Haier Smart Home : FY 2021 Annual Report.

Company Code：

600690.SH, 690D.DE

Short Name：

Haier Smart Home

Haier Smart Home Co., Ltd.

2021 Annual Report

Important Notice

I. The Board of Directors, the Board of Supervisors, directors, supervisors and senior management of

Haier Smart Home Co., Ltd. ('the Company') hereby assure that the content set out in the annual report is true, accurate and complete, and free from any false record, misleading representation or material omission, and are individually and collectively responsible for the content set out therein.

II.

All Directors of the Company have attended the board meetings.

• III. Hexin Certified Public Accountants Limited LLP has issued a standard and unqualified audit report for the Company.

• IV. Liang Haishan (legal representative of the Company), Gong Wei (chief financial officer of the Company) and Ying Ke (the person in charge of accounting department) hereby certify that the financial report set out in the annual report is true, accurate and complete.

• V. Proposal of profit distribution or proposal of capitalizing capital reserves for the reporting period resoluted and adopted by the Board

  Proposal of profit distribution for the reporting period are examined and reviewed by the Board: to declare a cash dividend of RMB4.60 per 10 shares (tax inclusive) to all shareholders based on the total number of shares held on record date and after deducting the repurchased shares from the repurchase account in respect of the future distribution proposal, with proposed distribution amounting to RMB4,320,413,011.54 (tax inclusive). The proportion of cash distribution is 33.1% of the net profit attributable to shareholder of parent company of the Company for the year. If there is any change in the total share capital of the Company during the period from the date of this report to the record date of the equity distribution, the total distribution amount will be remained unchanged with corresponding adjustment to the proportion of distribution per share.

• VI. Disclaimer in respect of forward-looking statements √ Applicable □Not Applicable

  Forward-looking statements such as future plans, development strategies as set out in this report do not constitute the Company's substantial commitment to investors. Investors are advised to pay attention to investment risks.

• VII. Is there any fund occupation by controlling shareholders and their related parties for non-operational purposes?

No

VIII. Is there any provision of external guarantee in violation of the prescribed decision-making procedures?

No

IX. Are there more than half of the Directors who are unable to guarantee the truthfulness, accuracy and completeness of the annual report disclosed by the Company?

No

X. Important Risk Warnings

For the possible risks which the Company may encounter, please refer to the relevant information set out in the section of 'MANAGEMENT DISCUSSION AND ANALYSIS' in this report.

XI. Others

□ Applicable √ Not Applicable

Chairman: Liang Haishan

Haier Smart Home Co., Ltd

30 March 2022

Contents

DOCUMENTS AVAILABLE FOR INSPECTION	(I) Financial statements with signatures and seals of the legal representative, chief accountant and person in charge of accounting department.
(II) Original audit report with seals of accounting firm, signatures and seals of registered accountants.
(III) Originals of all documents and announcements of the Company which have been publicly disclosed on the newspaper designated by China Securities Regulatory Commission during the reporting period.

LETTER TO SHAREHOLDERS	4
SECTION I	DEFINITIONS	11
SECTION II	GENERAL INFORMATION OF THE COMPANY AND KEY	13
FINANCIAL INDICATORS
SECTION III	MANAGEMENT DISCUSSION AND ANALYSIS	20
SECTION IV	CORPORATE GOVERNANCE	61
SECTION V	ENVIRONMENTAL AND SOCIAL RESPONSIBILITIES	111
SECTION VI	SIGNIFICANT EVENTS	120
SECTION VII	CHANGES IN ORDINARY SHARES AND INFORMATION	146
ABOUT SHAREHOLDERS
SECTION VIII	RELEVANT INFORMATION OF PREFERRED SHARES	157
SECTION IX	RELEVANT INFORMATION OFCORPORATE BONDS	158
SECTION X	FINANCIAL REPORT	166
SECTION XI	RESPONSIBILITY STATEMENT	366
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Letter to Shareholders

2021 was no doubt another year full of challenges. The COVID-19 pandemic has changed life and work patterns. While consumption has yet to fully recover, the global supply chain was confronted by various factors such as the chip shortage and insufficient logistics capacity. 2021 was also the first fiscal year following the integration of Haier Electronics into Haier Smart Home. With unyielding dedication of 100,000 Haier Smart Home innovators around the world, we have delivered more than 110 million unit of home appliances to consumers worldwide and reported best business result ever, including all-time-high sales revenue and net profit. By upholding entrepreneurial spirit since day one, we have firmly implemented strategies of global brand creation, scenario-based innovation, and efficiency enhancement by digitalization. 2021 represents the year when Haier Smart Home made significant progress in fulfilling its mission to provided customized better living experience for families around the world.

Key Accomplishments:

Record-breaking revenue and profit: In 2021, the Company delivered revenue of RMB 227.556 billion, representing 15.8% growth of organic revenue (excluding impact from disposed businesses). Also in 2021, the Company achieved net profit of RMB 13.217 billion, representing an increase of 16.7% as compared to 2020. Net profit attributable to the owner of the parent company was RMB 13.067 billion, representing growth of 47.1% from 2020.

Realizing synergy due to integration with Haier Electronics: The Company's operational efficiency

has been enhanced. In 2021, selling expense ratio was 16.1% and administrative expense ratio was 4.6%, representing optimization of 1.1 and 0.5 percentage points from 2020 on a comparable basis respectively.

High quality growth: In 2021, the Company's cash flow from operating activities was RMB 23.130 billion, representing increase of RMB 5.52 billion from 2020. Net cash flow from operation activities to net profit was 1.75.

Efforts to grow overseas business yielding results: Overseas business achieved record-high revenue

and profitability: overseas revenue reached RMB 113.725 billion, a growth of 13% from 2020; operating profit amounted to RMB 5.926 billion, an increase of 48.1% from 2020.

High-end brands achieved rapid growth: (1) In China, Casarte's sales revenue crossed RMB 10 billion mark and reached RMB 12.9 billion, representing a year-on-year increase of more than 40%. (2) In United States, our high-end brands Monogram, Café and GE Profile achieved over 40% growth rate.

Alignment of management and shareholder interests: We for the first time established a global

management and employee equity incentive scheme based on the Haier Smart Home listed company incentive platform, which comprised incentive tools such as restricted stock units and options. These performance-based schemes further align interests of our management and shareholders.

Sustainable long-term development: The Fortune Magazine published the Fortune Global 500 in 2021. Haier Smart Home was featured once again, moving up 30 places from 2020. In 2022, Fortune Magazine named Haier Smart Home as one of the 2022 World's Most Admired Companies. The Company was the only company outside the United States listed in the Home Equipment and Furnishings category.

Harmonious employee relations: Haier Smart Home has strived to protect the health and safety of our employees in areas affected by COVID-19, while maintaining our pledge to deliver quality service to customers. In China, being Haier Smart Home's home market, not a single employee's living or health suffered due to the pandemic. In the United States, the largest overseas market of our company, GE Appliances was among the top 20 in the 2021 list of Healthiest 100 Workplaces in America and came second as The Employers with the Healthiest Work Environment of Kentucky in 2021.

Remarkable results in technological progress: Haier Smart Home Air Conditioning, together with other R&D institutes, won the "National Award for Science and Technology Progress Second Grade" prize in November 2021 for the development of the "Theory of Building Thermal Environment and related Key Technologies for Green Construction". As China's most acclaimed technology award, the National Award for Science and Technology Progress recognizes major technological breakthroughs and creative contributions by Chinese people and organizations in various fields.

According to the '2021 Global Smart Home Invention Patent Top100' released by IPRdaily, Haier Smart Home occupied the first place with 4,535 published patent applications in 2021. In the same year, GEA was named the 'Smart Home Appliance Company of the Year' by IoT Breakthrough for the fourth consecutive year in the United States.

Growth Opportunities and strategic initiatives

Achievements of 2021 is behind us. In 2022, we may face challenges such as declining demand in China's real estate market, elevated international shipping costs and high commodity prices. However, the Company will remain proactive and fully committed to achieving rapid growth in 2022, with growth coming from capturing leadership positions in categories with high growth potential, as well as from