Stock Codes: 1810 (HKD counter) and 81810 (RMB counter)

2023 ANNUAL REPORT

2023 ANNUAL REPORT

This annual report (in both English and Chinese versions)
has been posted on the Company’s website at www.mi.com
and the Stock Exchange’s website at www.hkexnews.hk.
Shareholders who have chosen to rely on copies of the corporate
communications (including but not limited to annual report and
(where applicable) summary financial report, interim report and
(where applicable) summary interim report, notice of meeting,
listing document, circular and proxy form) posted on the
aforesaid websites in lieu of any or all the printed copies thereof
may request the printed copy of the annual report.

Shareholders who have chosen or are deemed to have consented

to receive the corporate communications using electronic means
and who have difficulty in receiving or gaining access to the
annual report posted on the Company’s website will promptly
upon request be sent the annual report in printed form free of
charge.

Shareholders may at any time choose to change their choice of

means of receipt (in printed form or by electronic means through
the Company’s website) and language (in English only, in Chinese
only or in both Chinese and English) of all future corporate
communications from the Company by sending reasonable prior
notice in writing by post to the Hong Kong Share Registrar at
17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai,
Hong Kong or by email at xiaomi.ecom@computershare.com.hk.
 CONTENTS

CORPORATE INFORMATION 4
FIVE-YEAR FINANCIAL SUMMARY 6
CHAIRMAN’S STATEMENT 8
MANAGEMENT DISCUSSION AND ANALYSIS 15
DIRECTOR’S REPORT 30
CORPORATE GOVERNANCE REPORT 81
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT 104
INDEPENDENT AUDITOR’S REPORT 193
CONSOLIDATED FINANCIAL STATEMENTS 199
DEFINITIONS 338
2 XIAOMI CORPORATION

We relentlessly
build amazing products
with honest prices
to let everyone in the world
enjoy a better life through
innovative technology
2023 ANNUAL REPORT 3
4 XIAOMI CORPORATION

CORPORATE
INFORMATION

Board of Directors Nomination Committee

Executive Directors Wong Shun Tak 灭䍍凞⽹灮(Chairman) (appointed with
effect from January 8, 2024)
Lei Jun灭暹序灮(Chairman of the Board)
Lin Bin 灭㝙㕎灮
Lin Bin灭㝙㕎灮(Vice Chairman of the Board)
Tong Wai Cheung Timothy灭ⓒ​䪢灮(Chairman) (resigned
Liu De (≋⽹)
with effect from January 8, 2024)
Cai Jinqing 灭哣憓朔灮 (appointed with effect from
Non-Executive Director
January 8, 2024)
Liu Qin 灭≋剻灮

Independent Non-Executive Directors

Corporate Governance Committee
Chen Dongsheng 灭昵㜳⌉灮(Chairman)
Chen Dongsheng 灭昵㜳⌉灮
Wong Shun Tak 灭䍍凞⽹灮
Wong Shun Tak 灭䍍凞⽹灮
Tong Wai Cheung Timothy灭ⓒ​䪢灮(resigned with
Tong Wai Cheung Timothy灭ⓒ​䪢灮(resigned with
effect from January 8, 2024)
effect from January 8, 2024)
Cai Jinqing 灭哣憓朔灮(appointed with effect from
Cai Jinqing灭哣憓朔灮 (appointed with effect from
January 8, 2024)
January 8, 2024)

Audit Committee Joint Company Secretaries

So Ka Man 灭嗉○㔑灮
Wong Shun Tak 灭䍍凞⽹灮(Chairman)
Liu Hao 灭≋䀟灮
Liu Qin 灭≋剻灮
Chen Dongsheng 灭昵㜳⌉灮
Authorized Representatives
Remuneration Committee Lin Bin 灭㝙㕎灮
So Ka Man 灭嗉○㔑灮
Chen Dongsheng 灭昵㜳⌉灮(Chairman)
Lei Jun 灭暹序灮
Wong Shun Tak 灭䍍凞⽹灮 Auditor
PricewaterhouseCoopers
Certified Public Accountants and Registered Public Interest
Entity Auditor
22/F, Prince’s Building, Central, Hong Kong
 2023 ANNUAL REPORT 5

Registered Office Hong Kong Share Registrar

Maples Corporate Services Limited Computershare Hong Kong Investor Services Limited
PO Box 309 Shops 1712–1716, 17th Floor
Ugland House Hopewell Centre
Grand Cayman, KY1-1104 183 Queen’s Road East
Cayman Islands
Wan Chai
Hong Kong
Head Office and Principal Place of
Business in Mainland China
Principal Share Registrar and Transfer
Xiaomi Campus Office
Anningzhuang Road Maples Fund Services (Cayman) Limited
Haidian District
PO Box 1093, Boundary Hall
Beijing
Cricket Square
The People’s Republic of China
Grand Cayman, KY1-1102
Cayman Islands
Principal Place of Business in
Hong Kong
Principal Banker
5/F, Manulife Place
348 Kwun Tong Road, Kowloon Shouti Technology Finance Sub-Branch,

Hong Kong Beijing Branch, China Merchants Bank

Hong Kong Legal Advisor Stock Codes

Skadden, Arps, Slate, Meagher & Flom 1810 (HKD counter) and 81810 (RMB counter)
42/F, Edinburgh Tower
The Landmark
Company Website
15 Queen’s Road Central
Hong Kong www.mi.com

Compliance Advisor
Guotai Junan Capital Limited
27/F, Low Block Grand
Millennium Plaza
181 Queen’s Road Central
Hong Kong
6 XIAOMI CORPORATION

FIVE-YEAR
FINANCIAL SUMMARY

Condensed consolidated statements of comprehensive income

2023 2022 2021 2020 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Revenue 270,970,141 280,044,016 328,309,145 245,865,633 205,838,682

Gross profit 57,476,239 47,577,190 58,260,941 36,751,862 28,554,033
Operating profit 20,008,670 2,816,498 26,028,664 24,034,729 11,760,217
Profit before income tax 22,011,047 3,933,956 24,417,033 21,633,432 12,162,646
Profit for the year 17,474,196 2,502,568 19,283,235 20,312,710 10,102,950
Profit attributable to owners of the company 17,475,173 2,474,030 19,339,321 20,355,504 10,044,164
Total comprehensive income for the year 18,510,061 6,247,923 17,879,021 17,949,889 10,543,383
Total comprehensive income attributable
to owners of the Company 18,507,548 6,201,669 17,940,990 17,986,452 10,472,914
Non-IFRS Measure:
Adjusted net profit 19,272,754 8,518,007 22,039,474 13,006,363 11,532,296

Condensed consolidated balance sheets

2023 2022 2021 2020 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Assets
Non-current assets 125,194,739 113,092,416 107,040,469 77,396,988 46,090,121
Current assets 199,052,700 160,414,795 185,851,401 176,282,835 137,539,086
Total assets 324,247,439 273,507,211 292,891,870 253,679,823 183,629,207

Equity and liabilities

Equity attributable to owners
of the Company 163,995,489 143,658,458 137,212,906 123,691,696 81,330,574
Non-controlling interests 266,279 264,602 219,590 321,819 327,102
Total equity 164,261,768 143,923,060 137,432,496 124,013,515 81,657,676

Non-current liabilities 44,398,075 39,956,618 39,731,903 21,739,380 9,790,826

Current liabilities 115,587,596 89,627,533 115,727,471 107,926,928 92,180,705
Total liabilities 159,985,671 129,584,151 155,459,374 129,666,308 101,971,531
Total equity and liabilities 324,247,439 273,507,211 292,891,870 253,679,823 183,629,207
 2023 ANNUAL REPORT 7

Year ended December 31, 2023

IoT and lifestyle Internet services

Total revenue Smartphone revenue products revenue revenue

271.0 157.5 80.1 30.1

RMB billion RMB billion RMB billion RMB billion

Connected IoT
Overseas revenue Smartphone shipments MAU(2)
devices(1)

44.9% 145.6 739.7 641.2

of total revenue million units million units million

Notes:

(1) Connected IoT devices as of December 31, 2023, excluding smartphones, tablets, and laptops

(2) In December 2023, including smartphones and tablets

8 XIAOMI CORPORATION

CHAIRMAN’S
STATEMENT

Dear Shareholders,

I am pleased to present our annual report for the year ended December 31, 2023 to the shareholders.

Business Review and Outlook

OVERALL IoT AND

SMARTPHONES
PERFORMANCE LIFESTYLE PRODUCTS

INTERNET CORPORATE SOCIAL

SERVICES RESPONSIBILITY

1. Overall performance

Throughout 2023, we diligently executed our key operating strategy of “dual emphasis on scale and profitability”.
As we maintained our industry-leading position globally, we emphasized on enhancing our capabilities, optimizing
our operating efficiency and driving improvements in profitability. In 2023, our adjusted net profit increased
126.3% year-over-year to RMB19.3 billion, and our total revenue was RMB271.0 billion, a slight decrease of 3.2%
year-over-year. Our adjusted net profit included RMB6.7 billion in expenses related to our smart Electric Vehicle
(“EV”) business and other new initiatives1.

1 Excluding share-based compensation expenses (SBC) related to smart EV and other new initiatives of RMB0.8 billion for the year.
 2023 ANNUAL REPORT 9

In October 2023, we upgraded our corporate strategy to “Human x Car x Home” and unveiled our new operating
system, “Xiaomi HyperOS”. According to Canalys, our global smartphone shipments ranked third in 2023, the third
consecutive year that we were ranked among the top three smartphone brands globally, with a market share of 12.8%.
In December 2023, our global monthly active users (“MAU”)2 reached 641.2 million, a historic high and an increase of
10.2% year-over-year. As of December 31, 2023, the number of connected IoT devices on our AIoT platform (excluding
smartphones, tablets and laptops) increased to 739.7 million, up 25.5% year-over-year. As part of our “Human x Car x
Home” strategy, we officially unveiled our first EV product, the Xiaomi SU7 Series, in December 2023.

In August 2023, we introduced our new goal for 2020–2030, which was to invest in foundational core technologies and
to become a global leader in the evolving realm of cutting-edge technologies. In 2023, our research and development
expenses were RMB19.1 billion, up 19.2% year-over-year. As of December 31, 2023, we had 17,800 research and
development personnel, accounting for 53% of our employees. In addition, we continued to extend our intellectual
property capabilities to foster innovation. As of December 31, 2023, we had obtained more than 37,000 patents
worldwide. In 2023, we unveiled our results in various areas, including our new operating system Xiaomi HyperOS,
our proprietary hinge used in Xiaomi MIX Fold 3, Xiaomi Shield Glass used in Xiaomi 14 Pro and Xiaomi 14 Ultra, as well
as Xiaomi EV’s five core technologies. In February 2024, we also officially launched the newly built Xiaomi Smart
Factory, with an annual smartphone production capacity of approximately ten million units.

In 2023, we continued to make significant progress in our smartphone premiumization strategy. The Xiaomi 14 Series,
our flagship smartphone launched in October 2023, garnered widespread acclaim for its leading-edge technology,
exquisite design, exceptional imaging, and excellent user experience. In terms of shipments, according to third-party
data, our market share of smartphone sales in the RMB4,000–RMB6,000 price segment in mainland China reached
16.9% in 2023, up by 9.2 percentage points year-over-year. According to third-party data, in mainland China, the
proportion of premium smartphone3 shipment represented more than 20% of our total smartphone shipments in
2023. In terms of pricing, in 2023, the average selling price (“ASP”) of our smartphones in mainland China increased
by over 19% year-over-year, hitting a record high.

As we steadily advanced our new retail operating strategy of “storefront integration” in mainland China in 2023, we
significantly improved the efficiency of our offline retail stores, gaining higher market share. According to third-party
data, our market share of smartphone shipments through offline channels in mainland China was 8.4% in 2023, up
by 1.8 percentage points year-over-year.

2 Including smartphones and tablets.

3 Premium smartphones in mainland China are models with retail prices at or above RMB3,000.
10 XIAOMI CORPORATION

CHAIRMAN’S STATEMENT

We continue to expand our global footprint. In 2023, our revenue from overseas markets reached RMB121.8 billion,
accounting for 44.9% of our total revenue. According to Canalys, in 2023, we witnessed significant smartphone
market share growth in the Middle East, Latin America, and Africa in 2023, up 1.3%, 1.2% and 2.4% year-over-year
respectively in these regions. Our smartphone shipments ranked No. 2 in the Middle East, and No. 3 in Latin America,
Africa and Southeast Asia. According to Canalys, our smartphone shipments ranked among the top three across 51
countries and regions globally and ranked among the top five across 65 countries and regions globally in 2023.

In 2023, our key AIoT products achieved remarkable success both in mainland China as well as globally. Our smart
large home appliances gained both positive customer reviews and sales growth, and revenue from the segment
increased by nearly 40% year-over-year in 2023. According to Canalys, in 2023, the ranking of our tablet shipments rose
to No. 3 in mainland China, and our shipments of wearable bands4 ranked No. 2 both in mainland China and globally.

In December 2023, we held our Xiaomi EV Technology Launch event, unveiling Xiaomi EV’s five core self-developed
technologies — E-Motor, Battery, Die-Casting, Smart Cabin, and Autonomous Driving. We also officially debuted the
Xiaomi SU7 Series. Positioned as a “full-size high-performance eco-technology sedan,” Xiaomi SU7 Series boasts a
captivating aesthetic design and ultra-high performance. Xiaomi SU7 Max, equipped with dual motors for all-wheel
drive, is turbocharged with a maximum horsepower of 673PS and a peak torque of 838N·m. With its zero-to-
hundred acceleration of 2.78 seconds and a top speed of 265 km/h, the Xiaomi SU7 Max offers a CLTC5 range of up
to 800 km. Crafted with industry-leading safety design standards and engineered with passive, active, and battery
safety mechanisms, among others, the Xiaomi SU7 Series safeguards users with the utmost protection. The pricing of
Xiaomi SU7 Series was formally announced on March 28, 2024.

As we executed our operating strategy of “dual emphasis on scale and profitability” in 2023, we achieved record-high
gross profit margin at the Group level, as well as in each of our business segments. In 2023, our gross profit margin
reached 21.2%, an increase of 4.2 percentage points year-over-year. By segment, in 2023, the gross profit margin
of our smartphone business reached 14.6%, an increase of 5.6 percentage points year-over-year. The gross profit
margin of our IoT and lifestyle products reached 16.3%, an increase of 1.9 percentage points year-over-year. The
gross profit margin of our internet services reached 74.2%, an increase of 2.4 percentage points year-over-year. Our
annual adjusted net profit was RMB19.3 billion, an increase of 126.3% year-over-year. Sufficient cash reserves serve
as a crucial foundation for the sustained development of both our core and new businesses. As of December 31,
2023, our cash resources6 reached RMB136.3 billion, hitting a record high. We have also been actively repurchasing
our shares in the open market, and we repurchased HKD1.5 billion, or 126.6 million shares, in 2023.

4 Wearable bands include basic bands, basic watches, and smart watches.

5 China Light-duty Vehicle Test Cycle.

6 Including but not limited to (i) cash and cash equivalents, (ii) restricted cash, (iii) short-term bank deposits, (iv) short-term investments measured

at fair value through profit or loss, (v) short-term investments measured at amortized cost, (vi) long-term bank deposits and (vii) other investments

included in long-term investments measured at fair value through profit or loss.

 2023 ANNUAL REPORT 11

2. Smartphones

According to Canalys, in 2023, global smartphone shipments decreased by 4.3% year-over-year. In 2023, we
maintained our No. 3 global smartphone shipment ranking with a 12.8% market share. In 2023, our smartphone
revenue reached RMB157.5 billion, with our global smartphone shipments reaching 145.6 million units.

We are firmly committed to executing our dual-brand strategy. Under the Xiaomi brand, in August 2023, we unveiled
the Xiaomi MIX Fold 3 in mainland China, illustrating our persistent innovation in foldable smartphones. The Xiaomi
MIX Fold 3 features our proprietary hinge, which adopts a 3-element connecting rod structure and has up to 14
micro-hinges. The tightly stacked rotating mechanism is much slimmer, lighter and more reliable with enhanced
durability. In October 2023, we unveiled the Xiaomi 14 Series in mainland China. The world’s first Snapdragon 8 Gen 3
Mobile Platform made its debut on the Xiaomi 14 Series, meticulously integrated with Xiaomi HyperOS for outstanding
performance. In February 2024, we unveiled the Xiaomi 14 Ultra in mainland China, which redefines mobile imaging
with a holistic experience upgrade. Xiaomi 14 Ultra optics come equipped with a quad-camera with Leica Summilux
optical lenses and a full range of focal lengths, featuring larger apertures for enhanced luminance. In terms of
computational photography, Xiaomi 14 Ultra is powered by Xiaomi AISP, our first-ever AI large model computational
photography platform, with an astounding computing power of 60 TOPS, providing image processing aptitudes for
thorough integration of software and hardware. We are also advancing our smartphone premiumization strategy
in the overseas markets. Just before the recently concluded MWC Barcelona 2024, we unveiled the Xiaomi 14 and
Xiaomi 14 Ultra Series with built-in Xiaomi HyperOS for global users. This marked the first-ever synchronized release
of our premium flagship smartphones globally.

Since the launch of the Redmi brand, the global cumulative sales volume of our Redmi smartphones surpassed
1 billion units. In September 2023, we released the Redmi Note 13 Series7 in mainland China. Redmi Note 13 and
Redmi Note 13 Pro+ are powered by the meticulously optimized MediaTek Dimensity 7200 Ultra and Dimensity 6080
mobile chipsets, fine-tuned by Redmi and MediaTek jointly, delivering exceptional performance while enhancing user
experience across the board. In November 2023, we released the Redmi K70 Series8 in mainland China. Fueled by the
Snapdragon 8 Gen 3 Mobile Platform, the Redmi K70 Pro boasts our cutting-edge “ice-sealed cooling system”. With
Xiaomi HyperOS as its foundational architecture, fortified by an AI subsystem, it significantly enhances both overall
performance and user experience. The sales volume of Redmi K70 Series exceeded 600,000 units in the first five
minutes9.

7 Including Redmi Note 13, Redmi Note 13 Pro, Redmi Note 13 Pro+ and Redmi Note 13 Pro+ AAPE Limited Edition.

8 Including Redmi K70, Redmi K70 Pro, Redmi K70E and Redmi K70 Pro Champion Edition.

9 Based on sales data recorded from 10:00 to 10:05 Beijing time on December 1, 2023.
12 XIAOMI CORPORATION

CHAIRMAN’S STATEMENT

3. IoT and lifestyle products

In 2023, despite various macro challenges, our IoT and lifestyle products delivered year-over-year growth in both
revenue and gross profit margin. In 2023, revenue from our IoT and lifestyle products was RMB80.1 billion, an
increase of 0.4% year-over-year, and gross profit margin reached 16.3%, hitting a record high, up 1.9 percentage
points year-over-year.

As of December 31, 2023, the number of connected IoT devices (excluding smartphones, tablets and laptops) on
our AIoT platform reached 739.7 million, up 25.5% year-over-year; the number of users with five or more devices
connected to our AIoT platform (excluding smartphones, tablets and laptops) reached 14.5 million, an increase of
25.3% year-over-year. In December 2023, the MAU of our Mi Home App grew to 85.8 million, an increase of 13.2%
year-over-year.

According to All View Cloud (“AVC”), in 2023, our TV shipments ranked among the top five globally.

In 2023, our smart large home appliances sustained high growth momentum in sales. In the full year of 2023,
our smart large home appliance revenue increased by nearly 40% year-over-year. Our air conditioner shipments
exceeded 4.4 million units in 2023, up 49% year-over-year. Our refrigerator shipments for the year exceeded
2.0 million units, doubling year-over-year. Furthermore, in 2023, our washing machine shipments exceeded
1.3 million units, up 24% year-over-year.

In 2023, our tablet products achieved remarkable growth, with global tablet shipments exceeding 5 million units,
an increase of more than 50% year-over-year. In particular, our annual tablet shipments in the overseas markets
doubled year-over-year. According to Canalys, in 2023, the ranking of our tablet shipments rose to No. 3 in mainland
China. In February 2024, we launched the Xiaomi Pad 6S Pro 12.4, the first tablet product with built-in Xiaomi
HyperOS. Powered by the Snapdragon 8 Gen 2 flagship processor, featuring a stunning 12.4-inch 3K high-definition
eye-protection display, Xiaomi Pad 6S Pro 12.4 supports multi-screen color consistency within our ecosystem. It also
pioneers Wi-Fi 7 high-speed connection technology on tablets and comes equipped with our revolutionary 120W
HyperCharge, offering up to a 100% charge with its 10,000mAh battery in 35 minutes.

In 2023, we continued to maintain our leading edge in wearables. According to Canalys, in 2023, our wearable band
shipments ranked No. 2 both in mainland China and in global markets, and our TWS earbud shipments ranked No. 2
in mainland China.
 2023 ANNUAL REPORT 13

4. Internet services
In 2023, our internet services reached record highs in both revenue and gross profit margin. Our internet services
revenue was RMB30.1 billion, an increase of 6.3% year-over-year. The gross profit margin of our internet services
reached 74.2%, an increase of 2.4 percentage points year-over-year.

In 2023, our internet user base continued to expand. Our MAU globally and in mainland China both hit record highs.
In December 2023, our global MAU reached 641.2 million, an increase of 10.2% year-over-year, while our MAU in
mainland China reached 155.6 million, up 8.3% year-over-year. In December 2023, the global MAU of our smart TV10
reached 66.0 million, an increase of 13.5% year-over-year.

In 2023, as we continued to optimize efficiency across our platform, our advertising revenue reached RMB20.5 billion,
an increase of 11.2% year-over-year, setting a record high.

In 2023, alongside the advancement of our smartphone premiumization strategy, the number of active users and paying
users of our gaming business continued to increase. Accordingly, we achieved solid growth in our gaming business. In
2023, our gaming revenue reached RMB4.4 billion, an increase of 7.0% year-over-year, setting a historic high.

In 2023, we continued to advance our globalization strategy. As we consistently broadened business alliances with
valued partners, we reinforced our content distribution capabilities and elevated our monetization capabilities. In
2023, revenue from our overseas internet services increased 24.1% year-over-year to RMB8.4 billion, hitting a record
high and accounting for 28.0% of our total internet services revenue, up 4.0 percentage points year-over-year.

5. Corporate Social Responsibility

We actively fulfill our corporate social responsibility and are deeply committed to driving low-carbon development,
offering customers green, smart, and sustainable products and services. In August 2023, we pledged to achieve
carbon neutrality in our own operations of our existing businesses along with 100% renewable energy utilization by
2040. In December 2023, we released our White Paper on Climate Action during the Conference of the Parties to the
United Nations Framework Convention on Climate Change (COP28), detailing our zero-carbon philosophy and our
approach to the zero-carbon transition.

In terms of corporate social responsibility, we continuously contributed to a better society in three key domains:
poverty and disaster relief, talent development, and technology innovation. As for poverty and disaster relief,
Beijing Xiaomi Foundation has cumulatively donated more than RMB162 million as of December 2023. In
December 2023, Beijing Xiaomi Foundation donated RMB5 million to the earthquake-stricken areas in Gansu
and Qinghai Province for relief efforts. For talent development, Xiaomi Scholarships program has covered
60 colleges and universities by the end of 2023, with a cumulative donation of RMB55 million. And Xiaomi Young
Talents program has covered 30 colleges and universities, sponsoring more than 500 young teachers and

10 Including Xiaomi Box and Xiaomi TV Stick.

14 XIAOMI CORPORATION

CHAIRMAN’S STATEMENT

researchers as of December 2023. For technology innovation, Xiaomi Innovation Joint Fund has cumulatively
donated RMB108 million and supported 74 scientific projects as of December 2023. In March 2024, Beijing
Xiaomi Foundation donated RMB100 million to the National Natural Science Foundation of China, supporting
fundamental research projects for young students.

We have fully integrated environmental, social, and governance (ESG) management into our business operations
and management. In January 2024, we announced the appointment of Ms. Cai Jinqing as the Company’s first female
board director. This represented a significant stride in our ongoing efforts to enhance our corporate management,
fostering greater gender diversity within our board of directors, and further strengthening the sophistication of our
corporate governance practices.

In 2023, our ESG initiatives were met with widespread acclaim globally. We were included in S&P Global’s
Sustainability Yearbook 2023 (China Edition) as an “Industry Mover”, listed as one of China’s Most Admired Companies
2023 by Fortune Magazine, named one of the “World’s Best Employers” by Forbes for the third consecutive year, and
honored with the Best ESG award in the Technology Hardware sector in Institutional Investor’s 2023 Asia Pacific
(Ex-Japan) Executive Team Awards, among others. In January 2024, in recognition of our outstanding sustainability
practices and performance, we were awarded the “Gold Medal” in EcoVadis’ sustainability rating, ranking in the top
3% globally within the industry11 and our score increased to 73 from 53 in 2022.

Our Pledge
Our mission is to relentlessly build amazing products with honest prices to let everyone in the world enjoy a better
life through innovative technology. To achieve this, as approved by our Board in May 2018, we pledged to our existing
and potential users that starting from 2018, the Xiaomi Hardware Business (“HB”), including smartphones and IoT
and lifestyle products, would have an overall net profit margin that would not exceed 5.0% per year. If the net margin
exceeds 5.0%, we will return the excess above 5.0% to our users. In 2023, the overall net margin of our hardware
business was less than 3%, fulfilling our pledge. (For the definition of hardware business net margin, please refer to
Hardware Business Net Margin.)

Lei Jun
Chairman

Hong Kong
March 19, 2024

11 Manufacture of communication equipment.

 2023 ANNUAL REPORT 15

MANAGEMENT
DISCUSSION AND ANALYSIS

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
The following table sets forth the comparative figures for the years ended December 31, 2023 and 2022:

Year ended December 31,

2023 2022
(RMB in millions)

Revenue 270,970.1 280,044.0

Cost of sales (213,493.9) (232,466.8)
Gross profit 57,476.2 47,577.2
Research and development expenses (19,097.7) (16,028.1)
Selling and marketing expenses (19,226.5) (21,323.3)
Administrative expenses (5,126.8) (5,113.9)
Fair value changes on financial instruments measured at fair value
through profit or loss 3,501.1 (1,662.0)
Share of net profits/(losses) of investments accounted for
using the equity method 45.6 (400.1)
Other income 740.1 1,135.5
Other gains/(losses), net 1,696.7 (1,368.8)
Operating profit 20,008.7 2,816.5
Finance income, net 2,002.3 1,117.5
Profit before income tax 22,011.0 3,934.0
Income tax expenses (4,536.8) (1,431.4)
Profit for the year 17,474.2 2,502.6

Non-IFRS Measure: Adjusted net profit 19,272.8 8,518.0

16 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Revenue
Revenue decreased by 3.2% to RMB271.0 billion for the year ended December 31, 2023, compared to RMB280.0 billion
for the year ended December 31, 2022. The following table sets forth our revenue by line of business for the year
ended December 31, 2023 and the year ended December 31, 2022:

Year ended December 31,

2023 2022
% of total % of total
Amount revenue Amount revenue
(RMB in millions, unless specified)

Smartphones 157,461.3 58.1% 167,217.2 59.7%

IoT and lifestyle products 80,107.7 29.6% 79,794.9 28.5%
Internet services 30,107.5 11.1% 28,321.4 10.1%
Others 3,293.6 1.2% 4,710.5 1.7%

Total revenue 270,970.1 100.0% 280,044.0 100.0%

Smartphones
Revenue from our smartphones segment decreased by 5.8% from RMB167.2 billion for the year ended December 31,
2022 to RMB157.5 billion for the year ended December 31, 2023, primarily due to decreases in both our smartphone
shipments and ASP. Our smartphone shipments decreased by 3.3% from 150.5 million for the year ended December 31,
2022 to 145.6 million for the year ended December 31, 2023. According to Canalys, in 2023, global smartphone
shipments decreased by 4.3% year-over-year. The ASP of our smartphones decreased by 2.7% from RMB1,111.3 per
unit for the year ended December 31, 2022 to RMB1,081.7 per unit for the year ended December 31, 2023, primarily
due to the enhanced efforts to clear our inventories in the overseas markets in the first half of 2023, and the strong
growth of our shipments in emerging markets which carry lower ASP in the second half of 2023, partially offset by an
increase in ASP in mainland China with the contribution from our premium smartphone shipments. In 2023, the ASP
of our smartphones in mainland China increased by over 19% year-over-year, hitting a record high.

IoT and lifestyle products

Revenue from our IoT and lifestyle products segment increased by 0.4% from RMB79.8 billion for the year ended
December 31, 2022 to RMB80.1 billion for the year ended December 31, 2023, primarily attributable to the increase in
revenue of our smart large home appliances and tablets, partially offset by the decrease in revenue of smart TVs and laptops.

Revenue from our smart large home appliances increased by nearly 40% year-over-year, primarily attributable to the
increased shipments of our air conditioners, refrigerators and washing machines in mainland China.
 2023 ANNUAL REPORT 17

Our tablets maintained strong growth momentum year-over-year, primarily due to the increased revenue of Xiaomi
Pad 6 series tablets and Redmi Pad SE series tablets which we introduced globally in 2023.

Revenue from smart TVs and laptops decreased by 17.8% from RMB23.7 billion for the year ended December 31, 2022
to RMB19.5 billion for the year ended December 31, 2023, mainly due to the decrease in global shipments of smart
TVs and laptops.

Internet services

Revenue from our internet services segment increased by 6.3% from RMB28.3 billion for the year ended December 31,
2022 to RMB30.1 billion for the year ended December 31, 2023, mainly due to the increase in revenue from our
advertising business and gaming business, partially offset by the decreased revenue from other value-added services.
The overseas internet services revenue increased by 24.1% from RMB6.8 billion for the year ended December 31, 2022
to RMB8.4 billion for the year ended December 31, 2023, accounting for 28.0% of our total internet services revenue,
driven by the continued expansion of our overseas internet user base. Our global MAU increased by 10.2% from
582.1 million in December 2022 to 641.2 million in December 2023.

Others

Other revenue decreased by 30.1% from RMB4.7 billion for the year ended December 31, 2022 to RMB3.3 billion for
the year ended December 31, 2023, primarily due to the decrease in revenue from the sales of buildings.
18 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Cost of Sales
Our cost of sales decreased by 8.2% from RMB232.5 billion for the year ended December 31, 2022 to RMB213.5 billion
for the year ended December 31, 2023. The following table sets forth our cost of sales by line of business for the year
ended December 31, 2023 and the year ended December 31, 2022:

Year ended December 31,

2023 2022
% of total % of total
Amount revenue Amount revenue
(RMB in millions, unless specified)

Smartphones 134,480.7 49.6% 152,248.4 54.4%

IoT and lifestyle products 67,029.1 24.7% 68,296.4 24.4%
Internet services 7,773.5 2.9% 7,974.4 2.8%
Others 4,210.6 1.6% 3,947.6 1.4%

Total cost of sales 213,493.9 78.8% 232,466.8 83.0%

Smartphones

Cost of sales related to our smartphones segment decreased by 11.7% from RMB152.2 billion for the year ended
December 31, 2022 to RMB134.5 billion for the year ended December 31, 2023, mainly due to the decreased revenue of
our smartphones, the decrease in cost of key components, as well as the decrease in inventory impairment provisions
in the overseas markets.

IoT and lifestyle products

Cost of sales related to our IoT and lifestyle products segment decreased by 1.9% from RMB68.3 billion for the year
ended December 31, 2022 to RMB67.0 billion for the year ended December 31, 2023, primarily due to the decrease in
revenue of smart TVs and laptops, partially offset by the increased revenue of our smart large home appliances and
tablets.
 2023 ANNUAL REPORT 19

Internet services

Cost of sales related to our internet services segment decreased by 2.5% from RMB8.0 billion for the year ended
December 31, 2022 to RMB7.8 billion for the year ended December 31, 2023, primarily due to the decrease in costs
from our advertising business and other value-added services.

Others

Cost of sales in our others segment increased by 6.7% from RMB3.9 billion for the year ended December 31, 2022 to
RMB4.2 billion for the year ended December 31, 2023, primarily due to the increase in costs from sales of materials,
partially offset by the decrease in revenue from sales of buildings.

Gross Profit and Margin

As a result of the foregoing, our gross profit increased by 20.8% from RMB47.6 billion for the year ended December 31,
2022 to RMB57.5 billion for the year ended December 31, 2023. Our gross margin increased from 17.0% for the year
ended December 31, 2022 to 21.2% for the year ended December 31, 2023.

The gross profit margin from our smartphones segment increased from 9.0% for the year ended December 31, 2022
to 14.6% for the year ended December 31, 2023, mainly due to the improved product mix, the decrease in cost of key
components, as well as the decrease in inventory impairment provisions in the overseas markets.

The gross profit margin from our IoT and lifestyle products segment increased from 14.4% for the year ended
December 31, 2022 to 16.3% for the year ended December 31, 2023, mainly due to higher revenue contribution and
the increased gross profit margin of certain products with higher gross profit margin, such as tablets, certain lifestyle
products and smart large home appliances.

The gross profit margin from our internet services segment increased from 71.8% for the year ended December 31,
2022 to 74.2% for the year ended December 31, 2023, mainly due to higher revenue contribution and the increased
gross profit margin of our advertising business.

Research and Development Expenses

Our research and development expenses increased by 19.2% from RMB16.0 billion for the year ended December 31,
2022 to RMB19.1 billion for the year ended December 31, 2023, primarily due to the increase in research and
development expenses related to our smart EV business and other new initiatives.
20 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Selling and Marketing Expenses

Our selling and marketing expenses decreased by 9.8% from RMB21.3 billion for the year ended December 31, 2022 to
RMB19.2 billion for the year ended December 31, 2023, primarily due to the decrease of logistics expenses.

Promotion and advertising expenses decreased by 3.3% from RMB7.2 billion for the year ended December 31, 2022 to
RMB7.0 billion for the year ended December 31, 2023, primarily due to the decrease in marketing expenses.

Administrative Expenses
Our administrative expenses remained stable at RMB5.1 billion for the year ended December 31, 2023 compared to
the year ended December 31, 2022, primarily due to the increase in administrative expense related to our smart EV
business and other new initiatives and the credit loss allowance of receivables, partially offset by the decrease in
professional service fees.

Fair Value Changes on Financial Instruments Measured at Fair Value Through

Profit or Loss
Our fair value changes on financial instruments measured at fair value through profit or loss changed from a loss
of RMB1.7 billion for the year ended December 31, 2022 to a gain of RMB3.5 billion for the year ended December 31,
2023, primarily due to the fair value gains of listed equity investments for the year ended December 31, 2023 compared
to fair value losses of listed equity investments for the year ended December 31, 2022.

Share of Net Profits/(Losses) of Investments Accounted for Using the Equity Method
Our share of net profits/(losses) of investments accounted for using the equity method changed from net losses
of RMB400.1 million for the year ended December 31, 2022 to net profits of RMB45.6 million for the year ended
December 31, 2023.

Other Income
Our other income decreased from RMB1.1 billion for the year ended December 31, 2022 to RMB0.7 billion for the year
ended December 31, 2023, primarily due to the decrease of government grants.
 2023 ANNUAL REPORT 21

Other Gains/(Losses), Net

Our other net gains/(losses) changed from a net loss of RMB1.4 billion for the year ended December 31, 2022 to a
net gain of RMB1.7 billion for the year ended December 31, 2023, primarily due to the increase of disposal gains
of investments accounted for using the equity method and foreign exchange gains, as well as less impairment of
investments accounted for using the equity method for the year ended December 31, 2023.

Finance Income, Net

Our net finance income increased from RMB1.1 billion for the year ended December 31, 2022 to RMB2.0 billion for
the year ended December 31, 2023, primarily due to the rise of short-term deposit and US dollar deposit interest rate,
partially offset by the change of value of financial liabilities to fund investors.

Income Tax Expenses

Our income tax expenses increased by 217.0% from RMB1.4 billion for the year ended December 31, 2022 to
RMB4.5 billion for the year ended December 31, 2023, primarily due to the significant increase of operating profit for
the year ended December 31, 2023.

Profit for the Year

As a result of the foregoing, our profit for the year increased by 598.3% from RMB2.5 billion for the year ended
December 31, 2022 to RMB17.5 billion for the year ended December 31, 2023.

Adjusted Net Profit

Our adjusted net profit increased by 126.3% from RMB8.5 billion for the year ended December 31, 2022 to
RMB19.3 billion for the year ended December 31, 2023.
22 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Consolidated Statement of Cash Flows

Year ended December 31,

2023 2022
(RMB in millions)

Net cash generated from/(used in) operating activities(1) 41,300.5 (4,389.7)

Net cash (used in)/generated from investing activities (35,169.1) 15,548.8
(1)
Net cash used in financing activities (505.0) (7,854.8)
Net increase in cash and cash equivalents 5,626.4 3,304.3
Cash and cash equivalents at beginning of year 27,607.3 23,511.6
Effects of exchange rate changes on cash and cash equivalents 397.6 791.4

Cash and cash equivalents at end of year 33,631.3 27,607.3

Notes:

(1) Excluding (1) the change of trade payments related to the finance factoring business; (2) the change of loan and interest receivables and impairment

provision for loan receivables mainly resulting from the fintech business; (3) the change of restricted cash resulting from the fintech business; and

(4) the change of deposits from customers resulting from the Airstar Bank, the net cash generated from operating activities was RMB42.3 billion

for the year ended December 31, 2023, and the net cash used in operating activities was RMB6.8 billion for the year ended December 31, 2022,

respectively. Excluding the change of borrowings for the finance factoring business, the net cash used in financing activities was RMB2.3 billion

for the year ended December 31, 2023, and the net cash used in financing activities was RMB3.8 billion for the year ended December 31, 2022,

respectively. The information in this footnote is based on the management accounts of the Group, which have not been audited or reviewed by the

Group’s auditor. The accounting policies applied in the preparation of the management accounts are consistent with those used for other figures in

this announcement.

(2) The cash resources which the Group considered in cash management include but not limited to cash and cash equivalents, restricted cash,

short-term bank deposits, short-term investments measured at fair value through profit or loss, short-term investments measured at amortized

cost, long-term bank deposits and treasury investments included in long-term investments measured at fair value through profit or loss. As of

December 31, 2023, the aggregate amount of cash resources of the Group was RMB136.3 billion.
 2023 ANNUAL REPORT 23

Net Cash Generated From Operating Activities

Net cash generated from operating activities represents the cash generated from our operations minus the income
tax paid. Cash generated from our operations primarily comprise our profit before income tax adjusted by non-cash
items and changes in working capital.

For the year ended December 31, 2023, net cash generated from our operating activities amounted to RMB41.3 billion,
representing cash generated from operations of RMB44.3 billion minus income tax paid of RMB3.0 billion. Cash
generated from operations was primarily attributable to our profit before income tax of RMB22.0 billion, adjusted by an
increase in trade payables of RMB11.1 billion, an increase in advance from customers of RMB4.0 billion, an increase
in other payables and accruals of RMB3.1 billion, provision for impairment of inventories of RMB3.9 billion and share-
based compensation of RMB3.4 billion, partially offset by fair value gains on financial instruments measured at fair
value through profit or loss of RMB3.5 billion.

Net Cash Used In Investing Activities

For the year ended December 31, 2023, our net cash used in investing activities was RMB35.2 billion, which was
primarily attributed to an increase of short-term bank deposits of RMB12.5 billion, an increase of long-term bank
deposits of RMB11.0 billion, an increase of short-term investments measured at fair value through profit or loss of
RMB10.4 billion.

Net Cash Used In Financing Activities

For the year ended December 31, 2023, our net cash used in financing activities was RMB0.5 billion, which was
primarily attributed to the distribution to fund investors of RMB2.9 billion, the payments for shares repurchase of
RMB1.4 billion, the payments of deferred consideration for acquisition of intangible assets of RMB1.4 billion, partially
offset by an increase of borrowings of RMB4.8 billion.
24 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Capital Expenditure

Year ended December 31,

2023 2022
(RMB in millions)

Capital expenditures(1) 7,662.1 5,799.6

(2)
Placement of long-term investments 4,303.0 7,716.0

Total 11,965.1 13,515.6

Notes:

(1) Capital expenditures represents the purchase of property, plant and equipment, intangible assets, land use rights and payment of deferred

consideration for acquisition of intangible assets.

(2) Placement for long-term investments represents equity investments, preferred share investments and other investments.

Non-IFRS Measure: Adjusted Net Profit

To supplement our consolidated results which are prepared and presented in accordance with all applicable IFRS
Accounting Standards issued by the International Accounting Standards Board (“IFRS Accounting Standards”), we utilize
non-IFRS adjusted net profit (“Adjusted Net Profit”) as an additional financial measure. We define Adjusted Net Profit as
profit for the period, as adjusted by adding back (i) share-based compensation, (ii) net fair value changes on investments,
(iii) amortization of intangible assets resulting from acquisitions, (iv) changes of value of financial liabilities to fund
investors, and (v) income tax effects of non-IFRS adjustments.

Adjusted Net Profit is not required by, or presented in accordance with, IFRS Accounting Standards. We believe that
the presentation of non-IFRS measures when shown in conjunction with the corresponding IFRS Accounting Standards
measures provides useful information to investors and management regarding financial and business trends in relation
to our financial condition and results of operations, by eliminating any potential impact of items that our management
does not consider to be indicative of our operating performance such as certain non-cash items and the impact of
certain investment transactions. We also believe that the non-IFRS measures are appropriate for evaluating the Group’s
operating performance. However, the use of this particular non-IFRS measure has limitations as an analytical tool,
and you should not consider it in isolation from, or as a substitute for analysis of, our results of operations or financial
conditions as reported under IFRS Accounting Standards. In addition, this non-IFRS financial measure may be defined
differently from similar terms used by other companies and therefore may not be comparable to similar measures used
by other companies.
 2023 ANNUAL REPORT 25

The following tables set forth reconciliations of the Group’s Non-IFRS measures for the years ended December 31, 2023
and 2022 to the nearest measures prepared in accordance with IFRS Accounting Standards.

Year Ended December 31, 2023

Adjustments
Changes of
Amortization value of
of intangible financial
Net fair value assets liabilities
As Share-based changes on resulting from to fund Income
reported compensation investments(1) acquisitions(2) investors(3) tax effects(4) Non-IFRS
(RMB in thousand, unless specified)

Profit for the year 17,474,197 3,344,357 (2,746,397) 144,008 410,946 645,643 19,272,754
Net margin 6.4% 7.1%

Year Ended December 31, 2022

Adjustments
Changes of
Amortization value of
of intangible financial
Net fair value assets liabilities
As Share-based changes on resulting from to fund Income
reported compensation investments(1) acquisitions(2) investors(3) tax effects(4) Non-IFRS
(RMB in thousand, unless specified)

Profit for the year 2,502,568 2,467,224 4,405,700 144,271 (583,862) (417,894) 8,518,007
Net margin 0.9% 3.0%

Notes:

(1) Primarily includes fair value changes on equity investments and preferred shares investments deducting the accumulative fair value changes for

investments (including the financial assets measured at fair value through profit or loss (“FAFVPL”) and the investments using the equity method

transferred from FAFVPL) disposed in the current period, net gains/(losses) on deemed disposals of investee companies, the impairment provision

for investments, re-measurement impact on loss of significant influence in an associate and, re-measurement of investments transferring from

FAFVPL to investments using the equity method.

(2) Represents amortization of intangible assets resulting from acquisitions.

(3) Represent the change of value of the financial liabilities payable to the fund investors, as a result of the change of fair value of the fund.

(4) Income tax effects of non-IFRS adjustments.

26 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Hardware Business Net Margin

HB overall net profit margin rate1 = HB overall net profit/Revenue from HB

HB overall profit before tax = Revenue from HB – Cost of sales of HB – Selling and marketing expenses of HB –
Administrative expenses of HB – Research and development expenses of HB

HB overall net profit = HB overall profit before tax – Income tax expenses of HB

Share-based compensation expenses are excluded from selling and marketing expenses of HB, administrative
expenses of HB, research and development expenses of HB. Income tax expenses of HB equals to the HB overall
profit before tax multiplied by the effective tax rate of the Group.

Note:

(1) The source data and calculation formulae of HB overall net profit margin rate are provided by the Group. PricewaterhouseCoopers Zhong Tian LLP

was engaged by the Group to conduct certain procedures, as mutually agreed by both parties, including agreeing the source financial data used to

the books and records and recalculating the HB overall net profit margin rate based on the formulae provided by the Group.

Liquidity, Financial Resources and Gearing

On December 4, 2020, the Company completed of a placing of a total of 1,000,000,000 placing shares at HK$23.70
for each placing share owned by Smart Mobile Holdings Limited to not less than six placees who and whose
ultimate beneficial owner(s) are independent third parties and allotted and issued 1,000,000,000 subscription
shares at HK$23.70 per subscription share under the general mandate to Smart Mobile Holdings (the “2020 Placing
and Subscription”). For further details, please refer to the Company’s announcements dated December 2, 2020,
December 3, 2020 and December 9, 2020.

Other than the funds raised through our Global Offering in July 2018, the 2020 Placing and Subscription and the
issuance of debt securities as described in “Issuance of Debt Securities” below, we have historically funded our cash
requirements principally from cash generated from our operations and bank borrowings. We had cash and cash
equivalents of RMB27.6 billion and RMB33.6 billion as of December 31, 2022 and December 31, 2023, respectively.

Our gearing ratio was -35.6% and -62.8%, which represented a net cash position, as of December 31, 2022 and
December 31, 2023, respectively. Our gearing ratio is calculated as net debt divided by total capital at the end of each
financial period. Net debt equals to our total borrowings less our cash and cash equivalents, restricted cash and
short-term bank deposits. Total capital is calculated as total equity plus net debt.
 2023 ANNUAL REPORT 27

Issuance of Debt Securities

On April 29, 2020, Xiaomi Best Time International Limited, a wholly owned subsidiary of the Company, issued US$600
million 3.375% senior notes due 2030 unconditionally and irrevocably guaranteed by the Company (the “2030 Notes”).
For further details, please refer to the announcements of the Company published on April 20, 2020 and April 23, 2020.

On December 17, 2020, Xiaomi Best Time International Limited issued zero coupon guaranteed convertible bonds
due 2027 guaranteed by the Company in the aggregate principal amount of US$855 million at an initial conversion
price of HK$36.74 per conversion share (subject to adjustments) (the “2027 Bonds”). The 2027 Bonds are listed on
the Stock Exchange. For further details, please refer to the announcements of the Company dated December 2, 2020,
December 3, 2020, December 17, 2020 and December 18, 2020.

As at December 31, 2023, no 2027 Bonds had been converted into new Shares.

On July 14, 2021, Xiaomi Best Time International Limited issued US$800 million 2.875% senior bonds due 2031 (the
“2031 Bonds”) and US$400 million 4.100% senior green bonds due 2051 (the “Green Bonds”), both of which were
unconditionally and irrevocably guaranteed by the Company. For further details of the 2031 Bonds and Green Bonds,
please refer to the announcements of the Company published on July 6, 2021, July 8, 2021, July 14, 2021 and July 15,
2021.

Borrowings
As of December 31, 2022 and December 31, 2023, we had total borrowings of RMB23.6 billion and RMB27.9 billion,
respectively.

Off-Balance Sheet Commitments and Arrangements

As of December 31, 2023, except for financial guarantee contracts, we had not entered into any significant off-balance
sheet arrangements.

Future Plans for Material Investments and Capital Assets

As of December 31, 2023, we did not have plans for material investments and capital assets.
28 XIAOMI CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

Investments Held
As of December 31, 2023, we had invested in more than 430 companies with an aggregate book value of
RMB67.1 billion, an increase of 5.0% year-over-year. In 2023, we recorded a net gain on disposal of investments (after
tax) of RMB1.7 billion. The total amount of our investments (including (i) fair value of our stakes in listed investee
companies accounted for using the equity method based on the stock price on December 31, 2023; (ii) book value of
our stakes in unlisted investee companies accounted for using the equity method; and (iii) book value of long-term
investments measured at fair value through profit or loss) would have reached RMB68.0 billion as of December 31,
2023.

The Group did not make or hold any significant investments (including any investment in an investee company with a
value of 5% or more of the Group’s total assets as of December 31, 2023) during the year ended December 31, 2023.

Material Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures

During the year ended December 31, 2023, we did not conduct any material acquisitions or disposals of subsidiaries,
associates and joint ventures.

Employee and Remuneration Policy

As of December 31, 2023, we had 33,627 full-time employees, 31,537 of whom were based in mainland China,
primarily at our headquarters in Beijing, with the rest primarily based in India. As of December 31, 2023, our research
and development personnel, totaling 17,800 employees, were staffed across our various departments.

Our success depends on our ability to attract, retain and motivate qualified personnel. As part of our human resources
strategy, we offer employees competitive compensation packages. As of December 31, 2023, 11,861 employees held
share-based awards. The total remuneration expenses, including share-based compensation expense, for the year
ended December 31, 2023 were RMB18.9 billion, representing an increase of 14.1% from RMB16.6 billion for the year
ended December 31, 2022.

Foreign Exchange Risk

The transactions of our Company are denominated and settled in our functional currency, the United States dollar.
Our Group’s subsidiaries primarily operate in the People’s Republic of China (the “PRC”) and other regions such as
India, and are exposed to foreign exchange risk arising from various currencies exposures, primarily with respect to
the United States dollar.
 2023 ANNUAL REPORT 29

Therefore, foreign exchange risk primarily arose from recognized assets and liabilities in our subsidiaries when
receiving or to receive foreign currencies from, or paying or to pay foreign currencies to overseas business partners.

We will continue to monitor changes in currency exchange rates and will take necessary measures to mitigate
exchange rate impact.

Pledge of Assets
As of December 31, 2023, our total restricted bank deposits amounted to RMB4.8 billion, compared with RMB4.0
billion as of December 31, 2022.

Contingent Liabilities
We did not have any material contingent liabilities as of December 31, 2023. Further details of the contingencies are
set out in Note 37 to the consolidated financial statements.
30 XIAOMI CORPORATION

DIRECTOR’S REPORT

The Board of the Company is pleased to present this Director’s report together with the consolidated financial
statements of the Group for the Reporting Period.

Principal Activities
The Company is an investment holding company. During the Reporting Period, the Group was principally engaged
in development and sales of smartphones, IoT and lifestyle products, provision of internet services and investments
holding in the PRC and other countries or regions.

Business Review
A fair review of the business of the Group as required by Schedule 5 to the Companies Ordinance (Chapter 622 of
the Laws of Hong Kong), including an analysis of the Group’s financial performance, an indication of likely future
developments in the Group’s business, a description of the principal risks and uncertainties facing the Group and the
Group’s key relationships with its stakeholders who have a significant impact on the Group and on which the Group’s
success depends, is set out in the sections headed “Chairman’s Statement” and “Management Discussion and
Analysis” of this annual report. These discussions form part of this annual report. Events affecting the Company that
have occurred since the end of the financial year are set out in the section headed “Events after the Reporting Period”
in this annual report.

Subsidiaries
Particulars of the Company’s subsidiaries are set out in Note 12 to the consolidated financial statements.

Property, plant and equipment

Details of movements in the property, plant and equipment of the Group during the Reporting Period are set out in
Note 15 to the consolidated financial statements.

Bank Loans and Borrowings

Particulars of bank loans and other borrowings of the Group as of December 31, 2023 are set out in the section headed
“Management Discussion and Analysis” in this annual report and Note 34 to the consolidated financial statements.

Donation
During the Reporting Period, the Group made charitable donations of approximately RMB24.4 million.
 2023 ANNUAL REPORT 31

Issuance of Debt Securities

On April 29, 2020, Xiaomi Best Time International Limited, a wholly owned subsidiary of the Company, issued US$600
million 3.375% senior notes due 2030 unconditionally and irrevocably guaranteed by the Company (the “2030 Notes”).
The 2030 Notes are listed on the Stock Exchange. For further details, please refer to the announcements of the
Company published on April 20, 2020, April 23, 2020 and May 3, 2020.

On December 17, 2020, Xiaomi Best Time International Limited issued zero coupon guaranteed convertible bonds
due 2027 guaranteed by the Company in the aggregate principal amount of US$855 million at an initial conversion
price of HK$36.74 per conversion share (subject to adjustments) (the “2027 Bonds”). The 2027 Bonds are listed on
the Stock Exchange. For further details, please refer to the announcements of the Company dated December 2, 2020,
December 3, 2020, December 17, 2020 and December 18, 2020.

As at December 31, 2023, no 2027 Bonds had been converted into new Shares.

On July 14, 2021, Xiaomi Best Time International Limited issued US$800 million 2.875% senior bonds due 2031
(the “2031 Bonds”) and US$400 million 4.100% senior green bonds due 2051, both of which were unconditionally
and irrevocably guaranteed by the Company (the “Green Bonds”). For further details of the 2031 Bonds and Green
Bonds, please refer to the announcements of the Company published on July 6, 2021, July 8, 2021, July 14, 2021 and
July 15, 2021.

Five-Year Financial Summary

A summary of the condensed consolidated results and financial positions of the Group is set out on page 6 of this
annual report.

Reserves
As of December 31, 2023, the Company had distributable reserves amounting to RMB62,775.6 million. Details of the
movements in the reserves of the Company during the Reporting Period are set out in Note 41(b) to the consolidated
financial statements.
32 XIAOMI CORPORATION

DIRECTOR’S REPORT

Purchase, Sale or Redemption of the Company’s Listed Securities

During the Reporting Period and up to the Latest Practicable Date, the Company repurchased a total of 280,734,400
Class B ordinary shares (the “Class B Shares”) of the Company on The Stock Exchange at an aggregate consideration
of approximately HK$3,620,173,600 (the “Share Repurchased”) to enhance the shareholder value in the long run.
Particulars of the Share Repurchased are as follows:

No. of Class B Shares Price paid per share Aggregate

Month of Repurchase Repurchased Highest Lowest Consideration
(HK$) (HK$) (HK$)

2023
May 4,400,000 10.54 10.46 46,197,760
June 38,200,000 11.00 9.96 407,830,772
July 6,900,000 10.88 10.66 74,524,630
September 37,700,000 12.00 11.58 445,713,652
October 16,000,000 12.00 11.64 189,868,052
November 1,600,000 15.00 14.96 23,989,565
December 21,800,000 16.30 14.44 329,330,498
2024
January 112,100,000 15.54 12.30 1,533,095,902
February 26,000,000 12.78 12.08 324,555,828
March 6,834,400 15.00 14.76 101,929,132
April 9,200,000 15.76 15.42 143,137,809

Total 280,734,400 3,620,173,600

As at the Latest Practicable Date, the number of Class B Shares in issue was reduced by 264,700,000 shares as
a result of the cancellations of the Shares Repurchased in May, June, July, September, October, November and
December 2023, January and February 2024 accordingly, and all of the Shares Repurchased in March and April
2024 are in the process of being cancelled. Upon cancellation of the Shares Repurchased, the weighted voting rights
(“WVR”) beneficiaries of the Company simultaneously reduced their WVR in the Company proportionately by way of
converting their Class A ordinary shares (the “Class A Shares”) into Class B Shares on a one-to-one ratio pursuant to
Rule 8A.21 of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”), such that the
proportion of shares carrying WVR of the Company shall not be increased, pursuant to the requirements under Rules
8A.13 and 8A.15 of the Listing Rules.
 2023 ANNUAL REPORT 33

The Class B Shares repurchased in May 2023, June 2023, and July 2023 were subsequently cancelled on August 21,
2023. A total of 9,061,798 Class A Shares were converted into Class B Shares on a one-to-one ratio on August 21, 2023,
of which Mr. Lei Jun, through Smart Mobile Holdings Limited, converted 8,161,142 Class A Shares and Mr. Lin Bin,
through Apex Star LLC, converted 900,656 Class A Shares.

The Class B Shares repurchased in September 2023 and October 2023 were subsequently cancelled on November 15,
2023. A total of 9,814,592 Class A Shares were converted into Class B Shares on a one-to-one ratio on November 15,
2023, of which Mr. Lei Jun, through Smart Mobile Holdings Limited, converted 8,839,116 Class A Shares and Mr. Lin
Bin, through Apex Star LLC, converted 975,476 Class A Shares.

The Class B Shares repurchased in November 2023, December 2023, January 2024 and February 2024 were
subsequently cancelled on March 14, 2024. A total of 29,373,916 Class A Shares were converted into Class B Shares
on a one-to-one ratio on March 14, 2024, of which Mr. Lei Jun, through Smart Mobile Holdings Limited, converted
26,454,431 Class A Shares and Mr. Lin Bin, through Apex Star LLC, converted 2,919,485 Class A Shares.

Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the
Company’s securities listed on the Stock Exchange during the Reporting Period and up to the Latest Practicable Date.

Share Schemes
The Company has four existing share schemes, namely the Pre-IPO ESOP, the 2018 Share Option Scheme, the 2018
Share Award Scheme and the 2023 Share Scheme. Since January 1, 2023 and until the adoption of the 2023 Share
Scheme, the Company has relied on the transitional arrangements provided for the existing share schemes and has
complied with the new Chapter 17 accordingly (effective from January 1, 2023).

A total of 387,288,632 new Shares, representing approximately 1.9% of the weighted average number of the Class
B Shares in issue of the Company, may be issued in respect of all options and awards granted during the Reporting
Period to eligible participants pursuant to the 2018 Share Option Scheme, the 2018 Share Award Scheme and the 2023
Share Scheme.

1. Pre-IPO ESOP
The following is a summary of principal terms of the Pre-IPO ESOP adopted by the Company on May 5, 2011,
superseded on August 24, 2012.

(a) Purpose
The purpose of the Pre-IPO ESOP is to promote the success and enhance the value of the Company, by
linking the personal interests of the members of the Board, employees, consultants and other individuals to
those of the Shareholders and, by providing such individuals with an incentive for outstanding performance,
34 XIAOMI CORPORATION

DIRECTOR’S REPORT

to generate superior returns to the Shareholders. The Pre-IPO ESOP is further intended to provide flexibility
to the Company in its ability to motivate, attract and retain the services of recipients upon whose judgment,
interest and special effort the successful conduct of the Company’s operation is largely dependent.

(b) Eligible participants

The eligible participants include employees, consultants, all members of the Board, and other individuals,
as determined, authorized and approved by the Board or a committee authorized by the Board. Awards in
the form of share options, restricted share awards and restricted stock units (“RSU”) may be granted to
selected participants.

(c) Maximum number of shares available for issue

The overall limit on the number of Shares which may be issued pursuant to the Pre-IPO ESOP is 251,307,455
Class B Shares, which was subsequently adjusted by the Board to 2,512,694,900 Class B Shares (adjusted
after taking into account the share subdivision which took place on June 17, 2018). No further Pre-IPO
Awards would be granted under the Pre-IPO ESOP after listing.

(d) Maximum entitlement of each participant

There is no maximum entitlement of each participant.

(e) Vesting period and exercise period

The share options may not be exercised until vested. The Board shall determine the time or times at which
an option may be exercised, provided that the term of any option granted under the Pre-IPO ESOP shall not
exceed ten years. Once vested, the vested portion of the option may be exercised in whole or in any part, at
any time.

As for the RSUs, at the time of grant, the Board shall specify the date or dates on which the RSUs shall
become fully vested and non-forfeitable.

(f) Consideration and purchase price

Pursuant to the Pre-IPO ESOP, there is no amount payable on application or acceptance of the award and
no purchase price of Shares awarded.

(g) Exercise price and payment

The exercise price per share subject to a share option under the Pre-IPO ESOP shall be determined by the
Board and set out in the award agreement and may be a fixed or variable price related to the fair market
value of the Class B Shares.

The Board may set performance objectives or other vesting criteria which, depending on the extent to which
they are met, will determine the number or value of RSUs that will be paid out to the selected participants.
 2023 ANNUAL REPORT 35

(h) Remaining life of the scheme

The term of the Pre-IPO ESOP commenced on August 24, 2012 and has expired on the tenth anniversary of
the above starting date. Upon expiry of the Pre-IPO ESOP, any Pre-IPO Awards that are outstanding shall
remain in force according to the terms of the Pre-IPO ESOP and the applicable award agreement.

Given that no further Pre-IPO Awards would be granted under the Pre-IPO ESOP, the outstanding number of
options and RSUs would be equivalent to the maximum number of new Shares available for issue under the
Pre-IPO ESOP. As of the Latest Practicable Date, outstanding options and RSUs representing 234,181,394
underlying Shares, being approximately 0.9% of the issued share capital of the Company, were granted to eligible
participants pursuant to the Pre-IPO ESOP. Except for Liu De, no share options and RSUs had been granted to the
Directors and other connected persons.

Details of movements of share options and RSUs granted under the Pre-IPO ESOP during the Reporting Period
are as follows:

Number of share options and RSUs

Weighted
average
closing price
of the Share
immediately
before the
Outstanding Outstanding date of
Exercise as at Exercised Cancelled Lapsed as at vesting
Date of Vesting price January 1, during during during December 31, during the
Grantees Role grant Period(1) (US$) 2023 the year the year the year 2023 year

Director
Liu De Executive 1/1/2018 5–10 years 0–0.10225 5,385,220 (5,385,220) — — — 12.56
Director

Category subtotal: 5,385,220 (5,385,220) — — —

Other grantees by category

Employee 4/1/2010 to 1–10 years 0–0.344 303,714,793 (53,815,449) — (10,565,000) 239,334,344 12.42
Participants 6/14/2018

Service Providers 1/1/2012 to 4–5 years 0–0.344 1,788,070 (668,000) — — 1,120,070 15.69
4/1/2018

Category subtotal: 305,502,863 (54,483,449) — (10,565,000) 240,454,414

Total: 310,888,083 (59,868,669) — (10,565,000) 240,454,414

(1): The exercise period of the options granted under the Pre-IPO ESOP shall commence from the date on which the relevant options become
vested and end on the 10th anniversary of the grant date, subject to the terms of the Pre-IPO ESOP and the share option award agreement
signed by the grantee.

Further details of the Pre-IPO ESOP are set out in Note 29 to the consolidated financial statements.
36 XIAOMI CORPORATION

DIRECTOR’S REPORT

2. 2018 Share Option Scheme

The following is a summary of the principal terms of the 2018 Share Option Scheme adopted by the Company on
June 17, 2018. Immediately upon the 2023 Share Scheme taking effect on June 8, 2023, no further share options
shall be granted under the 2018 Share Option Scheme.

(a) Purpose
The purpose of the 2018 Share Option Scheme is to provide selected participants with the opportunity
to acquire proprietary interests in the Company and to encourage selected participants to work towards
enhancing the value of our Company and its Shares for the benefit of our Company and the Shareholders
as a whole. The 2018 Share Option Scheme will provide our Company with a flexible means of retaining,
incentivizing, rewarding, remunerating, compensating and/or providing benefits to selected participants.

(b) Eligible participants

Eligible participants under the 2018 Share Option Scheme include any employee, director, officer,
consultant, advisor, distributor, contractor, customer, supplier, agent, business partner, joint venture
business partner or service provider of any member of the Group or any affiliate as the Board determines.

(c) Maximum number of shares available for issue

The total number of Class B Shares which may be issued upon exercise of all share options granted under
the 2018 Share Option Scheme is 120,700,000 Class B Shares, representing approximately 0.5% of the
issued share capital of the Company as at the Latest Practicable Date.

As of January 1, 2023, the total number of Shares available for grant under the 2018 Share Option Scheme
was 1,447,394,311 Shares.

Since the 2023 Share Scheme took effect on June 8, 2023, as of December 31, 2023, there was no further
share options available for grant under the 2018 Share Option Scheme.

(d) Maximum entitlement of each participant

Unless approved by shareholders of the Company, the total number of Class B Shares issued and to be
issued upon exercise of the options granted and to be granted under the 2018 Share Option Scheme and
any other share option scheme(s) of the Company to each selected participant (including both exercised
and outstanding options) in any 12-month period shall not exceed 1% of the total number of Class B Shares
in issue. Any further grant of options to a selected participant which would result in the aggregate number
of Class B Shares issued and to be issued upon exercise of all options granted and to be granted to such
selected participant (including exercised, cancelled and outstanding options) in the 12 month period up to and
including the date if such further grant exceeding the individual limit shall be subject to separate approval
of shareholders of the Company (with such selected participant and his associates abstaining from voting).
 2023 ANNUAL REPORT 37

(e) Grant of option and option period

An offer shall be deemed to have been accepted and the option to which the offer relates shall be deemed
to have been granted and to have taken effect when the duplicate of the offer letter comprising acceptance
of the offer duly signed by the grantee with the number of Class B Shares in respect of which the offer is
accepted clearly stated therein, together with a remittance in favor of the Company of HK$1.00 by way of
consideration for the grant thereof, which must be received by the Company within 20 business days from
the date on which the offer letter is delivered to the grantee. To the extent that the offer is not accepted
within 20 business days from the date on which the letter containing the offer is delivered to that selected
participant, it shall be deemed to have been irrecoverably declined.

An option may, subject to the terms and conditions upon which such option is granted, be exercised in
whole or in part by the grantee giving notice in writing to the Company in such form as the Board may from
time to time determine stating that the option is thereby exercised and the number of Class B Shares in
respect of which it is exercised.

The 2018 Share Option Scheme does not set out any performance targets that must be achieved before the
options may be exercised. However, the Board or its delegate(s) may at their sole discretion specify, as part
of the terms and conditions of any option, such performance conditions that must be satisfied before the
option can be exercised.

(f) Exercise price

The exercise price under an option shall be determined by the Board but shall be not less than the greater of:

(i) the closing price of a Class B Share as stated in the daily quotations sheet issued by the Stock
Exchange on the date of grant;

(ii) the average closing price of the Class B Shares as stated in the daily quotations sheets issued by the
Stock Exchange for the five business days immediately preceding the date of grant; and

(iii) the nominal value of a Class B Share on the date of grant.

(g) Remaining life of the scheme

The 2018 Share Option Scheme shall be valid and effective for the period of ten years commencing on the
Listing Date. The remaining life of the 2018 Share Option Scheme is approximately over 4 years.

As of December 31, 2023, a total of 233,500,000 options had been granted pursuant to the 2018 Share Option
Scheme since its adoption. As at the Latest Practicable Date, there is no further share options available for grant
under the 2018 Share Option Scheme.
38 XIAOMI CORPORATION

DIRECTOR’S REPORT

Details of movements of share options granted under the 2018 Share Option Scheme during the Reporting Period
are as follows:

Number of share options

Fair value Weighted

of options average
at the date closing
of grant price of
during the Shares
the year immediately
and the before the
Outstanding Outstanding accounting date of
as at Granted Cancelled Lapsed Exercised as at Exercise standard exercise
Grantees by Date of Vesting Exercise January 1, during during during during December Price and policy during
category grant Period Period 2023 the year the year the year the year 31, 2023 (HK$) adopted the year

Employee Participants
7/2/2020 4 years 7/2/2021 to 3,000,000 — — — — 3,000,000 13.60 N/A N/A
7/1/2030
9/4/2020 4-10 years 9/4/2021 to 105,200,000 — — — — 105,200,000 24.50 N/A N/A
9/3/2030
10/9/2020 4 years 10/9/2021 to 6,250,000 — — — — 6,250,000 21.04 N/A N/A
10/8/2030
1/6/2021 4 years 1/6/2022 to 6,250,000 — — — — 6,250,000 33.90 N/A N/A
1/5/2031
Total: 120,700,000 — — — — 120,700,000

Further details of the 2018 Share Option Scheme are set out in Note 29 to the consolidated financial statements.

3. 2018 Share Award Scheme

The following is summary of the principal terms of the 2018 Share Award Scheme adopted by the Company on
June 17, 2018. Immediately upon the 2023 Share Scheme taking effect on June 8, 2023, no further awards shall be
granted under the 2018 Share Award Scheme.
 2023 ANNUAL REPORT 39

(a) Purpose
The purpose of the 2018 Share Award Scheme is (1) to align the interests of eligible persons with those
of the Group through ownership of Class B Shares, dividends and other distributions paid on Shares and/
or the increase in value of the Class B Shares, and (2) to encourage and retain eligible persons to make
contributions to the long-term growth and profits of the Group.

(b) Eligible participants

The eligible participants include any individual, being an employee, director (including executive Directors,
non-executive Directors and independent non-executive Directors), officer, consultant, advisor, distributor,
contractor, customer, supplier, agent, business partner, joint venture business partner or service provider
of any member of the Group or any affiliate as the Board determines.

(c) Maximum number of shares available for award

The aggregate number of Class B Shares underlying all grants made pursuant to the 2018 Share Award
Scheme will not exceed 1,118,806,541 Shares without Shareholders’ approval subject to an annual limit of
3% of the total number of issued Shares at the relevant time.

As of January 1, 2023, 387,027,516 Award Shares were available for grant under the 2018 Share Award
Scheme. During the Reporting Period, 238,816,959 Award Shares were granted to eligible participants
pursuant to the 2018 Share Award Scheme and 61,701,292 Award Shares were forfeited pursuant to the
2018 Share Award Scheme.

Since the 2023 Share Scheme took effect on June 8, 2023, it follows that, as of December 31, 2023, there
was no further Award Shares available for grant under the 2018 Share Award Scheme.

(d) Maximum number of new Shares available for issue

Under the scheme mandate of the 2018 Share Award Scheme, the total number of new Class B Shares
issued and may be issued pursuant to the 2018 Share Award Scheme will not exceed 1,118,806,541 Shares.

The total number of Class B Shares which may be issued under the 2018 Share Award Scheme is
493,419,499 Class B Shares, representing approximately 2.0% of the issued share capital of the Company as
at the Latest Practicable Date.
40 XIAOMI CORPORATION

DIRECTOR’S REPORT

(e) Maximum entitlement of each participant

There is no maximum entitlement of each participant.

(f) Restrictions on grants

The Board and its delegate(s) may not grant any award (“Award”) in the form of Class B Shares pursuant
to the 2018 Share Award Scheme (the “Award Shares”) to any selected participant in any of the following
circumstances:

(i) where any requisite approval from any applicable regulatory authorities has not been granted;

(ii) where any member of the Group will be required under applicable securities laws, rules or regulations
to issue a prospectus or other offer documents in respect of such Award or the 2018 Share Award
Scheme, unless the Board determines otherwise;

(iii) where such Award would result in a breach by any member of the Group or its directors of any
applicable securities laws, rules or regulations in any jurisdiction;

(iv) where such grant of Award would result in a breach of the 2018 Share Award Scheme limit or would
otherwise cause the Company to issue Class B Shares in excess of the permitted amount in the
mandate approved by the Shareholders;

(v) where any Director is in possession of unpublished inside information in relation to the Company or
where dealings by Directors are prohibited under any code or requirement of the Listing Rules and all
applicable laws, rules or regulations;

(vi) during the period of 60 days immediately preceding the publication date of the annual results or, if
shorter, the period from the end of the relevant financial year up to the publication date of the results;
and

(vii) during the period of 30 days immediately preceding the publication date of the half-year results or,
if shorter, the period from the end of the relevant half-year period up to the publication date of the
results.
 2023 ANNUAL REPORT 41

(g) Consideration and purchase price

Pursuant to the 2018 Share Award Scheme, there is no amount payable on application or acceptance of the
Award and no purchase price of Shares awarded.

(h) Vesting and lapse

The Board or its delegate(s) may from time to time while the 2018 Share Award Scheme is in force and
subject to all applicable laws, determine such vesting criteria and conditions or periods for the Award
Shares to be vested/lapsed.

(i) Rights attached to the Award Shares

Save that the Board at its discretion may from time to time determine that any dividends declared and
paid by the Company in relation to the Award Shares be paid to the selected participants even though the
Award Shares have not yet vested, the selected participant only has a contingent interest in the Award
Shares underlying an Award unless and until such Award Shares are actually transferred to the selected
participant, nor does he/she have any rights to any related income until the Award Shares vest.

No voting rights may be exercised in respect of any Award Shares that have not yet vested.

(j) Duration and Termination

The 2018 Share Award Scheme shall terminate on the earlier of:

(i) the end of the period of ten years commencing on the Listing Date except in respect of any non-vested
Award Shares granted under the 2018 Share Award Scheme prior to the expiration of the 2018 Share
Award Scheme, for the purpose of giving effect to the vesting of such Award Shares or otherwise as
may be required in accordance with the provisions of the 2018 Share Award Scheme; and

(ii) such date of early termination as determined by the Board provided that such termination shall
not affect any subsisting rights of any selected participant under the rules of the 2018 Share Award
Scheme, provided further that for the avoidance of doubt, the change in the subsisting rights of a
selected participant in this paragraph refers solely to any change in the rights in respect of the Award
Shares already granted to a selected participant.
42 XIAOMI CORPORATION

DIRECTOR’S REPORT

(k) Remaining life of the scheme

The remaining life of the 2018 Share Award Scheme is approximately over 4 years.

Details of the Award Shares granted under the 2018 Share Award Scheme (to be satisfied by new Shares)
and their movements during the Reporting Period are as follows:

Number of award shares

Fair value of Weighted
Award Shares average
at the date of closing price
Closing price grant during of the Share
of Shares the year immediately
Unvested Unvested immediately and the before
Award Award Shares before accounting the date
Shares as at Granted Vested Cancelled Lapsed as at the grant standard of vesting
Grantees by Vesting Purchase January 1, during during during during December 31, during and policy during
category Date of grant Period price 2023 the year the year the year the year 2023 the year adopted(1) the year

Employee Participants
4/1/2019 4-10 years Nil 7,449,568 — (2,148,169) — (45,675) 5,255,724 N/A N/A 12.09
7/19/2019 1 year Nil — — — — — — N/A N/A N/A
9/4/2019 4-5 years Nil 4,650,879 — (4,574,255) — (76,624) — N/A N/A 10.75
11/28/2019 4 years Nil 3,139,179 — (2,989,958 (2)) — (132,989) 16,232 N/A N/A 11.92
1/6/2020 4 years Nil 16,254,501 — (8,278,862) — (780,610) 7,195,029 N/A N/A 11.63
4/1/2020 1-4 years Nil 6,746,619 — (3,435,430 (2)) — (409,735) 2,901,454 N/A N/A 12.06
7/2/2020 4-5 years Nil 8,830,227 — (4,519,835 (2)) — (489,122) 3,821,270 N/A N/A 10.87
9/4/2020 4-10 years Nil 11,000,000 — (2,000,000) — (500,000) 8,500,000 N/A N/A 12.36
10/10/2020 4-5 years Nil 1,718,468 — (493,005 (2)) — (271,955) 953,508 N/A N/A 11.90
1/6/2021 4 years Nil 8,546,264 — (3,094,147 (2)) — (774,434) 4,677,683 N/A N/A 11.67
7/2/2021 1-4 years Nil 40,220,229 — (12,974,938 (2)) — (3,546,720) 23,698,571 N/A N/A 10.98
7/5/2021 4–10 years Nil 99,263,285 — (3,782,639 (2)) — (12,306,250) 83,174,396 N/A N/A 10.73
11/24/2021 1-10 years Nil 33,732,320 — (9,860,438 (2)) — (3,081,983) 20,789,899 N/A N/A 11.82
3/23/2022 1-10 years Nil 149,464,631 — (30,076,949 (2)) — (8,630,614) 110,757,068 N/A N/A 11.47
5/20/2022 1-5 years Nil 46,926,172 — (11,319,421 (2)) — (5,031,478) 30,575,273 N/A N/A 10.96
8/21/2022 4 years Nil 84,497,537 — (20,100,794 (2)) — (7,151,938) 57,244,805 N/A N/A 11.70
11/24/2022 4-5 years Nil 41,816,250 — (9,764,811) — (3,324,933) 28,726,506 N/A N/A 14.70
3/27/2023 1-10 years Nil — 186,947,038(3) (2,003,040) — (10,630,105) 174,313,893 12.44 12.00 13.95
5/25/2023 2-4 years Nil — 48,802,290(3) (62,881) — (4,085,924) 44,653,485 10.40 10.50 14.22

Category subtotal: 564,256,129 235,749,328 (131,479,572) — (61,271,089) 607,254,796

 2023 ANNUAL REPORT 43

Number of award shares

Fair value of Weighted
Award Shares average
at the date of closing price
Closing price grant during of the Share
of Shares the year immediately
Unvested Unvested immediately and the before
Award Award Shares before accounting the date
Shares as at Granted Vested Cancelled Lapsed as at the grant standard of vesting
Grantees by Vesting Purchase January 1, during during during during December 31, during and policy during
category Date of grant Period price 2023 the year the year the year the year 2023 the year adopted(1) the year

Service Providers:
7/19/2019 1 year Nil — — — — — — N/A N/A N/A
9/4/2019 4 years Nil — — — — — — N/A N/A N/A
1/6/2020 4 years Nil 11,032 — (5,516) — — 5,516 N/A N/A 11.62
4/1/2020 1–4 years Nil 4,708 — (2,353) — — 2,355 N/A N/A 11.62
7/2/2020 4 years Nil 2,081 — (1,040) — — 1,041 N/A N/A 12.10
10/10/2020 4 years Nil 59,289 — (22,006) — (16,612) 20,671 N/A N/A 11.92
1/6/2021 4 years Nil 29,236 — (9,739) — (176) 19,321 N/A N/A 11.62
7/2/2021 4 years Nil 293,948 — (81,136) — (69,925) 142,887 N/A N/A 11.29
11/24/2021 4 years Nil 98,782 — (26,478) — (21,492) 50,812 N/A N/A 11.94
3/23/2022 4 years Nil 763,480 — (183,676) — (88,313) 491,491 N/A N/A 11.43
5/20/2022 4 years Nil 525,195 — (119,614) — (53,400) 352,181 N/A N/A 11.25
8/21/2022 4 years Nil 330,584 — (64,702) — (94,221) 171,661 N/A N/A 11.58
11/24/2022 4 years Nil 35,757 — (8,939) — — 26,818 N/A N/A 15.44
3/27/2023 4 years Nil — 688,684 (3) — — (86,064) 602,620 12.44 12.00 N/A
5/25/2023 4 years Nil — 228,255 (3) — — — 228,255 10.40 10.50 N/A

Category subtotal: 2,154,092 916,939 (525,199) — (430,203) 2,115,629

Total: 566,410,221 236,666,267 (132,004,771) — (61,701,292) 609,370,425

(1): The fair value of the award shares granted during the Reporting Period were determined based on the market value of the Shares at
the respective grant dates.

(2): Among the total number of Awards Shares vested as stated, 1,437,888 Award Shares were issued to employee participants who
subsequently become connected persons for the purpose of Listing Rules during the Reporting Period by way of existing shares. At the
time of grant, these employee participants were not connected persons.

(3): A time-based vesting schedule is applicable to the award shares. The number of award shares to be vested at every anniversary
year shall be based on the selected participant’s performance rank in the said anniversary year. The performance rank is linked to
the performance of the selected participant (and in some cases of the selected participant’s department) in the anniversary year as
assessed by the Group.
44 XIAOMI CORPORATION

DIRECTOR’S REPORT

Details of the outstanding Award Shares granted under the 2018 Share Award Scheme (to be satisfied by
existing Shares) are as follows:

Number of award shares

Fair value of Weighted
Award shares average
at the date of closing price
Closing price grant during of the Share
of Shares the year immediately
Unvested Unvested immediately and the before
Award Award Shares before accounting the date
Shares as of Granted Vested Cancelled Lapsed as of the grant standard of vesting
Grantees by Vesting Purchase January 1, during during during during December 31, during and policy during
category Date of Grant Period price 2023 the year the year the year the year 2023 the year adopted(1) the year

Grantees in aggregate:
1/6/2021 4 years Nil 13,406 — (4,468) — — 8,938 N/A N/A 11.62
11/24/2021 4 years Nil 8,619 — (2,873) — — 5,746 N/A N/A 11.94
3/23/2022 4–10 years Nil 1,510,618 — (2,654) — — 1,507,964 N/A N/A 11.40
5/20/2022 3–4 years Nil 1,038,787 — (342,928) — — 695,859 N/A N/A 10.90
8/21/2022 4 years Nil 110,433 — (27,607) — — 82,826 N/A N/A 11.02
11/24/2022 4 years Nil 497,680 — (124,420) — — 373,260 N/A N/A 11.74
3/27/2023 4-5 years Nil — 2,150,692 (3) — — — 2,150,692 12.44 12.00 N/A

Total: 3,179,543 2,150,692 (504,950) — — 4,825,285

(1): The fair value of the award shares granted during the Reporting Period were determined based on the market value of the Shares at
the respective grant dates.

(2): Please also refer to Note (2) above set out on page 43 of this annual report.

(3): Please also refer to Note (3) above set out on page 43 of this annual report.

Further details of movements in the 2018 Share Award Scheme are set out in Note 29 to the consolidated
financial statements.

4. 2023 Share Scheme

The 2023 Share Scheme was approved at the annual general meeting by the Shareholders on June 8, 2023.

(a) Purpose
The purpose of the 2023 Share Scheme is (1) to provide the Company with a flexible means of attracting,
remunerating, incentivising, retaining, rewarding, compensating and/or providing benefits to eligible
 2023 ANNUAL REPORT 45

participants; (2) to align the interests of eligible participants with those of the Company and Shareholders
by providing such eligible participants with the opportunity to acquire proprietary interests in the Company
and become Shareholders; and (3) to encourage eligible participants to contribute to the long- term growth,
performance and profits of the Company and to enhance the value of the Company and its Shares for the
benefit of the Company and Shareholders as a whole.

(b) Eligible participants

Eligible Participants are determined by the scheme administrator from time to time to be eligible to
participate as grantees under the 2023 Share Scheme, and shall fall under one or more of the below
categories:

(i) Employee Participant, being any person who is an employee (whether full-time or part-time or other
employment relationship), director or officer of any member of the Group on the Grant Date.

(ii) Related Entity Participant, being an employee (whether full-time or part-time or other employment
relationship), director or officer of the following: a “holding company” of the Company (as defined in
the SFO); a “subsidiary” of a holding company of the Company (as defined in the SFO) other than the
Group; or an “associate company” of the Company (as defined in the Listing Rules).

(iii) Service Provider Participant, being a person who provides services to the Group on a continuing basis
in its ordinary and usual course of business which are in the interests of the long term growth of the
Group as determined by the scheme administrator pursuant to the below criteria:

Category Eligibility criteria for Service Provider Participant

(1) Service providers Outsourced staff engaged by the Group that provides services which are
material and relevant to the Group’s operations (including but not limited
to information technology support, customer services and retails store
supports) on a regular or recurring basis.

(2) Consultants Those that (a) provide consultancy services material and relevant to the
Group’s operations (including but not limited to services in recruitment, tax,
research and development, market advisory services); (b) engage with the
Group on a regular or recurring basis; and (c) have specialties or expertise
in areas that supplement the Group or with which the Group would consider
important to maintain a close business relationship on an ongoing basis.
46 XIAOMI CORPORATION

DIRECTOR’S REPORT

Category Eligibility criteria for Service Provider Participant

(3) Suppliers Those that supply the Group with goods on a regular or recurring basis, with
which the Group would consider important to maintain a close business
relationship on an ongoing basis, and in turn, it would be beneficial to
the Group’s business relationship to grant such supplier with proprietary
ownership in the Company and to encourage the supplier to have a vested
shareholding interest in the Group and in the Group’s future development.

(4) Agents and Those that provide important services to the Group on a regular or
contractors recurring basis with which the Group would consider important to maintain
a close collaborative relationship on an ongoing basis, that in turn, it
would be beneficial to the collaboration between the Group and the agents
and/or contractors to grant such agents and/or contractors proprietary
ownership in the Company and to encourage the agents and/or contractors
to have a vested shareholding interest in the Group and the Group’s future
development.

(c) Award
An award may take the form of a Share Option or a Share Award, and which shall be funded by Award
Shares.

(d) Maximum number of Award Shares available for grant

The total number of Class B Shares which may be issued pursuant to all awards to be granted under the
2023 Share Scheme and awards to be granted under any other share schemes of the Company is not more
than 2,503,959,565 (the “Scheme Mandate Limit”). Within the Scheme Mandate Limit, the total number of
Shares which may be issued pursuant to awards to be granted to service provider participants under this
Scheme is not more than 125,197,978 (the “Service Provider Sublimit”).

Upon adoption of the 2023 Share Scheme on June 8, 2023, 2,503,959,565 Shares were available for grant
(including 125,197,978 Shares available for grant to Service Providers) under the 2023 Share Scheme.
During the Reporting Period, 150,622,365 Award Shares were granted to eligible participants (including
354,225 Award Shares granted to Service Providers) pursuant to the 2023 Share Scheme, respectively and
5,040,126 Award Shares were forfeited (including 7,673 Award Shares forfeited from Service Providers)
pursuant to the 2023 Share Scheme. It follows that, as of December 31, 2023, 2,358,377,326 Shares and
124,851,426 Shares were available for grant under the 2023 Share Scheme Limit and the Service Provider
Sublimit, respectively.
 2023 ANNUAL REPORT 47

(e) Maximum number of Award Shares available for issue

Upon adoption of the 2023 Share Scheme on June 8, 2023, 2,503,959,565 Shares were available for issue under
the Scheme Mandate Limit. During the Reporting Period, no new Shares were issued pursuant to the 2023 Share
Scheme. It follows that, as of December 31, 2023 and the Latest Practicable Date, 2,503,959,565 new Shares
(representing approximately 10.0% of the issued share capital of the Company as of the Latest Practicable Date)
and 2,501,663,634 new Shares (representing approximately 10.0% of the issued share capital of the Company as
of the Latest Practicable Date) were available for issue under the Scheme Mandate Limit, respectively.

(f) Issue price and exercise price

The scheme administrator may determine in their absolute discretion the Issue Price for the exercise of
Share Awards and/or the Exercise Price for Share Options for Awards in the form of Share Awards and/
or Share Option (as the case may be) and such prices shall be set out in the award letter. However, the
Exercise Price for Share Options shall be no less than the higher of: (a) the closing price of the Shares
on the Grant Date; and (b) the average closing price of the Shares for the five Business Days immediately
preceding the Grant Date.

(g) Maximum entitlement of each Eligible Participant

There is no specific maximum entitlement for each Eligible Participant under the 2023 Share Scheme.
Grants to individuals that exceed the thresholds set out in the New Chapter 17 will be subject to additional
approval requirements as required under the New Chapter 17.

(h) Exercise period

The scheme administrator may determine in its absolute discretion the exercise period for any award
of share options and/or share awards and such period shall be set out in the award letter. However, the
exercise period for any award of share options shall not be longer than 10 years from the grant date.

(i) Vesting period

The scheme administrator may determine the vesting period and specify such period in the award letter.
The vesting period may not be for a period less than 12 months from the grant date, except in limited
circumstances set out in the scheme rules. These circumstances may only apply to employee participants
and are consistent with the scenarios contemplated in FAQ 092-2022 issued by the Stock Exchange, including:

(i) grants of “make whole” awards to a new employee participant to replace the awards that the employee
participant forfeited when leaving their previous employer;

(ii) grants to an employee participant whose employment is terminated due to death or disability or event
of force majeure;

(iii) grants of awards that are subject to the fulfilment of performance targets as determined in the
conditions of the grantee’s grant;
48 XIAOMI CORPORATION

DIRECTOR’S REPORT

(iv) grants of awards the timing of which is determined by administrative or compliance requirements not
connected with the performance of the employee participant, in which case the vesting date may be
adjusted to take account of the time from which the award would have been granted if not for such
administrative or compliance requirements;

(v) grants of awards with a mixed vesting schedule such that the award vests evenly over a period of 12
months; or

(vi) grants of awards with a total vesting and holding period of more than 12 months.

(j) Acceptance
The scheme administrator may determine in their absolute discretion the amount (if any) payable on
application or acceptance of an award and the period within which any such payments must be made, and
such amounts (if any) and periods shall be set out in the award letter. Unless otherwise specified in the
award letter, the grantee shall have 10 business days from the grant date to accept the award, following
which, the portion not accepted by the grantee shall automatically lapse.

(k) Termination
The 2023 Share Scheme shall terminate on the earlier of: (a) the 10th anniversary of the Adoption Date;
and (b) such date of early termination as determined by the Board, provided that such termination shall not
affect any subsisting rights in respect of the Awards already granted to Eligible Participants.

(l) Remaining Life of the 2023 Share Scheme

The 2023 Share Scheme is valid and effective for a period of 10 years commencing from the date of adoption
and up to June 7, 2033. The remaining life of the 2023 Share Scheme is approximately over 9 years.
 2023 ANNUAL REPORT 49

Number of award shares

Fair value of
Award Shares Weighted
at the date of average
Closing price grant during closing price
of Shares the year of the Share
Unvested Unvested immediately and the immediately
Award Award Shares before accounting before the
Shares as at Granted Vested Cancelled Lapsed as at the grant standard date of vesting
Grantees by Vesting Purchase January 1, during during during during December 31, during and policy during
categories Date of grant Period price 2023 the year(2) the year the year the year 2023 the year adopted(1) the year

Employee Participants
8/30/2023 2-10 years Nil — 103,220,703 — — (4,393,784) 98,826,919 12.38 12.46 N/A
11/21/2023 2-10 years Nil — 47,047,437 — — (638,669) 46,408,768 16.18 15.38 N/A
Category subtotal: — 150,268,140 — — (5,032,453) 145,235,687
Service Providers
8/30/2023 4 years Nil — 339,825 — — (7,673) 332,152 12.38 12.46 N/A
11/21/2023 4 years Nil — 14,400 — — — 14,400 16.18 15.38 N/A

Category subtotal: — 354,225 — — (7,673) 346,552

Total: — 150,622,365 — — (5,040,126) 145,582,239

(1): The fair value of the award shares granted during the Reporting Period were determined based on the market value of the Shares at the
respective grant dates.

(2): A time-based vesting schedule is applicable to the award shares. The number of award shares to be vested at every anniversary year shall be
based on the selected participant’s performance rank in the said anniversary year. The performance rank is linked to the performance of the
selected participant (and in some cases of the selected participant’s department) in the anniversary year as assessed by the Group.

Further details of the 2023 Share Scheme are set out in Note 29 to the consolidated financial statements.

Equity-Linked Agreements
Save as disclosed in the sections headed “Share Schemes” and “Issuance of Debt Securities”, no equity-linked
agreements were entered into by the Group, or existed during the Reporting Period.
50 XIAOMI CORPORATION

DIRECTOR’S REPORT

Directors and Senior Management

The Directors of the Company during the Reporting Period and up to the date of the annual report were:

Executive Directors
Lei Jun
Lin Bin
Liu De

Non-Executive Director
Liu Qin

Independent Non-Executive Directors

Chen Dongsheng
Wong Shun Tak
Tong Wai Cheung Timothy (resigned with effect from January 8, 2024)
Cai Jinqing (appointed with effect from January 8, 2024)

The Company has received from each independent non-executive Director an annual confirmation of his independence
pursuant to Rule 3.13 of the Listing Rules and the Board considers them independent.

Cai Jinqing was appointed as an independent non-executive Director with effect from January 8, 2024. Cai Jinqing has
confirmed that she has obtained the legal advice referred to in Rule 3.09D of the Listing Rules, and she confirmed that
she understood her obligations as a director of a listed issuer.

Biographical Details and Other Information of the Directors

The biographical details of the Directors who held office during the Reporting Period and up to the Latest Practicable
Date are as out below:

Lei Jun (暹序), aged 54, is an executive Director, the Founder, the Chairman, the CEO of the Company, and the CEO
of the smart electric vehicle business. He is also a member of the Remuneration Committee. Lei Jun is overall
responsible for the Company’s strategy, company culture and key products. He oversees the senior management
team. Lei Jun currently holds directorships in various subsidiaries, Consolidated Affiliated Entities and operating
entities of the Group.

In 2000, Lei Jun founded joyo.com, an online retailing platform, which was acquired by Amazon in 2004. Meanwhile, as
an angel investor, Lei Jun has also invested in various innovative businesses including JOYY Inc. and UCWeb. Lei Jun is
also a renowned technology entrepreneur in mainland China. Lei Jun joined Kingsoft Corporation Limited (HKEx Stock
Code: 3888) in 1992 and has held various senior positions in Kingsoft, including as the chairman of the board since July
2011, non-executive director since August 2008 and the chief executive officer between 1998 and December 2007. From
December 2011, Lei Jun has served as a director of Beijing Kingsoft Office Software, Inc. (Sci-Tech Innovation Board of
the Shanghai Stock Exchange ticker: 688111). From January 2012 and April 2015, Lei Jun has been the non-executive
director and the Chairman of Kingsoft Cloud Holdings Limited (HKEx Stock Code: 3896; NASDAQ ticker: KC) respectively.
 2023 ANNUAL REPORT 51

Lei Jun graduated from Wuhan University (㬨㻤⣩⬺) in July 1991 and received a Bachelor of Science in Computer
Science.

Lin Bin (㝙㕎), aged 56, is an executive Director, a Co-founder and the Vice Chairman of the Board. He is also a
member of the Nomination Committee. Lin Bin currently holds directorships in various subsidiaries of the Group.

Lin Bin co-founded Xiaomi with Lei Jun in 2010. He served as President of Xiaomi until 2019 when he took on the role
of Vice Chairman. During the early phase of Xiaomi’s development, Bin was responsible for HR recruiting, legal and
finance operation, strategic partnerships with key suppliers, and overseas market expansion in countries like India,
Indonesia etc. As the company grew, Bin also oversaw the company’s domestic sales and marketing, after-sales
services operations, and Xiaomi’s smartphone business.

Lin Bin had served as an Engineering Director at Google Inc. between 2006 and 2010. Before this, he had worked at
Microsoft Corporation from 1995 to 2006 and served various roles such as Software Design Engineer (SDE), SDE Lead,
SDE Manager, and Engineering Director. Prior to this, Lin Bin worked as a Network Engineer at ADP Inc. since May 1993.

Lin Bin has held numerous visiting and adjunct professorships, including visiting professor at Zhejiang University
(㴛㰡⣩⬺) in 2002, visiting professor at Tongji University (⏎㾡⣩⬺) in 2002, adjunct professor at Nankai University
⌙敍⣩⬺) from 2002 to 2005 and adjunct professor at Sun Yat-sen University (ᷯⰳ⣩⬺) from 2005 to 2008. He
currently sits on the Board of Advisors of the Tufts University School of Engineering.

Lin Bin received a Bachelor of Science in Radio Electronics from Sun Yat-sen University (ᷯⰳ⣩⬺) in July 1990, and a
Master of Science from Drexel University in June 1992.

Liu De (≋⽹), aged 50, is an executive Director, a Co-Founder, Senior Vice President and Minister of the Group
Leadership Management Department, is currently responsible for the recruitment, promotion, training and evaluation
of the middle and senior management of the Group, as well as the organizational structure design and approval
procedures of each department. Mr. Liu is a director of various members of the Group. Mr. Liu is also a director
of Ninebot Limited (Shanghai Stock Exchange Stock Code: 689009), Viomi Technology Co., Ltd. (NASDAQ ticker:
VIOT), Zepp Health Corporation (NYSE ticker: ZEPP) and Shanghai Longcheer Technology Co., Ltd. (Shanghai Stock
Exchange Stock Code: 603341). In October 2002, Liu De co-founded Beijing Xinfengrui Industrial Design Co., Ltd. (⋙Ṯ
㕲抔扵⶧㤯姯姊℮⎺) and served as its executive director until 2007.

Liu De received a Bachelor’s degree in Industrial Design in July 1996 and a Master’s degree in Mechanical Design and
Theory in March 2001, both from the Beijing Institute of Technology (⋙Ṯ䏈⶧⣩⬺). Liu De received a Master’s degree
in Industrial Design from Art Center College of Design, Pasadena, California, US, in April 2010.
52 XIAOMI CORPORATION

DIRECTOR’S REPORT

Liu Qin (≋剻), former name: Liu Ya (≋暇), aged 51, is a non-executive Director and a member of the Audit
Committee. Liu Qin became a Director of the Company in May 2010. Liu Qin co-founded and has served as managing
partner of 5Y Capital (formerly known as Morningside Venture Capital Limited) since June 2007. The funds under 5Y
Capital’s management had been the earliest investors of the Group. Before co-founding 5Y Capital, Liu Qin served
various roles including as a business development director for investment at Morningside IT Management Services
(Shanghai) Co. Ltd. (㘪凊ᾣ〱䦓㉂媰娤 ᷌㴹 㛋昒℮⎺) from July 2000 to November 2008. Since June 2008, Liu Qin
has been a director of JOYY Inc. (NASDAQ ticker: YY). Since December 2014, Liu Qin has been a director of Agora, Inc.
(NASDAQ ticker: API). Liu Qin has also served as a non-executive director of XPeng Inc. (NYSE ticker: XPEV, SEHK
stock code: 9868) from September 2019 to June 2023.

Liu Qin received a Bachelor’s degree in Industrial Electrical Automation from University of Science and Technology
Beijing (⋙Ṯ䦓㉂⣩⬺) in July 1993, and a Master of Business Administration from China Europe International
Business School (ᷯ㬒⛍晝⶧┈⬺昤) on April 22, 2000.

Chen Dongsheng (昵㜳⌉), aged 66, has served as an independent non-executive Director since June 2018. He also
currently serves the chairman of both the Remuneration Committee and the Corporate Governance Committee, and a
member of the Audit Committee. Chen Dongsheng founded Taikang Insurance Group Inc. (㲲⹹ᾟ晬暈⛚偣ế㛋昒℮⎺)
(formerly known as Taikang Life Insurance Co., Ltd (㲲⹹Ṽ⢿ᾟ晬偣ế㛋昒℮⎺)) (“Taikang”) in 1996. He serves the
chairman and CEO of Taikang and holds various directorships within the Taikang group. Prior to this, Chen Dongsheng
served as the chairman and the general manager of China Guardian Auctions Co., Ltd (ᷯ⛍○⽹⛍晝㊏岥㛋昒℮
⎺) from May 1993. Prior to this, Chen Dongsheng worked as the deputy editor of the Management World (monthly),
published by the Development Research Center of the State Council of China.

Chen Dongsheng has accumulated extensive corporate governance experience during his leadership in the Taikang
group, as he oversaw the reform and optimization of the group’s corporate governance structure. Key corporate
governance initiatives implemented during Chen Dongsheng’s tenure include (i) formalizing the structure, functions
and accountability of the corporate governance bodies within the Taikang group, (ii) introducing board executive,
audit, nomination and remuneration committees, the members of which are selected by election, and (iii) appointing
independent directors.

Chen Dongsheng received a Bachelor’s degree in Political Economics in July 1983, and a PhD in Political Economics
in January 1999, both from Wuhan University (㬨㻤⣩⬺).
 2023 ANNUAL REPORT 53

Wong Shun Tak (䍍凞⽹), aged 63, currently serves as an independent non-executive Director, and also the chairman
of both the Audit Committee and Nomination Committee, and a member of the Remuneration Committee and
Corporate Governance Committee. In 2014, Wong Shun Tak co-founded and had concurrently served as the CFO
of Rokid Corporation Ltd. Wong Shun Tak has served as the independent non-executive Director, chairman of the
nomination committee, chairman of the remuneration committee and member of the audit committee of Kingsoft
Corporation Limited (SEHK Stock Code: 3888) since July 2014. Wong Shun Tak served as an executive director and
CFO of Kingsoft Corporation Limited (SEHK Stock Code: 3888) from October 2011 to July 2012, and also acted as
an independent non-executive director, the chairman of the audit committee and a member of the remuneration
committee of Kingsoft Corporation Limited (SEHK Stock Code: 3888) from April 2007 to September 2011. Wong Shun
Tak has served as an independent non-executive director and the chairman of the audit committee of the Company
since June 2018. He has also been appointed as the chairman of the nomination committee with effect from January 8,
2024. Mr. Wong currently serves as an independent non-executive director of several subsidiaries of the Company.

Wong Shun Tak served as vice president of finance and corporate controller of Alibaba Group Holding Ltd (NYSE
ticker: BABA; SEHK Stock Code: 9988) from August 2007 to September 2011. During his service with Alibaba Group, he
also acted as the chairman of Group Financial Control Committee of Alibaba Group.

Wong Shun Tak served as the CFO of Goodbaby Children Products Group (“Goodbaby”) from August 2003 to August
2007, a leading juvenile product manufacturer in China. Before joining Goodbaby, Wong Shun Tak worked as the vice
president of finance in IDT International Limited (SEHK Stock Code: 167) from September 2001 to July 2003.

In the past, Wong Shun Tak held key financial management positions in various multi-nationals companies, including
as the financial controller of AMF Bowling, Inc. from November 1996 to March 1998 and International Distillers China
Ltd. from December 1993 to October 1996. Wong Shun Tak has extensive experience in financial control, operations,
strategic planning and implementation, private fund investments and exit strategies.

Wong Shun Tak received a Master’s degree in Finance from the University of Lancaster in the United Kingdom and
a Master’s degree in Accounting from Charles Stuart University in Australia. He is also a fellow CPA member of the
Hong Kong Institute of Certified Public Accountants and a fellow CPA member of Australian Society of CPAs.
54 XIAOMI CORPORATION

DIRECTOR’S REPORT

Cai Jinqing (哣憓朔), aged 56, has been appointed as an independent non-executive Director, and a member of the
Nomination Committee and the Corporate Governance Committee with effect from January 8, 2024.

Cai Jinqing has served as the president of Kering Greater China since 2018. She is committed to enhancing
the reputation of Kering in Greater China, strengthening the relationship between Kering and its partners, propelling
the long-term development of Kering in China, and promoting the increasingly significant role of Greater China in the
global market.

From 2012 to 2018, she worked for Christie’s, a world-leading art auction house. She was appointed as the first
managing director, president and chairwoman of Christie’s China during her tenure at Christie’s. At present, she is a
member of Christie’s Asia Advisory Council. Cai Jinqing had also been the founding partner of Brunswick Beijing from
2005 to 2012, a world-renowned public relations consulting firm. Prior to that, she founded New Alliance Consulting
International Limited and managed the annual conference of Boao Forum for Asia as an exclusive public relations
consultant.

Since December 1, 2021, Cai Jinqing has served on the board of Mandarin Oriental International Limited (the shares
of which are listed on London Stock Exchange (Stock Code: MDO), the Singapore Exchange Limited (Stock Code:
M04) and Bermuda Stock Exchange (Stock Code: MOIBD.BH)) as a non-executive director. She also serves as the
vice chairwoman of the board of Teach for China, a leading non-profit organisation in China focusing on educational
inequality issues in China.

Cai Jinqing obtained her Bachelor’s degree from Wellesley College located in Massachusetts and holds a Master’s
degree in Public Affairs from Princeton University, School of International and Public Affairs.
 2023 ANNUAL REPORT 55

Biographical Details of Senior Management

The biographical details of the senior management of the Company who held office as of the Latest Practicable Date
are set out below:

Lei Jun (暹序), aged 54, is the Founder, the CEO of the Company, the Chairman and an executive Director, and the
CEO of the smart electric vehicle business. For further details, please see the paragraphs headed “Biographical
Details and Other Information of the Directors” in this section.

Lin Bin (㝙㕎), aged 56, is a Co-founder, the Vice Chairman of the Board and an executive Director. For further details,
please see the paragraphs headed “Biographical Details and Other Information of the Directors” in this section.

Lu Weibing (䚩​ⅲ), aged 48, is a Partner, President of the Group, and President of the International Business
Department of the Group. He is responsible the Smartphone Department, the Ecosystem Department, the Major
Appliance Department, the China Region and the India Region.

Lu Weibing joined the Group in 2019 and has since been in charge of China Region Sales and the International
Department, as well as branding, product planning, manufacturing, and sales & marketing of Redmi. Relying on
years of marketing experience and profound insights, he led the team and formulated the strategic goals and
business directions, and achieved very positive outcomes. Prior to this, Mr. Lu had rich working experience in the
telecommunication industry. He participated in the establishment of Shenzhen Chenyee Technology Co., Ltd. (㶳⛵ⷄ婢
⢻䦓㉂㛋昒℮⎺) and served as the President of Shenzhen Gionee Communication Equipment Co., Ltd. (㶳⛵ⷄ憓䪍応
ᾣ姯⁛㛋昒℮⎺). He also worked as the General Manager (Overseas Business Department) at Tianyu Communication
Equipment Co., Ltd. (⋙Ṯ⣫⭉㛙応応ᾣ姯⁛㛋昒℮⎺) and General Sales Manager at KONKA Communication Co., Ltd.
(⹹ἵ応ᾣ䦓㉂㛋昒℮⎺).

Lu Weibing received a Bachelor of Science in Chemistry from Tsinghua University (㷇厱⣩⬺) in 1998 and an Executive
Master of Business Administration from Cheung Kong Graduate School of Business (改㰡┈⬺昤) in 2009.

Liu De (≋⽹), aged 50, is a Co-Founder, Senior Vice President and Minister of the Group Leadership Management
Department an executive Director. For further details, please see the paragraphs headed “Biographical Details and
Other Information of the Directors” in this section.
56 XIAOMI CORPORATION

DIRECTOR’S REPORT

Zeng Xuezhong (㛀⬺⾢), aged 50, is Senior Vice President and President of Smartphone Department, responsible for the
research and development and manufacturing of smartphones. He joined the Group in July 2020. Zeng Xuezhong served
as senior vice president and president of ZTE Corporation (ᷯ凊応姌) (SEHK Stock Code: 763; SZSE Stock Code: 000063)
in mainland China, executive vice president of ZTE Corporation and chief executive officer of ZTE Terminal. He also
held senior management positions such as global executive vice president of Tsinghua Unigroup (䳭ℋ暈⛚㛋昒℮⎺),
president of Unisplendour Corporation Limited (䳭ℋ偣ế㛋昒℮⎺), chief executive officer of UNISOC (䳭ℋⰗ扵灭᷌㴹灮
䦓㉂㛋昒℮⎺), and chairman and general manager of Hatchip Communications (⋱剱応ᾣ㉂堕㛋昒℮⎺). As an excellent
manager and expert in communications industry, he has rich practical experience in corporate strategy, innovation and
transformation.

Zeng Xuezhong received a Bachelor’s degree in Physics and an Executive Master of Business Administration from
Tsinghua University (㷇厱⣩⬺).

Yan Kesheng (树ℍ⊟), aged 53, is a Vice President, General Manager of the Smart Manufacturing Department. He is
responsible for system-level solutions for smart manufacturing. Yan Kesheng joined the Group in 2010, and was head
of the Smartphone Hardware R&D Department. He fully engaged in processes including defining and manufacturing
of smartphones and established several departments including the Smartphone Core Component Department, Group
Quality Committee and Qinghe University. Before joining the Group, Yan Kesheng was a senior mechanical design
manager at Star Shine Tech Co., Ltd. (㗡係䃣䶜䦓㉂㛋昒℮⎺) from October 2008 to October 2010. From October
2002 to October 2008, Yan Kesheng worked as the chief structural design engineer and project leader at Motorola
Technology Co., Ltd. 㐫㈚佇㊋䦓㉂㛋昒℮⎺). Before this, Yan Kesheng worked as a senior mechanical engineer and
design team leader at Vtech Telecommunications Limited (​㗕怖応姌姯⁛㛋昒℮⎺) from December 1998 to October
2002 and as the chief engineer at Hubei Yichang Nanyuan Vehicle Manufacturing Co., Ltd. (㸘⋙⭞㗎⌙劓庌廝墿忢㛋昒
℮⎺) from July 1992 to November 1998.

Yan Kesheng received a Bachelor’s degree in Agricultural Machinery Design and Manufacturing from Hefei University
of Technology (⏊偧⶧㤯⣩⬺) (formerly known as Anhui Institute of Technology (⭋⽿⶧⬺昤)) in July 1992.

Lam Sai Wai Alain (㝙ᷘ​), aged 50, is a Vice President and the CFO of the Group, and the Chairman of Airstar Digital
Technology. Prior to joining the Group in October 2020, Alain served as a Managing Director and Head of Technology,
Media and Telecom in the Investment Banking and Capital Markets department of Credit Suisse between January
2016 and October 2020. Between July 1997 and December 2015, Alain worked at Morgan Stanley in various locations
including London, New York, Menlo Park and Hong Kong.
 2023 ANNUAL REPORT 57

Lam Sai Wai Alain received a Master’s degree in Engineering from the University of Oxford.

Zhu Dan (㛳᷻), aged 46, is a Vice President and Vice President of R&D, Smartphone Department. Zhu Dan joined
the Group in October 2010 and has been responsible for the Baseband Department, Product Department, Camera
Department, and Display Department, all under the Smartphone Department of the Group. From 2016 to 2018, he was
responsible for product planning in the Smartphone Product Department. From 2018 to 2021, he was responsible for
R&D management and technical roadmap for the Camera Department and led the Camera Department to receive
two DXOMARK first places. Prior to joining the Group, Zhu Dan was the R&D director of baseband department of
Firebrand Technology Limited灭Firebrand 䦓㉂㛋昒℮⎺灮from May 2008 to October 2010 and an electronics engineer
of Motorola North Asia Center灭㐫㈚佇㊋⋙Ṡᷯ⾅灮from October 2003 to May 2008.

Zhu Dan received a Bachelor’s degree and a Master’s degree in Automatic Control from Beijing Institute of
Technology灭⋙Ṯ䏈⶧⣩⬺灮in 2000 and 2003 respectively.

Wang Xiaoyan (䍍㚋暃), aged 49, is a Vice President and President of the Group’s China Region. Wang Xiaoyan joined the
Group in 2019 and has been responsible for the E-Commerce Department, Sales and Operation Department, New Retail
Department and Carrier Department of China Region. He has played a decisive role in the stabilization and development
of the new retail business of the China Region. Prior to this, he had rich working experience in the telecommunications
industry. He participated in the establishment of the mobile phone brand Xiaolajiao (⯑彥㣔) and worked at Tianyu
Communication Equipment Co., Ltd. (⋙Ṯ⣫⭉㛙応応ᾣ姯⁛㛋昒℮⎺) and ZTE Corporation (ᷯ凊応姌偣ế㛋昒℮⎺).

Wang Xiaoyan received a bachelor’s degree in physics from Beijing Normal University in 1994 and an MBA degree
from Renmin University of China (ᷯ⛍Ṽ㯓⣩⬺) in 1999.

Qu Heng (Ⰺ〔), aged 42, is a Vice President, Chairman of the Group Technology Committee, and Chairman of the
Group Information Security and Privacy Committee. He is also responsible for Group Quality Committee and the Group
Procurement Committee.

Qu Heng joined the Group in 2010. He is one of the founding team members of the Group and has been in charge of,
among others, MIUI, the software development of Mi Talk and router system engineering. Since 2018, he served as the
General Manager of the Group’s Ecosystem Department. Qu Heng has led the team to work on the smartphone-centred
smart ecosystem layout and the implementation of the Group’s “Smartphone x AIoT” strategy. Prior to this, Qu Heng
had many years of working experience in software development and worked at Beijing Kingsoft Corporation Limited.
58 XIAOMI CORPORATION

DIRECTOR’S REPORT

Qu Heng graduated from the department of computer science and engineering of Beihang University (⋙Ṯ凬䨼凬⣫⣩⬺)
in 2003 and received a master’s degree in computer science and engineering from Harbin Institute of Technology (⒊䈀
㾳⶧㤯⣩⬺) in 2013.

Ma Ji (楮樧), aged 45, is a Vice President and the General Manager of the Group’s New Retail Department of China
Region. Ma Ji joined the Group in 2013 and has been in charge of, among others, the MIUI Security Center, MIUI
products, and International Internet businesses. He led the team to facilitate the globalization of MIUI and the Group’s
Internet products and services. In October 2020, he was appointed as the General Manager of the Group’s Internet
Business Department; in December 2022, he was appointed as the Vice President of the Group; and in October 2023,
he was appointed as the General Manager of the Group’s New Retail Department of China Region, responsible for the
operation and expansion of Xiaomi Store in mainland China and the operation of Xiaomi Store App and Xiaomi YOUPIN
App. Prior to this, Ma Ji had many years of working experience in the mobile internet industry and worked at Qizhi
Software (Beijing) Co., Ltd. (⤉㘼庡Ẹ灭⋙Ṯ灮㛋昒℮⎺).

Ma Ji received a master’s degree in computer science and engineering from Zhejiang University (㴛㰡⣩⬺) in 2002.

Director’s Service Contracts and Appointment Letters

1. Executive Directors

Lei Jun and Lin Bin have each entered into a service contract with our Company on June 19, 2018. Liu De has
entered into a service contract with our Company on March 24, 2021. The initial term of their service contracts
shall commence from the date of his appointment and continue for a period of three years (subject always to
re-election as and when required under the Articles of Association), be automatically renewed for successive
periods of three years until terminated in accordance with the terms and conditions of the service contract or by
either party giving to the other not less than three months’ prior notice in writing. No annual director’s fees are
payable to the executive Directors under the current arrangement.

2. Non-executive Director and independent non-executive Directors

Liu Qin has entered into an appointment letter with our Company on June 10, 2021. The initial term for his
appointment letter shall be three years from the date of his appointment and shall be automatically renewed
for a successive period of three years (subject always to re-election as and when required under the Articles of
Association) until terminated in accordance with the terms and conditions of the appointment letter or by either
party giving to the other not less than one month’s prior notice in writing. No annual director’s fees are payable to
the non-executive Directors under the current arrangement.
 2023 ANNUAL REPORT 59

Each of Chen Dongsheng and Wong Shun Tak has entered into an appointment letter with our Company on June 10,
2021, and Cai Jinqing has entered into an appointment letter with our Company on January 8, 2024. The initial term
for their appointment letters shall be three years from the date of their appointment and shall be automatically
renewed for a successive period of three years (subject always to re-election as and when required under the
Articles of Association) until terminated in accordance with the terms and conditions of the appointment letter
or by either party giving to the other not less than three months’ prior notice in writing. Under these appointment
letters, each of the independent non-executive Directors will receive an annual director’s fee of HK$600,000, which
in each case has been recommended by the Remuneration Committee and approved by the Board with reference
to the independent non-executive Director’s qualifications, experience and responsibilities with the Company.

None of the Directors (including the Directors proposed for re-election at the annual general meeting) have a service
contract with members of the Group that is not determinable by the Group within one year without payment of
compensation, other than statutory compensation.

Directors’ Interests and Short Positions in Shares and Underlying Shares and
Debentures of the Company or any of its Associated Corporations
As of December 31, 2023, the interests and short positions of our Directors or chief executives of the Company in
the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of
Part XV of the SFO), as recorded in the register required to be kept by the Company pursuant to Section 352 of the
SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:
60 XIAOMI CORPORATION

DIRECTOR’S REPORT

1. Interest in Shares
Approximate
percentage of
Name of Number and shareholding in the
Director or Nature of Relevant class of relevant class
chief executive interest(1) company securities of Shares(2)

Lei Jun(3) Beneficiary, founder ARK Trust (Hong Kong) 4,113,113,657 90.06%
and settlor of a Limited Class A Shares
Trust(L) 1,941,065,981 9.47%
Class B Shares
Interest in controlled Smart Mobile Holdings 4,113,113,657 90.06%
corporations(L) Limited Class A Shares
1,789,599,309 8.73%
Class B Shares
Interest in controlled Smart Player Limited 59,221,630 0.29%
corporations(L) Class B Shares
Interest in controlled Team Guide Limited 92,245,042 0.45%
corporations(L) Class B Shares

Lin Bin(4) Beneficial owner(L) 30,347,523 0.15%

Class B Shares
Trustee of a trust(L) Apex Star FT LLC 93,438,272 0.46%
Class B Shares
Interest in controlled Apex Star LLC 453,919,103 9.94%
corporations(L) Class A Shares
1,701,528,712 8.30%
Class B Shares
Interest in controlled Bin Lin and Daisy Liu 60,686,600 0.30%
corporations(L) Family Foundation Class B Shares

Liu Qin(5) Interest in controlled Morningside China 7 0.00%

Corporations(L) TMT Fund I, L.P. Class B Shares
Founder of Trust(L) 184,466,366 0.90%
Class B Shares

Liu De(9) Beneficial owners(L) 10,000,000 0.05%

Class B Shares
Founder of a trust(L) Lofty Power 135,871,935 0.66%
International Limited Class B Shares

Chen Dongsheng(7) Interest in controlled Taikang Asset 2,443,200 0.01%

corporations(L) Management Class B Shares
(Hong Kong)
Company Limited
 2023 ANNUAL REPORT 61

Notes:

(1) The letter “L” denotes a long position in the shares.

(2) The calculation is based on the total number of relevant class of Shares in issue as at December 31, 2023.

(3) Smart Mobile Holdings Limited and Smart Player Limited are both wholly-owned by Sunrise Vision Holdings Limited which is in turn wholly-

owned by Parkway Global Holdings Limited. Team Guide Limited is wholly-owned by Techno Frontier Investments Limited. The entire

interests in Parkway Global Holdings Limited and Techno Frontier Investments Limited are held by ARK Trust (Hong Kong) Limited as trustee

for the trusts established by Lei Jun (as settlor) for the benefit of Lei Jun and his family. Accordingly, Lei Jun is deemed to be interested in 1)

the 4,113,113,657 Class A Shares and the 1,789,599,309 Class B Shares held by Smart Mobile Holdings Limited; and 2) the 59,221,630 Class B

Shares held by Smart Player Limited and 3) the 92,245,042 Class B Shares held by Team Guide Limited under the SFO.

(4) Lin Bin directly holds 30,347,523 Class B Shares. Apex Star FT LLC is controlled by Bin Lin Family Trust. Accordingly, Lin Bin, as the trustee

of Bin Lin Family Trust, is deemed to be interested in 93,438,272 Class B Shares held by Apex Star FT LLC under the SFO. Bin Lin and Daisy

Liu Family Foundation is controlled by Lin Bin. Accordingly, Lin Bin is deemed to be interested in 60,686,600 Class B Shares held by Lin Bin

and Daisy Liu Family Foundation under the SFO. Apex Star LLC is controlled by Bin Lin. Accordingly, Lin Bin is deemed to be interested in

1,701,528,712 Class B Shares and 453,919,103 Class A Shares held by Apex Star LLC under the SFO.

(5) Liu Qin is entitled to exercise or control the exercise of one-third of the voting power at general meetings of TMT General Partner Ltd.

and is therefore deemed to be interested in 7 Class B Shares in which TMT General Partner Ltd. is interested. TMT General Partner Ltd.

controls Morningside China TMT GP, L.P., which controls Morningside China TMT Fund I, L.P. (the “Morningside Funds”). Consequently, TMT

General Partner Ltd. is deemed to be interested in the Shares in which the Morningside Funds have an interest. Liu Qin is deemed to be

interested in 184,466,366 Class B Shares held by an entity controlled by the trustee of a discretionary trust, of which Liu Qin is a founder of

the discretionary trust, under the SFO.

(6) Liu De directly holds 10,000,000 Class B Shares. Lofty Power International Limited is controlled by YYL Trust (formerly known as YYL Family

Trust). Accordingly, Liu De, as the settlor and protector of YYL Trust, is deemed to be interest in 135,871,935 Class B Shares held by Lofty

Power International Limited under the SFO.

(7) Taikang Asset Management (Hong Kong) Company Limited is wholly-owned by Taikang Asset Management Company Limited. Taikang Asset

Management Company Limited is controlled by Chen Dongsheng. Accordingly, Chen Dongsheng is deemed to be interested in 2,443,200

Class B Shares held by Taikang Asset Management (Hong Kong) Company Limited under the SFO.
62 XIAOMI CORPORATION

DIRECTOR’S REPORT

2. Interest in associated corporations

Approximate
Name of Director percentage of
or chief executive Nature of interest Associated corporations shareholding(1)

Lei Jun Beneficial owner Xiaomi Finance(2) 42.07%

Interest in controlled Parkway Global Holdings 100%

corporations(L) Limited (3)

Interest in controlled Sunrise Vision Holdings 100%

corporations(L) Limited(3)

Interest in controlled Smart Mobile Holdings 100%

corporations(L) Limited (3)

Notes:

(1) The calculation is based on the total number of shares of the associated corporations in issue as of December 31, 2023.

(2) Xiaomi Finance is a subsidiary of the Company and therefore Xiaomi Finance is an associated corporation of the Company. Lei Jun is entitled
to receive up to 42,070,000 shares in Xiaomi Finance pursuant to options granted to him under the XMF Share Option Scheme I (subject to the
relevant vesting conditions).

(3) Smart Mobile Holdings Limited, the holding company of the Company, is wholly-owned by Sunrise Vision Holdings Limited which is in turn
wholly-owned by Parkway Global Holdings Limited. Lei Jun is the beneficial owner of the entire interest in Smart Mobile Holdings Limited,
and is deemed to be interested in the 4,113,113,657 Class A Shares and 1,789,599,309 Class B Shares held by Smart Mobile Holdings Limited
under the SFO. Therefore, Smart Mobile Holdings Limited, Sunrise Vision Holdings Limited and Parkway Global Holdings Limited are
associated corporations of the Company.

Save as disclosed above, as of December 31, 2023, so far as is known to any Director or the chief executive of the
Company, none of the Directors nor the chief executives of the Company had any interests or short positions in
the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of
Part XV of the SFO) which (a) were required, pursuant to Section 352 of the SFO, to be entered in the register referred
to therein; or (b) were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

Directors’ Interests in Transactions, Arrangements or Contracts of Significance

Save as disclosed in this annual report, none of the Directors nor any entity connected with the Directors had a
material interest, either directly or indirectly, in any transactions, arrangements or contracts of significance to which
the Company, its holding company, or any of its subsidiaries or fellow subsidiaries was a party subsisting during or at
the end of the Reporting Period.
 2023 ANNUAL REPORT 63

Permitted Indemnity Provision

Pursuant to the Articles of Association and subject to the applicable laws and regulations, every Director shall be
indemnified out of the assets of the Company against all losses or liabilities incurred or sustained by him as a Director in
defending any proceedings, whether civil or criminal, in which judgement is given in his favour, or in which he is acquitted.

Such permitted indemnity provision has been in force for the Reporting Period. The Company has taken out liability
insurance for our Directors for the Reporting Period.

Directors’ Rights to Acquire Shares or Debentures

Save as disclosed in this annual report, neither the Company nor its subsidiaries were a party to any arrangement that
would enable the Directors to acquire benefits by means of acquisition of Shares in, or debentures of, the Company
or any other body corporate, and none of the Directors or any of their spouses or children under the age of 18 were
granted any right to subscribe for the equity or debt securities of the Company or any other body corporate or had
exercised any such right at any time during the Reporting Period.

Directors’ Interests in Competing Business

Lei Jun is a founding partner of Shunwei Capital (“Shunwei”), which operates investment funds specializing in incubation,
start-ups, early to mid-stage and growth capital investments in internet and technology industries. While Shunwei may
acquire non-controlling interests in certain business that operate in technology and internet sectors similar to those
in which our Group operates, Shunwei is a pure financial investment company, and generally has no management or
shareholding control over any of its investee companies. We therefore do not believe that Shunwei competes in any material
way with our Group. Our Group is capable of carrying on the business independently, and at arm’s length from Shunwei.

During the Reporting Period, Liu Qin, our non-executive Director, has acted as a non-executive director of XPeng Inc.
(Stock code: 9868), a smart electric vehicles company in China, until June 20, 2023. The Company is of the view that
such competing interest did not result in any material conflict of interest because, in his capacity as a non-executive
Director, Liu Qin did not participate in the day-to-day management of XPeng Inc. Our Group is capable of carrying on
the smart electric vehicles business independently, and at arm’s length from XPeng Inc.

Save as disclosed in this annual report and except for the interests of the Controlling Shareholders in the Group,
during the Reporting Period, neither the Controlling Shareholders nor any of the Directors had any interest in a
business, apart from the business of the Group, which competes or is likely to compete, directly or indirectly, with the
Group’s business, which would require disclosure under Rule 8.10 of the Listing Rules.
64 XIAOMI CORPORATION

DIRECTOR’S REPORT

Substantial Shareholders’ Interests and Short Positions in Shares and Underlying

Shares
As of December 31, 2023, so far as the Directors are aware, the following parties (other than our Directors or chief
executive of the Company) had interests or short positions in the Shares or underlying Shares of the Company as recorded
in the register required to be kept by the Company pursuant to Section 336 of the SFO:

Approximate
percentage of
shareholding in
Name of Substantial the relevant
Shareholder Nature of interest Number of Shares class of Shares(1)

Class A Shares

Smart Mobile Holdings Limited(2) Beneficial interest 4,113,113,657 90.06%

Sunrise Vision Holdings Limited(2) Interest in controlled corporations 4,113,113,657 90.06%

Parkway Global Holdings Limited(2) Interest in controlled corporations 4,113,113,657 90.06%

ARK Trust (Hong Kong) Limited(2) Trustee 4,113,113,657 90.06%

Class B Shares

Smart Mobile Holdings Limited(2) Beneficial interest 1,789,599,309 8.73%

Sunrise Vision Holdings Limited(2) Interest in controlled corporations 1,848,820,939 9.02%

Parkway Global Holdings Limited(2) Interest in controlled corporations 1,848,820,939 9.02%

ARK Trust (Hong Kong) Limited(2) Trustee 2,744,129,894 13.38%

Notes:

(1) The calculation is based on the total number of relevant class of Shares in issue as of December 31, 2023.

(2) Smart Mobile Holdings Limited and Smart Player Limited are both wholly-owned by Sunrise Vision Holdings Limited which is in turn wholly-
owned by Parkway Global Holdings Limited. Team Guide Limited is wholly-owned by Techno Frontier Investments Limited. The entire interests in
Parkway Global Holdings Limited and Techno Frontier Investments Limited are held by ARK Trust (Hong Kong) Limited as trustee for the trusts

established by Lei Jun (as settlor) for the benefit of Lei Jun and his family. Accordingly, Lei Jun is deemed to be interested in 1) the 4,113,113,657

Class A Shares and the 1,789,599,309 Class B Shares held by Smart Mobile Holdings Limited; and 2) the 59,221,630 Class B Shares held by Smart

Player Limited and 3) 92,245,042 Class B Shares held by Team Guide Limited under the SFO. ARK Trust (Hong Kong) Limited is also a trustee for a

number of trusts and therefore is deemed to be interested in the 803,063,913 Class B shares held by the trusts.
 2023 ANNUAL REPORT 65

Save as disclosed above, as of December 31, 2023, no person, other than the Directors whose interests are set out in
the section headed “Directors’ Interests and Short Positions in Shares and Underlying Shares and Debentures of the
Company or any of its Associated Corporations” above, had any interests or short positions in the Shares or underlying
Shares as recorded in the register required to be kept pursuant to Section 336 of the SFO.

Contracts with Controlling Shareholders

No contract of significance has been entered into among the Company or any of its subsidiaries and the Controlling
Shareholders or any of its subsidiaries during the Reporting Period.

Management Contracts
No contract, concerning the management and administration of the whole or any substantial part of the business of
the Company was entered into or existed during the Reporting Period.

Connected Transactions
We have entered into a number of continuing agreements and arrangements with our connected persons in our
ordinary and usual course of business, which constitute continuing connected transactions under the Listing Rules.
We set out below details of the continuing connected transactions for our Group, in compliance with the requirements
of Chapter 14A of the Listing Rules.

1. Contractual Arrangements

(1) Contractual Arrangements in Place

The Company has entered into a series of Contractual Arrangements with the Consolidated Affiliated Entities
and the Registered Shareholders, pursuant to which our Company obtained effective control over and had the
right to receive all economic benefits from the business and operations of the Consolidated Affiliated Entities. In
this regard, our Directors consider that our Company can consolidate the financial results of our Consolidated
Affiliated Entities into our Group’s financial information as if they were our Company’s subsidiaries.
66 XIAOMI CORPORATION

DIRECTOR’S REPORT

The following simplified diagram illustrates the Contractual Arrangements that were in place as of December 31, 2023:

Xiaomi Corporation

100%

WFOEs Registered Shareholders(1)

Management and Service 100%

consultation Fees
Onshore Holdcos and its subsidiaries(5)

Notes:

(1) Registered Shareholders refer to the registered shareholders of the Onshore Holdcos, namely (i) Beijing Wali Culture; (ii) Rigo Design;

(iii) Xiaomi Inc.; (iv) Beijing Duokan; (v) Beijing Wali Internet; (vi) Xiaomi Pictures; (vii) Beijing Electronic Software; and (viii) Youpin Information

Technology.

(i) Beijing Wali Culture is owned by Lei Jun (暹序) as to 90% and Shang Jin (⯜忴) as to 10%.

(ii) Rigo Design is owned by Zhu Yin (㛳⌲) as to 61% and Li Jiong (㜐䁱) as to 39%.

(iii) Xiaomi Inc. is owned by Lei Jun (暹序) as to 77.80%, Li Wanqiang (源叮⻹) as to 10.12%, Hong Feng (㳬抔) as to 10.07% and Liu De (≋⽹)

as to 2.01%.

(iv) Beijing Duokan is owned by Wang Chuan (䍍⶟) as to 61.75% and Lei Jun (暹序) as to 38.25%.

(v) Beijing Wali Internet is owned by Lei Jun (暹序) as to 10%, Liu Yang (≋㲳) as to 65%, Liang Qiushi (㡃䦍⮨) as to 14%, Liu Jingyan

(≋㘱Ⱬ) as to 6%, Yuan Bin (塃⼮) as to 3%, and Nan Nan (⌙㤢) as to 2%.

(vi) Xiaomi Pictures is owned by Li Wanqiang (源叮⻹) as to 87.92%, Hong Feng (㳬抔) as to 10.07% and Liu De (≋⽹) as to 2.01%.

(vii) Beijing Electronic Software is owned by Lei Jun (暹序) as to 90% and Hong Feng (㳬抔) as to 10%.

(viii) Youpin Information Technology is owned by Lei Jun (暹序) as to 70%, Hong Feng (㳬抔) as to 10%, Liu De (≋⽹) as to 10% and Li

Wanqiang (源叮⻹) as to 10%.

(2) “—>” denotes direct legal and beneficial ownership in the equity interest.
 2023 ANNUAL REPORT 67

(3) “---->” denotes contractual relationship.

(4) “----” denotes the control by WFOEs over the Registered Shareholders and the Onshore Holdcos through (i) powers of attorney to exercise

all shareholders’ rights in the Onshore Holdcos, (ii) exclusive options to acquire all or part of the equity interests in the Onshore Holdcos and

(iii) equity pledges over the equity interests in the Onshore Holdcos.

(5) These include certain companies which do not currently carry out any business operations but are intended to carry out businesses which are

subject to foreign investment restrictions in accordance with the Special Administrative Measures on Access to Foreign Investment (Negative

List) (2021 Edition) (⣘┈㉗岉ↈ℧䈻⇧䭣䏈㍬㕿灭屢朤㷇╰灮灭2021⸶䈊灮).

A brief description of each of the specific agreements that comprise the Contractual Arrangements entered into
by each of the WFOEs and the Onshore Holdcos is set out as follows:

a) Exclusive Business Cooperation Agreements

Under the exclusive business cooperation agreements dated December 1, 2017, April 11, 2018, April 17, 2018 and
June 4, 2018, respectively, between the Onshore Holdcos and the WFOEs (the “Exclusive Business Cooperation
Agreements”), pursuant to which, in exchange for a monthly service fee, the Onshore Holdcos agreed to engage
the WFOEs as its exclusive provider of technical support, consultation and other services, including the following
services:

(i) the use of any relevant software legally owned by the WFOEs;

(ii) development, maintenance and updating of software in respect of the Onshore Holdcos’ businesses;

(iii) design, installation, daily management, maintenance and updating of network systems, hardware and
database design;

(iv) providing technical support and staff training services to relevant employers of the Onshore Holdcos;

(v) providing assistance in consultancy, collection and research of technology and market information
(excluding market research business that wholly foreign owned enterprises are prohibited from
conducting under the laws of mainland China);

(vi) providing business management consultation;

(vii) providing marketing and promotional services;

(viii) providing customer order management and customer services;

68 XIAOMI CORPORATION

DIRECTOR’S REPORT

(ix) transfer, leasing and disposal of equipment or properties; and

(x) other relevant services requested by the Onshore Holdcos from time to time to the extent permitted
under the laws of mainland China.

Under the Exclusive Business Cooperation Agreements, the service fee shall consist of 100% of the total
consolidated profit of the Onshore Holdcos, after the deduction of any accumulated deficit of the Consolidated
Affiliated Entities in respect of the preceding financial year(s), operating costs, expenses, taxes and other
statutory contributions and subject to any necessary adjustment by the WFOEs of the scope and amount of
service fees according to the PRC tax law and practices.

b) Exclusive Option Agreements

Under the exclusive option agreements dated December 1, 2017, April 11, 2018, April 17, 2018 and June 4,
2018, respectively, among the Onshore Holdcos, the WFOEs and the Registered Shareholders (the “Exclusive
Option Agreements”), pursuant to which the WFOEs have the rights to require the Registered Shareholders
to transfer any or all their equity interests in the Onshore Holdcos to the WFOEs and/or a third party
designated by it, in whole or in part at any time and from time to time, for considerations equivalent to
the respectively outstanding loans owed to the Registered Shareholders (or part of the loan amounts in
proportion to the equity interests being transferred) or, if applicable, for a nominal price, unless the relevant
government authorities or the PRC laws request that another amount be used as the purchase price, in which
case the purchase price shall be the lowest amount under such request. The Exclusive Option Agreements
shall remain effective unless terminated in the event that the entire equity interests held by the Registered
Shareholders in the Onshore Holdcos have been transferred to the WFOEs or their appointee(s).

c) Equity Pledge Agreements

Under the equity pledge agreements dated December 1, 2017, April 11, 2018, April 17, 2018 and June 4,
2018, respectively, entered into between the WFOEs, the Registered Shareholders and the Onshore Holdcos,
pursuant to which the Registered Shareholders agreed to pledge all their respective equity interests in the
Onshore Holdcos that they own, including any interest or dividend paid for the shares, to the WFOEs as a
security interest to guarantee the performance of contractual obligations and the payment of outstanding
debts. The pledge in respect of the Onshore Holdcos takes effect upon the completion of registration with
the relevant administration for industry and commerce and shall remain valid until after all the contractual
obligations of the Registered Shareholders and the Onshore Holdcos under the relevant Contractual
Arrangements have been fully performed and all the outstanding debts of the Registered Shareholders and
the Onshore Holdcos under the relevant Contractual Arrangements have been fully paid.
 2023 ANNUAL REPORT 69

d) Powers of attorney
The Registered Shareholders executed powers of attorney on December 1, 2017, April 11, 2018, April 17, 2018
and June 4, 2018, respectively, (the “Powers of Attorney”) pursuant to which the Registered Shareholders
irrevocably appointed the WFOEs and their designated persons (including but not limited to Directors and
their successors and liquidators replacing the Directors but excluding those non-independent or who
may give rise to conflict of interests) as their attorneys-in-fact to exercise on their behalf, and agreed and
undertook not to exercise without such attorneys-in-fact’s prior written consent, any and all right that
they have in respect of their equity interests in the Onshore Holdcos. The Powers of Attorney shall remain
effective for so long as each shareholder holds equity interest in the Onshore Holdco.

e) Loan Agreements
In relation to Beijing Wali Culture, Xiaomi Inc., Beijing Electronic Software and Youpin Information
Technology only, the relevant WFOEs and their Registered Shareholders entered into loan agreements
dated December 1, 2017, April 11, 2018, April 17, 2018 and June 4, 2018, respectively, pursuant to which the
relevant WFOEs agreed to provide loans to the Registered Shareholders, to be used exclusively as investment
in the relevant Onshore Holdcos. The term of each loan commences from the date of the agreement and
ends on the date the lender exercises its exclusive call option under the relevant exclusive option agreement,
or when certain defined termination events occur, such as if the lender sends a written notice demanding
repayment to the borrower, or upon the default of the borrower, whichever is earlier.

Save as disclosed above, there were no other new contractual arrangements entered into, renewed and/or
reproduced between our Group and our Onshore Holdcos and/or Consolidated Affiliated Entities during the
Reporting Period. There was no material change in the Contractual Arrangements and/or the circumstances
under which they were adopted during the Reporting Period.

For the Reporting Period, none of the Contractual Arrangements had been unwound on the basis that none of
the restrictions that led to the adoption of the Contractual Arrangements had been removed. As of December 31,
2023, we had not encountered interference or encumbrance from any PRC governing bodies in operating our
businesses through our Consolidated Affiliated Entities under the Contractual Arrangements.

The revenue of the Consolidated Affiliated Entities amounted to RMB9,973 million for the Reporting Period,
representing an increase by 13.0% from RMB8,822 million for the year ended December 31, 2022. For the
Reporting Period, the revenue the Consolidated Affiliated Entities accounted for approximately 3.7% of the
revenue of our Group (2022: 3.2%).
70 XIAOMI CORPORATION

DIRECTOR’S REPORT

(2) Reasons for Adopting the Contractual Arrangements

Our (i) operation of online culture business; (ii) Internet audio-visual program service; (iii) Internet publication
business and (iv) news business conducted by our Consolidated Affiliated Entities are considered as “prohibited”
under the Special Administrative Measures on Access to Foreign Investment (Negative List) (2021 Edition)
(⣘┈㉗岉ↈ℧䈻⇧䭣䏈㍬㕿灭屢朤㷇╰灮灭2021⸶䈊灮) (the “Negative List”) where foreign investment is strictly
prohibited (collectively, the “Prohibited Business”). Our (i) e-commerce marketplace business; (ii) cloud storage
service and other value-added telecommunication service business; and (iii) resales of mobile communication
products operated by our Consolidated Affiliated Entities are considered as “restricted” under the Negative
List where foreign investors of the entity engaging in all the three businesses are restricted from holding more
than 50% equity interests in companies providing such services or shall meet certain qualification requirements
(collectively, the “Restricted Business”, together with the Prohibited Business, the “Relevant Businesses”). Since
investment in the Relevant Businesses in which we currently and may operate are subject to restrictions under
current mainland China laws and regulations, as advised by our PRC legal adviser, we determined that it was not
viable for our Company to control our Consolidated Affiliated Entities directly through equity ownership. Instead,
we decided that, in line with common practice in industries in mainland China subject to foreign investment
restrictions, we would gain effective control over, and have the right to receive all the economic benefits
generated by the Relevant Businesses currently operated by our Consolidated Affiliated Entities through the
Contractual Arrangements between the WFOEs, on the one hand, and our Consolidated Affiliated Entities and the
Registered Shareholders, on the other hand.

Our Directors believe that the Contractual Arrangements are fair and reasonable because: (i) the Contractual
Arrangements were freely negotiated and entered into between the WFOEs and our Consolidated Affiliated
Entities and the Registered Shareholders; (ii) by entering into the exclusive business cooperation agreements
with the WFOEs, which are mainland China subsidiaries of our Company, our Consolidated Affiliated Entities will
enjoy better economic and technical support from us, as well as a better market reputation after the Listing, and
(iii) a number of other companies use similar arrangements to accomplish the same purpose.
 2023 ANNUAL REPORT 71

(3) Risks relating to the Contractual Arrangements

The Company believes the following risks are associated with the Contractual Arrangements, including:

• the PRC government may find that the agreements that establish the structure for operating our business
do not comply with PRC laws and regulations, which may subject us to severe penalties or be forced to
relinquish our interests in those operations;

• substantial uncertainties exist with respect to the interpretation and implementation of Foreign Investment
Law of the People’s Republic of China (ᷯ厱Ṽ㯓ℳ⑎⛍⣘┈㉗岉㲗) and how it may impact the viability of our
current corporate structure, corporate governance and business operations;

• the Contractual Arrangements may not be as effective in providing operational control as direct ownership
and our Consolidated Affiliated Entities and the Registered Shareholders may fail to perform their obligations
under the Contractual Arrangements;

• we may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by our
Consolidated Affiliated Entities, which could render us unable to conduct some or all of our business
operations and constrain our growth;

• the Contractual Arrangements may be subject to scrutiny by the PRC tax authorities and any additional taxes
could substantially reduce our consolidated profit and value of your investment;

• the equity holders, directors and executive officers of the Consolidated Affiliated Entities, as well as our
employees who execute other strategic initiatives, may have potential conflicts of interest with our Company;

• certain of the terms of the Contractual Arrangements may not be enforceable under the PRC laws and
regulations; and

• our exercise of the option to acquire equity ownership of our Consolidated Affiliated Entities may subject us
to certain limitations and substantial costs.

Further details of these risks are set out in the section headed “Risk Factors — Risks Relating to Our Contractual
Arrangement” on pages 86 to 93 of the Prospectus.
72 XIAOMI CORPORATION

DIRECTOR’S REPORT

Our Group has adopted the following measures to ensure the effective operation of our Group with the
implementation of the Contractual Arrangements and our compliance with the Contractual Arrangements:

• major issues arising from the implementation and compliance with the Contractual Arrangements or any
regulatory enquiries from government authorities, where necessary, have been submitted to our Board, if
necessary, for review and discussion on an occurrence basis;

• our Board has reviewed the overall performance of and compliance with the Contractual Arrangements for
the Reporting Period;

• our Company has disclosed the overall performance and compliance with the Contractual Arrangements in
our annual reports; and

• our Company has engaged external legal advisors or other professional advisors, if necessary, to assist the
Board to review the implementation of the Contractual Arrangements, review the legal compliance of WFOE
and our Consolidated Affiliated Entities to deal with specific issues and matters arising from the Contractual
Arrangements.

(4) Requirement related to Contractual Arrangements (other than relevant foreign ownership restrictions) as of
December 31, 2023
On December 11, 2001, the State Council promulgated the Regulations for the Administration of Foreign-
Invested Telecommunications Enterprises (the “FITE Regulations”), which were amended on September 10, 2008,
February 6, 2016 and March 26, 2022. According to the FITE Regulations, foreign investors are not allowed to hold
more than 50% of the equity interests in a company providing value-added telecommunications services, except
as otherwise prescribed by the state.

(5) Listing Rules Implications and Waivers from the Stock Exchange
For the purposes of Chapter 14A of the Listing Rules, and in particular the definition of “connected person,” the
Consolidated Affiliated Entities will be treated as our Company’s wholly-owned subsidiaries, and their directors,
chief executives or substantial shareholders (as defined in the Listing Rules) and their respective associates
will be treated as our Company’s “connected persons”. Therefore, the transactions contemplated under the
Contractual Arrangements constitute continuing connected transactions of our Company.
 2023 ANNUAL REPORT 73

In view of the Contractual Arrangements, we have applied to the Stock Exchange for, and the Stock Exchange has
granted, a waiver from strict compliance with (i) the announcement, circular and independent shareholders’ approval
requirements under Chapter 14A of the Listing Rules in respect of the transactions contemplated under the Contractual
Arrangements pursuant to Rule 14A.105 of the Listing Rules, (ii) the requirement of setting an annual cap for the
transactions under the Contractual Arrangements under Rule 14A.53 of the Listing Rules, and (iii) the requirement of
limiting the term of the Contractual Arrangements to three years or less under Rule 14A.52 of the Listing Rules, for so
long as our Shares are listed on the Stock Exchange subject however to the following conditions:

(a) no change to the Contractual Arrangements without independent non-executive Directors’ approval;

(b) no change to the agreements governing the Contractual Arrangements without independent Shareholders’
approval;

(c) the Contractual Arrangements shall continue to enable our Group to receive the economic benefits derived by
the Consolidated Affiliated Entities;

(d) the Contractual Arrangements may be renewed and/ or reproduced without obtaining the approval of our
Shareholders: (i) upon the expiry of the existing arrangements, (ii) in connections with any changes to the
Registered Shareholders or directors of the Consolidated Affiliated Entities, or (iii) in relation to any existing,
newly established or acquired wholly foreign-owned enterprise or operating company (including branch
company), engaging in a business similar or relating to those of our Group when such renewal and/or
reproduction is justified by business expediency and on substantially the same terms and conditions as the
existing Contractual Arrangements; and

(e) we will disclose details relating to the Contractual Arrangements on an on-going basis.

(6) Confirmation from Independent Non-executive Directors

The Company’s independent non-executive Directors have reviewed the Contractual Arrangements and confirmed that:

(i) the transactions carried out during the Reporting Period have been entered into in accordance with the
relevant provisions of the Contractual Arrangements;

(ii) no dividends or other distributions have been made by the Consolidated Affiliated Entities to the holders of
its equity interests which are not otherwise subsequently assigned or transferred to the Group during the
Reporting Period; and

(iii) any new contracts entered into, renewed or reproduced between the Group and the Consolidated Affiliated
Entities during the Reporting Period are fair and reasonable, or advantageous to the Shareholders, so far as
the Group is concerned and in the interests of the Shareholders as a whole.
74 XIAOMI CORPORATION

DIRECTOR’S REPORT

(7) Confirmations from the Company’s Independent Auditor

The Auditor has confirmed in a letter to the Board that, with respect to the aforesaid Contractual Arrangements:

(i) nothing has come to their attention that causes the Auditor to believe that the disclosed transactions under
the Contractual Arrangements have not been approved by the Board;

(ii) nothing has come to their attention that causes the Auditor to believe that the transactions were not
entered into, in all material respects, in accordance with the relevant agreements under the Contractual
Arrangements governing such transactions; and

(iii) nothing has come to their attention that causes the Auditor to believe that dividends or other distributions
had been made by our Consolidated Affiliated Entities to the holders of their equity interests which were not
otherwise subsequently assigned or transferred to our Group.

2. Other Connected Transactions

As disclosed in the Prospectus and the relevant announcements of the Company, the following transaction of the
Group constituted continuing connected transactions for the Company for the Reporting Period.

(1) The 2020 and 2023 XMF Framework Agreement

On December 30, 2020, our Company (for itself and on behalf of the XM Group) and Xiaomi Finance (for itself
and on behalf of the Xiaomi Finance Group) agreed to renew the framework agreement entered into between
the Company and Xiaomi Finance on June 18, 2018 by entering into a framework agreement in relation to the
provision to each other, or by one to the other, of (i) supply of products; (ii) data sharing and collaboration; (iii)
intellectual property licensing; (iv) payment and settlement services; (v) marketing services; (vi) comprehensive
support services; and (vii) financial services (the “2020 XMF Framework Agreement”).

Among all the transactions under the 2020 XMF Framework Agreement, (i) data sharing and collaboration
between the XM Group and the Xiaomi Finance Group; (ii) intellectual property licensing by the XM Group to the
Xiaomi Finance Group; and (iii) provision of financial services by the Xiaomi Finance Group to the XM Group are
fully-exempted continuing connected transactions under Chapter 14A of the Listing Rules.
 2023 ANNUAL REPORT 75

The annual cap and actual transaction amounts for the non-exempted continuing connected transactions under
the 2020 XMF Framework Agreement for the Reporting Period are set out as follows:

Actual transaction
Annual cap for amounts for
the year ended the year ended
No. Transactions December 31, 2023 December 31, 2023
(RMB million) (RMB million)

1. Supply of products by the XM Group to the Xiaomi Finance

Group 504 1
2. Provision of payment and settlement services by the
Xiaomi Finance Group to the XM Group 559 80
3. Provision of marketing services by the XM Group to the
Xiaomi Finance Group 877 6
4. Provision of marketing services by the Xiaomi Finance
Group to the XM Group 506 —
5. Provision of financial services by the XM Group to the Xiaomi
Finance Group (excluding the XMF Restructuring Loans) 9,033 5,301
6. Provision of comprehensive support services by the XM
Group to the Xiaomi Finance Group 654 89
7. Provision of comprehensive support services by the
Xiaomi Finance Group to the XM Group 209 66

The 2020 XMF Framework Agreement is for a term of three years from January 1, 2021 to December 31, 2023
(both days inclusive).

On December 22, 2023, the Company (for itself and on behalf of the XM Group) and Xiaomi Finance (for itself
and on behalf of the Xiaomi Finance Group) agreed to renew the 2020 XMF Framework Agreement for a term
of three years from January 1, 2024 to December 31, 2026 (both days inclusive).

We have agreed to treat members of the Xiaomi Finance Group as connected subsidiaries (as defined in
Rule 14A.16 of the Listing Rules) and thus the intra-group transactions involving the XM Group and the Xiaomi
Finance Group under the 2020 and 2023 XMF Framework Agreement will constitute connected transactions
under the Listing Rules.
76 XIAOMI CORPORATION

DIRECTOR’S REPORT

(2) Confirmation from Independent Non-executive Directors

The independent non-executive Directors of the Company have reviewed the continuing connected transactions
outlined above, and confirmed that such continuing connected transactions had been entered into:

(i) in the ordinary and usual course of business of our Group;

(ii) on normal commercial terms or better; and

(iii) in accordance with the relevant agreements governing them on terms that were fair and reasonable and
in the interests of our Company and our Shareholders as a whole.

During the year ended 31 December 2023, save as disclosed in the section headed “Connected Transactions”
of this annual report, no related party transactions disclosed in Note 39 to the financial statements
constituted a connected transaction or continuing connected transaction which should be disclosed pursuant
to the Listing Rules.

(3) Confirmations from the Company’s Independent Auditor

The Auditor has performed the relevant procedures regarding the Continuing Connected Transactions in
accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements
Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740
“Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by
Hong Kong Institute of Certified Public Accountants. The Auditor has issued an unqualified letter containing
findings and conclusions in respect of the continuing connected transactions disclosed by the Group in the
paragraph above in accordance with Rule 14A.56 of the Listing Rules.

The Auditor has confirmed in a letter to the Board that, with respect to the aforesaid continuing connected
transactions entered into in the Reporting Period:

(i) nothing has come to the Auditor’s attention that causes the Auditor to believe that the disclosed
continuing connected transactions have not been approved by the Board;

(ii) for transactions involving the provision of goods or services by the Group, nothing has come to the
Auditor’s attention that causes the Auditor to believe that the continuing connected transactions were
not, in all material respects, in accordance with the pricing policies of the Group;

(iii) nothing has come to the Auditor’s attention that causes the Auditor to believe that the transactions were
not entered into, in all material respects, in accordance with the relevant agreements governing such
transactions; and

(iv) nothing has come to the Auditor’s attention that causes the Auditor to believe that such continuing
connected transactions have exceeded the annual caps as set by the Company.
 2023 ANNUAL REPORT 77

Save as disclosed in this annual report, during the Reporting Period, the Company had no connected
transactions or continuing connected transactions which are required to be disclosed under the Listing
Rules. The Company has complied with the disclosure requirements under Chapter 14A of the Listing Rules
with respect to the continuing connected transactions entered into by the Group during the Reporting Period.

Major Customers and Suppliers

For the Reporting Period, the five largest customers of the Group accounted for approximately 18.3% of the Group’s
total revenues while the largest customer of the Group accounted for approximately 12.2% of the Group’s total
revenues. In addition, for the Reporting Period, the five largest suppliers of the Group accounted for approximately
32.0% of the Group’s total purchase amounts while the largest supplier for the Reporting Period, accounted for
approximately 12.1% of our total purchase amount.

None of our Directors, their respective associates, or any Shareholder who, to the knowledge of our Directors, owns
more than 5% of our issued capital, has any interest in any of our five largest customers and suppliers during the
Reporting Period and up to the Latest Practicable Date.

Pre-Emptive Rights
There are no provisions for pre-emptive rights under the Articles of Association or the laws of the Cayman Islands
which would oblige the Company to offer new Shares on a pro-rata basis to the existing Shareholders.

Tax Relief
The Company is not aware of any tax relief available to the Shareholders by reason of their holding of the Company’s
securities.

Weighted Voting Rights

The Company is controlled through weighted voting rights. Each Class A Share has 10 votes per share and each Class
B Share has one vote per share except with respect to resolutions regarding a limited number of Reserved Matters,
where each Share has one vote. The Company’s weighted voting rights structure will enable the WVR Beneficiaries
to exercise voting control over the Company notwithstanding the WVR Beneficiaries do not hold a majority economic
interest in the share capital of the Company. This allows the Company to benefit from the continuing vision and
leadership of the WVR Beneficiaries who will control the Company with a view to its long-term prospects and strategy.
78 XIAOMI CORPORATION

DIRECTOR’S REPORT

Shareholders and prospective investors are advised to be aware of the potential risks of investing in companies with
weighted voting rights structures, in particular that interests of the WVR Beneficiaries may not necessarily always
be aligned with those of our Shareholders as a whole, and that the WVR Beneficiaries will be in a position to exert
significant influence over the affairs of the Company and the outcome of shareholders’ resolutions, irrespective of
how other shareholders vote. Prospective investors should make the decision to invest in the Company only after due
and careful consideration.

As of December 31, 2023, the WVR Beneficiaries were Lei Jun and Lin Bin. Lei Jun beneficially owns 4,113,113,657
Class A Shares, representing approximately 62.2% of the voting rights in the Company with respect to shareholder
resolutions relating to matters other than the Reserved Matters. The Class A Shares are held by Smart Mobile
Holdings Limited, a company indirectly wholly-owned by a trust established by Lei Jun (as settlor) for the benefit of
Lei Jun and his family. Lin Bin beneficially owns 453,919,103 Class A Shares, representing approximately 6.9% of the
voting rights in the Company with respect to shareholder resolutions relating to matters other than the Reserved
Matters. The Class A Shares are held by Apex Star LLC, a company controlled by Lin Bin.

Class A Shares may be converted into Class B Shares on a one-to-one ratio. As of December 31, 2023, upon the
conversion of all the issued and outstanding Class A Shares into Class B Shares, the Company will issue 4,567,032,760
Class B Shares, representing approximately 22.3% of the total number of issued and outstanding Class B Shares or
18.2% of the issued share capital of the Company.

The weighted voting rights attached to Class A Shares will cease when none of the WVR Beneficiaries have beneficial
ownership of any of the Class A Shares, in accordance with Rule 8A.22 of the LisƟng Rules. This may occur:

(i) upon the occurrence of any of the circumstances set out in Rule 8A.17 of the Listing Rules, in particular where
the WVR Beneficiary is: (1) deceased; (2) no longer a member of the Board; (3) deemed by the Stock Exchange to
be incapacitated for the purpose of performing his duties as a director; or (4) deemed by the Stock Exchange to no
longer meet the requirements of a director set out in the Listing Rules;

(ii) when the Class A Shareholders have transferred to another person the beneficial ownership of, or economic
interest in, all of the Class A Shares or the voting rights attached to them, other than in the circumstances
permitted by Rule 8A.18 of the Listing Rules;

(iii) where a vehicle holding the Class A Shares on behalf of a WVR Beneficiary no longer complies with Rule 8A.18(2)
of the Listing Rules; or

(iv) when all of the Class A Shares have been converted to Class B Shares.
 2023 ANNUAL REPORT 79

Corporate Governance
The Company is committed to maintaining and promoting stringent corporate governance standards. The principles
of the Company’s corporate governance are to promote effective internal control measures and to enhance the
transparency and accountability of the Board to all the Shareholders.

Information on the corporate governance practices adopted by the Company is set out in the Corporate Governance
Report on pages 81 to 103 of this annual report.

Environmental Policies and Performance

The Company attaches great importance to environmental protection and resource conservation, and continuously
pays attention to the impact of its business operations on the environment. The Company advocates the concept
of green office and green product by incorporating it into the product life cycle, while focusing on improving the
performance of resource utilization and emission management. At the same time, as a core element in the value
chain, the Company hopes to work with more peers to create a green value chain.

For details of the Company’s environmental policies and performance, please refer to the Environmental, Social and
Governance Report on pages 104 to 192 of this annual report.

Final Dividend
The Board has resolved not to declare any final dividend for the Reporting Period.

Audit Committee
The Company has established the Audit Committee in compliance with Rule 3.21 of the Listing Rules and the CG Code.
The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal
controls system of the Group, review and approve connected transactions and to advise the Board. As of December 31,
2023, the Audit Committee comprises one non-executive Director and two independent non-executive Directors,
namely, Mr. Liu Qin, Dr. Chen Dongsheng and Mr. Wong Shun Tak. Mr. Wong Shun Tak is the chairman of the Audit
Committee.

The Audit Committee has reviewed the audited consolidated financial statements of the Group for the Reporting
Period. The Audit Committee has also discussed matters with respect to the accounting policies and practices
adopted by the Company and internal control with senior management members and the Auditor.
80 XIAOMI CORPORATION

DIRECTOR’S REPORT

Material Litigation
The Company was not involved in any material litigation or arbitration during the Reporting Period nor were the
Directors aware of any material litigation or claims that were pending or threatened against the Company.

Public Float
Based on the information that is publicly available to the Company and within the knowledge of the Directors as of
Latest Practicable Date, the Company has maintained the prescribed percentage of public float under the Listing
Rules.

Compliance with Relevant Laws and Regulations

As far as the Board is aware, the Group has complied with the relevant laws and regulations that have a significant
impact on the Group in all material aspects.

Auditor
The consolidated financial statements of the Group have been audited by PricewaterhouseCoopers, who will retire
and, being eligible, offer themselves for re-appointment at the annual general meeting.

Events after the Reporting Period

Save as disclosed above, there have been no other significant events that might affect the Group since the end of the
Reporting Period and up to the date of this annual report.

By order of the Board

Lei Jun
Chairman

Hong Kong, March 19, 2024

 2023 ANNUAL REPORT 81

CORPORATE
GOVERNANCE REPORT

The Board is pleased to present the Corporate Governance Report of the Company for the year ended December 31, 2023.

Corporate Governance Practices

The Company is committed to maintaining and promoting stringent corporate governance standards. The principles
of the Company’s corporate governance are to promote effective internal control measures and to enhance the
transparency and accountability of the Board to all the Shareholders.

The Board will continue to enhance its corporate governance practices appropriate to the conduct and growth of its
business and to review such practices from time to time to ensure that they comply with statutory and professional
standards and align with the latest development.

Save for code provision C.2.1 of the CG Code, the Company has complied with all the code provisions set out in the CG
Code contained in Appendix C1 to the Listing Rules during the Reporting Period. Key corporate governance principles
and practices of the Company as well as details relating to the foregoing deviation are summarized in the sections below.

Compliance with the Model Code for Securities Transactions by Directors

The Company has adopted the Model Code as the code of conduct regarding the Directors’ dealings in the securities of
the Company. Having made specific enquiry of all the Directors, all Directors confirmed that they have complied with the
provisions of the Model Code throughout the Reporting Period.

To supplement the Model Code, the Company has also put in place a disclosure of information policy for the handling
and disclosure of inside information. The policy sets out the procedures and internal controls for the handling and
dissemination of inside information in a timely manner and provides the Directors, senior management and relevant
employees a general guide in monitoring information disclosure and responding to enquiries. Further, control procedures
have been implemented to ensure that the unauthorized access and use of inside information is strictly prohibited.

Board of Directors
Board Composition

As at the Latest Practicable Date, the Board comprises the following Directors:

Executive Directors
Lei Jun (Chairman of the Board and Chief Executive Officer)
Lin Bin (Vice Chairman of the Board)
Liu De
82 XIAOMI CORPORATION

CORPORATE GOVERNANCE REPORT

Non-executive Director
Liu Qin

Independent Non-executive Directors

Chen Dongsheng
Wong Shun Tak
Tong Wai Cheung Timothy (resigned with effect from January 8, 2024)
Cai Jinqing (appointed with effect from January 8, 2024)

The biographical information of the Directors is set out in the section headed “Biographical Details and Other
Information of the Directors” in this annual report. In addition, an up-to-date list of our Directors and their roles and
functions is maintained on the Company’s website and the Stock Exchange’s website.

None of the members of the Board are related to one another.

Throughout the Reporting Period, the Board has met the requirements of the Listing Rules regarding the appointment
of at least three independent non-executive directors (representing at least one-third of the Board), with at least
one of whom possessing appropriate professional qualifications, or accounting, or related financial management
expertise. To provide transparency to the investor community and in compliance with the Listing Rules and the CG
Code, the independent non-executive Directors of the Company are clearly identified in all corporate communications
containing the names of the Directors.

The Company has received written annual confirmation from each of the independent non-executive Directors in
respect of their independence in accordance with the independence guidelines set out in Rule 3.13 of the Listing
Rules. The Company is of the view that all independent non-executive directors are independent.

Responsibilities and Delegation

The Board is responsible for the leadership and control of the Company, directing and supervising the Company’s
affairs and acting in the best interests of the Company and its shareholders.

The Board directly, and indirectly through its committees, leads and provides direction to management by laying down
strategies and overseeing their implementation, monitors the Group’s operational and financial performance, and
ensures that sound internal control and risk management systems are in place.
 2023 ANNUAL REPORT 83

All Directors, including non-executive Directors and independent non-executive Directors, have brought a wide
spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective
functioning. All Directors have full and timely access to all the information about the Company, and may upon request,
seek independent professional advice in appropriate circumstances at the Company’s expenses for discharging their
duties to the Company.

The Directors have disclosed to the Company details of other offices held by them.

The Board reserves for its discretion on all major matters relating to policy matters, strategies and budgets,
internal control and risk management, material transactions (in particular those that may involve conflict of
interests), financial information, appointment of directors and other significant operational matters of the Company.
Responsibilities relating to implementing decisions of the Board, directing and coordinating the daily operation and
management of the Company are delegated to the chief executive officer and management. The delegated functions
and responsibilities are periodically reviewed by the Board. Approval has to be obtained from the Board prior to any
significant transactions entered into by the aforesaid officers.

Chairman and Chief Executive Officer

Pursuant to code provision C.2.1 of the CG Code, companies listed on the Stock Exchange are expected to comply
with, but may choose to deviate from the requirement that the responsibilities between the chairman and the chief
executive officer should be segregated and should not be performed by the same individual. The Company does not
have a separate chairman and chief executive officer and Lei Jun currently performs these two roles. The Board
believes that vesting the roles of both chairman and chief executive officer in the same person has the benefit of
ensuring consistent leadership within the Group and enabling more effective and efficient overall strategic planning
for the Group. The Board considers that the balance of power and authority for the present arrangement will not be
impaired and this structure will enable the Company to make and implement decisions promptly and effectively. The
Board will continue to review and consider segregating the roles of the chairman of the Board and the chief executive
officer of the Company at an appropriate time, taking into account the circumstances of the Group as a whole.

Appointment and Re-Election of Directors

According to the Articles, at every annual general meeting of the Company, one-third of the Directors for the time
being (or if their number is not three or a multiple of three, then the number nearest to but not less than one-third)
shall retire from office by rotation provided that every Director (including those appointed for a specific term) shall
be subject to retirement by rotation at least once every three years. A Director appointed by the Board or by ordinary
resolutions of the Company, either to fill a casual vacancy or as an addition to the Board, shall hold office only until
the next following general meeting of the Company. All retiring Directors shall be eligible for re-election.

Each Director (including the non-executive Director and independent non-executive Directors) is engaged for a term
of three years, which is automatically renewed for terms of another three years. They are subject to retirement and
re-election in accordance with the provisions of the Articles as mentioned above.
84 XIAOMI CORPORATION

CORPORATE GOVERNANCE REPORT

Continuous Professional Development of Directors

Directors shall keep abreast of regulatory developments and changes in order to effectively perform their
responsibilities and to ensure that their contribution to the Board remains informed and relevant.

Each newly appointed Director has received formal, comprehensive and tailored induction on the first occasion of his
appointment to ensure appropriate understanding of the business and operations of the Company and full awareness
of director’s responsibilities and obligations under the Listing Rules and relevant regulatory requirements. Such
induction shall be supplemented by meetings with the senior management of the Company.

Pursuant to code provision C.1.4 of the CG Code, Directors should participate in appropriate continuous professional
development to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains
informed and relevant. Internally-facilitated briefings for Directors would be arranged and reading materials on
relevant topics would be provided to Directors where appropriate. All Directors are encouraged to attend relevant
training courses at the Company’s expenses.

Throughout the Reporting Period, the existing and former Directors have participated in continuous professional
training as follows:

Type of continuous
professional development
Name of director trainingNotes

Lei Jun A&B

Lin Bin A&B
Liu De A&B
Liu Qin A&B
Chen Dongsheng A&B
Wong Shun Tak A&B
Tong Wai Cheung Timothy(1) A&B

Notes:

A: Attending seminar(s), conference(s), forum(s) and/or training course(s)

B: Reading materials provided by external parties or by the Company including but not limited to updates relating to the Company’s business or
directors’ duties and responsibilities, corporate governance and regulatory update, Chapter 8A of the Listing Rules and knowledge relating to the
weighted voting rights, and other applicable regulatory requirements.

(1) Tong Wai Cheung Timothy has resigned as an independent non-executive Director with effect from January 8, 2024.
 2023 ANNUAL REPORT 85

Attendance Records of Directors

During the Reporting Period, the Company held four Board meetings, four Audit Committee meetings, two Corporate
Governance Committee meetings, one Remuneration Committee meetings and one Nomination Committee meeting.
The attendance records of each Director at the above Board and Board committee meetings of the Company are set
out in the table below.

Attendance/Number of Meetings
Corporate
Audit Governance Nomination Remuneration General
Name of Director Board Committee Committee Committee Committee Meeting

Lei Jun 4/4 — — — 1/1 1/1

Lin Bin 4/4 — — 1/1 — 1/1
Liu De 4/4 — — — — 1/1
Liu Qin 4/4 4/4 — — — 1/1
Chen Dongsheng 4/4 4/4 2/2 1/1 1/1 1/1
Wong Shun Tak 4/4 4/4 2/2 1/1 1/1 1/1
Tong Wai Cheung
Timothy(1) 4/4 — 2/2 — — 1/1

(1) Tong Wai Cheung Timothy has resigned as an independent non-executive Director with effect from January 8, 2024.

Apart from the above meetings, the chairman of the Board has held at least one meeting with independent
non-executive Directors during the Reporting Period without the presence of other Directors.

The Board will meet at least four times a year in the future involving active participation of a majority of Directors,
at approximately quarterly intervals. Schedules for regular Board meetings are normally agreed with Directors in
advance to facilitate their attendance. At least 14 days’ notice for all regular Board meetings will be given to all
Directors and all Directors are given the opportunity to include items or businesses for discussion in the agenda. For
all other Board meetings, reasonable notice will be given. Relevant agenda and accompanying meeting papers will be
sent to all Directors in a timely manner and at least three days in advance of every regular Board meeting.
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Board Committees
The Board has established four Board committees, namely, the Audit Committee, the Corporate Governance
Committee, the Nomination Committee and the Remuneration Committee, for overseeing particular aspects of the
Company’s affairs. All Board committees are established with specific written terms of reference which deal clearly
with their authority and duties, and are posted on the Company’s website and the Stock Exchange’s website.

Audit Committee

The Company has established the Audit Committee in compliance with Rule 3.21 of the Listing Rules and the CG code.
The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal
controls system of the Group, review and approve connected transactions and to advise the Board. As at the Latest
Practicable Date, the Audit Committee comprises one non-executive Director and two independent non-executive
Directors, namely, Liu Qin, Chen Dongsheng and Wong Shun Tak. Wong Shun Tak, who possesses the appropriate
professional qualification, and accounting and financial management expertise as required under Rule 3.10(2) of the
Listing Rules, is the chairman of the Audit Committee.

None of the members of the Audit Committee is a former partner of the Company’s existing Auditor,
PricewaterhouseCoopers.

During the Reporting Period, the Audit Committee has performed the following major tasks:

• Reviewed the 2022 annual report, including the Corporate Governance Report, the Environmental, Social and
Governance Report, Directors’ Report and the financial statements.

• Reviewed the audited annual results of the Group for the Reporting Period.

• Reviewed the unaudited first quarterly results of the Group for the three months ended March 31, 2023.

• Reviewed the unaudited interim results of the Group for the three and six months ended June 30, 2023.

• Reviewed the unaudited third quarterly results of the Group for the three and nine months ended
September 30, 2023.

• Discussed matters with respect to effectiveness of the Company’s financial reporting system, the system of
internal control in operation, risk management system and associated procedures within the Group with senior
management members, internal auditors and the Auditor.

• Reviewed the plans, resources and work of the Company’s internal auditors.
 2023 ANNUAL REPORT 87

• Reviewed the continuing connected transactions of the Group carried out during the Reporting Period.

• Reviewed the risk management and internal control systems of the Group.

• Discussed and made recommendation on the re-appointment of the Auditor.

• Reviewed the independence, terms of engagement and remuneration of PricewaterhouseCoopers for annual
audit for the Reporting Period.

• Reviewed the status of compliance with the CG Code, the Listing Rules and relevant laws by the Group.

The Auditor was invited to attend the Audit Committee meetings to discuss with the Audit Committee on issues arising
from the audit and financial reporting matters. The Audit Committee also met with the Auditor without the presence
of the executive Directors. The Audit Committee is satisfied with the independence and engagement of the Auditor. As
such, the Audit Committee has recommended its re-appointment.

Corporate Governance Committee

The Company has established the Corporate Governance Committee in compliance with Rule 8A.30 of the Listing
Rules and the CG Code. The Corporate Governance Committee is responsible for performing the functions set out
in code provision A.2.1 of the CG Code. The primary duties of the Corporate Governance Committee are to ensure
that the Company is operated and managed for the benefit of all Shareholders indiscriminately and to ensure the
Company’s compliance with the Listing Rules and safeguards relating to the weighted voting rights structure of the
Company. The Corporate Governance Committee would review the Company’s corporate governance policies and
practices, training and continuous professional development of Directors and senior management, the Company’s
policies and practices on compliance with legal and regulatory requirements, and the Company’s compliance with
the CG Code and disclosure in this Corporate Governance Report. As at the Latest Practicable Date, the members of
the Corporate Governance Committee are the independent non-executive Directors, namely, Chen Dongsheng, Wong
Shun Tak and Cai Jinqing. Chen Dongsheng is the chairman of the Corporate Governance Committee.

The following is a summary of work performed by the Corporate Governance Committee during the Reporting Period
and up to the Latest Practicable Date:

• Reviewed and monitored whether the Company is operated and managed for the benefits of all its Shareholders;
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• Reviewed the policies and practices of the Company on corporate governance and on compliance with legal and
regulatory requirements. The policies reviewed include the Code for Securities Transactions by Directors and
Relevant Employees, board diversity policy, director nomination policy, shareholders’ communication policy,
procedures for nomination of director by shareholders, disclosure of information policy, connected transactions
policy, whistle-blowing policy, dividend policy, board remuneration policy, board policy on obtaining independent
views and inputs and other corporate governance policies.

• Reviewed the Company’s compliance with the CG Code and the deviation(s) from code provision C.2.1 of the
CG Code, the Company’s disclosure in the Corporate Governance Report and the Company’s disclosure for
compliance with Chapter 8A of the Listing Rules.

• Reviewed the remuneration, the terms of engagement and the re-appointment of the Company’s compliance
advisor.

• Reviewed and monitored the management of conflicts of interests between the Group/the Shareholders on one
hand and the WVR Beneficiaries on the other.

• Reviewed and monitored all risks related to the weighted voting rights structure, including connected
transactions between the Group/the Shareholders on one hand and the WVR Beneficiaries on the other.

• Reviewed the arrangement for the training and continuous professional development of Directors and senior
management (in particular, Chapter 8A of the Listing Rules and knowledge in relation to risks relating to the
weighted voting rights structure).

• Sought to ensure effective and on-going communication between the Company and its Shareholders, particularly
with regards to the requirements of Rule 8A.35 of the Listing Rules.

• Reviewed the Company’s compliance with the ESG Reporting Guide and disclosure in Environmental, Social and
Governance Report.

• Reviewed work performance and work plan of ESG team and provide guidance and supervision to the ESG team.

• Reported on the work of the Corporate Governance Committee covering all areas of its terms of reference.

The Corporate Governance Committee has confirmed that (i) the WVR Beneficiaries have been members of the
Board throughout the Reporting Period; (ii) no matter under Rule 8A.17 of the Listing Rules has occurred during the
Reporting Period; and (iii) the WVR Beneficiaries have complied with Rules 8A.14, 8A.15, 8A.18 and 8A.24 of the Listing
Rules during the Reporting Period.
 2023 ANNUAL REPORT 89

In particular, the Corporate Governance Committee has confirmed to the Board it is of the view that the Company
has adopted sufficient corporate governance measures to manage the potential conflict of interest between the
Group and the beneficiaries of weighted voting rights in order to ensure that the operations and management of the
Company are in the interests of the Shareholders as a whole indiscriminately. These measures include the Corporate
Governance Committee (a) reviewing and monitoring each transaction contemplated to be entered into by the Group
and making a recommendation to the Board, prior to the transaction being entered into, of any potential conflict of
interest between the Group and/or the Shareholders on one hand and any beneficiaries of the weighted voting rights,
and (b) ensuring that (i) any connected transactions are disclosed and dealt with in accordance with the requirements
of the Listing Rules, (ii) their terms are fair and reasonable and in the interest of the Company and its Shareholders
as a whole, (iii) any directors who have a conflict of interest abstain from voting on the relevant board resolution, and
(iv) the Compliance Advisor is consulted on any matters related to transactions involving the beneficiaries of weighted
voting rights or a potential conflict of interest between the Group and these beneficiaries. The Corporate Governance
Committee recommended the Board to continue the implementation of these measures and to periodically review
their efficacy towards these objectives.

Having reviewed the remuneration and terms of engagement of the Compliance Advisor, the Corporate Governance
Committee confirmed to the Board that it was not aware of any factors that would require it to consider either the
removal of the current Compliance Advisor or the appointment of a new compliance advisor. As a result, the Corporate
Governance Committee recommended that the Board retain the services of the Compliance Advisor.

Independent Input Mechanism

The Company recognizes that Board independence is key to good corporate governance and to increase board
efficiency. As part of the established governance framework, the Group has adopted the Policy on Obtaining
Independent Views and Inputs (the “Independent Input Mechanism”) on November 23, 2022, which demonstrates the
Company’s commitment to high standards of corporate governance, board efficiency and making good governance
integral to the Company’s culture.

According to the Independent Input Mechanism, the Board, Board committees or individual Directors may seek
such independent professional advice, views and input as considered necessary to fulfil their responsibilities and in
exercising independent judgement when making decisions in furtherance of their director’s duties at the Company’s
expense (the “Mechanism”). Independent professional advice shall include legal advice and the advice of accountants
and other professional financial advisers on matters of law, accounting, tax and other regulatory matters.
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In the event that independent professional advice, views and input are considered necessary, the Board, Board
committees or individual Directors shall communicate with the company secretary to start the Mechanism, providing
background and details of the relevant incidents and/or transactions, and the issues involved which would require
independent views and input. They may direct any questions, queries, concerns or specific advice to be sought to the
company secretary who will then contact the Company’s professional advisers (including legal advisers, accountants,
independent auditor, internal control adviser) or other independent professional parties to obtain such independent
professional advice within a reasonable period of time. Any advice obtained through the Mechanism shall be duly
documented and made available to other members of the Board.

Despite having obtained any information or advice from the chairperson of the Board and/ or any independent
professional advisers through the Mechanism, the Directors are expected to exercise independent judgement in
forming their decisions. During the year ended December 31, 2023, the Board has reviewed the Independent Input
Mechanism and considered that the implementation of the mechanisms was effective.

Nomination Committee

The Company has established the Nomination Committee with written terms of reference in compliance with Rule 8A.27 of
the Listing Rules and the CG code. The primary duties of the Nomination Committee are to review the Board composition,
make recommendations to the Board regarding the rotation and appointment of Directors and Board succession, and
assess the independence of independent non-executive Directors of the Company. As at the Latest Practicable Date, the
Nomination Committee comprises one executive Director and two independent non-executive Directors, namely, Lin Bin,
Wong Shun Tak and Cai Jinqing. Wong Shun Tak is the chairman of the Nomination Committee.

During the Reporting Period, the Nomination Committee has performed the following major tasks:

• Reviewed the structure, size and composition of the Board to ensure that it has a balance of expertise, skills and
experience appropriate to the requirements for the business of the Group.

• Assessed the independence of all the independent non-executive Directors.

• Recommended the re-election of the retiring Directors at the 2023 annual general meeting of the Company.
 2023 ANNUAL REPORT 91

Board Diversity Policy

The Company has adopted a board diversity policy (the “Board Diversity Policy”) which sets out the approach to achieve
diversity of the Board. The Company recognizes and embraces the benefits of having a diverse Board and sees increasing
diversity at the Board level, including gender diversity, as an essential element in maintaining the Company’s competitive
advantage and enhancing its ability to attract, retain and motivate employees from the widest possible pool of available
talent. Pursuant to the Board Diversity Policy, in relation to reviewing and assessing the Board composition, the Nomination
Committee will consider a number of aspects, including but not limited to gender, age, cultural and educational background,
professional qualifications, skills, knowledge, and industry and regional experience. Pursuant to the Board Diversity Policy,
the Nomination Committee will discuss periodically and when necessary, agree on the measurable objectives for achieving
diversity, including gender diversity, on the Board and recommend them to the Board for adoption.

As of the Reporting Period, all of the Board are male. On January 8, 2024, Prof. Tong Wai Cheung Timothy resigned as
an independent non-executive Director and Ms. Cai Jinqing was appointed as an independent non-executive Director.
To further ensure gender diversity of the Board in the long run, the Nomination Committee will periodically review the
Board Diversity Policy and monitor its continued effectiveness. The Group will also continue to take opportunities to
increase the proportion of female board members workforce over time as and when suitable candidates are identified. For
further details on the gender ratio of the Group together with relevant data can be found in the Environmental, Social and
Governance Report on pages 104 to 192 of this Annual Report.

During the Review Period, the Board has reviewed and considered the implementation of the Board Diversity Policy to be
on track. The implementation of the Board Diversity Policy is evidenced by the fact that our Directors are from a diverse
age group with experience from different industries and sectors. The Directors have a balanced mix of knowledge and
skills, including knowledge and experience in the areas of computer science, engineering, business administration,
human resources, finance, and corporate governance. They obtained degrees in various areas including computer science,
engineering, electronics, industrial design, business administration, finance, and political economics. The Board is
characterized by significant diversity in terms of age, education background and professional experience.

The Company is also committed to ensure that recruitment and selection practices at all levels are appropriately
structured so that a diverse range of candidates are considered. The Nomination Committee shall report its findings
and make recommendation to the Board to complement the Company’s corporate strategy and to ensure that the Board
maintains a balanced diverse profile.

Director Nomination Policy

The Company has also adopted a nomination policy for the election of Directors in accordance with mandatory
disclosure requirement E(d)(iii) of the CG Code. Such policy, devising the criteria and procedures of selection and
performance evaluation, provides guidance to the Board on nomination and appointment of Directors of the Company.
The Board believes that the defined selection process is good for corporate governance in ensuring the Board
continuity and appropriate leadership at Board level, and enhancing Board effectiveness and diversity.
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The Nomination Committee and the Board may nominate candidates for directorship. In assessing the suitability and
the potential contribution to the Board of a proposed candidate, the Nomination Committee may make reference to
certain selection criteria, such as reputation for integrity, professional qualifications and skills, accomplishment and
experience in the internet and technology markets, commitment and relevant contribution, diversity in all aspects.
The Nomination Committee shall report its findings and make recommendation to the Board on the appointment of
appropriate candidate for directorship for decision and succession planning. The ultimate responsibility for selection
and appointment of Directors rests with the entire Board.

Remuneration Committee

The Company has established the Remuneration Committee with written terms of reference in compliance with
Rule 3.25 of the Listing Rules and the CG code. The primary duties of the Remuneration Committee are to review
and make recommendations to the Board regarding the terms of remuneration packages, bonuses and other
compensation payable to the Directors and senior management. The Remuneration Committee comprises one
executive Director and two independent non-executive Directors, namely, Lei Jun, Chen Dongsheng and Wong Shun
Tak. Chen Dongsheng is the chairman of the Remuneration Committee.

During the Reporting Period, the Remuneration Committee has performed the following major tasks:

• Reviewed the remuneration policy and the remuneration packages of the Directors and senior management of
the Company.

• Reviewed and approved the terms of and/or matters relating to incentive schemes (including share schemes)
under Chapter 17 of the Listing Rules.

• Reviewed and recommended to the Board the grant of share awards to certain senior management of the
Company and grantees. While considering the grant of share awards, the Remuneration Committee had
evaluated the remuneration of the grantee in comparable market peer and the value of grant to the grantee.
After considering those factors, the Remuneration Committee recommended the proposed grant of share
awards to the grantee to the Board for approval to appreciate the grantee’s devotion and commitment to the
Company which align with the purposes of the respective share schemes.

Directors’ Remuneration Policy

The purpose of the Director’s Remuneration Policy is to ensure that the Company can attract and retain its Directors
to meet the business needs of the Company. The Remuneration Committee is to make recommendations on the
Directors’ remuneration policies and structure, establish formal and transparent procedures to evaluate the
performance of Directors, review and make recommendations on incentive plans and the terms of Directors’ service
contracts, and make recommendations on the Directors’ remuneration packages.
 2023 ANNUAL REPORT 93

In making recommendations on the remuneration packages of Directors, the Remuneration Committee shall have
regard to:

• any corporate policies or goals as resolved by the Board from time to time;

• factors such as the level of remuneration paid by comparable companies, the time committed by the Directors
and their responsibilities, and the employment conditions elsewhere in the Group; and

• the level of remuneration necessary to attract and retain directors for successful management of the Company.

In addition, the Remuneration Committee shall:

• review and approve compensation payable to executive directors and senior management for any loss or
termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair
and not excessive;

• to review and approve compensation arrangements relating to dismissal or removal of directors for misconduct
to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate; and

• ensure that no director or any of their associates is involved in determining their own remuneration. In general,
no performance-related equity-based remuneration (such as options or share awards) should be given to
independent non-executive directors as it may impede their objectivity and independence.

Remuneration of Senior Management

Pursuant to code provision E.1.5 of the CG Code, the annual remuneration (including share-based compensation) of
the members of senior management, including those members of senior management who are also the executive
Directors(1), by band for the Reporting Period is set out below:

Annual Remuneration Number of individuals

HK$0 to HK$10,000,000 7
HK$10,000,001 to HK$30,000,000 4
HK$30,000,001 to HK$100,000,000 3
HK$100,000,001 to HK$150,000,000 —
HK$150,000,001 to HK$300,000,000 1

Notes:

(1) Senior management as of December 31, 2023.

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Further details of the remuneration for the Reporting Period are set out in Note 10 to the consolidated financial
statements contained in this annual report.

Risk Management and Internal Controls

The Board acknowledges its responsibility for the risk management and internal control systems and reviewing their
effectiveness. Such systems are designed to manage rather than eliminate the risk of failure to achieve business
objectives, and they can only provide reasonable, but not absolute, assurance against material misstatements or losses.

The Board has the overall responsibility for evaluating and determining the nature and extent of the risk of failure to
achieve the Company’s strategic objectives, as well as establishing and maintaining effective risk management and
internal control systems. Such systems are designed to manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Audit Committee assists the Board in leading the management team to oversee the design, implementation and
monitoring of the risk management and internal control systems.

The management considers that it is important to establish and to continue to improve its risk management and
internal control systems, and has strengthened internal control and internal audit functions of the Company during
the Reporting Period. The Company’s risk management and internal control systems have been developed with the
following principles and processes:

Organization principles:

In accordance with COSO framework(1), the Three Lines of Defense Model has been implemented:

The First Line of Defense — Management and Operation:

The First Line of Defense is mainly formed by the business and functional departments of the Company which are
responsible for the day-to-day operations, and they are responsible for designing and implementing control measures
to address the risks.

Notes:

(1) the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations.
 2023 ANNUAL REPORT 95

The Second Line of Defense — Risk Management, Internal Control and Other Functions:

The Second Line of Defense is mainly implemented by the Internal Control team, which is responsible for formulating
policies, designing and implementing integrated risk management and internal control systems. To ensure effective
implementation of such systems, this line of defense also assists and supervises the First Tine of Defense in the
establishment and improvement of control measures.

The Third Line of Defense — Internal Audit and Forensic:

The Third Line of Defense is mainly implemented by the Internal Audit team, which holds a high degree of
independence. They provide an evaluation of the effectiveness of the Company’s risk management and internal control
systems and monitor management’s continuous improvement over these areas.

The Internal Audit team directly reports to the Audit Committee.

Risk Management Process:

Internal control assessments are conducted regularly to identify risks that potentially impact the business of the
Group.

The Internal Audit team is responsible for performing independent reviews of the adequacy and effectiveness of
the risk management and internal control systems. These reviews are performed annually. The Internal Audit team
examines key issues in relation to the accounting practices and all key internal controls and provides its findings and
recommendations to the Audit Committee.

The Board, supported by the Audit Committee and management, reviewed the management reports and the internal
audit reports. For the Reporting Period, the Board considered the risk management and internal control systems of
the Company effective and adequate.

The Company has developed its disclosure policies which provide a general guide to the directors, officers, senior
management and relevant employees of the Company in handling confidential information, monitoring information
disclosure and responding to enquiries. Control procedures have been implemented to ensure that unauthorized
access and the use of insider information are strictly prohibited.
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Significant risks of the Company:

During the Reporting Period, through its risk management evaluation process, the Company identified certain
significant risks, which were reported to its Audit Committee. The Company designed and implemented measures to
address these risks accordingly:

1. Global macroeconomic risks

The uncertainty of the global economic trend leads to changes in policies and markets in areas including trade
and investment. The increasingly cut-throat competition in the industry also raises challenges to the Company
in achieving its business, operational and financial goals. In the face of global economic changes, the Company
adjusts its business development strategy accordingly, actively seeks and expands business development
opportunities, and creates value for users around the world. The Company also continuously improves its
operational efficiency to confront uncertainties arising from the external environment.

2. Geopolitical and compliance risks

The supervision and regulations of the technology industry by regulatory agencies around the world are becoming
progressively stringent. The Company conducts business and provides products and services in the global market,
and the continuous expansion of the Company’s business both domestically and overseas will be subject to legal
and regulatory requirements in areas including antitrust, anti-unfair competition, data and privacy protection,
and intellectual property rights. Uncertainties in regulatory policies and international relations around the world
may also have an impact on the Company’s business expansion. The Company has set up a specialized squad and
engaged a professional consultant team to closely follow changes in regulations and policies in countries around
the world, maintain active communications with regulatory agencies, and take timely measures. The Company
constantly refines and fortifies its internal management mechanism and its ability to manage external risks,
to strictly abide by the laws and regulations of markets and countries around the world, and to ensure that the
business development in countries around the world complies with local laws and regulations.
 2023 ANNUAL REPORT 97

3. Product and service quality

Quality issues of products and services may seriously affect the user experience, thus affecting our brand value
and reputation.

“Quality is the lifeline of Xiaomi”. This is a quote from our CEO that describes the importance of quality. The
Company’s Quality Committee is responsible for quality management for the entire Company, with its work scope
covering products, services and user experience. It introduces unified guidelines on the Group level and sets out
rules in respect of quality assessment, code of conduct, accident-handling and assessment, and related rewards.
An information system was set up to assist with quality control and help improve the efficiency and effectiveness
of quality evaluation. The Company actively promotes the culture of quality first, setting up quality-related awards
worth millions of RMB.

4. Supply chain

Our core products are highly reliant on various suppliers who provide raw materials and components. In
particular, for certain products (e.g. chips), the sources of raw materials and components are limited. Sourcing
from a single region or from a single vendor can happen as well. Products are likely subject to geopolitics as
well as delivery limitations and pricing risks, an example being components imperiled by industry-wide supply
shortages or volatile price fluctuations. The majority of our suppliers’ production lines are concentrated in China.
Our global operation including freight, pricing and timely delivery is subject to risk due to this situation.

We evaluate various risks, such as global macroeconomic factors, fiscal policies of different countries, tariff
policies, foreign exchange rates, inflation and other factors that may affect our supply chain, and actively seeks
ways to increase the strength of our supply chain. We continue to diversify supplier source to reduce the risks
of uncertainty brought by single source. We establish an alarm system for force majeure events such as natural
disasters and public health matters. We set up contingency plans for these events in order to minimize their
impact on our supply chain.

5. Information security and privacy

The Company’s business is highly dependent on information systems and data analysis. Information security
incidents may have impact on the continuity of business operations. To achieve certain business functionalities and
improve user experience, some of our products and services require user data. Compliance with data regulations
and data security is one of the top priorities of the Company. During the Reporting Period, governments across
the world strengthened regulations on internet security and the protection of user information. The management
recognized that any non-compliant collection, leakage or inappropriate handling of user data would lead to
significant impacts on users and the Company’s reputation. Furthermore, any leakage of sensitive business data
of to our competitors may compromise our competitive advantages.
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The Company’s Data Security and Privacy sub-Committee, which was established under our Technology
Committee, is responsible for formulating a data classification system and implementing security measures. It
is tasked with effectively managing privacy risks through formulating departmental representation mechanisms
for business units and deploying an online privacy assessment system to ensure that all major changes undergo
risk assessment. The Company has established a surveillance system and feedback process to monitor data
security incidents and minimize the impact of these incidents on the Company. The Company has also set up a
comprehensive training program on data security and privacy for employees, including orientation training for new
employees, professional sequence security skills training and system training for information representatives of
the business departments.

The Company has received the ISO 27001, ISO 29151 and ISO 27018 international security and privacy certifications.
We have also filed “Network Security Level Protection” document with the Ministry of Public Security of PRC, to
satisfy the requirements for corporate information security management. The Company released the “MIUI
Security and Privacy White Paper” to share the Company’s practices in data security and user privacy with users
and the industry.

Anti-Corruption and Whistleblowing Policies

The Company has adopted the Whistleblowing Management Rules and the Whistleblower Protection and Reward
Rules as the Company’s whistle-blowing policies in accordance with code provision D.2.6 of the CG Code, as well
as the Code of Honesty and Integrity, the Management Rules for Gift-giving, Hospitality and Travel Subsidy, and the
Conflicts of Interest Management Rules, as the Company’s anti-corruption policies, in accordance with code provision
D.2.7 of the CG Code. The said policies outline the principles and guidelines that the Company intends to apply to
promote and support anti-corruption laws and regulations and to establish a whistleblowing system for employees
and those who deal with the Company to raise concerns, in confidence and with anonymity, with the internal control
department of the Company, which will then report to the Audit Committee any material improprieties related to the
Company. These policies are reviewed from time to time to ensure their relevance and appropriateness to the Group’s
business, corporate strategy and stakeholder expectations.
 2023 ANNUAL REPORT 99

Directors’ Responsibilities in Respect of the Financial Statements

The Directors acknowledge their responsibilities for preparing the financial statements of the Company for the
Reporting Period.

The Board is responsible for presenting a balanced, clear and understandable assessment of annual and interim
reports, inside information announcements and other disclosures required under the Listing Rules and other
regulatory requirements. The senior management has provided to the Board necessary explanation and information
to enable the Board to make an informed assessment of the financial information and position of the Company, which
are put forward to the Board for approval.

The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern.

The statement of the Auditor about their reporting responsibilities on the Company’s consolidated financial statements
for the Reporting Period is set out under the section headed “Independent Auditor’s Report” in this annual report.

Auditor’s Remuneration
The fees paid/payable to the Auditor in respect of audit services and non-audit services for the Reporting Period are
analyzed below. The amount of audit service fee also included statutory audits and reviews of the Group and certain
subsidiaries. The non-audit services conducted by the Auditor mainly include professional services on tax advisory and
internal control consultation services.

Type of services provided by the Auditor Fees paid/payable

(RMB’000)

Audit services 52,744

Non-audit services 12,539

Total 65,283
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Joint Company Secretaries

Liu Hao, the joint company secretary of the Company, is responsible for advising the Board on corporate governance
matters and ensuring that the Board policies and procedures, as well as the applicable laws, rules and regulations
are followed. Liu Hao joined our Group in August 2018 and is the Company’s legal director overseeing the legal and
compliance affairs in relation to the Company’s corporate governance, capital markets, mergers and acquisitions and
corporate finance activities. Before joining our Group, he worked at Jingtian & Gongcheng Law Firm in Beijing where
he accumulated extensive working experience in corporate governance, capital markets, mergers and acquisitions
and corporate finance. He has previously also worked at another company listed on the Main Board of The Stock
Exchange of Hong Kong Limited, where he was responsible for legal compliance. Liu Hao holds a bachelor’s degree in
law and a master’s degree in civil and commercial law, as well as a PRC legal professional qualification. Liu Hao has
been appointed as joint company secretary with effect from March 25, 2022.

So Ka Man of Tricor Services Limited, an external service provider, has been acted as the company secretary of the
Company during the Reporting Period. The primary contact person at the Company is Liu Hao.

During the Reporting Period, each of Liu hao and So Ka Man has taken no less than 15 hours of relevant professional
training in compliance with Rule 3.29 of the Listing Rules.

Communications with Shareholders and Investor Relations

The Board believes that effective communication with the Shareholders is essential for enhancing investor relations
and investors’ understanding of the Group’s business performance and strategies. The Group also recognizes the
importance of transparency and timely disclosure of its corporate information, which enables the Shareholders and
investors to make the best investment decision. In this respect, the terms of reference of the Company’s Corporate
Governance Committee include, among others, seeking to ensure effective and on-going communication between the
Company and the Shareholders.

General meetings of the Company provide an opportunity for communication between the directors, senior
management and the Shareholders. The Board welcomes views of the Shareholders and encourages them to attend
general meetings to raise any concerns they might have with the Board or the management directly. Board members
and appropriate senior management of the Company are available at such meetings to respond to enquiries raised by
the Shareholders. To safeguard Shareholders’ interests and rights, a separate resolution will be proposed for each
issue at general meetings.
 2023 ANNUAL REPORT 101

During the Reporting Period, the Company held an annual general meeting on June 8, 2023. Notice of the meeting was
sent to the Shareholders on May 12, 2023, not less than 21 days before the date of the annual general meeting. The
chairman of the Board and the chairmen of each of the Audit Committee, the Corporate Governance Committee, the
Nomination Committee and the Remuneration Committee attended the annual general meeting and were available
to answer any questions raised by the Shareholders. A representative of the Auditor also attended to answer any
questions about the conduct of the audit, the preparation and content of the auditors’ report, the accounting policies
and auditor independence.

The Company publishes in a timely manner both English and Chinese versions of (i) any corporate communication (as
defined in the Listing Rules) of the Company that requires shareholder attention or action, and (ii) announcements
relating to matters to be disclosed under the Listing Rules (including but not limited to those involving insider
information, corporate actions and corporate transactions).

The Company maintains a website at “ www.mi.com “ as a communication platform with the Shareholders and
investors, where information on the Company’s announcement, financial information and other information are
available for public access. Shareholders and investors may send written enquiries or requests to the Company, for
the attention of the Board of Directors, as follows:

Address: 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong
Email: ir@xiaomi.com

The Company continues to enhance communications and relationships with Shareholders and investors. Designated
senior management maintains regular dialogue with institutional investors and analysts to keep them posted of the
Company’s developments. Enquiries from shareholders and investors are dealt with in an informative and timely
manner.

The Company ensures that the Hong Kong Share Registrar, Computershare Hong Kong Investor Services Limited,
maintains the most up-to-date information relating to the Company’s shares at all times so that it can respond
effectively to shareholder enquiries.

Shareholders’ Communication Policy

The Company has established a shareholders’ communication policy with the objective of promoting effective and
on-going communication between the Company and the Shareholders so that they can exercise their rights in an
informed manner. The Company endeavors to maintain an on-going dialogue with Shareholders and in particular,
through annual general meetings and other general meetings. Directors (or their delegates as appropriate),
appropriate management executives and external auditor will use all reasonable endeavors to attend annual general
meetings and answer enquiries from Shareholders.
102 XIAOMI CORPORATION

CORPORATE GOVERNANCE REPORT

The Company discloses information and publishes periodic reports and announcements to the public in accordance
with the Listing Rules, the relevant laws and regulations. The primary focus of the Company is to ensure information
disclosure is timely, fair, accurate, truthful and does not contain any material omission, thereby enabling
Shareholders, investors as well as the public to make rational and informed decisions.

During the Reporting Period, the Corporate Governance Committee reviewed the shareholders’ communication policy
and ensure its implementation and effectiveness, particularly with regards to the requirements of Rule 8A.35 of the
Listing Rules.

Dividend Policy
With respect to code provision F.1.1 of the CG Code, the Company has adopted a dividend policy on payment of
dividends. The Company does not have any pre-determined dividend payout ratio. Depending on the financial
conditions of the Company and the Group and the conditions and factors as set out in the dividend policy, dividends
may be proposed and/or declared by the Board during a financial year and any final dividend for a financial year will be
subject to the Shareholders’ approval.

Shareholders’ Rights
To safeguard the Shareholders’ interests and rights, separate resolutions are proposed at the Shareholders’ meetings on
each substantial issue, including the election of individual directors, for the Shareholders’ consideration and voting. All
resolutions put forward at the Shareholders’ meetings will be voted by poll pursuant to the Listing Rules and poll results
will be posted on the websites of the Company (www.mi.com) and the Stock Exchange after each Shareholders’ meeting.

Pursuant to the Articles of the Company, extraordinary general meetings shall be convened on the written requisition
of any one or more Shareholders holding, as of the date of deposit of the requisition, in aggregate shares representing
not less than one-tenth of the paid up capital of the Company which carry the right of voting at general meetings of the
Company. A written requisition shall be deposited at the principal office of the Company in Hong Kong to the Board or
the joint company secretaries for the purpose of requiring an extraordinary general meeting to be called by the Board
for the transaction of any business specified in such requisition. Such meeting shall be held within two months after
the deposit of such requisition. If within 21 days of such deposit, the Board fails to proceed to convene such meeting,
the requisitionist(s) themselves may convene the general meeting in the same manner, and all reasonable expenses
incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to them by the Company.

For the avoidance of doubt, Shareholders must deposit and send the original duly signed written requisition, notice or
statement (as the case may be) to the Company’s principal place of business in Hong Kong and provide their full name, contact
details and identification in order to give effect thereto. Shareholders’ information may be disclosed as required by law.
 2023 ANNUAL REPORT 103

There is no provision allowing the Shareholders to move new resolutions at general meetings under the Cayman Islands
Companies Law or the Articles. Shareholders who wish to move a resolution may request the Company to convene a
general meeting following the procedures set out in the preceding paragraph.

With respect to the Shareholders’ right in proposing persons for election as Directors, please refer to the procedures
available on the website of the Company.

The up-to-date version of the Memorandum and Articles of Association is available on the websites of the Company and
the Stock Exchange.

Constitutional Documents
During the Reporting Period, there were no significant changes in the Memorandum and Articles of Association of the
Company.

Events after the Reporting Period

Save as disclosed in this Corporate Governance Report, there has been no other significant event subsequent to the
Reporting Period and up to the Latest Practicable Date that might affect the Group.
104 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND

GOVERNANCE (ESG) REPORT
About this Report
This is the sixth environmental, social, and governance (ESG) report published by Xiaomi Corporation (“Xiaomi,” the
“Group,” or “we/us”), with an aim to present, on an objective and impartial basis, the ESG strategy, management, and
implementation progress of Xiaomi and its subsidiaries included in the Annual Report in 2023.

The Report was prepared in accordance with Appendix C2 Environmental, Social and Governance Reporting Guide
to the Listing Rules of the Stock Exchange of Hong Kong Limited (HKEx), with reference to the Global Reporting
Initiative (GRI) sustainability reporting Standards (2021), the Hardware — Sustainability Accounting Standard of the
Sustainability Accounting Standards Board (SASB), and the Recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD), and the United Nations Sustainable Development Goals (UNSDGs).

In preparation for the Report, we adhered to the reporting principles of Materiality, Quantitative, Balance, and
Consistency, while taking into account Accuracy, Balance, Clarity, Comparability, Completeness, Timeliness,
Verifiability, and Sustainability Context to define our reporting boundary and ensuring proper presentation of our
reported information.

The Group entrusted BSI Management Systems Certification (Beijing) Co., Ltd. to perform reasonable assurance on
selected ESG KPIs in accordance with the international assurance standards, AA1000 Assurance Standard V3, and
the GRI sustainability reporting Standards (2021). For more detailed assurance procedures and assurance report
conclusions, please refer to the attachment “Independent Assurance Statement.”

This Report covers the period from January 1, 2023, to December 31, 2023 (“this year” or “the reporting period”)
and presents information over a wider time frame spanning before or after 2023 to enhance data comparability and
continuity.

The information and cases within the Report are primarily cited from the Group’s statistical reports, official
documents, and financial statements in 2023. Unless otherwise specified, all currencies and amounts mentioned in
this report are measured in RMB.

The Group undertakes that there are no false records or misleading statements in this Report, and takes responsibility
for the authenticity, accuracy, and completeness of the information in this Report.

It is recommended to read this Report in conjunction with the section titled Corporate Governance Report as
contained in the Annual Report, as well as the Sustainability page (https://www.mi.com/global/about/sustainability/) of
the Group’s official website, and Xiaomi Corporation’s TCFD Report 2023.

This Report is published in both Chinese and English in April 2024. In the event of discrepancies between the Chinese
and English versions, the Chinese version shall prevail.

If you have any suggestions or comments about this report, please contact Xiaomi by the following means:

E-mail: mi-esg@xiaomi.com
 2023 ANNUAL REPORT 105

About Xiaomi
Xiaomi is a consumer electronics and smart manufacturing company with smartphones and smart hardware
connected by an IoT platform at its core, with smartphone shipments among global top 3. In December 2023, the
global monthly active users (MAU) of Xiaomi1 reached 641 million, representing a year-on-year increase of 10.2%.
Xiaomi has also established the world’s leading consumer AIoT2 platform, to which 740.0 million smart devices had
been connected (excluding smartphones, laptops, and tablets) as of December 31, 2023.

In 2023, we continued to make significant progress in our smartphone premiumization strategy. The Xiaomi 14 Series,
our flagship smartphone launched in October 2023, garnered widespread acclaim for its leading-edge technology,
exquisite design, exceptional imaging, and excellent user experience.

In August 2023, we introduced our new goal for 2020–2030, which was to invest in foundational core technologies and
to become a global leader in the evolving realm of cutting-edge technologies.

In October 2023, we upgraded our corporate strategy to “Human × Car × Home” and unveiled our new operating
system, “Xiaomi HyperOS”.

In December 2023, we held our Xiaomi EV Technology Launch event, unveiling Xiaomi EV’s five core self-developed
technologies — E-Motor, Battery, Xiaomi HyperCasting Technology, Smart Cabin, and Autonomous Driving. We also
officially debuted the Xiaomi SU7 Series.

In the pursuit of our strategic goal, we always adhere to our commitment to enriching and improving users’ life
experiences. We are constantly promoting technological innovation, aiming to build a platform of excellence in the
international arena of smart technology, lead the new trend of industry development, and present a richer and more
colorful smart life experience for users around the world.

Board Statement
Xiaomi has implemented effective strategies to balance its environmental and social impacts with business goals and
promote sustainable development of the Group.

The Board of Directors of Xiaomi (the “Board”) firmly believes that continuous advancement of the ESG management
framework is crucial to the sustainable development of the Group. Xiaomi should continue to accelerate business
growth by reducing ESG risks and increasing ESG opportunities, and contribute to a sustainable society through
its business. Therefore, all members of the Group are committed to continuously exploring and improving the ESG
system and driving Xiaomi towards a more sustainable future. To this end, the Board has appointed the Corporate
Governance Committee (the “CGC”) to oversee ESG issues at Xiaomi, with the assistance of the Group’s Sustainability
Committee (the “SC”).

In addition, the Group has integrated key ESG risks into its comprehensive risk management system. Senior management
and business directors are engaged in assessing key ESG risks related to the business. By identifying and assessing
the probability, impact, and trend of key ESG risks, Xiaomi Corporation has developed corresponding risk response
measures. The Board reviews key ESG-related risks on a regular basis and advises on risk management approaches.

1 Note: Including smartphones and tablets.

2 AIoT: Artificial Intelligence of Things.
106 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Xiaomi Corporation continues to develop and improve the Group’s ESG strategy system based on its existing
ESG strategy. On a bi-annual basis, the Board collects and analyzes data required for assessing ESG risks,
and synchronously discusses and reviews relevant strategies and measures. In this manner, it evaluates the
comprehensive impact of various ESG strategies on the Group’s overall finances through scenario analyses of the
performance of the strategies, ensuring alignment with the Group’s development strategy.

During the reporting period, the Board actively participated in the assessment of ESG risks and opportunities and
identified important matters. It focused on supply chain risks, product and service quality risks, among others. The
Audit Committee assisted the Board and senior management in overseeing the Group’s risk management practice,
as well as the design, implementation, and management of its internal control system. Details can be found in the
“Corporate Governance Report” section of the Group’s Annual Report, which has been reviewed and approved by
the Board.

The Board prioritizes gender diversity in Board membership and equality and inclusion undertakings. It continues to
promote a diverse perspective on corporate governance, higher gender awareness, and gender equality within the
organization. In January 2024, the Board reviewed, scrutinized, and approved the appointment of a female director.
For details, please refer to the “Corporate Governance Report” in the Annual Report.

In 2023, the Board looked into ESG issues that substantially impacted business and closely concerned Xiaomi’s
stakeholders, including the ESG strategy and the progress of sub-issues. The assessment process and results are
detailed in the “Stakeholder Engagement” and “Materiality Assessment” sections of this Report.

This year, the Board reviewed the Greenhouse Gas (GHG) emission reduction target of Xiaomi Corporation. For details,
please refer to the “GHG Emission Reduction Target and Carbon Footprint” section of this Report. The Board also
reviewed and evaluated Xiaomi’s operational environmental targets for its delivery progress and the latest adjustment
of these targets and provided recommendations for changes accordingly. Details can be found in the “Environmental
Target Setting and Review” section of this Report.

This Report was reviewed and approved by the Board on March 19, 2024.
 2023 ANNUAL REPORT 107

Stakeholder Engagement
At Xiaomi, we actively listen and respond to the expectations of our stakeholders, uphold transparent disclosure, and
release updates throughout the year on our Sustainability page (https://www.mi.com/global/about/sustainability/). We
have established effective communication mechanisms and diverse communication channels with stakeholders on
material issues to ensure that their opinions and recommendations are being integrated into our decision-making
process. We endeavor to strengthen our positive relationships with stakeholders and strive for mutual benefits and
win-win outcomes on sustainability issues.

Key Stakeholder Issues Most Concerned Main Communication Channels

Users Product and service quality Sales channels, the official website and
Data security and privacy protection applications, product information disclosure, user
Sci-tech innovation service channels, feedback and communication
Data inclusion channels, product launch events, social media,
and Xiaomi Fan activities

Shareholders and Risk management Annual general meetings, annual reports/

Investors Corporate governance interim reports, earnings announcements,
Sci-tech innovation investor meetings and events, the official website,
Corporate strategy and business press releases/announcements, surveys, and
returns questionnaires
Sustainability indicators

Employees Employee rights and communication Work communication meetings, the employee
Employee development and talent feedback email box, internal office software,
nurturing the labor union, employee service channels,
Employee wellbeing organizational ability surveys, training, internal
Corporate culture announcements, and whistleblowing channels
Inclusion and diversity
Work environment

Suppliers Labor rights Executive dialogues, suppliers’ conferences,

Business ethics business and technical collaboration, supplier
Compliance and stewardship audits, empowerment and training, surveys,
Supply chain continuity dialogue and reporting mechanisms
Environmental and social issues

Operators Product quality Executive dialogues, synergy and collaboration,

Technological innovation sustainability seminars, survey and questionnaire
Information security and privacy responses, and third-party audits
protection
Sustainability indicators
Responsible purchasing

Regulators Economic impact Regular inquiries, policy consultations, executive

Legal and regulatory compliance meetings, reporting procedures, on-site
Business ethics inspections, opinion contributions, and meetings
Occupational health and safety and communication with government agencies
Fair competition
108 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Key Stakeholder Issues Most Concerned Main Communication Channels

International Climate change and environmental Social media, industry conferences, forums
organizations and impacts and working groups, seminars, project-based
non-governmental Human rights and stewardship collaboration, and survey and questionnaire
organizations (NGOs) Information disclosure responses
and associations Community engagement
Circular economy
Natural resources and biodiversity

Media Information disclosure The official website, social media, press

Business strategies conferences, press releases/announcements, and
Data security and privacy protection media interviews
Sustainability strategy

Community Environmental impacts Community activities, press conferences, job

Local employment and economic fairs, charity works, and social media
growth
Community welfare and engagement
Natural resources and biological
diversity

Materiality Assessment
Defining Objectives and Scope
We conduct an annual review and analysis of our material issues. Our major stakeholders in this materiality assessment
include investors, the Board of Directors, senior management, partners, employees, and other key representatives
from internal and external roles and organizations. To ensure that Xiaomi is adaptable to the rapid changes in these
issues, any emerging issues, and sustainability demands in the longer term, we have established an ongoing review and
analysis process. It serves as an integral component of our materiality assessment and analysis mechanism to ensure
continued relevance and responsiveness.

Throughout the review and analysis of these issues, we have adhered to the “double materiality” principle. It dictates
that if a sustainability issue poses a significant impact on society or the environment, and also on Xiaomi’s strategic
goals, value drivers, competitive position, and long-term value creation for shareholders, it will be considered as a
material issue with potential ESG attributes.

Our materiality review and analysis aim to identify and consider key sustainability risks and opportunities and to
achieve the following objectives:

• Identifying key sustainability risks and opportunities related to Xiaomi’s business operations, cash flows, legal
or regulatory responsibilities, and access to capital;

• Optimizing our sustainability strategy and aligning it with our business targets;

• Providing sustainability information for Xiaomi’s broader business strategy, with a focus on sustainable growth;

• Determining the core issues to be included in our risk management, sustainability, and annual operations;

• Engaging internal and external stakeholders to collect diverse opinions;

 2023 ANNUAL REPORT 109

• Predicting sustainability issues that may impact Xiaomi’s development trajectory; and

• Setting targets to enhance Xiaomi’s business performance and efforts in sustainable development.

Organizational scope and boundaries:

• Our materiality review and analysis keep a global perspective as well as an eye on operations in specific regions.

• The review and analysis cover various business units, including smartphones, the Internet of Things (IoT) and
lifestyle products, and Internet services, across the Group.

• We take into account key issues throughout the value chain, including our own operations, the upstream (such
as sustainable supply chains), and the downstream (such as waste management and the circular economy).

Identifying Potential Issues

In the initial stage of the materiality assessment, the ESG team, the risk management team, and senior management
collaborated to conduct a comprehensive review of information sources to create a broad list of potential material
issues. During the process, we considered:

• Risks and opportunities at all levels from business operations to the Group;

• Industry practices and comparison with industry benchmarks;

• Internal data reflecting business operations and sustainability impacts in the year;

• International standards, conventions and demands of major regulators, including the Paris Agreement3, the
Guiding Principles on Business and Human Rights4, and the G20/OECD Principles of Corporate Governance5;

• Influential evaluation indices for corporate ESG performance, such as the Dow Jones Sustainability World
Index, and ESG disclosure frameworks and scoring methodologies, such as that of the Carbon Disclosure
Project (CDP);

• More extensive ESG trends and challenges around the globe; and

• Media reports on Xiaomi’s business areas.

We have given comprehensive evaluation of the risks and opportunities within Xiaomi’s context arising from material
issues and relevant external trends. This includes assessing the risk of increased green transition costs associated
with the issue of waste management and the circular economy, identifying the opportunity of potential cost savings
and efficiency enhancement in the issue of product and service quality, and recognizing the potential for new
revenues generated by green products and sustainable practices in the issue of climate mitigation and adaptation.
Moreover, we value the engagement of external stakeholders. We have effectively defined and explained the issues
in communication to solicit valuable feedback. This process entails identifying stakeholders who have a significant
impact on Xiaomi, with a special focus on those who exert the most influence on us, such as investors, users, supply
chain partners, and the media.

3 The Paris Agreement: https://unfccc.int/sites/default/files/resource/parisagreement_publication.pdf

4 Guiding Principles on Business and Human Rights:
https://www.ohchr.org/sites/default/files/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf
5 G20/OECD Principles of Corporate Governance: https://doi.org/10.1787/ed750b30-en
110 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Collating, Determining, and Prioritizing Issues

We strongly believe that utilizing business strategies to address ESG issues is a fundamental approach to achieving
sustainable development. To gain deeper insights into these issues, we have engaged in extensive communication with
internal and external stakeholders. During the process, we utilized various methods, such as questionnaire surveys
(with 2,046 valid responses collected in this survey), on-site visits, essential meetings, telephone consultations, and
online platform communication. These efforts have allowed us to further refine the list of material issues and ensure
a balanced and comprehensive representation of Xiaomi’s sustainability issues from a contemporary perspective.

In the mid-stage of the materiality assessment, we placed particular emphasis on the internal relationships and
potential overlaps between material topics, their alignment with Xiaomi’s business growth targets, and potential
interactions. By gaining insights into these complex relationships, we accurately identified potential systemic risks
and opportunities. Additionally, we took a holistic view to examine how each issue interacts with other factors, thus
affecting both Xiaomi’s business operations and the well-being of stakeholders. This process includes:

• Demonstrating the relationships between each issue and relevant business roles, designing and implementing a
quantitative review and analysis mechanism;

• Identifying the stakeholders associated with each issue and assessing the significance of the impact, with a
focus on the impact on Xiaomi’s value creation;

• Assessing the strategic importance of each issue in implementing strategies, responding to current and future
risks, identifying market opportunities, and fostering business development.

• Assessing and quantifying to the utmost the actual and potential sustainability impacts of each issue, as well as
their relevance to the Group’s major risks.

In this way, we have determined the material issues and their priorities:

Material Issue Governance and Key Business Areas Demonstrated

Product and service quality Smartphones, IoT and lifestyle products, and Internet services

Exploration and accessibility of Smartphones, IoT and lifestyle products, Internet services, and innovative
technology business

Sustainable supply chain Smartphones, IoT and lifestyle products, and innovative business

Climate mitigation and adaptation Smartphones

Data security and privacy protection Smartphones, IoT and lifestyle products, and internet services

Talent development Management infrastructure

Corporate governance Management infrastructure

Business ethics Management infrastructure

Waste management and the circular Smartphones and IoT and lifestyle products
economy

Natural resources and biodiversity Management infrastructure

Social welfare and community Smartphones, IoT and lifestyle products, and innovative business
engagement
 2023 ANNUAL REPORT 111

We have also determined the following three key issues and analyzed their strategies and measures:

Importance to Xiaomi’s
Material Issue Commitment Long-Term Value Strategy

Product and service As always, we are oriented Product and service We continue to deepen

quality by quality and strive to quality is the key to the quality reform, adhere
be the industry’s first in achieving long-term value to the principle of quality
quality and reputation. We and enhancing industry first, pursue industry
treat users wholeheartedly, competitiveness. Superior benchmarks, and place
place users at the center, quality can improve user users at our core. In
and make friends with experience and reduce this way, we ensure that
them. We provide users resource waste and every product meets the
with direct and effective environmental impact high standards of the
solutions and warm service. caused by product damage. Xiaomi brand and drive
We emphasize quality in the Company’s long-term
every aspect, including development and brand
R&D, manufacturing, reputation enhancement in
marketing, sales, delivery the global market.
and service.

Exploration and At Xiaomi, we spare To achieve long-term value We are dedicated to

accessibility of technology no efforts in practicing for Xiaomi, it is necessary technology fields with
the mission that “we to promote innovation long-term value to human
relentlessly build amazing in all its business lines. civilisation and insist on
products with honest To this end, we will long-lasting continuous
prices to let everyone in continue our investment in investment. We encourage
the world enjoy a better research and development innovation and the
life through innovative (R&D) and pursue more pursuit of technological
technology.” In 2023, we breakthroughs in self- excellence by articulating
released a new technology developed technological the Engineer Culture, and
strategy. We will put innovation to provide we advocate teamwork and
efforts into the underlying customers with experiences the professional growth
technology, adhere to at honest prices. of engineers. Xiaomi’s
long-term investment, technology R&D presence
deeply integrate software has entered 12 technology
and hardware, and seek areas and 99 segments,
empowerment of Artificial including self-developed
Intelligence (AI). operating systems, self-
(Software X Hardware) AI developed basic chips, and
5G mobile communication
technology.
112 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Importance to Xiaomi’s
Material Issue Commitment Long-Term Value Strategy
Sustainable supply chain Wherever our suppliers The ultimate efficiency We have reached a
operate, we seek to pursued by Xiaomi cannot consensus with our supply
cooperate responsibly be separated from the chain partners to focus
for win-win outcomes. outstanding performance on key areas such as
We actively support the of its global supply chain protecting the environment,
business and sustainability partners. Sustainable guarding employee rights,
objectives of our global supply chain management promoting employee health
suppliers throughout our can effectively reduce and benefits, improving
business and technology Xiaomi’s operating risks production quality, and
partnerships. We focus and enhance the stability observing business ethics.
on the social and and adaptability of its We also collaborate
environmental impacts supply chain. to address social and
of our supply chain and environmental issues
respect the communities arising from the use of raw
and ecosystems in which materials. We continuously
we operate. We ensure adjust and optimize our
that we agree with our supply chain business
suppliers on protecting the strategies and practices
environment, safeguarding and urge our suppliers to
employee rights, promoting improve their governance
employee health and and risk management. We
well-being, improving collaborate with suppliers
production quality, and by supervising, assisting,
complying with business and communicating with
ethics. We also collaborate them and promote the
to address social and implementation of effective
environmental issues management Programs
arising from the use of raw by suppliers. In this way,
materials. we ensure that Xiaomi’s
sustainable supply chain
commitments are met
and that the products and
services delivered by Xiaomi
to its users are in line with
the Group’s ESG strategy.

We believe in the symbiotic relationship between ESG considerations and business growth. Xiaomi excels at solving
problems through business and efficiency. We have integrated the material issues identified into the Group’s risk
management strategy to ensure the applicability and consistency of the analysis results of them.

Participation of Management and Crucial Feedback

During the reporting period, the Group’s Board of Directors and senior management team looked back on the
materiality review and analysis process and fully discussed the results. Subsequently, they gave replies and provided
recommendations for sustainable development actions based on a broader business strategy. Additionally, we took
into account feedback from key stakeholders and industry experts regarding the results of the materiality review
and analysis. We have implemented an ongoing communication mechanism to ensure the continual strength of our
materiality review and analysis process.
 2023 ANNUAL REPORT 113

Technology Created to Better Lives

Exploration and Accessibility of Technology
At Xiaomi, we regard the innovative technological core of our products and services as an crucial aspect of sustainable
business operations. The development of Xiaomi’s technology system began with an integrated technological innovation,
progressed into autonomous technological innovation, and further delved into disruptive technological innovation to attain
mastery and dominance of key technological domains. We continually push the boundaries of technology, seeking optimal
solutions for technology and interaction. We have established an overall technical architecture with wide coverage, great
span, and depth around six levels: Perception, Communication, AI, System, Computation, and Output.

With the support of an improved technological framework, we are committed to integrating multiple technological
capabilities, increasing R&D investment, and providing users with more convenient, affordable, and widely
applicable products and technologies. Xiaomi’s technology R&D endeavors now span across 12 technology areas,
including 5G mobile communication technology, big data, cloud computing, and AI. Furthermore, leveraging smart
manufacturing, our efforts have expanded into robotics, unmanned factories, and smart electric vehicles (EVs), totally
99 segments. By the end of 2023, we had established 10 R&D centers and employed an R&D team of 17,800, accounting
for 53% of our total workforce. Meanwhile, our R&D expenses reached RMB19.1 billion in 2023, up by 19.2% compared
with the previous year. We plan to invest more than RMB100 billion in R&D over the next five years (2022–2026).

Simultaneously, we are committed to collaborating with partners to broaden technology education opportunities for a wider
audience to promote digital inclusion, in addition to technological equality through extensive technological R&D as well as
application efforts. Over the past decade, we have continuously delivered leading technology products to a growing user
base, driven by deep underlying technological innovation and optimal efficiency throughout the entire chain. Through the
Xiaomi Ecosystem product portfolio, we have also made unique contributions to global digital inclusion and technological
equality development, establishing the world’s leading consumer AIoT platform. To this end, we have upgraded Xiaomi’s
technology strategy, focusing on technology fields of long-term value to human civilization and insisting on long-lasting
continuous investment.

Exploration of Technology

Product Innovation
Xiaomi HyperOS
In the era of everything interconnected, IoT devices involve a huge number of complex operating system branches. The
presence of various systems and protocols often poses challenges to connectivity between ecosystems. In response to
this challenge, in 2023, we consolidated the underlying operating systems of four systems — Xiaomi MIUI, Vela, Mina,
and CarOS — into a unified solution known as Xiaomi HyperOS, a human-centered operating system for the “Human ×
Car × Home” smart ecosystem. The system is committed to achieving the following goals:
114 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

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Xiaomi HyperOS, with a reconstructed underlying structure, maximizes the efficient utilization of the device hardware
capabilities of Xiaomi’s diverse product range. With underlying support for more than 200 processor platforms
and more than 20 common file systems, Xiaomi HyperOS caters to hundreds of device categories and thousands
of commodities, significantly enhancing the single-end performance of a device. Through precise hardware
resource scheduling, Xiaomi HyperOS optimizes device performance and efficiency. On lightweight devices with
limited arithmetic power, Xiaomi HyperOS delivers to users a smoother operating experience and superior energy
performance with its advanced performance scheduling.

Xiaomi HyperOS facilitates seamless connection and real-time interconnection between devices, eliminating barriers
between various hardware and harmonizing all connected devices. Xiaomi has independently developed Xiaomi
HyperConnect, a cross-end interconnection framework that operates atop the core system. Xiaomi HyperConnect
enables real-time networking and collaboration among ecological devices and also supports swift cross-device
communication. Additionally, it offers features such as network discovery, data transmission, and message distribution,
thereby providing users with an unprecedented Internet experience.

Xiaomi HyperOS deeply integrates large language model (LLM) technology and creates eight major subsystems
including the AI subsystem. These subsystems establish an intelligent operating environment, in which the core AI
subsystem bolsters individual devices’ AI capabilities and makes the entire ecosystem smarter. This advancement
enables devices to proactively comprehend user needs and respond accordingly. Leveraging LLM technology, the
system can understand user habits across devices and offer personalized automation suggestions.
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Xiaomi HyperOS is committed to the principle of openness and strives to foster an open smart ecosystem. We open
the cross-end interconnection framework capabilities of Xiaomi HyperConnect to all application developers and
smart hardware manufacturers. At present, over 9,000 smart hardware device manufacturers across more than
200 categories have access to this system. Xiaomi’s self-developed Xiaomi Vela is also open-sourced for all IoT
developers6 to support the global developer community. For more information, please refer to the Xiaomi HyperOS
Technical White Paper7.

Everything Interconnected
In our strategic practice of the “Human × Car × Home” smart ecosystem, we have established the world’s largest
consumer-grade AIoT platform, leading global smart living through innovative models and continual enhancement of
interconnectivity. Since the development of the Xiaomi ecosystem in 2013, our team has dedicated a decade of effort
to harnessing algorithms in smartphones and AIoT devices. Our achievements include the bionic quadruped robot
and MiLM-6B, our self-developed 6B large language model (LLM), which has been ranked first among LLMs with the
same parameter scale in the reputable Chinese review lists C-EVAL and CMMLU.

Xiaomi’s smart hardware is entering countless homes and penetrating various life scenarios. With the introduction
of smart home products in dozens of categories, such as Xiaomi Smart Speaker, robot vacuums, and smart TVs, we
have touched upon every aspect of users’ lives. Xiaomi has become the world’s largest consumer IoT platform, with
740 million devices (excluding smartphones, tablets, and laptops) connected to our AIoT platform, a year-on-year
increase of 25.5%. The number of users possessing five or more devices (excluding smartphones, tablets, and laptops)
connected to Xiaomi’s AIoT platform has reached 14.5 million, a year-on-year increase of 25.3%. Moreover, the Xiaomi
AIoT platform is the smart hardware ecosystem with the most comprehensive category coverage. It encompasses
more than 200 major categories of smart home appliances that cater to more than 95% of life scenarios, continuously
spreading intelligence. The interconnection of smart home products has delivered the utmost convenience and an
unparalleled smart living experience to users around the world.

While leading the industry with our AIoT technology, we are committed to fostering technological innovation and
advancement within our ecological chain partners. In November 2023, we hosted the IoT Ecosystem Partner
Conference, where we unveiled the Open-source Sharing Program with our IoT ecosystem partners. Through
initiatives such as the open-sourcing of Vela and the introduction of the Xiaomi HyperOS Connect technology brand,
we strive to empower smart ecosystem partners, practitioners in the home industry, and individual developers to
integrate seamlessly into the Xiaomi AIoT ecosystem and join hands to build the world’s largest “Human × Car ×
Home” smart ecosystem.

Xiaomi EV
In December 2023, we unveiled our groundbreaking progress in five key technologies of smart EVs: E-Motor, Battery,
Xiaomi HyperCasting Technology, Xiaomi Pilot Autonomous Driving, and Smart Cabin. We are reimagining the
technology stack that defines the automotive industry, starting with the underlying core technologies, to ensure that
Xiaomi EV leads in all aspects of the transportation industry’s evolution to a more sustainable future.

• Collaborating with globally leading teams, we have developed Xiaomi’s HyperEngine series, V6, which is
featured in Xiaomi’s first full-size high-performance eco-technology sedan, Xiaomi SU7 Series. The Xiaomi
HyperEngine V6 delivers a maximum power output of 220 kW PS and a maximum torque of 400 Nm, while the
Xiaomi HyperEngine V6s achieves a maximum power of 275 kW and a maximum torque of 500 Nm. The two
HyperEngines boast a speed of 21,000 rpm, positioning them at the forefront in the world.

6 Xiaomi’s IoT developers’ platform: https://iot.mi.com/vela?language=en

7 Xiaomi HyperOS Technical White Paper: https://cdn-file.hyperos.mi.com/hyperos-file/⯑䰵㽐㸅15㉂㛱䘿䙰ḨV1.0.pdf
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• We have developed a new super 800-V silicon carbide high-voltage platform, with a maximum voltage of 871 V.
With whole-link and no-dead-angle thermal safety protection, we have adopted the world’s most stringent
thermal failure safety standards: At a temperature of 55°C, a fully charged battery can prevent heat dispersion,
even in the absence of an operational water cooling system, thereby optimizing energy efficiency. For quality
assurance, we have established our own battery pack factory to guarantee the performance and quality of the
battery from the source.

• Xiaomi’s self-developed 9100t Xiaomi HyperCasting Technology Cluster represents a significant advancement
in production efficiency and energy conservation compared to traditional automobile manufacturing, thus
maximizing material efficiency. Collaborating with a national key laboratory of materials, we have developed
Xiaomi Titans Metal, the Xiaomi Hyper Die-Casting alloy material, using our self-developed Multi-Material
Performance Simulation System through tens of thousands of simulation experiments. This alloy ensures robust
structural components of the vehicle and guarantees stable performance for the body. These achievements
demonstrate Xiaomi’s unwavering commitment to environmental protection, efficiency, and safety in automobile
manufacturing. Leveraging Xiaomi HyperCasting Technology, Xiaomi EV prompts a new era of sustainable
development as an environmental pioneer in the industry.

• In the Xiaomi Pilot Autonomous Driving, we have developed three key perception technologies for smart driving,
Adaptive BEV Technology, Road-Mapping Foundational Model, and Super-Res Occupancy Network Technology.
Our Adaptive BEV Technology is the first of its kind in the industry, which facilitates more precise parking
scenarios and wider urban scenarios. Our Road-Mapping Foundational Model learns complex road conditions
and drivers’ driving habits to draw more rational driving trajectories. Our Super-Res Occupancy Network
Technology can identify an extensive range of irregular-shaped obstacles.

• Based on Xiaomi HyperOS, Smart Cabin has built a unified visual interaction system and created a
comprehensive shared ecosystem spanning from software to hardware, which provides users with the most
convenient driving experience. The Smart Cabin marks that Xiaomi’s “Human × Car × Home” smart ecosystem
has officially closed the loop.

Smart Manufacturing
The rise of smart manufacturing and digital technology is driving greater efficiency in resource utilization, reducing
waste reductions, and facilitating ecological restoration. As an industry spearhead, Xiaomi is committed to delivering
innovative solutions to the manufacturing industry, enabling a fully digitalized management system across the
entire value chain. By implementing precise product operations and management, we not only reduce costs but also
increase productivity, highlighting the crucial role of digital efficiency in bolstering business competitiveness.

From Smart Factory to Smart Manufacturing

Xiaomi actively participates in the intelligent transformation of the manufacturing industry through practice,
investment, and collaborations. In the year, Phase II of Xiaomi Smart Factory was completed and delivered as a whole.
By 2024, upon the completion of the installation and commissioning of all production lines, the company will have a
capacity of up to ten million smartphones annually. Our Smart Factory, equipped with automated production lines,
has achieved fully automated lights-out production across various processes including production management,
mechanical processing, packaging, storage, and transportation. Our smart production line systems and technologies
are highly self-developed. As of December 31, 2023, Xiaomi had obtained more than 520 patents in the field of smart
manufacturing worldwide. Xiaomi Smart Factory also serves as an “experimental field” for new processes, new
materials, new technological pre-research, smart equipment R&D, and automated production.
 2023 ANNUAL REPORT 117

Xiaomi Smart Factory implements an innovative “module + platform” approach, effectively tackling some of the
industry’s most intractable challenges and highlighting the immense potential of fully automated production
lines. The Smart Factory is specifically designed to match the needs of different materials and manufacturing
processes, allowing for flexible production and quick assembly line alterations at the user end. The solution
offers tremendous flexibility and allows for quick adaptation to the constantly changing market requirements.
This creates a standardized manufacturing platform that could be adopted to accommodate diverse production
needs and dynamic market demands.

By combining modules in different ways, over 180 types of process equipment have been installed in the
assembly line which led to a reduction in line-alteration costs and an expedition to the delivery cycle. The
equipment module reuse rate has increased from 50% to over 80%. In this agile production model, the
first-pass yield rate has been raised by over 5% compared to the conventional process, with a production
efficiency boost of approximately 60%, while significantly reducing unit equipment processing capacity and
energy consumption.

We have been exporting our smart manufacturing solutions to empower our partners in the manufacturing sector.
Several of our supply chain partners have already adopted the full set of Xiaomi’s smart production process and
operation system to facilitate their transition towards a highly efficient, low-energy, and intelligent manufacturing
hub. We remain committed to leveraging our unique experience in smart manufacturing to drive positive change.
While enhancing the upstream manufacturing sector, we will collaborate with numerous downstream eco-chain
companies to support China’s transition and upgrade towards smart manufacturing with Internet efficiency.

Digital and Smart Operations

Digital efficiency has gradually become a key differentiating factor in enhacing the competitiveness of the Group
and the country. At Xiaomi, we have developed a range of advanced digital tools, including the AIoT platform, retail
management platform, and smart manufacturing and supply chain management platform. These technologies enable
us to create a data loop across the “supply chain and manufacturing — distribution — product — user” cycle. Utilizing
big data and AI algorithms to build a central control platform, we apply intelligence in coordination, prediction, and
operations in multiple scenarios, enhancing the overall efficiency of the industry.

• In the production stage, we establish a data-based factory by integrating data across “equipment — industrial
control — data acquisition and monitoring — operational management — enterprise.” This approach enables
automated production, enhances production efficiency, and reduces material and energy consumption in
product processing.

• In the supply chain, Xiaomi values close collaboration with our ecosystem partners, including parts suppliers,
manufacturers, logistics companies, and more. Together, we develop a digitalized management system to
facilitate information sharing and synchronized operations, optimizing the efficiency of the entire value chain.

• In the retail end, Xiaomi’s new retail model has revolutionized the industry by fully digitizing every aspect of the
entire process and all underlying elements, encompassing people, goods, stores, rewards, promotions, and
training. We have implemented the traffic models, and user management models to establish an end-to-end
digitalized closed loop, empowering data-driven decision-making and business growth. Our new retail model
employs a unified set of pricing, models, and systems capable of addressing diverse levels, industry trends,
and market demands, successfully integrating digital infrastructure into sustainable development innovation
solutions (Ecomagination).
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Extreme efficiency empowering climate actions

• Digitalization and data analysis: We leverage advanced data analytics to optimize resource allocation, reduce
energy consumption, and minimize waste generation. In the future, we will further strengthen data-based
resource efficiency models, including climate-related indicators and analysis, to guide sustainable decision-
making and operations.

• Value chain climate adaptation: By utilizing AI-based stock allocation models, we can meet consumer demands
and enable big-data-based product selection, smart stock allocation, and one-click sourcing. We can also
predict and mitigate the impact of climate-induced disruptions on our supply chain. By optimizing logistics
operations and improving inventory turnover and shipping efficiency, we reduce carbon emissions and help our
suppliers adopt climate-resilient initiatives.

• Product lifecycle management: Through end-to-end digitalization, we take a “cradle-to-cradle” approach

to managing product lifecycle, reducing the generation of waste and minimizing the demand for new and
virgin resources.

• Guiding consumers toward making sustainable choices: By providing transparent digital flow data about
products, we offer information on environmental footprints and incentives for consumers to foster sustainable
consumption choices and behavior and create a more enjoyable customer experience.

• Smart inventory management: Leveraging AI and big data analysis for smart inventory management ensures
efficient stock levels to meet consumer demands while minimizing excess inventory and emissions related to
storage and waste generation.

Industry-University Cooperation
At Xiaomi, we have long been committed to fostering deep integration of industry, academia, and research, and
cooperated with universities and colleges to nurture young students’ professional strength, innovation ability, and
problem-analysis and problem-solving capabilities. Through the establishment of the Xiaomi Workshop in partnership
with many universities and colleges across China, we focus on seven key cooperation areas (including the Xiaomi
Lecture, technology competitions, joint innovation training, university-level forums for master and doctoral students,
and collaborative industrial research). These initiatives aim to empower student employment, incubate innovation
and entrepreneurship projects as well as the transformation of industrial research outcomes, and advance new
engineering disciplines based on the integration of industry and education.

Robotics
We have developed series of bionic robot for consumers and developers. By the end of 2023, Xiaomi’s bionic robot
series had been granted more than 140 valid patents worldwide. More than 270 applications are under review, among
which Humanoid Drummer and the bionic robot have been showcased in leading industry journals such as IEEE
Spectrum. Throughout the year, the Xiaomi Robotics Team collaborated with universities and colleges to organize
numerous robotics competitions and engage in joint research on the intelligent control and intelligent perception of
quadrupedal robots. Additionally, we have been active in voicing at international conferences such as the World Robot
Conference 2023 to bolster industry development.
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Xiaomi’s Accessibility of Technology

Vision for Accessibility of Technology

In the midst of the burgeoning digital era, we remain steadfast in our mission to “let everyone in the world enjoy
a better life through innovative technology” and “bridging the digital divide and making information accessible for
all.” Driven by these guiding principles, we are dedicated to building an equal and inclusive digital ecosystem. Over
the years, we have been unwavering in our commitment to maintaining our hardware net profit margin below 5%,
thus reducing the price threshold for technological products and making technology accessible. With our business
footprint spanning over more than 100 countries and regions around the world, we strive to dismantle economic and
geographic disparities, ensuring that the benefits of technological advancement reach every corner of the globe.

At Xiaomi, we embrace the values of inclusivity, diversity, and equality. We endeavor to make our products as equal,
inclusive, friendly, and accessible as possible, enabling everyone to benefit from the support of Xiaomi’s technology
and enjoy a better life. For more than a decade, we have prioritized inclusive technology. With continued efforts
in accessibility features and adaptations, our focus has expanded from product accessibility to a human-centered
support system for people with disabilities. Furthermore, recognizing the information barriers faced by people with
disabilities, we are committed to creating a barrier-free digital world for this group by providing easy-to-use smart
terminals and accessible information services.

Inclusive Technology
At Xiaomi, we uphold the concept of inclusive technology and have always been committed to promoting the mission
of inclusive technology through technological development and application. Our goal is not only to enable people with
disabilities to benefit from technology but also to offer technology experiences and tools that cater to the needs of users
facing difficulties in life due to social exclusion, and situational disabilities8. We prioritize the development of a Human-
centered Accessibility Support System, aim to gain insights into the inconveniences caused by various disabilities in
life from a more diverse perspective, and constantly deepen our understanding of the needs of people with disabilities
and their situational contexts. Leveraging AI technology, Xiaomi HyperOS now offers comprehensive services for
people with disabilities from three aspects: vision, hearing, and body with auxiliary features such as accessibility
haptic feedback, Xiaomi Ambient Sound Recognition, and AI Dialing Assistant, we provide a richer experience for users’
personalized needs. The Human-centered Accessibility Support System has been integrated into Xiaomi HyperOS,
providing users with an all-around barrier-free interaction experience. With rich ecological connections and the voice
control of AI Assistant, it also serves as a conduit for breaking down barriers and promote social integration.

Hearing Inclusion
At Xiaomi, we have been dedicated to solving communication challenges in hearing impairment scenarios. Relying on
speech-to-text technology, the Xiaomi Sound Recognition Function (real-time subtitle) and the AI Dailing Assistant
solve the communication inconvenience in daily face-to-face communication scenarios such as traveling and
shopping, as well as in call scenarios, thus significantly improving users’ communication experience.

Moreover, the Ambient Sound Recognition function effectively supplements users with a hearing impairment in
perceiving ambient sound information. This technology recognizes 14 key ambient sounds, including fire alarms, baby
cries, and kettle boiling sounds, providing critical safety and warning information to users with a hearing impairment.
We have extended this feature to smart home devices (for example, Xiaomi Smart Family Screen), which allows
users to monitor sounds of concern to users in their homes and send real-time notifications. This provides additional
security for users with a hearing impairment in their homes.

8 Situational disabilities: The term refers to disabilities that arise from specific situations or environments that affect people’s ability to interact with
technology.
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Xiaomi’s product design covers a wide range of usage scenarios for people with a hearing impairment. For
users unable to use the voice interaction function, the gesture control feature of the Mijia DreamE Light allows
for customized control of smart home devices through simple gestures, providing an efficient and easy-to-use
alternative. Users with a hearing impairment can easily control smart home devices, free from voice commands
or cumbersome smartphone operations.

Vision Inclusion
At Xiaomi, we have put efforts into enhancing independent and private information processing technology for visual
impairment scenarios, catering to users’ operational needs. Our OCR9 image- and text-reading technology solutions
empower users with a visual impairment to access text information from paper documents or product packaging
with simplicity and precision. We have also streamlined the interaction of our text-reading technology, implementing
automatic reading and segmented reading to simplify the text detection process. These enhancements improve the
efficiency and accuracy of users’ screening and processing of information in visual impairment scenarios. To better
cater to the needs of users with a visual impairment, we have provided accessibility functions such as Read Aloud with
Selection, Screen Zoom, and Text Contrast.

Body Inclusion
At Xiaomi, we harness the capabilities of a technology company to assist people with a physical impairment in
overcoming life barriers and lead convenience and a fun life. We have launched the first Android phone with voice
control support, empowering users with a physical impairment to control their mobile phones through converting
hand operation movements into voice commands. This innovation make it easier for them to navigate their daily lives.

We have also provided an accessible “Touch and Hold Delay” feature. It ensures that extended taps will not be
mistakenly recognized as long presses, alleviating difficulties in operating mobile phones in situations involving
physical impairments.

Accessibility Application in Smart Homes

We have introduced the new Xiaomi HyperMind technology in Xiaomi HyperOS, revolutionizing smart homes with
its “Active Intelligence” innovation and significantly enhancing the convenience of life for people with complex
disability needs. Transcending the limitations of the traditional command-based smart home, HyperMind leverages
its perceptual capabilities encompassing the environment, vision, hearing, and behaviors upon the user’s permission
to learn the user’s habits and preferences, based on which it makes autonomous decisions using AI and proactively
delivers services in appropriate scenarios. For users with limited perception, memory, judgment, and decision-
making abilities, HyperMind serves as an active assistant even before the user realizes the need or when the user
fails to complete the operation due to physical limitations. This proactive assistance alleviates the user’s difficulty in
adapting to the operation of the smart home and enhances the autonomy of life.

Continued Innovation in Inclusive Technology

Leveraging Xiaomi’s multifaceted and diversified leading technologies, we hosted the fourth Hackathon Technology
Competition of the Group this year. With a deep understanding of societal needs, Xiaomi’s engineers contributed
Xiaomi wisdom to tackling accessibility challenges. They introduced AI Identification Glasses that feature multi-modal
recognition and developed ambient sound detection technology and gesture interaction intelligent control technology,
practically satisfying the needs of users with disabilities. Xiaomi’s engineers remain committed to innovating and
applying accessibility technology to benefit millions of people with disabilities through technological advancements.

9 OCR: Optical Character Recognition. It refers to the technology for printed characters that optically converts the characters in a paper document
into black-and-white dot-matrix images and then converts the characters in the image into texts using recognition software.
 2023 ANNUAL REPORT 121

Technology Ethics and Digital Inclusion

Technology Ethics
At Xiaomi, we place significant emphasis on gender, religious, and cultural inclusion in the application of AI
technology. This approach guides us in designing products and services that prioritize the needs of all users.
Under the guidance and supervision of the AI Ethics Committee, we are dedicated to upholding ethical guidelines
and adhering to regulatory requirements that promote digital equality in the application of AI technology. We have
established and implemented the Xiaomi AI Ethical Principles, which address AI law, privacy, security, transparency,
and accountability, and apply to Xiaomi’s product development and applications. Through comprehensive and
systematic training, we have raised the awareness of digital inclusion in every employee.

In the field of AI, we have established the standards of Xiaomi Corporation for products accessing LLM algorithms.
These standards are designed to govern the development and application process to foster the healthy, ethical,
and secure development of Xiaomi’s products accessing LLM algorithms and to prevent the security, privacy, and
compliance risks in the development and application process. The standards are aligned with the Cybersecurity Law
of the People’s Republic of China, the Data Security Law of the People’s Republic of China, the Personal Information
Protection Law of the People’s Republic of China, and the Law of the People’s Republic of China on Scientific and
Technological Progress. We:

• Implement compliance processes for algorithms’ compliance assessment and pre-launch security testing;

• Formulated comprehensive security compliance requirements covering LLM sources, algorithm development
process, training data10, model application and deployment, as well as specific requirements to safeguard users’
rights and interests with respect to the handling and transparency of users’ personal information;

• Remove biased and hate data during the raw data cleaning phase;

• Collect data from different sources and scenarios to increase the diversity of data sources and avoid possible
data bias and discrimination;

• Utilize annotated data to train specialized security models to assess whether the generated content exhibits bias
and discrimination, and continuously iterate LLMs by means of reinforcement learning; and

• Evaluate model performance using multiple metrics in across various dimensions, prioritizing not only the
accuracy and utility of the generated content but also on its security and fairness.

Elderly Friendly Retrofits

At Xiaomi, we are actively bridging the digital gap for the elderly cross, facilitating their integration into the digital era
and enabling them to reap the benefits of digital advancements. Tailoring our solutions to their specific needs, we have
introduced numerous elderly-friendly retrofits across our mobile phones, smart TVs, and smart home devices. For
users going out or facing difficulties in the use of mobile phones, features such as Family Guardian offer invaluable
support. Moreover, we simplified the operation path of the software system, making it smoother and simpler to use
smart devices. Through features such as High Volume Mode, Triple-Click Zoom, and Read Aloud with Selection, our
elderly-friendly design delivers a new experience for elderly users to comfortably navigate smart devices.

10 Training data: All data that are directly used as inputs for model training, including input data from training processes such as pre-training,
supervised fine-tuning, and reinforcement learning.
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Protection of Minors
At Xiaomi, we always put the protection and healthy development of minors in the first place. As per the Law of the
People’s Republic of China on Protection of Minors, the Cybersecurity Law of the People’s Republic of China, the
Personal Information Protection Law of the People’s Republic of China, and other pertinent laws, we have developed
the Xiaomi Account Rules on the Protection of Children’s Personal Information11, which outline that when collecting,
using, transferring, or disclosing the personal information of minors, it is mandated for us to inform and obtain the
consent of their guardians. These rules also delineate the information collected and its usage on smartphones, smart
TVs, and audio devices.

In the Chinese mainland, Xiaomi TV’s Kids Channel adheres to the mission of “creating a children’s platform
for fun companionship and learning through play to ensure that every child enjoys a wonderful childhood” and
focuses on the four value aspects: safety, growth, fun, and companionship. With refined service design and
technological innovation, it ensures the safe and healthy development of minors in the digital world. Our “Pure
Mode” and rated and age-graded design customize our content recommendations to ensure that we accurately
locate appropriate content that meets children’s cognitive and comprehension abilities. In the year, we
launched the Museum Cinema popular science channel, enlightenment courses, interactive thinking exercises,
digital illustrated books, and other quality resources. For details, please refer to the “Support for Education”
section in this Report.

In the Chinese mainland this year, we upgraded the content of Xiaomi Kids Channel under the guidance of the
industry’s first Blue Paper on Film and TV Viewing Guides for Minors jointly developed by a university. The
upgrade, which covered our five major hardware products, namely, smartphones, smart TVs, tablet PCs, stereos,
and children’s watches, further enhanced guardians’ guidance and supervision on minors’ digital behaviors. We
have also launched anti-addiction functions, such as film viewing time control, eye protection mode, the child
lock, and posture reminder, to protect children’s physical and mental health in an all-around way.

Product and Service Quality

Product Quality
We advocate the Big Quality Concept of User-centric, Integrating Product Quality, User Experience and Service
Quality, with Full Participation and Closed-loop Management Across the Lifecycle, and always implement the
management concept of Quality Is the Lifeline of Xiaomi. We have established a comprehensive quality management
system for our quality management targets, as our relentless pursuit is to deliver the ultimate product quality and
service experience to our users. The Quality Committee of Xiaomi Corporation (the “Quality Committee”) coordinates
the quality management of the whole Group and formulates the Group’s quality policy, objectives, quality management
mechanism and requirements. Building upon this foundation, each business line continuously improves its quality
management methods and measures, adhering to the ISO 9001 quality management system standards. Throughout
the year, our business units of smartphones, tablets, laptops, home appliances, smart TVs, and IoT products either
obtained or maintained ISO 9001 management system certification.

11 Xiaomi Account Rules on the Protection of Children’s Personal Information: https://static.account.xiaomi.com/html/childPrivacy/en_US.html

 2023 ANNUAL REPORT 123

Product Quality Management

At Xiaomi, we always insist on providing amazing products with honest prices. We continuously strive to maximize
product quality and user experience by refining the quality management system, improving the management process,
and performing procedure-based, standardized, and IT-based quality management. In 2023, we reinitiated the quality
reform, upgrading the focus to “raising the bar and striving to be an industry benchmark.” As part of this effort, we
have issued the Quality Organization Construction Guidelines of Xiaomi Corporation and guided each business unit to
set up a Business Quality Committee. In this way, we established a robust quality management organization for the
business units and ensured standardized and procedure-based quality undertakings.

We have established a quality management system with distinct Xiaomi characteristics in light of Xiaomi’s business
model. This year, we introduced an updated program document, the Group Quality Manual 2.0, adding strategic
elements such as quality planning and medium- and long-term objectives. Aligned with the Group’s development
strategy of the “Human x Car x Home” smart ecosystem, we have devised a three-year quality plan with specific
targets. Our objectives include enhancing comprehensively improving the maturity of our business quality
management, establishing an industry-leading business high-quality delivery system and a high user experience
assurance system, listening to and understanding users’ needs, improving quality expertise across the business
chain, and continuing to foster a quality culture that puts “quality first” among all employees.

We have adopted and optimized the IPD12 process system establish Mi-IPD, a closed-loop system aimed at
enhancing whole-link hardware quality and experience. The system is designed to expedite the product cycle, from
conceptualization to market launch, through cross-departmental collaboration and refined project management.
Throughout this process, we remain committed to continuous improvement in product quality and user experience.
We deeply integrate key departments such as marketing, development, supply, manufacturing, service, finance, and
procurement, creating a flexible and efficient cross-functional project team.

In terms of quality management, the cross-departmental team conducts predictive analyses of fault feedback ratios
(FFRs), effectively identifying and preventing potential homogeneous problems. This approach enables issues to be
resolved before launch, thereby reducing product risk and improving customer satisfaction. By leveraging the EWP
(Early Warning Program) alongside with medium- and long-term closed-loop analysis, we monitor every aspect of the
product from design to production for quality and continuous improvement, fortifying our quality management system.
Xiaomi’s quality responsibility division and review mechanism ensures individual accountability for problem resolution
and the development of targeted quality improvement strategies. This accountability-to-individual management
approach improves the efficiency and accuracy of our problem-solving efforts. In addition, the seamless coordination
between our R&D and service ensures that direct transfer of customer feedback to the quality assurance team,
allowing for precise product quality enhancements that align with market and user needs.

With these measures, we have created an all-around quality management closed loop from early warning to
problem-solving, from responsibility tracing to continuous improvement. This robust closed-loop system enables
swift responses to market and user feedback, reduces the likelihood of quality accidents, and enhances internal
management efficiency and effectiveness, thus propeling us towards higher quality management objectives.

During the year, we received 32 external awards for quality, including a CAQ Quality Technical Award from the China
Association for Quality and three Business Improvement Case Awards from the China Quality Club. During the
reporting period, Xiaomi’s products did not experience any product quality accidents due to health or safety issues,
and the Group did not experience any product recall events in domestic or international markets.

12 IPD: Integrated Product Development. The IPD management system encompasses the complete process of product planning, development, and
lifecycle management from customer requirements to product retirement.
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Product Quality Improvement Initiatives

In 2023, we completed 249 product quality improvement projects, including the Global Continuous Quality
Improvement Project for Redmi Products, the Mobile Phone Manufacturing Yield Improvement Project, the Notebook
Quality Improvement and Enhancement Project, the Critical Quality Improvement Project for Cabin Voice, and the
Tumble Washer Noise Improvement Project. These projects cover smartphones, tablets, laptops, major appliances,
smart TVs, and IoT products.

For smartphone products, we have implemented a smartphone hardware quality system that integrates the four
dimensions of design, simulation, testing, and after-sales in a closed loop. This structured approach has enabled a
science-based and sound quality index system. During the year,

• We have achieved a positive feedback rate of over 99% on e-commerce platforms, and the net promoter score
(user experience surveys based on product quality) has increased by over 20% for three consecutive generations.

• Through comprehensive enhancements to our camera structure reliability simulation process, we have
developed science-based and leading reliability analysis methods and analysis capabilities, effectively
pre-empting reliability risks.

• We have completed the construction of simulation systems in key areas such as touch control on smartphone
displays and device structure. These systems have been integrated into the project development process
with continuous iteration and upgrading. As of the end of 2023, Xiaomi’s smartphone simulation system had
undergone over 2,000 simulation iterations and intercepted over 450 risks.

• We have established an abnormality management mechanism for all product lines to address challenges in
product line problem management. We performed closed-loop management in design, testing, production,
materials, and processes. Furthermore, we have proposed special studies on various technologies to address
different hardware issues and fully implemented them.

• We focus on developing and optimizing the quality index system. By establishing information technology and
intelligent standards, we have continuously optimized our R&D quality. As a result of these efforts, the overall
FFR of our smartphone products decreased to 36% compared to the previous year.

For wearable products, we have undertaken several projects aimed at optimizing pain points and improving hardware
and software quality. These projects target Bluetooth rate, battery life, app experience, charging and discharging, and
switching on and off. As a result, the FFR of our watch series decreased by an average of 57% during the year.

In 2023, We have launched a battery quality improvement project. In 2023,

• To extend the battery life, we have optimized the degradation of the core system materials by implementing a
multi-scenario battery health maintenance strategy.

• We have developed a battery cycle aging estimation strategy. Through the integration of Xiaomi’s self-developed
Starfish algorithm and big data models, we effectively enhanced battery quality and smartphone endurance.

• We introduced the Xiaomi Starfish algorithm. The Redmi K70E smartphone achieves 90%13 battery capacity
retention under heavy-duty scenarios14.

13 90%: The battery cell presents a capacity retention rate  90% for 1,000 heavy-duty long cycles under a standard laboratory environment. The data
is derived from the Xiaomi Lab, and the actual operation may vary slightly depending on the test environment, conditions, and other factors.
14 Heavy-duty scenario: It refers to the higher discharge current generated when the high energy consumption features of a smartphone are in use.
 2023 ANNUAL REPORT 125

Quality Awareness Enhancement

We prioritize the development of employee quality awareness. This year, we launched online and offline quality training
courses covering the Group’s quality system, product safety compliance requirements, quality management system,
and quality management tools. These courses aim to instill Xiaomi’s core values in quality within our workforce and
improve their quality awareness and professional capabilities. In 2023, we conducted general and specialized quality
courses and tests for the quality staff and core position holders, along with core specialized courses for international
business personnel. During the reporting period, we introduced the Group Quality Manual 2.0 and organized a “Quality
Quiz for Everyone.” A total of nearly 28,000 people completed and passed the quality assessment.

The continued growth of Xiaomi hinges on our professional quality management team. Therefore, we have accelerated
the cultivation of quality management professionals through the certification of quality managers of the China
Association for Quality (CAQ), Six Sigma Black Belt and Green Belt, and Performance Excellence Self-Assessors.

Service Quality
At Xiaomi, we are committed to providing user-centered service. We take multiple measures to continuously expand
our service offerings and always prioritize the swift and effective resolution of user issues. To enhance service quality
and bolster each department’s service quality management, we have instituted special performance indicators for the
service department. Adhering to the SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) criteria, we
have fortified our service quality management across multiple dimensions. In the process of determining and handling
quality incidents, we integrate service quality management with business quality improvement. We summarize
lessons from quality accidents and promote the experience of service quality improvement, thereby comprehensively
enhancing the quality awareness of all employees and service providers.

In terms of the process system, we have established and optimized the Issue-To-Resolution (ITR) process system15
to streamline our response to user feedback and enhance problem resolution efficiency. This system facilitates
closed-loop quality management from identifying problems to resolving them, thereby delivering Xiaomi’s quality
service to customers and significantly improving user experience.

For user inquiries and complaints, we adopt the approach of immediate responses and mobilize resources from all
departments to ensure efficient response and accurate, prompt, and reasonable resolution of all user issues. We
review customer complaints every week and analyze them across multiple channels and dimensions, take improvement
measures, and monitor their effectiveness. To facilitate user communication, we have established multiple channels,
including online tools and stores, to actively address all customer concerns. Leveraging the ITR process system, we
address user issues to continuously improve the user experience.

In terms of IT, we have implemented targeted measures to elevate the customer service experience through
technological innovation. Recognizing the growing demand for consultation and warranty, we have meticulously
developed an online service system with processes for display and inquiry. Our goal is to provide users with a
straightforward and easy-to-use platform, where they can easily access the required product information, solutions,
and warranty status. In 2023, we displayed details of refunds and charges and corresponding explanations to
customers on our official website, ensuring transparency of customer service information. This has resulted in a 33%
reduction in customer complaints over refund information and relevant issues.

15 The ITR process system: The construction method and management process for an Issue-To-Resolution customer service system. Specifically, it
refers to a customer-centered service process from problem identification to problem resolution, thus creating a closed loop of service in an end-
to-end manner.
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In our stores, we made face-to-face interactions with users through user symposiums and exchanges as well as visits
by product/R&D engineers to gather and address user concerns while refining our service offerings. Throughout the
year, we organized 18 user forums, gathered 307 pieces of user feedback, solved more than 230 practical problems,
and gained insight into the real needs of users. We also focus on catering to the personalized user needs and invite
users to engage with Xiaomi’s business departments to explore future design possibilities.

We always adhere to the spirit of “making friends with users” to enhance the overall service awareness of our
employees and improve the service quality of the Group. By integrating the ITR process into Xiaomi’s service process
and personnel training, we ensure that our service team can swiftly respond to user needs. We proactively track and
quickly address user needs, optimize user experiences, actively explore service solutions, and achieve consistent
and intensive service coverage. Moreover, we provide tailored product technical guidance and regular training to
continuously enhance the professionalism and service of Xiaomi’s service team.

We go beyond promoting the quality of our employees’ services to a high standard. We have established and
implemented a system of rewards and penalties to incentivize our partners in terms of service quality and attitude.
We offer rewards to outstanding partners who deliver top-notch services. Conversely, for partners who fail to maintain
service quality, we will impose graded penalties based on the severity and impact of the incident, aiming to reduce the
complaints stemming from partners.

Retail Services
We have continuously strengthened the service capabilities of our offline stores, expanded our service network
coverage, and enhanced the accessibility of our user services. Throughout the year, we created a refined management
system for store service indicators and established a closed-loop management mechanism from service quality
monitoring to improvement. In addition, by improving trainer management and the store training mechanism, we
deeply integrated the training content with frontline business operations. Moreover, we introduced a store risk
control management system and developed the Xiaomi Service Store Compliance Code of Conduct, laying a robust
foundation for operational compliance and capacity enhancement in our stores. These efforts ensure that Xiaomi
stores continually refine and elevate their service standards while delivering exceptional services. By the end of the
reporting period, in the Chinese mainland,

• We had a total of 1,793 offline retail stores;

• There are 5,108 engineers holding Xiaomi’s professional technical qualification certificates stationed in offline
stores;

• We hosted 2,789 engineer training sessions, providing a total of 10,123 hours of training;

• The user service satisfaction survey showed an improvement of 4.5% compared to 2022; and

• The offline store service network had covered 91.86% of the cities in the Chinese mainland, covering 316
prefecture-level cities, an increase of 1.45% compared with 2022.
 2023 ANNUAL REPORT 127

Sales and Service Integrated Operations

At Xiaomi, we have maintained our commitment to enhancing the user in-store experience and have achieved
significant progress in sales and service integrated operations. Throughout the year, we have witnessed a
36.6% increase in the number of our sales and service integrated stores in the Chinese mainland that have full-service
capabilities such as sales, returns and exchanges maintenance, and recycling. We have continually refined the
management of store operational quality, establishing clear standards for store operations to ensure the healthy
and robust growth of sales and service integrated operations. We have calibrated store targets, formulated subsidy
policies for new stores, instituted mechanisms for monitoring store operations and evaluating outstanding stores, and
issued the Sales and Service Operations Manual. These measures have facilitated the efficient conversion of sales and
service, driving overall enhancement in the sales and service capabilities of our frontline store teams.

In markets outside the Chinese mainland, we have introduced warranty policy differentiation, VIP customer service,
and trade-in targeted subsidies for Xiaomi’s flagship models. Warranty policy differentiation services encompass a
international warranty, a 2-year warranty and a complimentary replacement for a broken screen. VIP services include
one-time access to airport VIP lounges, exclusive customer service, and an exemption from out-of-warranty labor
fees, and special subsidies for trade-in. In some markets, we also offer fixed-price discounts for trade-ins.

In-Store and Send-In Repair Service

At Xiaomi’s offline stores and service points, users have access to exchange, overhaul, and repair services. We
continuously expand our service coverage and offerings. Throughout the year, we introduced new services such as
insurance business access, out-of-warranty exchange for IoT products, and repair services for motherboards and
screens of smartphones and laptop devices in the Chinese mainland, broadening our service scope. Additionally, we
have bolstered our repair service capabilities by establishing service points. Over the reporting period, we established
3,778 stores offering in-store repair service and 124 stores offering send-in repair service in the Chinese mainland.
We consistently meet user needs with an enhanced service network, strengthened repair service capabilities, and
expanded range of business.

We have also launched a new one-on-one “flash” delivery service in the Chinese mainland market, realizing instant
delivery and repair in the same city. Consumers and users can enjoy a smooth and worry-free shopping and
after-sales service experience through the “Store Flash Delivery” delivery and repair feature in Xiaomi Store.

On-site (Door-to-Door) Services

We have expanded the coverage area of our on-site services by accelerating the construction of on-site (door-to-door)
service points. As of the end of this reporting period, in the Chinese mainland,

• We have built a total of 7,725 on-site service points.

• These on-site (door-to-door) service points are staffed by 32,058 engineers holding Xiaomi professional technical
qualifications, representing a 63.18% increase compared to 2022. These engineers consistently deliver quality and
fast services for on-site products.

• Our on-site service capability for home appliances has extended to over 2,000 district and county-level jurisdictions.
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Trial of the Integrated Model of Air-Conditioner Delivery and Installation

In 2023, we launched a pilot program for the integrated model of air-conditioner delivery and installation in the
Chinese mainland. In the model, the delivery and installation process has been simplified, and rapid delivery
is provided to meet users’ demand for immediate installation upon delivery. The delivery and installation time
has been reduced by a total of 50 hours. We received 100% service satisfaction from our pilot customers. This
model has covered 106 cities nationwide, with a total of 282 outlets, greatly enhancing the user experience.

The one-time solution of delivery and installation achieves efficient synchronization of logistics and after-sales
service as well as real-time and accurate mutual transmission of time information, which further shortens
the logistics and installation time. Based on the integration capability of delivery and installation, Xiaomi’s
integrated model for dismantling, delivery, and installation innovatively blends in after-sales service to
provide users with a one-stop service from dismantling the old to installing the new. The successful trial of
the integrated service model of delivery and installation has significantly improved our service efficiency and
promoted Xiaomi’s continuous innovation in product service and user experience.

Delivery Services
To achieve the optimal distribution of spare parts warehousing and to reduce turnaround times and logistics transport
durations, we have established 25 spare parts storage centers across the Chinese mainland. This setup facilitates a
short-distance and rapid spare parts storage network. We have also established a device warehousing and distribution
network covering the whole Chinese mainland to further optimize the warehousing and distribution network. During
the year, we achieved next-day delivery for 80% of our orders in the Chinese mainland.

Quality Management for the Automobile Business Line

Product safety is fundamental pillar in the Total Quality Management (TQM) system for Xiaomi’s automobile business
line. Our aim is to guarantee that our products are not only safe and dependable but also of superior quality and in full
compliance with legal and regulatory standards. The system covers the entire product lifecycle, with stringent testing
procedures in place at every stage from R&D to production.

To achieve this goal, Xiaomi’s automobile business line has established a TQM system that consolidates all procedures,
management practices, quality standards, specifications, and operating guidelines pertaining to quality and safety for
the Group’s automobile and related business. By focusing on product features and problem management, Xiaomi’s
automotive business line has built a quality management system. This system not only meets the basic requirements
for access and the mass production system but also addresses the demands of each new product project in terms
of product features and validation. It also ensures that all projects can be fully safeguarded by process and standard
specifications.

In addition, Xiaomi’s automobile business line has devised and implemented the development, trial operation,
operation, and rapid iteration of digital management platforms, models, and processes, aimed at boosting the
efficiency and efficacy of quality management. As at the end of the reporting period, Xiaomi EV’s preventive quality
system has fully completed, passed the trial operation validation, and officially entered the operational phase.
 2023 ANNUAL REPORT 129

Xiaomi’s solid underlying core R&D technology provides a quality guarantee for the high range and high safety
of Xiaomi SU7 Series.

• Battery safety and range performance: Xiaomi SU7 Series incorporates Inverted Cell Technology, which
surpasses traditional solutions in heat dissipation and thermal insulation. It has passed the world’s
most stringent battery safety testing. Additionally, it features 14 layers of robust physical protection and
Xiaomi’s interconnected vehicle safety warning system, ensuring comprehensive battery safety.

• Active and passive safety: Xiaomi SU7 Series boasts an armor-cage-styled steel-aluminum hybrid
body that effectively absorbs and disperses impact forces, thereby to enhance collision safety. It fully
complies with the five-star safety standards of both China and the EU. Equipped with 16 active safety
configurations, it prevents accidents at critical times. Moreover, we provide stringent privacy security
protection to ensure users’ personal information and data security.

Data Security and Privacy Protection

Protecting user data privacy has always been one of Xiaomi’s core values. We consistently uphold international
regulations and standards in our practices of data security and privacy protection. We develop and update Xiaomi’s
privacy policy based on core principles contained in global privacy frameworks (such as those published by the OECD
and the APEC) and privacy laws (such as the Personal Information Protection Law of the People’s Republic of China,
the EU General Data Protection Regulation (GDPR), and the General Personal Data Protection Act of Brazil), ISO
standards, and regional industry guidelines (such as the guidelines of the European Data Protection Board (EDPB)).
Furthermore, we have been actively studying international trends to provide users with a privacy protection system
that is in line with the development of modern technology.

In the past year, we took steps to enhance information openness and transparency. We published or updated the MIUI
14 Security White Paper, the MIUI 14 Privacy White Paper, the Xiaomi IoT Privacy White Paper, the Xiaomi IoT Security
White Paper, and the Xiaomi Transparency Report 2022. Our annual Xiaomi Transparency Report offers details
about the data access requests received from law enforcement and government agencies worldwide, along with our
responses to these requests.

For more information on Xiaomi’s data security and privacy management, practices, reports, and policies, please
refer to:

Xiaomi Trust Centre https://trust.mi.com/

Xiaomi Security Centre https://trust.mi.com/misrc

Xiaomi Privacy https://privacy.miui.com/en/#/

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Data Security and Privacy Protection Governance Structure

At Xiaomi, we believe that protecting user data privacy is paramount to fostering a secure and quality user experience
while building trust with our users. We continuously iterate our data security and privacy protection management
system and establish reasonable and effective management procedures and standards. The Group has established
an Information Security and Privacy Committee (the “Security Privacy Committee”), which focuses on developing
and implementing rules, managing security risks associated with personal privacy, advancing privacy technology
capabilities, and enhancing risk response abilities. This year, we completed the change of term and reorganization
of the Security Privacy Committee. Each business department now operates a Security and Privacy Working Group,
contributing to a more mature data security system for the Group and effectively empowers the secure development
of smartphones and other business lines.

Xiaomi’s Board places great importance on data security and privacy protection. The Security Privacy Committee
reports to the Board periodically on the Group’s progress in this area and assists the Board in assessing risks in data
security and privacy protection, countermeasures, and their efficacy. Based on these assessments, the Board offers
management recommendations. In 2023, 100% of the sites of our technology operations received certification under
the ISO 2700116 for information security management systems (ISMS). This year, Xiaomi did not receive any validated
complaints about data security and privacy protection.

Data Security
Data security and privacy protection is the core of Xiaomi’s continuous pursuit. We are steadfast in safeguarding
users’ personal data and daily lives through the establishment of a leading security architecture and the adoption
of powerful security technologies. Leveraging Xiaomi HyperOS’s global security technology and the unified security
capabilities of our IoT platform, we have established a set of technical requirements and management mechanisms
covering smartphones, IoT devices, and Internet services. These measures utilize Transport Layer Security (TLS) and
encryption algorithms to protect user data security. We effectively communicate our objectives and requirements
of data security and privacy protection to our supply chain partners. We rigorously examine and manage the data
security and privacy protection capabilities of our supply chain partners and develop emergency response measures
for data security incidents. By doing so, we minimize potential risks and uphold our users’ data security privacy rights.

We also protect the security of users’ personal information and data through software system security updates and
security vulnerability fixes. Our smartphones and IoT products receive regular security updates, and we continuously
disseminate security recommendations and notifications to inform users of newly identified security vulnerabilities,
their potential impacts and remediation options, thereby helping users cope with the ever-changing security risks.
We actively receive security vulnerabilities of Xiaomi products submitted by users and security researchers in the
Xiaomi Security Centre. By receiving and validating vulnerabilities, determining the extent of their impact, determining
vulnerability fix solutions, and promptly following up, we enhance the security of Xiaomi products and services.

Xiaomi’s Data Security Technology

Security Strategy for the “Human x Car x Home” Smart Ecosystem
At Xiaomi, we place a paramount emphasis on addressing users’ concerns regarding data security and privacy
protection. We have incorporated them into the development of Xiaomi HyperOS. Xiaomi HyperOS has reconstructed
its security and privacy architecture to establish an underlying foundation with the self-developed TEE17 as a security
subsystem to reduce potential risks and improve the overall security of the system. Xiaomi TEE is an isolated security

16 ISO 27001: ISO 27001 is an international standard for information security management that is designed to help organizations manage and protect
information assets and secure them.
17 TEE: Trusted Execution Environment.
 2023 ANNUAL REPORT 131

operating system running on isolated hardware, purpose-built to handle sensitive information securely and cater to
the security requirements of different devices and application scenarios. Xiaomi HyperOS leverages different TEE
solutions to construct a trusted security base tailored to different hardware environments. Building upon this security
base, it bolsters the capabilities of device trustworthiness, universal key management, and cross-end authentication
at the framework layer, providing trusted connection, trusted transmission, and trusted peer-to-peer state for cross-
end scenarios. This technology provides security functions for many system applications such as face recognition,
privacy passwords, and lock screen passwords, and supports core devices such as smartphones and IoT devices.
Xiaomi’s self-developed TEE was awarded the first EAL5+18 certificate in China by the China Cybersecurity Review
Technology and Certification Centre (CCRC), which is the highest security certification for TEE systems.

Xiaomi HyperOS’ hardware-based security root of trust establishes a reliable chain of trust through the secure boot
process and is securely transferred to the operating system. The security subsystem of Xiaomi HyperOS designs
interconnection security modules and provides unified security for each device. This security subsystem amalgamates
hardware and software security technologies and deploys different security technologies at the hardware, kernel,
framework, and application layers. Through this comprehensive approach, it provides end-to-end complete link
protection for devices, thus safeguarding user data security and privacy. At the same time, Xiaomi HyperOS performs
end-to-end encryption during data transmission between devices through a TEE-based interconnection security
module that allows devices to verify each other, thus securing the entire network.

IoT Platform Uniform Security Capability

The Xiaomi IoT platform, as a unified IoT device platform built by Xiaomi, supports the access and management of
various devices such as smart wearables and smart hardware. Aligned with Xiaomi’s Cyber Security Baseline for
Consumer Internet of Things Device, the Xiaomi IoT platform incorporates a range of basic security capabilities. The
platform greatly enhances the security of the device system with hardware capabilities such as device communication
modules and security chips, as well as software capabilities such as the Xiaomi Vela system19. In addition, we have
developed protocols and standards such as the MIoT Spec protocol20, and the device two-way authentication protocol.
On the service side, the platform boasts the IoT Communication Centre, Digital Certificate Management Centre,
Authentication and Privilege Centre, Data Storage Centre, Firmware Management Centre, and Message Distribution
and Invocation Centre. These components facilitate the interaction function between devices and the service side
while ensuring the security of devices and the service side.

Supply Chain Data Security Audit and Management

We uphold stringent standards in managing our suppliers and partners to ensure data security and privacy protection.
For suppliers engaged in users’ personal information, we conduct rigorous inspections of their data security
capabilities at the early stage of supplier admission. We also require suppliers to adopt unified review criteria for user
information to ensure compliance with Xiaomi’s data security and privacy protection principles. During the supplier
admission phase, suppliers must follow Xiaomi’s data security and privacy protection review process for declaration
and evaluation. Should a supplier fail to pass, we will require the supplier to make improvements until they meet
our standards before entering into cooperation with Xiaomi. We conduct regular audits of supplier data security and
privacy protection practices throughout our cooperation. If issues arise, we will suspend cooperation with the supplier
until corrective actions are taken.

18 EAL: Evaluation Assurance Level. It is a numerical level that describes the degree to which a product has been evaluated against the Common
Criteria for Information Technology Security Assessment. From EAL1 to EAL7, the higher the numerical level, the higher the level of security for
the system implementation.
19 Xiaomi Vela is Xiaomi’s IoT embedded software platform based on the open source real-time operating system NuttX. It provides unified software
services on various IoT hardware platforms, supports rich components and easy-to-use frameworks, and bridges fragmented IoT application
scenarios.
20 MIoT Spec, or MIoT Specification, is a functional description of IoT device specification. It is an IoT protocol developed by the Mijia platform, which
contains function definitions, interaction models, message formats, and coding, and applies to devices connected to the Mijia platform.
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For the input and output of third-party data, we have established a standardized data privacy declaration process for the
whole Group. This process entails suppliers and partners compiling white papers on product/service-related privacy,
submitting security and privacy tests, completing data protection addendums (DPAs) and security questionnaires,
and submitting privacy declarations online. From the security questionnaire, we can monitor the information security
certificates (for example, ISO 27001) held by our suppliers and partners, which serve as an important reference for
cooperation.

Data Security Incident Emergency Response

At Xiaomi, we have established a rigorous data security incident management and emergency response system
process to ensure a swift and coordinated response to data security threats, minimize potential damages, and
safeguard user data security and privacy rights. Upon detecting abnormal data access or potential data encryption
errors, we will immediately initiate assessment procedures to evaluate the impact of the incident on users’ personal
rights and interests. Our dedicated team coordinates and manages emergency responses to data security incidents,
determines the severity of the incident, and coordinates emergency protection measures. Through diversified
investigative measures, we remain highly vigilant against data leakage, misuse, abuse, and other security incidents.
During the year, Xiaomi did not experience any data security leakage incidents.

We emphasize the importance of tracking and managing data security incidents. Our issue tracking management
system records the details of data security incidents and the way they are handled. Furthermore, we have established
an incident handling group to facilitate traceability of information flow and efficiency of collaboration. Following any
data security incident, we will set up a dedicated team to conduct in-depth analyses and summaries of the incident to
optimize future security management strategies.

Privacy Protection
Privacy has always been among Xiaomi’s core values. Guided by the privacy principle, we integrate the concept of
privacy by design into our product development process and continuously explore more innovative technologies to
protect privacy. To achieve this, we have established a comprehensive information security and privacy protection
governance framework, which is comprised of guiding principles, organizational structure, security and privacy
certifications, privacy policies, and a mechanism for continuous improvement. We also process and back up personal
information by leveraging secure and globally managed infrastructure, transfer user data through encrypted
communication channels, and store it with trusted cloud service providers.

For smart device users, we offered comprehensive privacy protection features through MIUI this year, effectively
safeguarding the privacy and security of personal information. Users have control over the applications running
on their mobile phones. The privacy security of Xiaomi products is effectively enhanced by many privacy protection
features introduced in MIUI 14, including app permission settings, key-protected private space, finding or locking
a lost device, secure photo sharing, and the incognito mode of Xiaomi Browser. For more information, please
refer to the Xiaomi MIUI 14 Privacy White Paper21. In 2023, we made technical upgrades to the MIUI 14 system.
A privacy white paper based on Xiaomi HyperOS is expected to be released in 2024.

For IoT device users, we provide privacy practices and safeguards specific to each product or application. Our IoT
products include the Xiaomi Watch, Xiaomi Smart Door Lock, robot vacuum, Mijia Electric Scooter, and Xiaomi Router.
For more information, please refer to the Xiaomi IoT Privacy White Paper22.

21 Xiaomi MIUI 14 Privacy White Paper: https://trust.mi.com/docs/miui-privacy-white-paper-global/

22 Xiaomi IoT Privacy White Paper: https://trust.mi.com/docs/iot-privacy-white-paper-global/
 2023 ANNUAL REPORT 133

At Xiaomi, we prioritize communication with our users and strive to create products and services that earn their
trust. To address users’ privacy concerns, complaints, and relevant issues effectively, we have established the Xiaomi
Privacy Support Platform (https://privacy.mi.com/support/?locale=en), providing an online channel to reach out to our
privacy team.

Privacy Protection Standards

At Xiaomi, we have always prioritized user privacy and security, integrating privacy protection principles into our
product design. We strictly follow and honor the following five principles and commitments:

Open and Transparent Data Processing

We strictly adhere to Xiaomi’s privacy policy and terms when collecting, using, storing, and disposing of users’
personal information to minimize data collection and retention as much as possible. All our products and services
feature a prominent privacy policy portal for users’ easy access at any time to how Xiaomi processes their data. We
also expressly inform users of the purpose and use of data processing and obtain their consent. We will never upload
any user data without users’ permission.

Effective Information Security and Privacy Management System

At Xiaomi, we actively foster an internal culture of privacy and have established a privacy management system
comprised of organizations, policies, and procedures. We have appointed a Chief Privacy Officer and formed an
Information Security and Privacy Committee covering all business teams to better coordinate and advance our privacy
protection efforts throughout the Group. Additionally, we collaborate with users, privacy experts, and third-party
certification agencies to continuously improve our privacy practices at Xiaomi.

User-controllable Personal Information

At Xiaomi, we empower users with control over the access of apps via simple and easy-to-use shortcuts, thereby
ensuring users’ personal data security. Users possess the right to allow, deny, and alter apps’ access to the system.
They can also view the autostarts, permission calls, chain starts, and sensitive behavior records of each app. Should
any unauthorized behavior by an app be detected, users can immediately revoke relevant authorizations and request
to obtain, correct, or delete the data collected via our Privacy Support feature.

Comprehensive Security Guards

At Xiaomi, we implement rigorous measures to safeguard users’ personal information and prevent data leakage risks.
When transmitting data, we employ secure transfer via HTTPS, hashing and obfuscation for sensitive information, and
protection of the transmission link to ensure maximum security. In local storage of files, we adopt file-level encryption
and key separation. In cloud storage, we implement security classification and a blend of multiple encryption methods
to effectively safeguard users’ privacy.

Strict Compliance with Laws and Regulations

At Xiaomi, we are committed to establishing standardized and sustainable procedures for privacy impact assessments
to ensure that our products and services always comply with laws and regulations regarding personal information
protection. All of our products are designed and developed to align with pertinent provisions of current privacy and
data security laws and regulations. We have established an internal systematic mechanism for privacy compliance
reviews at every stage. From product design to development, testing, and launching, there are specialized teams to
conduct data protection impact assessments and security tests.
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Privacy Protection Technology

At Xiaomi, we uphold strict protection of user privacy. Our commitment lies in advancing the synergistic development of
technological innovation and user privacy protection while respecting user privacy to cultivate greater trust among users.

• We have introduced differential privacy technology23. It ensures accurate statistical results without collecting
precise data, thereby minimizing access to users’ personal information.

• We also employ Edge Computing technology to locally process sensitive data (for example, biometrics) at the
device, eliminating the need to transfer data to cloud servers and thus reducing the risk of data leakage.

• With our self-developed MACE Mobile AI Computing Engine Open Source Deep Learning Inference Framework, we
complete complex data analysis and computation tasks on multiple devices, such as tracking activities and sleep
monitoring in Mi Health. We are also expanding the local processing of users’ personal data to more scenarios.

We firmly uphold users’ right to know and control their privacy. Our pioneering Privacy Flare feature has become
a network access standard of the Ministry of Industry and Information Technology. In the era of everything
interconnected, Xiaomi HyperOS has upgraded its permission management capabilities to the ecological level. It
offers features such as interconnection permission management, sensitive interconnection reminders, and sensitive
interconnection records. This evolution ensures that permission acquisition in interconnected scenarios is entirely
transparent to users and offers them high levels of control.

Data Security and Privacy Protection Culture

We prioritize cultivating a culture of data security and privacy protection. Throughout 2023, we organized various
security awareness enhancement activities aiming to raise employees’ awareness of data security and privacy
protection and the Group’s security defenses. These activities included Security and Privacy Awareness Month,
phishing drills, training courses, and online assessments. Our data security and privacy protection training activities
reached employees in all positions across the Group, including the Board, senior management, employees, suppliers,
contractors, partners, and personnel dedicated to security and privacy. We have tailored training programs to suit
different positions and introduced assessment and incentive mechanisms.

We recognize the importance of creating a culture of data security and privacy protection. Therefore, we have incorporated
courses on data security and privacy protection into our employee orientation training. We also enhance the effectiveness
of the training through regular security awareness quizzes and awareness promotion newsletters. During the year, we

• Organized data security and privacy protection awareness quizzes. More than 98% of the Group’s employees
attended training courses on data security and privacy protection and passed the examination;

• Delivered a number of special training courses for various business departments and the production and
research departments of companies in the ecosystem;

• Hosted the Security and Privacy Awareness Month and the 6th IoT Security Summit; and

• Organized at least four phishing drills to test the effect of employees’ data security awareness training in
combat exercises.

23 Differential privacy technology: This technology adds statistical noise to the user data before it leaves the device, converting the raw data into
obfuscated data and effectively avoiding direct identification of personal information.
 2023 ANNUAL REPORT 135

In addition, we provided specialized data security and privacy protection training for suppliers and partners, covering
nearly 1,000 suppliers and partners.

Security and Privacy Certifications

Xiaomi’s information security and privacy protection capabilities have been recognized by the industry’s leading
certification and testing agencies. We have passed several privacy protection certifications for all of our product lines,
including smartphones, Xiaomi HyperOS, IoT devices, Internet applications and services, sales and service systems,
and infrastructure. During the year, Xiaomi’s Trusted Execution Environment Operating System for Intelligent
Terminals (MiTEE OS) received the IT product information security certification EAL5+. We have also maintained the
validity of the following third-party audit certifications24:

ISO/IEC 27001 Information security management system certification

Certification for the management system of personal
ISO/IEC 27018
information in the cloud
ISO/IEC 27701 Personal information management system certification
SOC 2 Type II Certification Specialized security audit
TÜV Rheinland Enhanced Privacy Protection
MIUI
Testing

In addition, our Electric Scooter 4 Pro has obtained UL IoT Security Gold Certification25, and our Robot Vacuum-
Mop 2 Overseas Version has obtained TÜV Rheinland Product Network Security and Privacy Protection Standard
Certification. Xiaomi Smart Camera Tripod Head Version, Mijia mobile app, and Xiaomi Mesh System AX3000 router
were certified with the IoT Kitemark.

Data Security and Privacy Protection in the Automobile Business Line

Xiaomi’s automobile business line has established a robust data security and privacy protection system, policy, and
process, which are integrated into fine data management and scenario-based privacy protection features on the
product side.

The data security and privacy protection strategy of Xiaomi’s automobile business line spans the entire lifecycle of
data, including collection, transmission, storage, use, sharing, disclosure, and deletion. It allows Xiaomi’s new energy
vehicle (NEV) products to develop targeted protection measures at each stage to safeguard user data.

Moreover, we manage data by categorizing, grading, and labeling them to enhance the identification and protection
of sensitive information. Additionally, we offer users various scenario-based privacy protection features. In different
scenarios, Xiaomi SU7 Series will switch to perform smart privacy protection and data isolation as needed to protect
users’ interests.

For example, the “Worry-Free After-Sales” feature provides users with a smooth experience and privacy protection in
the after-sales maintenance scenario.

24 For all of Xiaomi’s privacy certifications, please refer to Xiaomi Trust Centre (https://trust.mi.com/compliance).
25 UL Solutions is an independent global security science company. It has created an evaluation system to measure the security of IoT products. It
rates products on one of five security levels, ranging from the lowest (Bronze) to the highest (Diamond).
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Xiaomi’s Zero Carbon Philosophy

We believe that it is our responsibility to leverage our products and technologies to support the 1.5˚C goal set forth
in the Paris Agreement and enable people worldwide to experience an enhanced quality of life through innovative
technology. As a global leader in innovative technology, we excel in offering solutions through technological
innovation and efficient models to advance the development and adoption of clean technologies. We collaborate with
stakeholders to foster a brighter future. We infuse climate awareness throughout the entire process of delivering
the “coolest products” to our customers. Moreover, we systematically explore ways to integrate low-carbon features
with Xiaomi’s strategy and brand, continuously developing and optimizing environmentally friendly technologies and
products. In propelling the world’s transition towards zero carbon, we have made encouraging progress.

The 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28) took
place in Dubai, UAE, from November 30 to December 12, 2023. At this significant global climate summit, Xiaomi
released its White Paper on Climate Action26, sharing its actions and commitments in addressing global climate
change. The paper details Xiaomi’s Zero-Carbon Philosophy and elaborates the Group’s approach to transitioning to
zero carbon. It highlights Xiaomi’s capacity to utilize AI-empowered AIoT to develop green products and establish a
sustainable supply chain, thereby aiding the industry and society in achieving global climate objectives.

Climate Mitigation and Adaptation

Tackling Climate Change

At Xiaomi, we prioritize enhancing energy efficiency, embracing clean energy, and innovating through smart
manufacturing, among other initiatives, to attain our carbon neutrality targets within our own operations. Moreover, we
are committed to spearheading the low-carbon transition and upgrading of the entire value chain. While concentrating
on improving product efficacy and ensuring product affordability, we strive to reduce the environmental footprint of our
products and services. Our ultimate aim is to make affordable clean technology accessible to all, thus contributing to
the creation of a better low-carbon future in collaboration with our stakeholders.

Climate Strategy
In October 2023, Xiaomi unveiled its brand new strategy “Human x Car x Home” smart ecosystem, featuring Xiaomi
HyperOS — a human-centered operating system at its core — designed to connect personal devices, cars, and smart
home products into a single, integrated system framework. This breakthrough lays the foundation for establishing
a universal “connected system,” enabling the interconnection of billions of devices in the future. This presents an
opportunity for us to explore clean technology applications across various devices, scenarios, and value chains,
thereby advancing a greener lifestyle and fostering a low-carbon society with positive climate impacts.

At Xiaomi, we adhere to the principles of “prompt action, practicability, steady progress, and continuous improvement”
as we actively respond to climate change. In 2023, we reviewed industry practices and climate publications and
engaged with internal stakeholders to assess climate-related risks and opportunities within the Group’s business and
existing facilities. Starting with reducing carbon emissions within our own operations, we also provide low-carbon
training to our suppliers, support them with carbon data and target management tools, and initiate decarbonization
projects to promote low-carbon transformation throughout our product and value chain. We collaborate with our
upstream and downstream partners to cultivate a green ecosystem. For more information about Xiaomi’s strategy to
address climate change and risk management, please refer to Xiaomi Corporation’s TCFD Report 202327.

26 Xiaomi Corporation White Paper on Climate Action:

https://cdn.cnbj1.fds.api.mi-img.com/staticsfile/svhc/climate%20action%20report/whitepaperonclimateactionXiaomicorp.pdf
27 TCFD: Task Force on Climate-related Financial Disclosures. For more information about Xiaomi’s response to climate change, please refer to the
Sustainability — Climate Change page on the Group’s official website (https://www.mi.com/global/about/sustainability#/climate).
 2023 ANNUAL REPORT 137

GHG Emission Reduction Targets and Carbon Footprint

GHG Emission Reduction Targets
Through more implementations and practices, we have gained a clearer understanding that our progress in reducing GHG
emissions is influenced by various factors, including the scale of our business, energy mix, supplier selection, and the
evolution of verification standards and models. These factors may directly contribute to fluctuations in our GHG emissions.
Nevertheless, our steadfast commitment remains to employ improved and cleaner technology in the way we design, make,
and deliver our products and services to users. We will continue to monitor the relationship between our business scale
and GHG emission metrics, while ensuring transparency in disclosing and reporting our emission reduction progress.

To support the global aspiration of reaching net zero by 2050, we are dedicated committed to reducing our Scope 1
and Scope 2 GHG emissions. To support progress towards Xiaomi’s goal of attaining to achieve carbon neutrality by
2040, we further updated our GHG reduction targets accordingly during the year.

• By no later than 2030, reduce GHG emissions28 from our main operating segments29 to 30% of the base year30 level;

• By 2035, use 100% renewable electricity in our own operations;

• By 2040, achieve carbon neutrality in our own operations of existing business segments31, use 100% clean heat
in our own operations, and use 100% renewable energy;

• Prioritize the use of low-carbon technologies and self-built renewable energy power generation facilities
to reduce GHG emissions and increase the share of renewable energy in electricity consumption through
long-term green power purchase agreements to reduce GHG emissions throughout our target period;

• Encourage key suppliers to establish renewable energy usage and GHG emission reduction targets that are
comparable to or more ambitious than those of Xiaomi to deliver continuous reduction in our Scope 3 emissions.

With our 2040 climate goals in mind and our insights into the future trends of the manufacturing sector, we envision
a gradual progression towards a carbon-neutral value chain encompassing raw materials, packaging, production, and
usage. Our focus will be directed towards the following key areas:

• Raw materials: We will foster deep collaborations with upstream suppliers to establish a supply chain of
critical materials, such as metals and plastics, sourced entirely from low-carbon and renewable sources.
Concurrently, we will accelerate research and deployment of next-generation lowcarbon materials to ensure an
environmentally friendly, sustainable, and responsible procurement practice for raw materials.

• Packaging: We will transition towards utilizing recyclable and biodegradable packaging materials while
eliminating excessive packaging to optimize weight and minimize environmental impact.

• Production: We are committed to continually enhancing production efficiency and striving to fully transition to
green electricity in production. We will provide guidance and support to key suppliers in their journey towards
achieving net-zero emissions, and while also minimizing carbon footprints through efficient energy management
and the adoption of green energy alternatives.

28 GHG emissions: Refers to the Company’s GHG emissions (absolute value) calculated in accordance with standards such as Greenhouse
Gas Protocol: Corporate Accounting and Reporting Standard, ISO 14064-1:2018—Specification with Guidance at the Organization Level for
Quantification and Reporting of Greenhouse Gas Emissions and Removals.
29 Main operating segments: Smartphone, IoT and Lifestyle products, Internet Services, and others (same scope as the operating segments stated in
the 2023 Annual Report).
30 Base year: 2021.
31 Existing operating segments: Smartphone, IoT and Lifestyle products, Internet Services, and others, as in the business scope in Xiaomi
Corporation’s latest earnings announcement.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

• Product use: We will leverage technological innovation to enhance the energy efficiency of smartphones and
other electronic products, improving performance while reducing energy consumption. Our aim is to ensure that
100% of electronic devices sold are compatible with green energy sources, thereby offering end-users with the
option and convenience to utilize clean energy.

GHG Emissions Measurement

The journey to achieving long-term GHG emission32 reduction targets begins with accurate data collection, assessment,
and tracking of Scope 1, 2, and 3 GHG emissions. Currently, Xiaomi’s energy supply across the entire value chain
predominantly relies on the grid. Given the regional variations in the energy mix for power generation globally, Xiaomi’s
GHG data standard and accounting models adhere to international protocols, including the Greenhouse Gas Protocol:
Corporate Accounting and Reporting Standard, ISO 14064-1:2018 — Specification with Guidance at the Organization Level
for Quantification and Reporting of Greenhouse Gas Emissions and Removals, as well as other relevant national, local,
and industry standards. The GHG emissions from our operations for the past four years are listed below:

Scope (Mt33 CO2e) 2023 2022 2021 2020

Direct GHG emissions (Scope 1)34 12,252.52 7,122.60 9,096.95 8,402.12

35
Indirect GHG emissions (Scope 2) 104,470.04 78,620.01 73,723.21 58,079.17
Other indirect GHG emissions from To be disclosed in 10,075,225.54 12,368,223.29 —
36
the value chain (Scope 3) September 2024

Product Carbon Footprints

We have established a carbon neutrality MARC37 management model for the lifecycle of our products. This model
encompasses aspects such as a management system, carbon footprint accounting, offset emission reduction, and
on-going external communication, enabling us to manage the carbon footprint of our products and contribute to green
practices in our products.

Carbon Neutrality MARC Model for the Whole Life Cycle

Management Accounting Reduction Communication

Establishing a business Accounting for the Continuous whole- Ongoing

lifecycle carbon carbon footprint of the process collaborative communication
neutrality management business, products, and innovation and (auditing, certification,
system and capabilities supply chains according emission reduction, disclosure, and
to standards and finally offsetting crediting)

32 Xiaomi’s GHG emissions mainly include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and hydrofluorocarbons (HFCs). The total GHG
emission is reported in terms of carbon dioxide equivalent. We calculated the GHG emissions from facilities and operations owned by Xiaomi, as
well as those from the upstream and downstream of Xiaomi’s value chain.
33 Mt: Metric tonnes, the same applies below.
34 Direct GHG emissions (Scope 1): GHG emissions directly generated from the use of natural gas and gasoline for operations and fugitive emissions
from refrigeration, fire suppression equipment, and fugitive emissions of GHG from the wastewater treatment process.
35 Indirect GHG emissions (Scope 2): GHG emissions generated from consumed electricity and consumed heat for operations.
36 Other indirect GHG emissions (Scope 3) from the value chain: All of Xiaomi’s products are sold directly to customers without further downstream
processing activities. We take the operational control approach to consolidate our GHG emission data, therefore, our GHG emissions from the
value chain include those from the purchased goods and services, capital goods, fuel, and energy-related activities (which are not included in
Scope and Scope 2), upstream transportation and distribution, waste generated in operations, business travel, employee commuting, upstream
leased assets, downstream transportation and distribution, processing of sold products, use of sold products, end-of-life treatment of sold
products, downstream leased assets and franchises.
37 MARC: Management, Accounting, Reduction, and Communication.
 2023 ANNUAL REPORT 139

In 2023, we launched a project to assess the carbon footprint throughout the lifecycle of our products and completed
product lifecycle carbon footprint assessments38 for five representative products (including two models of smartphone
products, one model of wearable products, and two models of air- conditioner products). Collaborating with an
independent organization specialized in carbon accounting and certification, we devised a smartphone-focused carbon
footprint assessment framework and methodology, drawing from the Code of Good Practice for Product Greenhouse
Gas Emissions and Reduction Claims and PAS 2050:2011: The Standard for Specification for the assessment of the life
cycle greenhouse gas emissions of goods and services. Moving forward, we will extend this approach to assess and
manage the product carbon footprint across a wider range of our products, including additional smartphone models,
air-conditioners, smart TVs, and other Xiaomi ecosystem products.

Take Xiaomi’s smartphone products as an example. The lifecycle carbon footprints39 of our products are as follows:

Product40 Product’s Carbon Footprint (KGCO2e)

Xiaomi 13 Pro (12GB+256GB) 62.81

Xiaomi 13 Pro (12GB+512GB) 65.68
Redmi Note 12 Pro 5G (6GB+128GB) 42.82
Redmi Note 12 Pro 5G (8GB+128GB) 45.93
Redmi Note 12 Pro 5G (8GB+256GB) 50.94

Supplier GHG Emission Reduction Program

To incentivize suppliers to adopt climate actions that align with or surpass Xiaomi’s GHG reduction targets, we have
introduced a special Supplier Carbon Reduction Program. In this program, we require our supplier partners to set
science-based GHG emission reduction targets. Additionally, we set forth specific criteria pertaining to increased
utilization of renewable energy, disclosure of GHG emissions data, and more. In 2023, we worked closely with 251 direct
purchasing suppliers of core products (including some component suppliers and all manufacturing suppliers). We
provided support for their validation of GHG emissions data and climate target setting. Among these suppliers, those
responsible for 79.89% of the total emissions of direct purchasing suppliers of core products set carbon reduction
targets. Those responsible for 81.49% of total emissions from direct purchasing of core products used new energy
power. Those responsible for 71.99% of the total emissions of directly purchasing suppliers of core products underwent
third-party validation of GHG data.

Exploration of Cutting-Edge Clean Technologies

We remain steadfast in our support for cutting-edge technology exploration projects. In 2023, we allocated nearly
RMB60 million in grants to cutting-edge technology projects, with some specifically focused on clean technologies.

Battery Technology: Research on Fast Charging High-Energy-Density Soft-Pack Lithium-ion Battery and Its
Key Materials
This project focuses on the research of the high-energy-density, fast-charging, long-cycle-life, high-safety lithium-ion
battery and its key materials applicable to smart terminals. By designing a battery structure characterized by high ion
transport, the project team improves energy efficiency to generate positive environmental benefits. In addition, the project
team researched high-voltage and high-compaction cathode materials, high-gram-capacity and low-expansion anode
materials that are stable in long cycles, and fast-charging electrolyte materials with high ionic conductivity that are stable
in high voltage. They aimed to extend the battery life and reduce the generation of battery waste. The project team also
developed a highly safe battery by studying the electrochemical and safety failure mechanisms of batteries. It effectively
reduces the number of safety accidents during the use of batteries, enhances public trust in new energy technologies, and
facilitates the promotion of new technologies in transforming the energy structure.

38 For more information about the carbon footprint of our products, please refer to the Sustainability page of the Group’s official website
(https://www.mi.com/global/about/sustainability).
39 Note: It includes the carbon emissions from raw materials, production, storage, transportation, usage, and end-of-life disposal.
40 The product carbon footprint data is based on measurements of product versions sold in Europe.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Composite Materials: Research on Green Composite Materials with a High Specific Strength and High Specific Modulus
The project is oriented to consumer electronic products, targeting the problems of preparing reinforcing fibers
for green composite materials, properties of the matrix-fiber interface, and bending modulus enhancement for
composite materials. The project team researched the preparation and modification method of reinforcing fibers of
green composite materials with high specific strength and high specific modulus, the modification and enhancement
mechanism of the matrix-fiber interface. In the project, the research on evaluation methods and damage mechanisms
for high specific strength and high specific modulus green performance promotes the saving of resources and positive
environmental impact and reduces the dependence on traditional materials.

Purification Technologies: Research on New Technologies for Long-lasting Purification of Indoor Air Pollutants
The harm of air pollution to people is one of the major environmental health risks globally. Outdoor air pollution
has a significant impact on indoor air quality. Therefore, the project team is committed to researching long-lasting
purification technologies for indoor air particulate matter (PM), bioaerosols, and common gaseous pollutants to help
improve indoor air quality. At the same time, the project team has developed new materials and technologies for
high-efficiency, low-resistance, and safe air purification, which effectively improve energy efficiency and reduce the
total amount of indoor air pollutants.

Looking ahead, in response to the demand for higher efficiency of clean energy and the autonomy of microgrids, we
will delve deeper into areas such as regional synergistic distributed source-load self-adaptive grid connections and
key technologies for the energy management of microgrids.

Green Logistics
Establishing a green and efficient logistics system is paramount not only for ensuring seamless connection and flow of
products across our value chain but also as a pivotal lever for reducing operational energy consumption and product
lifecycle footprint. We employ the digital new retail system, intelligent logistics system, and better management tools
(such as optimizing our product warehousing planning and transport routes and reducing the number of product
delivery turnarounds). By doing so, we aim to shorten the logistical distance from manufacturing to the consumer.
While maintaining logistics delivery quality, we have achieved high transport efficiency and effectively reduced our
logistics carbon footprint. Throughout the year, we accomplished the following results:

• Optimal allocation of warehousing resources. By leveraging big data analytics, we optimized warehousing
resource allocation to enhance storage capacity per unit area in logistics warehouses. The per square meter
efficiency of warehousing in the Chinese mainland has increased by 55.84% compared with the previous year.
We also reduced the intermediate links of warehousing and transport to lower the energy consumption of the
process.

• Changes in transport modes. We adopted transport mode changes and other measures in the transport of smart TV
products. For example, we increased the loading volume of our vehicles, resulting in a significant increase of 20%
in the loading rate of the entire vehicle compared with the previous year. This effectively shortened the transport
time in transit, enhanced the on-time rate of arrival at warehouses, and reduced transport energy consumption.

• Promotion of new energy vehicles (NEVs). We incentivized carriers to utilize as many NEVs as possible to
undertake Xiaomi business and deliver efficient, economical, and low-carbon logistics services. For our
international logistics operation, we collaborated with our service partners to use more LNG41 vehicles to
substitute diesel vehicles, and we have achieved a millage of 99,592 km.

41 LNG: Liquefied Natural Gas.

 2023 ANNUAL REPORT 141

• Adjustments to transport modes. In overseas markets, while meeting the requirements of safe and efficient
delivery, we shifted the transport mode for some of our products from high-emitting air transport to
lower-emitting rail or sea transport. A total of about 7.23 million products were involved, reducing carbon
emissions by about 3,976 tonnes (Mt) of CO2.

• Use of low-carbon transport. In the European market, we continued to increase utilization of low-carbon
transport methods to maintain efficient and high-quality deliveries while further reducing GHG emissions.
In terms of delivery mode, it was converted from FTL to Part-Load for the cargo out of Belgian and Spanish
warehouse to other European countries. By the end of 2023, 1,882 tonnes (Mt) of goods were shipped via the
Part-Load mode, maintaining efficient and high-quality deliveries and further reducing GHG emissions.

• Environmentally friendly use of logistics packages. By recycling packaging plant shipment transit boxes as
logistics boxes for device shipments from manufacturers, we annually saved 30 tonnes (Mt) of paper and 4.6
tonnes (Mt) of plastic bags. In the Chinese mainland market, the proportion of reused boxes in the total number
of logistics boxes increased by 36%, resulting in the conservation of 4 million boxes.

Green Offices
In addition to integrating low-carbon and energy-saving practices into the design, production, sales, and logistics of
our products, we have also embedded Xiaomi’s Zero Carbon Philosophy into our workplace.

Building energy consumption is a key priority for Xiaomi. We explore and evaluate opportunities for energy
conservation within our existing buildings and office campuses. Moreover, we incorporate energy efficiency principles
during the early stages of designing new buildings. Our green construction approach factors in local conditions and
building functions. We benchmark against leading international green building certification schemes to elevate the
overall environmental performance of our buildings and to guide our energy efficiency programs. The Beijing Xiaomi
Science and Technology Campus, being the centerpiece among Xiaomi’s office campuses, has attained the Leadership
in Energy and Environmental Design (LEED) Platinum® Certificate, as well as the 2-star Certificate of the China Green
Building Design Label (CGBL).

In July 2023, we capitalized on our proprietary data, technologies, and platforms to establish a Group-wide internal
employee carbon account system. This system records, quantifies, and visualizes carbon emission reduction data
voluntarily disclosed by employees from their work and personal lives. The system has a carbon emission reduction
incentive mechanism to encourage employees to practice green and low-carbon concepts through green travel and
other behaviors, thus contributing to the net-zero target by leading a green lifestyle. As of the end of the reporting
period, the platform received 47,150 contributions.

Energy Management
Operational Energy Management
At Xiaomi, we prioritize environmental protection and the reduction of energy consumption through operational
energy management. We have publicly committed to utilizing 100% renewable electricity in our own operations by
2035, and achieving carbon neutrality, alongside 100% renewable energy usage in our own operations by 2040. We are
increasing our procurement of renewable electricity to fulfill Xiaomi’s daily operational power needs. Furthermore, we
collaborate with suppliers to facilitate the low-carbon transition from traditional fossil energy to clean energy through
the long-term and incremental purchase and utilization of renewable power.
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By introducing an intelligent management system in our office spaces, we are deeply engaged in low-carbon
practices. This system accurately captures environmental attributes such as temperature, humidity, and light
intensity. Leveraging this data, the algorithms autonomously adjust commands. For instance, temperature and
humidity sensors regulate the air conditioning system autonomously to provide cooling or heating as required, whilst
brightness sensors automatically control lighting based on natural light intensity, maximizing the utilization of natural
light and reducing electricity consumption. Additionally, the system prevents energy wastage by idling devices. Human
sensors for security purposes and smart sunshade systems collaborate efficiently, activating only when human
activities are detected. Through these advanced methods of management, Xiaomi’s office spaces have been elevated
to a whole new level of comfort while realizing substantial energy consumption and carbon emissions savings.

Product Efficiency Enhancement

Through precise identification of user scenarios, we continuously optimize algorithms, particularly focusing on
communication modules, display screens, and intelligent ends in smartphones and AIoT devices to enhance seamless
connectivity across various scenarios. Additionally, the graded implementation of a power-saving strategy enhances
product efficiency and improves the user experience. With the Extreme Endurance Technology, Xiaomi’s smart
terminals can maximize energy saving by activating multiple power-saving strategies (such as identification and
control of the number of apps and high power-consuming apps as well as dark mode interface design) when the
power is critically low. Furthermore, we employ Power Saving Mode Technology. In the application scenarios of the
smart power-saving strategy, the device will automatically implement power-saving strategies for different power
stages, ensuring both user experience and energy efficiency simultaneously.

In terms of energy saving for telecommunication technology, we employ 5G energy-saving technologies, such as
self-adaptive broadband technology, which adjusts the bandwidth dynamically based on data volume to reduce energy
consumption; self-adaptive power optimization technology, which adjusts the transmit power of the mobile phone
adaptively to save energy; and 5G/4G intelligent switching technology. Through these technologies and means, we
reduce the energy consumption of mobile phones during 5G signal transmission and improve energy efficiency.

In terms of energy saving in screen display, we remain at the forefront of terminal screen technology. By incorporating
advanced screen materials to optimize energy use, we boost screen brightness efficiency and reduce the carbon
footprint associated with smartphone screen utilization. For example, Xiaomi’s latest Xiaomi 14 and Xiaomi 14 Pro
smartphones feature energy-saving screens equipped with high-efficiency screen power supply chips. These chips
have improved the efficiency of the screen power supply by approximately 7%. In addition, the application of new
OLED luminescent materials has led to an increase in luminescence efficiency of more than 16% (compared with the
luminescent materials with stacked structures in 2020).

In terms of smart terminals, we have undertaken systematic research on chip design, battery materials, and charging
algorithms and have pioneered an intelligent fast-charging system that integrates high charging rates, high energy
density, and efficient low-heat features. We have introduced the world’s first 3-in-1 fast-charging infrastructure,
which includes wired fast charging, wireless fast charging, and reverse wireless charging, complemented by chip
design methods. Through our efforts, we have introduced 4:2 and 4:1 charge pump fast charging chips with 98.6% and
96.8% efficiencies. These advancements have resulted in chip losses being reduced by more than 70%, positioning
Xiaomi among the global frontrunners in charging technology. This technology has been implemented in more than
100 million smart devices. Compared to traditional fast-charging technologies, it can save around 52 million kW of
electricity consumption on an annual basis.
 2023 ANNUAL REPORT 143

New Energy Power and Energy Storage

We are building upon our current line of low-power solar PV panels and mini energy storage devices utilized in
households, while continually expanding our product range and offerings to cater to the needs of customers, homes,
offices, and other settings. Additionally, we are developing smart hardware with DC technology and group intelligent
control capabilities. The ultimate goal is to establish a comprehensive ecosystem of energy generation, consumption,
storage, and control in residential, office, and travel scenarios. This is coined as the “Light, Storage, Direct, Agile”
active response terminal.

Xiaomi’s Renewable Energy and Charging Product Combo

Xiaomi’s portable renewable energy product, the Mijia Solar Panel, incorporates the innovative Metal Wrap
Through (MWT) technology with a 100-W MAX fast power output. It is designed to be used with the Mijia
Outdoor Power Supply 1000 Pro, the combined use of which will make outdoor power supply and storage
possible. These products’ efficient performance and portable design have made them an ideal choice to use
for outdoor travel, camping, and emergencies.

Investment and Expansion

We have demonstrated a strong commitment to investing in and supporting businesses across the energy storage
industry, including new energy battery manufacturers, battery material producers, portable energy storage solution
providers, companies specializing in battery thermal management technology, as well as emerging players in the
EV charging and equipment sector. Through partnerships in clean technology, we have fostered the development
of green, intelligent, and innovative products in more scenarios. In the NEV industry alone, we had invested over
RMB8 billion in over 70 high-quality companies as of 2023, whose operating income added up to over RMB110 billion.
Through joint innovation and investment, we and our partners are continuously speeding up the growth of businesses
committed to sustainability development.

Waste Management and Circular Economy

Electronic Waste and Circular Economy

At Xiaomi, responsible management of product end-of-life is integral to our transition towards a circular economy and
our efforts to minimize electronic waste. This endeavor involves intervention and innovation across our value chain,
from product design to enhancing product longevity, reuse, recycling, and dismantling. We comply with applicable laws
and regulations on electronic waste in all the markets where we operate. Furthermore, we proactively understand
and adapt to local electronic waste recycling systems. We continue to introduce more comprehensive electronic
waste management channels and methods to fulfill Xiaomi’s responsibility and commitment to product end-of-
life management. In alignment with the Basel Convention, we pledge not to export electronic waste to non-OECD
countries. Additionally, we actively collaborate with users, suppliers, and partners to establish a closed loop of resource
circulation.

Recycling and Reuse

On a global scale, we have implemented product take-back programs. The adoption of efficient sorting methods facilitates
categorized recycling, fostering a shift from a linear model of take-make-waste to a circular regeneration approach. Our
recycling services are available at our own facilities and through our partnered local recyclers and service providers,
which makes the recycling of electronic products more convenient and ensures that electronic and other solid waste
is properly treated. We strictly assess the certification qualifications of our partners in the electronic waste business
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as per applicable local laws, including the Quality Management System (ISO 9001), the Environmental Management
System (ISO 14001)42, the Information Security Management System (ISO/IEC 27001), and the Certifications for
Zero Landfill and Responsible Recycling (R2)43 of international electronic waste. Throughout our collaborations,
we establish specific agreements with our partners concerning labor rights, a safe and healthy work environment,
and the prohibition of illegal waste exports, ensuring that our partners handle waste recycling, refurbishment, or
disposal in a reasonable and legal manner. In addition, we have launched an internal purchase program of sample
devices for employees and established a standardized management system and standards for internal sample device
purchases, fully promoting resource recycling and reducing electronic waste generation. During the year, we recycled
approximately 12,260 tonnes (MT)44 of electronic waste, including smartphones, laptops, and IoT products, globally.
Over the next five years (2022-2026), our target is to recycle 38,000 tonnes (Mt) of electronic waste. As of the end of the
reporting period, we had achieved 44% of the waste recycling target set in 2022.

In markets outside of the Chinese mainland, we collaborate with third-party electronic waste recyclers ensure the
proper disposal of electronic waste through delivery or door-to-door collection by our partners. This service spans to
11 countries and regions (including Hong Kong, China; Thailand; Malaysia; and the UK), covering smartphones, smart
TVs, watches, electric scooters, and some other ecological chain products.

Trade-In
Our Trade-In program relies on our own facilities and third-party recyclers to promote the recollection and recycling
of used devices in the Chinese mainland, the UK, Germany, Italy, France, Spain, the Netherlands, and Poland. The
program encompasses a wide array of smartphone brands and some IoT devices. In 2023, we expanded the categories
of recyclable products and the coverage of recycling services in the Chinese mainland. Employing recycling methods
such as trade-in coupons45 and an “online + offline” combination (in store recycling, door-to-door recycling, and
mail-in recycling), we aim to incentivize users to recycle their products for new ones. Outside the Chinese mainland,
we conducted 22 trade-in subsidy events across the UK, Germany, France, and Italy, with a special World Earth Day
event offering trade-in subsidies for flagship models in France.

At the same time, we invest resources in supporting the development and layout of the recycling economy industry.
Our recycling business partners include two Xiaomi ecological chain enterprises, and we plan to continue to expand
our cooperation network.

Trade-In Service Fully Upgraded in European Markets

In 2023, we further upgraded the “trade-in” service in the UK, Germany, Italy, France, Spain, the Netherlands,
and Poland. We carried out in-depth development of Xiaomi’s official website in the above markets,
correlating the trade-in order with the recycling order and combining it with the operation of the page for
ordering a new device. This move provides users with a complete and convenient trade-in experience and
subsidy Program.

42 ISO 14001: ISO 14001 is the world’s first international environmental management standard system. It not only meets current environmental
requirements but also ensures that the management system will be able to meet future needs.
43 R2: Responsible Recycling.
44 During the year, the significant increase in the weight of electronic waste recycled by Xiaomi was mainly attributable to Xiaomi’s continued
expansion of product recycling and trade-in services and the significant growth in sales of major appliance products.
45 Trade-in coupons: Xiaomi users can participate in our Trade-In Program by returning their used products to us in exchange for coupons. We
will then assess the residual value of the products, conduct a quality inspection, and issue a “trade-in coupon” to the user’s Mi account upon
successful completion of the transaction.
 2023 ANNUAL REPORT 145

Used Device Refurbishment

We are committed to advancing the circular economy by continuously carrying out used device refurbishment
programs. During the year, our refurbishment factories in Europe alone refurbished 126,567 smartphones, smart
TVs, smartwatches, electric scooters, air purifiers, and robot vacuums, among other devices. Among refurbished
devices, there were more than 111,698 smartphones, more than 3,603 smartwatches, 1,243 smart TVs, 1,798 electric
scooters, 3,489 robot vacuums, and 4,736 other ecosystem devices. In 2023, we opened a refurbishment factory for
ecological chain products in Hong Kong, China, primarily for the refurbishment of dehumidifiers, air purifiers, and
robot vacuums.

Expanding Product Lifespan

Product Durability
When selecting materials for our products, we consider material durability. We have used new materials such as titanium
alloy and Dragon Scale Fiber46 in different models of smartphones. We have created an ultra-strong skeletal architecture
consisting of a high-strength composite aluminum skeleton, a raised and reinforced design at the corners of the middle
frame, a thickened motherboard with multiple metal reinforcements, and Corning Gorilla Glass Victus47. We have introduced
a keel pivot with aerospace-grade super steel, a three-stage connection, and 14 removable hinges. These enhancements
significantly improve the device’s drop resistance, durability, and endurance. In our latest flagship smartphones, we have
introduced Xiaomi’s Dragon Crystal Glass, renowned for its extreme durability properties as a screen material. This material
uses a professional powder formula in the screen panel. Through heat treatment above 800°C, it undergoes nucleation and
long crystal growth to form microscopic crystals with interlocking structures that are evenly dispersed in the glass. This
design allows the Xiaomi Dragon Crystal Glass to gain strength far beyond that of ordinary glass, boasting 10 times the
drop resistance and 1.25 times the scratch resistance, while maintaining a high transmittance rate. In durability tests such
as high temperature and humidity, dust and water resistance, and drop, we have also set up experimental standards that
surpass international norms, aiming to reduce the risk of product breakage in various scenarios.

In 2023, the Redmi K70E smartphone debuted the Starfish Algorithm, which enables the repairable function of the
phone’s battery. It maintains 90% of its battery capacity in the heavy-duty condition of 1,000 cycles, meeting rigorous
cycling capacity requirements. The Redmi Note 13 Pro smartphone also features a long-life cycle hardware and
software design, guaranteeing the long-use standard of 1,000 cycles. In addition, we have extended the lifespan of our
smartphone products by prolonging battery life and reducing charging frequency. The Xiaomi 14 and Xiaomi 14 Pro
smartphone products have seen a notable improvement in endurance (DOU48) by 7-8% compared to their predecessors.

Warranty Services
At Xiaomi, we are committed to providing users with convenient repair services and expanding product lifespan
through comprehensive warranty service plans. We offer repair parts and materials at reasonable prices to enhance
the maintainability of our products. In addition, we uphold our promise of product repair and ensure the availability
of spare parts for products that are no longer sold. Additionally, we have set clear requirements for our maintenance
service partners regarding spare parts storage duration and outlet maintenance capacity to better address our users’
repair needs. To effectively extend the service life of our products and reduce electronic waste, we provided board-
level repairs49 in the Chinese mainland in 2023 for products that previously required part replacements, with a

46 Dragon Scale Fiber: This material has the advantages of high toughness, high strength, impact resistance, and puncture resistance. A hair-thin
ceramic fiber can stretch 1.15 kg without breaking. Its impact strength is 36 times higher than that of glass.
47 Corning Gorilla Glass Victus: Corning® Gorilla® Glass Victus® is the first mobile phone glass released by Corning Gorilla that presents significant
improvements in both drop and scratch resistance. According to Corning’s official experimental data, the glass remains intact when dropped from
heights of up to 2 meters onto hard and rough surfaces.
48 DOU: Days of Use.
49 Board-level repairment: It refers to locating faulty components or equipment through simple repair operations (such as replacement and
debugging) and repairing.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

cumulative total of 192,000 orders completed. Warranty extension programs have been launched for key components
of home appliances. The warranty period for compressor and motor components of air conditioners, refrigerators, and
washing machines has been extended to ten years, and the warranty period for the motor, a primary component of the
vacuuming series products, has been extended from one year to three years. These programs have effectively reduced
the frequency of product replacement by users. We have enhanced our maintenance service capabilities for smart
TVs, prioritizing local repair over part replacements.

Product Design and Recycling

At Xiaomi, we actively promote the utilization of renewable resources in product design and R&D and aim to replace
traditional materials with bio-based and recycled alternatives. We assess the environmental impact of components
throughout their lifecycle during the product design phase, prioritize simple construction design and single-material
packaging, and enhance the renewable performance of products. Through these efforts, we aim to reduce and
eliminate waste and pollution and promote a circular economy. Moreover, we collaborate with our partners to
actively explore the application of renewable materials, bio-based raw materials, and high-performance new green
materials, thereby increasing the proportion of green materials in our products. This approach enhances enhance
the “low-carbon satisfaction” of our users. Throughout the year, we adopted the following initiatives in core product
development.

• Adoption of a low-carbon leather material solution for the first time. The back case of the Xiaomi 13T
smartphone is made of a biobased material based on apple pomace, with 24% of the polyurethane material
derived from biobased raw materials. Additionally, the base fabric is 100% made of recycled RPET50 fabric and
ensures zero organic solvents used in production.

• Reuse of marine debris. Recycled plastic materials derived from discarded fishing nets from the ocean are used
for some of the components of the Xiaomi 14 and Xiaomi 14 Pro smartphones. These parts contain over 50%
recycled materials.

• Extensive use of recycled metals. We have increased the utilization of recycled metal raw materials in
smartphone components, including recycled aluminum, gold, and copper. For example, some models of the
Redmi series feature die-cast center panels and front cases crafted from recycled aluminum materials, with
100% of metal scrap from production being recycled for production.

• Optimization of battery materials. With the newly introduced hybrid ternary battery technology, the
nickel-cobalt-manganese ternary material is added to the original lithium cobalt cobaltate cathode material
in the batteries of some smartphone products, reducing the cobalt consumption by 13%. This move not only
diminishes reliance on rare metals but also curtails the utilization of key mineral resources.

• Promotion of green packaging. We have significantly increased the proportion of molded pulp products used in
the packaging liners of smartphone products to 30–50% in some markets.

• Promotion of lightweight packaging. By reducing the grammage of raw materials for packaging content such
as instruction manuals and product starter guides, we have reduced paper use by 33.3%, saving approximately
1,170 tonnes (Mt) of paper.

50 RPET: Recycled PET or recycled polyethylene terephthalate. It is an environmentally friendly material made primarily from recycled PET plastic
bottles using physical or chemical techniques of extraction.
 2023 ANNUAL REPORT 147

We also continue to seek green and innovative packaging solutions for our ecosystem products, aiming to conserve
resources in packaging. In 2023, Xiaomi’s ecosystem products adhered to a design and R&D philosophy centered
on “eliminating excessive packaging, striving for simplicity and compactness, and pursuing green packaging”.
Through optimization of packaging structure, materials, printing, and manufacturing processes, we have revamped
our packaging R&D process, packaging design standards, reliability testing standards, and appearance inspection
standards. These initiatives guarantee the quality of product packaging while achieving substantial reductions in
packaging material consumption. This year has witnessed:

• De-plasticizing and biodegradability. In some of the IoT product packaging, we have transitioned from replace
the traditional BOPP51 full-wrap film to the tracing paper full-wrap film. This change not only maintains product
aesthetics and reliability but also achieves 100% de-plasticized and biodegradable packaging. Additionally, by
substituting two-sided paper coated with water-based oil for two-sided coated film, we have accomplished a
100% all-paper biodegradable packaging solution.

• Innovative application of materials. Xiaomi’s noise-canceling Bluetooth earphone, Necklace, adopts an

all-molded-pulp one-piece packaging structure from the outer box to the inner liner. Its raw material consists
of 70% bamboo pulp and 30% sugarcane pulp, successfully realizing 100% biodegradable packaging materials.

• Optimization of structure. For the packaging of the robot vacuum category, we have replaced the original plastic
structure with a paper tray structure, realizing 100% biodegradable packaging materials. Meanwhile, we have
switched the cushioning material of small products (such as Xiaomi AI Speaker Second Generation and Mijia
Smart Air Fryer PRO 4L) to recycled materials.

• Lightweight optimization. We have conducted in-depth optimization in packaging materials, structure, and
process, and completed the lightweight packaging R&D and design for a total of more than 20 products in
various categories, including robot vacuums, routers, speakers, kitchen and bathroom appliances, personal
care products, and smart door locks.

Restricted Substance Management

Specific chemical substances may pose negative impacts on human health and the ecological environment. At Xiaomi,
we prioritize the safety of our users and the environment by rigorously controlling the use of chemical substances.
We strictly adhere to global laws, regulations, and standards governing the restricted use of chemical substances,
including the Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic
Equipment (RoHS), the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), the Directive on
Packaging and Packaging Waste (94/62/EC), and the EU Persistent Organic Pollutants (POPs) Regulation.

In 2023, Xiaomi’s RoHS certification and REACH certification covered all smartphone products and IoT devices. We
updated our Product Environmental Hazardous Substance Management Guidelines based on globally applicable
regulations and standards on restricted substances (such as RoHS, REACH, and PoPs) and in light of Xiaomi’s
practices. We impose stringent restrictions on the use of restricted substances in the production and manufacturing of
our products in accordance with domestic and international standards. Additionally, we continuously strive to reduce
and phase out potentially restricted substances that may be contained in our products, such as Polyvinyl Chloride
(PVC), Brominated Flame Retardants (BFRs), beryllium, antimony, and cobalt. This effort reflects our commitment to
diminishing the negative impacts of our products on the environment.

51 BOPP: Biaxially Oriented Polypropylene.

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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

During the year, we provided training on the management of restricted substances for our suppliers to enhance their
performance in this regard. We classified different materials according to their environmental risk and required
our suppliers to conduct regular environmental tests in accordance with the environmental classifications. We
worked closely with our supply chain partners to set detailed management requirements on restricted substances
for the processes of product design and manufacturing and required all product and component suppliers to accept
the provisions and submit product environmental reports or third-party test reports on materials (including but
not limited to the Product Environmental Hazardous Substances Compliance Statement and third-party precision
analysis reports on hazardous substances), to ensure that the information they provide on restricted substances is
reliable. Moreover, we are dedicated to reducing negative impacts on the environment across stages of development,
production, and use. During the year, we switched from mineral ink to soy ink for printing package contents and
product user guides in the packaging of Xiaomi 14 series smartphone products and removed mineral oil-saturated
hydrocarbon (MOSH) and mineral oil-aromatic hydrocarbon (MOAH) substances from the packaging.

We strictly implement the process of pre-inspection and tracking management of restricted substances, and have
established a pre-inspection and tracking management system for parts and raw materials. In 2023, we disclosed the
Substances of Very High Concern (SVHC) contained in our products as per the provisions of REACH. For more details,
please refer to the Sustainability page on the Group’s official website (https://www.mi.com/global/about/sustainability).

We actively participate in the development and review of industry standards. In 2023, we participated in the
replacement review of the industry standard governing electrical and electronic products, Marking for Control
of Pollution Caused by Electronic Information Products (SJ/T 11364). We joined the Working Group on Pollution
Control Standards for Electrical and Electronic Products organized by major regulators. These endeavors signify our
commitment to setting domestic standards for restricted substances.

Operational Waste Management

At Xiaomi, we put operational waste under a strict classified collection and management mechanism and commission
qualified third-party organizations to recycle, dispose of, and reuse it. We have developed the Waste Management
System of the Xiaomi Science and Technology Campus to regulate the classification, collection, and disposal
procedures for solid waste. We have also assigned responsibilities for domestic waste recycling to ensure that
operational waste on the campus is handled in a safe and orderly manner. Embracing the regulator’s policy on waste
classification, we have continuously promoted waste classification and environmental protection awareness. Through
a three-step education and implementation method, “instruction, understanding, and implementation,” we ensure
the orderly and efficient implementation of waste classification. Our efforts included posting more than 300 signs
and posters on waste classification in the Xiaomi Science and Technology Campus, hosting regular training on waste
classification, and receiving four inspections on waste classification from relevant regulators throughout the year.

Non-hazardous Waste
Non-hazardous waste generated from our operations includes domestic waste from offices and food waste from
our canteens. We insist on using the food waste compression equipment installed in our canteens and have added a
new dishwasher to dehydrate and break up the residue. We use biotechnology to convert the compressed food waste
into animal feed or organic fertilizer that meets national standards. On average, each tonne (Mt) of food waste yields
approximately 0.3 tonnes (Mt) of organic fertilizer. In the year, we processed about 3,200 tonnes (Mt) of food waste.
 2023 ANNUAL REPORT 149

Hazardous Waste
We keenly recognize the potential risks that improper use and handling of chemicals may bring to our customers,
employees, communities, and the environment. Therefore, we are dedicated to continuously improving our chemical
management system, ensuring strict compliance with pertinent laws and regulations, and handling the chemical
substances involved in our products, activities, and services and the hazardous waste generated in a highly
responsible way. We have established a sound hazardous waste management system and processes. We also avoid
the generation of waste by optimizing our production and auxiliary processes and improving the efficiency of material
utilization. Hazardous waste generated is disposed of properly in strict accordance with pertinent processes and
regulations. In 2023, hazardous waste from our operations included toners and cartridges required by the printing
equipment as well as liquid and solid waste from the R&D and manufacturing of the automobile business line. All of
the waste was disposed of in an environmentally sound manner.

Hazardous waste treatment in the automobile business line

We adhere to the principles of “minimization, recycling, and safe disposal” of waste and are committed to reducing
the production and use of hazardous substances. In production manufacturing, we adopt advanced environmentally
friendly coating processes, such as zirconized film treatment and dry painting, to effectively reduce the emission
of volatile organic compounds (VOCs). Moreover, we strictly screen raw and auxiliary materials and prioritize
coating products with low VOCs content to reduce the generation of hazardous waste at the source.

We will implement a sludge drying and waste solvent concentration project. Through these measures, we will
further reduce the generation of hazardous waste and mitigate negative environmental impacts.

Natural Resources and Biodiversity

At Xiaomi, we attach great importance to the key role that natural resources play in our products and services, and
we perform responsible management of the resources used in our production and manufacturing processes. We
continuously optimize our product structure, reduce the use of materials, and develop and apply recycled or energy-
efficient materials. We minimize the use of fresh water and strive to eliminate waste of resources in our operations
and operations of our value chain. We maintain energy and water conservation and waste reduction measures
to improve resource efficiency and reduce pollutant emissions. At the same time, we continuously optimize our
operating environment and improve our management systems in accordance with the laws and regulations of the
locations in which we operate.

Water Stewardship
Water is an essential resource that flows through various aspects of sustainable development, and thriving society and
natural environment depend vitally on a well-functioning water system. Xiaomi’s water stewardship has progressed
steadily with continuous improvement. During the reporting period, the State increased its efforts in environmental
protection legislation and implemented several laws and regulations on water protection and stewardship. At Xiaomi,
we have taken proactive measures to align our practices with these new laws and regulations and meet regulatory
requirements. We have moved in advance for water protection and sustainable water stewardship demands.
Through data collection and analysis, we have developed and implemented various commitments and plans aimed
at sustainable water stewardship and evaluated the progress of implementation. We have achieved a sustainable
balance of water and excellent water quality, safeguarded key waters, and ensured access to safe drinking water for
our employees.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Alliance for Water Stewardship (AWS)

This year, Xiaomi obtained the Gold certification from the Alliance for Water Stewardship (AWS)49 for the first time.

Xiaomi Science and Technology Campus is the world’s first commercial office building to apply for the AWS
certification. Our achievement sets a precedent for global business companies by overcoming obstacles and
innovating to achieve the best score. Xiaomi Science and Technology Campus has been designed, built, operated,
and managed in accordance with green building standards. Its approach to water efficiency builds upon the
principles of using less water and maximizing the circular use of water resources, guiding other operating
campuses of Xiaomi in water stewardship. In addition, Xiaomi Science and Technology Campus is the only office
campus in the world to apply for AWS certification for protecting water resources in China’s Haihe River Basin,
effectively protecting water resources in n orthern China.

Water Stewardship Procedures

We have continuously promoted the concept of sustainable water stewardship from AWS standards and extended our
experience to other operating campuses of Xiaomi. We have established a comprehensive water stewardship system
to assess water-related risks and challenges. The campus director assumes the highest accountability for sustainable
water stewardship. The Corporate Social Responsibility (CSR) Centre, serving as the planning and management arm,
implements sustainable water stewardship programs and reports directly to the top manager. The Administration
Department coordinates and manages tap water, reclaimed water, cooling water, wastewater and rainwater, as well
as the planning and implementation of improvement programs on the campus.

We have set targets and action plans for total water consumption and water efficiency. We apply advanced water
conservation technologies and strengthen management measures to continuously improve water efficiency, and
review the results every year. Furthermore, we actively promote the utilization of recycled and reclaimed water and
continuously increase the rate of recycled water usage and the recycling rate of reclaimed water on the campus.
In addition, we are dedicated to protecting the water environment in local watersheds, supporting water security
planning for watersheds, and improving communication and information disclosure with external stakeholders.
For more information about Xiaomi Corporation’s water stewardship, please refer to the Sustainability page on the
Group’s official website (https://www.mi.com/global/about/sustainability).

Water Stewardship Practices

We are committed to advancing our water stewardship practices to ensure water security and protect aquatic
ecosystems in the watersheds where we operate. Our goal is to harness technology as catalyst for improving access
to affordable water resources. All wastewater produced in our operations is treated in strict compliance with local
regulations and requirements to ensure water safety. Throughout the year, we implemented a combination of
water conservation measures to manage water consumption within our commercial premises, including enhancing
management of air-conditioning water quality, utilizing high-pressure water cannons to clean grease traps, and
replacing traditional watering with sprinkler irrigation. At the same time, we have taken adequate preventive
measures to address potential incidents related to wastewater, ensuring the efficacy and safety of our water
stewardship. We rigorously monitor the quality and quantity of water supplied. We conduct real-time monitoring and
regular compositional analyses of the wastewater generated to ensure clean water while prevening water pollution.

52 Alliance for Water Stewardship (AWS): It is a water stewardship certification body established by the UN Global Compact (UNGC), the Carbon
Disclosure Project (CDP), and other international organizations. The AWS certification rates water use sites as Platinum, Gold, or Core (from
the highest to lowest) based on an assessment of 100 indicators, including stable water stewardship, water pollutant stewardship, water
sanitation, domestic impacts of biodiversity, and governance. For more information about Xiaomi’s response to climate change, please refer to the
Sustainability — Water Resources page on the Group’s official website (https://www.mi.com/global/about/sustainability#/water).
 2023 ANNUAL REPORT 151

Biodiversity
The essential role of natural resources in addressing climate-related challenges and conserving biodiversity was
emphasized at COP28, which concluded in December 2023 as an international conference on the global response to
climate change. Business development strategies that integrate nature conservation and climate action are becoming
increasingly critical. In the face of ongoing biodiversity loss, societal expectations regarding ecological conservation
from companies continue to escalate. In response, we are embarking on proactive initiatives at Xiaomi to uphold our
commitment to biodiversity conservation. We will formulate a biodiversity strategy aligned with the methodology of
related topics on Global Biodiversity Framework (GBF) and the Taskforce on Nature-related Financial Disclosures
(TNFD), aiming to minimize and avoid impacts on global ecosystems.

Biodiversity Commitments
We are committed to:

• Ensuring that our business activities are compliant with applicable local biodiversity laws and regulations in all
the markets we operate;

• Ensuring that our site selection and construction activities avoid and do not invade or cause negative impacts on
the habitats of endangered and protected species listed on the International Union for Conservation of Nature
(IUCN) Red List, and the natural and cultural heritage sites listed in the World Heritage List of the United
Nations Educational, Scientific and Cultural Organization (UNESCO);

• Encouraging suppliers to conduct biodiversity risk assessments associated with their operating sites, and to
take necessary measures (such as avoidance, reduction, restoration, and offsetting) in the event that their
production or operating boundaries are in the vicinity of key biodiversity ecosystems and habitats of threatened
and protected species, in order to minimize negative impacts and enhance ecological well-being; and

• Collaborating with partners to explore possible ways to alleviate biodiversity degradation.

Biodiversity Practices
At Xiaomi, we prioritize the conservation of biodiversity, water, and natural ecosystems. We have launched a charity
program with a focus on ecological conservation, covering various areas such as wildlife protection, stray animal
rescue, and environmental protection. This year, the Xiaomi Fundraising Platform for Charities continued its efforts
in the “Protecting Habitat of Migratory Birds” project in protecting and promoting migratory birds and their habitats.
It also drew more attention to “Three Rivers Water Conservation and Species Preservation,” a project that aims
to preserve the intact ecosystem of the Three River Sources (or Sanjiangyuan) ecosystems, thus contributing to
conserving the source of the Yangtze River.

While continuing to make a positive impact on the community, we are vigilant about our impact on the local biodiversity
and ecological environment. In 2023, we conducted a study on the ecological status of the flora and fauna at the Qiyue
Farm charity project site. This study included an assessment of the local soil, water quality, and other ecological
factors, as well as an evaluation of the distribution of local vegetation and animals. Using the sample survey method,
we examined the species diversity of the ground cover and its plants in different ecological environments in the area.
The results revealed the presence of 22 species of wild animals, including the badger and the wild boar; 40 species of
wild birds, including the little egret and the medium egret; and 10 species of wild amphibians and reptiles, including
the Zhenhai brown frog, in the evaluated area. These results demonstrate that the public welfare project has not only
contributed to the conservation of local wildlife diversity but also boosted the local economy.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

We have extended our biodiversity responsibility even to the greater world. This year, Xiaomi India partnered with
United Way India, an NGO, to launch an urban afforestation project in the National Capital region. With this partnership,
they aimed to promote the diversity of flora and fauna through soil and water conservation and groundwater level
monitoring. The project also aims to address the urgent need for increased green cover by planting 12,000 saplings of
over 40 different local varieties. The project follows the Miyawaki initiative53 to cultivate an urban forest. Soil moisture
is improved, and rainwater conservation measures are implemented to improve soil moisture, thus reducing pollution,
increasing biodiversity, and mitigating the urban heat island effect. Moreover, this urban forest contributes to carbon
reduction and sequestration and mitigates the impact of climate change, thus contributing to a sustainable world for
future generations.

At Xiaomi, we persevere with marine litter and plastic pollution control. In Aug 2023, Xiaomi India launched a
three-year program on prevention of ocean bound and waste management in Karnataka. The initiative aims
to enhance waste management. In Karnataka, we clear litter on beaches and in rivers and install protective
netsselect locations through source segregation, system streamlining, beach cleanup drives, installation of trash
barriers in rivers to prevent plastic waste from reaching the ocean and to maintain the stability of the marine
ecosystem, community awareness, infrastructure support, and behavioral change towards waste dumping. The
target of the three-year control program is to remove approximately 2,300 kg of dry waste from landfills and
water bodies every day and to conserve marine biodiversity while creating cleaner beaches and ecosystems.

At Xiaomi, we are committed to making a significant positive impact on society while actively practicing biodiversity
conservation. Through the Xiaomi Fundraising Platform for Charities, we raise awareness about environmental
protection and biodiversity conservation among users both online and offline. Online, we promote the concept of
environmental protection to users through smartphones, smart TVs, and other multi-terminal devices. Offline, we
organize a wide range of environment-themed public welfare volunteer activities, including tree planting, coastal
cleaning-ups, wetland ecological conservation, and dissemination of ecological knowledge. These activities serve to
advocate for environmental protection and biodiversity conservation among users.

53 The Miyawaki Initiative: The Miyawaki initiative, proposed by the Japanese botanist Akira Miyawaki, is an effective, smart, and sustainable way to
create native dense forests. This renowned method so effective is because it ensures that plants grow up to 10 times faster and that plantations
are up to 30 times denser than traditional forest planting methods.
 2023 ANNUAL REPORT 153

Shared Success for Partners

Talent Nurturing

Employee Rights and Diversity

Talent plays a pivotal role in Xiaomi’s quest high-quality technological innovation and its continued leadership in the
fiercely competitive industry landscape. By developing competitive recruitment, hiring, benefit, and incentive policies
globally, we are committed to providing a safe and comfortable work environment and fostering an “inclusive, open,
diverse, and equal” workplace that attracts diversified talented people. We have designed a training system that tailored
to the development of all types of employees, aimed at nurturing, motivating, and retaining professionals aligned with
the needs of corporate development. In 2023, our efforts yielded many remarkable results. We were included in the
World’s Best Employers 2023 list of Forbes, acknowledged by Forbes China as China’s Best Employer in Innovative
Practices of the Year, and were ranked among top 3 among China’s Most Attractive Employers by Universum.

Labor Standards
Our values of fairness, impartiality, and openness is enshrined in our Employee Handbook and other policies
applicable across our global operation as well as our approach to managing recruitment, employment, and employee
dismissal. We uphold and adhere to the guiding principles established by the International Labor Organization
(ILO), the Organization for Economic Cooperation and Development (OECD), and local workplace regulations. In
our Employee Handbook, we strictly prohibit child labor and forced labor anywhere, alongside harassment, abuse,
violence, and any form of discrimination in our workplace — including language, behaviors, and decision-making in
the recruitment process. We also provide relevant training to help employees better understand these issues. In 2023,
there were no reported incidents related to child and forced labor, employment and gender discrimination, and violent
behaviors in our workplace.

Anyone found to be in violation of these conducts will be subject to disciplinary action in accordance with our internal
policies and regulatory requirements. We operate in accordance with the principles of the United Nations Universal
Declaration of Human Rights and the United Nations Global Compact (UNGC) and require the same of all suppliers
doing business with us.

In 2023, we established a Labor Coexistence Committee in Colombia. As a supervisory body, it is one of

the Company’s key strategies to protect its employees. The committee is committed to improving the work
environment, preventing workplace bullying and harassment, and protecting employees from risks that could
endanger their health while at work. The establishment of the Labor Coexistence Committee in Colombia
highlights Xiaomi’s value and inclusion of talent.

Recruitment and Employment

We have assembled a dedicated Talent Strategy Team to work with our Human Resources Business Partners (HRBP)
across all business divisions to attract talent to fill the core technical and strategic roles of the Group. Craving
for talent, we have established various recruitment channels, including university-enterprise cooperation in talent
cultivation projects, the Future Star Program, postdoctoral workstations, internship recruitment, experienced hires,
campus recruitment, and internal referrals from employees. Our goal is to to bring together the best people from all
sectors and improve the efficiency of job-to-talent matching.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

We forbid child labor and forced labor at any stage of our operations and sufficiently protect the rights and interests
of all employees. Should we receive any reports of child labor or forced labor, we will immediately initiate an internal
investigation to probe into the alleged violation. Based on the investigation results, we will take different measures to
eliminate the impact of the violation (if substantiated), including but not limited to terminating the illegal contract and
providing remedies and support for the affected.

Committed to addressing the employment challenges faced by university graduates, we build employment platforms
for fresh graduates by various means. In 2023, we introduced a promotion campaign utilizing “metaverse” virtual
reality. This campaign offered details about Xiaomi Corporation’s campus environment and corporate culture.
The “metaverse” promotion campaign received nearly 27,000 views and more than 5,000 interactions from
students, significantly bolstering Xiaomi’s employer image and brand recognition. In addition, we invited Xiaomi’s
top management and general managers to participate in campus promotion. We hosted 100 exciting promotion
presentations at 87 universities and colleges in 34 cities, attracting over 16,000 students and amplifying Xiaomi’s
presence in universities and colleges.

During the year, we made significant enhancements to our recruitment and employment procedures. As part of
our efforts, we invited some of the signed fresh graduates to visit Xiaomi’s campuses and welcomed over 260 fresh
graduates in Beijing, Shanghai, Wuhan, and Nanjing. This program proved instrumental in fostering a positive
perception of Xiaomi Corporation and the recruitment process among the candidates. We have also set up an internal
recommendation mechanism and standardized the re-employment process.

To continually stimulate organizational vitality and provide more opportunities for career development, we have
implemented the “Moving Stars” flowing water54 program. It encourages employees to proactively seek internal job
applications and transfer opportunities. As a result, numerous employees have transitioned to new roles through this
mechanism, which bolsters the Group’s talent retention.

Diversity and Inclusion

At Xiaomi, we remain committed to building a diverse and equitable workplace, and we drive innovation with an open
and inclusive environment. Guided by the principle of embracing different voices and perspectives, we offer a range
of tools and resources to create a diversified work culture and a diverse, inclusive, and culturally vibrant workplace.

Commitment
We are committed to providing and safeguarding inclusive and equal opportunities for all employees in development
and promotion without regard to their national origin, ethnic group, age, gender, religion, and cultural background.
We support the aspirations of all employees and endeavor to promote a diverse, equal, inclusive, and open workplace.

We have set up a Women’s Rights Committee and mechanisms for the prevention of sexual harassment in the
workplace, as we are dedicated to supporting and protecting the rights and well-being of our female employees both
at work and at home. Every year, we organize commendation activities for our female employees to foster an equitable
mindset for all, and prevent any unconscious biases that may undermine our culture of equality and inclusivity.
In addition to the regular baby care rooms in offices, we hosted many recreational activities for our female employees,
delivered lectures on women’s health, and organized HPV55 vaccination during the year.

54 Flowing water: It is a program for internal job applications and transfers initiated by the employees. Employees who meet the conditions of flowing
water can apply for the program if there is a suitable position within the company, after a two-way choice between the employee him-/herself and
the receiving department.
55 HPV: Human Papilloma Virus.
 2023 ANNUAL REPORT 155

Inclusion Practices
We value the skill sets, wisdom, and resources that local workers bring to Xiaomi. By actively recruiting and developing
local workers, we promote local employment. As of the end of this reporting period, we had 2,090 employees in our
overseas workforce, with 1,885 of them being recruited locally. We respect employees of different faiths and cultural
backgrounds and provide them with equal and inclusive career development opportunities.

In our canteens, we give full consideration to the dietary habits of different ethnic groups and regions and offer
diversified food choices to accommodate employees from different cultural backgrounds. Throughout the year, we
expanded our dining options for employees to provide them with nutritionally balanced and richly varied dishes while
maintaining an emphasis on their dietary health. Moreover, we customize the office space to reflect the culture and
characteristics of the people where we operate and offer gifts and meals that align with local customs.

Employee Well-being
Creating a Safe Work Environment
At Xiaomi, we hold a steadfast belief that people are our most valuable assets and that Environment, Health, and
Safety (EHS) are core and foundational to how we grow and thrive as a business. We adhere to EHS regulations in all
regions where we operate and are committed to cultivating a strong EHS management culture to ensure a safe and
healthy workplace for all.

EHS Management System

We have established a comprehensive EHS management system. Guided by the EHS Safety Management Committee,
which comprises of top management, we continually enforce, promote, supervise, and enhance EHS policies and
management measures across the Group. In 2023, our focus within Xiaomi’s EHS management system was on
rules and personnel management. Regarding, we added safety norms, system documents, contingency plans, and
corresponding implementation documents, and developed EHS management manuals and related documents for
external contractors to adapt to new business scenarios. Concerning personnel management, we performed closed-
loop management of safety risks by identifying and rectifying risk sources in the workplace to prevent accidents and
eliminate major hazards. Rectification of safety duties was 100% concluded during the year.

During the year, we completed the ISO 4500156 and ISO 14001 system certifications, covering all relevant products
of the Group. Our EHS management system Program document. Throughout 2023, we achieved zero major EHS
accidents, zero major losses, zero major incidents of fire, zero environmental pollution and social reputation events,
and zero incidents of occupational disease or occupational health hazards.

This year, we organized EHS training programs. Among our internal EHS auditors, 20 passed the training and obtained
the professional qualification certified by third-party organizations. By the end of 2023, we had a total of 42 certified
internal EHS auditors, who had improved our internal EHS management quality and capability.

56 ISO 45001: ISO 45001 is an international standard for occupational health and safety management, which aims to protect against health diseases
and workplace injuries and to provide a safe and healthy workplace.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

EHS Risk Management

We conduct quarterly internal audits to identify potential EHS risks. We assess the likelihood and severity of the risk
with reference to the LEC method57. The results will guide the design and implementation of risk control measures
that apply to all of Xiaomi’s production and business operation areas. Through regular inspection, monitoring, and
assessment, we ensure that the EHS risks are effectively controlled. In 2023, we conducted quarterly audits, special
EHS safety inspections, and 343 daily inspections. We carried out immediate rectification for the hidden problems
found, and 100% of the rectifications were completed on schedule.

Health and Safety Measures

During the year, we continued to invest in personal protective equipment, host emergency rescue drills, and enhance
the management of hazardous areas to enhance the physical and mental wellness of our employees.

• We set up clinics and deploy medical personnel to provide medical consultations and physiotherapy and to handle
safety emergencies when necessary. Throughout the year, our medical team received 8,259 consultations,
provided 5,497 physiotherapy treatments, organized eight workplace emergency rescues, and supported three
major events of the Group.

• We have added factory clinics to provide daily consultation and emergency protection services for factory
employees.

• We placed professional Automatic External Defibrillators (AEDs) in the common areas of our facilities, such
as the office lobby, employee service center, and main conference rooms. We also organized AED emergency
response training for our employees.

• We installed warning signs in areas with potential health and safety hazards (e.g. laboratories), and set access
restrictions in these areas.

Emergency Measures
At Xiaomi Corporation, we have established a comprehensive emergency management system to effectively manage
and respond to all kinds of emergencies, including natural disasters, accidental disasters, public health incidents, and
social security incidents. Throughout the year, we introduced 75 new on-site disposal plans and diligently implemented
them, enhancing our emergency management system and effectively reducing the losses caused by emergencies to
the economy, society, and the environment. Additionally, we have formulated a comprehensive emergency response
plan and included it in the training curriculum for new employees, achieving 100% coverage.

Occupational Disease Prevention and Treatment

At Xiaomi, we prioritize the health of our employees by implementing a people-centric approach and emphasize the
prevention and treatment of occupational diseases. Throughout the year, we established an occupational health
management system. We ensure that our employees are protected from occupational diseases and harmful factors
through on-site risk assessment, development of preventive and control measures58, health monitoring, supervision, and
inspection. At the same time, we hosted occupational health training and educational activities to enhance employees’
awareness of occupational disease prevention and self-protection. 100% of our operators are licensed to work.

57 LEC: L is Likelihood, the likelihood of an accident; E is Exposure, the frequency with which people are exposed to hazardous environments; and
C is Consequence, the possible consequences of an accident should it occur.
58 Preventive and control measures: Including improving processes, using protective equipment, and providing personal protective equipment.
 2023 ANNUAL REPORT 157

EHS Training and Activities

We are committed to providing comprehensive EHS training and activities to ensure that our employees are well
informed about the risks and best practices associated with their work. In 2023, we provided employees of different
ranks59 with EHS training on various topics, including operational safety, fire safety, traffic safety, anti-fraud, rule of law,
first aid, and electricity safety. Over 200 training sessions were conducted throughout the year, covering all employees60.

To raise employees’ attention to EHS management and strengthen Xiaomi Corporation’s emergency management
system, we provide emergency management system training for the whole Group. We use robots to push information
to all employees and invite professional instructors to deliver lectures to provide employees with practical emergency
skills courses. Our The EHS safety knowledge competition was enthusiastically received by Xiaomi employees, with
more than 2,100 of them obtaining full scores.

We actively cooperate with emergency response authorities to host activities on fire and traffic safety. In
November 2023, we conducted fire evacuation drills, film and video watching, hands-on operation of fire
extinguishers, fire ladder experience, and a prize quiz. These activities enhanced employees’ ability to respond
to fire. In addition, during the National Traffic Safety Day campaign, we strengthened the awareness of traffic
safety among all Xiaomi employees with traffic safety quizzes and promotion boards.

Employee Compensation and Benefits

At Xiaomi, we prioritize providing competitive remuneration and benefits to our employees. We hold on to the
principles of Total Compensation and Performance-Oriented to develop our comprehensive compensation system and
incentive mechanism, which is clearly outlined in Xiaomi’s Employee Handbook. This transparent practice enables
employees to clearly understand how their remuneration is structured.

Compensation Schemes
At Xiaomi, we are committed to fair and equitable compensation. We assess our salary level globally every year to
ensure fair compensation. The senior leadership analyses compensation in terms of fairness-related metrics every
year and makes necessary salary adjustments based on market competitiveness and fairness in the annual review.

Employee Benefits
At Xiaomi, we care about the physical and mental health of our employees and offer a comprehensive health benefits
package, which includes a commercial insurance scheme, annual health checks, and health consultations.

In 2023, we provided additional insurance for employees and their family members with varying needs, covering 49,654
employees and their children. Our commercial insurance scheme includes:

• Providing supplementary medical insurance and accident insurance coverage for full-time employees in the
Chinese mainland;

• Providing accident insurance coverage for other groups of employees (interns, outsourced employees, part-time
employees) in the Chinese mainland;

59 Ranks: Including annual EHS training for the entire Group, EHS training for new employees, three-level training (the factory, workshop
(department), and shift levels), and Safety Committee training for principals and safety managers.
60 All employees: Including employees away from work for a long period, employees resuming work after a work-related injury, interns, trainees, and
external visitors.
158 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

• Providing supplementary medical insurance for the children of full-time employees in the Chinese mainland;
and

• Providing commercial insurance for overseas full-time employees based on the local situation.

We continue to provide annual health checks for our employees, covering all full-time employees in the Chinese
mainland. In 2023, we provided more benefits and support for our employees in addition to existing health check
items. We designed more targeted health checks. For example, we added glycated haemoglobin, thyroid function
tests (TSH, FT3, and FT4 for the thyroid function, and three items for the electrolyte test), and bone density tests
to our health checks. At the same time, we encourage our employees to undergo regular health checks every year,
pay attention to abnormal indicators, and raise their health awareness. We also provide discounted health checks
for family members of our employees and encourage our employees to care for the health of their family members.
Moreover, we have organized several events aimed at caring for and improving the health of our employees, including
the “Hello, Health” traditional Chinese medicine consultation, acupuncture and massage, distribution of healthy fruits,
and oral health seminars.

We also care for our employees’ mental health. Our Employee Assistance Program (EAP) continues to provide support
to enhance employee mental wellness. During the year, we developed an online mental care platform system, which
received 27,938 accesses from 2,162 people. We provided psychological counseling sessions, which attracted 623
employees to attend, and conducted a 12-session online training course on mental wellness and two offline lectures.
We also hosted three mental wellness events for a total attendees of over 1,300.

To assist our employees in better fulfilling their responsibilities as parents or family caregivers, we provide pregnant
employees with prenatal check-up leave, maternity leave, abortion leave, and breastfeeding leave, and all employees
with parental leave. During the year, a total of 2,860 employees availed themselves of parental leave, with a return-to-
work rate of 100% following their leave period.

To provide better returns and career development for our dispatched employees, we have increased the
percentage of subsidies for dispatched employees this year. Employees are given priority for promotion upon
completion of their assignments. In addition, we reimburse our dispatched employees for health checks and
vaccinations and purchase special overseas travel insurance for them to ensure their personal and property
safety. We also care for the needs of dispatched employees for family care and reunion by providing employees
with traveling leave and reimbursing them for the air tickets to visit their families.

Employee Incentives
We value the long-term motivation of our talented workforce and actively promote our employee Share Award
Scheme. In this scheme, employees will be granted share awards in recognition of their contribution, based on the
assessment under the Group’s performance management mechanism. In 2023, the Board awarded a total of 389.4
million shares to 8,361 selected participants.

We also attach importance to incentivizing innovation and intellectual property. In addition to the regular patent
application and authorization incentives of the Group, we have instituted a patent award at the Group level to reward
inventors, Xiaomi designers, and patent engineers who have made substantial contributions to patents.
 2023 ANNUAL REPORT 159

Employee Communication
At Xiaomi, we are committed to supporting employees in expressing their demands and exercising their rights through
various channels to ensure that their voices are heard and respected. To achieve this, we have established a diverse
communication mechanism, including the labor union, HR partners, and Xiaomi’s whistleblowing and complaint
channels, with the goal of fostering an open and equitable work environment. Additionally, we encourage employees
to actively engage in the Group’s development and decision-making process, fostering collaboration to build a
harmonious, respectful, and inclusive work environment.

We actively organize various activities, such as organizational capacity surveys and collective bargaining for the labor
union, to promote effective communication between employees and management. We are committed to safeguarding
our employees from discrimination, retaliation, harassment, and any unfavorable treatment when they express their
claims and exercise their rights. This commitment applies to all levels of company operations and decision-making.
When addressing employee claims and issues, we take into account labor practices and cultural differences in
different regions, striving to find optimal solutions to problems through honest and constructive dialogues. We believe
that by doing so, we can better understand the needs of our employees and promote a healthy corporate culture while
enhancing employees’ sense of belonging and satisfaction.

Talent Development
Performance Evaluation Management
At Xiaomi, we have developed a sound performance management mechanism to ensure fair employee evaluations
and drive employee motivation. In our daily operations, all employees use the OKR (Objectives and Key Results)
mechanism. On an annual, quarterly, and weekly basis, they align team and individual ideas for future improvement
of projects with current task performance. The OKR mechanism not only enhances Xiaomi employees’ understanding
of the progress of the organization, teams, and partners but also enables them to evaluate their own contributions,
ensuring that their efforts are directed towards top priorities. Additionally, it allows employees to track their own
achievements, set ambitious goals at any time, and fuel their intrinsic motivation.

In addition to the OKR mechanism, we ask employees to conduct multi-dimensional performance evaluations every
six months or a year, such as self-evaluation, 360-degree evaluation, evaluation of dotted-line superiors, evaluation by
supervisors, and evaluation by departmental calibration. By evaluating employees’ performance and personal growth
during the evaluation period, we aim to foster employees’ career development and ensure team management as a whole.

Meanwhile, employees can make appeals and seek further justification regarding their evaluation results and their
pay packages. The whole appeal process and the personal information of the applicants are strictly protected by our
confidentiality policies and system.

At Xiaomi, we ensure equal, transparent, and unhindered promotion opportunities for all employees. We offer fair
regular promotion opportunities to employees who meet the criteria. Additionally, for those who make exceptional
contributions, we provide unique incentives and promotion paths.

Training and Ability Development

Guided by the talent development philosophy to “nurture Xiaomi talents comprehensively and improve institutional
capability efficiently,” we are dedicated to providing comprehensive, systematic, and efficient training for our employees.
These training sessions cover various topics including general education, corporate culture, cutting-edge technology,
and management skills, among others. By equipping our employees with the necessary knowledge, expertise, and
leadership skills to tackle everyday challenges at work and excel in their roles, we drive the achievement of Xiaomi’s
strategic goals.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

We continuously improve our employee training curriculum. During the year, we completed the transformation
of self-developed courses, launching a total of 77 courses with an average employee satisfaction of 9.64/10. We
introduced a knowledge deposition project for key positions, launching a total of 41 courses in four categories (data,
products, sales, and localized operations and management), achieving an average course satisfaction rating of 9.7/10.
Meanwhile, we made progress in piloting, implementing, and promoting our digital training platform. Throughout
the year, we developed more than 6,000 courses and over 2,000 livestreaming classes and launched two certification
center programs (the Induction Technology Certification for New Retail After-sales Engineers in the Chinese mainland
and the Xiaomi Smart IoT Technology). These resources were accessed by over 37,000 employees, facilitating the
integration of various functional roles and subject areas.

We place a strong emphasis on helping new employees integrate into our company and ramp up their professional
skills rapidly through training. Our commitment is to deliver training for all new employees and interns, and we have
updated and iterated the Starry Program61 for fresh graduates, the Integration Program62 for experienced hires, and
the Xiaomi Internship Program63 for interns. These programs are designed to help new employees better understand
our company culture and policies, and nurture a strong sense of team belonging. During the year, we completed
approximately 180,000 hours of new employee training and added nine new courses to our offerings.

Training and Ability Development

Starry Program:
General induction training for fresh graduates to catalyze the
transition from students to Xiaomi employees

Training for Xiaomi’s new employees

in coordination with business

Department Training: Perceiving

Require Group Training: Learning about the Position Training: Mastering skills Knowledge
Knowledge sharing mechanism for fresh graduates
the department and understanding
ment Group and embracing its culture and quickly building competence classific
its business
analysis ation
History and culture Perception of the department General knowledge of position
Plan Co-
Systems and basic principles General knowledge of business Position profession
User-oriented operation

production
design Efficiency tools Industry information Sharing by experts
of knowle
Content Career development Special business topics Simulation in virtual programs dge
develo
Knowle
pment On-the-Job Open Courses
dge
(Cheese Pie, Master Class, General Knowledge Open Course, etc.)
Training review
implem Knowle
entation Integration activities Culture activities Growth activities Practice activities
dge
Effect sharing
evaluat · Specialized content experts · Internally certified trainers · Professional head teacher team Data
ion · Excellent supervisor team · Game-style learning platform · Interactive learning thinktank insights

Induction 1st month 2nd month 3rd month 4th month 5th month 6th month Regular employee

· Online self-learning · Off-the-job centralized · On-the-job self-learning

training

61 Starry Program: The Starry Program is Xiaomi Corporation’s induction training program for fresh graduates. Its core objective is to help fresh
graduates quickly complete the transition from students to Xiaomi employees, identify with the corporate culture, master the necessary workplace
and job skills, integrate into working life, and become qualified new employees.
62 Integration Program: The Integration Program is an induction training program for new employees of experienced hires. Its core objective is to
help trainees familiarise themselves with the Company’s history, rules, and regulations, identify with the cultural values, enhance the sense of
belonging to the team, and quickly integrate into Xiaomi.
63 Xiaomi Internship Program: The Xiaomi Internship Program is an induction program for Xiaomi interns. Its core objective is to help trainees
familiarize themselves with the Company’s values, comply with rules and regulations, master basic office skills, enhance their sense of belonging
to the Company, and increase their willingness to stay and become full-time employees.
 2023 ANNUAL REPORT 161

As a technology company, outstanding technical talents are our most valuable assets. Therefore, we place significant
emphasis on nurturing cultivating leadership skills among our technical experts. To this end, we continuously develop
courses for our mid- to high-level managers and organize internal and external knowledge-sharing events to broaden
their technical perspectives. This year, we continued Xiaomi’s Spark Program and Ignite Program. The Spark Program
is designed for primary-level leaders. It aims to equip new managers of small-scale teams with core management
skills, reinforcing their leadership fundamentals, and facilitate the role transition from individual contributors to
managers. The Ignite Program is designed for middle managers. It focuses on the three dimensions of strategy,
operations, and management, and aims to enhance comprehensive capabilities through leadership learning and
practice projects.

At Xiaomi, we prioritize talent development, support our employees in obtaining state-level technical and professional
certifications, and help them enhance their professional capabilities and professional image. During the year,
about 600 employees obtained professional and technical certificates issued and certified by the Ministry of Human
Resources and Social Security of China. We extend our training courses for full-time employees to newly onboarded
contractors, covering the corporate culture, corporate policies, and business ethics. We have estalibshed online
learning groups to offer instant assistance to our contractors and outsourced partners whenever necessary.

Engineer Culture
At Xiaomi, our commitment to technology is unwavering, and our Engineer Culture is deeply ingrained in our DNA. We
are relentless in forging an Engineer Culture that celebrates innovation and optimal efficiency. Focusing on encouraging
innovation, promoting exchanges, cultivating talent, and process management, we host multi-dimensional, diversified,
and multi-level technical and cultural exchange events. This year, we held Xiaomi Technology Carnival 2023, Xiaomi
Hackathon 2023, Xiaomi Million Dollar Technology Award 2023, the Automobile Simulator Challenge, and Data Mining
Competition. These events aim to stimulate diversified technological collisions.

In 2023, we continued the theme of “Boundless Creativity, Endless Life” and held the fourth Xiaomi Hackathon,
providing a platform for Xiaomi employees to practice creative ideas and exchange thoughts. This year’s
competition was upgraded in all aspects of the schedule and system. For the first time, it was supported by
metaverse live-streaming and online roadshows, providing more opportunities for the participating teams to
showcase their ideas.

A total of 311 people in 76 teams registered for this year’s Xiaomi Hackathon, covering various departments
and regions, demonstrating the spirit of cross-regional and cross-departmental collaboration. The competition
witnessed one first prize, two second prizes, three third prizes, six honorable mentions, and four special
prizes for the Starry Program. The prize-winning projects covered a wide range of fields, such as inclusive
technology, child education, and cutting-edge industry exploration. As a result, 24 patent applications were
submitted in 2023.

At Xiaomi, we advocate a culture of openness and inclusivity in technology. To this end, we have established the
“Tech Circle,” a Group-wide interactive platform for technical culture, which has so far brought together more than
46,000 participants. In 2023, 2,356 engineers contributed nearly 5,600 technical articles to the platform, reaching a
cumulative readership of 1.26 million in the year. In addition, we launched the Cheese Pie program, providing a stage
for Xiaomi’s internal business experts to share knowledge in various fields. In the Master Class, we invite influential
experts to bring professional cutting-edge knowledge sharing, helping Xiaomi employees expand their professional
horizons and extend their knowledge boundaries.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Sustainable Supply Chain

In 2023, we recognized the heightened complexity of the global supply chain. Confronted with various challenges
spanning diverse laws, regulation, and labor practice markets, we have remained steadfast in promoting exemplary
practices in ESG governance throughout Xiaomi’s global supply chain network and within the manufacturing industry.
Through years of dedicated effort, we have we have bolstered our ability to address the hidden risks in our supply
chain and have demonstrated strong governance capabilities and operational efficiency in the face of escalating
challenges.

ESG System for the Supply Chain

Supply Chain Management System
At Xiaomi, we understand the pivotal role of supply chain governance in the responsible purchasing of parts,
materials, chemicals, services, and other essential components. To this end, we have started with a clear governance
structure to enhance collaboration with our supply chain partners to mitigate risk by anticipating where future supply
chain shortages or redesigns might occur. Key elements of our supply chain ESG governance encompass:

Clear Governance Structure and Guidelines

We have established a Purchasing Committee to oversee supply chain governance. The committee is comprised of
senior management, representatives from the purchasing department, members of the SC, and representatives from
the legal and internal control compliance departments, who directly oversee supply chain ESG issues. In addition, we
have developed a Supplier Social Responsibility Code of Conduct, aligned with Xiaomi’s ESG governance principles. It
mandates our suppliers to comply with laws, ethical business practices, and human rights management requirements.

Embedding in supplier selection and assessment

We have embedded Xiaomi’s ESG governance principles into our supplier selection process, evaluating potential
suppliers based on their governance practices, compliance history, and ESG risk management capabilities. We
regularly assess suppliers’ compliance with governance standards through audits, assessments, and performance
reviews to ensure their fulfillment of responsibilities and continuous improvement of practices.

Transparency reporting and review mechanism

We collaborate with suppliers to enhance transparency in purchasing practices and foster a competitive and fair value
chain ecosystem. The Xiaomi ESG Practice Review/Evaluation Report contains detailed supply chain ESG governance
information, governance practices, risk control status, compliance, and corrective actions taken for any issues. It is
designed to showcase supply chain ESG governance performance64 and prevent potential conflicts between purchasing
practices and ESG guidelines.

Objective synergy and capacity building

We work with suppliers to improve ESG governance. We provide open access to our training on key topics, governance
tools, resources, and support to enhance ESG governance and risk management capabilities. On climate issues, we
have published supplier guides and created free resources to show suppliers the process of setting targets. We also
provide coaching to guide target-setting and mitigation actions. In addition, we participate in industry initiatives and
partnerships aimed at raising supply chain governance standards.

64 Such information/reports can be accessed by requesting the S&P CSA platform (for corporate representatives) or Capital IQ Pro platform (for
non-corporate representatives), the Ecovadis platform, and the CDP platform.
 2023 ANNUAL REPORT 163

Enhancing contracts and agreements and their performance

In our contracts with suppliers, we include specific ESG governance clauses outlining expectations, compliance
requirements, and potential consequences of non-compliance. When selecting suppliers and awarding contracts,
we give preference to those with strong ESG performance. We have also developed a well-defined mechanism
for non-compliance with governance standards, including measures such as corrective action, fines, and even
termination of contracts.

Promoting ethical practices and anti-corruption measures

We ensure that our anti-corruption policy is clearly communicated to all suppliers and that mechanisms are in place
for corruption reporting and investigation. We also promote ethical business behavior throughout the supply chain and
provide training and resources to promote integrity and ethical decision-making.

Through these initiatives, Xiaomi is dedicated to promoting ESG governance practices characterized by mutual
trust, transparency, and responsibility across our supply chain. These efforts not only help to mitigate risk but also
effectively strengthen our relationships with suppliers, foster trust with stakeholders, and enhance our reputation for
responsible and sustainable business practices.

Digital Supply Chain Management System

We leverage Xiaomi’s digital strengths and apply big data and AI technologies to continuously enhance supply chain
traceability, efficiency, and transparency and further mitigate ESG risks. In 2023, we updated our digital supply chain
management system, further expanding its system functionality and scope. Particularly, we bolstered the module
of sustainable supplier management built on the existing functions of order coordination management, quota
management, supplier registration and withdrawal management, purchase category management, and demand
feedback. The Supplier Corporate Social Responsibility (CSR) Management System features GHG verification,
wastewater and waste disposal surveys, raw material traceability management, labor management, and more. Each
feature is accompanied by key performance indicators to accurately monitor environmental and social impacts in the
flow path of raw materials and manufactured goods in real time. By digital means, we have enhanced the efficiency
of risk management for social responsibilities such as labor rights, achieved digital lifecycle management of our
supply chain, and effectively controlled the systemic risks of our supply chain. As of the end of the reporting period,
we applied the management system for the unified management of production suppliers, key components, and raw
material suppliers, covering all product lines.

Climate-related extreme weather events and natural disasters may continue to increase and disrupt the chain
reaction in global supply chain operations. Based on our technology and experience in natural disaster early warning
on the To C application side, we have established a supply chain natural disaster early warning system to enhance
supply chain climate resilience. The system directly notifies suppliers of disaster severity and improves their capacity
to respond to natural disasters across four aspects: disaster control, early prediction, rapid feedback, and multi-
dimensional control. Furthermore, we offer early warning and disaster impact assessment functions to safeguard the
sustainability of suppliers’ production and supply.

Supply Chain Risk Management

Management Rationale and Strategy
We implement a comprehensive risk management framework to detect, evaluate, and manage ESG risks associated
with our supply chain, with a specific emphasis on suppliers’ employment practices, environmental sustainability, and
regulatory compliance. Concurrently, we are committed to seeking and harnessing ESG opportunities to create added
value through win-win solutions. Anchored in our risk management strategy and business continuity system, we are
dedicated to fostering more ethical, sustainable, and fair supply chain collaborations through risk control, audits, and
trade secret protection.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

To improve the visibility and penetration of the supply chain, we leverage Xiaomi’s advantageous mature digital
governance. We have enhanced the risk management capabilities of each node enterprise in the supply chain,
improved the adaptable utilization of supply chain data and the accuracy of risk prediction, and established an early
warning system and emergency response mechanism. In this way, we better manage the environmental impact of our
supply chain and its impact on society.

To ensure that our suppliers fully understand and pay attention to ESG risks, we set explicit social responsibility
terms65 in contracts with our suppliers, requiring them to fulfill the corresponding social and environmental due
diligence obligations and to follow or refer to ISO 2230166, ISO 14001, ISO 45001, ISO 27001, ISO 2800067, and SA800068
to establish a Business Continuity Management (BCM) system. When identifying potential risks among our Tier-1
suppliers, we will take preventive and corrective measures and initiate related activities as needed. For Tier-2 and
3 suppliers, we will take similar measures as appropriate. These practices are systematically integrated into our
business processes.

In our comprehensive approach to identifying, assessing, and managing ESG risks associated with suppliers, we
employ various methods and tools, such as public opinion monitoring, on-site audits, assessment questionnaires, and
risk assessment programs. These tools offer us with a holistic understanding of potential issues in the supply chain,
enabling us to take appropriate measures to address them.

Compliance Management
We are committed to creating a safe, reliable, resilient, and competitive healthy industrial chain alongside our
supply chain partners. Throughout the year, we intensified our requirements on the supplier compliance ecosystem,
compliance systems, and open purchasing. To ensure a science-based and fair management approach, we refined
and updated the Xiaomi Supplier Social Responsibility Code of Conduct across labor management and human
rights protection, EHS health and safety, environmental standards, and business ethics. The revision was based
on the code of conduct of the Responsible Business Alliance (RBA) and the Joint Audit Cooperation (JAC) Supply
Chain Sustainability Guidelines and aligned with the OECD Guidelines for Multinational Enterprises, the UN Guiding
Principles on Business and Human Rights, and the UN Universal Declaration of Human Rights. We require Tier-1
suppliers to establish an ESG management system and to regularly measure performance, set targets, and share
review results. We encourage Tier-1 and 2 suppliers to cascade their expectations and requirements to lower-tier
suppliers, fostering a top-down ESG risk management system. We reward and support exceptional suppliers,
motivating them to innovate and enhance ESG risk management. In 2023, we presented the Most Valuable Partner
in Sustainability Award to seven of our supplier partners for their exemplary performance in ESG governance. We
require new suppliers to sign an acknowledgment of the above guidelines to qualify for the partnership, under which
they shall conform to internationally recognized labor rights protection standards and practices, as well as workplace
safety standards and codes of conduct. Any violation of these guidelines during the course of the partnership will
necessitate the supplier’s rectification of the situation or termination of the partnership.

65 Xiaomi Supplier Social Responsibility Code of Conduct: https://www.mi.com/global/about/sustainability#/docshow

66 ISO 22301: ISO 22301 is the international standard for Business Continuity Management Systems. It provides a framework for organizations to
enhance their resilience against various unforeseen disruptions, including extreme weather, fire, flood, natural disaster, theft, IT failure, employee
illness, or terrorist attack.
67 ISO 28000: ISO 28000 is an international standard for supply chain security management that is designed to help organizations take a more robust
approach to better address current and future risks.
68 SA8000: SA8000, or Social Accountability 8000, is the world’s first international standard for ethics. It is designed to provide a standard based on
international labor rights norms and the labor laws of the country where the standard is adopted, to protect and assist all those who produce
or provide services under the control and influence of the enterprise, including the enterprise itself and those employed by its suppliers and
subcontractors.
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Supplier Assessment and Performance

We collaborate closely with our suppliers to identify and manage ESG risks, considering their different roles,
locations, and tiers within the supply chain. In addition to supplier self-assessment, audits by Xiaomi-approved third
parties, and Xiaomi-led audits, we have developed a standardized toolkit tailored to various supply chain partners. It
assigns scores to adverse events based on their likelihood and potential severity, allowing us to accurately quantify
the impact. It also offers graded management and aids in identifying ESG risks throughout the purchase process and
implementing corresponding mitigation measures. At the end of the reporting period, we conducted a specialized
review of key suppliers69 and reviewed 805 manufacturing suppliers. Among the issues identified in the reviews, 92.5%
have been resolved.

As of the end of the reporting period, 42 suppliers’ cooperation with Xiaomi had been suspended/terminated in
Xiaomi’s regular supply chain audits due to various factors include environmental issues, fire prevention, labor
management, and business ethics, etc.

Evaluation Mechanism for New Supplier Onboarding

During the supplier nomination phase, we make explicit provisions on the responsibilities of both parties, deliverables,
and related terms and conditions. Xiaomi’s purchasers and specialists conduct on-site evaluations of the supplier.
The following dimensions are also taken into account in the criteria:

• Operational quality: The indicators include operational capacity, production management capacity, production
costs, quality management capacity, operational efficiency, financial capacity, and technical capacity;

• Environmental responsibility: The indicators include environmental impact in raw material purchase, process
flow, manufacturing, and transport;

• Social responsibility and compliance: The indicators include labor rights, occupational health and safety
management, and business ethics.

ESG compliance has long become one of the top criteria at Xiaomi when selecting and evaluating our new suppliers.
This entails assessing the sustainability policy, code of conduct, ISO certifications, and ESG standards and
performance of all new suppliers. If any red-line issues70 are identified during due diligence, the concerned supplier
will not be admitted to our supplier pool until such issues are rectified.

This year, we completed 987 supplier admission evaluations, of which 35 failed the assessment and were rejected.
Primary reasons for their failure include prominent social responsibility issues, integrity incidents, environmental and
fire safety issues, and serious compliance risks.

69 Key suppliers: Suppliers identified as having prominent ESG risks and/or strong business relevance to Xiaomi.
70 Red-line issues include but are not limited to product quality, labor management, environmental security, business ethics, and other major risk
incidents.
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Xiaomi Ecosystem Transparency Reporting Mechanism

The Supplier Transparency Reporting Mechanism follows a standardized auditing process through the steps
of access requirement analysis, supplier registration, information review and introduction of instructions,
and training on the Xiaomi Supplier Social Responsibility Code of Conduct. It aims to ensure that suppliers
meet our business standards. Ecosystem companies shall collect and submit basic supplier information and
audit reports before formal assessments. We conduct the initial screening of suppliers in accordance with the
Basic Admission Requirements for Xiaomi Ecosystem Suppliers and the auditing criteria in the Supplier Audit
Information Sheet. Only those who meet the established thresholds can enter the next stage of Xiaomi’s audit.

Third-Party Audit Mechanism

We also conduct compliance audits of our suppliers through independently certified third parties. The audit covers
compliance, business partnerships, and social responsibility, and involves in-depth communication with employees
and management. Items for immediate correction will be rectified on the spot after the initial review and confirmed
at the end of the audit. Upon completion of the audit, the third party will provide a report and assist in monitoring the
rectification of issues.

Assessment and Correction Process

We have developed a supplier self-assessment tool based on the Xiaomi Supplier Social Responsibility Code of
Conduct. It covers various dimensions, including basic qualifications, employee management, and other social
responsibility management, as well as environmental risks and business ethics. The tool has been distributed
to all Tier-1 suppliers, who are required to provide the necessary information and supporting documents for an
initial document review and to facilitate the annual self-assessment. Additionally, we encourage suppliers to obtain
international standard certifications such as ISO 9001, ISO 14001, and ISO 45001, and include them in their self-
assessment to enhance their sustainability capabilities.

Based on the results of the supplier assessment and evaluation, we assess the potential risks in the supply
chain, determine the risk level, and optimize the supply chain risk management strategy accordingly to ensure a
comprehensive understanding of the supply chain risk situation. For suppliers that fail the audit, we will take the
following measures.

• We will require the supplier to remedy and rectify within a limited period, during which we will closely follow up
on its progress of improvement.

• If the supplier fails to complete the rectification within the time limit or there are serious violations, we will
suspend or terminate the partnership according to the situation.

• Senior management of our purchase department or the Group will communicate directly with the supplier.

EHS Assessment
We continuously strengthen our audits of contractors’ and suppliers’ EHS management. To reinforce contractors’
awareness of safety compliance, we have established construction safety management procedures for stakeholders
to ensure the safety of contractors’ activities. We implement strict safety material reviews for each of the contractor’s
workers entering the site, and they are allowed to work only after passing the review.
 2023 ANNUAL REPORT 167

We enforce stringent process management for contractors, promptly notifying them of potential safety hazards and
mandating corrective actions. We strictly manage high-risk activities such as temporary fires and work-at-height,
and carry out safety audits for contractors. Throughout the year, 100% of our contractors passed the safety audit,
maintaining a safe work environment. We also implement mandatory supervisory measures for manufacturers as well
as material contractors and suppliers across all of our operating locations. We maintain clear scope, rigorous audits,
and continuous monitoring and rectification. EHS audits of suppliers are conducted through a combination of self-
inspection and sampling. Any supplier that fails to meet the standards will face termination of cooperation.

Reporting Channels and Procedures

We actively listen to suppliers’ opinions and suggestions, aiming to enhance our supplier management system’s
efficiency. To expand complaint channels for the supply chain, we have established an open reporting window on the
Xiaomi Corporation Integrity and Compliance Platform. Additionally, we provide protective measures for suppliers’
employees, aiming to create a more welcoming and inclusive work environment. For industry or external complaints,
we specify contact information in our Supplier Code of Conduct. We also require all stakeholders to sign contracts to
ensure compliance and transparency.

Responsible Purchasing
At Xiaomi, we are committed to purchasing raw materials responsibly and in particular, avoiding any funding, whether
direct or indirect, for conflict-affected areas. We have made continuous efforts to trace the sources of tantalum, tin,
tungsten, and gold (3TG) used in our hardware products. Additionally, we acknowledge the risk of human rights abuses
in the cobalt supply chain. Our commitment remains steadfast in ensuring that these raw materials associated with
Xiaomi’s hardware products do not directly or indirectly finance armed groups in the Democratic Republic of Congo
(DRC) and its neighboring countries.

Responsible Mining
We adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and
High-Risk Areas, and the RBA Responsible Minerals Initiative (RMI) on responsible sourcing of minerals, and pledge
not to source conflict minerals that directly or indirectly finance local armed groups. To uphold this commitment, we
have developed the Xiaomi Corporation Conflict Minerals Policy, established a due diligence procedure for conflict
minerals, elevated requirements for our suppliers, and set a process for identifying and preventing associated risks.
Every year, we track, monitor, and report the status of conflict minerals in our supply chain.

Due Diligence Procedure

Our due diligence procedure for conflict minerals consists of the following steps.

• Establish and develop a Conflict Minerals policy, due diligence procedure and safeguard measures, and define
the roles and responsibilities of internal personnel.

• Assess and identify the risk hotspots in the supply chain, and develop risk response and control procedures.

• Require suppliers to conduct due diligence on smelters and refiners, and disclose the information of smelters
and refiners in accordance with the Xiaomi Conflict Minerals management template or the Responsible Minerals
Initiative (RMI) Conflict Minerals Reporting Template (CMRT/EMRT) on an annual basis. Request smelters and
refiners to undertake relevant certifications if necessary.

• Analyze and verify the due diligence results reported by the suppliers to ensure that the minerals are not
sourced from conflict-affected areas.
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• Disclose the list of smelters and refiners who have passed our due diligence and verification. Disclose our
smelters and refiners list on an annual basis.

• Engage with suppliers continuously to improve response rate and enhance the data credibility of the smelters.

• Establish communication channels for stakeholders on Conflicted Minerals management.

• Provide training on Conflict Minerals Policy and the due diligence procedures to our employees and suppliers.

Code of Conduct for Responsible Mineral Management by Suppliers

We actively work with our suppliers and require them to perform responsible mineral management. Specific
requirements are as follows.

• Endorse the initiatives, processes, standards, and achievements of the Responsible Business Alliance (RBA).

• Support the work and achievements of the RBA Responsible Minerals Initiative (RMI).

• Follow the RBA Conflict Minerals Reporting Template/Extended Minerals Reporting Template (CMRT/EMRT)
and Responsible Minerals Assurance Process to develop Xiaomi’s Conflict Minerals management procedure
and template.

• Oblige to support Xiaomi in direct or indirect communication with smelters and refiners who are involved in
Conflict Minerals.

• Refer to the RBA Code of Conduct to conduct Conflict Minerals due diligence, or engage RBA-endorsed
third-party audit agencies to conduct independent audits. Report the audit result and corrective actions to
ensure conformance.

• Require upstream suppliers to manage minerals responsibly with reference to the RBA Code of Conduct.

• Establish policies to ensure that there is no direct or indirect contribution to financing crimes and human rights
violations.

Conflict Minerals Risk Identification

Upon our efforts on managing conflict minerals, we have initiated a more extensive supply chain traceability program to
trace the sources of tin, tantalum, tungsten, gold (3TG), cobalt, and mica in our products. This initiative aims to guarantee
that none of these come from conflict-affected zones. We have identified the following risks based on due diligence:

• Whether the supplier is located in the Democratic Republic of the Congo or a neighboring country;

• Whether the supplier purchases ore from controlled countries;

• Whether the information provided by the supplier and its supply chain is sufficiently accurate;

• Whether basic contact with the supplier (for example, email, phone calls, Internet research, and site visits)
sufficiently evidences that conflict will not be fuelled; and

• Whether conflict minerals are actually contained in our products, given the global nature of the supply chain.
 2023 ANNUAL REPORT 169

Our strategy to address these risks involves aligning suppliers with our supply chain code of conduct, urging them to
adhere to the standards, and considering suspension or termination of cooperation if compliance is not met.

This year, we identified a total of 420 upstream smelters and refiners across 55 countries and regions. The RMI’s
Responsible Minerals Assurance Process (RMAP) certifications are as follows. For those who have not yet obtained
RMAP certification, Xiaomi mandates them to undergo third-party due diligence in line with RMAP requirements, or
to switch to certified smelters and refiners. Moving forward, we will establish a robust disclosure mechanism for our
smelters/refiners, and continue to enhance our supply chain capabilities in governance, compliance, and transparency
to ensure responsible management of conflict minerals.

Xiaomi smelters/refiners with RMAP certifications in 2023

Minerals Proportion of RMAP-certified smelters and refiners Number of smelters/refiners

Tin 100.00% 82
Tantalum 100.00% 36
Tungsten 100.00% 50
Gold 100.00% 179
Cobalt 97.10% 69
Mica 100.00% 4

Supplier Empowerment
Supplier Empowerment
During the year, we carried out ESG capacity building with our key Tier-1 suppliers. We communicated, empowered,
and collaborated on projects on sustainability topics, including management of climate change issues, emissions
or pollution potential, circular economy practices, employee development, labor rights initiatives, anti-corruption,
anti-bribery, conflicts of interest or anti-competitive behaviors, and supply chain management. Notably, we made key
progress in avoiding pollution, minimizing emissions, and improving resource efficiency across the lifecycle of our
products.
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One of our partner manufacturers is always concerned about employee rights in its labor management
practices. It empowers employee development and growth in all aspects, creates a safe, healthy, and
harmonious work environment for employees, and guards the “people-centric” value chain ecosystem with
Xiaomi. In 2023, this partner, who undertook the production projects of some of Xiaomi’s smartphone models,

• Actively fostered a diverse and inclusive corporate culture, established a fair and mutually respectful
work environment, formulated the Measures for the Labour Protection of Women Employees and the
Procedures for the Protection of Female Workers (Pregnant Women), and hosted regular training on
the prohibition of discrimination in the workplace;
• Formulated the Management Procedures for the Prohibition of Forced Labor and the Management
System for the Protection of Underage and Child Labor, and continuously regulated the process of
reviewing the recruitment of employees and the procedures for remedying the employment of child
labor, to ensure compliance in employment;
• Attentively listened to the voices and needs of its employees through its labor union and employees’
conferences, keeping the channels of communication and exchange between the group and its
employees open and unimpeded; and
• Formulated several internal EHS systems such as the Safety Operating Procedures and the Safety
Management System for Special Operations, strengthened personnel training on safety risk awareness,
and standardized the safety management and safety operation behaviors, effectively preventing and
eliminating safety accidents and enabling the process control of safety management.
• Moreover, this partner has established reasonable position development channels, created a wealth of
training resources, set up a sound career development system, and maintained a robust workforce.

Another of our partner manufacturers actively embraces Xiaomi’s ESG governance principles and
demonstrates our shared commitment to the net-zero goal by implementing various green energy projects
and energy efficiency measures. In 2023, this partner, who undertook the production projects of some of
Xiaomi’s smartphones and tablets,

• Achieved its green power target of about 1,770,000 kWh per year by installing a 1,642-kW photovoltaic
project;
• Constructed a 5,400-RT ice storage air-conditioning system to help shift (staggered) peak loads on the
grid by 2.07 million kWh per year;
• Achieved annual electricity savings of 850,000 kWh and 1,070,000 kWh, respectively, by using
high-efficiency air-conditioning units and air compressors; and
• Employed energy-efficient air-conditioning pumps and frequency-controlled intelligent control
systems, waste heat recovery equipment, and acoustic imaging technology for detecting pipeline leaks.
These measures achieved a total annual average energy saving of 1.98 million kWh, reducing emissions
1,263.04 tonnes (Mt) of CO2e71.

71 1,263.04 tonnes (Mt) of CO2e. The project is located in Guangdong Province. The energy saving benefit data is calculated based on actual operations
and the technical value in theory. The electricity emission factor is cited from the Guidelines of Guangdong Province for Carbon Dioxide Emissions
Reporting by Enterprises (Entities) (Revised in 2024).
 2023 ANNUAL REPORT 171

Supply Chain Finance

Xiaomi’s Supply Chain Finance serves the manufacturing economy, offering the industry more suitable solutions,
higher efficiency, and more adequate resources compared to traditional financial institutions. Leveraging our digital
and technology solutions as a driving force, we aim to lead the enhancement of the digital service capacity of supply
chain finance, benefiting from our strong position in the manufacturing economy. Our focus remains on promoting the
digital upgrading of industry chain partners, accurately meeting the financial needs of supply chain enterprises, and
providing diversified cash flow protection tools for safe, rapid, and sustainable business development. As of the end of
the reporting period, Xiaomi’s Supply Chain Finance had facilitated over RMB300 billion in funds for more than 16,000
companies in the real economy.

Social Welfare and Community Engagement

For public welfare, we always adhere to the idea of “a better world brought by technology” and the mission of
“empowering public welfare development with technology and promoting technological innovation with public
welfare.” By engaging in proactive dialogue with users, communities, governments, and research institutions, we
discern the diverse needs of society. We incorporate the concept of technological development into endeavors such
as support for education and technology promotion and persistently innovate in public welfare practice models.
Additionally, we enthusiastically engage in social welfare initiatives such as volunteering, disaster relief, and aiding
the underprivileged. Through tangible efforts, we give back to society and enhance social well-being.

Support for Education

Talent Development: Xiaomi’s Funding Programs
As an innovative enterprise based on technology, we aspire to foster and cultivate talent in social sciences and
technology by leveraging our deep accumulation in areas such as technology, smart manufacturing, and AI. We
have nurtured and advanced technology talent through the Xiaomi Scholarship program, the Xiaomi Young Scholars
program, and the Xiaomi Sports Scholarship program initiated by the Xiaomi Foundation.

• The Xiaomi Scholarship program provides financial assistance for undergraduate and postgraduate students
at distinguished universities and colleges to support the construction and development of higher education
institutions in China. With an endowment fund of RMB500 million, this program is poised to support up to 70,200
undergraduate and postgraduate students at 100 universities and colleges nationwide. By the end of 2023, the
Xiaomi Scholarship program had been extended to 60 universities and colleges, with plans to expand to 30 more
this year, benefiting a total of 7,780 university and college students will be benefited.

• The Xiaomi Young Scholars program is designed to support young teachers and researchers who have
achieved outstanding results in the fields of computer science, electronics, electronics, and basic sciences
and exhibited great innovation potential. It will provide stable support for universities’ personnel training,
teaching staff development, and scientific research achievements. By the end of 2023, this program had covered
30 universities, with additional 10 institutions included this year, supporting more than 520 young scholars.

• The Xiaomi Sports Scholarship program aims to help outstanding but financially disadvantaged middle school
athletes focus on sports training and improve their sports skills. By the end of 2023, this program had supported
a total of 2,365 student-athletes from sports schools.
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Sci-Tech Innovation: Open Collaboration for Shared Progress

The Xiaomi Foundation maintains a program aimed at supporting basic research, applied basic research, and
research talent development in the areas of AI and energy inclusion, justice, and resilience transformation.
By the end of 2023, the program had supported 74 projects with a total funding amount of RMB108 million,
involving nearly 5,000 researchers in project applications. It has significantly advanced the innovation and
upgrading of cutting-edge exploration and solutions in these technology areas.

Innovative Education: Xiaomi AIoT Box

In 2023, we strengthened our integrated support for education and sci-tech innovation, focusing on the area of
innovation and entrepreneurship and the cultivation of sci-tech innovation capacity among students. We launched
the project of an Industry-Education Integration Community for the Next-Generation Intelligent Hardware Technology
Industry, introducing the Xiaomi AIoT Box as a central tool. Our collaboration included over 150 universities and
colleges, aiming to promote a new paradigm of industry-university-research integration and innovation in scientific
research and talent.

The Xiaomi AIoT Box is a new embedded intelligent development tool developed by Xiaomi. It facilitates the
construction of customized intelligent hardware systems through modular design. It can be interconnected with the
Mijia app, which allows the simulation of IoT hardware device prototype construction. The Xiaomi AIoT Box carries
Xiaomi’s best practices in hardware-software integration. Moreover, by merging theoretical instruction with hardware
development, it is a special tool showcasing Xiaomi’s hardware-software integration features. We have tailored course
content to enhance practical learning experiences of the project. During the year,

• We offered specialized courses on smart IoT development and smart IoT testing technologies for relevant
programs in universities and colleges. The program operated in collaboration with a total of 35 universities and
colleges, and 72 hours of training courses were designed. A total of 252,000 hours of training was provided for
3,500 students.

• We developed practical training skills courses for vocational colleges in three orientations: AI, intelligent IoT,
and electronics technology. The program operated in collaboration with a total of 145 vocational colleges,
and 216 hours of training courses were designed. A total of 1,879,200 hours of training was provided for
8,700 students.

• We launched youth popular science education courses for primary and secondary schools, such as smart IoT
labs, smart IoT practice platforms, and smart home application scenarios. These courses aim to contribute to
an overall quality system for primary and secondary schools. The program operated in collaboration with a total
of three primary and secondary schools, and 10 hours of training courses were designed. A total of 1,000 hours
of training was provided for 100 students.
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Child Development: Xiaomi Kids Channel

In 2023, we launched Xiaomi Children’s Park, a channel tailored to children’s physical and mental development in
the Chinese mainland. It offers a wealth of high-quality growth content regularly updated, significantly enhancing
the parenting experience with a focus on science-based approaches. Xiaomi Kids Channel upholds the mission of
“learning through play and happy companionship.” With a rich content ecosystem and refined operation, it provides
strong support to meet the needs of children’s viewing entertainment and growth education. During the year,

• We built a massive library of high-quality resources that provides over 700 general education courses for
enlightenment, more than 540 interactive thinking training programs, over 3,187 digital illustrated books,
and over 4,000 English programs. In this way, we created an immersive language learning and mind-training
environment designed to stimulate children’s interest in learning and strengthen their language proficiency and
mental agility.

• We launched the Museum Cinema popular science channel, which features captivating popular science films
played at more than 70 museums and science centers nationwide, such as the National Maritime Museum of
China and China Science and Technology Museum. Virtual visits to museums and science centers that may not
be accessible in person can stimulate children’s interest in science and their desire to explore.

• We introduced the Reading A-Z (RAZ) graded reading collection of illustrated books, with a total of 846 volumes.
This series, which is based on an international authoritative grading system, covers 13 English reading levels
from zero to junior high school level, fully meeting the English reading needs of children and teenagers.

• We curated a selection of more than 2,000 courses tailored to the learning needs of children from primary
school to high school. These courses, synchronized with the school curriculum, encompass a diverse range
of knowledge points, thinking development, reading and writing, and natural spelling, aiming to provide a
comprehensive and multi-dimensional learning platform for children.

Disaster Relief and Early Warning

Natural Disaster Early Warning System
As the frequency of extreme weather events rises due to global warming, we have developed a natural disaster
early warning system. This system accesses real-time data streams from the National Early Warning Information
Dissemination Center and monitors a wide range of natural disasters such as heavy rain, typhoons, and blizzards in
real time. This ensures that users can promptly access the latest information on natural disasters through Xiaomi’s
Natural Disaster Early Warning System and take appropriate precautions. Our Natural Disaster Early Warning System
ensures direct communication of the severity of natural disasters and the risk assessment associated with them to
users, employees in business positions, and partners through graded visualization of different levels of disasters. It
also provides them with disaster response recommendations.

Earthquake Early Warning

The Xiaomi smartphone and Xiaomi TV, as the first mobile phone and TV operating system to integrate the earthquake
early warning function, collaborate with the Chengdu Institute of Care-Life to establish a disaster prevention and
mitigation information channel for thousands of households. Xiaomi’s earthquake early warning now supports
users in all administrative regions of the Chinese mainland and Indonesia to subscribe to earthquake early warning
messages, ensuring that users can turn on the earthquake early warning function through their Xiaomi smartphones
and Xiaomi TVs. The availability of this function on Xiaomi smartphones and Xiaomi TVs demonstrates our commitment
to contributing to primary-level emergency response capabilities and safeguarding people’s lives. By the end of 2023,
we had successfully pushed nearly 92 million warnings on earthquakes at a magnitude of 4 or above worldwide.
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Emergency Disaster Relief

In the face of disasters, we immediately respond to emergencies and mobilize resources from all sectors for
donations through the Xiaomi Foundation. This year, we conducted two emergency relief operations.

• In August 2023, when floods struck the Beijing-Tianjin-Hebei region, the Xiaomi Foundation immediately donated
RMB25 million. The fund was primarily allocated to ensuring the safety of the victims, procuring emergency
relief materials, and supporting post-disaster reconstruction of education facilities of schools that were affected
by natural disasters to facilitate the resumption of normal education activities.

• In December 2023, in the face of the earthquake in Jishishan County of Gansu Province, the Xiaomi Foundation
provided assistance again and donated RMB5 million. These funds were utilized for purchasing emergency relief
materials and post-disaster reconstruction after the disaster. Additionally, we raised funds from the public to
provide urgently needed daily necessities for affected families.

To improve the efficiency and efficacy of disaster relief, the Xiaomi Foundation has released an Emergency Relief
Project Manual. This manual offers standardized and systematic guidance on processes and tools for disaster relief
and post-disaster reconstruction. It also ensures our ability to actively monitor, rapidly respond to, and effectively
track disaster situations and reconstruction progress.

Rural Revitalization
At Xiaomi, we actively respond to the strategy of rural revitalization and leverage our technological strengths to
support the construction of beautiful villages. In 2023, we collaborated with the Image Specialized Committee of the
Popular Culture Society of China to conduct research and launch the “Visual Nanping” project. This project aimed to
explore the unique rural culture of Nanping and promote its upgrading, developing tourism and special industries
based on agricultural products, and supporting young people in returning home to start a business and rural
revitalization.

Collaborating with local residents to create a visual enhancement Program for Nanping, we drew professionals
from different fields to rural areas through design and cultural activities. We insisted on blending and intersecting
innovative design with local culture, capturing and disseminating the story of Nanping culture in visual design.
Xiaomi’s public welfare designers outlined a VI application plan for Nanping encompassing design concepts, logos,
fonts, and colors, tailored to both the characteristics of the scenery and the brand image. Through these efforts, we
contributed Xiaomi’s ingenuity to the preservation of rural culture and the development of new rural areas.

Volunteering
At Xiaomi, we are committed to promoting volunteering and charity and exploring new models of social responsibility
through our employees and Xiaomi Fans. This year, we organized 15 employee volunteer activities around themes
such as “Agricultural Assistance,” “Elderly Assistance,” and “Education Assistance.” These activities involved a total
of 161 members of the Xiaomi Youth Volunteer Team, who collectively contributed over 2,460 hours of service time.

Agricultural Assistance
At Xiaomi, we are actively engaged in agricultural assistance and benefits and committed to promoting the sustainable
development of green agriculture. Our “Visual Nanping” rural revitalization volunteering project focuses on driving
economic and social advancement in Nanping Village, Anhui Province. By exploring new paths of village governance,
Xiaomi’s youth volunteering team has promoted complementary strengths and resource sharing. In September
2023, we established the Xiaomi Agricultural Assistance Foodie Club, which has launched nine agricultural products,
effectively addressing the problem of unsold fruits faced by villagers from Nanping.
 2023 ANNUAL REPORT 175

Elderly Assistance
We remain steadfast in building a people-centric elderly-friendly support system and seek solutions to addresss
the needs of elderly users and enable that they benefit from the convenience brought by the digital age. Throughout
the year, the Xiaomi Youth Volunteer Team launched the “Bringing Warmth to the Community” elderly assistance
event to help the elderly. Volunteers provided guidance to elderly residents in the community on the basic operation
of smartphones, especially the safe utilization of payment features, to enhance the confidence of the elderly in
digital payment. We launched many other elderly assistance events and made visits to research the elderly-friendly
configuration of AI Assistants.

We are also active in elderly assistance. During Christmas 2023, Xiaomi Germany, in cooperation with an
external agency, built a senior activity center for the elderly in Duesseldorf and donated EUR 17,000. By
supporting the work of the senior activity center, we facilitated exciting outings and activities for seniors.

Education Assistance
At Xiaomi, we remain dedicated the notion of technology-enabled education assistance. We continually deepen school-
enterprise cooperation, striving to extend and expand education assistance, with the goal to inspire young people to
leverage their intellect and creativity for a better future. Xiaomi’s Youth Volunteer Team launched the Enlightenment
Education and Practice Program for Technology Careers to raise primary and secondary school students’ awareness
of technology careers. The program includes field studies, visits, and lectures by industry experts. It has popularized
science and technology education and broadened students’ horizons for career enlightenment.

In 2023, we continued to launch Xiaomi Fan volunteer activities, encouraging Xiaomi Fans’ active involvement in
philanthropic endeavors. This year, we hosted 38 Xiaomi Fan volunteer activities with a total of 190 volunteer hours,
in which more than 400 Xiaomi Fan volunteers participated. During Xiaomi Fan Charity Month, we led Xiaomi Fans
to participate in online and offline volunteer activities and to feel and support public welfare. Xiaomi Fan volunteers
interacted closely with people with mental disabilities, contributing to a social environment that is inclusive of
employment for this group. In addition, we organized six disaster prevention and mitigation training activities, where
Xiaomi Fan volunteers learned disaster self-rescue and mutual-rescue skills under guidance and training and carried
out earthquake escape drills. Through these activities, we aimed to instill the professional concept of emergency
response.

In July 2023, we donated nearly RMB200,000 from the sales of the Eco-friendly Recycled Cotton Fashion
Sweater Design event to the Raising Little Ears public welfare project initiated by the Audiology Development
Foundation of China. The fund was used to help children with a hearing impairment in difficulty across the
country. In the Sweater Design event, Xiaomi Fans and children with a hearing impairment were invited to
create painting works.

During the Xiaomi Fan Festival, Xiaomi Net hosted a public welfare painting event with Xiaomi Fans and
children with autism. Proceeds from the sales of the charity-edition sports water bottles created will be
donated to the One Foundation’s Ocean Paradise Project.

Charitable Donations
At Xiaomi, we actively contribute to philanthropy and promote the ideals of humanitarianism and social welfare
through charitable donations. This year, the Xiaomi Buy42 project achieved remarkable results in donations by
donating more than 2,000 pieces of supplies with a total value of more than RMB860,000, further underscoring
Xiaomi’s positive role in creating social value and promoting sustainable development.
176 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Governance and Compliance

Corporate Governance

ESG Vision
ESG has been an integral part of our corporate development strategy and has been seamlessly woven into our
business operations and management. Committed to technology fields with long-term value to human civilization, we
prioritize sustained investments. We relentlessly build amazing products with honest prices and employ innovative
and sustainable technologies that are green, inclusive, and affordable to fulfill our commitment to letting everyone in
the world enjoy a better life through innovative technology.

ESG Governance Strategy and Structure

We always believe that good governance serves as the cornerstone for sustained corporate growth. Continuously
enhancing our ESG management system is conducive to fostering the healthy and sustainable development of
Xiaomi. We employ an efficient risk management and control mechanism to identify major ESG risks and develop risk
mitigation measures to facilitate the sustainable development of our operations and business.

The Board receives regular updates on the Company’s ESG progress and oversees the implementation of ESG
measures. The Group’s SC, led by the President and other top management and consisting of ESG management
personnel, is in charge of identifying ESG-related risks and setting sustainability strategy, targets, and action
plans, and is responsible for evaluating implementation progress. The SC reports and evaluates the Group’s ESG
performance and progress to the CGC on a bi-annual basis, and proposes interim targets and action plans for the
next phase of implementation. At the implementation level, the ESG Working Group coordinates internal and external
resources to guide the landing of strategy into actions at business units and enables performance monitoring. The
ESG Working Group also organizes quarterly meetings to share and discuss sustainability topics and their potential
impacts on business.

With these comprehensive governance and implementation mechanisms, we have improved our performance in
environmental protection, social responsibility, and corporate governance, and enhanced the effectiveness of our ESG
practices, laying a solid foundation for the Group’s sustained development.
 2023 ANNUAL REPORT 177

ESG Governance Strategy and Structure

Board level The highest ESG governance and decision-making body, and is accountable for the
Group’s ESG strategy and disclosure.
Provides guidance and confirmation on the identified key ESG issues and their
Board of Directors
order of priority
Receives regular updates on ESG progress through regular briefings.
Oversees the implementation of ESG programs.

Oversees key ESG commitments and performances, and assesses the

Group’s ESG-related risks.
Corporate Governance Reports ESG matters and progress to the Board on a regular basis.
Committee Reviewed the Company’s compliance with the ESG Reporting Guide and
disclosure in the Environmental, Social and Governance Report.
Reviewed work performance and work plan of the ESG team and provided
guidance and supervision to the ESG team.
Management
level

Responsible for identifying ESG-related risks, setting sustainability strategies,

Sustainability Committee targets and action plans, and evaluating implementation progress.
Reports to and evaluates the Company’s ESG performance and progress to
the CGC on a biannual basis. Establish action plans and set targets.

Coordinates and synergizes internal and external

resources, and provides guidance and support to
help business units implement ESG programs.
Implementation ESG Working Group Monitors and reports ESG performances.
level Organizes quarterly meetings to facilitate the
sharing and discussion of sustainability topics and
their potential impacts on business.

Relevant Business Units Implements actions according to the Group’s ESG strategy and management
procedures.

ESG Governance Performance

In the year, we advanced our ESG deployment and practices in all aspects and made remarkable progress. Our key
recognitions are as follows:

• Inclusion in S&P Global’s Sustainability Yearbook (China);

• Industry Mover in S&P Global’s Sustainability Yearbook (China);

• Downgraded to “Low Risk” in Morningstar’s Sustainalytics risk rating;

• MSCI ESG rating lifted to BB;

• Upgraded to “B” in the Climate Change Questionnaire and “C” in the Water Security Questionnaire of the Carbon
Disclosure Project (CDP);
178 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

• Gold Medal in EcoVadis Sustainability Rating, ranking top 3% in the global industry;

• China’s Best Employer of the Year by Forbes;

• Best ESG in the Technology Hardware sector by Institutional Investor;

• Nomination as the top 10 projects in the Sustainable and Green Innovation category by Paulson Institute;

• Sustainability Performance Award for 2023 by the British Standards Institution (BSI);

• ESG Company to Watch of the Year by Bloomberg Green;

• ESG Best Practice of China’s Listed Companies by Wind; and

• Inclusion in China’s Most Admired Companies 2023 by Fortune.

Corporate Governance
At Xiaomi, we uphold the principles of promoting effective internal control measures, increasing the transparency
of the work of the Board of Directors, and enhancing the accountability of the Board to all shareholders in fulfilling
our commitment to maintaining and promoting stringent corporate governance standards. The Board will continue
to enhance its corporate governance practices in line with Xiaomi’s business conduct and growth and review such
practices from time to time to ensure that they comply with statutory and professional standards and align with the
latest mandates. For more information about Xiaomi’s corporate governance principles, norms, and performance,
please refer to the “Corporate Governance Report” section in the annual report.

Board Independence
At Xiaomi Corporation, we observe the principle of Board independence. Board members are not related to each other.
Throughout the Reporting Period, the Board met the requirements of the Listing Rules regarding the appointment of
at least three independent non-executive directors (representing at least one-third of the Board), with at least one of
whom possessing appropriate professional qualifications or accounting or related financial management expertise. To
provide transparency to the investor community, the independent non-executive Directors of the Company are clearly
identified in all corporate communications containing the names of the Directors. We have received written annual
confirmation from each of the independent non-executive Directors in respect of their independence. For detailed
information about the list, biographies, roles, and responsibilities of Xiaomi Corporation’s Board members, please
refer to the “Report of the Board of Directors” section in the annual report and the “Board Members” page on the
Xiaomi Corporation’s website (https://ir.mi.com/corporate-information/board-of-directors).

Board Diversity
At Xiaomi Corporation, we recognize the benefits of diversity in Board membership (including gender diversity) and
the importance of Board diversity in maintaining the Group’s competitive advantage and attracting, retaining, and
motivating employees. Therefore, we have adopted a board diversity policy (the “Board Diversity Policy”). Pursuant
to the Board Diversity Policy, when reviewing and assessing the Board composition, the Nomination Committee
will consider a number of aspects, including but not limited to gender, age, cultural and educational background,
professional qualifications, skills, knowledge, and industry and regional experience. The Nomination Committee will
also discuss periodically and agree on the measurable objectives for achieving diversity (including gender diversity) on
the Board and recommend them to the Board for adoption.
 2023 ANNUAL REPORT 179

During the reporting period, all of the Board are male. On January 8, 2024, Prof. Tong Wai Cheung Timothy resigned
as an independent non-executive Director and Ms. Cai Jinqing was appointed as an independent non-executive
Director, further enhancing the gender diversity of Xiaomi’s Board membership. To further ensure gender diversity of
the Board in the long run, the Nomination Committee will periodically review the Board Diversity Policy and monitor
its continued effectiveness. We will also continue to take opportunities to increase the proportion of female board
members workforce over time as and when suitable candidates are identified.

During the reporting period, the Board reviewed and considered the implementation of the Board Diversity Policy to
be on track. The implementation of the Board Diversity Policy is evidenced by the fact that our Directors are from
a diverse age group with experience from different industries and sectors. The Directors have a balanced mix of
knowledge and skills, including knowledge and experience in the areas of computer science, engineering, business
administration, human resources, finance, and corporate governance.

We are also committed to ensuring that recruitment and selection practices at all levels are appropriately structured
so that a diverse range of candidates are considered. The Nomination Committee shall report its findings and make
recommendations to the Board to complement the Company’s corporate strategy and to ensure that the Board
maintains a balanced diverse profile.

Director’s Remuneration Policy

Xiaomi Corporation’s executive remuneration is closely linked to ESG performance. ESG performance focuses on
non-financial targets, which are set in alignment with Xiaomi’s sustainability strategy and encompass environmental
innovation performance, attractiveness as an employer, and EHS management outcomes. This remuneration structure
encourages the management to focus on long-term strategic goals for sustainable development and to achieve
long-term value growth for Xiaomi Corporation.

The purpose of the Director’s Remuneration Policy is to ensure that the Company can attract and retain its Directors
to meet the business needs of the Company. The Remuneration Committee is to make recommendations on the
Directors’ remuneration policies and structure, establish formal and transparent procedures to evaluate the
performance of Directors, review and make recommendations on incentive plans and the terms of Directors’ service
contracts, and make recommendations on the Directors’ remuneration packages.

In making recommendations on the remuneration packages of Directors, the Remuneration Committee shall have
regard to:

• any corporate policies or goals as resolved by the Board from time to time;

• factors such as the level of remuneration paid by comparable companies, the time committed by the Directors
and their responsibilities, and the employment conditions elsewhere in the Group; and

• the level of remuneration necessary to attract and retain directors for successful management of the Company.
180 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Business Ethics

Business Ethics Management System

Xiaomi is committed to conducting business ethically and strict adherence to all applicable laws and regulations.
We have enhanced our ethics management based on the Xiaomi Group Ethics Committee. The Group’s top
management listens to reports on the progress of major projects, plans and oversees the Group’s efforts in
business ethics, and provides employee training in this regard. This committee is also the highest body for the
investigation and accountability of misconduct and violations by employees, and it reports to the Board on the Group’s
anti-corruption and anti-bribery management. We also have a Safety Investigation Department dedicated to the
Group’s supervision undertakings, including ethical enhancement, system optimization, awareness raising, conflict
of interest assessments, accountability for misconduct and violations, complaint and whistleblowing management.
The General Manager of the Group’s Safety Investigation Department regularly reports to the Board of Directors.
For more about Xiaomi’s business ethics, please refer to the Sustainability page on the Group’s official website
(https://www.mi.com/global/about/sustainability).

Anti-corruption and Anti-bribery

At Xiaomi, we uphold the principles of openness, fairness, transparency, and integrity, maintaining a zero-tolerance
policy against bribery and corruption. Our objective is to achieve “full coverage and no restricted area” in anti-
corruption management. In this regard, we also closely follow the top prohibitions to “strictly forbid offering and
accepting bribery,” “severely punish embezzlement,” “forbid personnel corruption,” and “avoid conflicts of interest.”
In the year, under a standardized internal management system and a sound accountability system, the Ethics
Committee, the Human Resources Department, and the legal team collaborated to update safety and anti-corruption
terms in the Employee Handbook. They also supervise the implementation of the Employee Handbook, the Employee
Code of Conduct, and the Code of Integrity of Xiaomi Corporation in the Group. Our Employee Handbook outlines the
principles and requirements to guide our employees in lawful and ethical business practices. Upon joining the Group,
employees are required to sign an acknowledgment letter, which is an express commitment to compliance with all
the rules and regulations in the Employee Handbook. During the year, all employees in purchasing positions at the
Group signed the Conflict of Interest Declaration Commitment. In 2023, we passed the review of ISO 37001 Anti-
Bribery Management Systems, further improved the anti-corruption management framework, prevented and reduced
the risk of bribery and corruption, and promoted Xiaomi’s business ethics culture. During the year, we received the 2nd
Integrity and Compliance Innovation Award for Private Enterprises, the Best Innovation Project of the 2nd Integrity and
Compliance Innovation Award for Private Enterprises, and other recognitions.

At Xiaomi, we prioritize anti-corruption training for all relevant roles, including employees, suppliers, contractors,
and partners. For key positions within the Group (including the supply chain and the purchasing chain), reserve
managers for the position of General Manager, and other high-ranking positions, we host special training. In 2023,
we hosted 64 training sessions on ethics and safety, conflicts of interest, and integrity self-discipline, and one
anti-corruption training session for management and the Board of Directors. The training achieved 100% coverage
of management and employees, with over 50,000 participants in total. Among those sessions, there was one
anti-corruption session for management and the Board of Directors. For middle and senior management of
international business, we hosted two anti-corruption training sessions in light of the local laws, regulations, and
policy requirements of the foreign countries and regions where we operate. They provided systematic introductions
to local regulatory requirements and countermeasures, which strengthened the managers’ compliance awareness.
We also hosted 17 integrity self-discipline training sessions for local employees in the foreign countries and regions
where we operate, including India, Thailand, Malaysia, Nepal, Poland, Spain, and Portugal. The training further
enhanced overseas employees’ performance in integrity self-discipline. We also regard business ethics as an integral
part of the selection of suppliers, contractors, and partners. We require all partners to sign an integrity agreement at
the same time as signing a business contract.
 2023 ANNUAL REPORT 181

At Xiaomi, we require every employee to conduct business ethically and in full compliance with applicable laws
and regulations. This year, Xiaomi was not involved in any corruption-related litigation cases. We have opened
separate whistleblowing channels for external and internal sources and have established a dedicated whistleblowing
mechanism to ensure that the reports of misconduct are being handled in a secure, unimpeded, reliable, and effective
manner. For external whistleblowers, if they encounter or suspect any misconduct by a Xiaomi employee, such
as bribery, offering/receiving gifts or entertainment illegally, misappropriation of benefits, false reimbursement,
or financial malpractice, they can report to Xiaomi through official channels. Within the Group, we have built an
independent Open Xiaomi portal to showcase our management system, key policies, social responsibilities, and
whistleblowing channels for an open workplace. Employees and other stakeholders from all markets in different
countries and regions where Xiaomi operates can raise their concerns through the following public channels:

Email: tousu@xiaomi.com
Global integrity whistleblowing website: https://www.mi.com/global/service/integrity/#process

To better protect and reward whistleblowers, we have formulated the Whistleblower Protection and Reward Policy of
Xiaomi Corporation. This policy aims to support Xiaomi’s employees, suppliers, contractors, and partners to actively
participate in building a supervisory system characterized by openness, fairness, transparency, and integrity. A
whistleblower may receive up to RMB1 million in cash rewards for proven misconduct.

Anti-money Laundering
At Xiaomi, we uphold a risk-based approach. We strictly comply with the Anti-money Laundering Law of the People’s
Republic of China, the requirements set out in the Guidelines for the Self-assessment on Risks of Money Laundering
and Terrorist Financing of Corporate Financial Institutions issued by the People’s Bank of China, and other applicable
laws and regulations in regions where we operate, to fulfill our obligation in preventing money laundering across
boarders and countering terrorist financing. We also dedicate efforts to identifying customers and large and suspicious
transactions, reporting suspicious transactions, and relevant training and promotion. All levels of the Group actively
fulfill anti-money laundering duties as per the Group’s Basic Management System for Anti-Money Laundering. The
risk management of money laundering and terrorist financing has been included in the deliberations of the Board of
Directors. Under the coordinated management of the Board of Directors and the guidance of the Countering Terrorist
Financing Leadership Group, we have made steady progress in money laundering risk management. Through a digitized
monitoring system, we monitor and assess suspicious transactions, users, and financing activities and perform
anti-money laundering and countering terrorist financing undertakings such as customer identification, transaction
data analysis, and data confidentiality management. We perform internal anti-money laundering audits by combining
system audits and human reviews, which has significantly enhanced the efficiency and accuracy of our audits.
Throughout the year, we conducted a special anti-money laundering audit, which indicated that Xiaomi was not
involved in any money-laundering activities.

In 2023, we hosted several anti-money laundering training and publicity sessions. Internally, we hosted eight
training sessions for senior management and employees, with a total duration of over 15 hours. The training
focused on regulatory trends, major concerns, and the interpretation of key documents in the area of anti-money
laundering, which enhanced employees’ anti-money laundering awareness. Furthermore, we have actively
fulfilled the responsibility of educating the public and organized anti-money laundering and anti-organized
crime law campaigns for the general public. We produced original short promotion videos on preventing
telecom and Internet fraud. These videos have conveyed our anti-fraud messages to the general public.
182 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Anti-monopoly and Anti-unfair Competition

At Xiaomi, we put a high emphasis on anti-monopoly and anti-unfair competition compliance and recognize and
advocate the value of fair competition. In compliance with external laws and regulations such as the Anti-monopoly
Law of the People’s Republic of China and the Guidelines for Competition Compliance of Undertakings, we have
established anti-monopoly and anti-unfair competition compliance systems at the Group level. The Group’s legal
team coordinates our domestic and abroad anti-monopoly compliance and actively implements the internal policy,
Anti-monopoly Compliance Code of Conduct of Xiaomi Corporation. For our overseas business, we have formulated
the Xiaomi Group International Antitrust Compliance Work Guideline, which promoted Xiaomi’s compliance culture of
fair competition overseas and strengthened our ability to prevent anti-monopoly legal risks abroad. Throughout 2023,
there were no legal proceedings against Xiaomi in relation to monopoly or unfair competition behavior.

Employees’ anti-monopoly and anti-unfair competition awareness is essential to compliance risk management.
Thus, we have incorporated requirements on anti-monopoly and anti-unfair competition into the Code of Conduct of
Xiaomi Corporation. In 2023, we hosted nine anti-unfair competition training sessions in the Chinese mainland for
950 participants. Over 1,000 employees participated in 31 anti-monopoly compliance training sessions hosted for
our China and international businesses. These sessions provided explanations of domestic and international anti-
monopoly laws, risk scenarios and cases, compliance requirements and guidance. They raised awareness of anti-
monopoly and anti-unfair competition legal risk prevention among all employees.

Protection of Intellectual Property (IP)

At Xiaomi, we are committed to innovation-driven development. We place equal emphasis on innovation and quality,
and bring our technological innovations to the general public through IP practices. In turn, IP practices empower and
ensure our innovation. In the year, based on the Intellectual Property White Paper, we further advanced the Group’s
IP protection practices. Prioritizing the construction of IP policies and systems, we have established a robust IP
protection system, safeguarding the fruits of our intellectual endeavor in an open and friendly way while respecting
those of others. Our IP management framework encompasses patents, trademarks, open-source, data, and privacy.
Managed by our legal team, all business units have actively put management into practice, reinforcing Xiaomi’s line of
defense for IP.

As of the end of the reporting period, we had obtained more than 37,000 patents globally. At the end of the year,
we unveiled Xiaomi EV’s first model SU7, marking the successful launch of Xiaomi EV’s five self-developed core
technologies (E-Motor, Battery, Xiaomi HyperCasting Technology, Xiaomi Pilot Autonomous Driving, and Smart Cabin).
As of the end of December 2023, Xiaomi EV’s technological innovations in motors and electronic control systems as
well as batteries were granted 60 and 65 patents, respectively.

We value mutual benefits and win-win outcomes in the industry and actively participate in industry exchanges and
judicial practices. Leveraging Xiaomi’s extensive practices and experience in the global IP area, we offer best practice
cases for the industry and recommendations for the development and amendment of laws and IP-related industry
policies in major jurisdictions around the world, thus driving enhancements in the global IP system. In the year,
we were honored with the 24th China Patent of Excellence Award, underscoring Xiaomi’s prominent contribution to
technological innovation and economic and social development.
 2023 ANNUAL REPORT 183

Compliance in Advertising
At Xiaomi, we abide by the Advertising Law of the People’s Republic of China, the Measures for the Administration
of Internet Advertising, and other applicable laws and regulations of the locations where we operate. We also
comply with the Measures for Quality System Review and Management of Xiaomi Corporation and other internal
management systems of the Group. Relevant departments of Xiaomi collaborate to manage the compliance of our
products and services advertisements concerning the content, quality, and qualification of our advertising partners.
We strictly conform to the requirements of each advertising platform to prepare our advertisement content, and
the corresponding materials such as legal qualifications, for audit and verification by the platforms before it can go
live and reach the audience. Additionally, we have established a complaint mechanism to investigate feedback and
improve our advertisement management. During the year, the system operated effectively, and there were no major
legal proceedings or penalties against Xiaomi in relation to compliance in advertising or relevant public opinion
events.
184 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Key ESG Performance Indicators72

Key Environmental Indicators73
Based on Xiaomi’s current operations, Xiaomi’s key environmental indicators for 2023 are listed below:
Use amount

Unit 2023 2022 2021 2020

Total Comprehensive Energy

Consumption74 MWh 211,171.84 144,741.38 144,626.56 118,397.58
Direct Energy Consumption MWh 19,418.57 5,190.84 8,691.42 5,586.69
Indirect Energy Consumption MWh 191,753.27 139,550.54 135,935.14 112,810.89
Indirect Energy Consumption:
Renewable Energy MWh 372.00 — — —
Total GHG Emissions (Scope 1
and Scope 2)75 tonne (Mt) of CO2e 116,722.56 85,742.61 82,820.16 66,481.29
Direct GHG Emissions:
Scope 1 tonne (Mt) of CO2e 12,252.52 7,122.60 9,096.95 8,402.12
CO2 tonne (Mt) of CO2e 3,921.26 1,045.96 1,755.13 1,117.96
CH4 tonne (Mt) of CO2e 1,900.75 1,862.90 2,222.34 2,179.62
N 2O tonne (Mt) of CO2e 1.97 0.55 0.86 0.00
HFCs tonne (Mt) of CO2e 6,428.54 4,213.19 5,118.62 5,104.54
Indirect GHG Emissions:
Scope 2 tonne (Mt) of CO2e 104,470.04 78,620.01 73,723.21 58,079.17

72 The key ESG performance indicators listed here include, but not limited to, the same scope as the consolidated corporate statements, and data of
the actual operations of the controlling business and facilities in some cases. Numbers and percentage figures in this section have been subject to
rounding. Any discrepancy between the total and the sum of the amounts listed is due to rounding.
73 The data presented in this chapter has been assured by an independent third-party verification organization. The assurance certificate is available
on the Sustainability page of Xiaomi’s Website: https://www.mi.com/global/about/sustainability.
74 The total amount of energy consumption was calculated based on the consumption of purchased electricity, purchased heat, natural gas,
gasoline, and diesel, using the conversion factors specified in the national standard General Rules for Calculation of the Comprehensive Energy
Consumption (GB/T 2589-2020) of the People’s Republic of China. Direct energy consumption includes the consumption of natural gas, gasoline,
and diesel for the Company’s operations, while indirect energy consumption includes those from purchased electricity and purchased heat for
the Company’s operations. This year, the increase in total energy consumption is mainly due to the launch of Xiaomi’s automobile business line,
including the direct and indirect energy consumption of the automotive factory of 14,638.78 MWh and 37,068.28 MWh, respectively.
75 The Group’s calculation of GHG emissions was based on the Greenhouse Gas Protocol: Corporate Accounting and Reporting Standard,
ISO 14064-1:2018 — Specification with Guidance at the Organization Level for Quantification and Reporting of Greenhouse Gas Emissions and
Removals, as well as other applicable national, local, and industry standards. This year, the increase in carbon emissions is mainly due to the launch
of Xiaomi’s automobile business line, including the Scope 1 and Scope 2 emissions of the automotive factory of 4,244.79 tCO2e and 18,451.93 tCO2e,
respectively.
 2023 ANNUAL REPORT 185

Unit 2023 2022 2021 2020

The data is
expected to be
disclosed in
September
Scope 3 GHG Emissions tonne (Mt) of CO2e 2024. 10,075,225.54 12,368,223.29 —

Total Water Consumption

Water Withdrawal76 tonne (Mt) 683,906.94 510,156.05 463,663.00 303,132.92
Fresh Water Consumption tonne (Mt) 523,100.75 391,953.85 329,572.00 187,339.02
Reclaimed Water
Consumption tonne (Mt) 164,353.00 118,202.20 134,091.00 115,793.90
Water Discharge tonne (Mt) 562,194.62 — — —
Non-hazardous Waste tonne (Mt) 7,174.83 7,052.28 6,328.88 4,661.07
Hazardous Waste77 tonne (Mt) 95.78 1.43 2.50 0.37
Total Packaging Materials
Used for Finished Products tonne (Mt) 4,254.86 5,065.08 — —
Air Pollutant Emissions78
NOx Emissions tonne (Mt) 0.33 — — —
VOCs Emissions tonne (Mt) 0.21 — — —

Use Intensity

Unit 2023 2022 2021 2020

Energy consumption per MWh/RMB million

unit of revenue 0.78 0.52 0.44 0.48
Per capita energy consumption MWh/person 6.28 4.45 4.33 5.36
GHG emissions per unit of revenue tonne (Mt) of CO2e/RMB million 0.43 0.31 0.25 0.27
Per capita GHG emissions tonne (Mt) of CO2e/person 3.47 2.63 2.48 3.01
Per capita tap water consumption tonne (Mt)/person 15.56 12.04 9.86 8.49
Per capita non-hazardous waste tonne (Mt)/person 0.21 0.22 0.19 0.21
Per capita hazardous waste Kg/person 2.85 0.04 0.07 0.02
Product packaging material tonne (Mt)/RMB million
consumption per unit of revenue 0.02 0.02 — —

76 Water resources used by Xiaomi include running water and reclaimed water from the municipal water supply system, which is provided by third-party
utility company. Xiaomi has not encountered any events of water shortage. This year, we expanded the scope of our water resource-related data to
include those from our new self-operated campus and more leased office areas.
77 The increase in the total amount of hazardous waste during the year is mainly due to the launch of Xiaomi’s automobile business line.
78 From this year on, we consolidate the indicator disclosure of air pollutant emissions with new indicators added to more comprehensively present
our environmental performance data.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Environmental Target and Review

We set environmental targets. Every year, we review the environmental targets for the previous period and further
improve or formulate a more comprehensive set of environmental targets to cover our value chain. The Board of
Directors has reviewed the review results of the 2023 environmental targets and reviewed and approved the 2024
environmental targets.

Topic 2023 Targets Target completion status 2024 Targets

for this year
Energy By 2026, reduce energy Energy conservation and By 2026, reduce energy
consumption per 10,000 consumption reduction consumption per 10,000
RMB of revenue for measures are being RMB of revenue for
ISO 50001-certified progressed towards the ISO 50001-certified
facilities by at least 2.5% 2026 target. For details, facilities by at least 2.5%
as compared to the please refer to the “Energy as compared to the
2021 baseline. Management” section. 2021 baseline.

Greenhouse gas By no later than 2030, GHG emissions reduction is By no later than 2030,
79
reduce GHG emissions being progressed towards reduce GHG emissions
from our main operating the 2030 and 2040 targets. from our main operating
80
segments to at least 30% For details, please refer segments to at least 30% of
of the base year81 level; to the “Tackling Climate the base year level;
Change” section and 2023
By no later than 2040, By 2035, use 100%
Xiaomi Corporation TCFD
reduce the emissions from renewable electricity in our
report.82
the main business to 2% of own operations;
the emissions in the base
By 2040, achieve carbon
year and create conditions
neutrality in our own
for net zero emissions;
operations of existing
Prioritize the use of business segments83, use
low-carbon technologies, 100% clean heat in our own
long-term green power operations, and use 100%
purchase agreement, and renewable energy;
on-site renewable energy
generation to reduce GHG
emissions throughout our
target period;

79 GHG emissions: Refers to the Company’s GHG emissions (absolute value) calculated in accordance with standards such as Greenhouse Gas Protocol:
Corporate Accounting and Reporting Standard, ISO 14064-1:2018—Specification with Guidance at the Organization Level for Quantification and
Reporting of Greenhouse Gas Emissions and Removals.
80 Main operating segments: Smartphone, IoT and Lifestyle products, Internet Services, and others (same scope as the operating segments stated in
the 2023 Annual Report).
81 Base year: 2021.
82 2023 Xiaomi Corporation TCFD report: For more information about Xiaomi’s response to climate change, please refer to the Sustainability —
Climate Change page on the Group’s official website (https://www.mi.com/global/about/sustainability#/climate).
83 Existing operating segments: Smartphone, IoT and Lifestyle products, Internet Services, and others, as in the business scope in Xiaomi
Corporation’s latest earnings announcement.
 2023 ANNUAL REPORT 187

Topic 2023 Targets Target completion status 2024 Targets

for this year

Encourage key suppliers Prioritize the use of low-

to establish renewable carbon technologies and
energy usage and GHG self-built renewable energy
emission reduction targets power generation facilities
that are comparable to to reduce GHG emissions
or more ambitious than and increase the share
those of Xiaomi to deliver of renewable energy in
continuous reduction in our electricity consumption
Scope 3 emissions. through long-term
green power purchase
agreements to reduce GHG
emissions throughout our
target period;

Encourage key suppliers

to establish renewable
energy usage and GHG
emission reduction targets
that are comparable to
or more ambitious than
those of Xiaomi to deliver
continuous reduction in our
Scope 3 emissions.

Water At our own campus, This year, the use of At our own campus,
achieve at least 30% use reclaimed water in Xiaomi’s achieve at least 30% use
of reclaimed water and a own campus reached of reclaimed water and a
minimum of 50,000 m3 in 36.85%; minimum of 50,000 m3 in
water saving in 2023. water saving in 2024.
The annual water saving
target was accomplished.

Waste Over the next five years By the end of the Over the next five years
(from 2022 to 2026), we reporting period, we had (from 2022 to 2026), we
are committed to achieving accomplished 44% of our are committed to achieving
an accumulative recycling waste recycling target. an accumulative recycling
volume of 38,000 tonnes volume of 38,000 tonnes
(Mt) of e-waste, and (Mt) of e-waste, and
using 5,000 tonnes (Mt) of using 5,000 tonnes (Mt) of
recycled materials in our recycled materials in our
products. products.
188 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Key Social Indicators

Employees

Unit 2023 2022 2021 2020

84
Total Workforce Person 35,116 35,997 33,415 24,810

By Employment Type
Full-time Employees Person 33,627 32,543 33,427 22,074
Other Types of Employees Person 1,489 3,434 1,988 2,736
New Employees
Number of New Employees Person 7,257 9,643 17,089 —
Male % 73.65 69.35 66.70 —
Female % 26.35 30.65 33.30 —
Profile of Full-time Employees
By Gender
Male % 69.24 67.48 66.48 65.86
Female % 30.76 32.52 33.52 34.14
By Age Group
Under 30 % 35.76 39.40 43.69 47.32
30–50 % 63.51 59.74 55.51 52.14
Above 50 % 0.73 0.86 0.80 0.53
By Professional Category
Technical % 44.79 49.05 43.65 47.49
Non-technical % 55.21 50.95 56.35 52.51
By Cohort Level
Senior % 1.05 0.99 0.92 1.13
Male % 83.24 82.61 — —
Female % 16.76 17.39 — —
Mid-Level % 46.98 40.63 36.45 33.46
Male % 74.05 73.91 — —
Female % 25.95 26.09 — —
Junior % 51.97 58.38 62.64 65.41
Male % 64.63 62.76 — —
Female % 35.37 37.24 — —
By Geographic Region
China % 94.18 92.39 93.08 93.26
Other Asian Countries and Regions % 4.05 5.54 5.03 5.45
European Countries and Regions % 1.59 1.91 1.83 1.26
North American Countries and Regions % 0.14 0.16 0.05 0.03
South American Countries and Regions % 0.04 0.00 0.00 0.00
Oceania Countries and Regions % 0.00 0.00 0.00 0.00

84 Total employee workforce includes full-time employees of Xiaomi Group, as well as part-time employees and interns who have a direct employment
relationship with Xiaomi.
 2023 ANNUAL REPORT 189

Employee Turnover

Unit 2023 2022 2021 2020

Employee Turnover85 % 11.98 13.96 12.82 12.36

By Gender
Male % 11.20 13.32 12.07 11.97
Female % 13.71 15.27 14.30 13.11
By Age Group
Under 30 % 16.10 17.09 15.11 13.33
30–50 % 9.57 12.05 11.06 11.21
Above 50 % 19.91 3.21 9.40 39.83
By Geographic Region
Chinese mainland % 10.44 12.98 12.81 12.27
86
Regions beyond the Chinese mainland % 19.42 25.80 12.92 13.51

Work Injuries

Year Unit 2023 2022 2021 2020

No. of Work-Related Fatality Person 0 0 0 1

87
Work-Related Fatality Rate % 0.00% 0.00% 0.00% 0.0045%
Working Days Lost Due to Days 1,190 816 500 469
Work-Related Injury88

85 Turnover rate = the number of full-time employees who left the Company during the reporting period / the total number of full-time employees
at year-end × 100%.
86 The statistical scope of this year’s turnover of employees from regions beyond the Chinese mainland does not include India.
87 Work-related fatality rate = total number of work-related fatalities / total number of employees × 100%.
88 The data is derived from work-related injuries and fatalities recorded by Xiaomi’s human resources team and verified by local authorities. In China,
work-related injuries and fatalities shall be reported by the human resources team and recognized by the Bureau of Human Resources and Social
Security.
190 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Training and Development

Unit 2023 2022 2021

Training Rate

Overall Training Rate % 98.13 97.67 97.42

By Gender
Male % 98.20 97.05 97.29
Female % 98.00 98.96 97.68
By Cohort Level
Senior % 98.10 91.01 87.84
Mid-Level % 98.25 95.91 96.82
Junior % 98.00 99.01 97.91
Average Number of Training Hours
Overall Average Number Hour 30.17 35.57 25.76
of Training Hours
By Gender
Male Hour 30.68 36.95 25.94
Female Hour 29.10 32.72 25.39
By Cohort Level
Senior Hour 22.99 19.30 15.31
Mid-Level Hour 35.27 25.91 18.85
Junior Hour 30.48 42.57 29.94
 2023 ANNUAL REPORT 191

General Training Courses for New Employees

Unit 2023 2022 2021

Starry Program
Number of Participants Person 1,125 3,839 3,571
Courses Course 446 438 305
Total Course Hours Hour 58,251 236,671 359,802
Integration Program89
Number of Participants Person 7,350 4,243 —
Courses Course 13 12 —
Total Course Hours Hour 98,830 39,712 —
Xiaomi Internship
Number of Participants Person 1,302 2,000 339
Courses Course 9 9 8
Total Course Hours Hour 15,624 26,000 3,729

Talent Development Program for Management

Name of project 2023 Course Participant 2022 Course Participant 2021 Course Participant
Pool (Individuals) Pool (Individuals) Pool (Individuals)

Spark Program 1,186 1,250 1,070

90
Ignite Program 395 105 84

Percentage of Products Recalled due to Safety and Health Reasons

Year 2023 2022 2021

Percentage of sold or shipped 0.00% 0.00% 0.00%

products that have to be recalled
due to safety and health reasons

89 The Morning Star Program was not available in 2023.

90 The original Torch Program was merged with the Ignite Program.
192 XIAOMI CORPORATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT

Number of Complaints for Products and Services

Year 2023 2022 2021

Number of Complaints with Identified 71,682 76,874 88,336

Responsibility in the Globe
Resolution Rate of Complaints with Identified 99.95% 99.92% 99.94%
Responsibility
Resolution Rate of Complaints with Identified 89.93% 89.48% 89.04%
Responsibility within 72 Hours

Certification and Coverage Scope

2023 (Scope)

ISO 37001 Xiaomi Group

ISO 27001 Xiaomi Group
ISO 14001 R&D, manufacturing outsourcing management, and sales of
smartphones, tablets, smartwatches, earphones, smart TVs, and
speakers. R&D, manufacturing outsourcing management, and
sales of smart home products and smart bracelets. R&D of smart
home products (routers, robot vacuums, smart speakers, and
power accessories). Manufacturing outsourcing management, and
sales of notebooks.

ISO 45001 R&D, manufacturing outsourcing management, and sales of

smartphones, tablets, smartwatches, earphones, smart TVs, and
speakers. R&D, manufacturing outsourcing management, and
sales of smart home products and smart bracelets. R&D of smart
home products (routers, robot vacuums, smart speakers, and
power accessories). Manufacturing outsourcing management, and
sales of notebooks.

ISO 50001 Energy management activities involved in R&D, software

development, manufacturing outsourcing management, and
warehousing of smartphones and IoT and lifestyle products.

Classification of The Supply Chain By Region

Suppliers Related to the Manufacturing of 2023 2022

Smartphones and IoT and Lifestyle Products

Region
Chinese mainland 981 989
Regions beyond the Chinese mainland 131 36
 2023 ANNUAL REPORT 193

INDEPENDENT
AUDITOR’S REPORT

To the Shareholders of Xiaomi Corporation

(incorporated in the Cayman Islands with limited liability)

Opinion
What we have audited
The consolidated financial statements of Xiaomi Corporation (the “Company”) and its subsidiaries (the “Group”), which
are set out on pages 199 to 337, comprise:

• The consolidated balance sheet as of December 31, 2023;

• the consolidated income statement for the year then ended;

• the consolidated statement of comprehensive income for the year then ended;

• the consolidated statement of changes in equity for the year then ended;

• the consolidated statement of cash flows for the year then ended; and

• the notes to the consolidated financial statements, comprising material accounting policy information and other
explanatory information.

Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of
the Group as of December 31, 2023, and of its consolidated financial performance and its consolidated cash flows for
the year then ended in accordance with IFRS Accounting Standards and have been properly prepared in compliance
with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
194 XIAOMI CORPORATION

INDEPENDENT AUDITOR’S REPORT

Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the International Ethics Standards Board for Accountants
(“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

Key audit matter identified in our audit is related to the classification and fair value determination for unlisted
securities classified as “long-term investments measured at fair value through profit or loss”.

Key Audit Matter How our audit addressed the Key Audit Matter

The classification and fair value determination We understood the key controls over the capturing,
for unlisted securities classified as “long-term measurement and recording of the Unlisted
investments measured at fair value through profit Securities and assessed the inherent risk of material
or loss” misstatement by considering the degree of estimation
uncertainty and level of other inherent risk factors of
Refer to Note 3.3 and Note 20 to the consolidated related accounting estimate.
financial statements.
For the classification and initial recognition of the
The Group measures ordinary share investments Unlisted Securities, we have selected samples to
and preferred share investments in unlisted perform the following procedures:
companies other than those accounted for using
(1) We checked relevant legal documents such
equity method at fair value through profits or losses
as shareholder agreements, share purchase
(collectively the “Unlisted Securities”). The total
agreements and articles of association of the
amount of Unlisted Securities as of December 31,
investees to understand the commercial rationale
2023 was RMB38,347,349,000, accounting for 12% of
for these Unlisted Securities investments;
the Group’s total assets.
(2) We evaluated management’s analysis on
contract terms and assessed the reasonableness
of management’s accounting treatments.
 2023 ANNUAL REPORT 195

INDEPENDENT AUDITOR’S REPORT

Key Audit Matter How our audit addressed the Key Audit Matter

The classification, initial recognition and subsequent For the subsequent measurement of fair value of
measurement of the Unlisted Securities require the Unlisted Securities, we have selected samples to
management to analyze certain complex contract perform the following procedures:
terms, make corresponding judgments on the
Group’s business models of managing them, as well (1) We assessed the objectivity, independence and
as estimate their cashflows. The Group identified its competence of the external valuer engaged by
various rights and evaluated the financial impacts the Group;
based on key terms from relevant legal documents.
(2) We assessed the appropriateness of the
Management engaged an external valuer to assist valuation model (which was “market approach”),
determining the fair value of these Unlisted interviewed management and understood the
Securities when necessary. The fair value underlying assumptions and inputs used in
determination of such Unlisted Securities required fair value determination, and assessed the
management to make judgments and estimates, reasonableness of assumptions and inputs
including the appropriateness of using various used, including but not limited to comparable
unobservable inputs. companies and multipliers used, expected
volatility and discounted for lack of marketability;
We focused on this area due to the significance
of the balances of these investments and their (3) We tested the accuracy of the fair values
related fair value gain or loss for the year, as well calculation of Unlisted Securities.
as management judgments, assumptions and
estimations involved in the initial recognition and We found the judgments, assumptions and
subsequent fair value measurement of the Unlisted estimations made by management in relation to the
Securities which are subject to high degree of initial recognition and fair value determination of the
estimation uncertainty. Unlisted Securities to be supportable based on the
available evidence.
196 XIAOMI CORPORATION

INDEPENDENT AUDITOR’S REPORT

Other Information
The directors of the Company are responsible for the other information. The other information comprises all of the
information included in the annual report other than the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors and the Audit Committee for the Consolidated

Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a
true and fair view in accordance with IFRS Accounting Standards and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.

The Audit Committee is responsible for overseeing the Group’s financial reporting process.
 2023 ANNUAL REPORT 197

INDEPENDENT AUDITOR’S REPORT

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility
towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
198 XIAOMI CORPORATION

INDEPENDENT AUDITOR’S REPORT

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Choi Ming Yan Brian.

PricewaterhouseCoopers
Certified Public Accountants

Hong Kong, March 19, 2024

 2023 ANNUAL REPORT 199

CONSOLIDATED INCOME
STATEMENT
For the year ended December 31, 2023
(Expressed in Renminbi (“RMB”))

Year ended December 31,

Note 2023 2022
RMB’000 RMB’000

Revenue 6 270,970,141 280,044,016

Cost of sales 9 (213,493,902) (232,466,826)

Gross profit 57,476,239 47,577,190

Research and development expenses 9 (19,097,699) (16,028,132)

Selling and marketing expenses 9 (19,226,542) (21,323,323)
Administrative expenses 9 (5,126,798) (5,113,877)
Fair value changes on financial instruments measured at fair value
through profit or loss 3,501,053 (1,662,010)
Share of net profits/(losses) of investments accounted for using the
equity method 12(b) 45,615 (400,100)
Other income 7 740,091 1,135,560
Other gains/(losses), net 8 1,696,711 (1,368,810)

Operating profit 20,008,670 2,816,498

Finance income 11 3,558,347 1,663,941

Finance costs 11 (1,555,970) (546,483)

Profit before income tax 22,011,047 3,933,956

Income tax expenses 13 (4,536,851) (1,431,388)

Profit for the year 17,474,196 2,502,568

Attributable to:
— Owners of the Company 17,475,173 2,474,030
— Non-controlling interests (977) 28,538

17,474,196 2,502,568

Earnings per share (expressed in RMB per share): 14

Basic 0.70 0.10

Diluted 0.69 0.10

The notes on pages 208 to 337 are an integral part of these consolidated financial statements.
200 XIAOMI CORPORATION

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended December 31, 2023
(Expressed in RMB)

Year ended December 31,

Note 2023 2022
RMB’000 RMB’000

Profit for the year 17,474,196 2,502,568

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of investments accounted for
using the equity method 12(b) 9,326 57,211
Transfer of share of other comprehensive (income)/loss to profit or loss
upon disposal and deemed disposal of investments accounted for using
equity method (2,167) 93,311
Net losses from changes in fair value of financial assets at fair value
through other comprehensive income (26,711) (22,754)
Currency translation differences 321,098 (103,529)
Item that will not be reclassified subsequently to profit or loss
Currency translation differences 734,319 3,721,116

Other comprehensive income for the year, net of tax 1,035,865 3,745,355

Total comprehensive income for the year 18,510,061 6,247,923

Attributable to:
— Owners of the Company 18,507,548 6,201,669
— Non-controlling interests 2,513 46,254

18,510,061 6,247,923

The notes on pages 208 to 337 are an integral part of these consolidated financial statements.
 2023 ANNUAL REPORT 201

CONSOLIDATED BALANCE SHEET

As of December 31, 2023
(Expressed in RMB)

As of December 31,
Note 2023 2022
RMB’000 RMB’000

Assets
Non-current assets
Property, plant and equipment 15 13,720,825 9,138,221
Intangible assets 16 8,628,739 4,629,676
Investments accounted for using the equity method 12(b) 6,922,241 7,932,192
Long-term investments measured at fair value through profit or loss 20 60,199,798 55,979,974
Deferred income tax assets 35 2,160,750 2,278,175
Long-term bank deposits 25(c) 18,293,650 16,788,346
Long-term investments measured at amortized cost 20 364,476 405,371
Other non-current assets 18 14,904,260 15,940,461

125,194,739 113,092,416

Current assets
Inventories 24 44,422,837 50,437,891
Trade and notes receivables 22 12,150,928 11,795,074
Loan receivables 21 9,772,589 7,829,563
Prepayments and other receivables 23 20,078,875 18,578,491
Bills receivables measured at fair value through other
comprehensive income 125,661 40,003
Short-term investments measured at fair value through other
comprehensive income 20 582,131 449,109
Short-term investments measured at amortized cost 20 502,816 —
Short-term investments measured at fair value through profit or loss 20 20,193,662 9,845,910
Short-term bank deposits 25(c) 52,797,857 29,874,707
Restricted cash 25(b) 4,794,031 3,956,786
Cash and cash equivalents 25(a) 33,631,313 27,607,261

199,052,700 160,414,795

Total assets 324,247,439 273,507,211

Equity and liabilities

Equity attributable to owners of the Company
Share capital 26 407 406
Reserves 163,995,082 143,658,052

163,995,489 143,658,458

Non-controlling interests 266,279 264,602

Total equity 164,261,768 143,923,060

202 XIAOMI CORPORATION

CONSOLIDATED BALANCE SHEET

As of December 31, 2023
(Expressed in RMB)

As of December 31,
Note 2023 2022
RMB’000 RMB’000

Liabilities
Non-current liabilities
Borrowings 34 21,673,969 21,493,261
Deferred income tax liabilities 35 1,494,287 983,256
Warranty provision 1,215,546 945,270
Other non-current liabilities 30 20,014,273 16,534,831

44,398,075 39,956,618

Current liabilities
Trade payables 31 62,098,500 53,093,543
Other payables and accruals 32 25,614,650 18,440,716
Advance from customers 33 13,614,756 9,587,959
Borrowings 34 6,183,376 2,150,741
Income tax liabilities 1,838,222 1,384,133
Warranty provision 6,238,092 4,970,441

115,587,596 89,627,533

Total liabilities 159,985,671 129,584,151

Total equity and liabilities 324,247,439 273,507,211

The notes on pages 208 to 337 are an integral part of these consolidated financial statements.

The consolidated financial statements on pages 199 to 337 were approved by the Board of Directors on March 19,
2024 and were signed on its behalf:

Lei Jun Lin Bin

 2023 ANNUAL REPORT 203

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended December 31, 2023
(Expressed in RMB)

Attributable to owners of the Company

Other Non-
Share Treasury Share reserves Retained controlling Total
capital shares premium (Note 27) earnings Sub-total interests equity
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2023 406 (190,795) 59,483,288 12,951,008 71,414,551 143,658,458 264,602 143,923,060

Comprehensive income
Profit for the year — — — — 17,475,173 17,475,173 (977) 17,474,196
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss
Share of other comprehensive
income of investments accounted
for using the equity method 12(b) — — — 9,326 — 9,326 — 9,326
Transfer of share of other
comprehensive income to profit
or loss upon disposal and deemed
disposal of investments accounted
for using equity method — — — (2,167) — (2,167) — (2,167)
Net losses from changes in fair
value of financial assets at
fair value through other
comprehensive income — — — (26,711) — (26,711) — (26,711)
Currency translation differences 27 — — — 317,608 — 317,608 3,490 321,098
Item that will not be reclassified
subsequently to profit or loss
Currency translation differences 27 — — — 734,319 — 734,319 — 734,319

Total comprehensive income — — — 1,032,375 17,475,173 18,507,548 2,513 18,510,061

204 XIAOMI CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended December 31, 2023
(Expressed in RMB)

Attributable to owners of the Company

Other Non-
Share Treasury Share reserves Retained controlling Total
capital shares premium (Note 27) earnings Sub-total interests equity
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Transactions with owners in their

capacity as owners
Purchase of own shares 26 — (1,485,385) — — — (1,485,385) — (1,485,385)
Cancellation of shares 26 (2) 1,216,644 (1,216,642) — — — — —
Release of ordinary shares from
Share Scheme Trusts 26 1 21,245 1,788,344 (1,805,864) — 3,726 — 3,726
Share of other reserves of
investments accounted for
using the equity method 12(b) — — — 38,532 — 38,532 — 38,532
Employees share-based
compensation scheme:
— value of employee services 29 — — — 3,280,371 — 3,280,371 (836) 3,279,535
— exercise of share options
and restricted shares units
(“RSUs”) 26,29 2 — 658,545 (580,578) — 77,969 — 77,969
Share consideration for acquisition
of Zimi International Incorporation
(“Zimi”) completed in 2021 26 — — 64,752 (64,752) — — — —
Transfer of share of other reserves
to profit or loss upon disposal and
deemed disposal of investments
accounted for using the
equity method — — — (85,730) — (85,730) — (85,730)
Appropriation to statutory reserves 27 — — — 704,678 (704,678) — — —
Appropriation to general reserves 27 — — — 15,661 (15,661) — — —
Others — — — (2,083) 2,083 — — —

Total transactions with owners in

their capacity as owners 1 (247,496) 1,294,999 1,500,235 (718,256) 1,829,483 (836) 1,828,647

Balance at December 31, 2023 407 (438,291) 60,778,287 15,483,618 88,171,468 163,995,489 266,279 164,261,768
 2023 ANNUAL REPORT 205

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended December 31, 2023
(Expressed in RMB)

Attributable to owners of the Company

Other Non-
Share Treasury Share reserves Retained controlling Total
capital shares premium (Note 27) earnings Sub-total interests equity
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at January 1, 2022 407 (343,730) 59,717,626 8,536,648 69,301,955 137,212,906 219,590 137,432,496

Comprehensive income
Profit for the year — — — — 2,474,030 2,474,030 28,538 2,502,568
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss
Share of other comprehensive
income of investments accounted
for using the equity method 12(b) — — — 57,211 — 57,211 — 57,211
Transfer of share of other
comprehensive loss to profit
or loss upon disposal and deemed
disposal of investments accounted
for using equity method — — — 93,311 — 93,311 — 93,311
Net losses from changes in fair
value of financial assets at fair
value through other
comprehensive income — — — (22,754) — (22,754) — (22,754)
Currency translation differences 27 — — — (121,245) — (121,245) 17,716 (103,529)
Item that will not be reclassified
subsequently to profit or loss
Currency translation differences 27 — — — 3,721,116 — 3,721,116 — 3,721,116

Total comprehensive income — — — 3,727,639 2,474,030 6,201,669 46,254 6,247,923

Transactions with owners in their

capacity as owners
Purchase of own shares 26 — (2,386,143) — — — (2,386,143) — (2,386,143)
Cancellation of shares 26 (4) 2,539,078 (2,539,074) — — — — —
Release of ordinary shares from
Share Scheme Trusts 26 — — 1,315,868 (1,307,612) — 8,256 — 8,256
Share of other reserves of
investments accounted for
using the equity method 12(b) — — — 122,326 — 122,326 — 122,326
Employees share-based
compensation scheme:
— value of employee services 29 — — — 2,821,775 — 2,821,775 125 2,821,900
— exercise of share options
and RSUs 26,29 3 — 890,469 (793,005) — 97,467 — 97,467
Share consideration for acquisition
of Zimi completed in 2021 26 — — 98,399 (98,399) — — — —
Transfer of share of other reserves
to profit or loss upon disposal and
deemed disposal of investments
accounted for using equity method — — — (419,795) — (419,795) — (419,795)
Appropriation to statutory reserves 27 — — — 384,506 (384,506) — — —
Appropriation to general reserves 27 — — — (1,898) 1,898 — — —
Others — — — (21,177) 21,174 (3) (1,367) (1,370)

Total transactions with owners in

their capacity as owners (1) 152,935 (234,338) 686,721 (361,434) 243,883 (1,242) 242,641

Balance at December 31, 2022 406 (190,795) 59,483,288 12,951,008 71,414,551 143,658,458 264,602 143,923,060

The notes on pages 208 to 337 are an integral part of these consolidated financial statements.
206 XIAOMI CORPORATION

CONSOLIDATED STATEMENT OF
CASH FLOWS
For the year ended December 31, 2023
(Expressed in RMB)

Year ended December 31,

Note 2023 2022
RMB’000 RMB’000

Cash flows from operating activities

Cash generated from/(used in) operations 36(a) 44,312,243 (969,453)
Income tax paid (3,011,748) (3,420,277)

Net cash generated from/(used in) operating activities 41,300,495 (4,389,730)

Cash flows from investing activities

Capital expenditures (6,268,900) (5,799,570)
Proceeds from disposal of property, plant and equipment 72,833 17,334
Placement of short-term bank deposits (96,224,706) (58,365,222)
Maturity of short-term bank deposits 83,697,015 68,591,095
Placement of long-term bank deposits (13,148,838) (9,874,904)
Proceeds from disposal of long-term bank deposits 2,115,150 1,921,513
Purchase of short-term investments measured at
(53,357,701) (72,822,699)
fair value through profit or loss
Proceeds from maturity of short-term investments
42,999,761 92,620,278
measured at fair value through profit or loss
Purchase of short-term investments measured
(1,217,115) (776,338)
at fair value through other comprehensive income
Proceeds from maturity of short-term investments measured
1,092,656 1,073,150
at fair value through other comprehensive income
Purchase of long-term investments measured at amortized cost (9,376) (40,920)
Purchase of short-term investments measured at amortized cost (3,300,000) (630,996)
Proceeds from maturity of investments measured at
2,800,000 2,265,269
amortized cost
Interest income received 3,258,117 1,301,900
Investment income received 272,546 425,676
Purchase of long-term investments measured at fair value
(4,199,240) (7,687,992)
through profit or loss
Proceeds from disposal of long-term investments measured at
5,246,748 2,821,615
fair value through profit or loss
Purchase of investments accounted for using the equity method (103,807) (28,030)
Proceeds from disposal of investments accounted for using the
825,070 361,159
equity method
Acquisition of subsidiaries, net of cash acquired (18,144) (25,106)
Disposal of a subsidiary 101,294 —
Dividends received 197,583 201,561

Net cash (used in)/ generated from investing activities (35,169,054) 15,548,773
 2023 ANNUAL REPORT 207

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended December 31, 2023
(Expressed in RMB)

Year ended December 31,

Note 2023 2022
RMB’000 RMB’000

Cash flows from financing activities

Proceeds from borrowings 8,866,088 19,857,851
Repayment of borrowings (4,022,423) (22,649,189)
Finance expenses paid (758,137) (1,020,229)
Contribution from fund investors 1,417,086 806,000
Distribution to fund investors (2,884,215) (255,576)
Net proceeds from exercise of share options 69,919 83,925
Payments for shares repurchase (1,356,825) (2,386,143)
Payments for buyback of employee fund (31,431) (3,256)
Repayment of payables under letter of credit — (1,006,397)
Proceeds from financial assets sold under
959,650 —
repurchase agreements
Payments for buyback of financial assets sold under
(173,804) —
repurchase agreements
Payment of lease liabilities (1,197,692) (1,281,785)
Payment of deferred consideration for acquisition of
(1,393,188) —
intangible assets

Net cash used in financing activities (504,972) (7,854,799)

Net increase in cash and cash equivalents 5,626,469 3,304,244

Cash and cash equivalents at the beginning of the year 25(a) 27,607,261 23,511,579
Effects of exchange rate changes on cash and cash equivalents 397,583 791,438

Cash and cash equivalents at the end of the year 25(a) 33,631,313 27,607,261

The notes on pages 208 to 337 are an integral part of these consolidated financial statements.
208 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS
(Expressed in RMB unless otherwise indicated)

1 General information

Xiaomi Corporation (formerly known as Top Elite Limited) (the “Company”), was incorporated in the Cayman
Islands on January 5, 2010 as an exempted company with limited liability under the Companies Law, Cap. 22 (Law
3 of 1961, as consolidated and revised) of the Cayman Islands. The address of the Company’s registered office
is at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104,
Cayman Islands.

The Company is an investment holding company. The Company and its subsidiaries, including controlled
structured entities (together, the “Group”) are principally engaged in development and sales of smartphones,
internet of things (“IoT”) and lifestyle products, provision of internet services and investments holding in the
People’s Republic of China (“the PRC”) and other countries or regions.

Lei Jun is the ultimate controlling shareholder of the Company as of the date of approval of these consolidated
financial statements.

The regulations in mainland China restrict foreign ownership of companies that provide internet services,
e-commerce and value-added telecommunications services, etc., which include certain activities and services
operated by the Group. In order to enable certain foreign companies to make investments into these businesses
of the Group, the Company controls certain controlled structured entities through contractual arrangements.
On August 25, 2010, a wholly owned subsidiary of the Company, Xiaomi Communications Co., Ltd. (“Xiaomi
Communications”, a wholly foreign-owned enterprise) had entered into a series of contractual arrangements
(the “Contractual Arrangements”) with Xiaomi Inc. and its equity holders, which enable Xiaomi Communications
and the Group to:

• govern the financial and operating policies of Xiaomi Inc.;

• exercise equity holders’ voting rights of Xiaomi Inc.;

• receive substantially all of the economic interest returns generated by Xiaomi Inc. in consideration for the
business support, technical and consulting services provided by Xiaomi Communications;

• obtain an irrevocable and exclusive right to purchase all or part of the equity interests in Xiaomi Inc. from
its respective equity holders at a minimum purchase price when it is permitted under laws and regulations
in mainland China. Xiaomi Communications may exercise such options at any time until it has acquired all
equity interests of Xiaomi Inc.; and
 2023 ANNUAL REPORT 209

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

1 General information (continued)

• obtain a pledge over the entire equity interests of Xiaomi Inc. from its respective equity holders as
collateral security for all of Xiaomi Inc.’s payments due to Xiaomi Communications and to secure
performance of Xiaomi Inc.’s obligation under the Contractual Arrangements.

As a result of the Contractual Arrangements, the Group has rights to exercise power over Xiaomi Inc. and its
subsidiaries, receives variable returns from its involvement in Xiaomi Inc. and its subsidiaries, has the ability to
affect those returns through its power over Xiaomi Inc. and its subsidiaries and is considered to control Xiaomi
Inc. and its subsidiaries. Consequently, the Company regards Xiaomi Inc. and its subsidiaries as controlled
structured entities and consolidated the assets, liabilities and results of operations of Xiaomi Inc. and its
subsidiaries in the consolidated financial information of the Group.

Nevertheless, the Contractual Arrangements may not be as effective as direct legal ownership in providing the
Group with direct control over Xiaomi Inc. and its subsidiaries. Uncertainties presented by the legal system in
mainland China could impede the Group’s beneficiary rights of the results, assets and liabilities of Xiaomi Inc.
and its subsidiaries. The directors of the Company, based on the advice of its legal counsel, consider that the
Contractual Arrangements among Xiaomi Communications, Xiaomi Inc. and its equity holders are in compliance
with the relevant laws and regulations in mainland China and are legally binding and enforceable.

Other Contractual Arrangements were also executed for other operating companies in mainland China
established by the Group similar to Xiaomi Inc. subsequently. All of these operating companies are treated as
controlled structured entities of the Company and their financial statements have also been consolidated by the
Company. See details in Note 12(a).

2 Summary of accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied throughout all the years presented, unless otherwise stated.
210 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies

(a) Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with all
applicable IFRS Accounting Standards issued by the International Accounting Standards Board (“IFRS
Accounting Standards”) and disclosure requirements of the Hong Kong Companies Ordinance.

The consolidated financial statements of the Group have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and liabilities which are carried at fair value.

The preparation of consolidated financial statements in conformity with IFRS Accounting Standards
requires the use of certain critical accounting estimates. It also requires management to exercise
its judgment in the process of applying the Group’s accounting policies. The areas involving a higher
degree of judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 4.

(i) New and amended standards adopted by the Group

The following new and amended standards are mandatory for the first time for the Group’s
financial year beginning on January 1, 2023 and are applicable for the Group:

• IFRS 17 Insurance contracts

• Disclosure of accounting policies — Amendments to IAS 1 and IFRS practice statement 2

• Definition of accounting estimates — Amendments to IAS 8

• Deferred tax related to assets and liabilities arising from a single transaction
— Amendments to IAS 12

• International tax reform — Pillar Two Model Rules — Amendments to IAS 12

Other than the adoption of Amendments to IAS 12 as below disclosed, the adoption of the
other new and amended standards has had no significant impact on the results and the financial
position of the Group.
 2023 ANNUAL REPORT 211

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(a) Basis of preparation (continued)
(i) New and amended standards adopted by the Group (continued)
Deferred tax related to assets and liabilities arising from a single transaction — Amendments
to IAS 12
The Group applied the Amendment to IAS 12 — Deferred tax related to assets and liabilities
arising from a single transaction from its effective date on January 1, 2023. In accordance
with the retrospectively application transitional provisions, the Group recognized deferred
income tax for all temporary differences related to leases that gave rise to equal amounts
of taxable and deductible temporary differences on initial recognition date at the beginning
of the earliest comparative period presented. As a result, with the beginning of the earliest
period presented being January 1, 2022, an adjustment of RMB555,070,000 was recognized
to the gross amounts of deferred tax assets and deferred tax liabilities simultaneously, and
the resultant deferred tax assets and deferred tax liabilities met the set-off provisions and
presented on a net basis on the consolidated balance sheet.

Since the Group had considered the lease as a single transaction in which the assets and
liabilities are integrally linked and recognized deferred income tax on a net basis before the
adoption of this amendments, there were no impact on opening retained earnings upon the
adoption of the this amendments.

Amendments to IAS 12 International Tax Reform — Pillar Two Model Rules

Amendments to IAS 12 “International Tax Reform — Pillar Two Model Rules” have been
issued on May 23, 2023 and are effective for annual reporting periods beginning on or after
January 1, 2023. The Group has adopted the amendments and applied the temporary exception
to recognising and disclosing information about deferred income tax assets and liabilities
arising from tax law enacted or substantively enacted to implement the Pillar Two Model
Rules published by the Organisation for Economic Co-operation and Development.

The Group would continually evaluate the impact of the Pillar Two income tax exposure on the
consolidated financial statements.
212 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(a) Basis of preparation (continued)
(ii) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not
mandatory for the year ended December 31, 2023 and have not been early adopted by the
Group. These standards are not expected to have a material impact on the Group in the
current or future reporting periods and on foreseeable future transactions.

(b) Subsidiaries
(i) Consolidation
A subsidiary is an entity (including a structured entity) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases.

Intra-group transactions, balances and unrealized gains on transactions between group

companies are eliminated. Unrealized losses are also eliminated unless the transaction
provides evidence of an impairment of the transferred asset. When necessary, amounts
reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

(i) Subsidiaries controlled through Contractual Arrangements

There are entities controlled by the Group under Contractual Arrangements. The Group
does not have legal ownership in equity of these structured entities or their subsidiaries.
Nevertheless, under Contractual Arrangements entered into with the registered owners
of these structured entities, the Company and its other legally owned subsidiaries
control these companies by way of controlling the voting rights, governing their financial
and operating policies, appointing or removing the majority of the members of their
controlling authorities, and casting the majority of votes at meetings of such authorities.
Accordingly, the Group has rights to exercise power over these structured entities,
receives variable returns from its involvement in these structured entities, and has the
ability to affect those returns through its power over these structured entities. As a
result, they are presented as controlled structured entities of the Group, and their assets,
liabilities and results are consolidated in the Group’s consolidated financial statements.
 2023 ANNUAL REPORT 213

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(b) Subsidiaries (continued)
(i) Consolidation (continued)
(ii) Business combination
The Group applies the acquisition method to account for business combinations except
for business combination under common control. The consideration transferred for
the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued by the
Group. The consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.

The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-

acquisition basis either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value
of the acquirer’s previously held equity interest in the acquiree is remeasured to fair
value at the acquisition date; any gains or losses arising from such remeasurement are
recognized in profit or loss.

Any contingent consideration to be transferred by the Group is recognized at fair

value at the acquisition date. Subsequent changes to the fair value of the contingent
consideration that is deemed to be an asset or liability is recognized in accordance
with IFRS 9 in profit or loss. Contingent consideration that is classified as equity is not
remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest
in the acquiree and the acquisition-date fair value of any previous equity interest in
the acquiree over the fair value of the identifiable net assets acquired is recorded as
goodwill. If those amounts are less than the fair value of the net assets of the business
acquired in the case of a bargain purchase, the difference is recognized directly in the
profit or loss.
214 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(b) Subsidiaries (continued)
(i) Consolidation (continued)
(ii) Business combination (continued)
An acquisition of a business which is a business combination under common control
is accounted for in a manner similar to a uniting of interests whereby the assets and
liabilities acquired are accounted for at carryover predecessor values to the other party
to the business combination within all periods presented as if the operations of the
Group and the business acquired have always been combined. The difference between
the consideration paid by the Group and the net assets or liabilities of the business
acquired is adjusted against equity.

(iii) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in a loss of control are
accounted for as equity transactions — that is, as transactions with the owners of
the subsidiary in their capacity as owners. The difference between fair value of any
consideration paid and the relevant share of the carrying amount of net assets of
the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.

(iv) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured
to its fair value at the date when control is lost, with the change in carrying amount
recognized in profit or loss. The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an associate, joint venture or
financial asset. In addition, any amounts previously recognized in other comprehensive
income in respect of that entity are accounted for as if the Group had directly disposed
of the related assets or liabilities. It means the amounts previously recognized in other
comprehensive income (“OCI”) are reclassified to profit or loss, or transferred to another
category of equity as specified/permitted by applicable IFRS Accounting Standards.
 2023 ANNUAL REPORT 215

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(c) Associates
An associate is an entity over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights.

(i) Investments in associates in the form of ordinary shares

Investments in associates in the form of ordinary shares are accounted for using the equity
method of accounting in accordance with IAS 28 “Investments in Associates and Joint
Ventures”. Under the equity method, the investment is initially recognized at cost, and the
carrying amount is increased or decreased to recognize the investor’s share of the profit or
loss of the investee after the date of acquisition. The Group’s investments in these associates
include goodwill identified on acquisition, net of any accumulated impairment loss. Upon the
acquisition of the ownership interest in an associate, any difference between the cost of the
associate and the Group’s share of the net fair value of the associate’s identifiable assets and
liabilities is treated as goodwill.

If the ownership interest in an associate in the form of ordinary shares is reduced but
significant influence is retained, only a proportionate share of the amounts previously
recognized in other comprehensive income is reclassified to consolidated income statement
where appropriate.

The Group’s share of the associates’ post-acquisition profit or loss is recognized in the
consolidated income statement, and its share of post-acquisition movements in other
comprehensive income is recognized in other comprehensive income. The cumulative post-
acquisition movements are adjusted against the carrying amount of the investment. When the
Group’s share of losses in an associate equals or exceeds its interest in the associate, including
any other unsecured receivables, the Group does not recognize further losses, unless it has
incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that
the investments in the associate are impaired. If this is the case, the Group calculates the
amount of impairment as the difference between the recoverable amount of the associate and
its carrying value and includes the amount in “other gains/(losses), net” in the consolidated
income statement.
216 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(c) Associates (continued)
(i) Investments in associates in the form of ordinary shares (continued)
Profits and losses resulting from upstream and downstream transactions between the Group
and its associate are recognized in the Group’s financial statements only to the extent of
unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies
of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.

Gain or losses on dilution of equity interest in associates are recognized in the consolidated
income statement.

(ii) Investments in associates in the form of ordinary shares with preferential rights or
convertible redeemable preferred shares
Investments in associates in the form of ordinary shares with preferential rights or convertible
redeemable preferred shares are accounted as financial assets measured at fair value
through profit or loss (Note 2.1 (g)).

(d) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced
part is derecognized. All other repairs and maintenance are charged to profit or loss during the
financial period in which they are incurred.
 2023 ANNUAL REPORT 217

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(d) Property, plant and equipment (continued)
Depreciation on property, plant and equipment is calculated using the straight-line method to allocate
their cost to their residual values over their estimated useful lives, as follows:

— Leasehold improvements Estimated useful lives or remaining lease terms, whichever is shorter
— Electronic equipment 3–10 years
— Office equipment 2–5 years
— Buildings 40 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period.

Construction in progress mainly represents office buildings under construction, which is stated at
actual construction cost less accumulated impairment losses. Construction in progress is transferred
to appropriate categories of property, plant and equipment upon the completion of their respective
construction and depreciated over their respective estimated useful lives.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (Note 2.1 (f)).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are recognized within “Other gains/(losses), net” in the consolidated income statement.

(e) Intangible assets

(i) Goodwill
Goodwill arises from the acquisition of subsidiaries represents the excess of the
consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of
the identified net assets acquired.

For the purpose of impairment testing, goodwill acquired in a business combination is

allocated to each of the cash generating units (“CGUs”), or groups of CGUs, that is expected to
benefit from the synergies of the combination. Each unit or group of units to which the goodwill
is allocated represents the lowest level within the entity at which the goodwill is monitored for
internal management purposes. Goodwill is monitored at the operating segment level.
218 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(e) Intangible assets (continued)
(i) Goodwill (continued)
Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of the CGU containing
the goodwill is compared to the recoverable amount, which is the higher of value in use and
the fair value less costs of disposal. Any impairment is recognized immediately as an expense
and is not subsequently reversed.

(ii) License
License includes third-party payment license and other licenses. Third-party payment license
represents the license issued by the People’s Republic of China government authorities that
enable the Group to operate third-party payment business. Other licenses mainly include the
licenses to use certain intellectual properties purchased from third parties. These acquired
licenses are shown at historical cost. License that have an indefinite useful life are tested
annually for impairment and carried at cost less accumulated impairment losses. Others are
amortized over their estimated useful lives of 1 to 10 years using straight-line method.

(iii) Trademarks, patents and domain name

Separately acquired trademarks, patents and domain name are shown at historical cost.
Trademarks, patents and domain name acquired in a business combination are recognized at
fair value at the acquisition date. Trademarks, patents and domain name have a finite useful
life and are carried at cost less accumulated amortization. Amortization is calculated using
the straight-line method to allocate the cost of trademarks, patents and domain name over
their estimated useful lives of 1 to 20 years.

(iv) Other intangible assets

Other intangible assets mainly include computer software. They are initially recognized and
measured at costs incurred to acquire and bring them to use. Other intangible assets are
amortized on a straight-line basis over their estimated useful lives, and recorded within
operating expenses in the consolidated income statement.
 2023 ANNUAL REPORT 219

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(e) Intangible assets (continued)
(v) Research and development expenditures
Research expenditure is recognized as an expense as incurred. Costs incurred on development
projects (relating to the design and testing of new or improved products) are capitalized as
intangible assets when recognition criteria are fulfilled. These criteria include:

• it is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to
use or sell the software product are available; and

• the expenditure attributable to the software product during its development can be
reliably measured.

Other development expenditures that do not meet these criteria are recognized as an expense
as incurred.

(f) Impairment of non-financial assets

Intangible assets that have an indefinite useful life are not subject to amortization and are tested
annually for impairment. Assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized 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 value in use (“VIU”). For the purposes of assessing impairment, assets are grouped
at the lowest levels of CGUs. Non-financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date.
220 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(g) Financial assets
(i) Classification
The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive

income, or through profit or loss), and

• those to be measured at amortized cost.

The classification depends on the Group’s business model for managing the financial assets
and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in debt instruments, this will depend on
the business model in which the investment is held. For investments in equity instruments
that are not held for trading, this will depend on whether the Group has made an irrevocable
election at the time of initial recognition to account for the equity investment at fair value
through other comprehensive income.

See Note 19 for details of each type of financial asset.

The Group reclassifies debt investments when and only when its business model for managing
those assets changes.

(ii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are recorded in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
 2023 ANNUAL REPORT 221

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(g) Financial assets (continued)
(ii) Measurement (continued)
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model
for managing the asset and the cash flow characteristics of the asset. There are three
measurement categories into which the Group classifies its debt instruments:

• Amortized cost: Assets that are held for collection of contractual cash flows where
those cash flows represent solely payments of principal and interest are measured at
amortized cost. A gain or loss on a debt investment that is subsequently measured at
amortized cost and is not part of a hedging relationship is recognized in profit or loss
when the asset is derecognized or impaired. Interest income from these financial assets
is included in finance income using the effective interest method.

• Fair value through other comprehensive income (“FVOCI”): Assets that are held for
collection of contractual cash flows and for selling the financial assets, where the
assets’ cash flows represent solely payments of principal and interest, are measured
at FVOCI. Movements in the carrying amount are taken through OCI, except for the
recognition of impairment gains or losses, interest income and foreign exchange
gains and losses which are recognized in profit or loss. When the financial asset is
derecognized, the cumulative gain or loss previously recognized in OCI is reclassified
from equity to profit or loss and recognized in other gains/(losses), net. Interest income
from these financial assets is included in finance income using the effective interest
method. Foreign exchange gains and losses are presented in other gains/(losses), net.

• Fair value through profit or loss (“FVPL”): Assets that do not meet the criteria for
amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL and is not part of a hedging relationship is
recognized in profit or loss and presented net in the consolidated income statement
within other gains/(losses), net in the period in which it arises.
222 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(g) Financial assets (continued)
(ii) Measurement (continued)
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in OCI,
there is no subsequent reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment. Dividends from such investments continue to be recognized
in profit or loss as other income when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognized in the consolidated income
statement. Impairment losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in fair value.

(iii) Impairment
The Group assesses on a forward looking basis the expected credit losses associated with
its debt instruments carried at amortized cost and fair value through other comprehensive
income. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognized from initial recognition of the receivables.

Impairment on other financial assets, mainly including loan receivables, notes receivables,
other receivables, term bank deposits, long-term investments measured at amortized
cost and short-term investments measured at amortized cost or fair value through other
comprehensive income, is measured as either 12-month expected credit losses or lifetime
expected credit loss, depending on whether there has been a significant increase in credit risk
since initial recognition. If a significant increase in credit risk of a receivable has occurred
since initial recognition, then impairment is measured as lifetime expected credit losses.
 2023 ANNUAL REPORT 223

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(g) Financial assets (continued)
(iv) Derecognition
Financial assets
The Group derecognizes a financial asset, if the part being considered for derecognition meets
one of the following conditions: (i) the contractual rights to receive the cash flows from the
financial asset expire; or (ii) the contractual rights to receive the cash flows of the financial
asset have been transferred, the Group transfers substantially all the risks and rewards of
ownership of the financial asset; or (iii) the Group retains the contractual rights to receive the
cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows
to the eventual recipient in an agreement that meets all the conditions of de-recognition of
transfer of cash flows (“pass through” requirements) and transfers substantially all the risks
and rewards of ownership of the financial asset.

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the
difference between the two amounts below is recognized in profit or loss:

• the carrying amount of the financial asset transferred; and

• the sum of the consideration received from the transfer and any cumulative gain or loss
that has been recognized directly in equity.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership
and continues to control the transferred asset, the Group continues to recognize the asset to
the extent of its continuing involvement and recognizes an associated liability.

(h) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the
weighted average method. The cost of finished goods and work in progress comprises raw materials,
assembly cost and other direct costs. It excludes borrowing costs. Net realizable value is the
estimated selling price in the ordinary course of business, less the estimated costs to completion,
applicable variable selling expense and related tax.
224 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(i) Loan receivables
Loan receivables held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are recognized initially at fair value plus transaction costs that
are attributable to the acquisition of the assets and subsequently measured at amortized cost using
the effective interest method, less credit loss allowance. Amortized cost is calculated by taking into
account any discount or premium on acquisition and includes fees or costs that are an integral part
of the effective interest rate. The effective interest rate amortization is included in the profit or loss.
The loss allowance is recognized in profit or loss. See Note 2.1 (g)(iii) for a description of the Group’s
impairment policy for loan receivables.

(j) Cash and cash equivalents and restricted cash

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits
held at call with banks, other short-term highly liquid investments with original maturities of three
months or less.

Cash that is restricted from withdrawal, from use or from being pledged as security is reported
separately on the face of the consolidated balance sheets, and is not included in the total cash and
cash equivalents in the consolidated statements of cash flows.

(k) Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognized in the consolidated income statement over the period of the
borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some
or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services
and amortized over the period of the facility to which it relates.
 2023 ANNUAL REPORT 225

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(k) Borrowings (continued)
The fair value of the liability portion of a convertible bond is determined using a market interest rate
for an equivalent non-convertible bond. This amount is recorded as a liability on an amortized cost
basis until extinguished on conversion or maturity of the bond. The remainder of the proceeds is
allocated to the conversion option. This is recognized and included in shareholders’ equity, net of
income tax effects.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.

A financial liability is derecognized when the obligation under the liability is discharged, canceled, or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and a recognition of a new liability, and
the difference between the respective carrying amounts is recognized in profit or loss.

(l) Current and deferred income tax

The income tax expense for the period comprises current and deferred tax. Income tax is recognized
in the consolidated income statement, except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this case, the income tax is also recognized in
other comprehensive income or directly in equity, respectively.

(i) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the Company and
its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation and considers whether it is probable that a taxation authority will
accept an uncertain tax treatment. The Group measures its tax balances either based on
the most likely amount or the expected value, depending on which method provides a better
prediction of the resolution of the uncertainty.
226 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(l) Current and deferred income tax (continued)
(ii) Deferred income tax
Inside basis differences
Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax liabilities are not recognized if they arise from the
initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss and does not give
rise to equal amounts of taxable and deductible temporary differences. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the
balance sheet date and are expected to apply when the related deferred income tax asset is
realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized.

Outside basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from
investments in subsidiaries, associates and joint arrangements, except for deferred income
tax liability where the timing of the reversal of the temporary difference is controlled by the
Group and it is probable that the temporary difference will not reverse in the foreseeable
future. Generally the Group is unable to control the reversal of the temporary difference for
associates. Only when there is an agreement in place that gives the Group the ability to control
the reversal of the temporary difference in the foreseeable future, deferred tax liability in
relation to taxable temporary differences arising from the associate’s undistributed profits is
not recognized.

Deferred income tax assets are recognized on deductible temporary differences arising from
investments in subsidiaries, associates and joint arrangements only to the extent that it is
probable the temporary difference will reverse in the future and there is sufficient taxable
profit available against which the temporary difference can be utilized.
 2023 ANNUAL REPORT 227

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(l) Current and deferred income tax (continued)
(iii) Offsetting
Deferred income tax assets and liabilities are offset where there is a legally enforceable
right to offset current income tax assets against current income tax liabilities and where the
deferred income taxes assets and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable entities where there is an intention to
settle the balances on a net basis.

(m) Share-based payment

(i) Equity-settled share-based payment transactions
The Group operates share incentive plan, under which it receives services from employees
as consideration for equity instruments (RSUs and options) of the Group. The fair value of
the services received in exchange for the grant of the equity instruments (RSUs and options)
is recognized as an expense on the consolidated income statement with a corresponding
increase in equity.

In terms of the RSUs and options awarded to employees, the total amount to be expensed is
determined by reference to the fair value of equity instruments (RSUs and options) granted:

• including any market performance conditions;

• excluding the impact of any service and non-market performance vesting conditions; and

• including the impact of any non-vesting conditions.

Service and non-marketing performance conditions are included in calculation of the number
of RSUs and options that are expected to vest. The total amount expensed is recognized over
the vesting period, which is the period over which all of the specified vesting conditions are to
be satisfied.

At the end of each reporting period, the Group revises its estimates of the number of RSUs
and options that are expected to vest based on the non-marketing performance and service
conditions. It recognizes the impact of the revision to original estimates, if any, in the
consolidated income statement, with a corresponding adjustment to equity.
228 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(m) Share-based payment (continued)
(i) Equity-settled share-based payment transactions (continued)
In some circumstances, employees may provide services in advance of the grant date and
therefore the grant date fair value is estimated for the purposes of recognizing the expense
during the period between service commencement period and grant date.

When the options are exercised, the Company issues new ordinary shares. The proceeds
received net of any directly attributable transaction costs are credited to share capital and
share premium.

(ii) Cash-settled share-based payment transactions

The cost of cash-settled transactions is measured at fair value of the liability. The liability is
re-measured at each reporting date up to and at the date of settlement, with any changes in
fair value recognized in profit or loss for the year.

(n) Revenue recognition

The Group principally derives revenue from sales of products and provision of internet services.

Revenue is measured at the fair value of the consideration received or receivable, and represents
amounts receivable for goods sold or services performed, stated net of discounts, returns and
value-added taxes. The Group recognizes revenue when the specific criteria have been met for each
of the Group’s activities, as described below.

(i) Sales of products

Revenue from the sales of products (mainly including smartphones, IoT and lifestyle products)
directly to customers, is recognized when control of the goods has been transferred, being
when the products are accepted by the customers. The customers have full discretion over the
products, and there is no unfulfilled obligation that could affect the customers’ acceptance of
the products.

Customers in mainland China have an unconditional right to return the products purchased online
within 7 days. The Group bases its estimates of sales return on historical results, taking into
consideration the type of customers, the type of transactions and the specifics of each arrangement.
 2023 ANNUAL REPORT 229

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(n) Revenue recognition (continued)
(ii) Internet services
Internet services mainly comprise advertising services and internet value-added services.

(i) Advertising services

Advertising revenues comprise mainly display-based and performance-based advertisements.

Revenue from display-based advertisements to the users of smartphones and other

devices is recognized on a straight-line basis over the contracted period with customers
in which the advertisements are displayed.

Revenue from performance-based advertisements is recognized based on actual

performance measurement. The Group recognizes the revenue from the delivery of
(i) per-click when the users click on the content, (ii) per-impression when the advertising
contents are displayed to users, or (iii) per-download when the customers’ apps are
downloaded by users.

(ii) Internet value-added services

The Group recognizes the internet value-added services revenue (including online game
and fintech business) on a gross or net basis depending on whether the Group is acting
as a principal or an agent in the transaction.

For online game, the Group usually amostised the related revenue over the estimated
user relationship periods, given there is an explicit or implicit obligation of the Group to
maintain the relevant applications and allow users to have access to them.

Fintech business
The Group’s fintech revenues are primarily consist of financial interest income and
intermediary services income.

The Group generates financial interest income from provision of loan services through
its own online internet finance platform and factoring business. Revenue arising from
factoring business is recognized in the consolidated statement of comprehensive income
based on the duration and the effective interest rate. Revenue includes the amortization
of any differences between the initial carrying amount of an interest-bearing instrument
and its amount at maturity calculated on an effective interest rate basis.
230 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(n) Revenue recognition (continued)
(ii) Internet services (continued)
(ii) Internet value-added services (continued)
Fintech business (continued)
The Group also provides intermediary services to the borrowers and third party funding
parties (as the lenders). The Group are determined as neither the legal lender nor the
legal borrower in the loan origination and repayment process. Therefore, the Group
does not record loans receivable and payable arising from the loans between lenders
and borrowers. The Group only acts as an agent to facilitate such loans between
the borrowers and the lenders. The Group considers the loan facilitation and post-
lending management services as distinct performance obligations because both the
borrowers and lenders can benefit from the loan facilitation services and post-lending
management services on their own, and those services are clearly stated in the contract
and are separately identifiable, they are not integrated or interrelated with each other,
and do not significantly affect each other. For intermediary services with a financial
guarantee obligation, the Group first allocates the total consideration to the financial
guarantee liability, then the remaining consideration is allocated to loan facilitation
and post-lending management services on the basis of the relative standalone selling
prices, determined by using the cost plus margin approach; for intermediary services
with no financial guarantee obligation, the Group allocates the total consideration to
loan facilitation and post-lending management services on the basis of the relative
standalone selling prices, determined by using the cost plus margin approach. Revenues
from loan facilitation services are recognized at point-in-time upon the successful
matching between the borrowers and the lenders. Revenues from post-lending
management services are recognized ratably over the terms of the underlying loans as
the performance obligation is satisfied over time.

Determining whether revenue of the Group should be reported gross or net is based
on a continuing assessment of various factors. When determining whether the Group
is acting as the principal or agent in offering goods or services to the customer, the
Group needs to first identify who controls the specified goods or services before they
are transferred to the customer. The Group is a principal if the Group obtains control
through any of the following: (i) a good or another asset from the other party that the
Group then transfers to the customer; (ii) a right to a service to be performed by the
other party, which gives the Group the ability to direct that party to provide the service to
 2023 ANNUAL REPORT 231

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.1 Summary of material accounting policies (continued)

(n) Revenue recognition (continued)
(ii) Internet services (continued)
(ii) Internet value-added services (continued)
Fintech business (continued)
the customer on the Group’s behalf; (iii) a good or service from the other party that the
Group then combines with other goods or services in providing the specified good or
service to the customer. If control is unclear, when the Group is primarily obligated in a
transaction, is subject to inventory risk, has latitude in establishing prices and selecting
suppliers, or has several but not all of these indicators, the Group records revenues on a
gross basis. Otherwise, the Group records the net amount earned as commissions from
products sold or services provided.

The Group does not expect to have any contracts where the period between the transfer of the
promised goods or services to the customer and payment by the customer exceeds one year. As a
consequence, the Group does not adjust any of the transaction prices for the time value of money.

(o) Earnings per share

(i) Basic earnings per share
Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the Company, excluding any costs of servicing equity
other than ordinary shares.

• by the weighted average number of ordinary shares outstanding during the financial year, adjusted
for bonus elements in ordinary shares issued during the year and excluding treasury shares.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
232 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies

(a) Separate financial statements
Investments in subsidiaries (including controlled structured entities) are accounted for at cost less
impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are
accounted for by the Company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these
investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the
dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds
the carrying amount in the consolidated financial information of the investee’s net assets including goodwill.

(b) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Chief Executive Officer that makes strategic decisions.

(c) Foreign currency translation

(i) Functional and presentation currency
Items included in the financial information of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates (the
“functional currency”). The functional currency of the Company is United States dollar
(“US$”). The Company’s primary subsidiaries were incorporated in mainland China and these
subsidiaries considered RMB as their functional currency. As the major operations of the
Group are within mainland China, the Group determined to present its consolidated financial
statements in RMB (unless otherwise stated).

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the consolidated income statement.
Foreign exchange gains and losses are presented in the consolidated income statement within
“Other gains/(losses), net”.

Translation differences on non-monetary financial assets and liabilities are recognized in

profit or loss as part of the fair value changes.
 2023 ANNUAL REPORT 233

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(c) Foreign currency translation (continued)
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of
a hyper-inflationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate
at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect
of rates prevailing on the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and

• all resulting currency translation differences are recognized in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity and translated at the closing rate. Currency
translation differences arising are recognized in other comprehensive income.

(iv) Disposal of foreign operation and partial disposal

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a
foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign
operation, a disposal involving loss of joint control over a joint venture that includes a foreign
operation, or a disposal involving loss of significant influence over an associate that includes a
foreign operation), all of the currency translation differences accumulated in equity in respect of
that operation attributable to the owners of the Company are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group losing control over a
subsidiary that includes a foreign operation, the proportionate share of accumulated currency
translation differences are re-attributed to non-controlling interests and are not recognized
in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership
interest in associates or joint ventures that do not result in the Group losing significant
influence or joint control), the proportionate share of the accumulated exchange difference is
reclassified to profit or loss.
234 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(d) Investment properties
Investment properties, principally freehold office buildings, are held for long-term rental yields and are not
occupied by the Group. Investment properties are initially measured at cost, including related transaction costs
and where applicable borrowing costs. Subsequently, investment properties are stated at cost less accumulated
depreciation and accumulated impairment losses (if any). Depreciation is recognized so as to write off the cost of
investment properties to their residual values over their estimated useful lives of 38 to 40 years by using the
straight-line method.

(e) Financial guarantee contracts

Financial guarantee contracts are recognized as a financial liability at the time the guarantee
is issued. The liability is initially measured at fair value and subsequently at the higher of:

• the amount determined in accordance with the expected credit loss model under IFRS 9; and

• the amount initially recognized less, where appropriate, the cumulative amount of income
recognized in accordance with the principles of IFRS 15.

The fair value of financial guarantees is determined based on the present value of the difference in cash
flows between the contractual payments required under the debt instrument and the payments that would
be required without the guarantee, or the estimated amount that would be payable to a third party for
assuming the obligations.

Where guarantees in relation to loans or other payables of associates are provided for no compensation, the fair
values are accounted for as contributions and recognized as part of the cost of the investment.

(f) Receivables
Trade and notes receivables are amounts due from customers for goods sold or services performed
in the ordinary course of business.

Trade receivables are recognized initially at the amount of consideration that is unconditional unless they
contain significant financing components, when they are recognized at fair value.
 2023 ANNUAL REPORT 235

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(f) Receivables (continued)
Majority of other receivables are amounts due from outsourcing partners for raw material
delivered in the ordinary course of business. They are generally due for settlement within one year
and therefore all classified as current assets.

The Group holds the trade and other receivables with the objective of collecting the contractual
cash flows and therefore measures them subsequently at amortized cost using the effective
interest method. See Note 2.1 (g)(iii) for a description of the Group’s impairment policies for trade
and other receivables.

(g) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Trade payables are classified as current liabilities if payment
is due within one year (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest method.

(h) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to the cost of those assets, until such time
as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

(i) Employee benefits

(i) Pension obligations
The Group operates a mandatory provident fund scheme (“MPF Scheme”) for the eligible
employees in Hong Kong. The MPF Scheme is a defined contribution scheme, the assets of
which are held in separate trustee-administered funds. The Group’s contributions to MPF
Scheme are expensed as incurred.
236 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(i) Employee benefits (continued)
(i) Pension obligations (continued)
The Group’s subsidiaries operating in mainland China have to make contribution to staff
retirement scheme managed by local government authorities in accordance with the relevant
rules and regulations. The contributions borne by the Group under the government mandated
multi-employer defined contribution scheme are principally determined based on certain
percentages of the salaries of employees, subject to certain ceilings. Contributions to these
schemes are charged to the consolidated income statement as and when incurred and not
reduced by contributions forfeited by those who leave the plans prior to vesting fully in the
contributions. The Group has no legal or constructive obligations to pay further contributions.

(ii) Employee leave entitlements

Employee entitlements to annual leave are recognized when they accrue to employees.
A provision is made for the estimated liability for annual leave as a result of services rendered
by employees up to the balance sheet date. Employee entitlements to sick leave and maternity
leave are not recognized until the time of leave.

(iii) Bonus plans

The expected cost of bonuses is recognized as a liability when the Group has a present legal
or constructive obligation for payment of bonus as a result of services rendered by employees
and a reliable estimate of the obligation can be made. Liabilities for bonus plans are expected
to be settled within 1 year and are measured at the amounts expected to be paid when they
are settled.

(j) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of
past events; it is probable that an outflow of resources will be required to settle the obligation; and the
amount has been reliably estimated. Provisions are not recognized for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognized even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
 2023 ANNUAL REPORT 237

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(j) Provisions (continued)
Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to passage of time
is recognized as interest expense.

(i) Warranty provision

The Group records warranty liabilities at the time of sale for the estimated costs that will be
incurred under its basic limited warranty. The specific warranty terms and conditions vary
depending upon the product and the country in which it was sold, but generally includes
technical support, repair parts and labor associated with warranty repair and service actions.
The period ranges from one to six years. The Group revaluates its estimates on an annual basis
to assess the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

(k) Interest income

Interest income on financial assets at amortized cost and financial assets at fair value through
other comprehensive income calculated using the effective interest method is recognized in the
consolidated income statement as part of other income.

Interest income is presented as finance income where it is earned from financial assets that are
held for cash management purposes.

Interest income is calculated by applying the effective interest rate to the gross carrying amount
of a financial asset except for financial assets that subsequently become credit-impaired. For
credit-impaired financial assets the effective interest rate is applied to the net carrying amount of
the financial asset (after deduction of the loss allowance).

(l) Government grants

Grants from government are recognized at their fair value where there is a reasonable assurance that
the grants will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the consolidated income
statement over the period necessary to match them with the costs that they are intended to
compensate. Government grants relating to the property, plant and equipment, and other non-current
assets are included in the liabilities and are credited to consolidated income statement on a straight-
line basis over the expected lives of the related assets.
238 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(m) Leases
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the
leased asset is available for use by the Group.

Contracts may contain both lease and non-lease components. The Group allocates the consideration
in the contract to the lease and non-lease components based on their relative stand-alone prices.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• variable lease payment that are based on an index or a rate, initially measured using the index
or rate as of the commencement date;

• amounts expected to be payable by the Group under residual value guarantees;

• the exercise price of a purchase option if the Group is reasonably certain to exercise that
option; and

• payments of penalties for terminating the lease, if the lease term reflects the Group exercising
that option.

Lease payments to be made under reasonably certain extension options are also included in the
measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for leases in the Group, the lessee’s
incremental borrowing rate is used, being the rate that the individual lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and conditions.
 2023 ANNUAL REPORT 239

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(m) Leases (continued)
To determine the incremental borrowing rate, the Group:

• where possible, uses recent third-party financing received by the individual lessee as a
starting point, adjusted to reflect changes in financing conditions since third party financing
was received;

• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for
leases held by the Group, which does not have recent third party financing; and

• makes adjustments specific to the lease, e.g. term, country, currency and security.

If a readily observable amortising loan rate is available to the individual lessee (through recent
financing or market data) which has a similar payment profile to the lease, then the group entities
use that rate as a starting point to determine the incremental borrowing rate.

Lease payments are allocated between principal and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date less any lease incentives
received;

• any initial direct costs; and

• restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying asset’s useful life.
240 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

2 Summary of accounting policies (continued)

2.2 Summary of other accounting policies (continued)

(m) Leases (continued)
Payments associated with short-term leases of cloud servers are recognized on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months
or less without a purchase option.

Lease income from operating leases where the Group is a lessor is recognized in income on a
straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease
are added to the carrying amount of the underlying asset and recognized as expense over the
lease term on the same basis as lease income. The respective leased assets are included in the
balance sheet based on their nature.

(n) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction from the proceeds.

(o) Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s
financial statements in the period in which the dividends are approved by the Company’s
shareholders or directors, where appropriate.

(p) Dividend income

Dividends are received from financial assets measured at fair value through profit or loss and
at fair value through other comprehensive income. Dividends are recognized as other income in
profit or loss when the right to receive payment is established. This applies even if they are paid
out of pre-acquisition profits, unless the dividend clearly represents a recovery of part of the cost
of an investment. In this case, the dividend is recognized in other comprehensive income if it
relates to an investment measured at fair value through other comprehensive income. However,
the investment may need to be tested for impairment as a consequence.
 2023 ANNUAL REPORT 241

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk,
interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program
focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the
Group’s financial performance. Risk management is carried out by the senior management of the Group.

(a) Market risk

(i) Foreign exchange risk
The transactions of the Company are denominated and settled in its functional currency,
US$. The Group’s subsidiaries operate in mainland China and overseas, and they are exposed
to foreign exchange risk arising from various currency exposures, primarily with respect to
US$ and RMB. Therefore, foreign exchange risk primarily arose from recognized assets and
liabilities in the Group’s subsidiaries in mainland China when receiving or to receive foreign
currencies from, or paying or to pay foreign currencies to overseas business partners, and
recognized assets and liabilities in the Group’s overseas subsidiaries when receiving or to
receive foreign currencies from, or paying or to pay foreign currencies to business partners in
mainland China.

For the Group’s subsidiaries whose functional currency is RMB, if RMB had strengthened/
weakened by 5% against US$ with all other variables held constant, the profit before income
tax for the year ended December 31, 2023 would have been approximately RMB148,572,000
(2022: RMB74,470,000) higher/lower, as a result of net foreign exchange gains on translation
of net monetary liabilities denominated in US$.

For the Company and the Group’s subsidiaries whose functional currency is US$, if RMB had
strengthened/weakened by 5% against US$ with all other variables held constant, the profit
before income tax for the year ended December 31, 2023 would have been approximately
RMB63,629,000 higher/lower (2022: RMB83,657,000 higher/lower), as a result of net foreign
exchange gains (2022: net foreign exchange gains) on translation of net monetary assets
(2022: net monetary assets) denominated in RMB.
242 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(a) Market risk (continued)
(ii) Interest rate risk
The Group’s interest rate risk primarily arose from borrowings with floating and fixed
rates (details of which has been disclosed in Note 34), long-term investments measured at
amortized cost, long-term bank deposits, short-term investments measured at fair value
through other comprehensive income, short-term investments measured at amortized cost,
loan receivables, short-term bank deposits and cash and cash equivalents. Those carried at
floating rates expose the Group to cash flow interest rate risk whereas those carried at fixed
rates expose the Group to fair value interest rate risk.

If the interest rate of cash and cash equivalents had been 50 basis points higher/lower,
the profit before income tax for the year ended December 31, 2023 would have been
RMB168,157,000 (2022: RMB138,036,000) higher/lower.

If the interest rate of borrowings with floating rate had been 50 basis points higher/lower, the
profit before income tax for the year ended December 31, 2023 would have been approximately
RMB23,652,000 (2022: RMB13,178,000) lower/higher. This analysis does not include the effect
of interest capitalized.

The fair value interest rate risk arises from financial assets and liabilities carried at fixed
rates is not significant for the Group.

The Group regularly monitors its interest rate risk to ensure there is no undue exposure to
significant interest rate movements.

(iii) Price risk

The Group is exposed to price risk primarily in respect of its investments in equity instruments
that classified in the balance sheet as of fair value through profit or loss. The Group is not
exposed to commodity price risk. To manage its price risk arising from the investments, the
Group diversifies its portfolio. Each investment is managed by senior management on a case
by case basis. The sensitivity analysis is performed by management, see Note 3.3 for detail.
 2023 ANNUAL REPORT 243

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk
The Group is exposed to credit risk in relation to its long-term investments measured at amortized
cost, long-term bank deposits, loan receivables, trade and notes receivables, other receivables,
short-term investments measured at amortized cost, short-term investments measured at fair
value through other comprehensive income, short-term investments measured at fair value through
profit or loss, bills receivables measured at fair value through other comprehensive income,
short-term bank deposits, restricted cash, cash and cash equivalents, and financial guarantee
contracts. The carrying amounts of each class of the above financial assets represent the Group’s
maximum exposure to credit risk in relation to financial assets.

To manage risk arising from cash and cash equivalents, long-term bank deposits, short-term bank
deposits, restricted cash, short-term investments measured at fair value through profit or loss
and bills receivables measured at fair value through other comprehensive income, the Group only
transacts with state-owned or reputable financial institutions in mainland China and reputable
international financial institutions outside of mainland China. There has been no recent history of
default in relation to those financial institutions.

For short-term investments measured at fair value through other comprehensive income, long-term
investments measured at amortized cost and short-term investments measured at amortized cost,
mainly including debt securities whose contractual cash flows are solely principal and interest,
management makes periodic collective assessments as well as individual assessment on the
recoverability based on historical settlement records and past experiences. In view of the sound
rating of bond issuers, management believes that the credit risk inherent in those investments due
from them is not significant.

To manage risk arising from trade and notes receivables, the Group has policies in place to ensure
that credit terms are made to counterparties with an appropriate credit history and the management
performs ongoing credit evaluations of its counterparties. The credit period granted to the
customers is usually no more than 180 days and the credit quality of these customers is assessed,
which takes into account their financial position, past experience and other factors.

For other receivables, management makes periodic collective assessments as well as individual
assessment on the recoverability of other receivables based on historical settlement records and
past experiences. In view of the history of cooperation with debtors and the sound collection history
of receivables due from them, management believes that the credit risk inherent in the Group’s
outstanding other receivable balances due from them is not significant.
244 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)
For the financial guarantee contracts, the Group has taken measures to manage credit risk,
including credit examination, fraud examination and risk monitoring alert. The maximum credit
risk exposure from financial guarantee contracts is RMB28,391,000 as of December 31, 2023
(2022: RMB435,846,000), the majority of which are not credit-impaired on initial recognition and no
significant increase in credit risk subsequently. The Group has recognized loss allowance for such
losses at each of the reporting date.

To manage risk arising from loan receivables, the Group performs standardized credit management
procedures:

• For pre-approval investigation, the Group uses its platform and systems using big data
technology to optimize the review process, including credit analysis, assessment of
collectability of borrowers, possibility of misconduct and fraudulent activities.

• In terms of credit examining management, the Group has established specific policies and
procedures to assess loans offering.

• For subsequent monitoring, the Group has implemented credit examination on each borrower
every three months. For unqualified borrowers, credit facilities granted previously could be
terminated immediately. Once the loan was issued, all borrowers would be assessed by fraud
examination model to prevent fraudulent behaviors.

• In post-loan supervision, the Group has established risk monitoring alert system through
periodical monitoring, system alert, and corresponding solutions to identify impaired loans.

The estimation of credit exposure for risk management purposes is complex and requires the use
of models, as the exposure varies with changes in market conditions, expected cash flows and the
passage of time. The assessment of credit risk of a portfolio of assets entails further estimations
as to the likelihood of defaults occurring, of the associated loss ratios and of default correlations
between counterparties. The Group measures credit risk using Probability of Default (“PD”),
Exposure at Default (“EAD”) and Loss Given Default (“LGD”).
 2023 ANNUAL REPORT 245

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)
(b1) Expected credit loss model for loan receivables, as summarized below:
• The loan receivables that are not credit-impaired on initial recognition are classified in
‘Stage 1’ and have their credit risk continuously monitored by the Group. The expected
credit loss is measured on a 12-month basis.

• If a significant increase in credit risk (as defined below) since initial recognition is identified,
the financial instrument is moved to ‘Stage 2’ but is not yet deemed to be credit-impaired.
The expected credit loss is measured on lifetime basis.

• If the financial instrument is credit-impaired (as defined below), the financial instrument is
then moved to ‘Stage 3’. The expected credit loss is measured on lifetime basis.

• In Stages 1 and 2, interest income is calculated on the gross carrying amount (without
deducting the loss allowance). If a financial asset subsequently becomes credit-impaired
(Stage 3), the Group is required to calculate the interest income by applying the effective
interest method in subsequent reporting periods to the amortized cost of the financial asset
(the gross carrying amount net of loss allowance) rather than the gross carrying amount.

The impairment of loan receivables was provided based on the ‘three-stages’ model by
referring to the changes in credit quality since initial recognition.

The key judgments and assumptions adopted by the Group in addressing the requirements of
the standard are discussed below:

(1) Significant increase in credit risk (SICR)

The Group considers loan receivables to have experienced a significant increase in
credit risk when backstop criteria has been met. A backstop is applied and the loan
receivables considered to have experienced a significant increase in credit risk if the
borrower is more than 1 day past due on its contractual payments.

(2) Definition of default and credit-impaired assets

The Group defines a financial instrument as in default, when the borrower is more
than 90 days past due on its contractual payments. This has been applied to all loan
receivables held by the Group.
246 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)
(b1) Expected credit loss model for loan receivables, as summarized below (continued):
(3) Measuring ECL — Explanation of inputs, assumptions and estimation techniques
The expected credit loss is measured on either a 12-month or lifetime basis depending
on whether a significant increase in credit risk has occurred since initial recognition or
whether an asset is considered to be credit-impaired. Expected credit losses are the
discounted product of the PD, EAD and LGD.

The ECL is determined by projecting the PD, LGD and EAD for each future month and
for each portfolio. These three components are multiplied together and adjusted for the
likelihood of survival (i.e. the exposure has not prepaid or defaulted in an earlier month).
This effectively calculates an ECL for each future month, which is then discounted back
to the reporting date and summarized. The discount rate used in the ECL calculation is
the original effective interest rate or an approximation thereof.

(4) Forward-looking information incorporated in the ECL models

The calculation of ECL incorporate forward-looking information. The Group has
performed historical analysis and identified the business climate index as the key
economic variables impacting credit risk and expected credit losses.

As with any economic forecasts, the projections and likelihoods of occurrence are
subject to a high degree of inherent uncertainty and therefore the actual outcomes
may be significantly different to those projected. The Group considers these forecasts
to represent its best estimate of the possible outcomes and has analyzed the non-
linearities and asymmetries within the Group’s different portfolios to establish that the
chosen scenarios are appropriately representative of the range of possible scenarios.
 2023 ANNUAL REPORT 247

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)
(b1) Expected credit loss model for loan receivables, as summarized below (continued):
(5) Grouping of instruments for losses measured on a collective basis
For expected credit loss provisions modeled on a collective basis, a grouping of
exposures is performed on the basis of shared risk characteristics, such that risk
exposures within a group are homogeneous.

(b2) Credit loss allowance

The credit loss allowance recognized in the year is impacted by a variety of factors, as
described below:

• Transfers between Stage 1 and Stages 2 or 3 due to loan receivables experiencing

significant increases (or decreases) of credit risk in the year, and the subsequent “step
up” (or “step down”) between 12-month and lifetime ECL;

• Additional allowances for new financial instruments recognized, as well as releases for
loan receivables derecognized in the year;

• Loan receivables derecognized and write-offs of allowances related to assets that were
written off during the year.
248 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)
(b2) Credit loss allowance (continued)
The following tables explains the gross carrying amount and credit loss allowance of loan
receivables:

Stage 1 Stage 2 Stage 3 Total

RMB’000 RMB’000 RMB’000 RMB’000

As of December 31, 2023

Gross carrying amount 9,832,099 6,237 806,808 10,645,144
Loss allowance (62,755) (4,075) (805,725) (872,555)

9,769,344 2,162 1,083 9,772,589

As of December 31, 2022

Gross carrying amount 7,863,286 21,544 740,850 8,625,680
Loss allowance (42,429) (16,950) (736,738) (796,117)

7,820,857 4,594 4,112 7,829,563

Note:

During the year ended 31 December 2023, majority of new loans receivables were originated from the factoring loan

business; and the transfer between stages were immaterial during the year.
 2023 ANNUAL REPORT 249

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk (continued)
(b2) Credit loss allowance (continued)
The following tables explain the changes in the credit loss allowance for loan receivables
between the beginning and the end of the year due to these factors:

Stage 1 Stage 2 Stage 3 Total

RMB’000 RMB’000 RMB’000 RMB’000

Loss allowance as of
January 1, 2023 42,429 16,950 736,738 796,117

Transfer between stages (902) (21,006) 21,908 —

Provision of expected credit losses 21,051 8,119 110,918 140,088
Write-offs — — (63,904) (63,904)
Currency translation differences 177 12 65 254

Loss allowance as of
December 31, 2023 62,755 4,075 805,725 872,555

Loss allowance as of
January 1, 2022 124,182 89,550 778,692 992,424

Transfer between stages (4,268) (40,890) 45,158 —

Provision of expected credit losses (73,235) (31,425) 68,526 (36,134)
Write-offs — — (154,071) (154,071)
Currency translation differences (4,250) (285) (1,567) (6,102)

Loss allowance as of
December 31, 2022 42,429 16,950 736,738 796,117

(b3) Write-off policy

The Group writes off loan receivables, in whole or in part, when it has exhausted all practical
recovery efforts and has concluded there is no reasonable expectation of recovery. Indicators
that there is no reasonable expectation of recovery include ceasing enforcement activity.

The Group may write off loan receivables that are still subject to enforcement activity. The
Group still seeks to recover amounts it is legally owed in full, but which have been written off
due to no reasonable expectation of full recovery.

(b4) Modification
The Group rarely modifies the terms of loans provided to customers due to commercial
renegotiations, or for distressed loans, with a view to maximizing recovery. The Group
considers the impact from such modification is not significant.
250 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk
The Group aims to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the
underlying business, the policy of the Group is to regularly monitor the Group’s liquidity risk and to
maintain adequate cash and cash equivalents or adjust financing arrangements to meet the Group’s
liquidity requirements. There are loan covenants terms for certain borrowings. As of December 31,
2023, there is no non-compliance with such loan covenants (2022: Nil).

The table below analyzes the Group’s non-derivative financial liabilities and off-balance sheet
guarantee liabilities into relevant maturity grouping based on the remaining year at each balance
sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.

Between 1 Between 2
Less than 1 year and 2 years and 5 Over 5
year years years years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Group
At December 31, 2023
Borrowings 11,783,279 3,316,353 2,454,025 15,826,470 33,380,127
Trade payables 62,098,500 — — — 62,098,500
Other payables 17,362,253 — — — 17,362,253
Lease liabilities 804,641 425,136 708,479 268,386 2,206,642
Liabilities to fund investors — — 11,574,737 2,228,308 13,803,045
Off-balance sheet guarantee
liabilities 5,772 — — — 5,772

At December 31, 2022

Borrowings 2,707,100 537,088 10,341,827 16,107,081 29,693,096
Trade payables 53,093,543 — — — 53,093,543
Other payables 12,901,886 — — — 12,901,886
Lease liabilities 1,072,383 508,876 608,323 414,582 2,604,164
Liabilities to fund investors — — 14,053,228 806,000 14,859,228
Off-balance sheet guarantee
liabilities 322,786 — — — 322,786
 2023 ANNUAL REPORT 251

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.2 Capital management
The Group’s objectives when managing capital are 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 enhance shareholders’ value in the long-term.

The Group monitors capital (including share capital and share premium) by regularly reviewing the capital
structure. As a part of this review, the Group considers the cost of capital and the risks associated with
the issued share capital. The Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or repurchase the Company’s shares. In the opinion of the
directors of the Company, the Group has strong cash positions, continuously generating operating profits
with a low level of indebtedness.

3.3 Fair value estimation

The table below analyzes the Group’s main financial instruments carried at fair value as of each balance
sheet date, by level of the inputs to valuation techniques used to measure fair value.

The following table presents the Group’s financial assets and liabilities that are measured at fair value at
December 31, 2023:

Level 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000

Assets
Long-term investments measured at
fair value through profit or loss
(Note 20) 5,992,430 — 54,207,368 60,199,798
Short-term investments measured at
fair value through profit or loss
(Note 20) — — 20,193,662 20,193,662
Short-term investments measured at
fair value through other
comprehensive income (Note 20) 582,131 — — 582,131
Bills receivables measured at fair value
through other comprehensive income — — 125,661 125,661

6,574,561 — 74,526,691 81,101,252

Liabilities
Liabilities to fund investors (Note 30(a)) — — 2,228,308 2,228,308
252 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.3 Fair value estimation (continued)

The following table presents the Group’s financial assets and liabilities that are measured at fair value at
December 31, 2022:

Level 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000

Assets
Long-term investments measured at
fair value through profit or loss
(Note 20) 4,547,386 — 51,432,588 55,979,974
Short-term investments measured at
fair value through profit or loss
(Note 20) — — 9,845,910 9,845,910
Short-term investments measured at
fair value through other
comprehensive income (Note 20) 449,109 — — 449,109
Bills receivables measured at fair value
through other comprehensive income — — 40,003 40,003

4,996,495 — 61,318,501 66,314,996

Liabilities
Liabilities to fund investors (Note 30(a)) — — 806,000 806,000

(a) Financial instruments in level 1

The fair value of financial instruments traded in active markets is based on quoted market prices at
each of the reporting dates. A market is regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and
those prices represent actual and regularly occurring market transactions on an arm’s length basis.
The quoted market price used for financial assets held by the Group is the current bid price. These
instruments are included in level 1. The amounts of net fair value gain for level 1 investments for
the year ended December 31, 2023 is RMB794,785,000 (2022: net fair value losses RMB773,674,000).
 2023 ANNUAL REPORT 253

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.3 Fair value estimation (continued)

(b) Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques
maximize the use of observable market data where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair value of an instrument are observable, the
instrument is included in level 2.

(c) Financial instruments in level 3

If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.

Specific valuation techniques used to value financial instruments include:

• Quoted market prices or dealer quotes for similar instruments;

• Discounted cash flow model and unobservable inputs mainly including assumptions of
expected future cash flows and discount rate; and

• A combination of observable and unobservable inputs, including risk-free rate, expected

volatility, discount rate for lack of marketability, market multiples, etc.

Level 3 instruments of the Group’s assets mainly include long-term investments measured at fair
value through profit or loss and short-term investments measured at fair value through profit or
loss.
254 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.3 Fair value estimation (continued)

(c) Financial instruments in level 3 (continued)
The following table presents the changes in level 3 instruments of long-term investments measured
at fair value through profit or loss for the years ended December 31, 2023 and 2022:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year 51,432,588 45,817,637

Additions 5,306,388 7,636,143
Disposals (2,458,853) (2,091,056)
Changes in fair value 2,427,596 (1,277,618)
Transfer to level 1 financial instruments (2,872,137) (547,574)
Currency translation differences 371,786 1,895,056

At the end of the year 54,207,368 51,432,588

Net unrealized gains/(losses) for the year 1,631,788 (1,181,027)

 2023 ANNUAL REPORT 255

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.3 Fair value estimation (continued)

(c) Financial instruments in level 3 (continued)
The following table presents the changes in level 3 instruments of short-term investments
measured at fair value through profit or loss for the years ended December 31, 2023 and 2022:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year 9,845,910 29,311,848

Disposal of a subsidiary — (60,000)
Additions 53,357,701 72,822,699
Disposals (43,272,307) (93,045,954)
Changes in fair value 292,701 389,282
Currency translation differences (30,343) 428,035

At the end of the year 20,193,662 9,845,910

Net unrealized gains for the year 71,186 51,031

The Group has a team that manages the valuation of level 3 instruments for financial reporting
purposes. The team manages the valuation exercise of the investments on a case by case basis. At
least once every year, the team would use valuation techniques to determine the fair value of the
Group’s level 3 instruments. External valuation experts will be involved when necessary.

The valuation of the level 3 instruments mainly included long-term investments measured at fair
value through profit or loss in unlisted companies and certain listed companies for which sale
is restricted for a specified period (Note 20), and short-term investments measured at fair value
through profit or loss (Note 20). As these instruments are not traded in an active market, their fair
values have been determined by using various applicable valuation techniques, including discounted
cash flows or market approach, etc.
256 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.3 Fair value estimation (continued)

(c) Financial instruments in level 3 (continued)
The following table summarizes the quantitative information about the significant unobservable
inputs used in recurring level 3 fair value measurements.

Relationship of
Significant unobservable
unobservable inputs
Description Fair values inputs Range of inputs to fair values
As of December 31, As of December 31,
2023 2022 2023 2022
RMB’000 RMB’000

Long-term 43,743,711 42,302,277 Expected 15%–103% 26%–99% The higher

investments volatility the expected
measured at fair volatility, the
value through lower the fair
profit or loss value
(Note 20) Discount for 4%–30% 2%–30% The higher the
— Ordinary lack of DLOM, the lower
shares marketability the fair value
investments (“DLOM”)
and preferred Risk-free 1.9%–7% 0.2%–5%
shares rate
investments

Short-term 20,193,662 9,845,910 Expected rate 0.25%– 1.25%– The higher the
investments of return 3.25% 3.50% expected rate of
measured at fair return, the higher
value through the fair value
profit or loss
(Note 20)
 2023 ANNUAL REPORT 257

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

3 Financial risk management (continued)

3.3 Fair value estimation (continued)

If the fair values of the ordinary shares and preferred shares held by the Group, which was included
in long-term investments measured at fair value through profit or loss had been 5% higher/lower,
the profit before income tax for the year ended December 31, 2023 would have been approximately
RMB2,486,807,000 (2022: RMB2,342,483,000 ) higher/lower.

There were no material transfers between level 1, 2 and 3 of fair value hierarchy classifications during the
year ended December 31, 2023, except that certain financial assets were transferred out of level 3 of fair
value hierarchy to level 1 classifications due to the conversion to ordinary shares as the result of the initial
public offering or lifting of sale restriction of the investee companies.

The carrying amounts of the Group’s financial assets that are not measured at fair value, including cash
and cash equivalents, restricted cash, short-term bank deposits, long-term bank deposits, short-term
investments measured at amortized cost, long-term investments measured at amortized cost, trade
receivables, loan receivables and other receivables, and the Group’s financial liabilities that are not
measured at fair value, including borrowings, trade payables and other payables, approximate their fair
values due to short maturities or the interest rates are close to the market interest rates.
258 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

4 Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year
are addressed below.

(a) Fair value of financial assets

Fair value of financial assets, in the absence of an active market, is estimated by using appropriate
valuation techniques. Such valuations were based on certain assumptions about credit risk, volatility and
liquidity risks associated with the instruments, which are subject to uncertainty and might materially differ
from the actual results. Further details are included in Note 3.3.

(b) Impairment of loan receivables

The Group follows the guidance of IFRS 9 to determine when a loan receivable is impaired. This
determination requires significant judgment and estimation. In making this judgment and estimation,
the Group evaluates, among other factors, the duration of receivables and the financial health, collection
history of individual debtors and expected future change of credit risks, including the consideration of
factors such as general economy measures, changes in macroeconomic indicators etc. Further details
are included in Note 3.1 to the consolidated financial statements.

(c) Taxation
The Group is subject to income taxes in different jurisdictions. Significant judgment is required in
determining the worldwide provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be probable due. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will impact the
current and deferred income tax assets and liabilities in the period in which such determination is made.

For temporary differences which give rise to deferred tax assets, the Group assesses the likelihood
that the deferred income tax assets could be recovered. Deferred tax assets are recognized based on
the Group’s estimates and assumptions that they will be recovered from taxable income arising from
continuing operations in the foreseeable future or the reversal of temporarily taxable difference.

The Group is also subject to other taxation in different jurisdictions. Significant judgment is required in
determining the worldwide provision of other taxation. There are many transactions and calculations for
which the ultimate tax determination is uncertain.
 2023 ANNUAL REPORT 259

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

4 Critical accounting estimates and judgments (continued)

(d) Inventory provision

Inventories are stated at the lower of cost and net realizable value. Management makes provision for
inventories based on historical experience and estimation of future market condition and sales. The actual
net realizable value maybe higher or lower than previously estimated. This requires significant judgment
and estimation.

(e) Recoverability of non-financial assets and investments accounted for using the equity
method
The Group tests annually whether goodwill has suffered any impairment. Other non-financial assets,
mainly including property, plant and equipment, intangible assets, investment properties, right-of-
use assets as well as investments accounted for using the equity method are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The recoverable amount of non-financial assets is the greater of its fair value less costs of disposal and
value in use. In determining fair values, various applicable valuation techniques (e.g. discounted cash
flows or market approach) are used, with significant unobservable inputs including expected volatility,
discount for lack of marketability and risk free rates, etc. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset, which requires significant
judgment relating to level of revenue, operating costs and discount rates.

Judgment is required select key assumptions applied in the adopted valuation models, including
discounted cash flows and market approach. Changing the assumptions selected by management in
assessing impairment could materially affect the result of the impairment test and in turn affect the
Group’s financial condition and results of operations. If there is a significant adverse change in the key
assumptions applied, it may be necessary to take additional impairment charge to the consolidated
income statements.

(f) Warranty provision

Warranty provision is based on the estimated cost of product warranties when revenue is recognized.
Factors that affect the Group’s warranty liability include the number of products sold under warranty,
historical and anticipated rates of warranty claims on those products, and estimated cost per claim to
satisfy the warranty obligation. The estimation basis is reviewed on an on-going basis and revised where
appropriate.
260 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

4 Critical accounting estimates and judgments (continued)

(g) Revenue
Application of various accounting principles related to the measurement and recognition of revenue
requires the Group to make judgments and estimates. Specifically, significant judgments include
determining whether the Group is acting as the principal in a transaction. The Group is a principal in
a transaction if the Group obtains control of the products sold or services provided before they are
transferred to customers. If control is unclear, when the Group is primarily obligated in a transaction, is
subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not
all of these indicators, the Group records revenues on a gross basis. Otherwise, the Group records the net
amount earned as commissions from products sold or services provided.

5 Segment information

The Group’s business activities, for which discrete financial statements are available, are regularly reviewed and
evaluated by the CODM. The CODM, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Chief Executive Officer of the Company.

Currently, substantially all of the Group’s revenue were generated from sales of smartphone and the ecosystem
products or services, these revenue are regularly reviewed and evaluated by the CODM, thus the Group
determined that it has operating segments as follows:

• Smartphones

• IoT and lifestyle products

• Internet services

• Others

The CODM assesses the performance of the operating segments mainly based on segment revenue and gross
profit of each operating segment. The selling and marketing expenses, administrative expenses and research
and development expenses are not included in the measure of the segments’ performance that reviewed by
CODM as a basis for the purpose of resource allocation and assessment of segment performance. Fair value
changes on financial instruments measured at fair value through profit or loss, share of net profits/(losses) of
investments accounted for using the equity method, other income, other gains/(losses), net, finance income,
finance costs and income tax expenses are not allocated to individual operating segments as they were centrally
monitored by the Group.
 2023 ANNUAL REPORT 261

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

5 Segment information (continued)

The revenues from external customers reported to CODM are measured as segment revenue, which is the
revenue derived from the customers in each segment:

• Revenues from smartphones segment are derived from the sale of smartphones.

• Revenues from the IoT and lifestyle products segment primarily comprise revenues from sales of (i) the
Group’s other products, including smart TVs, laptops, AI speakers and smart routers, and (ii) the Group’s
ecosystem products, including certain IoT and other smart hardware products, as well as certain lifestyle
products.

• Revenues from internet services segment are derived from advertising services and internet value-added
services including online game and fintech business.

• Others segment primarily comprises revenue from the Group’s hardware repair services for products,
installation services for certain IoT products, sale of materials and others.

The Group’s cost of sales for smartphones segment and IoT and lifestyle products segment primarily consist of
(i) procurement cost of raw materials and components, (ii) assembly cost charged by the Group’s outsourcing
partners, (iii) royalty fees for certain technologies embedded in the products, (iv) costs, in the forms of
production costs and profit-sharing, paid to the Group’s partners for procuring ecosystem products, (v) warranty
expenses, and (vi) provision for impairment of inventories. The Group’s cost of sales for internet services
segment primarily consist of (i) bandwidth, server custody and cloud service related costs, and (ii) content fees
to game developers. Cost of sales for others segment primarily consists of hardware repair costs, installation
costs, costs from sale of materials and development costs of buildings.

Other information, together with the segment information, provided to the CODM, is measured in a manner
consistent with that applied in the consolidated financial statements. There were no separate segment assets
and segment liabilities information provided to the CODM, as CODM does not use this information to allocate
resources or to evaluate the performance of the operating segments.
262 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

5 Segment information (continued)

There were no material inter-segment sales during the years ended December 31, 2023 and 2022. The revenues
from external customers reported to the CODM are measured in a manner consistent with that applied in the
consolidated income statement.

The segment results for the years ended December 31, 2023 and 2022 are as follows:

Year ended December 31, 2023

IoT and
lifestyle Internet
Smartphones products services Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Segment revenues 157,461,309 80,107,740 30,107,494 3,293,598 270,970,141

Cost of sales (134,480,722) (67,029,144) (7,773,544) (4,210,492) (213,493,902)

Gross profit/(loss) 22,980,587 13,078,596 22,333,950 (916,894) 57,476,239

Year ended December 31, 2022

IoT and
lifestyle Internet
Smartphones products services Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Segment revenues 167,217,177 79,794,877 28,321,444 4,710,518 280,044,016

Cost of sales (152,248,415) (68,296,397) (7,974,356) (3,947,658) (232,466,826)

Gross profit 14,968,762 11,498,480 20,347,088 762,860 47,577,190

The reconciliation of gross profit to profit before income tax is the same as that shown in the consolidated
income statement, thus no reconciliation provided here.
 2023 ANNUAL REPORT 263

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

5 Segment information (continued)

For the years ended December 31, 2023 and 2022, the geographical information on the total revenues is as
follows:

Year ended December 31,

2023 2022
RMB’000 % RMB’000 %

Mainland China 149,189,720 55.1 142,258,417 50.8

Rest of the world (Note (a)) 121,780,421 44.9 137,785,599 49.2

270,970,141 280,044,016

Note:

(a) Revenues outside mainland China are mainly from Europe and India.

The major customers which contributed more than 10% of the total revenue of the Group for the years ended
December 31, 2023 and 2022 are listed as below:

Year ended December 31,

2023 2022
% %

Customer A 12.2 13.4

All the revenues derived from other single external customer were less than 10% of the Group’s total revenues
for the years ended December 31, 2023 and 2022.
264 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

6 Revenue

Year ended December 31,

2023 2022
RMB’000 RMB’000

Smartphones 157,461,309 167,217,177

IoT and lifestyle products 80,107,740 79,794,877
Internet services 30,107,494 28,321,444
Others 3,293,598 4,710,518

270,970,141 280,044,016

7 Other income

Year ended December 31,

2023 2022
RMB’000 RMB’000

Government grants 333,578 604,051

Dividend income 157,569 125,299
Value-added tax and other tax refunds 105,660 108,081
Additional deduction of input value-added tax 143,284 298,129

740,091 1,135,560
 2023 ANNUAL REPORT 265

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

8 Other gains/(losses), net

Year ended December 31,

2023 2022
RMB’000 RMB’000

Gains on disposal and deemed disposal of investments accounted for

using the equity method (Note 12(b)) 1,580,123 127,310
Foreign exchanges gains/(losses), net 124,405 (998,602)
Impairment on investments accounted for using the equity method
(Note 12(b)) (7,138) (450,948)
Others (680) (46,570)

1,696,710 (1,368,810)

9 Expenses by nature

Year ended December 31,

2023 2022
RMB’000 RMB’000

Cost of inventories sold and royalty fees 192,822,082 208,148,924

Provision for impairment of inventories (Note 24) 3,861,753 7,794,470
Employee benefit expenses (Note 10) 18,935,182 16,607,997
Depreciation of property, plant and equipment, right-of-use assets and
investment properties (Note 15, 17, 18) 2,401,979 2,310,951
Amortization of intangible assets (Note 16) 2,434,308 1,396,442
Promotion and advertising expenses 6,996,492 7,233,932
Content fees to game developers and video providers 3,245,179 3,137,676
Credit loss allowance 321,528 217,971
Consultancy and professional service fees 1,491,329 1,495,318
Cloud service, bandwidth and server custody fees 2,208,314 2,259,250
Warranty expenses 4,801,995 5,419,526
Auditor’s remuneration 65,283 83,618
— Audit services 52,744 54,618
— Non-audit services 12,539 29,000
266 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

9 Expenses by nature (continued)

During the year ended December 31, 2023, the Group incurred research and development expenses of
approximately RMB19,097,699,000 (2022: RMB16,028,132,000), which mainly comprised employee benefits
expenses of RMB11,845,739,000 (2022: RMB9,639,067,000). No significant development expenses had been
capitalized during the year (2022: Nil).

10 Employee benefit expenses

Year ended December 31,

2023 2022
RMB’000 RMB’000

Wages and salaries 11,981,862 10,548,009

Share-based compensation expenses (Note 29) 3,378,670 2,497,358
Contributions to pension plans 1,410,904 1,315,876
Other social security costs, housing benefits and other employee benefits 2,163,746 2,246,754

18,935,182 16,607,997

(i) Pensions — defined contribution plans

During the year ended December 31, 2023, no forfeited contributions were utilized by the Group to reduce
its contributions for the current year (2022: Nil).
 2023 ANNUAL REPORT 267

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

10 Employee benefit expenses (continued)

(ii) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group do not include any director of the
Company for the years ended December 31, 2023 and 2022. All of these individuals have not received any
emolument from the Group as an inducement to join the Group or compensation for loss of office during
the years ended December 31, 2023 and 2022. The emoluments payable to the five highest paid individuals
during the years ended December 31, 2023 and 2022 are as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Wages and salaries 10,654 17,268

Share-based compensation expenses 402,227 326,448
Contributions to pension plans 312 192
Discretionary bonuses 3,300 363
Other social security costs, housing benefits and
other employee benefits 444 275

416,937 344,546

The emoluments fell within the following bands:

Number of individuals
Year ended December 31,
2023 2022

Hong Kong dollar (“HK$”)25,500,001 to HK$26,000,000 1 —

HK$31,000,001 to HK$31,500,000 — 1
HK$40,000,001 to HK$40,500,000 1 —
HK$46,000,001 to HK$46,500,000 1 —
HK$46,500,001 to HK$47,000,000 — 1
HK$52,500,001 to HK$53,000,000 1 1
HK$72,500,001 to HK$73,000,000 — 1
HK$197,500,001 to HK$198,000,000 — 1
HK$298,000,001 to HK$298,500,000 1 —
268 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

10 Employee benefit expenses (continued)

(iii) Benefits and interests of directors

The remuneration of every director is set out below:

During the year ended December 31, 2023:

Employer’s
Allowances contribution
Discretionary and benefits to a retirement
Name of Director Fees Salary bonuses in kind benefit scheme Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive Directors
LEI, Jun — — — — — —
LIN, Bin — — — — — —
LIU, De — — — — — —

Non-executive Directors
LIU, Qin — — — — — —

Independent non-executive
Directors
CHEN, Dongsheng 540 — — — — 540
WONG, Shun Tak (a) 991 — — — — 991
TONG Wai Cheung
Timothy (b)(c) 991 — — — — 991
 2023 ANNUAL REPORT 269

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

10 Employee benefit expenses (continued)

(iii) Benefits and interests of directors (continued)

During the year ended December 31, 2022:

Employer’s
Allowances contribution
Discretionary and benefits to a retirement
Name of Director Fees Salary bonuses in kind benefit scheme Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive Directors
LEI, Jun — — — — — —
LIN, Bin — — — — — —
LIU, De — — — — — —

Non-executive Directors
LIU, Qin — — — — — —

Independent non-executive
Directors
CHEN, Dongsheng 516 — — — — 516
WONG, Shun Tak (a) 946 — — — — 946
TONG Wai Cheung
Timothy (b)(c) 946 — — — — 946

Notes:

(a) HK$500,000 was paid to Mr. Wong Shun Tak during the years ended December 31, 2023 and 2022 in connection with his service as

director or other service in respect of management of the affairs of the Company’s subsidiary undertakings.

(b) HK$500,000 was paid to Prof. Tong Wai Cheung Timothy during the years ended December 31, 2023 and 2022 in connection with his

service as director or other service in respect of management of the affairs of the Company’s subsidiary undertakings.

(c) Prof. Tong Wai Cheung Timothy has resigned as independent non-executive director of the Company with effect from

January 8, 2024. Meanwhile, Ms. Cai Jinqing was appointed as an independent non-executive director of the Company with effect

from January 8, 2024.

270 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

10 Employee benefit expenses (continued)

(iv) Directors’ termination benefits

No director’s termination benefit subsisted as of December 31, 2023 and 2022 or at any time during all the
years presented.

(v) Consideration provided to third parties for making available directors’ services
No consideration provided to third parties for making available directors’ services subsisted as of
December 31, 2023 and 2022 or at any time during all the years presented.

(vi) Information about loans, quasi-loans and other dealings in favor of directors, controlled
bodies corporate by and connected entities with such directors
No loans, quasi-loans and other dealings in favor of directors, controlled bodies corporate by and
connected entities with such directors subsisted as of December 31, 2023 and 2022 or at any time during
all the years presented.

(vii) Directors’ material interests in transactions, arrangements or contracts

No significant transactions, arrangements and contracts in relation to the Group’s business to which the
Company was a party and in which a director of the Company had a material interest, whether directly or
indirectly, subsisted as of December 31, 2023 and 2022 or at any time during all the years presented.
 2023 ANNUAL REPORT 271

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

11 Finance income and costs

Year ended December 31,

2023 2022
RMB’000 RMB’000

Finance income:
Interest income from bank deposits 3,558,347 1,663,941

Interest income mainly represents interest income from bank deposits, including bank balances and term
deposits.

Year ended December 31,

2023 2022
RMB’000 RMB’000

Finance costs:
Change in amortized cost of liabilities to fund investors (Note 30) 405,724 (583,862)
Interest expense from borrowings (Note 34),
lease liabilities (Note 17) and payable for purchase of
intangible assets (Note 30, 32) 1,154,965 1,132,892
Less: amount capitalized (4,719) (2,547)

1,555,970 546,483

Finance costs have been capitalized on qualifying assets at average interest rates of 4.19% per annum for the
year ended December 31, 2023 (2022: 4.15%).
272 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(a) Major subsidiaries and controlled structured entities

As of December 31, 2023 and 2022, the Company had the following major subsidiaries (including controlled
structured entities):

Place of Effective interest held

incorporation/
establishment Date of Particulars As of the
As of December 31,
and kind of incorporation/ of issued/ date of this
Name legal entity establishment paid-in capital 2023 2022 report Principal activities

Subsidiaries
Directly held:
Xiaomi H.K. Hong Kong, April 7, HK$10,000 100% 100% 100% Wholesale and retail of
Limited limited liability 2010 smartphones and ecosystem
company partners’ products
Fast Pace Limited British Virgin January 8, US$2 100% 100% 100% Investment holding and
Islands, limited 2013 investment activities
liability company
Best Ventures British Virgin March 21, US$1 100% 100% 100% Investment holding and
Limited Islands, limited 2013 investment activities
liability company
Xiaomi Singapore Singapore, limited December 23, Singapore Dollar 100% 100% 100% Sales of smart hardware
Pte. Ltd. liability 2013 (“SGD”)1 and
company US$641,879,420
Xiaomi Best Time Hong Kong, December 20, US$500,000,000 100% 100% 100% Intra-group capital supervision,
International limited liability 2018 collection, remittance, credit
Limited company guarantee and interest rate
risk management
Subsidiaries
Indirectly held:
Xiaomi Mainland China, August 25, US$320,000,000 100% 100% 100% Sales of smartphones, sales of
Communications limited liability 2010 ecosystem partners’ products
Co., Ltd. company and provision of customer
services
Beijing Xiaomi Mainland China, January 9, US$27,000,000 100% 100% 100% Sales of smart hardware
Electronics limited liability 2012
Co., Ltd. company
 2023 ANNUAL REPORT 273

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(a) Major subsidiaries and controlled structured entities (continued)

As of December 31, 2023 and 2022, the Company had the following major subsidiaries (including controlled
structured entities) (continued):

Place of Effective interest held

incorporation/
establishment Date of Particulars As of the
As of December 31,
and kind of incorporation/ of issued/ date of this
Name legal entity establishment paid-in capital 2023 2022 report Principal activities

Subsidiaries
Indirectly held:
(continued)
Beijing Xiaomi Mobile Mainland China, May 8, RMB1,288,000,000 100% 100% 100% Software and hardware
Software Co., Ltd. limited liability 2012 development and provision of
(“Xiaomi Mobile”) company software related services
Zhuhai Xiaomi Mainland China, January 25, RMB2,000,000 100% 100% 100% Procurement and sales of
Communications limited liability 2013 smartphones, ecosystem
Co., Ltd. company partners’ products and spare
parts, procurement of raw
materials
Guangzhou Xiaomi Mainland China, September 22, RMB951,000,000 100% 100% 100% Sales of smart hardware
Communications limited liability 2016
Co., Ltd. company
Xiaomi Technology India, limited October 7, Indian Rupees 100% 100% 100% Sales of smartphones and
India Private liability company 2014 (“INR”) 207,450 ecosystem partners’ products
Limited
(“Xiaomi India”)
Guangzhou Xiaomi Mainland China, December 29, RMB1,000,000 100% 100% 100% Provision of advertising and
Information Service limited liability 2016 promotion services
Co., Ltd. company
Xiaomi Home Mainland China, June 27, RMB100,000,000 100% 100% 100% Operation of retail stores
Commercial limited liability 2017
Co., Ltd. company
Red Better Limited British Virgin October 8, — 100% 100% 100% Investment activities
Islands, limited 2013
liability company
Green Better Limited British Virgin December 9, US$1 100% 100% 100% Investment activities
Islands, limited 2013
liability company
274 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(a) Major subsidiaries and controlled structured entities (continued)

As of December 31, 2023 and 2022, the Company had the following major subsidiaries (including controlled
structured entities) (continued):

Place of Effective interest held

incorporation/
establishment Date of Particulars As of the
As of December 31,
and kind of incorporation/ of issued/ date of this
Name legal entity establishment paid-in capital 2023 2022 report Principal activities

Subsidiaries
Indirectly held:
(continued)
People Better Limited British Virgin April 22, US$1,000,001 100% 100% 100% Investment activities
Islands, limited 2014
liability company
Xiaomi Home Mainland China, January 20, RMB80,000,000 100% 100% 100% Operation of retail stores
Technology limited liability 2017
Co., Ltd. company
PT. Xiaomi Indonesia, limited April 23, Indonesian Rupiah 100% 100% 100% Sales and production of
Technology liability company 2018 (“IDR”) smartphones, sales of
Indonesia 13,000,000,000 television
Shenzhen Xiaomi Mainland China, September 29, RMB591,000,000 100% 100% 100% Sales of smart hardware and
Information limited liability 2019 provision of advertising and
Technology company promotion services
Co., Ltd.
Xiaomi Technology Netherlands, October 29, EUR1,000,000 100% 100% 100% Sales of smart hardware
Netherlands B.V. limited liability 2018
company
Shenzhen Xiaomi Mainland China, March 9, RMB50,000,000 100% 100% 100% Sales of smart hardware
Communication limited liability 2020
Technology company
Co., Ltd.
Shanghai X-Ring Mainland China, December 7, RMB1,919,999,882 100% 100% 100% Technical services, integrated
Technology limited liability 2021 circuit chip design and service
Co., Ltd. company
 2023 ANNUAL REPORT 275

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(a) Major subsidiaries and controlled structured entities (continued)

As of December 31, 2023 and 2022, the Company had the following major subsidiaries (including controlled
structured entities) (continued):

Place of Effective interest held

incorporation/
establishment Date of Particulars As of the
As of December 31,
and kind of incorporation/ of issued/ date of this
Name legal entity establishment paid-in capital 2023 2022 report Principal activities

Subsidiaries
Indirectly held:
(continued)
Tianxing Digital Mainland China, December 26, RMB2,313,630,000 100% 100% 100% Electronic payment technology
Technology Co., Ltd. limited liability 2013 services
(“Tianxing Digital”) company
Xiaomi Technology Thailand, limited July 4, Thai Baht (“THB”) 99.99% 99.99% 99.99% Sales of smart hardware
(Thailand) LIMITED liability company 2018 200,000,000
Airstar (Tianjin) Mainland China, November 19, RMB400,000,000 100% — 100% Commercial factoring business
Commercial limited liability 2023
Factoring Co., Ltd. company
Xiaomi Smart Mainland China, November 19, RMB500,000 100% — 100% Sales of smart hardware
Appliances (Wuhan) limited liability 2023
Co., Ltd. company

Controlled structured
entities (Note (a)):
Xiaomi Inc. Mainland China, March 3, 2010 RMB1,850,000,000 100% 100% 100% E-commerce business
limited liability
company
Tianjin Jinxing Mainland China, December 26, RMB2,476,557,552 100% 100% 100% Investment activities
Venture Investment limited liability 2013
Co., Ltd. company
Beijing Duokan Mainland China, February 10, RMB10,000,000 100% 100% 100% Sales of e-book
Technology Co., limited liability 2010
Ltd. company
Beijing Wali Internet Mainland China, June 1, 2009 RMB2,100,000 100% 100% 100% Provision of internet services
Technologies limited liability
Co., Ltd. company
276 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(a) Major subsidiaries and controlled structured entities (continued)

As of December 31, 2023 and 2022, the Company had the following major subsidiaries (including controlled
structured entities) (continued):

Place of Effective interest held

incorporation/
establishment Date of Particulars As of the
As of December 31,
and kind of incorporation/ of issued/ date of this
Name legal entity establishment paid-in capital 2023 2022 report Principal activities

Controlled structured
entities (Note (a)):
(continued)
Hubei Xiaomi Yangtze Mainland December 7, RMB8,728,747,873 24% 20% 24% Investment activities
River Industry China, limited 2017
Investment Fund partnership
Partners (Limited
Partnership)
Youpin Information Mainland China, April 4, RMB50,000,000 100% 100% 100% E-commerce business
Technology limited liability 2018
Co., Ltd. company
Beijing Xiaomi Zhizao Mainland September 18, RMB3,435,085,714 35% 46% 35% Investment activities
Equity Investment China, limited 2021
Fund Partners partnership
(Limited
Partnership)
Xiaomi EV Technology Mainland China, November 18, RMB665,735,674 100% 100% 100% Smart electric vehicle business,
Co., Ltd. limited liability 2021 technical services
company

Notes:

(a) The Company does not have directly or indirectly legal ownership in equity of these structured entities or their subsidiaries. Nevertheless,
under certain Contractual Arrangements entered into with the registered owners of these structured entities, the Company and its other
legally owned subsidiaries control these companies by way of controlling the voting rights, governing their financial and operating policies,
appointing or removing the majority of the members of their controlling authorities, and casting the majority of votes at meetings of
such authorities. Accordingly, the Group has rights to exercise power over these structured entities, receives variable returns from its
involvement in these structured entities, and has the ability to affect those returns through its power over these structured entities. As a
result, they are presented as structured entities of the Company.

(b) The Company considered that the non-wholly owned subsidiaries with non-controlling interests are not significant to the Group, therefore,
no summarized financial information of these non-wholly owned subsidiaries is presented separately.

(c) The English names of the subsidiaries are direct translation or transliteration of their Chinese registered names.
 2023 ANNUAL REPORT 277

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(b)Investments accounted for using the equity method

As of December 31,
2023 2022
RMB’000 RMB’000

Investments in associate accounted for using the equity method

—Listed entities (Note (a)) 1,421,275 2,918,299
—Unlisted entities 5,500,966 5,013,893

6,922,241 7,932,192

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year 7,932,192 10,230,751

Additions 72,407 24,530
Disposals and transfers (Note (b)) (1,128,679) (1,575,316)
Share of net profits/(losses) 45,615 (400,100)
Share of other comprehensive income 9,326 57,211
Share of changes of other reserves 38,532 122,326
Dividends from associates (40,014) (76,262)
Impairment provision (7,138) (450,948)

At the end of the year 6,922,241 7,932,192

Notes:

(a) As of December 31, 2023, the fair value of the investments in associates which were listed entities was RMB2,284,313,000
(December 31, 2022: RMB4,204,010,000).

(b) From February to November 2023, the Group disposed in total 2,376,744 shares of Beijing Roborock Technology Co., Ltd
(“Beijing Roborock”) and generated aggregate net gains of approximately RMB516,020,000. On December 5, 2023, the Group derecognized
the investment in Beijing Roborock after the Group lost significant influence, and recognized the remaining equity interest in Beijing
Roborock as a financial asset measured at fair value through profit or loss, with a deemed disposal gain of RMB957,661,000.
278 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

12(b)Investments accounted for using the equity method (continued)

Management has assessed the level of influence that the Group exercises on certain associates and determined
that it has significant influence through the board representation and other relevant facts and circumstances,
even though the respective shareholding of some investments is below 20%. Accordingly, these investments
have been classified as associates.

As of December 31, 2023, there were no individually material associates that are accounted for using the equity
method. Aggregated amount of the Group’s share of profits/(losses) of individually immaterial associates
accounted for using the equity method is as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Aggregate amounts of the Group’s share of:

Net profit/(loss) 32,178 (647,701)
Other comprehensive income 9,326 57,211

Total comprehensive income/(loss) 41,504 (590,490)

There are no contingent liabilities relating to the Group’s interests in the associates.

13 Income tax expenses

The income tax expenses of the Group during the years ended December 31, 2023 and 2022 are analyzed as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Current income tax 3,908,395 2,267,077

Deferred income tax (Note 35) 628,456 (835,689)

Income tax expenses 4,536,851 1,431,388

 2023 ANNUAL REPORT 279

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

13 Income tax expenses (continued)

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the
statutory tax rate of 25% in mainland China, being the tax rate applicable to the majority of consolidated entities
as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Profit before income tax 22,011,047 3,933,956

Tax calculated at statutory income tax rate of 25% 5,502,762 983,489
Tax effects of:
—Effect of different tax rates in other jurisdictions (Note (a),(b),(c)) 717,310 738,249
—Preferential income tax rates applicable to subsidiaries (Note (d)) (2,641,645) (344,188)
—Tax losses and temporary differences for which no deferred
income tax assets was recognized 2,030,571 679,419
—Expenses not deductible for income tax purposes 558,903 331,589
—Utilization of previously unrecognized deductible tax losses
and temporary differences (91,147) (9,617)
—Recognition of previously unrecognized tax losses and
temporary differences 354,861 28,656
—Super Deduction for research and development expenses (Note (e)) (1,301,676) (691,793)
—Income not subject to tax (771,008) (155,801)
—Reversal of deferred income tax assets — 90,082
—Others 177,920 (218,697)

Income tax expenses 4,536,851 1,431,388

Notes:

(a) Cayman Islands and British Virgin Islands income tax

The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the
Cayman Islands and accordingly, is exempted from Cayman Islands income tax. As such, the operating results reported by the Company,
including the share-based payments (Note 29), are not subject to any income tax.

The Group entities established under the International Business Companies Acts of British Virgin Islands (“BVI”) are exempt from BVI
income taxes.
280 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

13 Income tax expenses (continued)

Notes: (continued)

(b) Hong Kong income tax

Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% on the assessable profits for the years
presented, based on the existing legislation, interpretations and practices in respect thereof.

(c) India income tax

Entities incorporated in India are subject to corporate income tax at tax rates of 25% to 35% on the assessable profits for the years
presented, based on the existing legislation, interpretations and practices in respect thereof.

(d) Preferential EIT rate

Certain subsidiaries in mainland China are entitled to preferential tax rates ranging from 10% to 15%. Main subsidiaries with preferential
EIT rates are as follows:

Xiaomi Mobile was qualified as a “Key Software Enterprise” in the third quarter of 2018 and renewed this qualification annually, hence it
enjoyed a preferential income tax rate of 10% from 2017 to 2022. The directors of the Company consider Xiaomi Mobile can still be qualified
upon annual renewal in the first half of 2024 and hence continues to enjoy the preferential income tax rate of 10% for the year ended
December 31, 2023.

Tianxing Digital was qualified as a “High and New Technology Enterprise” in November 2018 and renewed this qualification in
December 2021, hence it enjoys a preferential income tax rate of 15% from 2018 to 2023.

(e) Super Deduction for research and development expense

According to the relevant laws and regulations promulgated by the State Council of the People’s Republic of China that was effective from
2008 onwards, enterprises engaging in research and development activities were entitled to claim 150% of their research and development
expenses so incurred as tax deductible expenses when determining their assessable profits for that year (“Super Deduction”). The
State Taxation Administration of The People’s Republic of China (“STA”) further announced in March 2021 that enterprises engaging in
research and development activities would entitle to claim 175% of their research and development expenses as Super Deduction until
December 2023. The STA announced in September 2022 to increase the Super Deduction rate to 200% of their research and development
expenses from October 1, 2022 to December 31, 2022. The STA further announced in March 2023 that enterprises engaging in research
and development activities would entitle to claim 200% of their research and development expenses as Super Deduction from January 1,
2023. The Group has made its best estimate for the Super Deduction to be claimed for the Group’s entities in ascertaining their assessable
profits during the period.
 2023 ANNUAL REPORT 281

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

13 Income tax expenses (continued)

Notes: (continued)

(f) Withholding tax in mainland China (“WHT”)

According to the New Corporate Income Tax Law (“New EIT Law”), distribution of profits earned by companies in mainland China since
January 1, 2008 to foreign investors is subject to withholding tax of 5% or 10%, depending on the country of incorporation of the foreign
investors, upon the distribution of profits to overseas-incorporated immediate holding companies.

The Group does not have any plan in the foreseeable future to require its subsidiaries in mainland China to distribute their retained
earnings and intends to retain them to operate and expand its business in mainland China. Accordingly, no deferred income tax liability
related to WHT on undistributed earnings of these subsidiaries was accrued as of the end of each reporting period.

14 Earnings per share

(a) Basic
Basic earnings per share for the years ended December 31, 2023 and 2022 are calculated by dividing the
profit attributable to the Company’s owners by the weighted average number of ordinary shares in issue
during the year.

Year ended December 31,

2023 2022

Net profit attributable to the owners of the Company (RMB’000) 17,475,173 2,474,030
Weighted average number of ordinary shares in issue
(thousand shares) 24,884,874 24,828,316

Basic earnings per share (expressed in RMB per share) 0.70 0.10
282 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

14 Earnings per share (continued)

(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary shares. As the inclusion of potential
ordinary shares from the convertible bonds would be anti-dilutive, it is not included in the calculation of
diluted earnings per share for the year ended December 31, 2023.

Year ended December 31,

2023 2022

Net profit attributable to the owners of the Company (RMB’000) 17,475,173 2,474,030

Weighted average number of ordinary shares in issue

(thousand shares) 24,884,874 24,828,316
Adjustments for RSUs and share options granted to employees
(thousand shares) 440,117 468,412

Weighted average number of ordinary shares for calculation of

diluted earnings per share (thousand shares) 25,324,991 25,296,728

Diluted earnings per share (expressed in RMB per share) 0.69 0.10
 2023 ANNUAL REPORT 283

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

15 Property, plant and equipment

Electronic Office Leasehold Construction

equipment equipment Buildings improvements in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2023
Cost 2,372,125 32,897 4,762,328 2,184,779 2,877,312 12,229,441
Accumulated depreciation (1,236,019) (22,412) (287,833) (1,544,956) — (3,091,220)

Net book amount 1,136,106 10,485 4,474,495 639,823 2,877,312 9,138,221

Year ended December 31, 2023

Opening net book amount 1,136,106 10,485 4,474,495 639,823 2,877,312 9,138,221
Additions 724,890 8,595 — 430,947 4,416,125 5,580,557
Transfer 169,085 — 2,897,381 — (3,066,466) —
Transfer from investment — — 273,354 — — 273,354
properties to buildings
Transfer from buildings to — — (1,777) — — (1,777)
investment properties
Disposals (35,606) (51) — (48,451) — (84,108)
Depreciation charge (Note 9) (527,218) (3,164) (149,436) (509,604) — (1,189,422)
Currency translation differences 950 319 — 2,731 — 4,000

Closing net book amount 1,468,207 16,184 7,494,017 515,446 4,226,971 13,720,825

At December 31, 2023

Cost 3,180,964 43,016 7,953,621 2,093,698 4,226,971 17,498,270
Accumulated depreciation (1,712,757) (26,832) (459,604) (1,578,252) — (3,777,445)

Net book amount 1,468,207 16,184 7,494,017 515,446 4,226,971 13,720,825

284 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

15 Property, plant and equipment (continued)

Electronic Office Leasehold Construction

equipment equipment Buildings improvements in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2022
Cost 1,775,713 25,717 3,690,248 1,885,773 1,707,106 9,084,557
Accumulated depreciation (876,772) (19,356) (173,072) (1,050,736) — (2,119,936)

Net book amount 898,941 6,361 3,517,176 835,037 1,707,106 6,964,621

Year ended December 31, 2022

Opening net book amount 898,941 6,361 3,517,176 835,037 1,707,106 6,964,621
Additions 628,619 9,358 — 348,766 2,237,311 3,224,054
Transfer from construction — — 991,793 — (1,067,179) (75,386)
in progress to investment
properties and buildings
Transfer from investment — — 74,566 — — 74,566
properties to buildings
Disposals (8,408) (2,039) — (52,962) — (63,409)
Depreciation charge (Note 9) (384,379) (3,358) (109,040) (493,280) — (990,057)
Currency translation
differences 1,333 163 — 2,262 74 3,832

Closing net book amount 1,136,106 10,485 4,474,495 639,823 2,877,312 9,138,221

At December 31, 2022

Cost 2,372,125 32,897 4,762,328 2,184,779 2,877,312 12,229,441
Accumulated depreciation (1,236,019) (22,412) (287,833) (1,544,956) — (3,091,220)

Net book amount 1,136,106 10,485 4,474,495 639,823 2,877,312 9,138,221

Construction in progress as of December 31, 2023 and 2022 mainly comprises new office buildings being
constructed in mainland China.
 2023 ANNUAL REPORT 285

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

15 Property, plant and equipment (continued)

Depreciation expenses have been charged to the consolidated income statement as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Cost of sales 147,454 123,900

Administrative expenses 202,531 147,520
Selling and marketing expenses 388,218 454,414
Research and development expenses 451,219 264,223

1,189,422 990,057
286 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

16 Intangible assets

Trademarks,
patents
Goodwill and domain
(Note (a)) License name Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2023
Cost 1,696,639 4,592,900 2,239,030 857,031 9,385,600
Accumulated amortization — (3,292,644) (1,023,784) (439,496) (4,755,924)

Net book amount 1,696,639 1,300,256 1,215,246 417,535 4,629,676

Year ended December 31, 2023

Opening net book amount 1,696,639 1,300,256 1,215,246 417,535 4,629,676
Additions — 6,004,245 3,882 426,621 6,434,748
Disposals — — (318) (4,390) (4,708)
Amortization charge (Note 9) — (1,988,681) (237,347) (208,280) (2,434,308)
Currency translation differences — 1 1,624 1,706 3,331

Closing net book amount 1,696,639 5,315,821 983,087 633,192 8,628,739

At December 31, 2023

Cost 1,696,639 11,159,486 2,246,985 1,263,547 16,366,657
Accumulated amortization — (5,843,665) (1,263,898) (630,355) (7,737,918)

Net book amount 1,696,639 5,315,821 983,087 633,192 8,628,739

 2023 ANNUAL REPORT 287

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

16 Intangible assets (continued)

Trademarks,
patents
Goodwill and domain
(Note (a)) License name Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2022
Cost 1,696,639 4,566,090 2,185,896 465,941 8,914,566
Accumulated amortization — (2,258,648) (775,872) (300,887) (3,335,407)

Net book amount 1,696,639 2,307,442 1,410,024 165,054 5,579,159

Year ended December 31, 2022

Opening net book amount 1,696,639 2,307,442 1,410,024 165,054 5,579,159
Additions — 33,390 31,227 378,198 442,815
Disposals — (6,607) — (3,190) (9,797)
Amortization charge (Note 9) — (1,035,493) (233,592) (127,357) (1,396,442)
Currency translation differences — 1,524 7,587 4,830 13,941

Closing net book amount 1,696,639 1,300,256 1,215,246 417,535 4,629,676

At December 31, 2022

Cost 1,696,639 4,592,900 2,239,030 857,031 9,385,600
Accumulated amortization — (3,292,644) (1,023,784) (439,496) (4,755,924)

Net book amount 1,696,639 1,300,256 1,215,246 417,535 4,629,676

Note:

(a) Impairment test for goodwill

For the purpose of impairment tests of goodwill, goodwill is allocated to groups of CGUs. Such groups of CGUs represent the lowest level

within the Group for which the goodwill is monitored for internal management purpose.

Impairment review on the goodwill of the Group has been conducted by the management as of December 31, 2023 and 2022 according to

IAS 36 “Impairment of assets”. For the purposes of impairment review, the recoverable amount of goodwill is determined based on VIU

calculations by using the discounted cash flow method.

288 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

16 Intangible assets (continued)

Note (continued):

(a) Impairment test for goodwill (continued)

(i) Impairment test for goodwill of Zimi

On July 5, 2021, the Group completed the acquisition of Zimi which mainly engages in the design, manufacture and sales of mobile

charges and related products, and recognized goodwill amounting to RMB1,382,143,000, which was allocated to Zimi as it was

monitored by management at Zimi level and goodwill impairment assessment was performed accordingly as of December 31, 2021.

Under an internal group reorganization as completed in 2022, the Group has integrated Zimi with a business unit of the Group

which has similar business with Zimi to maximize the synergy from the acquisition of Zimi. Accordingly, the goodwill arising from

the acquisition of Zimi was reallocated to the aforesaid business unit as identified at the lowest level which management monitors

the related goodwill for internal purposes.

The VIU was determined using discounted cash flows calculation which derived from the five-year financial projections plus a

terminal value related to cash flows beyond the projection period (five-year period) extrapolated using estimated perpetual growth

rate. For the impairment test as of December 31, 2023, the key assumptions used by management for VIU calculation include:

(1) the annual growth rate of revenue for a five-year period ranging from 2%–4% (2022: 9%–11%) for the business, the gross

profit range from 20%–21% (2022: 17%–19%), which was determined by the management based on past performance and

its expectation for market development;

(2) pre-tax discount rate of 22% (2022: 22%) was estimated by using the weighted average cost of capital (“WACC”) method.

The WACC was calculated by referring to public market data including risk free rate, market return, beta of comparable

public companies etc. and the specific risk of the business;

(3) the estimated perpetual growth rate used in the VIU calculation for period beyond the projected period was 2.2%

(2022: 2.0%), after making reference to long term inflation rate of the PRC.

As of December 31, 2023, the recoverable amount calculated based on VIU exceeded carrying value by RMB183,770,000

(2022: RMB202,736,000). Had annual growth rate of revenue for a five-year period been 5% lower or the pre-tax discount rate

been 1% higher, the headroom would be decreased to RMB69,283,000 or RMB63,342,000 (2022: RMB81,133,000 or RMB56,531,000)

respectively.

Reasonably possible changes in other key assumptions used in the impairment test of goodwill will not lead to the goodwill

impairment loss as of December 31, 2023.

 2023 ANNUAL REPORT 289

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

16 Intangible assets (continued)

Note (continued):

(a) Impairment test for goodwill (continued)

(ii) Impairment test for goodwill of others

The goodwill of others is mainly generated from the acquisitions of Duokan International Group Inc. amounting to RMB141,360,000

and Wali International amounting to RMB106,807,000 before 2015. Management forecasted the average annual revenue growth

rate in five-year period is 5%, and the cash flows beyond the five-year period were extrapolated using the estimated annual growth

rates of 2.2% (2022: 2.0%). Pre-tax discount rate of 20% was used to reflect market assessment of time value and the specific risks

relating to the CGUs.

The management performed impairment test for the goodwill and determined such goodwill was not impaired. Reasonably

possible changes in key assumptions will not lead to the goodwill impairment loss as of December 31, 2023 and 2022.

Amortization charges were expensed off in the following categories in the consolidated income statement:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Cost of sales 1,207,569 —

Administrative expenses 113,521 146,744
Selling and marketing expenses 7,600 6,511
Research and development expenses 1,105,618 1,243,187

2,434,308 1,396,442

The Group tests annually whether goodwill and other intangible assets with an indefinite useful life have
suffered any impairment. During the years ended December 31, 2023 and 2022, no goodwill or other identifiable
intangible assets have been impaired.
290 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

17 Leases
(i) The consolidated balance sheet includes the following amounts relating to leases:

As of December 31,
2023 2022
RMB’000 RMB’000

Right-of-use assets (Note (a))

Land use rights 8,142,639 8,118,481
Servers and other equipment 67,767 488,430
Properties 1,766,195 1,757,332
Other assets 2,293 741

9,978,894 10,364,984

Lease liabilities (Note (b))

Current (712,011) (947,392)
Non-current (1,256,155) (1,464,736)

(1,968,166) (2,412,128)

Notes:

(a) Included in the line item ‘Other non-current assets’ in the consolidated balance sheet. The addition of right-of-use assets for the
year ended December 31, 2023 was RMB927,317,000 (2022: RMB3,019,150,000).

(b) Current lease liabilities and non-current lease liabilities are included in the line item ‘Other payables and accruals’ and ‘Other non-
current liabilities’ in the consolidated balance sheet, respectively.

(ii) The consolidated income statement includes the following amounts relating to leases:

Year ended December 31,

2023 2022
RMB’000 RMB’000

Depreciation charge of right-of-use assets (Note (a)) 1,149,698 1,248,886

Interest expense (included in finance costs) 83,117 101,484
Expense relating to short-term leases not included in lease
liabilities (included in cost of sales and research and
development expenses) 403,839 463,732
Expense relating to variable lease payments
not included in lease liabilities (included in selling and
marketing expenses) 215,031 255,966

1,851,685 2,070,068
 2023 ANNUAL REPORT 291

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

17 Leases (continued)

Besides land use rights, the Group leases offices, warehouses, retail stores and servers.

The total cash outflow in financing activities for leases during the year ended December 31, 2023 was
RMB1,197,692,000 (2022: RMB1,281,785,000), including principal elements of lease payments of approximately
RMB1,114,575,000 (2022: RMB1,180,301,000) and related interest paid of approximately RMB83,117,000 (2022:
RMB101,484,000), respectively.

Note:

(a) The depreciation charge of land use rights, servers and other equipment, properties and other assets for the year ended December 31, 2023
were RMB217,725,000 (2022: RMB171,042,000), RMB420,663,000 (2022: RMB416,189,000), RMB511,128,000 (2022: RMB661,002,000) and
RMB182,000 (2022: RMB653,000), respectively.

18 Other non-current assets

As of December 31,
2023 2022
RMB’000 RMB’000

Right-of-use assets (Note 17) 9,978,894 10,364,984

Investment properties (Note (a)) 2,287,548 2,863,867
Long-term deposits to suppliers 1,000,402 1,256,373
Prepayments for property, plant and equipment 1,064,273 921,434
Others 573,143 533,803

14,904,260 15,940,461
292 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

18 Other non-current assets (continued)

Note:

(a) Investment properties

Buildings and Land use

facilities rights Total

RMB’000 RMB’000 RMB’000

COST

At January 1, 2023 1,656,378 1,493,759 3,150,137

Transfer from property, plant and equipment 1,777 — 1,777

Transfer from land use rights — 43,942 43,942

Transfer to property, plant and equipment (295,918) — (295,918)

Transfer to land use rights — (322,895) (322,895)

At December 31, 2023 1,362,237 1,214,806 2,577,043

ACCUMULATED DEPRECIATION

At January 1, 2023 (77,260) (209,010) (286,270)

Charge for the year (Note 9) (36,671) (26,188) (62,859)

Transfer to property, plant and equipment 22,564 — 22,564

Transfer to land use rights — 37,070 37,070

At December 31, 2023 (91,367) (198,128) (289,495)

NET BOOK VALUE

At December 31, 2023 1,270,870 1,016,678 2,287,548

 2023 ANNUAL REPORT 293

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

18 Other non-current assets (continued)

Note (continued):

(a) Investment properties (continued)

Buildings and Land use

facilities rights Total

RMB’000 RMB’000 RMB’000

COST

At January 1, 2022 1,616,858 1,493,759 3,110,617

Addition 44,420 — 44,420

Transfer from property, plant and equipment 75,386 — 75,386

Transfer to property, plant and equipment (80,286) — (80,286)

At December 31, 2022 1,656,378 1,493,759 3,150,137

ACCUMULATED DEPRECIATION

At January 1, 2022 (40,866) (179,116) (219,982)

Charge for the year (Note 9) (42,114) (29,894) (72,008)

Transfer to property, plant and equipment 5,720 — 5,720

At December 31, 2022 (77,260) (209,010) (286,270)

NET BOOK VALUE

At December 31, 2022 1,579,118 1,284,749 2,863,867

294 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

18 Other non-current assets (continued)

Note (continued):

(a) Investment properties (continued)

(i) Details of the Group’s main investment properties and information about the fair value hierarchy as of December 31, 2023 and 2022

are as follows:

As of December 31,

2023 2022

Carrying Fair value Carrying Fair value

amount (level 3) amount (level 3)

RMB’000 RMB’000 RMB’000 RMB’000

Main investment properties 2,272,703 2,604,900 2,784,676 3,477,280

The Group’s investment properties were valued at December 31, 2023 for investment property units located in Haidian and

Yizhuang, Beijing and Haizhu, Guangzhou by Asia-Pacific Consulting and Appraisal Limited, which is an independent qualified valuer.

The valuation was determined on the basis of capitalization of the net rental income with due provisions for reversionary income

potential of the respective properties as of December 31, 2023. The key inputs were term yield and reversionary yield which ranged from

3% to 6% (2022: from 3% to 6%).

(ii) Property rental income earned during the year ended December 31, 2023 was approximately RMB103,981,000

(2022: RMB104,505,000). The investment property units have committed tenants for the next 2 years to 10 years (2022: 3 years to

11 years). As of December 31, 2023, as a lessor, the Group had future minimum lease receipts under non-cancellable operating

leases as follows:

As of December 31,

2023 2022

RMB’000 RMB’000

No later than 1 year 96,550 122,731

Later than 1 year and no later than 10 years 203,370 358,363

299,920 481,094

(iii) Depreciation charges of approximately RMB62,859,000 for the year ended December 31, 2023 have been charged in profit or loss

(2022: RMB72,008,000).
 2023 ANNUAL REPORT 295

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

19 Financial instruments by category

As of December 31,
2023 2022
RMB’000 RMB’000

Assets as per balance sheet

Financial assets measured at fair value:
— Long-term investments measured at fair value through profit or loss
(Note 20) 60,199,798 55,979,974
— Short-term investments measured at fair value through profit or loss
(Note 20) 20,193,662 9,845,910
— Short-term investments measured at fair value through other
comprehensive income (Note 20) 582,131 449,109
— Bills receivables measured at fair value through other
comprehensive income 125,661 40,003
Financial assets measured at amortized costs:
— Trade and notes receivables (Note 22) 12,150,928 11,795,074
— Loan receivables (Note 21) 9,772,589 7,829,563
— Other receivables 10,103,353 11,265,671
— Long-term investments measured at amortized cost (Note 20) 364,476 405,371
— Short-term investments measured at amortized cost (Note 20) 502,816 —
— Long-term bank deposits (Note 25(c)) 18,293,650 16,788,346
— Short-term bank deposits (Note 25(c)) 52,797,857 29,874,707
— Restricted cash (Note 25(b)) 4,794,031 3,956,786
— Cash and cash equivalents (Note 25(a)) 33,631,313 27,607,261

223,512,265 175,837,775

Liabilities as per balance sheet

Financial liabilities measured at fair value:
— Liabilities to fund investors (Note 30) 2,228,308 806,000
Financial liabilities measured at amortized cost:
— Trade payables (Note 31) 62,098,500 53,093,543
— Other payables 14,619,660 11,149,880
— Borrowings (Note 34) 27,857,345 23,644,002
— Liabilities to fund investors (Note 30) 11,574,737 14,053,228
— Lease liabilities (Note 17) 1,968,166 2,412,128

120,346,716 105,158,781
296 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

20 Investments

As of December 31,
2023 2022
RMB’000 RMB’000

Current assets
Short-term investments measured at
— Amortized cost (i) 502,816 —
— Fair value through other comprehensive income (ii) 582,131 449,109
— Fair value through profit or loss (iii) 20,193,662 9,845,910

21,278,609 10,295,019

Non-current assets
Long-term investments measured at amortized cost (ii) 364,476 405,371
Long-term investments measured at fair value through profit or loss
— Ordinary shares investments (iv) 15,291,625 14,491,407
— Preferred shares investments (v) 34,444,516 32,358,256
— Treasury investments (vi) 6,846,562 6,216,228
— Other investments (vii) 3,617,095 2,914,083

60,564,274 56,385,345
 2023 ANNUAL REPORT 297

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

20 Investments (continued)

Movement of long-term investments measured at fair value through profit or loss is as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year 55,979,974 50,113,702

Additions and transfers 5,691,031 8,615,245
Disposals (5,183,986) (2,898,750)
Change in fair value 3,238,848 (2,046,690)
Currency translation differences 473,931 2,196,467

At the end of the year 60,199,798 55,979,974

(i) Short-term investments measured at amortized cost

Short-term investments measured at amortized cost are shareholders’ deposits deposited by the Group
in an associate Chongqing Xiaomi Consumer Finance Co., Ltd., with an interest rate of 3.27% per annum.
The investments are held for collection of contractual cash flow and the contractual cash flows of these
investments qualify for solely payments of principal and interest, hence they are measured at amortized
costs. None of these investments are past due.

(ii) Short-term investments measured at fair value through other comprehensive income
and long-term investments measured at amortized cost
Short-term investments measured at fair value through other comprehensive income and long-term
investments measured at amortized cost are mainly debt securities, denominated in HK$, US$ and RMB,
where the contractual cash flows are solely principal and interest. The securities are mainly issued by
corporates and banks and the fair value of such debt securities was determined based on quoted price on
bond market. None of these investments are past due.

Debt securities that are only held for collection of contractual cash flows are measured at amortized cost.
Debt securities that are held for both collection of contractual cash flows and for selling, are measured at
fair value through other comprehensive income.
298 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

20 Investments (continued)

(iii) Short-term investments measured at fair value through profit or loss

The short-term investments measured at fair value through profit or loss are wealth management products,
denominated in RMB and US$, with expected rates of return ranging from 0.25% to 3.25% per annum for
the year ended December 31, 2023 (2022: 1.25% to 3.50%). None of these investments are past due.

(iv) Ordinary shares investments

As of December 31,
2023 2022
RMB’000 RMB’000

Listed 11,388,792 11,019,105

Unlisted 3,902,833 3,472,302

15,291,625 14,491,407

The fair values of the listed securities are determined based on the closing prices quoted in active
markets (level 1: quoted price (unadjusted) in active markets). For certain listed securities which are
restricted for sale in a specified period, their fair values are determined based on quoted market prices
and unobservable inputs (i.e. discount rate for lack of marketability) and hence classified as level 3 of the
fair value hierarchy.

The fair values of unlisted securities are measured using a valuation technique with unobservable inputs
and hence classified as Level 3 of the fair value hierarchy. Refer to Note 3.3 for the major assumptions
used in the valuation for investment in private companies.

(v) Preferred shares investments — unlisted

During the year ended December 31, 2023, the Group made aggregate preferred shares investments of
RMB1,761,454,000 (2022: RMB4,253,445,000). These investees are principally engaged in sales of IoT and
lifestyle products, provision of internet services and integrated circuit industry.
 2023 ANNUAL REPORT 299

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

20 Investments (continued)

(v) Preferred shares investments — unlisted (continued)

The preferred shares investments in these investees are convertible redeemable preferred shares or
ordinary shares with preferential rights. The Group has the right to require and demand the investees to
redeem all of the shares held by the Group at guaranteed predetermined fixed amount upon redemption
events which are out of control of issuers. Hence, these investments are accounted for as debt
instruments and are measured at financial assets at fair value through profit or loss. Refer to Note 3.3 for
the major assumptions used in the valuation for investment in private companies.

(vi) Treasury investments

Treasury investments mainly represent investments in the debt instruments issued by certain reputable
banks or non-bank financial institutions or entities purchased in the secondary market. As these
investments were classified as debt investment and returns are not solely payments of principal and
interest, they are measured at fair value through profit or loss.

(vii) Other investments

Other investments primarily consist of investments in private equity investment funds. As fund investments
classified as debt investment which are not solely payments of principal and interest, they are measured
at fair value through profit or loss.

(viii) Amounts recognized in profit or loss of financial investments measured at fair value
through profit or loss

Year ended December 31,

2023 2022
RMB’000 RMB’000

Long-term investments measured at fair value through

profit or loss
— Ordinary shares investments 1,401,934 (3,748,111)
— Preferred shares investments 1,690,946 2,271,904
— Treasury and other investments 120,695 (575,085)
Short-term investments measured at fair value through
profit or loss 292,701 389,282

3,506,276 (1,662,010)
300 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

21 Loan receivables

As of December 31,
2023 2022
RMB’000 RMB’000

Unsecured loan 10,645,144 8,625,680

Less: credit loss allowance (872,555) (796,117)

9,772,589 7,829,563

Loan receivables are loans derived from subsidiaries of the Group which engage in the factoring finance business.
Such amounts are recorded at the principal amount less expected credit loss. Loan receivables are denominated in
RMB and US$.

Detail of the credit risk assessment of loan receivables is disclosed in Note 3.1.

22 Trade and notes receivables

Details of trade and notes receivables are as follows:

As of December 31,
2023 2022
RMB’000 RMB’000

Trade receivables 10,253,922 9,334,300

Notes receivables 2,213,964 2,666,114

Less: credit loss allowance (316,958) (205,340)

12,150,928 11,795,074
 2023 ANNUAL REPORT 301

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

22 Trade and notes receivables (continued)

The carrying amounts of the Group’s trade and notes receivables are denominated in the following currencies:

As of December 31,
2023 2022
RMB’000 RMB’000

RMB 7,763,251 7,040,345

US$ 1,987,801 2,253,596
EUR 886,786 1,384,041
INR 717,317 501,725
Others 795,773 615,367

12,150,928 11,795,074

Movements on the Group’s credit loss allowance of trade and notes receivables are as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year (205,340) (163,977)

Credit loss allowance (recognized) (116,902) (44,745)
Receivables written off during the year as uncollectable 5,284 3,382

At the end of the year (316,958) (205,340)

(a) The Group generally allows a credit period within 180 days to its customers. Aging analysis of trade and
notes receivables based on invoice date is as follows:

As of December 31,
2023 2022
RMB’000 RMB’000

Up to 3 months 9,108,133 9,325,061

3 to 6 months 1,666,418 1,946,964
6 months to 1 year 522,612 469,147
1 to 2 years 1,016,563 150,685
Over 2 years 154,160 108,557

12,467,886 12,000,414
302 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

22 Trade and notes receivables (continued)

(b) The Group applies the simplified approach to providing for expected credit losses prescribed by
IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To
measure the expected credit losses, trade receivables have been grouped based on shared credit risk
characteristics and the days past due. The Group’s expected loss rates are mainly determined based on
the corresponding historical credit loss rates which are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables. The
Group has considered the expected changes in macroeconomic factors, such as Consumer Price Index
(“CPI”), Gross Domestic Product (“GDP”) and Business Climate Index (“BCI”), and accordingly adjusts the
historical loss rates based on expected changes in all factors identified. The loss allowance provisions as
of December 31, 2023 and 2022 are determined as follows:

Up to 3 to Over 6
3 months 6 months months
Current past due past due past due Total

December 31, 2023:

Expected loss rate 0.68% 3.57% 6.94% 50.64%
Gross carrying amount (in thousand) 6,385,387 2,896,056 753,327 219,152 10,253,922
Loss provision (in thousand) 43,493 103,444 52,310 110,981 310,228

December 31, 2022:

Expected loss rate 1.00% 2.34% 8.10% 61.99%
Gross carrying amount (in thousand) 7,155,007 1,823,112 240,420 115,761 9,334,300
Loss provision (in thousand) 71,350 42,747 19,479 71,764 205,340

As of December 31, 2023 and 2022, the majority of the balance of receivables are due from certain channel
distributors and customers in mainland China, India and Europe who usually settle the amounts due by them
within 180 days.

As of December 31, 2023 and 2022, the credit loss allowance for notes receivables is not significant.
 2023 ANNUAL REPORT 303

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

23 Prepayments and other receivables

As of December 31,
2023 2022
RMB’000 RMB’000

Receivables from subcontractors for outsourcing of raw

materials and amounts paid for third parties 7,591,022 8,919,697
Recoverable value-added tax and other taxes 7,248,105 4,641,951
Prepayments to suppliers 1,786,057 1,567,950
Deposits to suppliers 735,031 382,399
Receivables from market development fund 190,617 153,919
Prepaid fees for patent expenses and other prepaid expenses 1,148,975 1,102,919
Receivables from employees related to Employee Fund
(Note (a)) 90,350 95,850
Receivables related to share options and RSUs granted to
employees 261,239 159,302
Receivables for disposal of investments 57,062 251,733
Operating and finance lease receivables 417,435 484,588
Others 760,597 962,784

20,286,490 18,723,092

Less: credit loss allowance (207,615) (144,601)

20,078,875 18,578,491

Note:

(a) Receivables from employees related to Employee Fund is interest bearing and repayable when the employee resign from the Group.

Further detail included in Note 29.

As of December 31, 2023 and 2022, the carrying amounts of other receivables were primarily denominated
in RMB and US$ and approximated their fair value at each of the reporting dates. Other receivables that are
measured at amortized costs included receivables from subcontractors for outsourcing of raw materials and
amounts paid for third parties, deposit to suppliers, receivables from employees related to Employee Fund,
receivables related to share options and RSUs granted to employees, receivables for disposal of investments,
operating and finance lease receivables and others were considered to be of low credit risk, and thus the
impairment provision recognized during the years ended December 31, 2023 and 2022 was limited to 12 months
expected losses.
304 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

24 Inventories

As of December 31,
2023 2022
RMB’000 RMB’000

Raw materials 11,455,435 17,122,900

Finished goods 27,132,256 28,650,303
Work in progress 3,564,974 3,068,508
Spare parts 3,494,076 4,410,902
Others 952,492 655,638

46,599,233 53,908,251

Less: provision for impairment (Note (a)) (2,176,396) (3,470,360)

44,422,837 50,437,891

Note:

(a) For the year ended December 31, 2023, provision for impairment of RMB3,861,753,000 (2022: RMB7,794,470,000) was recorded in “cost of

sales” in the consolidated income statement.

Provision for impairment movements for the years ended December 31, 2023 and 2022 are as below:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year (3,470,360) (1,331,147)

Provision for impairment (3,861,753) (7,794,470)
Transfer to cost of sales upon sold 5,155,717 5,655,257

At the end of the year (2,176,396) (3,470,360)

 2023 ANNUAL REPORT 305

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

25 Cash and bank balances

(a) Cash and cash equivalents

As of December 31,
2023 2022
RMB’000 RMB’000

Cash at bank and in hand 26,909,303 22,156,628

Short-term bank deposits with initial terms within three months 6,722,010 5,450,633

33,631,313 27,607,261

Cash and cash equivalents are denominated in the following currencies:

As of December 31,
2023 2022
RMB’000 RMB’000

RMB 18,661,376 13,247,547

US$ 9,956,424 9,971,440
EUR 1,216,482 1,165,271
INR 354,090 844,278
HK$ 771,113 966,876
Others 2,671,828 1,411,849

33,631,313 27,607,261

The weighted average effective interest rate for the short-term bank deposits with initial terms within
three months was 5.88% per annum for the year ended December 31, 2023 (2022: 1.33%).

(b) Restricted cash

As of December 31, 2023, among the restricted cash, INR45,321,947,000 (equivalent to RMB3,874,120,000)
was restricted by India authorities due to the in-progress investigation described in Note 37.
306 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

25 Cash and bank balances (continued)

(c) Term bank deposits

An analysis of the Group’s term bank deposits as of December 31, 2023 and 2022 are listed as below:

As of December 31,
2023 2022
RMB’000 RMB’000

Short-term bank deposits denominated in:

RMB 18,521,889 8,709,906
INR 31 37
US$ 34,275,937 21,164,764

52,797,857 29,874,707

Long-term bank deposits denominated in:

RMB 16,808,185 15,392,410
INR 151 141
US$ 1,485,314 1,395,795

18,293,650 16,788,346

Short-term bank deposits are bank deposits with original maturities over three months, under twelve
months and redeemable on maturity. Long-term bank deposits are bank deposits with original maturities
over twelve months and redeemable on maturity.

The effective interest rate of the short-term bank deposits and long-term bank deposits of the Group in
RMB ranged from 1.55% to 3.95% and 2.85% to 3.50% per annum for the year ended December 31, 2023,
respectively (2022: from 1.65% to 3.95%, and 3.20% to 3.95%, respectively).

The effective interest rate of the short-term bank deposits and long-term bank deposits of the Group in
US$ ranged from 5.15% to 6.10% and 5.50% to 5.71% per annum for the year ended December 31, 2023,
respectively (2022:from 2.80% to 5.87%, and 5.30% to 5.53%, respectively).
 2023 ANNUAL REPORT 307

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

26 Share capital and treasury shares

(a) Share capital

Authorized:
As of December 31, 2023 and 2022, the total authorized number of ordinary shares is 270,000,000,000
shares with par value of US$0.0000025 per share.

Issued:
As of December 31, 2023, the number of issued share capital of Class A and Class B Share is 4,576,032,760
and 20,506,393,747, respectively. Each Class A ordinary share will entitle the holder to exercise 10 votes,
and each Class B ordinary share will entitle the holder to exercise one vote, on any resolution tabled at the
Company’s general meetings, except for resolution with respect to a limited number of reserved matters,
in relation to which each ordinary share is entitled to one vote.

Equivalent
Nominal nominal
Number of value of value of
ordinary ordinary ordinary Share
Note shares shares shares premium
’000 US$’000 RMB’000 RMB’000

As of January 1, 2023 24,951,334 62 406 59,483,288

Exercise of share options and RSUs 59,868 — 2 658,545

Shares repurchased and cancelled (119,200) — (2) (1,216,642)
Issuance of ordinary shares to Share
Scheme Trusts (a) 176,120 — — —
Release of ordinary shares from Share
Scheme Trusts (a) — — 1 1,788,344
Share issued for acquisition of Zimi
completed in 2021 5,305 — — 64,752

As of December 31, 2023 25,073,427 62 407 60,778,287

As of January 1, 2022 24,992,449 62 407 59,717,626

Exercise of share options and RSUs 88,385 — 3 890,469

Shares repurchased and cancelled (239,462) — (4) (2,539,074)
Issuance of ordinary shares to Share
Scheme Trusts (a) 102,907 — — —
Release of ordinary shares from Share
Scheme Trusts (a) — — — 1,315,868
Share issued for acquisition of Zimi
completed in 2021 7,055 — — 98,399

As of December 31, 2022 24,951,334 62 406 59,483,288

308 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

26 Share capital and treasury shares (continued)

(a) Share capital (continued)

Issued (continued):

Notes:

(a) The Company issued ordinary shares with respect to the share options and RSUs under the employees share-based compensation
scheme to be exercised by certain grantees of the Company to trusts, which were established to hold the shares for and on behalf
of the grantees (collectively, “Share Scheme Trusts”).

(b) Treasury shares

Number of shares Amounts
’000 RMB’000

As of January 1, 2023 20,289 190,795

Shares repurchased 133,677 1,485,385
Shares cancelled (119,200) (1,216,644)
Release of ordinary shares from
Share Scheme Trusts (1,938) (21,245)

As of December 31, 2023 32,828 438,291

As of January 1, 2022 24,503 343,730

Shares repurchased 235,248 2,386,143
Shares cancelled (239,462) (2,539,078)

As of December 31, 2022 20,289 190,795

 2023 ANNUAL REPORT 309

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

26 Share capital and treasury shares (continued)

(b) Treasury shares (continued)

During the year ended December 31, 2023, the Company repurchased its own ordinary shares on the Stock
Exchange of Hong Kong Limited as follows:

Number of Highest price Lowest price paid Aggregate

Month/Year shares paid per share per share price paid
’000 HK$ HK$ HK$’000

April 2023 1,938 12.36 12.02 23,773

May 2023 4,400 10.54 10.46 46,198
June 2023 38,200 11.00 9.96 407,831
July 2023 6,900 10.88 10.66 74,525
September 2023 37,700 12.00 11.58 445,714
October 2023 16,000 12.00 11.64 189,868
November 2023 1,600 15.00 14.96 23,990
December 2023 26,939 16.36 14.44 411,759

133,677 1,623,658
310 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

27 Other reserves

Share-based Currency Statutory

compensation translation surplus General Capital Conversion
reserve differences reserve reserve reserve option Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2023 7,415,315 381,026 2,632,834 52,225 420,118 1,764,799 284,691 12,951,008
Appropriation to statutory
reserves (Note (a)) — — 704,678 — — — — 704,678
Appropriation to general
reserves — — — 15,661 — — — 15,661
Employees share-based
compensation scheme:
— value of employee services
(Note (c) and Note 29) 3,280,371 — — — — — — 3,280,371
— exercise of share options
and RSUs (580,578) — — — — — — (580,578)
Share of other comprehensive
income of investments
accounted for using the equity
method (Note 12(b)) — — — — — — 9,326 9,326
Share of other reserves of
investments accounted for
using the equity method
(Note 12(b)) — — — — 38,532 — — 38,532
Release of ordinary shares
from Share Scheme
Trust (Note 26(a)(a)) (1,805,864) — — — — — — (1,805,864)
Transfer of share of other
reserves to profit or loss upon
disposal and deemed disposal
of investments accounted for
using equity method — — — — (85,730) — — (85,730)
Transfer of share of other
comprehensive income to
profit or loss upon disposal
and deemed disposal of
investments accounted
for using equity method — — — — — — (2,167) (2,167)
Net losses from changes in
fair value of financial assets
at fair value through other
comprehensive income — — — — — — (26,711) (26,711)
Share consideration for
acquisition of Zimi
completed in 2021 — — — — (64,752) — — (64,752)
Others — — (2,083) — — — — (2,083)
Currency translation
differences (Note (b)) — 1,051,927 — — — — — 1,051,927

At December 31, 2023 8,309,244 1,432,953 3,335,429 67,886 308,168 1,764,799 265,139 15,483,618
 2023 ANNUAL REPORT 311

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

27 Other reserves (continued)

Share-based Currency Statutory

compensation translation surplus General Capital Conversion
reserve differences reserve reserve reserve option Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2022 6,694,157 (3,218,845) 2,269,502 54,123 815,986 1,764,799 156,926 8,536,648
Appropriation to statutory reserves
(Note (a)) — — 384,506 — — — — 384,506
Appropriation to general reserves — — — (1,898) — — — (1,898)
Employees share-based
compensation scheme:
— value of employee services
(Note (c) and Note 29) 2,821,775 — — — — — — 2,821,775
— exercise of share options
and RSUs (793,005) — — — — — — (793,005)
Share of other comprehensive income
of investments accounted for using
the equity method (Note 12(b)) — — — — — — 57,211 57,211
Share of other reserves of
investments accounted
for using the equity
method (Note 12(b)) — — — — 122,326 — — 122,326
Release of ordinary shares
from Share Scheme
Trust (Note 26(a)(a)) (1,307,612) — — — — — — (1,307,612)
Transfer of share of other reserves
to profit or loss upon disposal and
deemed disposal of investments
accounted for using equity method — — — — (419,795) — — (419,795)
Transfer of share of other
comprehensive loss to profit or loss
upon disposal and deemed disposal
of investments accounted for using
equity method — — — — — — 93,311 93,311
Net losses from changes in
fair value of financial assets
at fair value through other
comprehensive income — — — — — — (22,754) (22,754)
Share consideration for
acquisition of Zimi
completed in 2021 — — — — (98,399) — — (98,399)
Others — — (21,174) — — — (3) (21,177)
Currency translation
differences (Note (b)) — 3,599,871 — — — — — 3,599,871

At December 31, 2022 7,415,315 381,026 2,632,834 52,225 420,118 1,764,799 284,691 12,951,008
312 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

27 Other reserves (continued)

Notes:

(a) In accordance with the Company Law of the People’s Republic of China and the stipulated provisions of the articles of association of

subsidiaries with limited liabilities in mainland China, appropriation of net profits (after offsetting accumulated losses from prior years)

should be made by these companies to their respective statutory surplus reserve funds and discretionary reserve funds before distributions

are made to the owners. The percentage of appropriation to statutory surplus reserve fund is 10%. The amount to be transferred to

discretionary reserve fund is determined by the equity owners of these companies. When the balance of the statutory surplus reserve fund

reaches 50% of the registered capital, such transfer needs not to be made. Both statutory surplus reserve fund and discretionary reserves

fund can be capitalized as capital of an enterprise, provided that the remaining statutory surplus reserve fund shall not be less than 25% of

the registered capital.

In addition, in accordance with the Law of the People’s Republic of China on Enterprises with Foreign Investments and the stipulated

provisions of the articles of association of wholly owned foreign subsidiaries in mainland China, appropriation from net profits (after

offsetting accumulated losses brought forward from prior years) should be made by these companies to their respective reserve fund. The

percentage of net profit to be appropriated to the reserve fund is not less than 10% of the net profit. When the balance of the reserve fund

reaches 50% of the registered capital, such transfer needs not to be made. With approvals obtained from respective boards of directors of

these companies, the reserve fund can be used to offset accumulated deficit or to increase capital.

(b) Foreign currency translation reserve represents the difference arising from the translation of the financial statements of companies within

the Group that have a functional currency different from the presentation currency of RMB for the financial statements of the Company and

the Group.

A majority of the currency translation differences are arising from the Company when it translates the financial statements from the

functional currency of US$ to presentation currency of RMB.

(c) Share-based compensation reserve arises from share-based payments granted to employees of the Group, see Note 29 for detail.

28 Dividends

No dividends have been paid or declared by the Company during the years ended December 31, 2023 and 2022.
 2023 ANNUAL REPORT 313

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

29 Share-based payments

On May 5, 2011, the Board of Directors of the Company approved the establishment of the “Xiaomi Corporation
2011 Employee Stock Option Plan” (“2011 Plan”) with the purpose of attracting, motivating, retaining and
rewarding certain employees and directors. The 2011 Plan was valid and effective for 10 years from the approval
of the Board of Directors. The maximum number of shares that may be issued under 2011 Plan shall be
35,905,172 Class B ordinary shares (which were adjusted to 1,436,206,880 shares after the 1 to 4 share split on
March 14, 2014 and further 1 to 10 Share Subdivision on June 17, 2018). The 2011 Plan permits the awards of
options and RSUs.

Subsequently in August 2012, the 2011 Plan was superseded in its entirety as the “2012 Employee Stock Incentive
Plan” (“Pre-IPO ESOP”). The purpose of Pre-IPO ESOP is same as the 2011 Plan. The Pre-IPO ESOP was valid
and effective for 10 years from the approval of the Board of Directors. Through Pre-IPO ESOP, the Company
may grant equity-based incentive up to 45,905,172 Class B ordinary shares initially (which were adjusted to
1,836,206,880 shares after the 1 to 4 share split on March 14, 2014 and further 1 to 10 Share Subdivision on June
17, 2018). The aggregate number of reserved Class B ordinary shares approved was 2,512,694,900. The Pre-IPO
ESOP permits the awards of options and RSUs.

On June 17, 2018, the Board of Directors of the Company adopted the establishment of the 2018 Share Option
Scheme. The purpose of 2018 Share Option Scheme is to provide selected participants with the opportunity
to acquire proprietary interests in the Company and to encourage selected participants to work towards
enhancing the value of the Company and its shares for the benefit of the Company and its shareholders as a
whole. The total number of Class B ordinary shares available for grant under 2018 Share Option Scheme was
1,568,094,311 shares.

On June 17, 2018, the Board of Directors of the Company adopted the establishment of the 2018 Share Award
Scheme. The purpose of the 2018 Share Award Scheme are (1) to align the interests of eligible persons with
those of the Group through ownership of Class B ordinary shares, dividends and other distributions paid on
shares and/or the increase in value of the Class B ordinary shares, and (2) to encourage and retain eligible
persons to make contributions to the long-term growth and profits of the Group. The aggregate number of
Class B ordinary shares underlying all grants made pursuant to the 2018 Share Award Scheme will not exceed
1,118,806,541 shares without shareholders’ approval.
314 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

29 Share-based payments (continued)

On March 24, 2023, the Board of Directors of the Company adopted the 2023 Share Scheme. The purpose of the
2023 Share Scheme are (1) to align the interests of eligible persons with those of the Group through ownership
of Class B ordinary shares, dividends and other distributions paid on shares and/or the increase in value of the
Class B ordinary shares, and (2) to encourage and retain eligible persons to make contributions to the long-
term growth and profits of the Group. The aggregate number of Class B ordinary shares underlying all grants
made pursuant to the 2023 Share Scheme will not exceed 2,503,959,565 shares without shareholder’s approval.

Pre-IPO ESOP
Share options granted to employees
Movements in the number of share options granted to employees and their related weighted average exercise
prices are as below:

Average
exercise price
Number of per share
share options option (US$)

Outstanding as of January 1, 2023 345,873,793 0.05

Forfeited during the year (10,565,000) 0.11
Transferred to Share Scheme Trust (Note 26(a)(a)) (4,735,000) 0.12
Exercised during the year (59,868,669) 0.18

Outstanding as of December 31, 2023 270,705,124 0.02

Exercisable as of December 31, 2023 238,753,023 0.25

Outstanding as of January 1, 2022 466,216,237 0.08

Forfeited during the year (28,049,666) 0.21
Transferred to Share Scheme Trust (Note 26(a)(a)) (12,883,200) 0.10
Exercised during the year (79,409,578) 0.18

Outstanding as of December 31, 2022 345,873,793 0.05

Exercisable as of December 31, 2022 252,266,503 0.23

The weighted-average remaining contract life for outstanding share options was 2.51 years and 3.39 years as of
December 31, 2023 and 2022, respectively.
 2023 ANNUAL REPORT 315

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

29 Share-based payments (continued)

2018 Share Option Scheme

Share options granted to employees
Movements in the number of share options granted to employees and their related weighted average exercise
prices are as below:

Average
exercise price
Number of per share
share options option (HK$)

Outstanding as of January 1, 2023 120,700,000 24.53

Forfeited during the year — —

Outstanding as of December 31, 2023 120,700,000 24.53

Exercisable as of December 31, 2023 10,537,500 22.54

Outstanding as of January 1, 2022 121,900,000 24.53

Forfeited during the year (1,200,000) 24.50

Outstanding as of December 31, 2022 120,700,000 24.53

Exercisable as of December 31, 2022 5,862,500 20.79

The weighted-average remaining contract life for outstanding share options was 6.69 years and 7.69 years as of
December 31, 2023 and 2022, respectively.

Fair value of share options

The Group has used Binomial option-pricing model to determine the fair value of the share option as of the
grant date.
316 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

29 Share-based payments (continued)

2018 Share Award Scheme

RSUs granted to employees
Movements in the number of RSUs granted to the Company’s employees under 2018 Share Award Scheme and
the respective weighted average grant date fair value are as below:

Weighted
average grant
date fair value
per RSU
Number of RSUs (HK$)

Outstanding as of January 1, 2023 569,589,764 16.86

Granted during the year 238,816,959 11.69
Forfeited during the year (61,701,292) 16.42
Transferred to Share Scheme Trust (Note 26(a)(a)) (132,509,721) 15.25

Outstanding as of December 31, 2023 614,195,710 15.24

Outstanding as of January 1, 2022 359,723,827 21.44

Granted during the year 366,319,134 12.80
Forfeited during the year (74,782,454) 16.84
Transferred to Share Scheme Trust
(Note 26(a)(a)) and others (81,670,743) 18.86

Outstanding as of December 31, 2022 569,589,764 16.86

The weighted-average remaining contract life for outstanding RSUs was 8.38 years and 8.83 years as of
December 31, 2023 and 2022, respectively.
 2023 ANNUAL REPORT 317

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

29 Share-based payments (continued)

2023 Share Scheme

RSUs granted to employees
Movements in the number of RSUs granted to the Company’s employees under 2023 Share Scheme and the
respective weighted average grant date fair value are as below:

Weighted
average grant
date fair value
per RSU
Number of RSUs (HK$)

Outstanding as of January 1, 2023 — —

Granted during the year 150,622,365 13.37
Forfeited during the year (5,040,126) 12.83

Outstanding as of December 31, 2023 145,582,239 13.39

The weighted-average remaining contract life for outstanding RSUs was 9.64 years as of December 31, 2023.

The total expenses recognized in the consolidated income statement in connection with share options and
RSUs granted to the Group’s employees under all share-based payment schemes are RMB3,279,535,000 and
RMB2,821,900,000 for the years ended December 31, 2023 and 2022, respectively.

Employee fund
On August 31, 2014, the Board of Directors of the Company approved the establishment of Employee Fund
with the purpose of which is to invest in companies within the business ecosystem of the Group. The Company
invited certain employees to participate, with the condition that they would only receive the original investment
sum with interest should they decide to resign from the Group within 5 years from the establishment date
(the “Lockup Period”). Upon the end of the Lockup Period, the holders would become the equity holders of the
Employee Fund. According to the arrangement of Employee Fund, the equity holders of the Employee Fund can
demand the Company to buy back the shares at fair value or continue to hold the shares when they resign after
the Lockup Period. The Group measures the liability related to cash-settled share-based payments at fair value
as of December 31, 2023.
318 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

29 Share-based payments (continued)

Employee fund (continued)

The total expenses recognized and reversed in the consolidated income statements for the Employee Fund
granted to the Group’s employees are RMB99,135,000 and RMB324,542,000 for the years ended December 31,
2023 and 2022, respectively.

Share based awards granted to Lei Jun

On June 17, 2018, Lei Jun was granted 42,070,000 share options in Xiaomi Finance Inc. (“Xiaomi Finance”)
pursuant to the first share option scheme adopted by Xiaomi Finance. Such share options were vested
immediately and Lei Jun can exercise these share options with exercise price of RMB3.8325 for each share
option for the following 20 years commencing on June 17, 2018. No share option was exercised for the years
ended December 31, 2023 and 2022, respectively.

30 Other non-current liabilities

As of December 31,
2023 2022
RMB’000 RMB’000

Liabilities to fund investors (Note (a)) 13,803,045 14,859,228

Lease liabilities (Note 17) 1,256,155 1,464,736
Payable for purchase of intangible assets 2,768,401 —
Deferred government grants 2,115,561 61,004
Others 71,111 149,863

20,014,273 16,534,831

Note:

(a) It represents the funds raised by the third party investors under Hubei Xiaomi Yangtze River Industry Investment Fund Partners (Limited

Partnership) (湖北小米長江產業基金合夥企業(有限合夥)) (the “Hubei Fund”) and Beijing Xiaomi Zhizao Equity Investment Fund Partners

(Limited Partnership) (北京小米智造股權投資基金合夥企業(有限合夥)) (the “Beijing Fund”). The Group controls the Hubei Fund and the

Beijing Fund as the Group is exposed to and has rights to variable returns from its involvement with the Hubei Fund and the Beijing Fund,

and has the ability to affect those returns through its power over the Hubei Fund and the Beijing Fund.
 2023 ANNUAL REPORT 319

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

30 Other non-current liabilities (continued)

Note (continued):

(a) (continued)

For the amount raised from limited partners of the Hubei Fund, the Group has contractual obligation to settle the liability with the limited

partners and therefore is classified as a financial liability measured at amortized cost in the consolidated financial statements. The

carrying amount of this financial liability approximates to its fair value.

For the amount raised from limited partners of the Beijing Fund, the Group has contractual obligation to settle the liability with the limited

partners and the management designates it as a financial liability measured at fair value through profit or loss in the consolidated financial

statements.

31 Trade payables

Trade payables primarily include payables for inventories. As of December 31, 2023 and 2022, the carrying
amounts of trade payables were primarily denominated in RMB, US$ and INR.

Trade payables and their aging analysis based on invoice date are as follows:

As of December 31,
2023 2022
RMB’000 RMB’000

Up to 3 months 52,493,579 47,999,500

3 to 6 months 4,809,809 1,820,555
6 months to 1 year 3,039,535 2,172,721
1 to 2 years 1,001,272 855,854
Over 2 years 754,305 244,913

62,098,500 53,093,543
320 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

32 Other payables and accruals

As of December 31,
2023 2022
RMB’000 RMB’000

Amounts collected for third parties 858,632 842,068

Payroll and welfare payables 3,120,400 2,535,922
Deposits payable 4,761,399 4,335,731
Employee Fund (Note 29) 864,840 811,018
Accrual expenses 2,742,593 1,752,006
Payables for construction cost 2,220,127 1,748,373
Payables for investments 41,325 93,866
Other taxes payables 1,648,291 886,005
Lease liabilities (Note 17) 712,011 947,392
Deposits from customers 1,519,475 1,607,408
Deferred government grants 2,771,695 1,169,511
Payables for purchase of intangible assets 2,390,221 —
Others 1,963,641 1,711,416

25,614,650 18,440,716

The carrying amounts of other payables were primarily denominated in RMB and US$ and approximate their fair
values as of December 31, 2023 and 2022.

33 Advance from customers

Advance from customers primarily includes advance from customers when the Group receives payments in
advance of the delivery of products or performance of services.

Advance from customers mainly included contract liabilities, which are the Group’s obligations to transfer goods
or services to a customer for which the Group has received consideration (or an amount of consideration is due)
from the customer. As of December 31, 2023, the total contract liabilities amounted to RMB12,612,179,000
(2022: RMB8,756,344,000), which will be recognized as revenue within one year.
 2023 ANNUAL REPORT 321

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

34 Borrowings

As of December 31,
2023 2022
RMB’000 RMB’000

Included in non-current liabilities

Secured borrowings — 102,325
Unsecured borrowings (Note (a)) 16,631,078 16,656,195
Convertible bonds (Note (b)) 5,042,891 4,734,741

21,673,969 21,493,261

Included in current liabilities

Secured borrowings — 3,283
Unsecured borrowings (Note (a)) 6,183,376 2,147,458

6,183,376 2,150,741

Notes:

(a) As of December 31, 2023, other than the interest rate of 49% (2022: 14.3%) for unsecured borrowings in Turkish Lira (“TRY”) 200,000,000

(2022: TRY 189,466,000) which was equivalent to RMB48,102,000 (2022: RMB70,538,000), and the interest rate of 14.25% (2022: Nil) for

unsecured borrowings in Russian Rouble (“RUB”) 500,000,000 (2022: Nil), which was equivalent to RMB40,135,000 (2022: Nil), the interest

rate of the remaining unsecured borrowings was 2.40% to 6.19% (2022: 2.10% to 4.10%) per annum.

(b) On December 17, 2020, the Group completed the issuance of 7-Year US$855,000,000 zero coupon guaranteed convertible bonds due on

December 17, 2027 (the “Bonds”) to third party professional investors (the “bondholders”). The bondholders have the right, at any time on

or after January 27, 2021 up to the 10 days prior to the maturity date, to convert part or all of the outstanding principal amount of the Bonds

into ordinary shares of the Group at a conversion price of HK$36.74 per share, subject to adjustments. The outstanding principal amount

of the Bonds is repayable by the Group upon the maturity of the Bonds on December 17, 2027, if not previously redeemed, converted or

purchased and cancelled.

322 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

34 Borrowings (continued)

Notes (continued):

(b) (continued):

The liability component of the Bonds recognized in the balance sheet are calculated as follows:

RMB’000

Liability component as of January 1, 2023 4,734,741

Interest accrued 226,884

Effect of foreign currency translation 81,266

Liability component as of December 31, 2023 5,042,891

Liability component as of January 1, 2022 4,138,542

Interest accrued 206,933

Effect of foreign currency translation 389,266

Liability component as of December 31, 2022 4,734,741

The equity component of the Bonds of RMB1,764,799,000 was included in “Reserves” (Note 27) of the Group as of December 31, 2023 and 2022.
 2023 ANNUAL REPORT 323

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

35 Deferred income taxes

Deferred income taxes are calculated in full on temporary differences under the liability method using the tax
rates at which are expected to be applied at the time of reversal of the temporary differences.

The amount of offsetting deferred income tax assets and liabilities is RMB497,823,000 as of December 31, 2023
(2022: RMB698,411,000). The analysis of deferred income tax assets and liabilities before offsetting is as follows:

As of December 31,
2023 2022
RMB’000 RMB’000

Deferred income tax assets:

— to be recovered after 12 months 782,601 1,135,477
— to be recovered within 12 months 1,875,972 1,841,109

2,658,573 2,976,586

Deferred income tax liabilities:

— to be settled after 12 months (1,957,295) (1,646,852)
— to be settled within 12 months (34,815) (34,815)

(1,992,110) (1,681,667)

The gross movement on the deferred income tax assets is as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year 2,561,062 1,853,918

Adjustment on amendment to IAS 12 (Note 2.1 (a)) 415,524 555,070

At the beginning of the year (Restated) 2,976,586 2,408,988

(Debited)/credited to the consolidated income statement (318,013) 567,598

At the end of the year 2,658,573 2,976,586

324 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

35 Deferred income taxes (continued)

The gross movement on the deferred income tax liabilities is as follows:

Year ended December 31,

2023 2022
RMB’000 RMB’000

At the beginning of the year (1,266,143) (1,394,688)

Adjustment on amendment to IAS 12 (Note 2.1 (a)) (415,524) (555,070)

At the beginning of the year (Restated) (1,681,667) (1,949,758)

(Debited)/credited to the consolidated income statement (310,443) 268,091

At the end of the year (1,992,110) (1,681,667)

 2023 ANNUAL REPORT 325

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

35 Deferred income taxes (continued)

The movement in deferred income tax assets and liabilities during the years without taking into consideration
the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax assets:

Depreciation
of property,
plant and
equipment
and Fair value Unrealized
Accrued Provision for amortization changes of gain on
liabilities and impairment of intangible financial Credit loss intra-group
provisions of inventories assets Tax losses assets allowance transactions Lease Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2023 686,101 491,545 43,176 452,826 89,846 41,439 622,024 47,912 86,193 2,561,062
Adjustment on amendment
to IAS 12 (Note 2.1 (a)) — — — — — — — 415,524 — 415,524

At January 1, 2023 (Restated) 686,101 491,545 43,176 452,826 89,846 41,439 622,024 463,436 86,193 2,976,586
Credited/(debited) to
consolidated income
statement 219,910 (124,442) (12,950) (240,019) 33,269 35,275 (95,880) (144,119) 10,943 (318,013)

At December 31, 2023 906,011 367,103 30,226 212,807 123,115 76,714 526,144 319,317 97,136 2,658,573

At January 1, 2022 432,232 237,069 45,146 318,964 82,770 171,181 473,912 13,207 79,437 1,853,918
Adjustment on amendment
to IAS 12 (Note 2.1 (a)) — — — — — — — 555,070 — 555,070

At January 1, 2022 (Restated) 432,232 237,069 45,146 318,964 82,770 171,181 473,912 568,277 79,437 2,408,988
Credited/(debited)
to consolidated
income statement 253,869 254,476 (1,970) 133,862 7,076 (129,742) 148,112 (104,841) 6,756 567,598

At December 31, 2022 686,101 491,545 43,176 452,826 89,846 41,439 622,024 463,436 86,193 2,976,586

Deferred income tax assets are recognized for deductible temporary differences to the extent that the realization
of the related tax benefits through future taxable profits is probable.
326 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

35 Deferred income taxes (continued)

As of December 31, 2023, the Group did not recognize deferred income tax assets of RMB3,262,716,000 (2022:
RMB1,365,921,000), in respect of deductible temporary differences and cumulative tax losses amounting
RMB18,415,305,000 (2022: RMB6,855,803,000), that can be carried forward against future taxable income. The
tax losses as of December 31, 2023 amounting to RMB2,343,293,000 (2022: RMB1,838,100,000) can be carried
forward indefinitely, and the remaining amount of RMB15,477,728,000 (2022: RMB4,018,848,000) will expire
within 11 years (2022: 12 years).

The movement in deferred income tax assets and liabilities during the years without taking into consideration
the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax liabilities:

Depreciation of
property,
plant and
Fair value equipment and
changes of amortization Unrealized
financial of intangible exchange Business
assets assets gain/(loss) combination Lease Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2023 (773,742) (147,944) (140,282) (188,473) (15,465) (237) (1,266,143)

Adjustment on
amendment to
IAS 12 (Note 2.1 (a)) — — — — (415,524) — (415,524)

At January 1, 2023 (Restated) (773,742) (147,944) (140,282) (188,473) (430,989) (237) (1,681,667)
(Debited)/credited to
consolidated income
statement (704,121) 29,237 140,282 34,814 189,430 (85) (310,443)

At December 31, 2023 (1,477,863) (118,707) — (153,659) (241,559) (322) (1,992,110)

At January 1, 2022 (1,105,849) (62,594) — (223,353) (2,892) — (1,394,688)

Adjustment on amendment
to IAS 12 (Note 2.1 (a)) — — — — (555,070) — (555,070)

At January 1, 2022 (Restated) (1,105,849) (62,594) — (223,353) (557,962) — (1,949,758)

Credited/(debited) to
consolidated income
statement 332,107 (85,350) (140,282) 34,880 126,973 (237) 268,091

At December 31, 2022 (773,742) (147,944) (140,282) (188,473) (430,989) (237) (1,681,667)
 2023 ANNUAL REPORT 327

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

36 Cash flow information

(a) Cash generated from/(used in) operations

Year ended December 31,
2023 2022
RMB’000 RMB’000

Profit before income tax 22,011,047 3,933,956

Adjustments for:
— Depreciation of property, plant and equipment, right-of-use
assets and investment properties 2,401,979 2,310,951
— Amortization of intangible assets 2,434,308 1,396,442
— Gain on disposal of property, plant and equipment (12,510) (6,887)
— Credit loss allowance 321,528 217,971
— Provision for impairment of inventories 3,861,753 7,794,470
— Impairment provision for investments accounted for using
the equity method (Note 8) 7,138 450,948
— Interest income (3,558,347) (1,663,941)
— Interest expense 1,555,970 546,483
— Dividend income (157,569) (125,299)
— Share of net (profits)/losses of investments accounted for using
the equity method (45,615) 400,100
— Gains on disposal and deemed disposal of investments accounted for
using the equity method (1,580,123) (127,310)
— Loss on disposal of a subsidiary — (458)
— Fair value changes on financial instruments measured at fair value
through profit or loss (3,501,053) 1,662,010
— Share-based compensation 3,378,670 2,497,358
— Foreign exchange (gains)/losses, net (124,405) 998,602
Operating cash flows before changes in working capital
— Decrease/(increase) in inventories 2,173,795 (5,448,990)
— (Increase)/decrease in trade receivables (1,652,782) 4,346,873
— Increase in loan receivables (1,983,565) (2,545,224)
— (Increase)/decrease in prepayments and other receivables (2,426,241) 1,444,782
— (Increase)/decrease in restricted cash (659,788) 350,688
— Increase/(decrease) in trade payables 11,147,623 (20,514,286)
— Increase in advance from customers 4,026,797 298,782
— Increase in warranty provision 1,537,927 1,311,348
— Increase/(decrease) in other payables and accruals 3,101,149 (540,598)
— Increase in other non-current liabilities 2,054,557 41,776

Cash generated from/(used in) operations 44,312,243 (969,453)

328 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

36 Cash flow information (continued)

(b) Non-cash investing and financing transactions

Other than addition of right-of-use assets and lease liabilities described in Note 17, transfer of
investments accounted for using the equity method to financial assets at fair value through profit or loss
as described in Note 12(b) and Note 20, addition of intangible assets in Note 16 with increase of payables
for purchase of intangible assets in Note 30 and Note 32, addition of property, plant and equipment in
Note 15 with payables for purchase of property, plant and equipment in Note 32, there were no material
non-cash investing and financing transactions for the years ended December 31, 2023 and 2022.
 2023 ANNUAL REPORT 329

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

36 Cash flow information (continued)

(c) Reconciliation of liabilities generated from financing activities

Liabilities from financing activities
Payables for
Liabilities purchase of
Interest to fund Lease intangible
Borrowing payable investors liabilities assets Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Liabilities from financing activities

as of January 1, 2023 23,644,002 157,830 14,859,228 2,412,128 — 41,073,188

Cash flows 4,262,857 (177,329) (1,467,129) (1,197,692) (1,393,188) 27,519

Accrued interest expenses 839,025 193,288 405,724 83,117 39,535 1,560,689
Foreign exchange adjustments 271,122 — — — — 271,122
Other non-cash movements (Note (a)) (1,159,661) (164,158) 5,222 670,613 6,512,275 5,864,291

Liabilities from financing activities

as of December 31, 2023 27,857,345 9,631 13,803,045 1,968,166 5,158,622 48,796,809

Liabilities from financing activities

as of January 1, 2022 26,246,840 146,651 14,892,666 3,281,154 — 44,567,311

Cash flows (2,791,338) (1,020,229) 550,424 (1,281,785) — (4,542,928)

Accrued interest expenses — 1,031,408 (583,862) 101,484 — 549,030
Foreign exchange adjustments 1,738,062 — — — — 1,738,062
Other non-cash movements (Note (a)) (1,549,562) — — 311,275 — (1,238,287)

Liabilities from financing activities

as of December 31, 2022 23,644,002 157,830 14,859,228 2,412,128 — 41,073,188

Notes:

(a) It mainly resulted from the addition of payables for purchase of intangible assets, the addition of leases and the maturity of

discounted commercial bill acceptance.

330 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

37 Contingencies

The Group, in the ordinary course of its business, is involved in various claims, suits, and legal proceedings
that arise from time to time. Since December 2021, Xiaomi Technology India Private Limited (“Xiaomi India”)
has been involved in various investigations and notifications initiated by relevant Indian authorities including the
Income Tax Department, the Directorate of Revenue Intelligence and the Directorate of Enforcement (the “ED”)
in relation to compliance of relevant income tax regulations, custom duties regulations as well as foreign
exchange regulations, respectively.

In this connection, Xiaomi India received orders alleging that it has inappropriately deducted certain costs
and expenses, including purchase costs of mobile phones and royalty fees paid to overseas third parties as
well as companies within the Group. As a result, certain of its bank accounts has been attached and thereby
INR45,321,947,000 (equivalent to RMB3,874,120,000) has been considered as restrictive as of December 31, 2023.
The cases are currently in the hearing stages and not yet concluded.

Management assessed the aforesaid matters related to Xiaomi India, after taking into considerations of opinions
from professional advisors, it is concluded that Xiaomi India has valid grounds to respond to the relevant Indian
authorities. The Group, hence, has not made any provision as of December 31, 2023 pertaining to these matters.

Conclusions of legal proceedings, investigations and allegations could take a long period of time, and the Group
could receive judgments or enter into settlements that may adversely affect its operating results or cash flows.
Quantifying the related financial effects is not practical at this stage.
 2023 ANNUAL REPORT 331

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

38 Commitments

(a) Capital commitments

Capital expenditure contracted for at the end of the years but not yet incurred is as follows:

As of December 31,
2023 2022
RMB’000 RMB’000

Property, plant and equipment 1,068,216 2,366,080

Intangible assets 5,932 1,165,439
Investments 857,726 882,374

1,931,874 4,413,893

(b) Operating lease commitments

The Group leases offices, warehouses, retail stores and servers under non-cancellable operating
lease agreements. The Group has recognized right-of-use assets and lease liabilities for these leases,
except for certain short-term leases, variable lease payments and leases contracted but before the
commencement date as shown in the table below, see Note 17 for further information. The Group’s future
aggregate minimum lease payments under non-cancellable operating leases are as follows:

As of December 31,
2023 2022
RMB’000 RMB’000

Not later than 1 year 278,368 289,127

Later than 1 year and not later than 5 years 550,153 681,126
Later than 5 years 825,079 855,925

1,653,600 1,826,178
332 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

39 Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party
or exercise significant influence over the other party in making financial and operational decisions. Parties are
also considered to be related if they are subject to common control. Members of key management and their
close family members of the Group are also considered as related parties.

The following significant transactions were carried out between the Group and its related parties during the
years presented. In the opinion of the directors of the Company, the related party transactions were carried out
in the normal course of business and at terms negotiated between the Group and the respective related parties.

(a) Significant transactions with related parties

Year ended December 31,
2023 2022
RMB’000 RMB’000

(i) Sales of goods and services

Associates of the Group 349,954 1,413,135
Associates of Lei Jun 47,254 2,251

397,208 1,415,386

(ii) Purchases of goods and services

Associates of the Group 32,017,985 37,142,979
Associates of Lei Jun 4,891 2,741

32,022,876 37,145,720
 2023 ANNUAL REPORT 333

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

39 Related party transactions (continued)

(b) Year end balances with related parties

As of December 31,
2023 2022
RMB’000 RMB’000

(i) Trade receivables from related parties

Associates of the Group 133,432 292,583
Associates of Lei Jun 2,921 3,001

136,353 295,584

(ii) Trade payables to related parties

Associates of the Group 9,698,412 7,171,035
Associates of Lei Jun 2,572 1,767

9,700,984 7,172,802

(iii) Prepayments and other receivables from related parties

Associates of the Group 251,536 454,796
Associates of Lei Jun 37,478 71,783

289,014 526,579

(iv) Other payables and accruals to related parties

Associates of the Group 78,141 85,431
Associates of Lei Jun 82,799 86,461

160,940 171,892

(v) Advance from customers

Associates of the Group 65,271 37,838
Associates of Lei Jun 10,570 80

75,841 37,918

All the balances with related parties above were unsecured, non-interest bearing and repayable within
one year.
334 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

39 Related party transactions (continued)

(c) Loans to related parties

Year ended December 31,
2023 2022
RMB’000 RMB’000

Loans to associates:
At the beginning of the year 1,936 1,682
Loans advanced 50,000 80,940
Loans repaid (2,761) (47,393)
Interest charged 424 (182)
Less: credit loss allowance 757 (43,616)
Currency translation differences 68 10,505

At the end of the year 50,424 1,936

(d) Key management compensation

Year ended December 31,
2023 2022
RMB’000 RMB’000

Salaries 20,557 32,831

Discretionary bonuses 7,140 2,477
Share-based compensation 384,205 399,465
Employer’s contribution to pension schedule 1,821 1,576

413,723 436,349

40 Events after the reporting period

The Company repurchased 138,100,000 Class B ordinary shares of the Company during January and February
2024. The total considerations were approximately HK$1,857,651,730. And the shares repurchased were
subsequently cancelled on March 14, 2024.
 2023 ANNUAL REPORT 335

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

41 Financial position and reserve movement of the Company

(a) Financial position of the Company

As of December 31,
2023 2022
RMB’000 RMB’000

Assets
Non-current assets
Property, plant and equipment 60 245
Investment in subsidiaries 41,000,871 36,687,166
Investment accounted for using the equity method 426,827 837,433
Other assets 79 78

41,427,837 37,524,922

Current assets
Prepayments and other receivables 24,466,383 25,768,288
Cash and cash equivalents 453,104 228,538

24,919,487 25,996,826

Total assets 66,347,324 63,521,748

Equity and liabilities

Equity attributable to owners of the Company
Share capital 407 406
Reserves (Note 41(b)) 62,775,595 60,673,864

Total equity 62,776,002 60,674,270

Liabilities
Current liabilities
Other payables and accruals 3,571,322 2,847,478

Total liabilities 3,571,322 2,847,478

Total equity and liabilities 66,347,324 63,521,748

The balance sheet of the Company was approved by the Board of Directors on March 19, 2024 and was
signed on its behalf:

Lei Jun Lin Bin

336 XIAOMI CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

41 Financial position and reserve movement of the Company (continued)

(b) Reserve movement of the Company

Share-based Currency
Treasury Share compensation translation Capital Accumulated Conversion
shares premium reserve differences reserve losses option Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2023 (190,795) 59,483,288 7,491,132 2,154,679 318,783 (10,338,813) 1,764,799 (9,209) 60,673,864
Loss for the year — — — — — (470,182) — — (470,182)
Purchase of own shares (1,485,385) — — — — — — — (1,485,385)
Cancellation of shares 1,216,644 (1,216,642) — — — — — — 2
Release of ordinary shares from
Share Scheme Trust 21,245 1,788,344 (1,805,864) — — — — — 3,725
Employees share-based
compensation scheme:
— value of employee services
(Note 29) — — 3,240,396 — — — — — 3,240,396
— exercise of share options and
RSUs (Note 29) — 658,545 (580,578) — — — — — 77,967
Share of other comprehensive
income of investments
accounted for using the
equity method — — — — — — — 2,046 2,046
Share of other reserves of
investments accounted for using
the equity method — — — — (1,157) — — — (1,157)
Share consideration for acquisition
of Zimi completed in 2021 — 64,752 — — (64,752) — — — —
Currency translation differences
(Note (a)) — — — 734,319 — — — — 734,319

At December 31, 2023 (438,291) 60,778,287 8,345,086 2,888,998 252,874 (10,808,995) 1,764,799 (7,163) 62,775,595
 2023 ANNUAL REPORT 337

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in RMB unless otherwise indicated)

41 Financial position and reserve movement of the Company (continued)

(b) Reserve movement of the Company (continued)

Share-based Currency
Treasury Share compensation translation Capital Accumulated Conversion
shares premium reserve differences reserve losses option Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At January 1, 2022 (343,730) 59,717,626 6,797,476 (1,566,437) 367,725 (9,725,539) 1,764,799 (93,408) 56,918,512
Loss for the year — — — — — (613,274) — — (613,274)
Purchase of own shares (2,386,143) — — — — — — — (2,386,143)
Cancellation of shares 2,539,078 (2,539,074) — — — — — — 4
Release of ordinary shares from
Share Scheme Trust — 1,315,868 (1,307,612) — — — — — 8,256
Employees share-based
compensation scheme:
— value of employee services
(Note 29) — — 2,794,273 — — — — — 2,794,273
— exercise of share options and
RSUs (Note 29) — 890,469 (793,005) — — — — — 97,464
Share of other comprehensive
income of investments
accounted for using the
equity method — — — — — — — 84,199 84,199
Share of other reserves of
investments accounted for
using the equity method — — — — 49,457 — — — 49,457
Share consideration for acquisition
of Zimi completed in 2021 — 98,399 — — (98,399) — — — —
Currency translation differences
(Note (a)) — — — 3,721,116 — — — — 3,721,116

At December 31, 2022 (190,795) 59,483,288 7,491,132 2,154,679 318,783 (10,338,813) 1,764,799 (9,209) 60,673,864

Note:

(a) Foreign currency translation reserve represents the difference arising from the translation of the financial statements of the
Company as its functional currency in US$, different from its presentation currency as RMB.
338 XIAOMI CORPORATION

DEFINITIONS

“affiliate” with respect to any specified person, any other person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with such
specified person

“Articles” or “Articles of the articles of association of the Company adopted on June 17, 2018 with effect
Association” from Listing and amended on June 2, 2022

“associate(s)” has the meaning ascribed to it in the Listing Rules

“Auditor” PricewaterhouseCoopers, the external auditor of the Company

“Beijing Digital Technology” Beijing Xiaomi Digital Technology Co., Ltd.* (⋙Ṯ⯑䰵㔺䡾䦓㉂㛋昒℮⎺), a
limited liability company established under the laws of mainland China on
December 21, 2010 and our indirect wholly-owned subsidiary

“Beijing Duokan” Beijing Duokan Technology Co., Ltd.* (⋙Ṯ⣜䛍䦓㉂㛋昒℮⎺), a limited liability
company established under the laws of mainland China on February 10, 2010 and
our Consolidated Affiliated Entity

“Beijing Electronic Software” Beijing Xiaomi Electronic Software Co., Ltd.* (⋙Ṯ⯑䰵暽⬒庡Ẹ㉂堕㛋昒℮⎺), a
limited liability company established under the laws of mainland China on July 1,
2014 and our Consolidated Affiliated Entity

“Beijing Wali Culture” Beijing Wali Culture Communication Co., Ltd.* (⋙Ṯ䒨≝㕉⋘⁵㑯㛋昒℮⎺), a
limited liability company established under the laws of mainland China on May 8,
2014 and our Consolidated Affiliated Entity

“Beijing Wali Internet” Beijing Wali Internet Technologies Co., Ltd.* (⋙Ṯ䒨≝䵴䴣䦓㉂㛋昒℮⎺), a
limited liability company established under the laws of mainland China on
June 1, 2009 and our Consolidated Affiliated Entity

“Beijing Wenmi” Beijing Wenmi Culture Co., Ltd* (⋙Ṯ㕉䰵㕉⋘㛋昒℮⎺), a limited liability
company established under the laws of mainland China on December 28, 2016
and our wholly-owned subsidiary
 2023 ANNUAL REPORT 339

“Board” our Board of Directors

“CEO” chief executive officer

“CFO” chief financial officer

“CG Code” the Corporate Governance Code and Corporate Governance Report set out in
Appendix C1 of the Listing Rules

“Class A Shares” class A ordinary shares of the share capital of the Company with a par value of
US$0.0000025 each, conferring weighted voting rights in the Company such that
a holder of a Class A Share is entitled to ten votes per share on any resolution
tabled at the Company’s general meetings, save for resolutions with respect to
any Reserved Matters, in which case they shall be entitled to one vote per share

“Class B Shares” class B ordinary shares of the share capital of the Company with a par value of
US$0.0000025 each, conferring a holder of a Class B Share one vote per share on
any resolution tabled at the Company’s general meetings

“Co-founder” Hong Feng, Li Wanqiang, Lin Bin, Liu De, Wang Chuan, Wong Kong Kat and Zhou
Guangping

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended,
supplemented or otherwise modified from time to time

“Company”, “our Company”, Xiaomi Corporation ⯑䰵暈⚤ (formerly known as Top Elite Limited), a company
or “the Company” with limited liability incorporated under the laws of the Cayman Islands on
January 5, 2010

“Compliance Advisor” Guotai Junan Capital Limited, being the compliance advisor of the Company

“connected person(s)” has the meaning ascribed to it in the Listing Rules

“connected transaction(s)” has the meaning ascribed to it in the Listing Rules

340 XIAOMI CORPORATION

DEFINITIONS

“Consolidated Affiliated the entities we control through the Contractual Arrangements, namely the
Entities”, each a Onshore Holdcos and their respective subsidiaries
“Consolidated
Affiliated Entity”

“Contractual Arrangements” the set of agreements that entered into by each of the WFOEs and the Onshore
Holdcos for the purpose of operations of the Restricted Business of the Group in
the PRC

“Controlling Shareholder(s)” has the meaning ascribed thereto under the Listing Rules and unless the
context otherwise requires, refers to Lei Jun and the directly and indirectly held
companies through which Lei Jun has an interested in the Company, namely,
Smart Mobile Holdings Limited and Smart Player Limited

“Director(s)” the director(s) of the Company

“Group”, “our Group”, the Company, its subsidiaries and the PRC Operating Entities (the financial results
or “the Group” of which have been consolidated and accounted for as a subsidiary of the Company
by virtue of the Contractual Arrangements) from time to time

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the People’s Republic of China

“Hong Kong dollars” Hong Kong dollars, the lawful currency of Hong Kong
or “HK dollars” or “HK$”

“IFRS” International Financial Reporting Standard

“Latest Practicable Date” April 8, 2024, being the latest practicable date prior to the bulk printing and
publication of this annual report

“Listing” the listing of the Class B Shares on the Main Board of the Stock Exchange

“Listing Date” July 9, 2018, the date on which the Shares were listed on the Stock Exchange
 2023 ANNUAL REPORT 341

“Listing Rules” the Rules governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited, as amended, supplemented or otherwise modified from time to time

“Main Board” the stock exchange (excluding the option market) operated by the Stock
Exchange which is independent from and operates in parallel with GEM of the
Stock Exchange

“Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers as set
out in Appendix C3 of the Listing Rules

“Onshore Holdcos” each a (i) Beijing Wali Culture, (ii) Rigo Design, (iii) Xiaomi Inc., (iv) Beijing Duokan,
“Onshore Holdco” (v) Beijing Wali Internet, (vi) Xiaomi Pictures, (vii) Beijing Electronic Software and
(viii) Youpin Information Technology

“PRC” the People’s Republic of China

“PRC Legal Advisor” JunHe LLP

“Pre-IPO ESOP” the pre-IPO employee stock incentive scheme adopted by the Company on
May 5, 2011 and superseded on August 24, 2012 as amended from time to time

“Prospectus” the prospectus of the Company dated June 25, 2018

“Registered Shareholders” the registered shareholders of the Onshore Holdcos

“Reporting Period” the year ended December 31, 2023

“Reserved Matters” those matters resolutions with respect to which each Share is entitled to one
vote at general meetings of the Company pursuant to the Articles of Association,
being (i) any amendment to the Memorandum or Articles, including the variation
of the rights attached to any class of shares, (ii) the appointment, election
or removal of any independent non-executive Director, (iii) the appointment
or removal of the Company’s auditors, and (iv) the voluntary liquidation or
winding-up of the Company
342 XIAOMI CORPORATION

DEFINITIONS

“Rigo Design” Rigo Design (Beijing) Co., Ltd.* (佐⌕庡Ẹ姯姊灭⋙Ṯ灮㛋昒℮⎺), a limited

liability company established under the laws of mainland China on April 24, 2012
and our Consolidated Affiliated Entity

“RMB” or “Renminbi” Renminbi, the lawful currency of mainland China

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as
amended, supplemented or otherwise modified from time to time

“Share(s)” the Class A Shares and/or Class B Shares in the share capital of the Company, as
the context so requires

“Shareholder(s)” holder(s) of the Share(s)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the meaning ascribed to it in section 15 of the Companies Ordinance

“substantial shareholder” has the meaning ascribed to it in the Listing Rules

“Tianjin Commercial Factoring” Xiaomi Commercial Factoring (Tianjin) Co., Ltd* (⯑䰵┈㤯ᾟ䏈灭⣫㳧灮㛋昒屮ẽ
℮⎺), a limited liability company established under the laws of mainland China
on March 21, 2018 and our indirect wholly-owned subsidiary

“United States” or “US” the United States of America, its territories, its possessions and all areas subject
to its jurisdiction

“US$” United States dollars, the lawful currency of the United States

“weighted voting rights” has the meaning ascribed to it in the Listing Rules
or “WVR”
 2023 ANNUAL REPORT 343

“WFOEs”, each a “WFOE” Beijing Baien, Xiaomi Mobile Software, Beijing Wenmi, Beijing Digital Technology,
Tianjin Commercial Factoring, Beijing Wali, Xiaomi Communications and Xiaomi
Youpin Technology

“WVR Beneficiary” has the meaning ascribed to it in the Listing Rules

“Xiaomi Communications” Xiaomi Communications Co., Ltd* (⯑䰵応姌㉂堕㛋昒℮⎺), a limited liability

company established under the laws of mainland China on August 25, 2010 and
our indirect wholly-owned subsidiary

“Xiaomi EV” Xiaomi EV, Inc., an exempted company incorporated under the laws of the
Cayman Islands with limited liability and a direct wholly-owned Subsidiary of
the Company

“Xiaomi Finance” Xiaomi Finance Inc., an exempted company with limited liability incorporated
under the laws of the Cayman Islands on February 15, 2018 and our direct
wholly-owned subsidiary

“Xiaomi Finance Group” Xiaomi Finance and its subsidiaries and consolidated affiliated entities from time
to time

“Xiaomi Inc.” Xiaomi Inc.* (⯑䰵䦓㉂㛋昒屮ẽ℮⎺), a limited liability company established

under the laws of mainland China on March 3, 2010 and our Consolidated
Affiliated Entity

“Xiaomi Pictures” Xiaomi Pictures Co., Ltd.* (⯑䰵⼳㤯㛋昒屮ẽ℮⎺), a limited liability company
established under the laws of mainland China on June 7, 2016 and our
Consolidated Affiliated Entity

“Xiaomi Youpin Technology” Xiaomi Youpin Technology Co. Ltd.* (⯑䰵㛋⒃䦓㉂㛋昒℮⎺), a limited liability
company established under the laws of mainland China on May 8, 2018 and our
indirect wholly-owned subsidiary
344 XIAOMI CORPORATION

DEFINITIONS

“XMF Share Option Scheme I” the first share option scheme adopted by Xiaomi Finance on June 17, 2018, as
amended from time to time

“XM Group” our Group other than the Xiaomi Finance Group

“Youpin Information Technology” Youpin Information Technology Co., Ltd.* (㛋⒃ᾣ〱䦓㉂㛋昒℮⎺), a limited
liability company established under the laws of mainland China on April 4, 2018
and our Consolidated Affiliated Entity

“2018 Share Award Scheme” the share award scheme adopted by the Company on June 17, 2018

“2018 Share Option Scheme” the share option scheme adopted by the Company on June 17, 2018

“2023 Share Scheme” the share scheme adopted by the Company on June 8, 2023

“%” per cent

 Stock Codes: 1810 (HKD counter) and 81810 (RMB counter)

2023 ANNUAL REPORT

2023 ANNUAL REPORT