,564 - 25,977 - - 671,541 1,305,613
Hefei Midea Refrigerator Co., Ltd. 500,247 - 7,794 - - 508,041 -
Ningbo Midea United Material Supply Co., Ltd. 491,350 - 1,748 - - 493,098 593,117
Guangdong Midea Group Wuhu Air-Conditioning
Equipment Co., Ltd. 352,041 - - - - 352,041 -
Midea International Corporation Company
Limited 176,974 - - - - 176,974 -
Others 7,419,404 50,000 126,873 (151,648) - 7,444,629 1,666,981
Total 26,586,165 50,000 327,406 (151,648) 17,247,707 44,059,630 6,275,207
Note: During the current year, the Company completed share swap and merger with Wuxi Little Swan Company Limited by issuing shares.
196
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2019
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
17 Notes to the Company’s financial statements (Cont’d)
(2) Long-term equity investments (Cont’d)
(b) Associates
Investment in associates mainly refers to the investments in Foshan Shunde Rural Commercial
Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies by the Group.
(3) Operating Income
Revenue mainly comprises other operating income including the brand royalty income, rental
income and management fee income, etc. obtained by the parent company from the subsidiaries.
(4) Investment income
Item Current figure Comparative figure
Income from long-term equity
investment under cost method 6,275,207 6,275,165
Investment income from wealth
management products purchased
from financial institutions 78,219 257,771
Investment income from long-term
equity investment under equity
method 144,453 127,081
Others 249,518 (76,565)
Total 6,747,397 6,583,452
There is no significant restriction on repatriation of the Company's investment income.
197
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)
[English translation for reference only]
1 Details of non-recurring profit or loss
Comparative
Item Current figure figure
Disposal gains of non-current assets, including the portion
written off in provision for asset impairment (13,705) 266,895
Except for the effective hedging activities related to the Group’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 and other non-current financial assets and
investment income from disposal of financial assets held for
trading, derivative financial assets, financial liabilities held for
trading, derivative financial liabilities and other non-current
financial assets (74,312) (521,715)
Others 944,851 1,065,178
Sub-total 856,834 810,358
Less: Corporate Income tax effect (of which the decrease is
represented by “-”) (227,883) (253,535)
Minority interests effect (after tax) 2,444 (120,230)
Net non-recurring profit or loss attributable to shareholders of
the parent company 631,395 436,593
Basis of preparation of details of non-recurring profit or loss:
Under the requirements in 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 refer to those arises from transactions and events that are not directly
relevant to ordinary activities, or that are relevant to ordinary activities, but are 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:
Earnings per share (RMB/share)
Weighted average return Basic earnings per Diluted earnings per
on net assets (%) share share
Current Comparativ Current Comparative Current Comparative
Item figure e figure figure figure figure figure
Net profit attributable to
shareholders of the
Company 16.97% 16.43% 2.32 1.97 2.30 1.94
Net profit attributable to
shareholders of the
Company net of non-
recurring profit or loss 16.27% 15.88% 2.22 1.90 2.21 1.87
198
Section XI Documents Available for Reference
1. The original of The Semi-Annual Report 2019 of Midea Group Co., Ltd. signed by
the legal representative;
2. The financial statements signed and stamped by the legal representative, the Chief
Financial Officer and the accounting supervisor;
3. 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
4. The electronic version of The Semi-Annual Report 2019 that is released on
http://www.cninfo.com.cn.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
31 August 2019
199
