2021 Annual Report
Stock Code: 601231 Abbreviated Name: USIConvertible Bond Code: 113045 Abbreviated Name: USI Convertible Bond
Universal Scientific Industrial (Shanghai) Co., Ltd.
2021 Annual Report
Note: This Report has been prepared in both Chinese and English. Should there be any discrepancies ormisunderstandings between the two versions, the Chinese version shall prevail.
2021 Annual Report
Important Notice
I. The Board of Directors, the Board of Supervisors, directors, supervisors and seniormanagement of the Company hereby assure that the content set out in the annual report istruthful, accurate and complete, and contains no misrepresentations, misleading statements ormaterial omissions, and are individually and collectively responsible for the content set out therein.
II. All directors attend the board meeting.
III. Deloitte Touche Tohmatsu Certified Public Accountants LLP has issued a standard andunqualified auditor's report for the Company.
IV. Jeffrey Chen, person in charge of the Company, Tan-Yang Liu, person in charge of accounting,and Chern Yuh-Huah, person in charge of the accounting firm (accountant in charge) declare thatthe financial report in the annual report is truthful, accurate and complete.
V．The proposal of profit distribution for the reporting period deliberated and passed by theBoardRegarding its profit distribution plan for 2021, USI is going to distribute a cash dividend of RMB 2.60(tax included) for every 10 shares on the basis of the total share capital on the record date forimplementing the plan after deducting the number of shares in its special buy-back securities account,without bonus share or transfer of public reserve into share capital, and all the remaining undistributedprofits shall be carried forward for distribution in the following years. If the total share capital of theCompany and the number of shares in the special buy-back account of the Company change before therecord date for implementing the plan, the cash dividend per share to be distributed shall remainunchanged and the total amount of distribution shall be adjusted accordingly.The Company's Profit Distribution Plan for the 2021 was deliberated and approved at the 15th meetingof the fifth session of the Board of Directors of the Company, and it still needs to be deliberated at theCompany's 2021 annual general meeting of shareholders.
VI. Risk disclosure for forward-looking statements
√Applicable □ Not Applicable
This report involves forward-looking statements such as future plans, and does not constitute a materialcommitment of the Company to investors. Investors are requested to pay attention to investment risks.
VII. Are there any funds occupied by controlling shareholders and their affiliates for non-operational purposes?No
VIII. Is there any external guarantee in violation of the prescribed decision-making process?No
IX. Are more than half of the directors unable to guarantee the truthfulness, accuracy andcompleteness of the annual report disclosed by the Company?No
X. Major risk disclosureThe major risks facing the Company are described in “Possible Risks” of “Discussion and Analysis ofCorporate Development in the Future” in this report.
XI. Other information
□ Applicable √Not Applicable
2021 Annual Report
Contents
Section I Definitions ...... 4
Section II Company Profile and Key Financial Indicators ...... 6
Section III Management Discussion and Analysis ...... 11
Section IV Corporate Governance ...... 41Section VEnvironmental and Social Responsibility ...... 64
Section VI Major Events ...... 74
Section VII Changes in Share Capital and Information of Shareholders ...... 102
Section VIII Related Information of Preferred Stocks ...... 110
Section IX Related Information of Bonds ...... 111
Section X Financial Statements ...... 113
| Catalog of files for reference | Accounting statements signed and sealed by the person in charge of the Company, the person in charge of accounting and the person in charge of the accounting firm |
| Original audit report sealed by the accounting firm and signed and sealed by certified public accountants | |
| Original copies of all documents and announcements of the Company publicly disclosed in newspapers designated by CSRC during the reporting period |
2021 Annual Report
Section I Definitions
I. DefinitionsIn this report, the following terms shall have the following meanings unless the context otherwiserequires:
| The Company, the Group, USI, or the listed company | Universal Scientific Industrial (Shanghai) Co., Ltd. |
| SSE | Shanghai Stock Exchange |
| USI Enterprise Limited | USI Enterprise Limited, the controlling shareholder of the Company, registered in Hong Kong |
| Universal Scientific Industrial Co., Ltd. | Universal Scientific Industrial Co., Ltd., a company listed on the Taiwan Stock Exchange under the stock code 2350, which terminated its listing on June 17, 2010 |
| ASE Technology Holding Co., Ltd. | ASE Technology Holding Co., Ltd., a company listed on the Taiwan Stock Exchange under the stock code 3711 |
| ASE Inc. | Advanced Semiconductor Engineering, Inc., formerly listed on the Taiwan Stock Exchange under the stock code 2311 and delisted in 2018. |
| ASE (Shanghai) Inc. | ASE (Shanghai) Inc., a subsidiary of ASE Inc. in which it holds 100% shares |
| Universal Global Technology Co., Limited | Universal Global Technology Co., Limited, a subsidiary of the Company in which the Company holds 100% shares |
| Universal Global Technology (Shanghai) Co., Ltd., Jinqiao Facility | Universal Global Technology (Shanghai) Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| USI Electronics (Shenzhen) Co., Ltd., Shenzhen Facility | USI Electronics (Shenzhen) Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| Universal Global Technology (Kunshan) Co., Ltd., Kunshan Facility | Universal Global Technology (Kunshan) Co., Ltd., a wholly-owned subsidiary of the Company |
| Universal Global Electronics Co., Ltd. | Universal Global Electronics Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| Universal Global Technology (Huizhou) Co., Ltd., Huizhou Facility | Universal Global Technology (Huizhou) Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| Universal Global Scientific Industrial Co., Ltd. | Universal Global Scientific Industrial Co., Ltd., registered in Taiwan, a subsidiary of the Company in which the Company holds 100% shares |
| USI Vietnam, Vietnam Facility | Universal Scientific Industrial Vietnam Company Limited, a subsidiary of the Company in which the Company holds 100% shares |
| FAFG | Financiere AFG, a simplified joint stock company established and validly existing under the laws of France and a subsidiary of the Company in which the Company holds 100% shares |
| ASDI | ASDI Assistance Direction, a simplified joint stock company established and validly existing under the laws of France, controlled by Gilles Baruk Benhamou, a director of the Company |
| AFG | Asteelflash Group, a simplified joint stock company established and validly existing under the Laws of France. It is a subsidiary of FAFG in which FAFG holds 100% shares. Since January 1, 2022, it has been merged into its parent company FAFG. |
| Asteelflash Suzhou | Asteelflash (Suzhou) Co., Ltd., a subsidiary of FAFG in which FAFG holds 100% shares |
| USI Poland, Poland Factory | Formerly known as Chung Hong Electronics Poland SP.Z. O.O; the Company completed the acquisition of 100% of its equity on June 22, 2020, and it was renamed Universal Scientific Industrial Poland Sp.z o.o. |
| Memtech | Memtech International Ltd., which was listed on the Singapore Stock Exchange in 2004, and was delisted on August 22, 2019. The Company indirectly holds 42.23% of its equity. |
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| EMS | Electronic Manufacturing Services, the services provided by manufacturers for electronic brand owners, such as manufacturing, procurement, partial design and logistics |
| ODM | Original Design and Manufacturer |
| DMS | Design and Manufacturing Services |
| D(MS)2 | An acronym for DMS combined with Miniaturization and Solution |
| SMT | Surface Mount Technology, a new generation of electronic assembly technology, which compresses traditional electronic components into components that mare tens of times smaller than their original volume and realizes high-density, highly reliable, miniaturized and low-cost assembly of electronic products, as well as automated production. The process for assembling components onto printed (or other) substrates is called SMT process, and the associated assembly equipment is called SMT equipment. |
| PCB | Printed Circuit Board, known as the “cornerstone” of electronic products. A large number of electronic parts used in electronic products are embedded on PCBs of different sizes. In addition to fixing parts, the main function of PCBs is to provide circuit connections between various parts. |
| SiP | System in Package; multiple functional wafers, including processors and memory wafers, are integrated into a package according to the application scenarios, the number of package substrate layers and other factors, so as to achieve a basic package scheme with complete functions |
| CAGR | Compound Annual Growth Rate |
| The reporting period or current period | January 1, 2021 to December 31, 2021 |
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Section II Company Profile and Key Financial IndicatorsI. Company Profile
| Name in Chinese | 环旭电子股份有限公司 |
| Abbreviation in Chinese | 环旭电子 |
| Name in English | Universal Scientific Industrial (Shanghai) Co., Ltd. |
| Abbreviation in English | USISH |
| Legal representative | Jeffrey Chen |
II. Contact Persons and Contact Information
| Secretary of the Board of Directors | Securities affairs representative | |
| Name | Jinpeng Shi | Lili Liu |
| Address | F/5, Building B, 169 Shengxia Road, Pudong New Area, Shanghai | F/5, Building B, 169 Shengxia Road, Pudong New Area, Shanghai |
| Tel. | 021-58968418 | 021-58968418 |
| Fax | 021-58968415 | 021-58968415 |
| Public@usiglobal.com | Public@usiglobal.com |
III. Basic Information
| Registered address | 1558 Zhangdong Road, Integrated Circuit Industrial Zone, Zhangjiang Hi-tech Park, Shanghai |
| Change record of registered address | None |
| Office address | F/5, Building B, 169 Shengxia Road, Pudong New Area, Shanghai |
| Zip code of office address | 201203 |
| Website | www.usiglobal.com |
| Public@usiglobal.com |
IV. Information Disclosure and Place at Which the Report Is Available
| Names and websites of press media on which the Company discloses its annual report | Shanghai Securities News, China Securities Journal, Securities Times, and Securities Daily |
| Website of the stock exchange on which the Company discloses its annual report | www.sse.com.cn |
| Annual report available at | Securities Department of the Company |
V. Stock Profile
| Stock profile | ||||
| Stock class | Listed on | Stock abbreviation | Stock code | Stock abbreviation before change |
| A shares | Shanghai Stock Exchange | USI | 601231 | None |
| Convertible corporate bonds that can be converted into A shares of the Company | Shanghai Stock Exchange | USI Convertible Bond | 113045 | None |
VI. Other Relevant Information
| Accounting firm hired by the Company (within China) | Name | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Office address | F/30, 222 East Yan’an Road, Shanghai |
2021 Annual Report
| Names of accountants who give their signatures | Yuan Shouqing, and Hu Ke | |
| Sponsor organization that performs the duty of continuous supervision during the reporting period | Name | Haitong Securities Co., LTd. |
| Office address | 689 Guangdong Road, Shanghai | |
| Names of sponsor representatives who give their signatures | Zhang Zihui, and Yang Yang | |
| Period of continuous supervision | April 2, 2021 to December 31, 2022 | |
| Financial consultant who performs the duty of continuous supervision during the reporting period | Name | Zhong De Securities Company Limited |
| Office address | F/22, Deutsche Bank Tower, China Central Place, 81 Jianguo Avenue, Chaoyang District, Beijing, China | |
| Names of financial consultant representatives who give their signatures | Wang Wei, and Guan Renhao | |
| Period of continuous supervision | December 2020 to December 2021 |
VII. Key Accounting Data and Financial Indicators in the Past Three Years(I) Key accounting data
Unit: yuan Currency: RMB
| Key accounting data | 2021 | 2020 | YoY (%) | 2019 | |
| Before adjustment | After adjustment | ||||
| Operating revenue | 55,299,654,770.21 | 47,696,228,222.53 | 47,696,228,222.53 | 15.94 | 37,204,188,424.22 |
| Net profits attributable to shareholders of the listed company | 1,857,968,074.82 | 1,739,435,448.10 | 1,739,435,448.10 | 6.81 | 1,262,103,937.04 |
| Net profits attributable to shareholders of the listed company net of non-recurring gains/losses | 1,695,083,855.46 | 1,615,438,890.95 | 1,615,438,890.95 | 4.93 | 1,044,674,761.73 |
| Net cash flows from operating activities | -1,102,446,978.90 | 1,436,523,674.10 | 1,436,523,674.10 | -176.74 | 2,425,772,253.61 |
| End of 2021 | End of 2020 | YoY (%) | End of 2019 | ||
| Before adjustment | After adjustment | ||||
| Net assets attributable to shareholders of the listed company | 13,081,960,207.42 | 12,049,820,179.95 | 12,049,820,179.95 | 8.57 | 10,275,615,667.91 |
| Total assets | 35,856,733,503.81 | 31,070,402,620.02 | 30,938,495,875.49 | 15.40 | 21,911,851,349.31 |
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(II) Key financial indicators
| Key financial indicators | 2021 | 2020 | YoY (%) | 2019 | |
| Before adjustment | After adjustment | ||||
| Basic EPS (yuan/share) | 0.85 | 0.80 | 0.80 | 6.25 | 0.58 |
| Diluted EPS (yuan/share) | 0.83 | 0.80 | 0.80 | 3.75 | 0.58 |
| Basic EPS net of non-recurring gains/losses (yuan/share) | 0.77 | 0.74 | 0.74 | 4.05 | 0.48 |
| Weighted average ROE (%) | 14.83 | 15.88 | 15.88 | Down 1.05 pct. | 12.93 |
| Weighted average ROE net of non-recurring gains/losses (%) | 13.53 | 14.75 | 14.75 | Down 1.22 pct. | 10.70 |
Explanation of the Company’s key accounting data and financial indicators in the past three years at theend of the reporting period
√Applicable □Not Applicable
The net cash flow from operating activities in 2021 decreased by 176.74% mainly due to the increase ininventories in response to customer orders in the current period.
VIII. Accounting Data Differences under Domestic and Overseas Accounting Standards(I) Differences in net profits and net assets attributable to shareholders of the listed company inthe financial report disclosed under international accounting standards and Chinese accountingstandards
□Applicable √Not Applicable
(II) Differences in net profits and net assets attributable to shareholders of the listed company inthe financial report disclosed under overseas accounting standards and Chinese accountingstandards
□Applicable √Not Applicable
(III) Explanation of differences between Chinese accounting standards and overseas accountingstandards
□Applicable √Not Applicable
IX. Key Financial Data by Quarter for 2021
Unit: yuan Currency: RMB
| Q1 (January - March) | Q2 (April - June) | Q3 (July - September) | Q4 (October - December) | |
| Revenue | 10,934,611,963.62 | 11,338,662,842.90 | 14,244,559,091.53 | 18,781,820,872.16 |
| Net profits attributable to shareholders of the listed company | 271,906,070.22 | 279,133,337.38 | 571,759,229.79 | 735,169,437.43 |
| Net profits attributable to shareholders of the | 232,201,444.36 | 230,612,730.76 | 541,472,044.59 | 690,797,635.75 |
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| listed company net of non-recurring gains/losses | ||||
| Net cash flows from operating activities | -217,236,055.57 | -385,456,159.36 | -1,241,451,416.67 | 741,696,652.70 |
Explanation of differences between quarterly data and those disclosed in regular reports
□Applicable √Not Applicable
X. Items and Amounts of Non-Recurring Gains/Losses
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Items of non-recurring gains/losses | Amount in 2021 | Notes (if applicable) | Amount in 2020 | Amount in 2019 |
| Gains/losses from disposal of non-current assets | -9,115,989.64 | See Note (V), 56 and 58 (V) 56, 58 for details | 1,172,336.59 | 1,318,458.06 |
| Government grants included in current gains/losses, excluding those closely related to operating activities of the Company, or regular government grants in a certain quota in accordance with state policies | 50,678,106.85 | See Note (V), 52 and 53 (V) 52, 53 for details | 76,779,477.12 | 52,011,788.56 |
| Gains/losses on changes in fair value arising from holding trading financial assets, derivative financial assets, trading financial liabilities and derivative financial liabilities, and investment income from disposal of trading financial assets, derivative financial assets, trading financial liabilities, derivative financial liabilities and other debt investments, except the effective hedging business related to the normal operation of the Company, | 134,150,704.71 | See Note (V), 6 (V) 6 for details | 57,415,602.04 | 175,214,439.86 |
| Write-back of receivables and provisions for contract assets impairment subject to separate impairment tests | 2,836,069.00 | See Note (V), 57 and 58 (V) 56, 58 for details | - | - |
| Other non-operating income or expenditures | 18,576,128.64 | See Note (V), 57 and 58 (V) 57, 58 for details | 11,899,780.26 | 11,116,543.38 |
| Less: Enterprise income tax affected | 34,238,090.20 | 22,910,526.54 | 22,248,382.17 | |
| Non-controlling interest affected (after tax) | 2,710.00 | 360,112.32 | -16,327.62 | |
| Total | 162,884,219.36 | 123,996,557.15 | 217,429,175.31 |
Explanation on defining a non-recurring gain/loss item listed in Interpretation Pronouncement onInformation Disclosure Criteria for Public Companies No. 1 - Non-Recurring Gains/Losses as arecurring gain/loss item
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□Applicable √Not Applicable
XI. Items Measured at Fair Value
□Applicable √Not Applicable
Unit: yuan Currency: RMB
| Item | Opening balance | Ending balance | Change in the current period | Impact on profit of the current period |
| Financial assets held for trading | 182,315,272.70 | 96,480,087.56 | -85,835,185.14 | 31,292,952.87 |
| Other equity instruments | 41,351,831.65 | 75,957,194.28 | 34,605,362.63 | |
| Other non-current financial assets | 152,935,434.70 | 236,978,820.68 | 84,043,385.98 | 15,032,169.92 |
| Financial liabilities held for trading | -976,413.16 | -18,402,480.68 | -17,426,067.52 | -1,736,900.19 |
| Total | 375,626,125.89 | 391,013,621.84 | 15,387,495.95 | 44,588,222.60 |
XII. Other information
□Applicable √Not Applicable
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Section III Management Discussion and Analysis
I. Discussion and Analysis of OperationsIn 2021, as the Company consolidated financial statements with FAFG and its EMS/ODM businessaccelerated, the Company realized annual operaing revenue of RMB 55.30 billion, an increase of 15.94%over RMB 47.70 billion in 2020, with revenue of all categories increasing year on year (YoY).
The Company achieved an operating profit of RMB 2.13 billion in 2021, an increase of 8.67% over RMB
1.96 billion in 2020. The total profit was 2.14 billion yuan, an increase of 8.38% compared with RMB 1.97billion in 2020. The net profit attributable to shareholders of the listed company was RMB 1.858 billion, anincrease of 6.81% over RMB 1.74 billion in 2020. The net profit attributable to shareholders of the listedcompany net of non-recurring gains/losses was RMB 1.70 billion, an increase of RMB 80 million or 4.93%over RMB 1.62 billion in 2020.
II. Industry of the Company during the Reporting Period(I)Basic situation of the industry
The EMS industry mainly provides overall supply chain solutions such as design, engineeringdevelopment, raw material procurement, manufacturing, logistics, testing and after-sales service forvarious electronic products and equipment.
The rapid development of downstream industries such as tablet computers, smart TVs, smart wearabledevices, AR/VR and smart home has driven the healthy development of precision electronic components,smart acoustic machines and smart hardware industries.The rise of China’s manufacturing industry and the continuous and rapid expansion of the electronicconsumer market have driven the sustainable development of domestic electronic manufacturingoutsourcing industry. After more than 20 years of investment by world-leading EMS providers in China,China has become the most active and competitive region in the global EMS industry.
(II)Industry characteristics and development trends
1. The industry has a large overall scale, with high industry concentration and fiercecompetition
In 2021, the industrial scale of the global EMS industry has exceeded USD 640 billion, with highindustry concentration. The top 10 manufacturers in the world accounted for more than 70% of the totalrevenue. Leading enterprises in the industry have accumulated rich customer resources and industryexperience, with large assets and revenues, and maintained a relatively stable leading position. Due tothe accelerated upgrading of electronic products and equipment industry, shortened product life cycleand high technical transparency, the industry is experiencing increasingly fierce competition in sub-sectors in the industry. Enterprises in the industry need to actively expand new products and customerincremental demand, improve process, intelligent manufacturing and new product research anddevelopment, and increase product added value.
2. 5G drives consumer electronics technology innovation and product upgrade
5G has ushered in the era of “Internet of Everything”. New technologies and products such as cloudcomputing, AI, Internet of Things, smart wearables and AR/VR have been accelerated and promoted,and the application depth and breadth of smart interactive products such as smart phones, tabletcomputers, smart speakers, wearable devices and automotive electronics have been continuouslyexpanded. Innovative products of consumer electronics are the demand increment most concerned by theEMS industry.
3. The demand for electronic products related to automobiles and cloud infrastructure hasgrown rapidly
In the global context of “carbon neutrality”, the sales volume of new energy electric vehicles has greatlyincreased. The proportion of electric vehicles in the global sales of new vehicles will continue to growrapidly. The demand for automotive electronics related to electric vehicles has surged, the upgrading oftechnologies such as intelligent cockpit and intelligent navigation has accelerated, and the proportion of
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manufacturing service outsourcing has increased. In addition, 5G applications have driven broadbandinfrastructure, and the continuously growing cloud business scale of technology giants has driven theheavy investment in cloud infrastructure, and the demand for related electronic products such as servers,switches and storage has grown rapidly.
(III)Periodic, regional and seasonal characteristics of the industry
1. Periodicity of industry development
The development of the EMS industry has a great cyclical relationship with downstream industries, andthe electronic products industry is closely related to the macroeconomic situation. When the economy isbooming, the market demand for electronic products is large and the growth rate is high, which drivesthe production and sales of the EMS industry; when the economy is in a downturn, the purchasing powerof consumers and enterprises declines, the demand for products decreases, and the production and salesvolume of industries decreases.
2. Regional characteristics of industry
The global EMS industry rose in Europe and America, and then gradually shifted to South America,Southeast Asia and Taiwan of China. At present, China, South Asia, Eastern Europe, South America andother regions have become the fastest growing areas of EMS industry due to their advantages of lowproduction costs.
At present, the global electronic intelligent manufacturing service enterprises are mainly concentrated inAsian countries or regions such as China, India and Vietnam. Enterprises in the industry sell their mainproducts to manufacturing and assembly enterprises or directly to downstream brand owners, and finallythe products will be sold all over the world.
3. Seasonal characteristics of industry operation
The electronic intelligent manufacturing service industry has certain seasonal characteristics in terms oforders and revenues. The first and second quarters of each year are traditionally off-seasons, the thirdquarter is the peak sales season, and the fourth quarter is the peak shipment season. Considering thefrequent release of new consumer electronics by brand owners in the second half of a year and theinfluence of Spring Festival in the first half of a year, the sales revenue of enterprises in this industry inthe second half of each year is generally higher than that in the first half of each year.(IV) Competitive position of the Company in the industry
The Company is a world-renowned manufacturer in the EMS industry. In 2020, USI ranked 12
thamongglobal EMS providers, with top-ranking annual revenue growth rate and net operating margin in theindustry. The Company is an industry leader in SiP miniaturization technology, leading the industry inmany business segments.
III. Core Business during the Reporting Period(I) Key Products and SolutionsAs a world-leading D(MS)
manufacturer, by providing brand customers with more value-added design,manufacturing and related services, USI participates more in developing industry-wide applicationsolutions, and enhances the manufacturing value added of products and overall services. In the future,following the core concept of creating value for customers, USI will attach more importance to Solutionsand Services among the D(MS)
, strive to expand the base of high-quality customers and strengthenpartnership with them, gradually transform the Company from a manufacturing service provider to atotal solution provider and comprehensive service provider in the fields mentioned below.
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1. Wireless communication products
In the field of wireless communication, the Company, with a strong design and manufacturing team,provides customers with design, verification manufacturing and related services for enterprise-classwireless interconnection products and highly competitive wireless module products by collaboratingwith the world's leading wireless communication IC companies. From product concept, prototype design,testing and verification to mass production, USI, with its R&D team and management system, offerscustomers with a suitable R&D schedule and reliable quality assurance to meet customer needs, achieverapid product launches, and enhance customers' competitive advantages. Wireless communicationproducts mainly include wireless communication System-in-Package (SiP) modules, system-levelInternet of Things (IoT) modules, IoT modules, low-power-consumption telecommunication modules,enterprise-level wireless routers, etc.
2. Consumer electronics
The Company is the industry's leading manufacturer of smart wearable SiP modules. As smart wearablestend to be “light, thin, short and small”, the system in package (SiP) technology has become the key toproviding highly integrated and miniaturized designs. Since 2013, the Company has been committed tothe miniaturization and highly integrated development of SiP modules related to wearables, includingnew advanced packaging technologies such as local spacing shielding, selective plastic packaging, filmplastic packaging, selective sputtering, shape cutting, dry ice cleaning and 3D steel stencil printing. At
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present, smart wearable SiP modules include smart watch SiP module, true wireless earbuds (TWS)module, and optical heart rate module.
In addition to smart wearable SiP modules, the Company also operates video products, connectingdevices and other product fields, mainly including LED light bars, timing control boards, source-leveldrive boards, smart stylus pens, electromagnetic sensing boards, and hair removal machines.
3. Industrial electronics
With sophisticated professionals in product R&D, design, project management, manufacturing andlogistics support, USI is committed to the industrial product market. The Company provides customerswith the most cost-effective, optimized design and a full package of solutions with a strict quality controlprocess, meeting their needs from mass production, diversified production, to customized production.Industrial products mainly include point-of-sale (POS) and smart handheld devuce (SHD).
4. Computer and storage
On the market of computer motherboards and peripheral applications, the Company, by adoptingefficient manufacturing process and strict quality management system, shortens the time to market andmass production for customers' products, improving efficiency while saving costs. USI’s computermotherboard products include motherboards for servers and workstations, and SipSet modules forlaptops and tablets, etc. USI’s computer peripheral products are mainly devices that connect laptops toperipherals, such as docking station and dongle.Storage and interconnection products include solid-state drives (SSDs) and enterprise-class high-speedswitches and network adapters. USI has industry-leading R&D capabilities for new technologies, suchas fibre channel, SAS, SATA, 10 gigabit ethernet, dual port I/O and wireless broadband, etc., and hasdeveloped diversified products. The Company is a leading SSD design and manufacturing partner,providing customers with services in manufacturing, hardware design, product verification andcustomized design of test platform. The Company's OEM products, including high-speed switches andhost channel adaptor (HCA) cards, are must-have devices for enterprises, institutions, computing centersand data centers.
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5. Automotive electronics
With over three decades of experience in the automotive industry, USI provides turnkey DMS solutionsand global manufacturing services. The Company has been devoted to improving overall quality controland reducing costs through complete logistics services and flexible IT infrastructure. As a leadingmanufacturer on the automotive electronics market, USI has built long-term partnership with well-known automotive electronics suppliers across the world.Automotive electronic products include voltage regulators, rectifiers, battery management systems,power modules for EV charging, hydraulic control modules, motor controllers, external LED lighting,Integrated Electric Parking Brake (IEPB), in-vehicle infotainment system control unit or control panel,etc.
6. Medical electronics
Medical electronic products are mainly home care and hospital analytical equipment, including vitaminK antagonist therapy equipment, cardiovascular equipment and glucose metering device.(II) Miniaturization design and productsUSI has a leading position in SiP miniaturization technology. By integrating several functional ICs andaccessory circuits into a module, miniaturized system modules effectively reduce the area of functionalmodules, improve the efficiency of circuit system, and ensure the effectiveness of electromagneticinterference shielding. With the trend of miniaturization, personalization and functional diversificationof consumer electronics, the modules applied in these products are also developing rapidly towardsminiaturization and integration of multiple functions, which becomes the mainstream of similar moduleproducts.Through miniaturization technology, most electronic systems, especially for mobile devices, IoT devices,and wearables, can be reduced in size to meet market demands. As SiP is quite complex with regard tothe capital input, technologies and product design, the Company will continue to increase investment inmulti-functional, more complex and more precise modules to stay on the cutting edge in the industry. Inthe era of 5G and IoT, the application of wearable devices will be more extensive and diversified, andthere will be larger demands for lighter, thinner, shorter and smaller electronic products, and theapplication of miniaturization technology will be accelerated.The design and manufacturing ability of “miniaturized” products is one of the core competitiveness ofthe Company, and the Company will strive to expand the application and market of miniaturizedmodules. At the same time, in the fields of wireless communication, computers, wearables, solid-statestorage, industrial electronics, automotive electronics and other products, the Company will also expandthe application of miniaturization technology and develop modular products such as SOM (System on
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Module) and SipSet.
At present, USI's SiP products cover WiFi modules, UWB modules, mmWave antenna-in-package (AiP)modules, fingerprint sensor modules, and modules for smart wearables such as watches and earbuds.
IV. Analysis of Core Competitiveness during the Reporting Period
√Applicable □ Not Applicable
As a large design and manufacturing service provider in the field of electronic products, the Companyhas the following core competitive advantages:
(I) Prominent position in the industry and standardized corporate governance
The Company is a world-renowned manufacturer in the EMS industry. In the global ranking of EMSproviders, the Company ranked 12th in revenue scale in 2020, with its annual revenue growth rate andnet operating margin of main business ranking top in the industry. The Company is a leadingmanufacturer in many business segments and an industry leader in SiP miniaturization technology, witha prominent position in the industry.The Company attaches great importance to internal control and corporate governance, strictly abides bylaws and regulations, and the relevant regulatory requirements of Shanghai Stock Exchange as well asrequirements of Taiwan Stock Exchange and New York Stock Exchange because of its parent companyASE Technology Holding Co., Ltd. The Company has been rated A for information disclosure byShanghai Stock Exchange for the last four consecutive years, and won a series of honors for itsoperations and governance.
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(II) Global layout and advantages in localized services
In December 2020, the Company completed the acquisition of AFG, the second largest EMS company inEurope. At present, it has 27 production bases in 10 countries (including regions) including Chinesemainland, Taiwan, the United States, France, Germany, Britain, Czech Republic, Mexico, Poland,Tunisia and Vietnam, serving world-renowned brand owners. Through its global layout, the Companynot only globalizes its business cooperation and production bases, but also focuses on the global marketand integrates global resources to become a more international company.
2021 Annual Report
(III) Diversified business areas and rich product portfolio
The Company not only has the comprehensive strength of professional design and manufacture ofelectronic products (covering electronic components, spare parts and complete machines) and systemassembly, but also has the advantages of strategic selection of sub-sectors and integration of products.The Company's product portfolio is “rich and balanced”, covering five major fields, such as 3C(communication, consumption and computer) products, industrial electronics, medical care, automotiveelectronics, etc. On the basis of “selecting the best among the best”, the Company implements horizontalintegration across sub-sectors and industries, conforms to the development trend of continuousintegration of electronic industry, dynamically realizes the optimal combination of its products, andpromotes its sustainable and stable development. At the same time, the Company will strengthen thevertical integration of core components and complete machines, highlight service value, enhancecustomer engagement and expand quality customers, and then consolidate and enhance its strategicposition as an integrated service provider in the supply chain.
The Company always attaches importance to judging the industry development and grasping marketopportunities. The Company has established long-term and stable supply chain partnership with manyinternational first-class large-scale electronic product brands, and occupies an important position in thesupply chain of its core products. Based on the close cooperation with the world-class electronic brandsand the close follow-up of the industry technology development trend, the Company can quicklyrespond to the changes in market demand, and make forward-looking deployment and advanced researchand development of new products in time. At the end of 2020, the Company set up a MiniaturizationCompetence Center (MCC), committed to becoming a benchmark technology innovation engine in theindustry, serving the needs of domestic and foreign customers for miniaturized and modular productsaround smart phones, smart wearables, automotive electronics and other fields, and providing “one-stopservice” from design to manufacturing. In April 2021, the Company started Corporate Venture Capital(CVC). Taking business collaboration as the starting point, it makes strategic investment in upstream anddownstream of the industrial chain, organically combines industrial empowerment with capital operation,and incubates business sectors and potential partners with growth potential through the investment ofsupporting funds and resources, so as to serve the medium and long-term corporate developmentstrategy of enterprises, establish an closed loop of industrial ecology and continuously enhanceenterprise value.(IV) Focus on automation and intelligent manufacturing
As a global leader in electronic design and manufacturing, the Company has been taking “intelligentmanufacturing” as one of its important business strategies. After more than 40 years of development, theCompany has the ability of large-scale production management in the electronic manufacturing industry,and has formed a distinctive, industry-leading and effective production and operation management andinternal control system in its long-term management practice. The Company can timely and efficientlypurchase all kinds of raw materials according to customer needs, complete the assembly of all finishedproducts and related after-sales service, respond quickly to market changes, shorten the delivery cycleand improve production efficiency through the optimization of various supply processes.
The Company uses the mainstream I4.0 automation technology to realize the intelligent manufacturing
2021 Annual Report
roadmap. At present, technologies that have been introduced include internal automation equipmentcommunication network supporting 5G and 4G, Automatic Material Handling Systems (AMHS), fullyautomated manipulator testing unmanned workshop, and real-time production equipment statusmonitoring with remote access dashboard; artificial intelligence (AI) technology has been applied to themanagement of key production equipment, production systems and product inspection systems.
(V) Product innovation driven by R&D
The Company always attaches importance to technology R&D, and constantly increases investment inR&D. From 2019 to 2021, the Company invested RMB 1.37 billion, RMB 1.576 billion and RMB 1.64billion respectively in R&D. By the end of 2021, the Company had a R&D team of 2,332 people, andthe Company had obtained 696 patents with 173 patents under application.The Company is a global leader in SiP technology. In 2021, it integrated a number of advancedtechnologies on the miniaturized and multifunctional SiP, such as double-sided plastic packaging whichcan ensure the high integration and design flexibility of products and realize double-sidedelectromagnetic shielding. The Company has successfully developed a new spacing shieldingtechnology that uses metal frames and laser slotting technology on packaging products, so that theproducts have greater flexibility in design and application.
In addition to miniaturization technology for wearable and communication products, the Companyprovides multi-process services of electronic packaging process, high-density SMT process and “EMS+”(Electronics Manufacturing Service Plus) for storage, industrial and automotive electronic products.
Based on the advantages of advanced technology and core processes, the Company achieved newbreakthroughs in product innovation in 2021. The automotive electronics business has obtained themanufacturing certification of ISO26262; the application products of electric vehicle power system,battery management system and heat dissipation system have been formally mass-produced; theassembly, production and testing of power modules at power semiconductor international manufacturershave been laid out. IGBT and SiC power modules for electric vehicle inverters are expected to beofficially mass-produced in 2022. The Company has introduced all-flash array products using PCIeGen.4 technology, WM-BZ-ST-55 dual-core Bluetooth 5.0 antenna package module, and SOM7225 5Gsystem module integrating memory, power management IC, audio codec and multi-mode wirelessconnection interface.
(VI) Long-term adherence to sustainable management
The Company has been adhering to the vision of “Be a most reliable provider for electronicdesign,manufacturing service, and modularization with diversified global footprints and miniaturizationsolution”. Guided by the United Nations Sustainable Development Goals (SDGs), it strengthens theSDGs awareness of every employee, and works hand in hand with partners and communities to promoteeconomic growth and productivity improvement in a sustainable way. With the mission of “Turninnovative technologies into value for our customers”, the Company promises to contribute to high-quality and sustainable living space, provide employees with a challenging and fulfilling workingenvironment, create substantial rewards for stakeholders, and fulfill its responsibilities as a worldcorporate citizen.
People are the valuable assets of the Company. The Company has been constantly improving the careerplanning, performance appraisal and incentive mechanism of employees, providing a platform for thedevelopment of talents, a channel for more outstanding talents to join and a powerful talent guarantee forthe Company to achieve its development goals. The Company attaches great importance to personneltraining and technological innovation, and provides employees with a suitable career development paththrough platforms and incentive measures in parallel, and at the same time realizes the accumulation ofits own talents. In addition, the Company has established a long-term and effective employee incentivemechanism to improve the cohesion of employees and enterprise competitiveness, and ensure its long-term and stable development. In the last three years, the Company has continuously launched employeestock ownership plans and equity incentive plans according to business needs.
While operating steadily, the Company takes the mission of “creating value for shareholders and sharinggrowth with shareholders”. By the end of 2021, the Company had achieved a cumulative net profit ofRMB 10.03 billion and a cumulative cash dividend of RMB 3.29 billion since its listing, with an averagecash payout ratio of 32.79%, effectively safeguarding and enhancing the interests of investors.
2021 Annual Report
V. Main Operations during the Reporting PeriodThe Company achieved operating revenue of RMB 55.30 billion in 2021, an increase of 15.94% over RMB
47.70 billion in 2020, and the revenue from various products increased YoY; among them, the revenue fromindustrial products increased by 67.26% YoY; the revenue from automotive electronics increased by 54.05%YoY; the revenue from computer and storage products increased by 25.28% YoY. The main reasons for thechange in operating revenue are: (1) increased revenue in the consolidated FAFG statements in 2021; (2) in2021, the global economy resumed growth, and the electric vehicle, intelligent manufacturing and new energyindustries drove the demand growth of related business segments; the growth rate of the Company'sEMS/ODM business accelerated, especially industrial and automotive electronics; (3) new production lines inMexico and Taiwan sites have been put into production one after another, and orders have increased rapidly.In 2021, the proportion of communication and consumer electronics products in the revenue decreased YoY,while the proportion of industrial, computer and storage products and automotive electronics in the operatingrevenue all increased.
The total sales, administrative, R&D and financial expenses of the Company in 2021 were RMB 3.33 billion,an increase of RMB 310 million or 10.29% over RMB 3.02 billion in 2020.
The Company achieved operating profit of RMB 2.13 billion in 2021, an increase of 8.67% over RMB 1.96billion in 2020; the total profit was RMB 2.14 billion, an increase of 8.38% over RMB 1.97 billion in 2020;the net profit attributable to shareholders of the listed company was RMB 1.86 billion, an increase of 6.81%over RMB 1.74 billion in 2020. In 2021, the net profit attributable to shareholders of the listed company netof non-recurring gains/losses was RMB 1.70 billion, an increase of RMB 80 million and 4.93% over RMB
1.62 billion in the same period of 2020.
（I）Main business analysis
1.Analysis of changes in related items in income statement and cash flow statement
Unit: yuan Currency: RMB
| Items | Amount in the current period | Amount of the same period last year | Change in percentage (%) |
| Operating revenues | 55,299,654,770.21 | 47,696,228,222.53 | 15.94 |
| Operating costs | 49,981,479,197.84 | 42,809,550,114.14 | 16.75 |
| Sales expenses | 311,480,902.10 | 219,892,291.75 | 41.65 |
| Administrative expenses | 1,169,173,384.77 | 1,123,158,982.65 | 4.10 |
| Financial expenses | 203,398,590.62 | 95,750,510.66 | 112.43 |
| R&D expenses | 1,641,398,512.61 | 1,576,363,064.48 | 4.13 |
| Net cash flow from operating activities | -1,102,446,978.90 | 1,436,523,674.10 | -176.74 |
| Net cash flow from investment activities | -1,486,554,540.33 | -3,010,920,320.94 | -50.63 |
| Net cash flow from financing activities | 2,391,384,303.44 | 1,824,477,834.32 | 31.07 |
Reasons for changes in sales expenses:
Mainly due the increase in consolidated revenue and royalties inthe current period
Reasons for changes in financial expenses:
Mainly due to the increase in costs related to the issuance ofconvertible corporate bonds in the current period
Reasons for changes in net cash flow from operating activities:
Mainly due to the increase in inventoryin the current period in response to customer orders.
Reasons for changes in net cash flow from investment activities:
Mainly due to the decrease in equityinvestment in the current period compared with payment for M&A of the overseas company the previousyear
Reasons for changes in net cash flow from financing activities:
Mainly due to the cash received from theissuance of convertible bonds in the current period.
Detailed explanation of the major changes in the business type, profit composition or profit source of theCompany in the current period
□Applicable √Not Applicable
2.Revenue and cost analysis
√Applicable □ Not Applicable
2021 Annual Report
In the current period, the Company's main business income increased by 15.94% over the same periodlast year, and its main business cost increased by 16.75% over the same period last year. The specificanalysis is as follows:
(1)Main business by sector, product, region and by sales mode
Unit: yuan Currency: RMB
| Main business by product | ||||||
| Product | Revenue | Operating cost | Gross profit margin (%) | Revenue YoY (%) | Operating cost YoY (%) | Year-on-year change in gross profit margin (%) |
| Industrial products | 7,276,135,793.13 | 6,074,544,645.90 | 16.51 | 67.26 | 76.05 | Down 4.17 pct. |
| Computer and storage | 4,793,053,315.18 | 4,079,381,724.91 | 14.89 | 25.28 | 27.17 | Down 1.27 pct. |
| Consumer electronics | 18,566,021,687.70 | 16,886,497,387.85 | 9.05 | 7.85 | 8.78 | Down 0.77 pct. |
| Automotive electronics | 2,605,088,256.75 | 2,402,266,475.49 | 7.79 | 54.05 | 52.93 | Up 0.68 pct. |
| Communication electronics | 21,211,368,145.31 | 19,799,912,823.21 | 6.65 | 4.57 | 5.20 | Down 0.56 pct. |
| Medical electronics | 280,679,550.41 | 264,285,249.65 | 5.84 | 289.85 | 305.46 | Down 3.63 pct. |
| Others | 521,255,215.26 | 471,281,079.75 | 9.59 | 122.30 | 183.42 | Down 19.50 pct. |
| Total | 55,253,601,963.75 | 49,978,169,386.76 | 9.55 | 15.90 | 16.76 | Down 0.66 pct. |
| Main business by region | ||||||
| Region | Operating revenue | Operating cost | Gross profit margin (%) | Year-on-year change in operating revenue (%) | Year-on-year change in operating cost (%) | Year-on-year change in gross profit margin (%) |
| Chinese Mainland | 38,299,554,979.91 | 34,498,348,382.50 | 9.92 | 8.90 | 9.21 | Down 0.25 pct. |
| Taiwan, China | 17,051,370,814.17 | 15,654,246,788.13 | 8.19 | 10.04 | 10.76 | Down 0.59 pct. |
| Europe | 2,803,209,531.97 | 2,542,462,768.34 | 9.30 | 649.54 | 681.80 | Down 3.74 pct. |
| Others | 10,966,675,435.84 | 10,902,099,445.89 | 0.59 | 35.25 | 35.97 | Down 0.52 pct. |
| Tradeoff | -13,867,208,798.14 | -13,618,987,998.10 | 1.79 | 20.86 | 20.95 | Down 0.08 pct. |
| Total | 55,253,601,963.75 | 49,978,169,386.76 | 9.55 | 15.90 | 16.76 | Down 0.66 pct. |
Explanation of the main business by sector, product, region and sales mode
None
(2)Analysis of production and sales volume
√Applicable □ Not Applicable
| Main products | Output | Sales volume | Inventory | Year-on-year change in | Year-on-year | Year-on-year change |
2021 Annual Report
| production (%) | change in sales volume (%) | in inventory (%) | ||||
| Computer and storage | 19,809,213 | 19,683,453.00 | 762,612.00 | 33 | 27 | 20 |
| Industrial products | 37,916,394 | 42,350,692.00 | 618,850.00 | 402 | 450 | -88 |
| Communication electronics | 591,015,901 | 601,868,775.00 | 29,128,767.00 | 0 | 5 | -27 |
| Consumer electronics | 264,155,896 | 257,881,242.00 | 11,968,140.00 | 54 | 51 | 110 |
| Automotive electronics | 51,465,137 | 55,498,365.00 | 3,461,042.00 | 7 | 15 | -54 |
| Medical electronics | 0 | 16,506,212.00 | 44,915.00 | -100 | 3 | -100 |
| Others | 6,786,265 | 6,839,332.00 | 52,311.00 | 3 | 5 | -50 |
| Total | 971,148,806 | 1,000,628,071.00 | 46,036,637.00 | 14 | 19 | -39 |
Explanation of production and sales volume
(3)Performance of major procurement contracts and major sales contracts
□Applicable √Not Applicable
(4)Cost analysis
Unit: yuan
| Situation by product | |||||||
| Product | Cost item | Current amount | Percentage in total cost (%) | Amount in the same period last year | Percentage in total cost (%) | YoY (%) | Remark |
| Communication electronics | Raw materials | 17,563,315,933.47 | 88.73 | 16,220,124,974.12 | 86.21 | 8.28 | |
| Consumer electronics | Raw materials | 15,480,396,654.47 | 91.82 | 14,435,748,436.59 | 93.08 | 7.24 | |
| Computer and storage | Raw materials | 3,463,510,159.58 | 86.15 | 2,791,807,541.16 | 88.04 | 24.06 | |
| Industrial products | Raw materials | 5,081,919,122.30 | 83.86 | 2,981,371,121.70 | 86.60 | 70.46 | Due to the increase of consolidated revenue |
| Automotive electronics | Raw materials | 1,793,876,098.35 | 75.76 | 1,141,329,332.81 | 73.50 | 57.17 | Due to the increase of consolidated revenue |
| Medical electronics | Raw materials | 195,058,601.05 | 74.31 | 51,073,963.83 | 78.88 | 281.91 | Due to the increase of consolidated revenue |
| Others | Raw materials | 355,017,372.12 | 77.23 | 138,850,899.05 | 91.46 | 155.68 | Due to the increase of consolidated revenue |
| Total | 43,933,093,941.3 | 88.18 | 37,760,306,269.26 | 88.42 | 16.35 | ||
2021 Annual Report
Explanation of other aspects of cost analysis
The Company completed the acquisition of FAFG and consolidated its statements in December 2020.With FAFG’s financial statements consolidated for the full year of 2021, and the Company’sconsolidated revenue has grown significantly.
(5)Changes in the consolidation scope due to equity changes of major subsidiaries during thereporting period
□Applicable √Not Applicable
(6)Major changes or adjustments in the business, products or services of the Company during thereporting period
□ Applicable √ Not Applicable
(7)Major customers and major suppliers
A. Main customers of the Company
The sales to the top five customers amounted to RMB 329.75 million, accounting for
59.63
% of thetotal annual sales; among the top five customers, the sales to related parties amounted to 0RMB ,accounting for 0% of the total annual sales.
During the reporting period, the proportion of sales to a single customer exceeded 50% of the total, and therewere new customers among the top 5 customers or heavy dependence on a few customers.
□Applicable √Not Applicable
B. Main suppliers of the Company
The purchase amount from the top five suppliers was RMB 206.15 billion, accounting for 44.83 % of the totalannual purchase amount; among the top five suppliers, the purchase amount from related parties was 0 yuan,accounting for 0 % of the total annual purchase amount.
During the reporting period, the proportion of purchases from a single supplier exceeded 50% of the total, andthere were new suppliers among the top 5 suppliers or heavy dependence on a few suppliers.
□Applicable √Not Applicable
Other explanationsThe sales of the Company's top five customers are as follows:
Unit: 10,000 yuan Currency: RMB
| No. | Customer name | Sales | Proportion to total annual sales (%) |
| 1 | Company A | 1,803,650.04 | 32.62 |
| 2 | Company B | 838,884.48 | 15.17 |
| 3 | Company C | 242,666.08 | 4.39 |
| 4 | Company D | 207,534.48 | 3.75 |
| 5 | Company E | 204,718.83 | 3.7 |
| Total | 3,297,453.92 | 59.63 |
The purchase amount of the Company's top five suppliers is as follows:
Unit: 10,000 yuan Currency: RMB
| No. | Supplier name | Purchase amount | Proportion in total annual purchase (%) |
| 1 | Supplier A | 1,035,366.40 | 22.52 |
| 2 | Supplier B | 798,231.42 | 17.36 |
| 3 | Supplier C | 96,448.51 | 2.10 |
| 4 | Supplier D | 66,400.86 | 1.44 |
| 5 | Supplier E | 65,002.91 | 1.41 |
| Total | 2,061,450.10 | 44.83 |
3. Expenses
√Applicable □Not Applicable
2021 Annual Report
| Items | 2021 | 2020 | Change | YoY | Explanation |
| Sales expense | 311,480,902.10 | 219,892,291.75 | 91,588,610.35 | 41.65 | Mainly due the increase in consolidated revenue and royalties in the current period |
| Financial expenses | 203,398,590.62 | 95,750,510.66 | 107,648,079.96 | 112.43 | Mainly due to the increase in costs related to the issuance of convertible corporate bonds in the current period |
| Loss on assets impairment | -18,746,153.38 | -11,792,788.58 | -6,953,364.80 | 58.96 | Mainly due to the provisions for losses on inventory impairment in accordance with accounting policies in the current period |
| Loss on credit impairment | -1,706,888.48 | 7,894,930.75 | -9,601,819.23 | -121.62 | Mainly due to the provisions for losses on credit impairment in accordance with accounting policies in the current period |
| Income from change in fair value (losses are represented by '-') | 44,588,222.60 | -6,272,200.14 | 50,860,422.74 | -810.89 | Mainly resulted from the changes in fair value caused by derivative financial products |
| Investment income (losses are represented by '-') | 111,678,979.96 | 83,440,494.33 | 28,238,485.63 | 33.84 | Mainly due to the settlement income of derivative financial products of hedging operation in the current period and the cash dividend received from equity investment. |
| Gain from disposal of assets (losses are represented by '-') | 2,414,697.02 | 1,796,090.81 | 618,606.21 | 34.44 | Mainly due to the increase in income from fixed asset disposal in the reporting period. |
| Other income | 50,678,106.85 | 76,779,477.12 | -26,101,370.27 | -34.00 | Mainly due to the decrease in government subsidies recognized in the current period |
| Non-operating income | 19,628,576.06 | 14,978,610.83 | 4,649,965.23 | 31.04 | Mainly due to the income received from insurance claim and changes in lease in the reporting period |
| Non-operating expenses | 12,583,134.08 | 3,066,306.86 | 9,516,827.22 | 310.37 | Mainly due to losses on asset scrapping in |
2021 Annual Report
the current period
4.R&D investment
(1) Particulars of
R&D investment
√Applicable □Not Applicable
Unit: yuan
| Expensed R&D investment in the current period | 1,641,398,512.61 |
| Capitalized R&D investment in the current period | 0 |
| Total R&D investment | 1,641,398,512.61 |
| Proportion of total R&D investment in operating revenue (%) | 2.97 |
| Proportion of capitalized R&D investment (%) | 0 |
(2)Table of R&D personnel
√Applicable □Not Applicable
| Number of R&D personnel in the Company | 2,332 |
| Proportion of R&D personnel in the total number of employees of the Company (%) | 9.7 |
| Breakdown by educational background | |
| Educational background | Number of personnel |
| Doctor’s degree | 8 |
| Master’s degree | 779 |
| Bachelor’s degree | 1,233 |
| Junior college | 248 |
| Senior high school and under | 64 |
| Breakdown by age | |
| Age | Number of personnel |
| Under 30 years old (excluding 30 years old) | 544 |
| 30-40 years old (including 30 years old and excluding 40 years old) | 1,069 |
| 40-50 years old (including 40 years old and excluding 50 years old) | 565 |
| 50-60 years old (including 50 years old and excluding 60 years old) | 149 |
| 60 years old and above | 5 |
(3)Remark
□Applicable √ Not Applicable
(4)Reasons for major changes in the composition of R&D personnel and its impact on the futuredevelopment of the Company
□Applicable √ Not Applicable
5.Cash flow
√Applicable □ Not Applicable
| Items | 2021 | 2020 | Reasons for change |
| Net cash flow from operating activities | -1,102,446,978.90 | 1,436,523,674.10 | Mainly due to the increase in inventory in the current period in response to customer orders |
2021 Annual Report
| Net cash flow from investing activities | -1,486,554,540.33 | -3,010,920,320.94 | Mainly due to less equity investment in the current period compared with expenses for M&A of overseas subsidiary last year |
| Net cash flow from financing activities | 2,391,384,303.44 | 1,824,477,834.32 | Mainly due to the cash received from the convertible corporate bonds in the reporting period |
(II)Explanation of significant changes in profit caused by non-main business
□Applicable √ Not Applicable
(III)Analysis of assets and liabilities
√Applicable □Not Applicable
1.Assets and liabilities
Unit: Yuan
| Item | December 31, 2021 | Proportion to total assets (%) December 31, 2021 | December 31, 2020 | Proportion to total assets (%) December 31, 2020 | YoY | Remark |
| Financial assets held for trading | 96,480,087.56 | 0.27 | 182,315,272.70 | 0.59 | -47.08 | Mainly due to the decrease of accounts receivable factoring business in the current period |
| Inventory | 9,037,562,662.64 | 25.20 | 6,765,336,245.29 | 21.77 | 33.59 | Mainly due to stock and inventory preparation in response to customers' expected orders as a result of global component shortage and the pandemic |
| Investments in other equity instruments | 75,957,194.28 | 0.21 | 41,351,831.65 | 0.13 | 83.69 | Mainly due to the changes in the fair value of industrial fund investment in the current period |
| Construction in progress | 798,015,703.22 | 2.23 | 431,942,421.24 | 1.39 | 84.75 | Mainly due to the construction of new plants and the purchase of machinery and equipment to meet growing operational needs |
| Other non-current assets | 136,815,311.18 | 0.38 | 89,743,706.46 | 0.29 | 52.45 | Mainly due to the increase of prepaid expenses for equipment and construction costs in the reporting period |
| Other non-current | 236,978,820.68 | 0.66 | 152,935,434.70 | 0.49 | 54.95 | Mainly due to new strategic equity |
2021 Annual Report
| financial assets | investments in the current period | |||||
| Short-term borrowings | 2,480,500,031.68 | 6.92 | 375,341,430.81 | 1.21 | 560.86 | Mainly due to the adjustment of the fund structure and the increase of short-term loans from overseas banks in the reporting period |
| Taxes payable | 238,676,479.75 | 0.67 | 179,000,709.13 | 0.58 | 33.34 | Mainly due to the increase in returns and the accrual of income tax in the current period |
| Derivative financial liabilities | 976,413.16 | 0.00 | 18,402,480.68 | 0.06 | -94.69 | Mainly resulted from the changes in fair value caused by derivative financial products |
| Long-term borrowings | 1,101,220,467.55 | 3.07 | 3,011,668,944.64 | 9.69 | -63.43 | Mainly due to the adjustment of the fund structure and the repayment of short-term loans from overseas banks in the reporting period |
| Deferred income | 59,791,942.70 | 0.17 | 32,724,563.92 | 0.11 | 82.71 | Mainly due to government subsidies related to assets received in the current period |
| Bond payable | 3,115,505,143.28 | 8.69 | 0.00 | 0.00 | Not applicable | Mainly resulted from the issuance of convertible corporate bonds in the current period |
| Treasury stock | -341,236,339.88 | -0.95 | -134,707,206.58 | -0.43 | 153.32 | Mainly due to share buy-back in the current period |
| Surplus reserve | 738,004,669.96 | 2.06 | 542,610,242.85 | 1.75 | 36.01 | Mainly due to the accrual of surplus reserve in the current period |
| Other equity instruments | 409,902,116.17 | 1.14 | 0.00 | 0.00 | Not applicable | Mainly due to conversion rights from the convertible corporate bonds in the current period |
Other explanationsNone
2.Overseas assets
√Applicable □ Not Applicable
(1)Asset size
Including: overseas assets 23,500,315,447.75 (unit: yuan; currency: RMB), accounting for
45.37
% of
2021 Annual Report
the total assets.
(2)Relevant explanations on the relatively high proportion of overseas assets
□Applicable √Not Applicable
3. Major asset restrictions as of the end of the reporting period
□ Applicable √ Not Applicable
4.Other explanations
□ Applicable √ Not Applicable
(IV)Analysis of industry business information
√Applicable □ Not Applicable
1. In terms of communication products, according to the data compiled by the Company, Apple smartphones accounted for 17% of the global smart phone market in 2021, with sales reaching 228 millionunits, an increase of 19% over that of 2020.
WW Smart Phone Estimated Market Share
| 2020 | 2021 | 20'21 | |||
| Shipments (M units) | Market Share% | Shipments (M units) | Market Share% | YoY Growth% | |
| Worldwide Total | 1243 | - | 1319 | - | 6.1 |
| Samsung | 240 | 19 | 265 | 20 | 11 |
| Apple | 192 | 15 | 228 | 17 | 19 |
| Xiaomi | 139 | 11 | 180 | 14 | 30 |
| Vivo | 97 | 8 | 124 | 9 | 28 |
| OPPO | 106 | 9 | 132 | 10 | 24 |
| Others | 470 | 38 | 391 | 30 | -17 |
Source: USI, Jan. 2022
2. In terms of consumer electronics, according to the market survey report compiled by the Company,the overall wearable product market shipments grew at a CAGR of 11%.
WW Wearable Market Forecast
| Product | 2020 | 2021F | 2022F | 2023F | 2024F | 2025F | 20/21 YoY | 20-25 CAGR |
| Total Shipment (M Units) | 446 | 537 | 622 | 681 | 727 | 763 | 20% | 11% |
| Earwear | 268 | 330 | 393 | 434 | 466 | 492 | 23% | 13% |
| Watch | 106 | 133 | 152 | 167 | 181 | 192 | 25% | 12% |
| Wrist Band | 70 | 72 | 75 | 76 | 76 | 76 | 3% | 2% |
| Others | 2.0 | 2.1 | 2.5 | 3.0 | 3.4 | 3.8 | 3% | 14% |
| Market Share (%) | ||||||||
| Earwear | 60% | 61% | 63% | 64% | 64% | 64% | ||
| Watch | 24% | 25% | 24% | 25% | 25% | 25% | ||
| Wrist Band | 16% | 13% | 12% | 11% | 10% | 10% | ||
| Others | 0.4% | 0.4% | 0.4% | 0.4% | 0.5% | 0.5% | ||
Source: USI, Feb. 2022
2021 Annual Report
3. In terms of computers and storage products, according to the data compiled by the Company, themarket demand for server mainboards and switches will still maintain stable growth. By strengtheningcooperation with major customers, the Company strives for more market shares and orders.
3.1 Server Revenue by Region
| Sum of Vendor Revenue ($M) Region | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | CAGR |
| North America | 35,108 | 39,105 | 41,542 | 42,870 | 44,748 | 45,987 | 5.5% |
| Greater China | 22,484 | 25,882 | 28,358 | 29,694 | 31,456 | 32,738 | 7.8% |
| Western Europe | 9,824 | 11,004 | 11,530 | 12,079 | 12,463 | 12,915 | 5.6% |
| Japan (Region) | 3,504 | 3,543 | 3,615 | 3,744 | 3,782 | 3,906 | 2.2% |
| Mature Asia/Pacific | 2,366 | 2,659 | 2,679 | 2,746 | 2,814 | 2,820 | 3.6% |
| Emerging Asia/Pacific | 1,601 | 1,734 | 1,763 | 1,811 | 1,845 | 1,871 | 3.2% |
| Latin America | 1,725 | 1,710 | 1,675 | 1,759 | 1,746 | 1,715 | -0.1% |
| Eastern Europe | 1,076 | 1,114 | 1,175 | 1,243 | 1,314 | 1,365 | 4.9% |
| Middle East and North Africa | 1,227 | 1,297 | 1,340 | 1,323 | 1,321 | 1,338 | 1.7% |
| Eurasia | 1,162 | 1,011 | 1,101 | 1,164 | 1,207 | 1,221 | 1.0% |
| Sub-Saharan Africa | 368 | 429 | 437 | 442 | 444 | 417 | 2.5% |
| Grand Total | 80,446 | 89,488 | 95,214 | 98,875 | 103,138 | 106,293 | 5.7% |
Source: USI, Feb. 2022
| 3.2 Global Ethernet Switch and Router Market Unit: USD billion | |||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 20’-25’ CAGR | |
| Switch and router | 42.7 | 43.1 | 43.6 | 44.0 | 44.4 | 44.9 | 1.0% |
Source: USI, Feb. 2022
3.3. In terms of storage products, SSD is the important product of the Company. According to the datacompiled by the Company, SSD applications are growing in laptops and data centers, and the demandhas obviously increased. The annual market growth rate in 2021 was 15%. The compound growth rate ofSSD market from 2020 to 2025 is about 9.3%. While actively maintaining existing customers, theCompany is striving to develop new customers and focus on developing enterprise-level products.
Unit: USD million
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 20/21 YoY | 20-25 CAGR | |
| Total SSD Revenue | 32,083 | 36,959 | 37,744 | 41,341 | 46,193 | 49,992 | 15% | 9.3% |
Source: USI, Feb. 2022
4. In terms of industrial products, according to the data compiled by the Company, the market of themain products, smart handheld devices and POS, grew by 8.8% in 2021 due to the growth of logisticsand warehousing demand and the recovery of retail industry.
Unit: USD billion
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 20/21 YoY | 20-25 CAGR | |
| Total POS Revenue | 65 | 71 | 76 | 83 | 90 | 98 | 8.8% | 8.5% |
Source: USI, Feb. 2022
5. In terms of automotive products, according to the data compiled by the Company, the automotiveelectronics industry resumed its growth as the epidemic and material shortage abated; in particular, thecompound growth rate of demand for ADAS and HEV-EV is relatively high.
5.1 Automotive Electronics Forecast by Domain
Unit: USD million
2021 Annual Report
| Domain | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 20-25 CAGR |
| ADAS | 24,758 | 28,874 | 33,379 | 37,524 | 41,362 | 47,573 | 14% |
| Body & Convenience | 16,861 | 17,661 | 18,010 | 18,450 | 18,581 | 18,736 | 2.1% |
| Chassis & Safety | 19,597 | 19,958 | 20,105 | 20,314 | 20,407 | 20,797 | 1.2% |
| HEV-EV | 6,567 | 9,634 | 12,699 | 16,229 | 20,007 | 22,662 | 28% |
| Information | 28,348 | 29,510 | 29,879 | 31,340 | 32,809 | 33,318 | 3.3% |
| Powertrain | 27,364 | 28,781 | 30,328 | 31,148 | 30,856 | 30,748 | 2.4% |
| Grand Total | 123,495 | 134,418 | 144,400 | 155,005 | 164,022 | 173,834 | 7.1% |
Source: USI, Feb. 2022
5.2 New Energy Cars Sales
| M units | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | CAGR (20-26) |
| Total | 2.6 | 5.3 | 7.7 | 13.9 | 19.0 | 25.0 | 32.3 | 41.3 | 41.0% |
| PHEV | 0.7 | 1.0 | 2.0 | 2.7 | 3.8 | 5.0 | 6.4 | 8.1 | 40.6% |
| EV | 1.9 | 4.2 | 5.7 | 11.3 | 15.2 | 19.9 | 25.8 | 33.3 | 41.1% |
Source: USI, Feb. 2022
5.3 Total Auto Power Module
Unit: USD million
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | CAGR (20-25) | |
| Total Auto Power Module | 1,113 | 1,173 | 1,636 | 2,030 | 2,643 | 3,440 | 4,387 | 30.2% |
| IGBT Power Module | 849 | 951 | 1,376 | 1,744 | 2,260 | 2,930 | 3,477 | 29.6% |
| MOSFET Power Module | 243 | 197 | 223 | 241 | 274 | 312 | 375 | 13.7% |
| Wide Bandgap Power Module | 21 | 24 | 36 | 46 | 109 | 198 | 535 | 86.0% |
Source: USI, Feb. 2022
6. In terms of medical products, according to the data compiled by the Company, the market demand forelectronic manufacturing services has grown steadily.
Medical Product Assembly Value, 2020-2025
Unit: USD million
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 20-25 CAGR | |
| Medical Diagnostics | 18,590 | 19,950 | 21,430 | 22,890 | 24,330 | 25,850 | 6.8% |
| Therapeutic | 11,010 | 11,475 | 11,980 | 12,515 | 13,050 | 13,640 | 4.4% |
| Monitoring & Surgical | 17,650 | 18,650 | 19,660 | 20,870 | 22,120 | 23,450 | 5.8% |
| Total | 47,250 | 50,075 | 53,070 | 56,275 | 59,500 | 62,940 | 5.9% |
Source: USI, Feb. 2022
2021 Annual Report
(V)Analysis of investment
Overall analysis of foreign equity investment
√Applicable □ Not Applicable
In order to implement its development strategy, in 2021, the Company injected capital into HuizhouFacility and Vietnam Facility as planned, which have been completed and put into operation. In 2021,the Company increased investment in industrial funds and started Corporate Venture Capital (CVC)investment.
1. Significant equity investment
√Applicable □ Not Applicable
1) On July 3, 2020, the second meeting of the fifth Board of Directors of the Company reviewed andapproved the Proposal on Foreign Investment by Wholly-owned Subsidiaries, which proposed to increase thetotal project investment of Vietnam Facility by USD 158 million, and adjusted the total project investment ofVietnam Facility from USD 42 million to USD 200 million. Among them, the Company invested USD 80million through Universal Global Technology Co., Limited, and the rest of the funds were financed frombanks or raised by Vietnamese Facility. For details, please refer to the Announcement on Foreign Investmentof Wholly-owned Subsidiaries (L.2020-053).
The Company injected capital to Vietnam Facility in batches. As of December 31, 2021, it has hasinvested a total capital of USD 80 million through Universal Global Technology Co., Limited.
2) On March 26, 2021, the ninth meeting of the fifth Board of Directors and the eighth meeting of thefifth Board of Supervisors of the Company reviewed and approved the Proposal on Using Raised Fundsto Increase Capital of Subsidiaries, and agreed that the Company would use RMB 600 million raisedfunds from convertible corporate bonds to increase the capital of Huizhou Facility, the implementer ofthe fundraising project “Huizhou Facility Electronic Products Production Project”. The Company willinject capital into Huizhou Facility in batches according to the progress of the fundraising project. Fordetails, please refer to the Announcement on Using Raised Funds to Increase Capital of Subsidiaries (No.2021-030).
As of December 31, 2021, the Company has used the raised funds to inject RMB 325 million intoHuizhou Facility.
2.Significant non-equity investment
□ Applicable √ Not Applicable
3.Financial assets measured at fair value
√Applicable □ Not Applicable
| Company | Number of shares held at the beginning of the period | Beginning book value | Number of shares held at the end of the period | Ending book value | Gain/loss during the reporting period |
| TriKnight Capital Corporation | 29,285,000.00 | 41,351,831.65 | 29,285,000.00 | 75,957,194.28 | 14,910,026.14 |
| PHI FUND, L.P. | 10,798,010.00 | 64,091,002.18 | 15,000,000.00 | 93,130,696.47 | 3,782,154.36 |
| GaN System Inc. | N/A | N/A | 589,622.00 | 31,878,465.32 | - |
| Senscomm Semiconductor Co., Ltd. | N/A | N/A | 257,937.00 | 20,000,000.00 | - |
| Glory Ventures | N/A | N/A | 1,000,000.00 | 1,000,000.00 | - |
| Others | N/A | 252,757,224.54 | N/A | 186,473,333.29 | 72,526,893.91 |
| Total | 40,083,010.00 | 358,200,058.37 | 46,132,559.00 | 408,439,689.36 | 91,219,074.41 |
Note: Gain/loss during the reporting period includes fair value evaluation, gains and losses from disposal,cash dividends and handling fees
2021 Annual Report
4.Specific progress of material asset restructuring and integration during the reporting period
√Applicable □ Not Applicable
After the Company completed the equity transfer of FAFG in December 2020, it started the collaborativeintegration with AFG. In 2021, the regional management collaboration between the Company and AFGproduction bases has been completed, and cooperation has been strengthened in global sales, customer service,finance, IT, supply chain, R&D, etc.
Opinions of independent directorsThe independent directors have agreed on this matter.
(VI)Sale of material assets and equity
□Applicable √Not Applicable
(VII)Analysis of major holding and joint stock companies
√Applicable □ Not Applicable
| Company Name | Currency of registered capital | Registered capital (RMB) | Total assets | Net assets | Net profit |
| UNIVERSAL GLOBAL TECHNOLOGY(KUNSHAN)CO., LTD. | RMB | 550,000,000.00 | 326,055.37 | 142,773.92 | 30,680.16 |
| Universal Global Electronics (Shanghai) Co., Ltd. | RMB | 50,000,000.00 (note) | 6,121.25 | 6,105.14 | 124.73 |
| Universal Global Technology Co., Limited | USD | 327,500,000.00 (note) | 436,721.43 | 69,911.49 | -8,356.50 |
| Universal Global Technology (Shanghai) Co., Ltd. | RMB | 1,330,000,000.00 | 378,769.37 | 179,893.92 | 32,720.79 |
| Universal Global Technology (Huizhou) Co., Ltd | RMB | 460,000,000.00 | 58,666.29 | 44,657.13 | -969.19 |
| USI Science and Technology (Shenzhen) Co.,Ltd | RMB | 10,000,000.00 | 1,571.39 | 1,325.47 | 115.81 |
| USI Electronics (Shenzhen) Co., Ltd. | USD | 75,000,000.00 | 267,351.84 | 138,632.46 | 24,222.00 |
| USI Japan Co., Ltd. | JPY | 95,000,000.00 | 820.25 | 731.54 | 59.41 |
| Universal Global Technology Co., Limited | NTD | 1,980,000,000.00 (note) | 617,519.27 | 151,106.96 | 23,839.12 |
| Universal Global Industrial Co., Limited | USD | 11,000,000.00 | 196,417.48 | 9,099.42 | 407.49 |
| Universal Scientific Industrial De México S.A. De C.V. | MXN | 1,258,077,326.00 | 196,586.22 | 44,883.56 | -4,976.66 |
| USI America, Inc. | USD | 9,500,000.00 | 5,206.97 | 4,432.62 | 100.57 |
| Universal Global Technology Co., Limited | USD | 51,000,000.00 (note) | 23,075.15 | 23,068.20 | 488.81 |
| UNIVERSAL SCIENTIFIC INDUSTRIAL VIETNAM COMPANY LIMITED | USD | 80,000,000.00 | 117,011.48 | 46,382.06 | -4,338.53 |
2021 Annual Report
| Universal Scientific Industrial (France) | EUR | 321,374,822.00 (note) | 213,806.26 | 174,921.38 | -1,302.29 |
| USI Inc. | NTD | 1,399,727,400.00 | 176,351.92 | 75,549.99 | 4,281.23 |
| PLN | 80,852,300.00 | 25,546.45 | 22,392.55 | 4,230.03 | |
| FINANCIERE AFG | EUR | 183,649,562.80 | 513,144.38 | 313,625.62 | 13,620.28 |
Note: the registered capital includes the amount of re-investment to other subsidiaries, and the amount oftotal assets, net assets and net profit is from standalone financial statements
2. Joint-stock company
Unit: RMB 10,000 yuan
| Company Name | % | Currency of registered capital | Registered capital (RMB) | Total assets | Net assets | Net profit |
| Universal Global Technology Co., Limited | 49 | RMB | 220,000,000 | 65,418.35 | 23,312.33 | 1,269.96 |
| M-Universe Investments PTE.LTD. | 42.23 | USD | 138,969,126 | 139,563.56 | 94,076.13 | 3,782.03 |
3. Subsidiaries or joint-stock companies that contributed over 10% to the net profit of the Company
Unit: RMB 10,000 yuan
| Company Name | Revenue | Operating profit | Net profit | Contribution to consolidated net profit |
| Universal Global Technology (Shanghai) Co., Ltd. | 829,683.29 | 37,226.90 | 32,720.79 | 17.62% |
| UNIVERSAL GLOBAL TECHNOLOGY(KUNSHAN)CO., LTD. | 582,101.67 | 35,423.56 | 30,680.16 | 16.52% |
| USI Electronics (Shenzhen) Co., Ltd. | 414,141.46 | 26,659.61 | 24,222.00 | 13.05% |
(VIII)Structured entities controlled by the Company
□Applicable √ Not Applicable
VI. Discussion and Analysis of Corporate Development in the Future(I) Industry Landscape and Trends
√Applicable □ Not Applicable
1. Global market capacity of the industry
According to the reports by professional market research institutions compiled by the Company, theglobal electronic manufacturing service (EMS) revenue exceeded USD 640 billion in 2021, and isexpected to reach USD 830 billion in 2025, growing at an average CAGR of 7.1% from 2020 to 2025.The overall market shows a steady growth trend, and the Asia-Pacific region will maintain a leadinggrowth rate.
2021 Annual Report
Source：USI, Feb. 2022
The Worldwide CM, EMS and ODM Market by Region, 2020-2025
| The Worldwide CM, EMS and ODM Market by Region, 2020-2025 | |||||||
| Region | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | CAGR |
| CM Revenue ($M) | |||||||
| Americas | 99,043 | 97,524 | 101,398 | 105,838 | 110,591 | 116,661 | 3.3% |
| EMEA | 72,669 | 71,139 | 73,376 | 75,899 | 78,590 | 81,675 | 2.4% |
| APAC | 422,944 | 475,809 | 510,965 | 551,779 | 595,962 | 639,951 | 8.6% |
| Total | 594,656 | 644,472 | 685,739 | 733,517 | 785,143 | 838,288 | 7.1% |
| EMS Revenue ($M) | |||||||
| Americas | 96,702 | 95,251 | 99,061 | 103,420 | 108,074 | 114,018 | 3.3% |
| EMEA | 68,949 | 67,501 | 69,661 | 72,099 | 74,695 | 77,682 | 2.4% |
| APAC | 312,070 | 356,094 | 382,437 | 413,945 | 448,463 | 482,556 | 9.1% |
| Total | 477,721 | 518,846 | 551,159 | 589,463 | 631,231 | 674,256 | 7.1% |
| ODM Revenue ($M) | |||||||
| Americas | 2,341 | 2,273 | 2,337 | 2,419 | 2,518 | 2,644 | 2.5% |
| EMEA | 3,720 | 3,638 | 3,715 | 3,800 | 3,895 | 3,993 | 1.4% |
| APAC | 110,874 | 119,715 | 128,529 | 137,835 | 147,499 | 157,396 | 7.3% |
| Total | 116,935 | 125,627 | 134,580 | 144,054 | 153,912 | 164,032 | 7.0% |
Source：USI, Feb. 2022
2. Global competitive landscape and industry ranking
Among global EMS providers, USI ranked 12
th
in 2020.
| Rank | Name of manufacturer | Operating income (USD 100 million) | Annual growth rate | Net operating margin |
| Year | 2020 | 19'20 | 2020 | |
| 1 | Honghai | 1,823 | 5.4% | 2.1% |
| 2 | PEGATRON | 475 | 7.3% | 1.6% |
| 3 | Quanta | 371 | 11% | 2.3% |
| 4 | COMPAL | 353 | 11% | 1.0% |
| 5 | Wistron | 286 | 0.9% | 1.5% |
| 6 | Jabil Circuit, Inc. | 276 | 5.0% | 0.8% |
Global EMS/ODM Market Forecast
2021 Annual Report
| 7 | Flextronics | 233 | -6.4% | 1.8% |
| 8 | BYD | 228 | 23% | 3.8% |
| 9 | INVENTEC | 173 | 5.2% | 1.3% |
| 10 | delta | 99 | 14% | 9.7% |
| 11 | TPV | 92 | 4.3% | 2.5% |
| 12 | USI | 70 | 30% | 3.6% |
| Whole Industry | 5940 | 7.1% | 2.2% |
Source：USI, Feb. 2022
3. Industry trend of profit level and analysis of net profit margin
The Company's net profit margin was 3.63% in 2020 and 3.36% in 2021, better than the average of theworld's top 10 contract manufacturers (CMs).The reasons why the Company's net income ratio is higher than the industry average are as follows:
(1) USI has a diversified and balanced product mix, and its products are high technology-based.USI has competitive advantages in the segments of the Company’s product categories. Meanwhile, USIprovides design and manufacturing services in key parts and components, rather than end productassembly.
(2) USI has an industry-leading technology level. The Company has a high product yield andprocess capacity above industry average. For instance, USI's average first pass yield of SMT processexceeds 99.7%.
(3) USI has an advantage in cost control. In the process of new product introduction (NPI), USIgain an advantage in cost management by selecting best-match materials; USI effectively controls theunit production cost by adopting an efficient production line layout and an institutionalized,systematized and standardized production process.In addition, the Company optimizes the existingmanufacturing process and builds an intelligent factory by introducing intelligent automation,transforming labor-intensive manufacturing into high-productivity intelligent manufacturing, improvingproduct quality, enhancing process stability and on-schedule delivery ability, and maximizing cost-effectiveness.
4. Industry landscape
In the short-to-medium term, the demand for traditional 3C products will continue to grow more slowly.What used to drive high-speed growth of the industry, such as PCs and mobile phones, has entered intothe maturity stage. In this case, modular and system integration products, providing fast and easy-to-usemarket solutions, have been widely applied in mobile phones and wearable devices. With more featuresof health monitoring and big data analysis rolling out, it is expected that more wearable devices willadopt modular solutions in the future.In addition, with the rapid development of new technologies such as5G and AI, the improvement of data resource storage, calculation and application demand in China has driventhe growth of data center scale. In early 2022, the “14
th
Five-year Plan” proposed that “data center is thedigital base of digital economy”, and “counting from east to west” provides bottom support for data centerand facilitates the development of digital economy. The construction period of “counting from east to west”project is from 2022 to 2025. The data center has a long industrial chain, wide coverage and great drivingeffect, which will drive the transformation, upgrading and innovative development of many core industries ofdigital economy, including electronic information manufacturing, software and information technologyservices.
In the medium-to-long term, 5G will be the largest opportunity for the electronic industry. 5G willactually usher in an era of Internet of Things (IoT), where everything is connected, by meeting the needsof growing mobile data traffic and the emerging devices and application scenarios in the future. With theaccelerated integration of 5G with Industrial Internet, cloud computing, big data, artificial intelligence(AI), and IoT, the amount and complexity of data should be supported by high-performance computing,which brings new opportunities for the development of AI and edge computing, and subsequently booststhe demand for hardware, electronic equipment, communication and storage.In addition, the automobileindustry is undergoing the transformation of “electrification, intelligence, unmanned and networking”.The accelerated development of automobile intelligence makes the intelligent boundary expandcontinuously, and many fields such as intelligent cockpit, intelligent driving, power electronics, electricmotor control and battery energy storage will usher in accelerated growth.
(II) Corporate Development Strategy
2021 Annual Report
□Applicable √ Not Applicable
1. Industry development trend
As the EMS business model has grown matured and EMS service capabilities have continuouslyimproved, the global EMS industry has expanded its serviceable fields, and the revenue/shipments hasincreased year by year. In order to meet the growing needs of brand customers, the EMS industrycontinuously expands to the high-end field of the product value chain. This trend brings broader spacefor USI, a manufacturer that has product planning, design and R&D capabilities. According to themarket analysis report and the market data collected by the Company, the global EMS/ODM market hasbeen growing steadily with a CAGR of 7.1%.
2. Industrial barriers
(1) Barriers of R&D and manufacturing capacity
Due to the rapid development of electronic products, short product iteration cycle, and the deepening ofspecialization in the division of labor, brand customers put forward much higher and more stringentrequirements for manufacturing service providers in product design and process research anddevelopment.Market demand promotes the transformation and upgrading of manufacturing servicesfrom traditional manufacturing to intelligent manufacturing. Through intelligent automation, theCompany can optimize the manufacturing process, improve product quality, enhance process stabilityand on-schedule delivery ability, etc., and provide supporting facilities in the overall R&D technicalcapability, process technical support, quality technical control and production technical management.This has become a very high threshold to enter the electronic manufacturing services.
(2) Barriers to entering brand owners' supply chain
Against a background of rapid product evolution and intensified global competition in electronicindustry, CMs can only achieve sustainable profitability by cooperating with large brand customers andjoining their global eco-system of division of labour. Before that, however, they need long-termmarketing and promotion, strict certification of quality system and product performance verification.Therefore, strict vendor qualification is the barrier for new entrants.
(3) Barriers of mass production management
One of EMS providers' key services for global brand customers is mass production service. To achievehigh efficiency and quality of product manufacturing under the circumstances of numerous productionlines, various types of raw materials in large quantities, and high-volume purchase orders, the EMSproviders should adopt standardized management of production process and operation procedures, real-time online monitoring, product testing and inspection, etc. This requires strong competences inproduction management of EMS companies.
(4) Barriers of supply chain management (SCM)
EMS providers serve clients in a wide range of fields, including communication and consumerelectronics; the EMS services vary from product R&D, design, material procurement, manufacturing,quality control, logistics, distribution to after-sales service; the services are provided globally, making itnecessary for EMS providers to have global procurement, distribution and maintenance capabilities toreduce costs and better serve their brand customers. Therefore, it is a complex and systematic for EMSproviders to meet each customer's needs of services in the whole the supply chain, and establish anefficient and competitive supporting system for upstream and downstream services. It is an obstacle forEMS providers to develop excellent supply chain management competence that meets customers’ needs.
(5) Barriers of sufficient capital investment
The EMS providers must have the manufacturing capacity matched with the business scale of theirlarge-scale brand customers, which requires sufficient investment in fixed assets such as equipment,plants, supporting facilities, etc. Specifically, to realize precision manufacturing, the EMS providersneed to purchase a large number of expensive SMT line, assembly and test equipment, which requireshigh initial investment, and subsequent investments in technologies and equipment renewal along withconstant product upgrades; on the other hand, mass production needs large-scale, complete procurementsystem, for which a large amount of working capital is required. Therefore, continuous and sufficientcapital investments can be another obstacle to entering the EMS industry.
3. Changes in competitive landscape
The top manufacturers in the global contract manufacturing industry are relatively stable, and top threeproduct categories (communication, computer and consumer electronics) by revenue share maintainrelatively stable growth.
2021 Annual Report
According to the statistics from professional institutions collected by the Company, in 2021, the revenueof the top three categories in the contract manufacturing industry was communication, accounting for36%, computer, accounting for 34%, and consumer electronics, accounting for 14%.It is estimated that by 2025, communications, computer and consumer electronics will account for 85%of the entire contract manufacturing industry. From 2019 to 2025, the three categories will grow at aCAGR of 6.7%, 5.8%, 1.8% respectively.
4. Challenges ahead
(1) Industry players strive for market share more actively, intensifying the competitive pressure ofmarket expansion.
(2) To respond to clients' the requirements of high-quality service and cost control, USI needs tocontinuously increase investment, improve efficiency and reduce costs, facing increasing difficulties inlarge-scale operation and refined management.
(3) USI, which has accelerated vertical integration and global business expansion through M&Aand strategic investment, needs to arrange financing projects and the funds appropriately, controlfinancial risks, promote effective integration and synergy after the M&A and, eventually, achieve thegoal of creating value for the Company. The whole process has some uncertainties and risks.
5. Corresponding strategies
(1) Based on the Company's technical, capital, and resource integration advantages, USI hasdeepened partnership with the existing customers and try to win more customers to extend its business.
(2) Complying with the development trend of “global demand and localized service”, USI hasrationally distributed global production capacity, introduced new technologies and developed newproducts for customers with advanced manufacturing process, flexible production capacity and localizedservice, and shortened the time from design concept to mass production to provide more added value.
(3) USI has increased R&D investment in key technologies and application fields, strengthenedvertical integration and industrial cooperation between upstream and downstream of the industrial chainby integrating Group resources, sharing technologies and independent innovation, and actively deployednew products and new customers in the industrial and automotive electronics fields to seize the businessopportunities of future market growth.
(4) USI has deepened business collaboration with FAFG, continuously integrated the globalproduction bases and technical capabilities of both parties, focused on new terminal markets andcustomers together, and realized the expansion of global revenue scale in the future.
(5) Starting from the Company's development strategy, USI has introduced professionals withworld-renowned enterprise experience to achieve the development goals in important business areas.
(6) USI has maintained a stable financial structure and a sufficient source of funds required for thedevelopment of new technologies and products.(III) Business plan
□Applicable √ Not Applicable
1. Overall plan
As a global electronic design, manufacturing and service D(MS)
provider, the Company will not onlypursue internal growth, but actively seek external growth momentum in the future.Adhering to thestrategy of “modularization, diversification and globalization”, the Company revolves around five majorfields: 4C + 1I (Communication, Computer, Consumer and Car Electronics + Industrial Products), basedon rich and balanced product lines, with miniaturized solutions as the technical core, lays out the futureof the industry with a global perspective, continuously innovates in miniaturized solutions, and strives tocreate value for customers.
Through long-term and stable cooperation with global leading brand manufacturers for many years, theCompany has maintained its leading role in miniaturized modules, SiP, wearable electronicsmanufacturing and other sub-sectors. Meanwhile, the Company adheres tothe strategy of “selecting thebest among the best”, and locks in a niche market with high growth and certain market scale accordingto market dynamics, customer needs and mainstream technology of electronic technology, combinedwith the core advantages accumulated over the years. The Company will continue to seek externalgrowth opportunities, and strengthen products, supply chains, customers, technologies andmanufacturing bases to drive continued revenue and profitability growth.Focusing on the development trend of smart cars, automotive power modules and power electronics areanother focus of the Company’s development strategy. The Company has been deeply engaged inautomotive and electricity business for over 30 years, with years of accumulated technology and
2021 Annual Report
experience. At present, the Company has entered into the assembly, production and testing of powermodules of international power semiconductor manufacturers, and is expected to formally mass produceIGBT and SiC power modules used in Inverter for electric vehicles in 2022. Through flexibleorganization, the Company will introduce production automation and continuously strengthen the powerproduction and testing technology related to electric vehicles, which is expected to continue to growrapidly in the next five years.
2. R&D plan
Cutting-edge process capability, strict quality control system and real-time feedback for manufacturingand sales have always been the key factors for customers to build long-term trust and partnership with acompany. To maintain its competitive edge in the industry, USI must continue to strengthen its R&Dcapacity, and increase the proportion of investment into product R&D. By recruiting outstanding R&Dtalents from both Chinese mainland and Taiwan, the Company will inject vitality into the developmentof various new technologies and products, integrate the capabilities of software, hardware andminiaturization, and improve the added value and profit of products.Currently USI has been devoted to producing lighter, thinner, shorter, smaller products with low-powerconsumption, strong interconnectivity, and intelligent learning capability. Looking into the future, USIwill use 5G lab test and verification methods to provide the best miniaturized antenna design forintelligent mobile devices, and expand the technology to computer, communication, wearable, industrialand car electronics, connecting the cloud storage and cloud computing, and integrating all producttechnologies to form an IoT network to meet the needs of customers.In 2022, the Company will continue to study SESUB technology and its application in SiP, embeddingthe main chip inside the substrate, making full use of the substrate surface to provide more space for SiPdesign and parts arrangement, and thereby realizing high density and miniaturization of products. Inaddition, due to COVID-19 outbreak, anti-epidemic or epidemic prevention materials have been addedto structural parts (especially plastics). In order to avoid infection by contact, antibacterial agents havebeen added to the material process formula, and antibacterial agents or disinfectants have been sprayedon the surface of portable products. At the same time, how to strengthen the durability of materials mustalso be considered. The Company's R&D team continues to expand business opportunities in the field ofmaterial application.
Therefore, the Company will focus on the following R&D directions:
(1) Developing the design capability of wireless communication modules and 5G new RF products;continue to focus on the development of QUALCOMM’s latest 5G IoT platform, upgrade productspecifications in line with the mainstream trend of the market, and take into account the product lifecycle;
(2) Automotive electronic products;
(3) Continuously expanding the application of miniaturized products into the IoT field, andconstantly improving manufacturing process;
(4) Cooperating with other industry-leading technology companies to produce module productswith higher integration and more functions, and expand to IoT and other fields;
(5) Developing network-attached storage (NAS) devices for cloud computing, and cooperating withmajor chip companies for the development of high-performance SSD and R&D on miniaturization ofSSD;
(6) Developing miniaturization and automation technologies, and automation tools;
(7) Persistently developing products with green design to reduce material and energy consumption.
3. Production plan
Through M&A of FAFG, USI has 27 production sites in 10 countries or regions, including Chinesemainland, Taiwan, the United States, France, Germany, the United Kingdom, the Czech Republic,Mexico, Poland, Tunisia and Vietnam.By acquiring part of Memtech's equity and strengthening thevertical integration of industries, the Company will appropriately expand the production capacity ofproduction bases in other regions according to customer demand and future growth demand. In 2021, theCompany's factories in Vietnam and Huizhou were completed and officially put into production.Since 2016, referring to the spirit of Industry 4.0 and taking Shanghai Zhangjiang factory as the firstdemonstration site, the Company has worked out the “5-star factory standard” for intelligentmanufacturing, that is, the machines are 100% automated, light-off production is enabled in more than80% of the production lines, and the direct manpower is less than 30%. The Company plans to upgradeits main factories to 3-star and 4-star in 2023, and upgrade its four factories to 5-star light-off factories in
2021 Annual Report
2025 to realize fully automated production.In addition, the Company has set up a digital transformation committee, continuously strengtheneddigital management, comprehensively improved its entire process, and made good use of IT technologyplatform to upgrade, so as to create future competitive advantages.
4. Human resources (HR) plan
According to its future development strategy, USI has formulated an HR plan on the basis of HRdemand forecast, including talent recruitment and training. To satisfy the needs of business developmentand enhance work efficiency, USI intends to optimize HR structure, and improve the level of automatedmanufacturing. The Company will continue to improve the people-oriented corporate culture, creategrowth opportunities for employees, establish a career development, performance evaluation andincentive mechanism for employees, and reduce employee turnover so as to provide a strong talentfoundation for the Company to achieve its development goals.
5. Sustainable business plan
USI integrates the core values of “unity of knowledge and action, concerted efforts” into its businessstrategy and operation management, constantly pursues sustainable development, and actively promotesthe improvement of environment (E), society (S) and governance (G). In terms of environment (E), itreduces environmental impact, promotes resource recycling development and actively seeks climategovernance solutions to cope with climate change. In terms of society (S), it continues employee careand promotes social participation activities to exert enterprise influence, and thus realizes globalpartnership. In terms of governance (G), it upholds the principle of safeguarding investors' rights andinterests, strengthening operational risk management and implementing information security control toachieve a sound corporate governance structure.In 2010, USI started to issue annual sustainability reports, and established Sustainability Committee ofthe Group in 2020, ranking top in the industry rankings published by S&P Global, MSCI, Sustainalytics,SynTao Green Finance, Sino-Securities Index, Wind and other domestic and foreign ESG rating agencies.
At the beginning of 2022, USI released the report “Task Force on Climate-Related Financial Disclosure,TCFD)”, managed and disclosed climate risks and opportunities, and launched a phased strategy toachieve the goal of net zero carbon emissions in 2050.
(IV)Possible risks
√Applicable □ Not Applicable
1. Macroeconomic fluctuation risk
Electronic manufacturing industry is closely related to technological development and consumer demand.The Company has been keeping an eye on market changes, maintaining close interaction with customersto grasp their demand changes, strengthening the collection and analysis of market information to reducethe impact of product demand changes on the Company, participating in product design or productdevelopment with leading customers in the industry, so as to realize resource sharing and ensure thatR&D technology can meet customer's needs. However, if the global macroeconomic growth declinesfurther, resulting in weak demands for downstream communications, consumer electronics and industrialelectronics products, the Company's operating performance may face adverse effects.
2. Industry competition risks
EMS industry is a fully competitive industry with numerous global manufacturers, but its overallconcentration is on the rise. According to market research and information collected by USI, the revenueof the world’s top 25 EMS manufacturers accounted for more than 80% of the entire market in 2020 and2021, and the industry kept high level of rivalry and concentration. With an increasing number ofindustry participants and shortened product life cycle, the Company is faced with intense competition insub-sectors of the industry. If the Company cannot ensure the leading advantages of technology andproducts or extend the industrial chain to the design with high added value in time, its market share andprofit margin may face the risk of being squeezed.
3. Risk of high customer concentration
During the reporting period, the the Company’s revenue from its top five customers accounted for 59.63%of the total revenue, showing high customer concentration. Such customers are internationally-renownedelectronic brands, and have established a long-term and stable cooperative relationship with USI toensure sufficient business order.In spite of this,if the customer demand declines, or the Company failstotimelymeet the customer requirements in product R&D and design, product quality control, qualifiedsupplier certification, delivery date, etc., it may cause certain fluctuations in customer orders,thus
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adversely affectingthe Company's business scale and operating performance. Therefore, the Companyfaces the risk of high customer concentration to a certain extent.
4. Risk of technology R&D and upgrading
Communication electronics, consumer electronics, computers and storage products account for morethan 80% of its revenue. The 3C products, characterized by rapid technological update, frequent producttechnology upgrade and gradually shortened product life cycle, is becoming increasingly miniaturized,shorter and thinner. As new technologies and products are constantly emerging in the industry where theCompany is operating, the rapid upgrading of technologies and products may impact the Company'sproducts using existing technologies. If the Company fails to reasonably and continuously increaseinvestment in technology R&D, or timely develop new products with higher quality and meetingcustomer needs, it will be unable to maintain its core competitiveness, which will have a potentialadverse impact on its profitability. In recent years, the Company has gradually realized the “global”production and operation layout through M&A or establishing new subsidiaries in different countries andregions around the world. However, there are differences in laws and regulations, accounting and taxsystems, business practices, corporate management systems, corporate cultures and other aspectsbetween the operating bases located in various countries or regions and listed company. The Companyand merged or newly established companies still need to integrate at least in financial management,customer management, resource management, business development, corporate culture, etc. If therelevant integration plan is not effectively implemented, it may face risks such as unsatisfactory synergyM&A or newly established enterprises, loss of core personnel, and decline in performance.
5. Transnational operation risk
To better serve major customers, USI has arranged production, sales and logistics worldwide to quicklyrespond to the product delivery needs of major customers. As a result, the Company has 27 large-scaleproduction bases (including those under construction) in 10 countries and regions. Overseas companiesneed to abide by the laws and regulations of their countries and regions when conducting business andsetting up institutions abroad, and to a certain extent, they need to rely on overseas raw materialsuppliers, technical service providers or overseas third-party service institutions to ensure the orderlyoperation of daily businesses. If the laws, regulations, industrial policies or political and economicenvironment of the countries and regions where overseas business is located have undergone majorchanges, or there are unpredictable factors such as international tensions, wars, trade sanctions or otherforce majeure, it may have potential adverse effects on the normal business operation and sustainabledevelopment of overseas companies. In addition, if the countries and regions where the relevant overseasbusinesses are located have restrictions on foreign exchange control and dividend distribution, overseascompanies may have the risk of restrictions on dividend remittance.
6. Emerging risk: Upstream supply chain risk
Due to COVID-19 outbreak and the shortage of global chip capacity, since 2020, there has been acontinuous shortage of supply in the electronics supply chain, a shortage of chips and key components,and an increase in procurement and international logistics costs. In order to ensure on-time delivery, theCompany also needs more materials to establish safety stock. Due to theoverstockorunderstock ofcertain components, the Company's materials in stock have increased greatly. In response to theexisting
supply chain risks, the Company needs to have more flexibility in the procurement of key components,material inventory management, production scheduling, etc. It also needs to confirm demand moreclosely with customers and make dynamic adjustment, and arrange shipments and internationaltransportation reasonably to avoid negative impact on the operation.
(V) Miscellaneous
□Applicable √Not Applicable
VII. The circumstances and reasons for the Company’s failure to disclose according to thestandards due to special reasons such as non-applicability of the standards or state secrets andtrade secrets
□Applicable √Not Applicable
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Section IV Corporate Governance
I. Particulars on corporate governance
√ Applicable □Not Applicable
During the reporting period, the Company, in strict accordance with the relevant requirements of theCompany Law the Securities Law and the Code of Corporate Governance for Listed Companies, ChinaSecurities Regulatory Commission, and Shanghai Stock Exchange, strengthened information disclosureefforts, continuously optimized the corporate legal person governance structure, established the soundinternal control system, and standardized the business operation, to effectively guarantee the interests ofthe Company and its all shareholders. The Company's general meeting of shareholders, Board ofDirectors, Board of Supervisors, and all operation levels had clear responsibilities. All directors,supervisors and members of the senior management were diligent and responsible. Directors andsupervisors actively participated in the Company's general meetings of shareholders, meetings of theBoard of Directors, and meetings of the Board of Supervisors, and earnestly performed theirresponsibilities. Related directors voluntarily abstained from voting on relevant related transactions toensure the safe, stable, healthy and sustainable development of the Company.
(I) Shareholders and general meetings of shareholders: The Company convened and held generalmeetings of shareholders in accordance with the requirements of the Company Law, the Articles ofAssociation, and the Rules of Procedure for the General Meeting of Shareholders. The general meetingsof shareholders complied with the relevant provisions in aspects of preparations, proposals, procedures,voting and resolutions, resolution execution and information disclosure, and ensured that allshareholders, especially minority shareholders, fully exercised their voting rights and maintained equalstatus. The Company also invited lawyers to attend the general meetings of shareholders to confirm andwitness the convening procedures, deliberation matters, and identities of attendees, and issue legalopinions to ensure the legality and validity of the general meeting of shareholders.(II) Relationship between the controlling shareholder and the listed company: The Company and itscontrolling shareholder were independent of each other. The Company's board of directors, board ofsupervisors and internal institutions could operate independently. The Company established a long-termmechanism to prevent the controlling shareholder and its affiliated companies from occupying the listedcompany's funds and infringing on the listed company's interests, and no major shareholders occupiedthe listed company's funds and assets.
(III) Directors and the Board of Directors: The Company elected directors in strict accordance withthe selection and appointment procedures stipulated in the Company Law and the Articles of Association.The Company's Board of Directors met the requirements of laws and rules in terms of number andcomposition of members. The Company's directors could seriously attend the meetings of the Board ofDirectors in accordance with the Procedure Rules of the Board of Directors and other regulations. TheBoard of Directors set up four special committees, namely the Audit Committee, the StrategicCommittee, the Nomination Committee, and the Remuneration Committee, of which the membership isreasonable. Since their establishment, the special committees have been operating in strict accordancewith the corresponding work regulations, and fully playing its professional role in the Company'soperation and management. The independent directors of the Company, in strict compliance with theGuidelines on the Performance of Duties by Independent Directors, performed their responsibilities in aconscientious and responsible, diligent and honest manner, and put forward valuable opinions andsuggestions in the process of reviewing related transactions and internal control norms.
(IV) Supervisors and the Board of Supervisors: The Company's Board of Supervisors strictlycomplied with the relevant provisions of the Company Law and the Articles of Association, met therequirements of laws and rules in terms of number and composition of members, and could, according tothe Rules of Procedure of the Board of Supervisors and other regulations, seriously performed theirresponsibilities, and supervised the compliance with laws and regulations of the Company's financepersonnel, directors and members of the senior management in performing their responsibilities andexpressed relevant opinions.
(V) Performance evaluation and incentive and restraint mechanisms: The Company established fairand transparent performance evaluation standards and incentive and restraint mechanism for members ofthe senior management; the members of the senior management of the Company were appointed in anopen and transparent manner and in compliance with the provisions of relevant laws and regulations.
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(VI) Information disclosure and transparency: The Company truthfully, accurately, completely andtimely disclosed relevant information through Shanghai Securities News, China Securities Journal,Securities Times, Securities Daily, and the website of Shanghai Stock Exchange, in strict accordancewith relevant laws and regulations and the requirements of the Information Disclosure ManagementRegulations formulated by the Company, and did a good job in confidentiality before informationdisclosure, and earnestly fulfilled the obligation of information disclosure as a listed company, to ensurethe openness, fairness and impartiality of information disclosure by the Company and actively safeguardthe legitimate rights and interests of the Company and its investors, especially minority shareholders.During the reporting period, the Company was not criticized, condemned or punished by regulatoryagencies for information disclosure violations.(VII) Investor relations and related stakeholders: The Company, in accordance with the relevantrequirements of the Self-disciplinary Rules Listed Companies No. 3 - Cash Dividends of ListedCompanies by China Securities Regulatory Commission and the Guidelines for the Self-supervision ofListed Companies No. 1 - Standardized Operation of Shanghai Stock Exchange, firmly established theawareness of rewarding shareholders, improved the cash dividend regulations, maintained theconsistency, rationality and stability of the cash dividend policy, and ensured the authenticity of cashdividend information disclosure. The Company actively received all kinds of investors, and set up aninvestor relations section on the Company's website, which further strengthened investors' understandingand recognition of the Company, promoted the benign interaction between the Company and investors,and was conducive to effectively protecting the interests of investors. The Company could fully respectand safeguard the legitimate rights and interests of its employees, suppliers, customers, banks and otherstakeholders, and achieved mutual benefits in economic exchanges to promote the sustainable andhealthy development of the Company.
(VIII) Establishment and improvement of the internal control system: The Company continuouslyimproved the internal control system and strengthened the execution and implementation of internalcontrol norms in strict accordance with the regulatory requirements, and performed the self-inspectionand self-evaluation over the effectiveness of internal control of the Company's key business processesand key control links on the basis of strengthening daily supervision and special inspections.
(IX) Registration and management of insiders: The Company strictly implemented theAdministrative Regulations for Registration of Information Insiders in accordance with the requirementsof regulatory agencies.
Whether there are significant differences between the Company’s corporate governance and laws,administrative regulations and the requirements of China Securities Regulatory Commission oncorporate governance of listed companies; if there are significant differences, the reasons shall beexplained
□ Applicable √Not Applicable
II. Specific measures taken by the Company's controlling shareholder and actual controller toensure the independence of the Company's assets, personnel, finance, organization, and business,and solutions, work progress and subsequent work plans adopted by them to affect the Company'sindependence
√ Applicable □Not Applicable
For details, see the "Commitment to Guarantee the Independence of Listed Companies" in "Section VIImportant Matters".
Situation that the Company's controlling shareholder, actual controller, and other units under theircontrol are engaged in the same or similar business as or with the Company, impact of horizontalcompetition or major changes in horizontal competition on the Company, settlement measures taken,settlement progress and subsequent settlement plans
□ Applicable √Not Applicable
III. Brief Introduction to general meetings of shareholders
| Session number | Holding date | Query index of the designated website on which the | Disclosure date when the resolution is | Resolution |
2021 Annual Report
| resolution is published | published | |||
| 2020 annual general meeting of shareholders | April 23, 2021 | www.sse.com.cn (Announcement No.: 2021-041) | April 24, 2021 | Deliberated and approved 16 proposals, including the Work Report of the Board of Directors for the Year 2020, the Work Report of the Board of Supervisors for the Year 2020, the Financial Final Report for the Year 2020, 2020 Annual Report and Its Summary, the Profit Distribution Preplan for the Year 2020, the Proposal on Regular Related Transactions for the Year 2020, the Proposal on Estimated Regular Related Transactions for the Year 2020, the Proposal on Investment Quota of Wealth Management Products with Self-owned Idle Funds for the Year 2021, the Proposal on Bank Credit Line for the Year 2021, the Proposal on Financial Derivatives Transactions for the Year 2021, the Proposal on Renewal of Financial Audit Institution, the Proposal on Renewal of Internal Control Audit Institution, the Proposal on Amendment to the Articles of Association, the Proposal on Agreeing to Provision of Mutual Guarantees by Controlled Subsidiaries, the Proposal on Amendment to the External Guarantee Management Regulations, and the Proposal on Supplement of Candidates for Non-Independent Directors of the Fifth Session of the Board of Directors |
| The first interim general meeting of shareholders for the year of 2021 | September 13, 2021 | www.sse.com.cn (Announcement No.: Lin 2021-075) | September 14, 2021 | Deliberated and approved 3 proposals, including the Proposal on 2021 Employee Stock Ownership Plan (Draft) and Its Summary, the Proposal on the Administrative Measures for 2021 Employee Stock Ownership Plan, and the Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the 2021 Employee Stock Ownership Plan |
Convening of an interim general meeting of shareholders requested by the preferred shareholders whosevoting rights have been restored
□ Applicable √Not Applicable
Particulars on general meetings of shareholders
□ Applicable √Not Applicable
2021 Annual Report
IV. Directors, supervisors and members of the senior management(I) Shareholding change and remuneration of directors, supervisors and members of the seniormanagement currently employed and retired during the reporting period
√Applicable □Not Applicable
Unit: Share
Position(note)
| Sex | Age | Commencement date of term of office | Termination date of term of office | Number of shares held at the beginning of the year | Number of shares held at the end of the year | Change in share of the year | Reasons for change | Total pre-tax remuneration from the Company during the reporting period (RMB 10,000) | Whether remuneration was obtained from related parties of the Company |
Chairman
of theBoard ofDirectors
| Male | 58 | 2018-06-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 250 or more | Yes |
Director
| Male | 58 | 2016-04-19 | 2023-04-27 | 0 | 0 | 0 | N/A | Yes |
Directorand General
Manager
| Male | 68 | 2008-06-20 | 2023-04-27 | 0 | 0 | 0 | N/A | 250 or more | No |
Director
| Male | 63 | 2018-07-16 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Director(Resigned)
| Male | 61 | 2018-07-16 | 2021-04-23 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Director
| Male | 43 | 2010-03-10 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Director
| Male | 44 | 2017-04-17 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Director
| Male | 68 | 2021-04-23 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Independent
Director
| Male | 58 | 2017-04-17 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | No |
Independent
Director
| Male | 78 | 2017-04-17 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | No |
Independent
Director
| Male | 60 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | No |
Chairman
of the
Board ofSupervisors
| Male | 59 | 2008-06-19 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Supervisor
| Male | 47 | 2016-04-19 | 2023-04-27 | 0 | 0 | 0 | N/A | Below 40 | Yes |
Employeesupervisor
| Male | 50 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 40~100 | Yes |
Senior Vice
President
| Male | 59 | 2011-02-09 | 2023-04-27 | 20,700 | 20,700 | 0 | N/A | 150~250 | No |
Senior Vice
President(Resigned)
| Male | 66 | 2009-12-09 | 2021-12-24 | 0 | 0 | 0 | N/A | 150~250 | No |
Senior Vice
President
| Male | 60 | 2008-06-20 | 2023-04-27 | 0 | 0 | 0 | N/A | 150~250 | No |
Senior Vice
President(Resigned)
| Male | 66 | 2008-06-20 | 2021-12-24 | 0 | 56,000 | 56,000 | Stock option incentive exercise | 150~250 | No |
Vice
President
| Male | 64 | 2009-12-09 | 2023-04-27 | 0 | 0 | 0 | N/A | 40~100 | No |
2021 Annual Report
Senior Vice
President
| Male | 63 | 2017-04-27 | 2023-04-27 | 0 | 0 | 0 | N/A | 250 or more | No |
Senior Vice
President
| Male | 59 | 2017-04-27 | 2023-04-27 | 0 | 0 | 0 | N/A | 150~250 | No |
Senior Vice
President
| Male | 59 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 100~150 | No |
Senior Vice
President
| Male | 57 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 100~150 | No |
Senior Vice
President
| Male | 54 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 150~250 | No |
VicePresident
| Male | 63 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 100~150 | No |
VicePresident(Resigned)
| Male | 55 | 2020-04-28 | 2021-12-24 | 0 | 0 | 0 | N/A | 150~250 | No |
VicePresident
| Male | 56 | 2020-04-28 | 2023-04-27 | 0 | 0 | 0 | N/A | 150~250 | No |
VicePresidentand ChiefFinancial
Officer
| Male | 57 | 2008-06-20 | 2023-04-27 | 0 | 20,000 | 20,000 | Stock option incentive exercise | 100~150 | No |
Senior Vice
President
andSecretary tothe Boardof Directors
| Male | 46 | 2018-06-28 | 2023-04-27 | 0 | 52,000 | 52,000 | Stock option incentive exercise | 250 or more | No |
/
| / | / | / | / | 20,700 | 148,700 | 128,000 | / | / |
Note: During the reporting period, the Company assumed expenses of options and employee stockownership plan granted tothe directors, supervisors and members of the senior management, totalingRMB 6.60 million, which were not included in the pre-tax remuneration they received from theCompany.
| Name | Work Experience |
| Jeffrey Chen | Jeffrey Chen, from Taiwan, China, graduated from the University of British Columbia with a master’s degree in business administration. Mr. Chen has served as chairman of Universal Scientific Industrial (Shanghai) Co., Ltd. since June 2018. He joined the predecessor of ASE Technology Holding Co., Ltd. in 1994, serving successively as the assistant to the central staff office, special assistant to the chairman and chief of staff of the Group, as well as CFO and director of ASE Test Limited, a subsidiary of the Group and a listed company on NASDAQ. He previously worked for Citibank Taiwan as the general manager assistant and Bankers Trust Taipei Branch as the assistant general manager. Currently he also serves as a director of ASE Technology Holding Co., Ltd. and an independent director of Mercuries & Associates Holding, LTD. |
| Chen-Yen Wei | Chen-Yen Wei from Taiwan, China, holds a bachelor’s degree from National Chiao Tung University. Mr. Wei joined Universal Scientific Industrial Co., Ltd in 1979, where he served successively as engineering manager, vice president of finished product business group, senior vice president of communication product business group, senior vice president of corporate service unit, and general manager of the company. Currently he serves as the director and president of the Company. |
| Dtuang Wang | Dtuang Wang, from Taiwan, China, holds a bachelor’s degree in laws from National Taiwan University, a master’s degree in laws from National Chung Hsing University, and a doctorate in law from National Chengchi University. He was the CEO of ASE Foundation, a director of Dinggu Holdings Co., Ltd., a director of Hongjing Construction Co., Ltd., an independent executive director of First Commercial Bank Co., Ltd., dean of School of Law, Ming Chuan University. Currently he serves as Group Chief Executive and Corporate Governance Director of ASE Technology Holding Co., Ltd. and a member of the company’s Risk Management |
2021 Annual Report
| Committee, a director of ASE Semiconductor Manufacturing Co., Ltd., and the professor of Ming Chuan University Law School. | |
| Rutherford Chang | Rutherford Chang, American, holds a bachelor’s degree in Psychology from Wesleyan University. Mr. Chang served as the special assistant to the chairman of J&R Holding and the special assistant to the chairman of Advanced Semiconductor Engineering, Inc. In addition to serving as a director of the company, he also serves as a director of ASE Semiconductor Manufacturing Co., Ltd. |
| Neng Chao Chang | Neng Chao Chang, British, with a bachelor’s degree in economics from Williams University, is a former analyst at Morgan Stanley. He currently serves as the general manager of USI America Inc., a director of ASE Test Inc., a director of USI Inc., and a director of Advanced Semiconductor Engineering, Inc. |
| Gilles Baruk Benhamou | Gilles Baruk Benhamou, French, born in June, 1953, graduated from ?cole Polytechnique in Paris with a master’s degree in science. Mr. Gilles Benhamou has more than three decades’ experience in the electronic components & assembly industry. Currently he serves as the CEO of Financière AFG S.A.S., the CEO of ASDI Assistance Direction, the CEO of Saphir, a director of Decelect, and the CEO of Retail Evolution. |
| Yunwei Tang | Chinese, with a doctorate in accounting from SUFE, is the founder of the Chinese Accounting Professors Association. Mr. Tang worked for SUFE where he held the following positions including a lecturer, associate professor, assistant to the president, professor, vice president and president. He previously served as a member of the China Accounting Standards Committee, a member of Chinese Auditing Standards Board, president of Shanghai Accounting Association, and a member of the Listing Committee for Shanghai Stock Exchange. Mr. Tang served as a senior researcher of the International Accounting Standards Board from March 1999 to January 2000. He was awarded honorary membership to the Association of Chartered Certified Accountants, an honorary fellowship of Lingnan University in Hong Kong, and the title of an outstanding international visiting professor of the American Accounting Association. During the reporting period, in addition to serving as the independent director of the Company, he also served as an independent director of China Jushi Co., Ltd., , Ping An Healthcare and Technology Company Limited and Shanghai Lujiazui International Financial Asset Exchange Co.,Ltd.. |
| Yiyun Chu | Yiyun Chu, Chinese, with a doctorate in accounting from Shanghai University of Finance and Economics (SUFE), is a professor and doctoral advisor of the School of Accounting, SUFE, a researcher at Key Research Institute of Accounting and Finance, SUFE, and selected candidate of accounting master training project of the Ministry of Finance, who concurrently takes the position of a member of the Committee for Accounting Standards for Business Enterprises appointed by the Ministry of Finance, the director of Accounting Society of China, and executive secretary of Accounting Education Branch, Accounting Society of China. He also serves as an independent director of Ping An, Bank of Hebei (Not listed) and Bank of Jiaxing, and an external supervisor of Ping An Bank. |
| Michael Chung | Michael Chung, from Taiwan, China, has a bachelor’s degree in Electrical Engineering from National Tsing Hua University, Taiwan. Mr. Chung served as the general manager of the business group of Hon Hai Precision Industry Co., Ltd. and the chief executive officer of TPK Holding Co., Ltd. He joined AcSiP in June 2019 as the Chairman of the Board since. He also serves as an independent director of LuxNet Corp., a director of SAVITECH, Dasheng Venture Capital Co., Ltd, Feng Tay Enterprises Co., Ltd. and LOROM INDUSTRIAL CO., LTD. |
| Meng-Kuo Shih | Meng-Kuo Shih, from Taiwan, China, has a master’s degree in management science from Taiwan Jiaotong University. Mr. Shih used to serve as deputy director of finance of TECO Electric & Machinery Co., Ltd., director of finance of TECO OPTRONICS CORPORATION, chief financial officer and spokesperson of InterServ International Inc., and chief financial officer of Advanced Semiconductor Engineering, Inc. In addition to the director of USI, he holds the position of a director of USI Inc. |
| Andrew Robert Tang | Andrew Robert Tang, American, graduated from Yale University. Mr. Tang previously worked for private investment companies and Morgan Stanley, and joined Advanced Semiconductor Engineering, Inc. in 2014 where he currently assumes the Vice President. He also serves as a director of Guam Capital Investment Company. |
| David Huang | David Huang, from Taiwan, China, holds an EMBA from Shanghai Jiaotong University. Mr. Huang previously worked for Universal Scientific Industrial Co., Ltd. Currently he serves as the director of USI's manufacturing services. |
2021 Annual Report
| Ta-I Lin | Ta-I Lin, from Taiwan, China, has a bachelor's degree in Electrical Engineering from National Cheng Kung University and a master's degree of EMBA from Peking University. After graduation, Mr. Lin joined in Universal Scientific Industrial Co., Ltd. where he served successively as the general manager of Universal Scientific Information Products Business Division, president of USI Electronics (Shenzhen) Co., Ltd., and the manager of Universal Scientific Industrial Co., Ltd. Taiwan Factory. Currently, serves as the senior Vice President of the Company. |
| Feng-Ta Chen | Mr. Feng-Ta Chen, from Taiwan, China, once served as deputy manager of SAMPO CORP., manager of wireless network card operation management of Universal Scientific Industrial Co., Ltd., associate manager of ERP project management, associate manager of global human resources administration, and general manager of Shanghai Zhangjiang Factory, Jinqiao Factory, and Shengxia Factory of USI. Currently, he serves as the senior vice president of the Company's global sales and after-sales service department. |
| Jing Cao | Jing Cao, American, holds a double master's degree in engineering from Arizona State University. Once served as the senior Vice President of Mindspeed, the vice president of Tyco Electronics Co., Ltd., and the senior Vice President of UTAC Semiconductor Co., Ltd. Currently, serves as the senior vice president of the Company. |
| Yuan-Hsin Sheng | Yuan-Hsin Sheng, from Taiwan, China, once served as the general manager of Eagle Test Systems Taiwan, the vice president of ASE Inc., and the vice president of Universal Scientific Industrial Co., Ltd. Currently, serves as the senior vice president of the Company. |
| Tan-Yang Liu | Tan-Yang Liu, from Taiwan, China, holds a master's degree from the University of Southampton, UK. Once worked as director of Audit Department of KPMG, deputy manager of Underwriting Department of Taiwan International Securities Investment Consulting Corp., the deputy manager of International Department of UOB Securities Pte Ltd, the deputy manager of International Department of Mega Capital (Asia) Company Limited, and the vice president of Capital Market Department of Polaris Securities Co., Ltd. Currently, serves as the vice president and chief financial officer of the Company. |
| Jinpeng Shi | Chinese, holds a bachelor's degree from the School of Economics and Management of Tongji University, and a EMBA's degree from China Europe International Business School. Once worked as the project manager of International Business Department of Guotai Junan Securities, the director of the Shanghai Investment Banking Department of Southwest Securities, and the vice president of Investment Banking Department, the president of No.3 Business Department and the managing director of Great Wall Securities. Currently, serves as the senior vice president and the secretary to the Board of Directors of the Company. |
| Yung-Che Fang | Yung-Che Fang, from Taiwan, China, holds a doctor's degree in Mechanical and Aeronautical Engineering from Case Western Reserve University. Once worked as the executive vice president at SOCLE Technology Corporation, and the vice president at GIGABYTE Technology Co., Ltd. and First International Computer, Inc. Currently, serves as the senior vice president of the Company. |
| Jeh-Chang Lee | Jeh-Chang Lee from Taiwan, China, holds a MBA's degree from University of Maryland. Mr. Lee Once worked as the deputy director of Taiwan Semiconductor Manufacturing Co., Ltd. and currently serves as the senior vice president of the Company. |
| Johnson Lien | Johnson Lien, from Taiwan, China, holds a MBA's degree from Chung Hsing University. Once worked as the special assistant to the general manager and the marketing director of Siliconware Precision Industries Co., Ltd., and the vice president at Avct and Avct Optical Electronic and at Jmex Solutions. Currently, serves as the senior vice president of the Company. |
| Chia-Hsiung Yu | Chia-Hsiung Yu, from Taiwan, China, holds a MBA's degree from National Chiao Tung University. Currently, serves as the vice president of the Company. |
| Yueh-Ming Lin | Yueh-Ming Lin, from Taiwan, China, holds a bachelor's degree of Electrical Engineering from Feng Chia University. Mr. Lin Joined in Universal Scientific Industrial Co.，Ltd. In 1995. Currently, serves as the vice president of the Company. |
| TS Chen | TS Chen, from Taiwan, China, holds a bachelor's degree in industrial engineering from Chung Yuan Christian University. Mr. Chen joined in Advanced Semiconductor Engineering, Inc. in June 1988. Before joining ASE Group, he worked for Taiwan Integrated Circuit Manufacturing Co., Ltd. and Philips Electronic Building Elements Industries (Taiwan) Ltd. From June 1988 to June 2006, Mr. Chen served successively as the senior vice president at Advanced Semiconductor Engineering, Inc. and the general manager at Zhongli Branch of Advanced Semiconductor Engineering, Inc. From June 2006 to May 2012, he worked as the |
2021 Annual Report
| general manager of Powerase Technologies Inc. From June 2006 to June 2015, he served as the supervisor of Advanced Semiconductor Engineering, Inc.; in June 2015, he was appointed as director of the Company; In August 2015, served as the general manager at Zhongli Branch of Advanced Semiconductor Engineering, Inc. No longer served as director of the Company after April 23, 2021. | |
| Chueh Hou | Chueh Hou, from Taiwan, China, holds an MBA's degree from Tunghai University. In July 1987, Mr. Hou joined in Universal Scientific Industrial Co., Ltd. where he served as the manager of the engineering department, the director of the development office, the vice president of the business office, the senior vice general manager of the business division, and the general manager of the Company. He was appointed as the senior vice president of the Company in December 2009, and no longer held this position due to retirement on December 24, 2021. |
| Hung-Chi Liu | Hung-Chi Liu, from Taiwan, China, graduated from the Electronics Department of Chung Yuan Christian University. Mr. Liu once worked as the purchasing engineer of NCR Systems Taiwan Ltd., the manager of HP Development Company, L.P., the person in charge of the Wireless Communication Products Division of Universal Scientific Industrial Co., Ltd. He was appointed as the senior vice president of the Company in June 2008, and no longer held this position due to retirement from December 24, 2021. |
| Tsung-Yi Chiu | Tsung-Yi Chiu from Taiwan, China, holds a master's degree in Industrial Management from National Taiwan University of Science and Technology. Mr. Chiu was appointed as the vice president of the Company in April 2020, and no longer held this position due to early retirement from December 24, 2021. |
Particulars on other information
□Applicable √Not applicable
(II) Employment of directors, supervisors and senior management currently employed and retiredduring the Reporting Period
1. Employment in shareholders’ companies
√Applicable □Not Applicable
| Name of person employed | Name of shareholder’s company | Position held in shareholder’s company | Commencement date of term of office | Termination date of term of office |
| Jeffrey Chen | ASE Technology Holding Co., Ltd., etc. | Director (representative) of ASE Technology Holding Co., Ltd., Advanced Semiconductor Engineering, Inc. and ASE TEST, Inc.; supervisor of ASE (Shanghai) Inc., ASE (Kunshan) Japan Inc. and ASE (Korea) Inc. Supervisor, ASE (Weihai) Inc.; director of Wuxi Tongzhi Microelectronics Co., Ltd., ASE Test Limited (Singapore), ASE Test Holdings Ltd. And Omniquest Industrial Ltd.; supervisor ofASE Assembly & Test (Shanghai) Limited; director of Shanghai Ding Hui Real Estate Development Co., Ltd.; director (representative) of ASE Electronics Inc.; director of Advanced Semiconductor Engineering (HK) Limited, Suzhou ASE Semiconductors Co., Ltd., Shanghai Ding Wei Real Estate Development Co., Ltd., Shanghai Ding Yu Real Estate Development Co., Ltd., KunShan Ding Hong Real Estate Development Co., Ltd., Shanghai Ding Qi Property Management Co., Ltd., Shanghai Ding Fan Commercial Management Co., Ltd., Shanghai DingXu Property Management Co., Ltd., and Super Zone Holdings Ltd.; chairman of | / | / |
2021 Annual Report
| the Board of Directors and director (representative) of USI Inc.; director of Huntington Holdings International Co., Ltd., Shanghai Ding Yao Real Estate Development Co., Ltd. and Real Tech Holdings Limited | ||||
| Chen-Yen Wei | USI Inc., etc. | Director of USI Inc., HUNTINGTON HOLDINGS INTERNATIONAL CO. LTD., UNITECH HOLDINGS INTERNATIONAL CO. LTD., REAL TECH HOLDINGS LIMITED, and Universal ABIT Holding Co., Ltd. | / | / |
| Dtuang Wang | ASE Technology Holding Co., Ltd. | Chief executive and corporate governance director, member of the Risk Management Committee and chief risk officer, chief information security officer of ASE Technology Holding Co., Ltd.; director (representative), and chief executive of Advanced Semiconductor Engineering, Inc.; chairman of the Board of Directors and general manager at Advanced Semiconductor Engineering (China) Ltd.; director and general manager at ASE Assembly & Test (Shanghai) Limited; director of SINO HORIZON; director of Hung Ching Development & Construction Co.; director of Hong Jing New Stocks Co., Ltd.; Director and CEO of ASE Cultural and Education Foundation and ASE Environmental Sustainability Foundation | / | / |
| Rutherford Chang | ASE Technology Holding Co., Ltd. | Director of ASE Technology Holding Co., Ltd., director (representative) of Advanced Semiconductor Engineering, Inc., director (representative) of ASE TEST, Inc., director and general Manager of ASE Investment (Kunshan) Limited, and director (representative) of USI Inc. | / | / |
| Neng Chao Chang | Advanced Semiconductor Engineering, Inc. | Director (representative) of Advanced Semiconductor Engineering, Inc., director (representative) of ASE TEST, Inc., and director (representative) of USI Inc. | / | / |
| Meng-Kuo Shih | USI Inc., etc. | Director of USI Inc., HUNTINGTON HOLDINGS INTERNATIONAL CO. LTD., UNITECH HOLDINGS INTERNATIONAL CO. LTD., REAL TECH HOLDINGS LIMITED, Universal ABIT Holding Co., Ltd. and USI Enterprise Limited | / | / |
| Andrew Robert Tang | Advanced Semiconductor Engineering, Inc., etc. | Supervisor (representative) of Advanced Semiconductor Engineering, Inc.; ASE TEST, Inc.; director of Shanghai Ding Hui Real Estate Development Co., Ltd., Shanghai Ding Wei Real Estate Development Co., Ltd., and Shanghai Ding Yu Real Estate Development Co., Ltd.; supervisor (representative) of USI Inc.; director of ASE Cultural and Education Foundation and ASE Environmental Sustainability Foundation | / | / |
| Chen-Lung Wei | USI Inc., etc. | Director of USI Inc., director of HUNTINGTON HOLDINGS INTERNATIONAL CO. LTD., and director of Universal ABIT Holding Co., Ltd. | / | / |
| Ta-I Lin | Universal ABIT Holding Co., Ltd. | Director | / | / |
| Tan-Yang Liu | USI Inc., etc. | Director of USI Enterprise Limited and director of USI Inc. | / | / |
| TS Chen | ASE Technology | Director (representative) of ASE Technology | / | / |
2021 Annual Report
| Holding Co., Ltd., etc. | Holding Co., Ltd.; director (representative) of Advanced Semiconductor Engineering, Inc. and general manager at its Zhongli Branch; supervisor of Suzhou ASE Semiconductors Co., Ltd.; director of ASE (Weihai) Inc. and ASE (Kunshan) Inc.; director (representative) of Lu-Chu Development Corporation | ||
| Particulars on employment in shareholders’ companies | TS Chen no longer served as director of the Company from April 23, 2021. | ||
2021 Annual Report
2. Employment in other companies
√Applicable □Not Applicable
| Name of person employed | Name of other companies | Position held in other companies | Commencement date of term of office | Termination date of term of office |
| Dtuang Wang | School of Law of Ming Chuan University, etc. |
Director and CEO of Zhang Yao HongyingSocial Welfare and Charity Foundationand Honorary Professor at School of Lawof Ming Chuan University
| / | / | |||
| Gilles Baruk Benhamou | Saphir, etc. | CEO of Saphir, director of Decelect, CEO of Retail Evolution, and CEO of ASDI Assistance Direction | ||
| Meng-Kuo Shih | Global Venture Capital Co., Ltd. | Director | / | / |
| Andrew Robert Tang | Guam Capital Investment | Director | / | / |
| Yunwei Tang | China Jushi Co., Ltd., etc. | Independent director of China Jushi Co., Ltd., Ping An Healthcare and Technology Co., Ltd., and Shanghai Lujiazui International Financial Asset Exchange Co.,Ltd. | / | / |
| Yiyun Chu | Shanghai University of Finance and Economics, etc. | Professor and PhD advisor with School of Accounting, SUFE, member of the 1st Advisory Committee for Accounting Standards for Business Enterprises of the Ministry of Finance, director of the Accounting Society of China, executive secretary-general at the Accounting Education Branch of the Accounting Society of China, full-time researcher at Institute of Accounting and Finance, Shanghai University of Finance and Economics as the Key Research Base of Humanities and Social Sciences of the Ministry of Education, and independent director of Ping An Insurance (Group) Company of China, Bank of Hebei Co., Ltd. (Unlisted), and Bank of Jiaxing (Unlisted) | / | / |
| Michael Chung | AcSiP, etc. | Chairman of the Board of Directors of AcSiP, independent director of LuxNet Corp., and director of Savitech Corp., Dasheng Venture Capital Co., Ltd., FENG TAY ENTERPRISES CO., LTD., and LOROM INDUSTRIAL CO., LTD. | / | / |
| Ta-I Lin | SUMA-USI Electronics Co., Ltd. | Director | / | / |
| Jinpeng Shi | GJS Capital Co., Ltd., etc. | Director of GJS Capital Co., Ltd. and supervisor of SUMA-USI Electronics Co., Ltd. | / | / |
| Particulars on employment in other | None | |||
2021 Annual Report
companies
(III) Remuneration of directors, supervisors and members of the senior management
√Applicable □Not Applicable
| Decision-making procedures for the remuneration of directors, supervisors and members of the senior management | The relevant proposals on the annual remuneration of members of the senior management personnel shall be reviewed by the Remuneration Committee under the Board of Directors and then submitted to the Board of Directors for deliberation and approval before implementation. |
| Determination basis for the remuneration of directors, supervisors and members of the senior management | Remuneration shall be determined according to their performance appraisal, combined with the Company's asset status, profitability and progress of annual business objectives. |
| Actual payment of the remuneration of directors, supervisors and members of the senior management | For details, see Section IV-I (I) Shareholding change and remuneration of directors, supervisors and members of the senior management currently employed and retired during the reporting period. |
| Total remuneration actually received by all directors, supervisors and members of the senior management at the end of the Reporting Period | RMB 30.52 million |
(IV) Changes in directors, supervisors and members of the senior management of the Company
√Applicable □Not Applicable
| Name | Position | Change | Reason for change |
| TS Chen | Director | Resigned | Resignation due to work arrangement adjustment |
| Gilles Baruk Benhamou | Director | Appointed | New appointment |
| Chueh Hou | Senior vice president | Resigned | Resignation due to retirement |
| Hung-Chi Liu | Senior vice president | Resigned | Resignation due to retirement |
| Tsung-Yi Chiu | Vice president | Resigned | Resignation due to retirement |
(V) Particulars on punishments by securities regulatory authorities in the past three years
□Applicable √Not Applicable
(VI) Others
□Applicable √Not Applicable
V. Meetings of the Board of Shareholders held during the reporting period
| Session of meeting | Holding date | Resolution |
| The 8th meeting of the fifth session of the Board of Directors | March 1, 2021 | The following proposals were deliberated and adopted: 1. Proposal on the Company's Qualification for the Public Issuance of Convertible Corporate Bonds 2. Proposal on the Listing of Convertible Corporate Bonds 3. Proposal on Opening a Special Account for Funds Raised by Public Issuance of Convertible Corporate Bonds and Signing a Regulatory Agreement |
| The 9th meeting of the fifth session of the Board of Directors | March 26, 2021 | The following proposals were deliberated and adopted: 1. Proposal on the 2020 Work Report of the Board of Directors 2. Proposal on the 2020 Work Report of the General Manager 3. Proposal on 2020 Final Financial Report |
2021 Annual Report
| 4. Proposal on 2021 Annual Report and its Summary 5. Proposal on 2020 Annual Internal Control Self-Assessment Report 6. Proposal on 2020 Annual Corporate Social Responsibility Report 7. Proposal on 2020 Profit Distribution Plan 8. Proposal on Recognition of Loss of Assets Deductible Against Taxable Income in 2020 9. Proposal on the Remuneration of the Company's Senior Management in 2020 10. Proposal on Regular Related Party Transactions in 2020 11. Proposal on Predicted Regular Related Party Transactions in 2021 12. Proposal on the Amount of Wealth Management Products Using Self-owned Idle Funds Allowed for 2021 13. Proposal on Bank Credit Lines in 2021 14. Proposal on the Amount of Financial Derivative Transactions Allowed for 2021 15. Proposal on the Company's Provision of Financial Assistance to Subsidiaries 16. Proposal on New Candidates for Non-independent Directors of the Fifth Session of the Board of Directors 17. Proposal on Appointing Securities Affairs Representative 18. Proposal on Formulating 2021 Internal Audit Plan 19. Proposal on Renewing the Contract with Financial Audit Institutions 20. Proposal on Renewing the Contract with Internal Control Audit Institutions 21. Proposal on Amending the Articles of Association 22. Proposal on Amending the Rules of Registration for Insiders 23. Proposal on Replacing Pre-issuance Investments Using Self-Owned Funds and Flotation Costs with Raised Funds 24. Proposal on Using Raised Funds for the Supplementary Working Capital Project 25. Proposal on Using Raised Funds to Inject Capital into Subsidiaries 26. Proposal on Using Idle Raised Funds for Cash Management 27. Proposal on Guarantees Between Holding Subsidiaries 28. Proposal on Amending the Administrative Rules of External Guarantee 29. Proposal on Holding 2020 Annual General Meeting of Shareholders | ||
| The 10th meeting of the fifth session of the Board of Directors | April 26, 2021 | The following proposals were deliberated and adopted: 1. Proposal on Quarterly Report for Q1 2021 2. Proposal on Amending the Rules of Information Disclosure 3. Proposal on Amending the Internal Reporting Rules for Major Issues 4. Proposal on Confirmation of the Participants and Vesting price of Core Employee Stock Ownership Plan Phase II |
| The 11th meeting of the fifth session of the Board of Directors | cJuly 12, 2021 | The following proposals were deliberated and adopted: 1. Proposal on Retroactive Adjustment of Financial Statements for Business Combination not Under Common Control 2. Proposal on the Use of Self-owned Funds for Corporate Venture Capital and Authorization of Investment Quota |
| The 12th meeting of the fifth session of the Board of | August 24, 2021 | The following proposals were deliberated and adopted: 1. Proposal on the 2021 Semi-Annual Report and its Summary 2. Proposal on the Special Report on the Deposit and Actual |
2021 Annual Report
| Directors | Usage of the Raised Funds in the First Half of 2021 3. Proposal on the Plan for Share Buy-back by Centralized Bidding Transactions 4. Proposal on 2021 Employee Stock Ownership Plan (Draft) and its Summary" 5. Proposal on the Administrative Rules for 2021 Employee Stock Ownership Plan 6. Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Formalities Related to 2021 Employee Stock Ownership Plan 7. Proposal on Holding the First Extraordinary General Meeting of Shareholders in 2021 | |
| The 13th meeting of the fifth session of the Board of Directors | October 26, 2021 | The following proposals were deliberated and adopted: 1. Proposal on Quarterly Report for Q1 2021 2. Proposal on the Adjustment of Participants and Cancellation of Part of the Options in the Incentive Stock Option Plan 2015 3. Proposal on the First Exercise Period of Incentive Stock Option Plan 2019 Part I and the Method of Independent Exercise 4. Proposal on Adjustment of Some Issues and Cancellation of Part of the Stock Options in the Incentive Stock Option Plan 2019 5. Proposal on First Exercise Period of Incentive Stock Option Plan 2019 Part II and the Method of Independent Exercise 4. Proposal on Adjustment and Cancellation of Part of the Stock Options in the Incentive Stock Option Plan 2019 7. Proposal on Adjustment of the Use of the Company's Shares bought back in 2019 |
| The 14th meeting of the fifth session of the Board of Directors | December 14, 2021 | The following proposals were deliberated and adopted: 1.Proposal on USI's Wholly-owned Subsidiary FAFG's Combination with its Wholly-owned Subsidiary AFG 2.Proposal on Amending the Procedures for Loaning of Funds |
VI. Performance of functions and duties by directors(I) Attendance of directors at meetings of the Board of Directors and general meetings ofshareholders
| Name of director | Independent director or not | Attendance at meetings of the Board of Directors | Attendance at general meetings of shareholders | |||||
| Number of attendance required | Number of attendance in person | Number of attendance by communication | Times of attendance by proxy | Number of absence | Two consecutive absences in person or not | Number of attendance | ||
| Jeffrey Chen | No | 7 | 7 | 6 | 0 | 0 | No | 2 |
| Rutherford Chang | No | 7 | 7 | 7 | 0 | 0 | No | 0 |
| Neng Chao Chang | No | 7 | 7 | 7 | 0 | 0 | No | 0 |
| Dtuang Wang | No | 7 | 7 | 7 | 0 | 0 | No | 0 |
| Chen- | No | 7 | 7 | 7 | 0 | 0 | No | 0 |
2021 Annual Report
| Yen Wei | ||||||||
| TS Chen | No | 2 | 2 | 2 | 0 | 0 | No | 0 |
| Gilles Baruk Benhamou | No | 5 | 5 | 5 | 0 | 0 | No | 0 |
| Yiyun Chu | Yes | 7 | 7 | 7 | 0 | 0 | No | 2 |
| Yunwei Tang | Yes | 7 | 7 | 7 | 0 | 0 | No | 0 |
| Michael Chung | Yes | 7 | 7 | 7 | 0 | 0 | No | 0 |
Particulars on two consecutive absences in person from meetings of the Board of Directors
□Applicable √Not Applicable
| Number of meetings of the Board of Directors held in 2021 | 7 |
| Including: on site | 0 |
| by communication | 5 |
| on site x by communication | 2 |
(II) Objection raised by directors to relevant issues of the Company
□Applicable √Not Applicable
(III) Others
□Applicable √Not Applicable
VII. Special committees under the Board of Directors
√Applicable □Not Applicable
(1). Members of special committees under the Board of Directors
| Type of special committees | Name of members of special committees |
| Audit Committee | Yunwei Tang, Jeffrey Chen, Chen-Yen Wei, Yiyun Chu, and Michael Chung |
| Nomination Committee | Michael Chung, Jeffrey Chen, Chen-Yen Wei, Yunwei Tang, and Yiyun Chu |
| Remuneration and Appraisal Committee | Yiyun Chu, Jeffrey Chen, Chen-Yen Wei, Michael Chung, and Yunwei Tang |
| Strategic Committee | Jeffrey Chen, Chen-Yen Wei, Gilles Baruk Benhamou, Neng Chao Chang, and Michael Chung |
(2). 5 meetings held by the Audit Committee during the reporting period
| Holding date | Meeting content | Important comments and suggestions | Other information on performance of functions and duties |
| March 26, 2021 | The following proposals were deliberated and submitted to the Board of Directors: 1. Proposal on Financial Final Accounts Report of 2020 2. Proposal on 2020 Final Financial Report 3. Proposal on 2020 Annual Internal Control Self-Assessment Report 4. Proposal on 2020 Profit Distribution Plan 5. Proposal on Regular Related | The Company's financial report was true, complete and accurate, with no related cheating, fraud and material misstatement, and the Company had no significant accounting error adjustments, no changes in significant accounting policies and estimates, no matters involving important accounting judgments, and no matters resulting in a non-standard audit report with unqualified opinions. The actual operation of the | Conducted on-site research on the Company's operation and communicated with the management on the Company's development. |
2021 Annual Report
| Party Transactions in 2020 6. Proposal on Predicted Regular Related Party Transactions in 2021 7. Proposal on the Amount of Wealth Management Products Using Self-owned Idle Funds Allowed for 2021 8. Proposal on Bank Credit Lines in 2021 9. Proposal on the Amount of Financial Derivative Transactions Allowed for 2021 10. Proposal on the 2020 Work Report of the General Manager 11. Proposal on Formulating 2021 Internal Audit Plan 12. Proposal on Renewing the Contract with Internal Control Audit Institutions 13. Proposal on Renewing the Contract with Financial Audit Institutions 14. Proposal on Replacing Pre-issuance Investments Using Self-Owned Funds and Flotation Costs with Raised Funds 15. Proposal on Using Raised Funds for the Supplementary Working Capital Project 16. Proposal on Using Raised Funds to Inject Capital into Subsidiaries 17. Proposal on Using Idle Raised Funds for Cash Management 18. Proposal on 2020 Performance Report of the Audit Committee | Company's internal control complied with the requirements of the corporate governance norms for listed companies issued by the China Securities Regulatory Commission. | ||
| April 26, 2021 | The following proposals were deliberated and submitted to the Board of Directors: 1. Proposal on Financial Statements for Q1 2021 2. Proposal on Work Report on Internal Control for Q1 2021 | The Company's financial report was true, complete and accurate, with no related cheating, fraud and material misstatement, and the Company had no significant accounting error adjustments, no changes in significant accounting policies and estimates, no matters involving important accounting judgments, and no matters resulting in a non-standard audit report with unqualified opinions. After the internal audit work report was reviewed, no major problems were found in the internal audit work. | Communicated with the management on the Company's development. |
| July 12, 2021 | Proposal on Retroactive Adjustment of Financial data for Business Combination not Under Common Control was deliberated and submitted to the Board of Directors. | The external appraiser appointed by the Company confirmed the fair value of various identifiable assets, liabilities and contingent liabilities of FAFG obtained in the business combinate ion. According to the relevant accounting standards, it was necessary to retrospectively | Communicated with the chief financial officer and the secretary of the board of directors on the allocation of the ppa company's |
2021 Annual Report
| adjust some of the financial data of the Company's 2021 First Quarter Report. The financial statements retrospectively adjusted in line with the relevant provisions of the accounting standards, objectively and truly reflected the Company's financial situation and actual operating results. | acquisition premium. | ||
| August 24, 2021 | The following proposals were deliberated and submitted to the Board of Directors: 1. Proposal on Financial Statements for H1 2021 2. Proposal on Work Report on Internal Control for H1 2021 3. Proposal on the Special Report on the Deposit and Actual Usage of the Raised Funds in the First Half of 2020 | The Company's financial report was true, complete and accurate, with no related cheating, fraud and material misstatement, and the Company had no significant accounting error adjustments, no changes in significant accounting policies and estimates, no matters involving important accounting judgments, and no matters resulting in a non-standard audit report with unqualified opinions. After the internal audit work report was reviewed, no major problems were found in the internal audit work. The Company used the raised funds in accordance with the provisions and requirements of relevant laws, regulations, and regulatory documents, and disclosed the relevant information of the raised funds in a timely, true, accurate and complete manner, with no violation of the use and management of the raised funds. | Conducted research on the Company's operation and communicate with the management on the Company's development. |
| October 26, 2021 | The following proposals were deliberated and submitted to the Board of Directors: 1. Proposal on Quarterly Report for Q3 2021 2. Proposal on Work Report on Internal Control for Q3 2021 | The Company's financial report was true, complete and accurate, with no related cheating, fraud and material misstatement, and the Company had no significant accounting error adjustments, no changes in significant accounting policies and estimates, no matters involving important accounting judgments, and no matters resulting in a non-standard audit report with unqualified opinions. After the internal audit work report was reviewed, no major problems were found in the internal audit work. | Conducted research on the Company's operation and communicate with the management on the Company's development. |
(3). 1 meeting held by the Nomination Committee during the reporting period
| Holding date | Meeting content | Important comments and suggestions | Other information on performance of functions and duties |
2021 Annual Report
| March 26, 2021 | Deliberated and approved the Proposal on Nominating and Supplementing Candidates (company) for Non-Independent Directors of the Fifth Session of the Board of Directors | The Nomination Committee performed its duties diligently in accordance with relevant regulations and the provisions of the Articles of Association and the Rules of Work of the Nomination Committee of the Company, reviewed the Company's nomination and addition of non-independent director candidates for the fifth session of the Board of Directors, and formulated a proposal to be submitted to the Board of Directors of the Company for deliberation. | None |
(4). 4 meetings held by the Remuneration and Appraisal Committee during the reporting period
| Holding date | Meeting content | Important comments and suggestions | Other information on performance of functions and duties |
| March 26, 2021 | Deliberated and approved the Proposal on Confirming the Company's Members of the Senior Management for the Year 2020, and agreed to submit the proposal to the Board of Directors for deliberation. | The remunerations paid by the Company to directors, supervisors and members of the senior management were in line with the Company's remuneration system standards, and the remuneration data disclosed were true, reasonable and accurate. | None |
| April 26, 2021 |
Deliberated and approved theProposal on Confirming theHolders of Phase-2 CoreEmployee Stock OwnershipPlan and the Transfer Price, andagreed to submit it to the Boardof Directors for deliberation.
| The holders identified in the current employee stock ownership plan all met the relevant laws and regulations, the holding conditions stipulated in the normative documents, and the determination standards for the participants stipulated in the employee stock ownership plan. Their subject qualification as the holders was legal and valid. The current employee stock ownership plan was conducive to the sustainable development of the listed company, and there was no situation that damages the interests of the listed company and its all shareholders. | None | ||
| August 24, 2021 | Deliberated and approved the following proposals and agreed to submit them to the Board of Directors for deliberation: 1. Proposal on “2021 Employee Stock Ownership Plan (Draft) and Its Summary” 2.Proposal on the “Administrative Measures for | The Company's 2021 employee stock ownership plan could further improve the Company's remuneration incentive mechanism, fully mobilize the enthusiasm of the Company's core employees, realize the long-term development of the Company and the full integration of employees' | None |
2021 Annual Report
| 2021 Employee Stock Ownership Plan” 3. Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the 2021 Employee Stock Ownership Plan | interests, and facilitate the Company sustainable operations, thus the meeting agreed with the Company to implement the 2021 employee stock ownership plan. | ||
| October 26, 2021 | Deliberated and approved the following proposals and agreed to submit them to the Board of Directors for deliberation: 1. Proposal on Adjustment of Incentive Objects and Cancellation of Partial Equity under the 2015 Stock Option Incentive Plan 2. Proposal on the Satisfaction with Exercise Conditions by the First Exercise Period of the Initial Grant of the 2019 Stock Option Incentive Plan and Exercise of the Right by Self-Exercise 3. Proposal on Adjustment of Matters Related to the Initial Grant of the 2019 Stock Option Incentive Plan and Cancellation of Partial Equity 4. Proposal on the Satisfaction with Exercise Conditions by the First Exercise Period of the Reserved Grant of the 2019 Stock Option Incentive Plan and Exercise of the Right by Self-Exercise 5. Proposal on Adjustment of Matters Related to the Reserved Grant of the 2019 Stock Option Incentive Plan and Cancellation of Partial Equity | The exercise conditions for the first exercise period of the initial grant equity and reserved grant equity under the incentive plan were met, and the Company's implementation of the exercise was in line with the relevant provisions of the Option Incentive Plan and the Option Incentive Administration Measures. The adjustment and cancellation were performed in line with the relevant provisions of the Company's Stock Option Incentive Plan (Draft) and Appraisal Administrative Measures for Implementation of the Stock Option Incentive Plan. | None |
(5). 3 meetings held by the Strategic Committee during the reporting period
| Holding date | Meeting content | Important comments and suggestions | Other information on performance of functions and duties |
| March 26, 2021 | The members of the Strategic Committee listened carefully to the 2021 Strategic Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. made by the Company's President Mr. Chen-Yen Wei, and discussed it. None of the participating members had any objection to the report. | The members of the Strategic Committee listened carefully to the 2021 Strategic Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. made by the Company's President Mr. Chen-Yen Wei, and discussed it. None of the participating members had any objection to the report. | Understood the impact of international trade frictions on the Company's business |
2021 Annual Report
| July 12, 2021 | The Strategic Committee deliberated the Proposal on Using Self-owned Funds for Enterprise Venture Capital Investment and Investment Quota Authorization, and agreed to submit it to the Board of Directors for deliberation. | The Strategic Committee deliberated the Proposal on Using Self-owned Funds for Enterprise Venture Capital Investment and Investment Quota Authorization, and agreed to submit it to the Board of Directors for deliberation. | None |
| August 24, 2021 | The Strategic Committee deliberated the Proposal on the Plan for Repurchasing Shares through Centralized Bidding Transactions and agreed to submit it to the Board of Directors for deliberation. | The Strategic Committee deliberated the Proposal on the Plan for Repurchasing Shares through Centralized Bidding Transactions and agreed to submit it to the Board of Directors for deliberation. | None |
(6). Specific particulars on matters of objection
□Applicable √Not Applicable
III. Particulars on risks in the Company identified by the Board of Supervisors
□Applicable √Not Applicable
The Board of Supervisors had no objection to the supervision during the reporting period.
IX. Employees of the parent company and major subsidiaries at the end of the period(I) Employees
| Number of on-the-job employees of the parent company | 2,636 |
| Number of on-the-job employees of the main subsidiaries | 22,131 |
| Total number of on-the-job employees | 24,768 |
| Number of retirees of whom the parent company and major subsidiaries are responsible for the expenses | 13 |
| Breakdown by function | |
| Function | Number |
| Production | 16,163 |
| Sales | 734 |
| Technical | 4,902 |
| Financial | 231 |
| Administrative | 2,738 |
| Total | 24,768 |
| Breakdown by education background | |
| Education background | Number |
| Doctor's degree | 13 |
| Master's degree | 1,385 |
| Bachelor's degree | 3,919 |
| Junior college | 3,421 |
| Senior school's degree and below | 16,030 |
| Total | 24,768 |
(II) Remuneration policy
√Applicable □Not Applicable
According to the needs of the Company's development strategy, combined with industrial characteristics,talent market supply and demand, employment areas and other factors, the Company applied a market-following strategy for the remuneration of ordinary position personnel, while gave key positionpersonnel and outstanding talents competitive remuneration and provided them with equity incentivessuch as stock options or employee stock ownership plan.
2021 Annual Report
(III) Training program
√Applicable □Not Applicable
The Company has established a dual-track learning pathway. One the one hand, internal training coursesin different categories are designed systematically and arranged by five colleges, so that trainees cantake required courses, join training sessions held by internal lecturers as well as workshops organized byexternal professional lecturers. On the other hand, the Company promotes the Individual DevelopmentProgram (IDP), so as to ensure the depth and breadth of employees' career development and contributeto sustainable development.
(IV) Labor outsourcing
√Applicable □Not Applicable
| Total working hours of labor outsourcing | 7,909,001.53 |
| Total remuneration paid for labor outsourcing | 172,374,675.64 |
X. Plan for profit distribution or capitalization from public reserve funds(I) Formulation, implementation or adjustment of the cash dividend policy
√Applicable □Not Applicable
Regarding its profit distribution plan for 2020, USI intended to distribute a cash dividend of RMB 5 (taxincluded) for every 10 shares on the basis of the total share capital on the record date for implementingthe plan after deducting the number of shares in its special buy-back securities account, without bonusshare or transfer of public reserve into share capital, and all the remaining undistributed profits werecarried forward for distribution in the following years. The Company's total share capital on the recorddate for implementing the plan for 2020 profit distribution was 2,209,609,072 shares, and after thededuction of 11,332,177 shares in the Company's special buy-back securities account, the actual numberof shares participating in the distribution was 2,198,276,895 shares. 2020 profit distribution wascompleted on June 3, 2021.Regarding its profit distribution plan for 2021, USI is going to distribute a cash dividend of RMB 2.60(tax included) for every 10 shares on the basis of the total share capital on the record date forimplementing the plan after deducting the number of shares in its special buy-back securities account,without bonus share or transfer of public reserve into share capital, and all the remaining undistributedprofits were carried forward for distribution in the following years.Prior to the record date for implementing the plan, in case of any changes in the Company's total sharecapital and the number of shares in the Company's special buy-back securities account, the amount ofcash dividends distributed per share will remain unchanged, and the total distribution will be adjustedaccordingly.The Company's Profit Distribution Plan for the Year 2021 was deliberated and approved at the 15
th
meeting of the fifth session of the Board of Directors of the Company, and it still needs to be deliberatedat the Company's 2021 annual general meeting of shareholders.
(II) Special description of the cash dividend policy
√Applicable □Not Applicable
Whether in compliance with provisions of the Articles of Association orrequirements of the resolution of the general meeting of shareholders
| √Yes □No | |
| Whether the dividend standard and ratio are definite and clear | √Yes □No |
| Whether the related procedures and mechanisms for decision-making are complete | √Yes □No |
| Whether independent directors performed their duties responsibly and played their due roles | √Yes □No |
| Whether minority shareholders were given the opportunity to fully express their opinions and demands, and whether their legitimate rights and interests were fully protected | √Yes □No |
(III) If the profits of the Company and the parent company's profits distributable to shareholdersare positive during the reporting period, but there is no profit distribution plan, the Companyshall disclose the reasons, the usage and the utilization plan of the undistributed profits in detail
2021 Annual Report
□Applicable √Not Applicable
XI. Equity incentive plan, employee stock ownership plan or other employee incentive measures ofthe Company and their impacts(I) Incentive matters disclosed in temporary announcements and without further progress orchange in subsequent implementation
√Applicable □Not Applicable
| Overview | Index |
| Option exercise of the Incentive Stock Option Plan 2015: In the fourth quarter of 2021, a total of 19,900 shares were exercised and registered for transfer. As of December 31, 2021, a total of 7,798,620 shares were exercised and registered for transfer, accounting for 37.56% of the total number of exercisable stock options. | For details, see the announcement (No.: 2022-001) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on January 5, 2022 |
| Option exercise of the Incentive Stock Option Plan 2019 Part I: In the fourth quarter of 2021, a total of 509,300 shares were exercised and registered for transfer. As of December 31, 2021, a total of 509,300 shares were exercised and registered for transfer, accounting for 3.15% of the total number of exercisable stock options. | |
| Option exercise of Incentive Stock Option Plan 2019 Part II: In the fourth quarter of 2021, no option was exercised yet. | |
| The Core Employee Stock Ownership Plan Phase II completed the non-trading transfer of shares: On December 22, 2021, the Company received the Transfer Registration Confirmation issued by China Securities Depository and Clearing Co., Ltd.; 1,780,050 shares held in the Company's special buy-back securities account (B882423910) were transferred to the Company's second-phase core employee stock ownership plan securities account in the form of non-trading transfer on December 21, 2021, at a price of RMB 12.665 per share (the total transaction consideration was RMB 22,544,333.25) | For details, see the announcement (No.: 2021-102) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on December 23, 2021 |
| The Employee Stock Ownership Plan 2021 completed the non-trading transfer of shares: On September 23, 2021, the Company received the Transfer Registration Confirmation issued by China Securities Depository and Clearing Co., Ltd.; 281,200 shares held in the Company's special buy-back securities account (B882423910) were transferred to the Company's securities account for Employee Stock Ownership Plan 2021 in the form of non-trading transfer on September 22, 2021, at a price of RMB 0 per share. | For details, see the announcement (No.: 2021-077) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on September 24, 2021 |
(II) Incentive matters not disclosed in temporary announcements or with further progressEquity incentive
□Applicable √Not Applicable
Other particulars
√Applicable □Not Applicable
Employee stock ownership plan
√Applicable □Not Applicable
The Core Employee Stock Ownership Plan Phase I held 1,280,600 shares in the lock-up peirod, and asof December 31, 2021, a total of 479,900 shares have been sold.
Other incentive measures
□Applicable √Not Applicable
(III) Equity incentives granted to directors and members of the senior management during thereporting period
□Applicable √Not Applicable
(IV) Establishment and implementation of appraisal mechanism and the incentive mechanism forsenior management during the reporting period
2021 Annual Report
□Applicable √Not Applicable
The Company had an appraisal and incentive mechanism. The Remuneration and Appraisal Committeeevaluated directors, supervisors and members of the senior management and formulated an annualremuneration plan based on the profit completion and the Company's operational indicators of the veryyear. The plan comprehensively considered the average annual salary level of related industries and thecurrent situation of the Company, and linked the annual salary of the Company's operators with theCompany's asset status, profitability and completion of annual business goals, to fully mobilize theenthusiasm of operators, further improve the work performance appraisal and the survival of the fittestmechanism for the Company's members of the senior management, and strengthen the restraint ofresponsibility objectives.
XII. Construction and implementation of internal control system during the reporting period
√Applicable □Not Applicable
During the reporting period, the Company revised the Internal Reporting System for Major Matters, theRules of Information Disclosure, the Rules of External Guarantee Management, the AdministrativeRegulations for Registration of Information Insiders and the Procedures for Loaning of Funds andcontinued carrying out internal control construction, optimization and improvement. The Companymaintained effective internal control in all material aspects of financial and non-financial reporting.
Particulars on major defects in the internal control during the reporting period
□Applicable √Not Applicable
XIII. Management and control on subsidiaries during the reporting period
√Applicable □Not Applicable
During the reporting period, subject to the requirements of the Company's internal control system, theCompany carried out effective management in terms of operation, organization structure, humanresources, finance, capital, guarantee and information disclosure of its subsidiaries in accordance withthe Administration Regulations for Subsidiaries. Subsidiaries operated in accordance with theadministration regulations formulated by the Company, and established corresponding decision-making,execution, monitoring and feedback systems. Their organizational structures were with clear division oflabor and sound and clear functions.
XIV. Particulars on the internal control audit report
√Applicable □Not Applicable
Whether to disclose the internal control audit report: YesType of internal control audit report opinions: An unqualified opinion
XV. Rectification of problems identified in self-examination of governance special actions by thelisted companyNot Applicable
XVI. Others
□Applicable √Not Applicable
2021 Annual Report
Section VEnvironmental and Social Responsibility
I. Environmental information(I)Environmental protection information of companies belonging to key pollutant-discharge unitsand their main subsidiaries announced by the environmental protection department
√Applicable □Not Applicable
1. Pollutant
Discharge information
√Applicable □Not Applicable
1) The information of wastewater detection and waste treatment in USI in 2021 is as follows:
| Information on Wastewater Discharge in 2021 | |||||||
| Number & position of wastewater discharge port | ws-3101154143063-1 | Monitoring units and methods | Shanghai Weizheng Test Technology Co., Ltd. | ||||
| Discharge standard | “Integrated Wastewater Discharge Standard” DB31/199 | Discharge mode and destination | It is discharged from the pipe and enters the urban sewage treatment plant | ||||
| Testing items | Standard value | Test date | |||||
| 2021/1/12 | 2021/3/10 | 2021/05/21 | 2021/8/23 | 2021/10/14 | 2021/11/23 | ||
| PH | 6--9 | 7.72 | 7.56 | 6.99 | 6.7 | 7.2 | 6.2 |
| Suspended Solids (SS) (mg/L) | ≤400 | 246 | 34 | 80 | 33 | 34 | 34 |
| Chemical Oxygen Demand (COD) (mg/L) | ≤500 | 286 | 188 | 160 | 90 | 182 | 105 |
| Biochemical Oxygen Demand (BOD5) (mg/L) | ≤300 | 46.4 | 46.0 | 34.6 | 21.7 | 48.7 | 22.4 |
| Ammonia Nitrogen (NH3-N) (mg/L) | ≤45 | 15.2 | 20.8 | 2.22 | 2.74 | 8.22 | 0.24 |
| Total Nitrogen (mg/L) | ≤70 | 25.7 | 23.6 | 18.1 | 23.9 | 13.2 | 3.02 |
| Total Phosphorus (mg/L) | ≤8 | 1.76 | 1.79 | 2.79 | 0.2 | 0.61 | 0.41 |
| Petroleum (mg/L) | ≤15 | 0.29 | ＜0.06 | 0.16 | ＜0.06 | 0.14 | 0.13 |
| Animal and Vegetable Oils (mg/L) | ≤100 | ＜0.06 | 0.94 | 0.43 | ＜0.06 | 0.08 | ＜0.06 |
| Anionic Surfactant (mg/L) | ≤20 | 0.10 | 0.32 | ＜0.17 | 0.12 | 0.44 | 0.36 |
| Total Dissolved Solids (mg/L) | ≤2000 | 466 | 410 | 1.02×103 | 214 | 596 | 467 |
| Remarks | / | Qualified | Qualified | Qualified | Qualified | Qualified | Qualified |
2021 Annual Report
| Information on Solid (Hazardous) Waste Discharge in 2021 | ||||||
| Name | Category | Code | Output (tons) | Transfer amount (tons) | Storage capacity (tons) | Disposal or recovery |
| PCB dust, board edge, PCB with parts | Hazardous waste | 900-045-49 | 25.932 | 25.932 | 0 | Hand it over to a qualified unit for processing |
| Empty barrels, rags, filter elements and sludge contaminated with chemicals | Hazardous waste | 900-041-49 | 39.216 | 39.216 | 0 | Hand it over to a qualified unit for processing |
| Organic resin | Hazardous waste | 900-014-13 | 30.17 | 30.17 | 0 | Hand it over to a qualified unit for processing |
| Bromopropane | Hazardous waste | 900-404-06 | 18.366 | 18.366 | 0 | Hand it over to a qualified unit for processing |
| Waste isopropanol and other solvents | Hazardous waste | 900-402-06 | 165.132 | 165.132 | 0 | Hand it over to a qualified unit for processing |
| Waste oil | Hazardous waste | 900-249-08 | 0.51 | 0.51 | 0 | Hand it over to a qualified unit for processing |
| Waste cutting fluid | Hazardous waste | 900-006-09 | 1.014 | 1.014 | 0 | Hand it over to a qualified unit for processing |
| Waste activated carbon | Hazardous waste | 900-039-49 | 7.582 | 7.582 | 0 | Hand it over to a qualified unit for processing |
| 200L iron drum | Hazardous waste | 900-041-49 | 120 | 120 | 0 | Hand it over to a qualified unit for processing |
| Waste fluorescent tubes | Hazardous waste | 900-023-29 | 0.19 | 0.19 | 0 | Hand it over to a qualified unit for processing |
| Lead-acid waste battery | Hazardous waste | 900-044-49 | 0 | 0 | 0 | Hand it over to a qualified unit for processing |
| Lead–tin paste and tin slag | Hazardous waste | 900-025-31 | 0 | 0 | 0 | Hand it over to a qualified unit for processing |
| Laboratory waste | Hazardous waste | 900-047-49 | 0.1 | 0.1 | 0 | Hand it over to a qualified unit for processing |
2) The treatment information of industrial waste gas and hazardous waste in USI Electronics (Shenzhen)Co., Ltd. in 2021 is as follows:
| Discharge port information | Types of pollutants | Discharge mode | Implementation standards | Is there any excessive emission? | Is the total emission approved? |
| A1 | Tin, lead and their compounds Non-methane total | Organized emission | Emission Limits of Air Pollutants in Guangdong Province DB4427-2001 | None | None |
2021 Annual Report
| hydrocarbons | |||||
| A2 | Tin, lead and their compounds Non-methane total hydrocarbons | Organized emission | Emission Limits of Air Pollutants in Guangdong Province DB4427-2001 | None | None |
| A3 | Tin, lead and their compounds Non-methane total hydrocarbons | Organized emission | Emission Limits of Air Pollutants in Guangdong Province DB4427-2001 | None | None |
| B4 | Tin, lead and their compounds Non-methane total hydrocarbons | Organized emission | Emission Limits of Air Pollutants in Guangdong Province DB4427-2001 | None | None |
| B5 | Tin, lead and their compounds Non-methane total hydrocarbons | Organized emission | Emission Limits of Air Pollutants in Guangdong Province DB4427-2001 | None | None |
| C6 | Tin, lead and their compounds Non-methane total hydrocarbons | Organized emission | Emission Limits of Air Pollutants in Guangdong Province DB4427-2001 | None | None |
Hazardous waste generation information is as follows:
| Species | Output T/a | Delivery situation | ||
| Delivery volume T/a | Delivery date | Collection and transportation unit | ||
| Waste organic solvent | 21.26 | 21.26 | January to December 2021 | 1.DONGGUAN WEIJI RENEWABLE RESOURCES CENTRALIZED PROCESSING CENTER CO., LTD. 2. Huizhou TCL Environment Technology Co., Ltd. 3. 100% legally handled by Hanlan (Foshan) Industrial Environment Service Co., Ltd. and other companies |
| Waste circuit board (without electronic components) | 45.809 | 45.809 | January to December 2021 | |
| Waste circuit board (with electronic components) | 5.596 | 5.596 | January to December 2021 | |
| Abandoned packing drums/empty containers | 4.57 | 4.57 | January to December 2021 | |
| Waste emulsion | 0.65 | 0.65 | January to December 2021 | |
| Waste dry battery | 0.06 | 0.06 | January to December 2021 | |
| Waste cloth/paper/sand/cotton swabs/wood chaff/gloves/other wastes containing solvents | 34.02 | 34.02 | January to December 2021 | |
| Waste mineral oil | 0.245 | 0.245 | January to December 2021 | |
| Waste activated carbon | 14.02 | 14.02 | January to December 2021 | |
2021 Annual Report
| Waste fluorescent tubes | 0.125 | 0.125 | January to December 2021 | |
| Total | 126.455 | 126.455 | January to December 2021 |
3) Information on wastewater detection, waste treatment and industrial waste gas emission of AsteelflashSuzhou. in 2021 is as follows:
| Information on Wastewater Discharge in 2021 | ||||
| Number & position of wastewater discharge port | Coordinates: x=53452. 745 Y=31496.402 | Monitoring units and methods | Suzhou Youlian Checking & Measuring Technology Service Co.,Ltd. | |
| Discharge standard | Water Quality Standard for Sewage Discharged into Urban Sewers > GB/T31962-2015 | Discharge mode and destination | It is discharged from the pipe and enters the urban sewage treatment plant | |
| Testing items | Standard value | Test date | ||
| 2021/4/30 April 30, 2021 | 2021/07/21 July 21, 2021 | 2021/10/18 October 18, 2021 | ||
| PH | 6.5-9.5 | 7.35 | 7.82 | 7.1 |
| Suspended Solids (SS)(mg/L) | ≤400 | 26 | 20 | 19 |
| Chemical Oxygen Demand (COD)(mg/L) | ≤500 | 214 | 24 | 95 |
| Biochemical Oxygen Demand (BOD5)(mg/L) | ≤350 | 71.9 | 8.4 | 43.8 |
| Ammonia Nitrogen (NH3-N)(mg/L) | ≤45 | 24.1 | 6.4 | 11.8 |
| Total Nitrogen(mg/L) | ≤70 | 70.0 | 7.41 | 1.27 |
| Total Phosphorus(mg/L) | ≤8 | 3.76 | 0.73 | 13.0 |
| Animal and Vegetable Oils (mg/L) | ≤100 | 0.45 | ND | ND |
| Remarks | / | Qualified | Qualified | Qualified |
| Information on Solid (Hazardous) Waste Discharge in 2021 | |||||||
| Name | Category | Code | Output (tons) | Transfer amount (tons) | Storage capacity (tons) | Disposal or recovery | |
| PCB plate edges, PCB with parts | Hazardous waste | 900-045-49 | 16.7535 | 14.2335 | 2.52 | Hand it over to a qualified unit for processing | |
| Empty buckets and rags contaminated with chemicals | Hazardous waste | 900-041-49 | 5.151 | 5.151 | 0 | Hand it over to a qualified unit for processing | |
| Waste isopropanol and other solvents | Hazardous waste | 900-402-06 | 7.06 | 6 | 1.06 | Hand it over to a qualified unit for processing | |
| Waste oil | Hazardous waste | 900-999-49 | 17.741 | 17.741 | 0 | Hand it over to a qualified unit for processing | |
| Waste fluorescent | Hazardous | 900-023-29 | 0 | 0 | 0 | NA | |
2021 Annual Report
| tubes | waste | |||||
| Lead-tin slag | Hazardous waste | 900-000-31 | 0.2 | 0 | 2.2 | Self-storage |
| Waste activated carbon | Hazardous waste | 900-039-49 | 0.224 | 0.224 | 0 | Hand it over to a qualified unit for processing |
| Information on Industrial Exhaust Emission in 2021 | ||||||
| Sampling point position | Standard dry flue gas flow rate | Test result | Remarks: | |||
| Particulate matter | Voc | Reporting date: January 13, 2021 | ||||
| Emission concentration Mg/m3 | Emission rate Kg/h | Emission concentration Mg/m3 | Emission rate Kg/h | |||
| PTH 1# | 1172 | ND | ND | ND | ND | Entrusted third party: Suzhou Youlian Checking & Measuring Technology Service Co.,Ltd. |
| PTH 2# | 3510 | ND | ND | ND | ND | |
| PTH 3# | 5774 | ND | ND | ND | ND | |
| PTH 4# | 1854 | ND | ND | ND | ND | |
| SMT 5# | 636 | ND | ND | ND | ND | |
| SMT 6# | 2772 | ND | ND | ND | ND | |
| SMT 7# | 1800 | ND | ND | ND | ND | |
| SMT 8# | 1956 | ND | ND | ND | ND | |
| SMT 9# | 1836 | ND | ND | ND | ND | |
| SMT 10# | 1174 | ND | ND | ND | ND | |
| Washing Room 1# | 1204 | 1.4 | 0.00169 | ND | ND | |
| Washing Room 2# | 1272 | ND | ND | ND | ND | |
2.Construction and operation of pollution prevention and control facilities
√Applicable □ Not Applicable
1) USI
Construction status: A new sewage treatment station is built in 2021 to treat the wastewater after cleaningwith water-based cleaning agent.
There is no change in waste gas and noise treatment facilities in 2021 compared with that in 2020.
In 2021, the waste gas treatment facilities and waste water treatment facilities are in good operation, andconsumables such as activated carbon and filter cotton are replaced regularly. The outsourced monitoringresults of each waste gas and waste water discharge outlet show that the waste gas reaches the standard.
Total emissions: hazardous waste 273 tons / VOCs 3.785 tonsExcessive emissions: N/AApproved total discharge: wastewater CODcr: 11.1341t/a; ammonia nitrogen: 0.5592t/a; exhaust gasparticulate matter: 1.795 t/a; SO2: 0.013t/a; NOx: 1.1098t/a; VOCs: 12.1229t/a
2）Shenzhen FacilityConstruction status: There is no change in pollution source treatment facilities in 2021 compared withthat in 2020.
3 discharge ports in Building A: UV photolysis + activated carbon adsorption
2 discharge ports in Building B: UV photolysis + activated carbon adsorption
1 discharge port in Building C: Activated carbon adsorption (laboratory, unused in recent two years)
Operation status: In 2021, the waste gas treatment facilities are in good operation, with regular operationand maintenance. The outsourced monitoring results of each waste gas outlet show that the waste gasreaches the standard.Total emissions: 126 tons of hazardous waste / 1.227 tons of VOCsExcessive emissions: N/AApproved total emissions: currently no relevant requirements by Shenzhen government
3) Asteelflash Suzhou
Construction status: There is no change in pollution source treatment facilities in 2021 compared withthat in 2020.
12 discharge ports in Building 1: Activated carbon adsorption
2021 Annual Report
Operation status: In 2021, the waste gas treatment facilities are in good operation, with regular operationand maintenance. The outsourced monitoring results of each waste gas outlet show that the waste gasreaches the standard.
Total emissions: hazardous waste 47.13 tons / VOCs 0 tonsExcessive emissions: no excessive emissionsApproved total emissions: currently no relevant requirements by Suzhou government
3. Environmental impact assessment (
EIA) of construction projects and other environmentalprotection administrative licenses
√Applicable □ Not Applicable
1) USI
| Name of administrative license | Project file name | Production or approval unit | Document No. | Content description |
| Pollutant discharge permit | Pollutant discharge permit | Pudong New Area Ecological Environment Bureau | 91310000745611834X001U | None |
| EIA report form | Environmental Impact Assessment Report Form of Technical Transformation Project of Deep Intelligent Production Line of Ultra-thin Communication Module | Pudong New Area Ecological Environment Bureau | H.P.H.B.X.P.[2009] No. 360 | None |
| EIA registration form | Staff Canteen Project of USI | NA | 20193100000300000434 | None |
2) Shenzhen Facility
The latest EIA and main administrative licensing information are as follows:
| Name of EIA/Administrative License | Licensing Authority | Licensing Date | License File No. |
| EIA Reply (Expansion Project) | Approved by Shenzhen Nanshan District Environmental Protection and Water Affairs Bureau | June 17, 2015 | S.N.H.S.P.X [2015] No.113 |
| Pollutant discharge permit | Nanshan Administration Sub-bureau of Shenzhen Ecological Environment Bureau | December 9, 2019 | Permit No.: 91440300723001066L001Q |
3) Asteelflash Suzhou
The latest EIA and main administrative licensing information are as follows:
| Name of EIA/Administrative License | Licensing Authority | Licensing Date | License File No. |
| Production technical transformation project with an annual output of 150 million automatic canned cigarette oil boxes | Suzhou Wujiang Ecological Environment Bureau | July 8, 2019 | W.H.J [2019] No.180 |
| Pollutant discharge permit | Suzhou Wujiang Ecological Environment Bureau | May 22, 2020 | Permit No.: 91320509734422894M001Y |
4.Emergency plan for environmental emergencies
√Applicable □ Not Applicable
2021 Annual Report
| Project file name | Filing Date | Filing Department | Record No. |
| Emergency Plan for Sudden Environmental Time of Universal Scientific Industrial (Shanghai) Co., Ltd. | July 29, 2021 | Pudong New Area Ecological Environment Bureau | 02-310115-2021-276-L |
| Emergency Plan for Environmental Emergencies of USI Electronics (Shenzhen) Co., Ltd. | November 30, 2020 | Shenzhen Ecological Environment Bureau | 440305-2020-0067-L |
5.Environmental self-monitoring scheme
√Applicable □ Not Applicable
The Company entrusts a third-party environmental testing agency to conduct environmental monitoringwork for the Company in strict accordance with the relevant requirements of the Technical Guide forSelf-Monitoring of Pollutant Discharge Units. At the same time, the Company has also formulated adetailed daily monitoring plan to regularly and routinely monitor emission sources of various pollutants.After being tested by a third-party environmental testing agency, pollutants in all processes of theCompany meet the discharge standards.
6.The situation of administrative punishment due to environmental problems during thereporting period
□Applicable √ Not Applicable
7.Other environmental information that should be disclosed
√Applicable □ Not Applicable
| Participation in environmental pollution liability insurance | None |
| Payment of environmental tax | Pay environmental tax on time every quarter |
| Environmental policy and annual environmental objectives and results | Complying with laws and regulations, responding to environmental protection, hazard prevention, communication training, pollution prevention, continuous improvement, energy saving and waste reduction, effective utilization, setting goals and sustainable operation. |
| Environmental protection investment and environmental technology development | Every year, special funds are invested in environmental protection projects to ensure that environmental protection funds are earmarked. The funds are used for annual environmental testing, pollution prevention and control, waste reduction and recycling to ensure that all environmental emissions meet the requirements of environmental protection laws and regulations. |
| Recycling of waste products | A waste management plan has been formulated, in which hazardous wastes are handed over to qualified units for treatment and non-hazardous wastes are recycled by licensed recycling units or cleared and transported to licensed incineration plants for treatment. |
| Total resource consumption in 2021 | USI: 207,553 tons of water and 73,522,365 Kwh of electricity USI Electronics (Shenzhen) Co., Ltd.: 98,965 tons of water and 28,038,300 Kwh of electricity Asteelflash Suzhou: 164,054 tons of water and 13,411,700 Kwh of electricity |
| Environmental violations in 2021 | None |
| Environmental awards in 2021 | None |
(II)Description of environmental protection of companies other than key pollutant-dischargingunits
□Applicable √Not Applicable
(III) Relevant information conducive to protecting ecology, preventing and controlling pollutionand fulfilling environmental responsibilities
√Applicable □ Not Applicable
1. Recycling of electronic waste
2021 Annual Report
USIadheres to the principles of “pollution prevention and continuous improvement” and “energy saving,waste reduction and effective use” and lists waste reduction and reuse as the Company’s policies whichare implemented by all factories and listed as annual performance indicators. It strengthens the effectivecontrol of wastes through regular data recording, tracking and monitoring of use and output. Amongthem, hazardous wastes are handed over to licensed qualified processors for treatment and non-hazardous wastes are recycled by licensed recyclers or cleared and transported to licensed incinerationplants for treatment; in 2021, the recovery rate of waste reached 85.46%.USIwill continue toimplement the waste reduction policy, reduce the waste from the source, and strive to achieve the goal ofsustainable resources.
2. Cleaning technology
USI follows the strategy of green management and ecological design of products, quickly responds tothe latest international environmental protection laws and regulations and environmental protectioninstructions of sales areas, and formulates “Specifications of Green Products” to control the hazardoussubstances contained in electronic components and products. In product design, USI considers thepotential environmental impact of products according to specifications of green products and Design forEnvironment (DfE) operation procedures, and adopts the latest international energy consumption lawsand regulations (Energy Star and ErP) and various environmental indicators (such as utilization ofmaterials, energy saving and carbon reduction, recyclability,, etc.) to reduce the negative impact ofproduct life cycle on the environment.
The design and R&D personnel of USI have the ability of designing ecological products, andcontinuously introduce the concepts of green products and clean technologies to ensure that the cleantechnology products manufactured and sold will meet the requirements of environmental protection lawsand regulations of various countries and meet customer needs, development trends of environmentalprotection and internal control standards of the Company. The revenue of clean technology productsaccounts for 32.8% of the Company's overall revenue and the Company will continue to invest inresearch and development to increase the proportion of clean technology products in the future.
(IV)Measures taken to reduce their carbon emissions during the reporting period and their effects
√Applicable □ Not Applicable
USI continues to implement the greenhouse gas reduction policy. Since 2007, it has carried out internalinventory of greenhouse gases according to ISO 14064-1 standard. In 2010, it integrated variousproduction bases for inventory, which was verified by a third-party verification agency, and establishedthe basic data of USI. Since 2018, Taiwan’s factory categories have been introduced, and mainlandfactories have also been introduced one after another. In 2020, a more comprehensive and in-depthcategory inventory has been conducted. In addition, the carbon footprint accounting of products has beencarried out since 2017, and information disclosure has been carried out in accordance with relevantinternational norms, initiative regulations and customer requirements.
In response to the challenges brought by climate change to USI, the mainland plant has used 100%renewable energy, while the Mexican plant consumes 30% of its annual power from renewable energy.
In addition, Zhangjiang plant and Shenzhen plant conduct carbon quota management according to localregulations. Moreover, the total amount management of greenhouse gases, the trading system and thepossible energy tax or carbon tax are all issues that we continue to pay attention to. In addition tocontinuous energy saving improvement, USI continues to promote green commitment andenvironmental protection related measures in various plants to reduce risks and opportunities brought byclimate change.
1. USI
In 2021, the Company implements energy-saving benefits in plants and replaces the two-fluid humidifier withhigh-pressure micro-mist humidifier, saving about 44,230 Kwh of electricity annually.
2. Shenzhen Facility
The Company actively implements the emission reduction initiatives, trains its employees to save energy andreduce consumption, and effectively controls the air conditioning in office space, saving about 36,000 KWhof electricity annually.
3. Asteelflash Suzhou
1) Clean energy and new energy were used from January 2021, mainly including hydropower, nuclearpower and new energy. Among them, the total electricity consumption in 2021 is 13,407,010 KWh, of whichgreen electricity consumption accounts for 15% of the total electricity consumption.
2) In March 2021, some water pumps of the air conditioning system were reconstructed, saving about
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225,360 Kwh of electricity annually.
3) One cooling tower was replaced in February and in August 2021 respectively, saving about 935,611Kwh of electricity
II. Social Responsibility Work
√Applicable □ Not Applicable
USI actively participates in social welfare, honors the promise of “actively promoting social well-beingand participating in social welfare activities” in the Sustainable Development Policy, and hopes tobecome one of the models of corporate social citizenship. In 2021, it invested RMB 3,048,341 to supportsocial welfare projects. In addition to donating money, it widely practiced the four main axes of“investing in education”, “giving back to the society”, “conserving the environment” and “promotingliterature and art” through various activities, so as to realize local care, contribute to the community andbuild a sustainable future.
In addition to expanding education to get rid of poverty, and actively carrying out rural education, ruralrevitalization and other public welfare actions, USI also continues to sponsor projects such as “China GoLeague”, “Love Library”, “The Million Tree Project”, “Coastal Cleanup”, “Road Public Welfare Service”and art and cultural performances in various factories. With the promotion and practice of enterprises, itcan give more positive energy to society and environment and create better value for human society bycombining the efforts of all people.
III. Consolidate and expand the achievements of poverty alleviation and rural revitalization
√Applicable □ Not Applicable
USI expands the achievements of poverty alleviation in education as the main axis, actively carries outpublic welfare actions such as rural education and rural revitalization, and makes every effort toconsolidate the achievements of poverty alleviation, help more students realize their dreams and achieveharmonious social development. In 2021, USI promoted revitalization activities such as “Science andTechnology Helps Rural Education”, “Hope for Pearl”, “Western Student Aid Plan”, “Spring FestivalGift Package” for Rural Revitalization by Charity Federation, “Hearty Wish” and “Huanghe JiaotongUniversity Student Aid Activity”, with a total investment of RMB 216,000 to help 1,043 poor students.
(I) Science and technology helps rural education
USI uses science and technology to help rural education, donating computer in classrooms for ruralschools, improving teaching environment, enriching teaching resources and helping rural students getbetter educational resources. A total of 150 computers were donated to build computer classrooms in fiveschools in Gansu and Qinghai Province, benefiting 961 students. USI continued to follow up thecomputer teaching and use in class of caring teachers and students, and specially organized a team ofprofessional social workers, technicians, project executors and local poverty alleviation workers to visitand investigate. According to the research report, in 2022, it plans to further empower rural teachers andrural education with the help of science and technology, so that school teachers can teach computercourses more smoothly and improve the project efficiency.
(II) Hope for Pearl
Shenzhen Facility and Kunshan Facility has actively participated in the "Hope for Pearl", and supportedstudents from extremely poor families with excellent grades to complete their education for fiveconsecutive years. In 2021, through the charity walking development activities with the theme of“Gathering Love and Escorting Pearl”, it combined sports with public welfare, got close to nature onfoot, shared their initial intentionof “Hope for Pearl” on the way of “Pearl Retrieval”, enabled employeesto directly support and participate in the “Hope for Pearl”, donated RMB 100,000 to Yezhai MiddleSchool in Qianshan, Anhui Province, and set up the fifth pearl class of USI-“2021 USI Shuijing PearlClass” to help 40 poor students complete their education. In addition to material support, it continued toprovide spiritual care. Under the escort of love, the 2018 USI Shuijing Pearl Class has taken the first stepin pursuing their dreams. 100% of the 30 pearl students in Jianshan Middle School were admitted intouniversities, and 97%of students in USI Shuijing Pearl Class in Luoyang No.3 Middle School wereadmitted into universities, 45% of them to key universities.
(III) Western Student Aid Plan
USI has carried out the Western Student Aid Plan through Cihui Foundation in western rural areas suchas Yunnan and Sichuan Province, invested RMB 48,000 to support 12 college students, guaranteedstudents' educational opportunities in the form of subsidies, helped outstanding students in remote
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villages to further their education, and escorted their growth to successfully complete their education andhelp more people with the knowledge learned.
(IV) Rural Revitalization through “Spring Festival Gift Package” and “Hearty Wish”Activities by Kunshan Charity Federation
Adhering to “doing small things with great love”, USI took the form of a “gift package” before theSpring Festival, donated RMB 9,000 of “Spring Festival Gift Package” to convey greetings to scatteredorphans, scattered elderly people with five guarantees, families with low income and marginal income,and families with disabled persons in difficulty in Kunshan, and sends rice, grain and oil, dry goods andother materials to each family. This year’s gift package is different from that of the previous years. Therice and dry goods’ gift boxes come from Bijiang, Guizhou Province and Atushi, Xinjiang, Kunshan’scounterparts in pairing assistance. This time, it chose to buy poverty alleviation products from one poorarea to support another, which not only helped counterparts in the sales of agricultural products, but alsoconveyed delicious food and love to the “tip of the tongue” of impoverished families in Kunshan. Withthe initial intention of “true feelings, true intentions and true goodness”, it is intended to do the best andoffer the love.
On the occasion of Children's Day on June 1, USI continued to support the Charity Federation’s “HeartyWishes” activities, collected and sorted out the wishes of 30 children in remote areas of Kunshanthrough in-depth visits to mountain villages and communities by the Charity Federation, and donated the“Children’s Day Wishes” with a total value of RMB 9,000 to accurately satisfy each child's tiny wishesand convey social care.
(V) Student aid activities of Huanghe Jiaotong University
In order to offer children in remote areas better educational resources, USI donated computers worthRMB 50,000 for students of Huanghe Jiaotong University, hoping that the technological teaching toolswould allow students to have more possibilities in the future.
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Section VI Major EventsI. Performance of commitments(I) Commitments by the Company's actual controllers, shareholders, affiliates, acquirers, the Company and other relevant commitment parties during orsubsisted during the reporting period
√ Applicable □Not Applicable
| Commitment background | Commitment type | Party making the commitment | Commitment content | Commitment time and term | Whether there is a deadline for performance | Whether strictly performed in a timely manner | If not performed in a timely manner, describe the specific reasons | If not performed in a timely manner, describe the next step |
| Commitments related to major asset restructuring | Others | USI Enterprise Limited, directors, supervisors, members of the senior management, and actual controllers of USI | Note 1 | 2December 12, 2019 | No | Yes | ||
| Others | USI, ASDI and FAFG | Note 2 | December 12, 2019 | No | Yes | |||
| Others | USI Enterprise Limited and actual controllers of USI | Note 3 | December 12, 2019 | No | Yes | |||
| Settlement of horizontal competition | USI Enterprise Limited and actual controllers of USI | Note 4 | December 12, 2019 | No | Yes |
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| Settlement of related transactions | USI Enterprise Limited and actual controllers of USI | Note 5 | December 12, 2019 | No | Yes | |||
| Others | ASDI | Note 6 | December 12, 2019 | No | Yes | |||
| Restriction on sale of shares | ASDI | Note 7 | December 8, 2020 to December 7, 2023 | Yes | Yes | |||
| Commitments related to IPO | Settlement of horizontal competition | USI Enterprise Limited and ASE Inc. | Note 8 | Long term | No | Yes | ||
| Settlement of horizontal competition | Actual controller of USI | Note 9 | Long term | No | Yes | |||
| Others | USI Enterprise Limited | Note 10 | Long term | No | Yes | |||
| Others | ASE (Shanghai) Inc. | Note 11 | Long term | No | Yes | |||
| Others | Actual controller of Universal Scientific Industrial (Shanghai) Co., Ltd. | Note 12 | Long term | No | Yes |
Note 1:
1. Commitment regarding provision of true, accurate and complete information:
(1) The relevant information, materials, and certificates provided by and the statements, explanations, commitments, and guarantees made by the party makingthe commitment to the listed company and the intermediaries involved in this transaction for this transaction are true, accurate and complete, and contain no false
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records, misleading representations or material omissions, their copies are consistent with the originals, and the signatures and seals on all documents are true.
(2) During the period of participating in this transaction of the listed company, the party making the commitment will, in accordance with relevant laws,administrative regulations and rules, and relevant provisions of China Securities Regulatory Commission and Shanghai Stock Exchange, timely provide informationon this transaction and ensure that such information is true, accurate and complete, and contains no false records, misleading representations or material omissions.
(3) If the party making the commitment is placed on file for investigation by the judicial authority or by the China Securities Regulatory Commission since theinformation provided or disclosed in this transaction is suspected of false records, misleading statements or material omissions, before the conclusion of theinvestigation is made, the party making the commitment shall not transfer the shares (if any) that it has equity in the listed company, and shall, within two tradingdays of receipt of the case filing and inspection notice, submit the written application for suspension of transfer and the stock account to the Board of Directors ofthe listed company, so that the Board of Directors applies to the stock exchange and the registration and clearing company for the lock on behalf of the party makingthe commitment; if the application for lock-up is not submitted within two trading days, the Board of Directors shall be authorized to directly submit the identityinformation and account information of the party making the commitment to the Shanghai Stock Exchange and the registration and clearing company and apply forlock-up after verification; if the Board of Directors fails to do so, the Shanghai Stock Exchange and the registration and clearing company shall be authorized todirectly lock the relevant shares. If the investigation concludes that there are any violations of laws and regulations, the party making the commitment undertakes tolock up the shares voluntarily for relevant investor compensation arrangements.
2. Commitment regarding no major violations of laws and regulations:
(1) As of the date of issuance of this letter of commitment, the party making the commitment has no violation of Articles 147 and 148 of the Company Law.
(2) Before the listed company publicly discloses the relevant information of this transaction in accordance with the law, the party making the commitment shallfulfill the obligation to keep the corresponding information confidential according to the law, shall not make such information public or disclose such information,and shall not be engaged in illegal activities such as insider trading and manipulation of the securities market through the use of the information related to thistransaction which is not made public or disclosed with the Company's consent or in line with the law.
(3) In the last three years, the party making the commitment was not filed for investigation by judicial organs for suspected crimes or by administrativeauthorities such as China Securities Regulatory Commission for suspected violations of laws and regulations; In the last twelve months, the party making thecommitment was not publicly reprimanded by the Shanghai Stock Exchange and had no other material dishonesty; In the last three years, the party making thecommitment did not receive any serious administrative punishments (including administrative punishments within the securities market, public reprimands from theexchange, and other penalties related to the securities market, except those obviously unrelated to the securities market) or criminal punishments, and was notinvolved in material civil lawsuits or arbitrations related to economic disputes; The party making the commitment had no dishonesty such as failure to repay largedebts on time, failure to perform commitments, being subject to administrative supervision measures taken by the China Securities Regulatory Commission ordisciplinary actions by the Shanghai Stock Exchange.
3. Commitment regarding no circumstances stipulated in Article 13 of the Interim Provisions on Strengthening the Supervision over Abnormal StockTrading Related to the Material Asset Reorganizations of Listed Companies:
(1) The party making the commitment has not been placed on file for investigation or filed for inspection due to suspected insider trading related to this majorasset reorganization.
(2) In the last 36 months, the party making the commitment was not subject to administrative punishments by the China Securities Regulatory Commission orinvestigated for criminal liability by judicial authorities for insider trading related to this major asset restructuring.
(3) The party making the commitment does not have the circumstance stipulated in Article 13 of the Interim Provisions on Strengthening the Supervision overAbnormal Stock Trading Related to the Material Asset Reorganizations of Listed Companies that it shall not participate in the major asset restructuring of listed
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companies.
4. Commitment regarding no reduction in holdings before the completion of the transaction:
(1) During this transaction, the party making the commitment guarantees that it shall not reduce its holdings of the listed company's shares (if any) from thedate of resumption of trading of the listed company's shares to the completion of this transaction.
(2) Upon the expiration of the aforementioned period for non-reduction of the listed company's shares, the party making the commitment shall strictly abide bythe relevant laws and regulations such as the Company Law and the Securities Law, and the relevant provisions and requirements of the China Securities RegulatoryCommission and the Shanghai Stock Exchange on the reduction of holdings. If the China Securities Regulatory Commission and the Shanghai Stock Exchange havenew provisions on the reduction of holdings, the party making the commitment shall also strictly abide by the relevant provisions.
(3) From the date of resumption of trading of the Company's shares to the completion of this transaction, if the Company implements ex-rights such ascapitalization of shares, gifting of bonus shares, or rationing of shares, the party making the commitment guarantees that the newly shares acquired therefrom shallalso abide by the above compliance to no reduction of holdings.
(4) In case of violation of any of the above commitments, the proceeds obtained by the party making the commitment from the reduction of holdings shall beowned by the Company, and the party making the commitment shall be liable for all direct and indirect losses caused thereby to the listed company, and undertakecorresponding legal liabilities.
Note 2:
1. Commitment regarding provision of true, accurate and complete information:
(1) The relevant information, materials, and certificates provided by and the statements, explanations, commitments, and guarantees made by the listedcompany to the intermediaries involved in this transaction for this transaction are true, accurate and complete, there are no false records, misleading representationsor material omissions, the copies are consistent with the originals, and the signatures and seals on all documents are true. (2) During the period of participating inthis transaction, the Company will, in accordance with relevant laws, administrative regulations and rules, and relevant provisions of China Securities RegulatoryCommission and Shanghai Stock Exchange, timely provide information on this transaction and ensure that such information is true, accurate and complete, andcontains no false records, misleading representations or material omissions. In case of violation of any of the above commitments, the Company will bearindependent and/or joint legal liabilities; if any loss is caused thereby to any other party, the Company will undertake the corresponding compensation liability to theparty suffering from the loss according to law.
(2) ASDI and FAFG has provided the listed company with the information and materials in relation to this transaction that the listed company had requested inwriting ASDI to do so, and commit that the above content, and the statements, explanations, commitments, and guarantees in relation to this transaction made byASDI and FAFG are true, accurate and complete, and contain no false records, misleading representations or material omissions, their copies are consistent with theoriginals, and the signatures and seals on all documents are true. From the date of this commitment to the closing date of this transaction, ASDI and FAFG will, inaccordance with relevant laws, administrative regulations and rules, and relevant provisions of China Securities Regulatory Commission and Shanghai StockExchange, make reasonable commercial efforts to provide the Company and the intermediaries involved in this transaction with information about this transaction ina timely manner, and ensure that such information is true, accurate and complete, and contains no false records, misleading representations or material omissions. IfASDI is placed on file for investigation by the Chinese judicial authority or by the China Securities Regulatory Commission since the information provided by ASDIin this transaction is suspected of false records, misleading statements or material omissions, before the conclusion of the investigation is made, ASDI shall nottransfer the shares (if any) that it has equity in the listed company, and shall, within two trading days of receipt of the case filing and inspection notice, submit thewritten application for suspension of transfer and the stock account to the Board of Directors of the listed company, so that the Board of Directors applies to the
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stock exchange and the registration and clearing company for the lock on behalf of ASDI; if the application for lock-up is not submitted within two trading days, theBoard of Directors shall be authorized to directly submit the identity information and account information of ASDI to the Shanghai Stock Exchange and theregistration and clearing company and apply for lock-up after verification; if the Board of Directors fails to do so, ASDI shall authorize the Shanghai StockExchange and the registration and clearing company to directly lock the relevant shares. If the official investigation of the judicial authority or the China SecuritiesRegulatory Commission concludes that there are any violations of laws and regulations, ASDI undertakes to lock up the shares voluntarily for relevant investorcompensation arrangements. If the information provided in this letter of commitment is inaccurate or incomplete, which negatively affects the transaction or causeslosses to the listed company, (i) all claims or requests made by the listed company or its affiliates with respect to the signatory of this letter of commitment, mayonly be made in accordance with the terms and conditions of the Share Purchase Agreement ("SPA") in relation with this transaction, and (ii) the signatory shall beliable to third parties in accordance with applicable laws and regulations; and in cases of (i) and (ii), the listed company and its affiliates are not entitled to anycompensation other than under the SPA, namely, the SPA is the independent and sole source of recourse for the listed company and its affiliates against the signatory.If the Company or any of its affiliates fails to obtain control over FAFG (directly or indirectly) pursuant to the SPA, this letter of commitment and the statements andcommitments contained therein shall automatically terminate and be deemed invalid. If the transaction is not realized through the issuance of new shares by thelisted company, this letter of commitment shall automatically be deemed invalid. If the above information changes before the closing of the transaction, theCompany shall be notified in writing.
2. Commitment of the listed company and ASDI regarding no related relationship:
(1) The listed company has no related relationship with ASDI, enterprises controlled by ASDI and other related parties. If the Company's violation of the abovecommitment causes any impact or loss to this transaction, it shall be liable for compensation according to law. (2) ASDI, enterprises controlled by ASDI (except forFAFG and enterprises controlled by FAFG), and directors of ASDI have no related relationship with the listed company. If the information provided in this letter ofcommitment is inaccurate or incomplete, which negatively affects the transaction or causes losses to the Company, (i) all claims or requests made by the listedcompany or its affiliates with respect to the signatory of this letter of commitment, may only be made in accordance with the terms and conditions of the SharePurchase Agreement ("SPA") in relation with this transaction, and (ii) the signatory shall be liable to third parties in accordance with applicable laws and regulations;and in cases of (i) and (ii), the listed company and its affiliates are not entitled to any compensation other than under the SPA, namely, the SPA is the independentand sole source of recourse for the listed company and its affiliates against the signatory. If the listed company or any of its affiliates fails to obtain control overFAFG (directly or indirectly) pursuant to the SPA, this letter of commitment and the statements and commitments contained therein shall automatically terminateand be deemed invalid. If the transaction is not realized through the issuance of new shares by the listed company, this letter of commitment shall automatically bedeemed invalid. If the above information changes before the closing of the transaction, the listed Company shall be notified in writing.
3. Commitment of the listed company regarding no major violations of laws and regulations:
(1) The listed company is a company limited by shares legally established and validly existing within the territory of the People's Republic of China, and listedon the main board of the Shanghai Stock Exchange, and has the subject qualification for this transaction.
(2) As of the date of issuance of this letter of commitment: In the last three years, the listed company was not filed for investigation by judicial organs forsuspected crimes or by administrative authorities such as China Securities Regulatory Commission for suspected violations of laws and regulations. In the lasttwelve months, the listed company was not publicly reprimanded by the Shanghai Stock Exchange and had no other material dishonesty. In the last three years, thelisted company did not receive any serious administrative punishments (including administrative punishments within the securities market, public reprimands fromthe exchange, and other penalties related to the securities market, except those obviously unrelated to the securities market) or criminal punishments, and was notinvolved in material civil lawsuits or arbitrations related to economic disputes. The listed company had no dishonesty such as failure to repay large debts on time,failure to perform commitments, being subject to administrative supervision measures taken by the China Securities Regulatory Commission or disciplinary actions
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by the Shanghai Stock Exchange.
Note 3: Commitment to Guarantee the Independence of the Listed Company:
(1) Guarantee that the listed company's personnel are independent
1) Guarantee that the general manager, vice president and other members of the senior management of the listed company hold full-time positions in the listedcompany and receive remuneration from the listed company, and no other administrative positions other than directors and supervisors in the party making thecommitment and its related parties; and that the personnel of the listed company continue maintaining independent;
2) Guarantee that the listed company has an independent and complete labor, personnel and remuneration management system, and that such system iscompletely independent of the party making the commitment and its related parties;
3) Guarantee that the directors, supervisors and members of the senior managers of the listed company are elected and perform the corresponding procedures instrict accordance with the relevant provisions of the Company Law and the articles of association of the listed company, and no directors, supervisors and membersof the senior managers exceed the power or authority of the Board of Directors or the general meeting of the listed company to make personnel appointment andremoval decisions or interfere with personnel appointment and removal decisions.
(2) Guarantee that the listed company's assets are independent
1) Guarantee that the listed company has independent and complete assets, and all of its assets are under the control of the listed company, and areindependently owned and operated by the listed company;
2) Guarantee that the party making the commitment and its related parties did not and will not illegally occupy the funds and assets of the listed company inany way before and after the completion of this transaction.
(3) Guarantee that the listed company's finance is independent
1) Guarantee that the listed company has an independent financial department and an independent financial accounting system, is equipped with specializedfinancial personnel, and establishes an independent and complete financial accounting system. Guarantee that the listed company has a standardized andindependent financial accounting system and a financial management system for branches and subsidiaries;
2) Guarantee that the listed company opens a bank account independently, and does not share a bank account with the party making the commitment and itsrelated parties;
3) Guarantee that the listed company can make financial decisions independently and there is no interference in the use of funds of the listed company;
4) Guarantee that the financial personnel of the listed company are independent and do not take part-time jobs at or receive remuneration from the party makingthe commitment and its related parties;
5) Guarantee that the listed company pays taxes independently in accordance with the law.
(4) Guarantee that the listed company's organization is independent
1) Guarantee that the listed company has a sound corporate governance structure as a joint-stock company and has an independent and complete organizationalstructure;
2) Guarantee that the general meeting of shareholders, the Board of Directors, independent directors, the Board of Supervisors, and the general manager of thelisted company exercise their functions and powers independently in accordance with laws, regulations and the articles of association of the listed company.
(5) Guarantee that the listed company's business is independent
1) Guarantee that the listed company has the assets, personnel, qualifications and capabilities to carry out business activities independently, and has the abilityto operate independently and continuously in the market;
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2) Guarantee not to interfere in the business activities of the listed company except through the exercise of shareholder rights;
3) Guarantee that the party making the commitment and its related parties do not engage in the same or similar business as or with that of the listed company,and take effective measures to avoid horizontal competition.
(6) This letter of commitment shall have legal effect upon signature by the party making the commitment. The party making the commitment shall strictlyfulfill all the commitments in this letter of commitment, and if its violation of any of such commitments causes any losses to the listed company, the party makingthe commitment shall bear the corresponding legal liabilities.
Note 4: Commitment to avoid horizontal competition
(1) The party making the commitment guarantees that after the completion of this transaction, it shall not directly or indirectly engage in the same or similarbusiness or projects as or with that in the business scope of the Company, so as to avoid direct or indirect competition with the Company's production and operation.
(2) The controlling shareholder of the Company guarantees that it shall not use its share-controlling relationship with the Company to conduct businessactivities that damage or may damage the interests of the Company and its other shareholders; and that it shall not use the information it understands or knows aboutthe Company to assist third parties to engage in, participate in or invest in a business or project that competes with the Company.
(3) The actual controller guarantees that it shall make efforts to cause the family members in close relation with it not to directly or indirectly engage in,participate in or invest in any business activities that compete with the production and operation of the Company. The actual controller guarantees that it shall notuse its relationship with the Company to conduct business activities that damage or may damage the interests of the Company and its other shareholders; and that itshall not use the information it understands or knows about the Company to assist third parties to engage in, participate in or invest in a business or project thatcompetes with the Company.
(4) In case of any losses caused to the Company due to the violation of the above commitments by the party making the commitment, the party making thecommitment shall be liable for compensation and bear corresponding legal liabilities. The above commitments shall take effect from the date of this letter ofcommitment, and shall continue to be effective throughout the period in which the party making the commitment is the controlling shareholder and the actualcontroller of the Company, and cannot be changed or revoked.
Note 5: Commitment to reduce and regulate related transactions:
(1) The party making the commitment and the enterprises controlled or influenced by the party making the commitment shall try their best to avoid and reducerelated transactions with the listed company and its subsidiaries.As far as the commitment of the listed company to reduce and regulate related transactions, the transactions between the listed company and its subsidiaries andindependent third parties through the market shall be conducted by the listed company and its subsidiaries and independent third parties. Other companies controlledor influenced by the committing party will strictly refrain from lending to the listed company and its subsidiaries, occupying the funds of the listed company and itssubsidiaries, or encroaching on the listed company and its subsidiaries by making advances and repaying debts. Listed company funds;
(2) All transactions required between the party making the commitment and the enterprises controlled or influenced by the party making the commitment andthe listed company and its subsidiaries shall be conducted in strict with the market principal and in a fair and reasonable manner based on the general principles ofequality, mutual benefit and valuable consideration. If there is a government price for the transaction, the government price shall prevail; if not, the market fair priceshall prevail; if there is neither a government price nor a market reference price, the cost price shall be determined according to the cost plus a comparable andreasonable profit level;
(3) Related transactions between the party making the commitment and the listed company and its subsidiaries shall be subject to necessary legal procedures
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and information disclosure obligations in strict accordance with the listed company's articles of association and related transaction management system. The partymaking the commitment shall take the initiative to perform the obligation of avoidance according to the law when the listed company's authority deliberates relatedtransactions; related transactions subject to deliberation by the authority can only be executed after the deliberation and approval by the authority;
(4) The party making the commitment guarantees that it shall not obtain any illegitimate benefits through related transactions or make the listed company andits subsidiaries undertake any undue obligations. If the listed company or its subsidiaries or other shareholders suffer losses due to the violation of the abovecommitments by the party making the commitment, or the listed company or its subsidiaries or other shareholders' interests are misappropriated due to the use ofrelated relationship by the party making the commitment, the party making the commitment shall be liable for compensation to the losses caused therefrom of thelisted company, its subsidiaries and other shareholders;
(5) The above commitments shall continue to be valid during the period when the party making the commitment and the enterprises controlled or influenced bythe party making the commitment constitute the related parties of the listed company, and cannot be changed or revoked.
Note 6:
1. Commitment regarding clear ownership of the target assets:
(1) Matters concerning the ownership of the target equity (referring to the 8,317,462 shares of FAFG held by ASDI, accounting for about 10.4% of the totalshare capital of FAFG): Subject to the stipulations in the Company's articles of association and the shareholders' agreement, a. The Company has legal and completeownership and disposal rights over the equity of the target company, with no defect or objection in the qualification of shareholders, the Company's holding of thetarget shares does not involve any form of entrusted shareholding, trust holding or similar arrangements, and the target equity is not involved in any property rightsdisputes or potential disputes; b. The Company has fully paid the registered capital corresponding to the equity held in the target company; c. The equity of the targetcompany is not subject to pledge, seizure, freezing, ownership dispute and other right restrictions. As far as the Company is aware, there is no situation related to thetarget equity held by the Company that may affect the legal existence of the target company. The Company commits to maintain the aforesaid situation until thecompletion of this transaction.
(2) If the information provided in this letter of commitment is inaccurate or incomplete, which negatively affects the transaction or causes losses to the listedcompany, (i) all claims or requests made by the listed company or its affiliates with respect to the signatory of this letter of commitment, may only be made inaccordance with the terms and conditions of the Share Purchase Agreement ("SPA") in relation with this transaction, and (ii) the signatory shall be liable to thirdparties in accordance with applicable laws and regulations; and in cases of (i) and (ii), the listed company and its affiliates are not entitled to any compensation otherthan under the SPA, namely, the SPA is the independent and sole source of recourse for the listed company and its affiliates against the signatory.
(3) If the listed company or any of its affiliates fails to obtain control over FAFG (directly or indirectly) pursuant to the SPA, this letter of commitment and thestatements and commitments contained therein shall automatically terminate and be deemed invalid. If the transaction is not realized through the issuance of newshares by the listed company, this letter of commitment shall automatically be deemed invalid.
(4) If the above information changes before the closing of the transaction, the listed company shall be notified in writing.
2. Commitment regarding no circumstances stipulated in Article 13 of the Interim Provisions on Strengthening the Supervision over Abnormal StockTrading Related to the Material Asset Reorganizations of Listed Companies:
(1) Regarding the non-existence of matters that the person making the commitment is not allowed to participate in the major asset restructuring of listedcompanies: As of the date of this letter of commitment, to the best of the person making the commitment's knowledge, the person making the commitment and itsdirectors, supervisors, members of the senior management, controlling shareholders, and actual controllers, and institutions controlled by the person making thecommitment (excluding FAFG and enterprises controlled by FAFG) have not been placed on file for investigation or filed for inspection due to suspected insider
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trading related to this transaction; In the last 36 months, they were not subject to administrative punishments by the China Securities Regulatory Commission orinvestigated for criminal liability by judicial authorities for insider trading related to this major asset restructuring. None of the aforementioned relevant entities isprohibited from participating in the major asset restructuring of listed companies in accordance with Article 13 of the Article 13 of the Interim Provisions onStrengthening the Supervision over Abnormal Stock Trading Related to the Material Asset Reorganizations of Listed Companies.
(2) If the information provided in this letter of commitment is inaccurate or incomplete, which negatively affects the transaction or causes losses to the listedcompany, (i) all claims or requests made by the listed company or its affiliates with respect to the signatory of this letter of commitment, may only be made inaccordance with the terms and conditions of the Share Purchase Agreement ("SPA") in relation with this transaction, and (ii) the signatory shall be liable to thirdparties in accordance with applicable laws and regulations; and in cases of (i) and (ii), the listed company and its affiliates are not entitled to any compensation otherthan under the SPA, namely, the SPA is the independent and sole source of recourse for the listed company and its affiliates against the signatory.
(3) If the listed company or any of its affiliates fails to obtain control over FAFG (directly or indirectly) pursuant to the SPA, this letter of commitment and thestatements and commitments contained therein shall automatically terminate and be deemed invalid. If the transaction is not realized through the issuance of newshares by the listed company, this letter of commitment shall automatically be deemed invalid.
(4) If the above information changes before the closing of the transaction, the listed company shall be notified in writing.
Note 7:
The lock-up period for the shares of the Company acquired by ASDI in the share exchange transaction is thirty-six months from the delivery of the new shares.
Note 8:
(1) The commitment person (including other enterprises controlled by the party making the commitment, the same below) currently does not engage in thesame or similar business as or to that of Universal Scientific Industrial (Shanghai) Co., Ltd. ("USI"), which constitute horizontal competition with USI, or otherbusiness that may adversely affect USI. (2) The person making the commitment shall not directly or indirectly engage in or participate in any business or activitythat competes with USI in any way (including but not limited to independent operation, joint venture operation, or owning equity and other interests in anothercompany or enterprise) inside or outside China, or engage in any business activities that are the same as, similar to or may replace USI's business in any way. (3) Ifthe business opportunity obtained by the person making the commitment from any third party does or may constitute competition with the business operated by USI,the person making the commitment shall notify USI immediately and cause the business opportunity to be transferred to USI. (4) Where USI further expands itsbusiness scope on the basis of its existing business, if the Company has already carried out production and operation of such expanded business, the person makingthe commitment agrees that USI has the right of first refusal to purchase the relevant business under the same commercial conditions; If the Company has not yetproduced or operated such expanded business, it shall not engage in new business that competes with USI. (5) The person making the commitment shall, in futurebusiness operations, avoid operating business that constitutes horizontal competition with USI. If the new business that the person making the commitment intendsto carry out may constitute horizontal competition with USI, the person making the commitment shall obliged to notify USI of the new business. If USI objects tothis, the person making the commitment shall unconditionally give up the development of the new business. If USI believes that the new business is beneficial to itsdevelopment, the person making the commitment shall not only unconditionally give up the development of the new business, but also promote the new business tobe carried out by USI. If USI determines that a certain business the person making the commitment has already conducted is in competition with USI, the personmaking the commitment shall transfer the business to a third party or terminate the business on its own in a timely manner after USI raises an objection. If USImakes a transfer request, the person making the commitment shall unconditionally transfer the above-mentioned business and assets to USI in priority at a fair priceassessed by an intermediary with qualifications for securities business.
2021 Annual Report
Note 9:
(1) Other enterprises excluding USI (including enterprises controlled by USI, the same below) controlled by the person making the commitment currently donot engage in the same or similar business as or to that of Universal Scientific Industrial (Shanghai) Co., Ltd.("USI"), which constitute horizontal competition withUSI, or other business that may adversely affect USI. (2) The person making the commitment shall not, during the period of being confirmed as the actual controllerof USI according to Chinese laws and regulations, directly or indirectly engage in or participate in any business or activity that competes with USI in any way(including but not limited to independent operation, joint venture operation, or owning equity and other interests in another company or enterprise) inside or outsideChina, or engage in any business activities that are the same as, similar to or may replace USI's business in any way. (3) If the business opportunity obtained by theperson making the commitment from any third party does or may constitute competition with the business operated by USI, the person making the commitmentshall notify USI immediately and cause the business opportunity to be transferred to USI. (4) Where USI further expands its business scope on the basis of itsexisting business, if the person making the commitment has already carried out production and operation of such expanded business, the person making thecommitment agrees that USI has the right of first refusal to purchase the relevant business under the same commercial conditions; if other enterprises controlled bythe person making the commitment have not yet carried out production or operation of such expanded business, the person making the commitment shall guaranteethat such other enterprises shall not engage in new businesses that compete with USI. (5) Other enterprises controlled by the person making the commitment shall,in future business operations, avoid operating business that constitutes horizontal competition with USI. If the new business that other enterprises controlled by theperson making the commitment intend to carry out may constitute horizontal competition with USI, such other enterprises shall be obliged to notify USI of the newbusiness. If USI objects to this, such other enterprises shall unconditionally give up the development of the new business. If USI believes that the new business isbeneficial to its development, such other enterprises shall not only unconditionally give up the development of the new business, but also promote the new businessto be carried out by USI. If USI determines that a certain business such other enterprises has already conducted is in competition with USI, such other enterprisescontrolled by the person making the commitment shall transfer the business to a third party or terminate the business on its own in a timely manner after USI raisesan objection. If USI makes a transfer request, such other enterprises shall unconditionally transfer the above-mentioned business and assets to USI in priority at afair price assessed by an intermediary with qualifications for securities business. Other enterprises controlled by the person making the commitment shall not engagein business or activities that do or may adversely affect the operation and development of USI in any way. Such way includes but is not limited to: utilizing thesocial resources and customer resources of the person making the commitment to hinder or limit the independent development of USI; spreading news orinformation that is unfavorable to USI in the society and among customers; using the control position of the person making the commitment to exert influence,resulting in abnormal changes or fluctuations of USI's management personnel and R&D technicians, which are not conducive to the development of USI.
Note 10:
(1) For the situation that USI currently has or is about to have some patent rights and patent application rights in common with Universal Scientific IndustrialCo., Ltd., in order to protect the interests of USI and its minority shareholders, the person making the commitment hereby commits that: if Universal ScientificIndustrial Co., Ltd. (including other enterprises controlled by Universal Scientific Industrial Co., Ltd. except USI and enterprises controlled by USI) causes any rightinfringement and economic losses to USI and enterprises controlled by USI when exercising its patent application co-ownership and patent co-ownership, the personmaking the commitment shall be legally liable for the losses suffered by USI and enterprises controlled by USI and shall also pay full compensation. (2) Before theIPO of USI, if USI must be jointly and severally liable for damages to the dispatched personnel due to the fact that the labor dispatch unit is in arrears with thedispatched personnel’s wages, the person making the commitment agrees to compensate USI for the entire economic loss. (3) If USI and its subsidiaries need to paysocial insurance premiums or housing provident fund for employees as required or decided by the competent department, or USI and its subsidiaries are fined or
2021 Annual Report
suffer losses for failure to pay social insurance premiums or housing provident funds for employees in accordance with the law, the person making the commitmentshall be willing to assume such liability without the consideration of USI and its subsidiaries.
Note 11:
USI is currently leasing part of the property of ASE (Shanghai) Inc. (hereinafter referred to as the "person making the commitment") for staff dormitory purposes.The person making the commitment hereby makes the following commitments: If USI cannot continue using the leased property or suffers a claim from a third partydue to the defect of the property right of the person making the commitment to the leased property, the person making the commitment shall bear the correspondinglegal liabilities, and shall also fully compensate USI for any losses, fines and relocation expenses incurred thereby.
Note 12:
The person making the commitment and enterprises controlled by the person making the commitment (except ASE Technology Holding Co., Ltd. and enterprisescontrolled by ASE Technology Holding Co., Ltd.) do not own any patents, patent application rights or non-profit patented technology. (2) For the situation that USIcurrently has or is about to have some patent rights and patent application rights in common with Universal Scientific Industrial Co., Ltd., in order to protect theinterests of USI and its minority shareholders, the person making the commitment hereby commits that: if Universal Scientific Industrial Co., Ltd. (including otherenterprises controlled by Universal Scientific Industrial Co., Ltd. except USI and enterprises controlled by USI) causes any right infringement and economic lossesto USI and enterprises controlled by USI when exercising its patent application co-ownership and patent co-ownership, the person making the commitment shall belegally liable for the losses suffered by USI and enterprises controlled by USI and shall also pay full compensation. (3) Before the IPO of USI, if USI must be jointlyand severally liable for damages to the dispatched personnel due to the fact that the labor dispatch unit is in arrears with the dispatched personnel’s wages, theperson making the commitment agrees to compensate USI for the entire economic loss. (4) If USI and its subsidiaries need to pay social insurance premiums orhousing provident fund for employees as required or decided by the competent department, or USI and its subsidiaries are fined or suffer losses for failure to paysocial insurance premiums or housing provident funds for employees in accordance with the law, the person making the commitment shall be willing to assume suchliability without the consideration of USI and its subsidiaries.
2021 Annual Report
(II) Where the Company has profit forecasts on assets or projects, and the reporting period waswithin the term of profit forecasts, the Company has to state whether such profit forecasts onassets or projects are fulfilled and the reasons therefor
□Fulfilled □Unfulfilled √Not Applicable
(III) Execution of the performance commitments and its impact on the goodwill impairmenttesting
□Applicable √Not Applicable
II. Non-operating misappropriation of funds by controlling shareholders and other related partiesduring the reporting period
□Applicable √Not Applicable
III. Illegal guarantees
□Applicable √Not Applicable
IV. Explanation by the Board of Directors of the Company on the "audit report with non-standardopinions" issued by the accounting firm
□Applicable √Not Applicable
V. Analysis by the Company on reasons for and impacts of changes in accounting policies andaccounting estimates or corrections of significant accounting errors(I) Analysis by the Company on reasons for and impacts of changes in accounting policies andaccounting estimates
□Applicable √Not Applicable
(II) Analysis by the Company on reasons for and impacts of corrections of significant accountingerrors
□Applicable √Not Applicable
(III) Communication with the previous accounting firm
□Applicable √Not Applicable
(IV) Other particulars
□Applicable √Not Applicable
VI. Appointment and dismissal of the accounting firm
Unit: 10,000 Currency: RMB
| Current accounting firm | |
| Name of domestic accounting firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Remuneration of domestic accounting firm | 388 |
| Term of office of domestic accounting firm | 11 |
| Name | Remuneration | |
| Internal control audit accounting firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP | 56 |
| Financial consultant | Zhong De Securities Company Limited | 0 |
| Sponsor | Haitong Securities Co., Ltd. | 1,520.52 |
Particulars on appointment and dismissal of the accounting firm
√Applicable □Not Applicable
2021 Annual Report
The Company's 2020 annual general meeting of shareholders was held on April 23, 2021, and thismeeting deliberated and approved the appointment of Deloitte Touche Tohmatsu Certified PublicAccountants LLP as the Company's 2021 financial audit agency and internal control audit agency.
Particulars on the change of accounting firm during the auditing period
□Applicable √Not Applicable
VII. Risk of suspension of listing(I) Reasons for the suspension of listing risk warning
□Applicable √Not Applicable
(II) Measures to be taken by the Company
□Applicable √Not Applicable
(III) Situation and reasons for termination of listing
□Applicable √Not Applicable
VIII. Matters related to bankruptcy and reorganisation
□Applicable √Not Applicable
IX. Material litigation and arbitration
□The Company had material litigation and arbitration during the year √The Company did not havematerial litigation and arbitration during the year
X. Suspected violations of laws and regulations of, and punishments and rectifications to the listedCompany, its directors, supervisors, members of the senior management, controlling shareholders,and actual controllers
□Applicable √Not Applicable
XI. Particulars on credibility status of the Company, its controlling shareholders and actualcontrollers during the reporting period
√Applicable □Not Applicable
During the reporting period, the Company's controlling shareholders and actual controllers did not failedto perform the obligations determined by the effective legal documents of the court, and had no bad faithsituation such as a large amount of debts due and unpaid.
XII. Major related transactions(I) Related transactions in relation to daily operation
1. Events disclosed in temporary announcements and without further progress or change insubsequent implementation
√Applicable □Not Applicable
| Overview | Index |
| Announcement on Regular related transactions | For details, see the announcement (No.: 2021-023) on the website of the Shanghai Stock Exchange (www.sse.com.cn) |
2. Events disclosed in temporary announcements and with further progress or change insubsequent implementation
□Applicable √Not Applicable
3. Events not disclosed in temporary announcements
□Applicable √Not Applicable
(II) Related transactions as a result of acquisition and disposal of assets or equity
1. Events disclosed in temporary announcements and without further progress or change in
2021 Annual Report
subsequent implementation
□Applicable √Not Applicable
2. Events disclosed in temporary announcements and with further progress or change insubsequent implementation
□Applicable √Not Applicable
3. Events not disclosed in temporary announcements
□Applicable √Not Applicable
4. Disclosable performance achievements during the Reporting Period when involved with agreed-upon performance
□Applicable √Not Applicable
(III) Major related transactions in joint external investment
1. Events disclosed in temporary announcements and without further progress or change insubsequent implementation
□Applicable √Not Applicable
2. Events disclosed in temporary announcements and with further progress or change insubsequent implementation
□Applicable √Not Applicable
3. Events not disclosed in temporary announcements
□Applicable √Not Applicable
(IV) Creditor's rights and debts with affiliates
1. Events disclosed in temporary announcements and without further progress or change insubsequent implementation
□Applicable √Not Applicable
2. Events disclosed in temporary announcements and with further progress or change insubsequent implementation
□Applicable √Not Applicable
3. Events not disclosed in temporary announcements
□Applicable √Not Applicable
(V) Financial business between the Company and the financial company with a relatedrelationship with the Company, the Company's holding financial company, and the related party
□Applicable √Not Applicable
(VI) Others
□Applicable √Not Applicable
XIII. Material contracts and their performance(I) Trusteeship, contracting and leasing matters
1. Trusteeship
□Applicable √Not Applicable
2. Contracting
□Applicable √Not Applicable
3. Leasing
□Applicable √Not Applicable
2021 Annual Report
(II) Guarantees
√Applicable □Not Applicable
Unit: Yuan Currency: RMB
| The Company's external guarantees (excluding guarantees to subsidiaries) | |||||||||||||||
| Guarantying party | Relationship between the guarantying party and the listed company | Guaranteed party | Guarantee amount | Guarantee date (date of signing the agreement) | Guarantee start date | Guarantee expiry date | Guarantee type | Collateral (if any) | Whether the guarantee has been fulfilled | Whether the guarantee is overdue | Guarantee overdue amount | Counter-guarantee situation | Whether it is a guarantee for related parties | Related relationship | |
| / | / | / | / | / | / | / | / | ||||||||
| Total amount of guarantees during the reporting period (excluding guarantees to subsidiaries) | 0 | ||||||||||||||
| Total balance of guarantees at the end of the reporting period (A) (excluding guarantees to subsidiaries) | 0 | ||||||||||||||
| Guarantee of the Company and its subsidiaries to subsidiaries | |||||||||||||||
| Total amount of guarantees to subsidiaries during the reporting period | 10,768.54 | ||||||||||||||
| Total balance of guarantees to subsidiaries at the end of the reporting period (B) | 7,555.77 | ||||||||||||||
| Total amount of the Company's guarantees (including guarantees to subsidiaries) | |||||||||||||||
| Total amount of guarantees (A+B) | 7,555.77 | ||||||||||||||
| Proportion of the total amount of guarantees in the Company's net assets (%) | 0.82 | ||||||||||||||
| Including: | |||||||||||||||
| Amount of guarantee provided to shareholders, actual controllers and related parties (C) | 0 | ||||||||||||||
| Amount of debt guarantee provided directly or indirectly for the guaranteed object whose asset-liability ratio exceeds 70% (D) | 4,367.92 | ||||||||||||||
| Amount of the total guarantee exceeding 50% of the net assets (E) | 0 | ||||||||||||||
| Total amount of the above three guarantees (C+D+E) | 4,367.92 | ||||||||||||||
| Particulars on the situation that unexpired guarantees may bear joint liability for repayment | None | ||||||||||||||
| Particulars on guarantees | The above are all guarantees between controlled subsidiaries for the purpose of satisfying the daily operation needs of the subsidiaries. The objects of the guarantee are the wholly-ownedx | ||||||||||||||
2021 Annual Report
subsidiaries within the scope of its consolidated statement. The Company have decision-makingpower on their operation and have access to their latest financial and credit status information,therefore can effectively control and prevent risks.
2021 Annual Report
(III) Entrusting others to manage cash assets
1. Entrusted wealth management
(1) Overall condition of entrusted wealth management
√Applicable □Not Applicable
Unit: Yuan Currency: RMB
| Type | Source of fund | Amount incurred | Undue balance | Overdue uncollected amount |
| Bank wealth management products | Self-owned funds | 3,616,000,000.00 | 0 | 0 |
| Bank wealth management products | Raised funds | 3,027,000,000.00 | 0 | 0 |
| Fund wealth management products | Self-owned funds | 4,452,170.32 | 0 | 0 |
Others
□Applicable √Not Applicable
2021 Annual Report
(2) Individual entrusted wealth management
√Applicable □Not Applicable
Unit: 10,000 Currency: RMB
| Trustee | Type of Entrusted Investment | Amount | Start Date | End date | Source | Direction | Type of Returns | Annual Return | Expected return (If any) | Actual gain or loss | Principal repayment | Legal procedures conducted | Future entrusted investment plan | Impairment provision (if any) |
| Hwabao WP Fund Management Co., Ltd. | Fund wealth management products | 40.00 | 2020/5/14 | 2021/9/13 | Self-owned funds | Standardised debt-based assets and money market funds | Fixed income collective asset management | 2.09 | All repaid | Yes | No | |||
| Hwabao WP Fund Management Co., Ltd. | Fund wealth management products | 405.22 | 2020/5/14 | 2021/9/13 | Self-owned funds | Standardised debt-based assets and money market funds | Fixed income collective asset management | 18.89 | All repaid | Yes | No | |||
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000.00 | 2021/4/2 | 2021/6/30 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 0.61% from 7 days to less than 14 days, 1.16% from 14 to less than 21 days, 1.76% from 21 days to less than 30 days, 2.41% from 30 days to less than | 163.17 | 163.17 | All repaid | Yes | No |
2021 Annual Report
| 60 days, 2.61% from 60 days to less than 89 days, 3.3 % at 89 days | ||||||||||||||
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 30,000.00 | 2021/4/2 | 2021/6/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.300% | 241.40 | 241.40 | All repaid | Yes | No | |
| Bank of Beijing Shanghai Branch | Bank wealth management products | 20,000.00 | 2021/4/6 | 2021/6/29 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.300% | 151.89 | 151.89 | All repaid | Yes | No | |
| China Construction Bank Shanghai Baosteel Branch | Bank wealth management products | 12,000.00 | 2021/4/2 | 2021/5/7 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 2.950% | 33.95 | 29.18 | All repaid | Yes | No | |
| China Construction Bank Shanghai Baosteel Branch | Bank wealth management products | 60,000.00 | 2021/4/2 | 2021/6/29 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 462.90 | 506.30 | All repaid | Yes | No | |
| Bank of Communications Shanghai Branch | Bank wealth management products | 30,000.00 | 2021/4/6 | 2021/6/30 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 3.170% | 221.47 | 221.47 | All repaid | Yes | No | |
| Agricultural Bank of China Shanghai Branch | Bank wealth management products | 6,000.00 | 2021/4/6 | 2021/5/6 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 2.950% | 14.55 | 14.55 | All repaid | Yes | No | |
| Agricultural Bank of China Shanghai Branch | Bank wealth management products | 6,000.00 | 2021/4/6 | 2021/6/1 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 3.100% | 28.54 | 28.54 | All repaid | Yes | No | |
| Agricultural Bank of China Shanghai | Bank wealth management products | 20,000.00 | 2021/4/6 | 2021/6/29 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 147.29 | 147.29 | All repaid | Yes | No |
2021 Annual Report
| Branch | ||||||||||||||
| Agricultural Bank of China Shanghai Branch | Bank wealth management products | 20,000.00 | 2021/4/6 | 2021/6/29 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 147.29 | 147.29 | All repaid | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000.00 | 2021/7/2 | 2021/9/28 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 1.5%, 3.5% or 3.6% | 173.06 | 173.06 | All repaid | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 21,500.00 | 2021/7/2 | 2021/9/28 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.5%, 3.5% or 3.6% | 186.03 | 186.03 | All repaid | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 20,000.00 | 2021/7/2 | 2021/9/29 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.20%～3.46% | 165.81 | 165.81 | All repaid | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 20,000.00 | 2021/7/2 | 2021/9/2 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.20%～3.46% | 115.51 | 115.51 | All repaid | Yes | No | |
| Bank of Beijing Shanghai Branch | Bank wealth management products | 20,000.00 | 2021/9/7 | 2021/10/28 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.35%～3.2% | 89.42 | 89.42 | All repaid | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 21,500.00 | 2021/10/11 | 2021/12/30 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.5%, 3.65% or 3.75% | 174.39 | 174.39 | All repaid | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 25,700.00 | 2021/10/11 | 2021/12/30 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.5%, 3.61% or 3.71% | 206.17 | 206.17 | All repaid | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 20,000.00 | 2021/10/12 | 2021/12/29 | Raised funds | Money market: cash&deposit | Principal protected, floating rate | 1.20%～3.46% | 147.88 | 147.88 | All repaid | Yes | No | |
| Xiament International Bank Shanghai Branch | Bank wealth management products | 5,300.00 | 2021/1/7 | 2021/3/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 0.38% or 0.51% from 7 days to | 40.69 | 40.69 | All repaid | Yes | No |
2021 Annual Report
| less than 14 days, 0.80% or 1.06 % from 14 days to less than 21 days, 1.35% or 1.64% from 21 days to less than 30 days, 1.40% or 2.31% from 30 days to less than 60 days, 1.50% or 2.51% from 60 days to less than 83 days, and 3.33% at 83 days | ||||||||||||||
| Xiament International Bank Shanghai Branch | Bank wealth management products | 5,300.00 | 2021/4/2 | 2021/6/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 0.61% from 7 days to less than 14 days, 1.16% from 14 to less than 21 | 43.24 | 43.24 | All repaid | Yes | No |
2021 Annual Report
| days, 1.76% from 21 days to less than 30 days, 2.41% from 30 days to less than 60 days, 2.61% from 60 days to less than 89 days, 3.3 % at 89 days | ||||||||||||||
| Xiament International Bank Shanghai Branch | Bank wealth management products | 5,400.00 | 2021/7/2 | 2021/9/28 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 1.5%, 3.5% or 3.6% | 46.73 | 46.73 | All repaid | Yes | No | |
| Xiament International Bank Shanghai Branch | Bank wealth management products | 500.00 | 2021/10/11 | 2021/11/23 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 1.4%或3.65%或3.75% | 2.18 | 2.18 | All repaid | Yes | No | |
| Xiament International Bank Shanghai Branch | Bank wealth management products | 5,000.00 | 2021/10/11 | 2021/12/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 1.5%, 3.65% or 3.75% | 40.56 | 40.56 | All repaid | Yes | No | |
| Bank of East Asia Suzhou Branch | Bank wealth management products | 3,000.00 | 2021/1/4 | 2021/3/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.450% | 24.10 | 24.44 | All repaid | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000.00 | 2021/1/5 | 2021/3/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 36.82 | 37.78 | All repaid | Yes | No | |
| Shanghai Rural | Bank wealth | 3,000.00 | 2021/1/8 | 2021/2/9 | Self- | Money | Principal | 3.050% | 8.02 | 7.83 | All repaid | Yes | No |
2021 Annual Report
| Commercial Bank Kunshan Branch | management products | owned funds | market: cash&deposit | protected, floating rate | ||||||||||
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 7,000.00 | 2021/1/6 | 2021/3/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.250% | 51.73 | 51.73 | All repaid | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 3,000.00 | 2021/1/26 | 2021/3/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 17.61 | 18.13 | All repaid | Yes | No | |
| Shanghai Rural Commercial Bank Kunshan Branch | Bank wealth management products | 3,000.00 | 2021/2/22 | 2021/3/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.080% | 9.37 | 9.03 | All repaid | Yes | No | |
| Industrial and Commercial Bank of China Development Zone Branch | Bank wealth management products | 3,500.00 | 2021/4/1 | 2021/6/1 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.500% | 20.47 | 20.55 | All repaid | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000.00 | 2021/4/2 | 2021/6/3 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.700% | 62.85 | 62.85 | All repaid | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000.00 | 2021/4/2 | 2021/5/2 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 14.17 | 14.17 | All repaid | Yes | No | |
| China Citic Bank Kunshan Branch | Bank wealth management products | 3,500.00 | 2021/4/5 | 2021/5/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 18.26 | 18.26 | All repaid | Yes | No | |
| Bank of Ningbo Kunshan Branch | Bank wealth management products | 2,000.00 | 2021/4/19 | 2021/5/19 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.390% | 5.57 | 5.57 | All repaid | Yes | No | |
| Bank of Suzhou | Bank wealth | 3,000.00 | 2021/4/23 | 2021/5/23 | Self- | Money | Principal | 3.400% | 8.50 | 8.50 | All repaid | Yes | No |
2021 Annual Report
| Kunshan Qiandeng Branch | management products | owned funds | market: cash&deposit | protected, floating rate | ||||||||||
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 6,000.00 | 2021/7/2 | 2021/8/2 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.700% | 18.85 | 18.85 | All repaid | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 3,000.00 | 2021/7/13 | 2021/8/13 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.700% | 9.25 | 9.25 | All repaid | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 3,000.00 | 2021/8/24 | 2021/9/29 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.700% | 10.95 | 10.95 | All repaid | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 3,000.00 | 2021/10/12 | 2021/11/12 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.600% | 9.00 | 9.00 | All repaid | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 3,000.00 | 2021/11/5 | 2021/12/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.600% | 16.27 | 16.27 | All repaid | Yes | No | |
| Fubon Bank | Bank wealth management products | 10,000.00 | 2021/1/6 | 2021/3/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 73.64 | 73.64 | All repaid | Yes | No | |
| Xiamen International Bank North Bund Branch | Bank wealth management products | 10,000.00 | 2021/1/6 | 2021/3/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.260% | 76.07 | 76.07 | All repaid | Yes | No | |
| Standard Chartered | Bank wealth management products | 5,000.00 | 2021/2/3 | 2021/3/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 24.55 | 24.55 | All repaid | Yes | No | |
| Fubon Bank | Bank wealth management | 10,000.00 | 2021/4/2 | 2021/6/2 | Self-owned | Money market: | Principal protected, | 3.300% | 55.15 | 55.15 | All repaid | Yes | No |
2021 Annual Report
| products | funds | cash&deposit | floating rate | |||||||||||
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 10,100.00 | 2021/4/2 | 2021/5/31 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 0.61% from 7 days to less than 14 days, 1.16% from 14 to less than 21 days, 1.76% from 21 days to less than 30 days, 2.41% from 30 days to less than 60 days, 2.61% from 60 days to less than 89 days, 3.3 % at 90 days | 54.62 | 54.62 | All repaid | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 20,000.00 | 2021/1/6 | 2021/3/25 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.470% | 148.31 | 148.31 | All repaid | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 10,000.00 | 2021/1/7 | 2021/3/25 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.470% | 73.20 | 73.20 | All repaid | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 20,000.00 | 2020/1/4 | 2021/3/25 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.300% | 144.66 | 144.66 | All repaid | Yes | No | |
| Bank of | Bank wealth | 5,000.00 | 2021/1/8 | 2021/3/25 | Self- | Money | Principal | 4.690% | 48.83 | 48.83 | All repaid | Yes | No |
2021 Annual Report
| Communications Shenzhen Huaqiang Branch | management products | owned funds | market: cash&deposit | protected, floating rate | ||||||||||
| Bank of Communications Shenzhen Huaqiang Branch | Bank wealth management products | 5,000.00 | 2021/1/8 | 2021/3/25 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 1.650% | 17.18 | 17.18 | All repaid | Yes | No | |
| Industrial Bank Shenzhen Bank | Bank wealth management products | 5,000.00 | 2021/2/3 | 2021/3/22 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.050% | 19.64 | 19.64 | All repaid | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 7,000.00 | 2021/4/8 | 2021/6/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.420% | 54.44 | 54.44 | All repaid | Yes | No | |
| Industrial Bank Shenzhen Bank | Bank wealth management products | 5,000.00 | 2021/4/2 | 2021/6/29 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.230% | 38.94 | 38.94 | All repaid | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 6,000.00 | 2021/4/21 | 2021/6/29 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 38.56 | 38.56 | All repaid | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 5,000.00 | 2021/6/30 | 2021/6/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 22.82 | 22.82 | All repaid | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 3,000.00 | 2021/5/27 | 2021/6/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 9.50 | 7.13 | All repaid | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 10,000.00 | 2021/7/7 | 2021/9/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.420% | 79.64 | 79.64 | All repaid | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 5,000.00 | 2021/7/1 | 2021/8/12 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 19.56 | 19.56 | All repaid | Yes | No | |
| Bank of Shanghai Shenzhen Branch | Bank wealth management products | 5,000.00 | 2021/7/6 | 2021/9/6 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.200% | 27.18 | 27.18 | All repaid | Yes | No |
2021 Annual Report
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 5,000.00 | 2021/8/12 | 2021/9/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.400% | 22.82 | 22.82 | All repaid | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 10,000.00 | 2021/10/27 | 2021/12/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.300% | 57.86 | 57.86 | All repaid | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 10,000.00 | 2021/10/27 | 2021/12/30 | Self-owned funds | Money market: cash&deposit | Principal protected, floating rate | 3.350% | 58.74 | 58.74 | All repaid | Yes | No |
Others
□Applicable √Not Applicable
2021 Annual Report
(3) Provision for the impairment of entrusted wealth management
□Applicable √Not Applicable
2. Entrusted loans
(1) Overall condition of entrusted loans
□Applicable √Not Applicable
Others
□Applicable √Not Applicable
(2) Individual entrusted loans
□Applicable √Not Applicable
Others
□Applicable √Not Applicable
(3) Provision for the impairment of entrusted loans
□Applicable √Not Applicable
3. Others
□Applicable √Not Applicable
(IV) Other material contracts
□Applicable √Not Applicable
XIV. Particulars on other major events that have great influence on investors' value judgmentsand investment decisions
□Applicable √Not Applicable
2021 Annual Report
Section VII Changes in Share Capital and Information of
Shareholders
I. Changes in share capital(I) Table of changes in shares
1. Table of changes in shares
Unit: Share
| Before the change | Change | After the change | |||||||
| Number | Percentage (%) | New Issue | Bonus Issue | Stock converted from housing accumulation fund | Others | Subtotal | Number | Percentage (%) | |
| I. Shares subject to selling restrictions | 25,939,972 | 1.17 | 0 | 0 | 0 | 0 | 0 | 25,939,972 | 1.17 |
| 1. Shares held by the foreign capital | 25,939,972 | 1.17 | 0 | 0 | 0 | 0 | 0 | 25,939,972 | 1.17 |
| Including: Shares held by the foreign legal person | 25,939,972 | 1.17 | 0 | 0 | 0 | 0 | 0 | 25,939,972 | 1.17 |
| II. Tradable shares held subject to selling restrictions | 2,183,403,400 | 98.83 | 829,410 | 0 | 0 | 0 | 829,410 | 2,184,232,810 | 98.83 |
| 1. RMB ordinary shares | 2,183,403,400 | 98.83 | 829,410 | 0 | 0 | 0 | 829,410 | 2,184,232,810 | 98.83 |
| III. Total number of shares | 2,209,343,372 | 100 | 829,410 | 0 | 0 | 0 | 829,410 | 2,210,172,782 | 100 |
2. Particulars on changes in ordinary shares
√ Applicable □Not Applicable
During the reporting period, the Company's total share capital increased from 2,209,343,372 shares to2,210,172,782 shares, representing an increase of 829,410 shares, due to the exercise of equityincentives and the conversion of convertible bonds.
3. Impact of changes in shares on the earnings per share, net asset value per share and otherfinancial indicators in the last year and period (if any)
√ Applicable □Not Applicable
4. Other contents that must be disclosed in the opinion of the Company or according torequirements of the securities regulatory institution
□Applicable √Not Applicable
(II) Changes in shares with trading restrictions
□Applicable √Not Applicable
2021 Annual Report
II. Issuance and listing of securities(I) Issuance of securities as at the reporting period
√ Applicable □Not Applicable
Unit: Share Currency: RMB
| Type of stocks and derivative securities | Issue date | Issue price (or interest rate) | Issue number | Listing date | Number of approved for listing and trading | Termination date of transactions |
| Convertible corporate bonds, split-trade convertible bonds | ||||||
| Convertible corporate bonds | March 4, 2021 | 100 | 34,500,000 | April 2, 2021 | 34,500,000 | March 3, 2027 |
Particulars on issuance of securities as at the reporting period (please provide separate particulars on thebonds with different interest rates during their duration):
√ Applicable □Not Applicable
The term of the convertible bonds issued during the reporting period is 6 years from the date of issuance,that is, from March 4, 2021 to March 3, 2027. The coupon rate is 0.10% in the first year, 0.20% in thesecond year, 0.60% in the third year, 1.30% in the fourth year, 1.80% in the fifth year, and 2.00% in thesixth year.
(II) Changes in the total number of shares and shareholder structure of the Company and changesin the structure of assets and liabilities of the Company
√ Applicable □Not Applicable
1. Changes in the total number of shares
During the reporting period, the Company's total share capital increased from 2,209,343,372 to2,210,172,782 shares.
2. Changes in shareholder structure
No controlling shareholder and no actual controller of the Company changed. The controllingshareholder of the Company was still USI Enterprise Limited, and its shareholding ratio was passivelydiluted from 76.21% to 76.18% due to the above change in shares. Except for the controlling shareholder,the Company had no other major shareholders holding more than 5% of the shares. The actualcontrollers of the Company were still Jason C.S. Chang and Richard H.P. Chang brothers.
3. Changes in the structure of assets and liabilities of the Company
At the beginning of the reporting period, the Company had total assets of RMB 31.070 billion and totalliabilities of RMB 19.020 billion, with the asset-liability ratio of 61.22%; at the end of the reportingperiod, the Company had total assets of RMB 35.856 billion and total liabilities of RMB 22.774 billion,with the asset-liability ratio of 63.51%. The Company's asset-liability ratio increased by 2.29% over thesame period of the previous year.
(III) Existing internal employee shares
□Applicable √Not Applicable
III. Shareholders and actual controllers(I) Total number of shareholders
| Total number of shareholders of ordinary shares as at the end of the reporting period | XX |
| Total number of shareholders of ordinary shares at the end of last month prior to the disclosure date of this annual report | XX |
(II) Table of shareholdings of the top ten shareholders and the top ten shareholders of shares incirculation (or shareholders not subject to selling restrictions) as at the end of the reporting period
Unit: share
2021 Annual Report
| Name of shareholder (full name) | Change during the reporting period | Number of shares held as at the end of the period | Percentage (%) | Number of shares held subject to selling restrictions | Pledge, marking or freezing | Nature of shareholder | ||
| Status | Number | |||||||
| USI Enterprise Limited | 0 | 1,683,749,126 | 76.18 | 0 | None | 0 | Foreign legal person | |
| Hong Kong Securities Clearing Company Ltd. | -23,081,699 | 63,121,824 | 2.86 | 0 | Unknown | Foreign legal person | ||
| China Securities Finance Co., Ltd. | 0 | 36,750,069 | 1.66 | 0 | Unknown | Domestic state-owned legal person | ||
| ASDI ASSISTANCE DIRECTION | 0 | 25,939,972 | 1.17 | 25,939,972 | Pledge | 25,939,972 | Foreign legal person | |
| ASE (Shanghai) Inc. | 0 | 18,098,476 | 0.82 | 0 | None | 0 | Domestic non-state-owned legal person | |
| Zoomlion Runshi (Beijing) Investment Company Limited | 5,000 | 5,998,765 | 0.27 | 0 | Unknown | Domestic non-state-owned legal person | ||
| Bank of Korea - Self-owned funds | 338,400 | 5,777,005 | 0.26 | 0 | Unknown | Foreign legal person | ||
| Bank of China Co., Ltd. - China AMC 5G Communication Themed ETF | -7,154,459 | 3,799,069 | 0.17 | 0 | Unknown | Others | ||
| Li Yalian | 3,573,900 | 3,573,900 | 0.16 | 0 | Unknown | Domestic natural person | ||
| Zhang Fangzheng | 3,280,500 | 3,280,500 | 0.15 | 0 | Unknown | Domestic natural person | ||
| Shareholdings of the top ten shareholders of shares not subject to selling restrictions | ||||||||
| Name of shareholder | Number of tradable shares not subject to selling restrictions held | Type and number of shares | ||||||
| Type | Number | |||||||
| USI Enterprise Limited | 1,683,749,126 | RMB ordinary shares | 1,683,749,126 | |||||
| Hong Kong Securities Clearing Company Ltd. | 63,121,824 | RMB ordinary shares | 63,121,824 | |||||
| China Securities Finance Co., Ltd. | 36,750,069 | RMB ordinary shares | 36,750,069 | |||||
| ASE (Shanghai) Inc. | 18,098,476 | RMB ordinary shares | 18,098,476 | |||||
| Zoomlion Runshi (Beijing) Investment Company Limited | 5,998,765 | RMB ordinary shares | 5,998,765 | |||||
| Bank of Korea - Self-owned funds | 5,777,005 | RMB ordinary shares | 5,777,005 | |||||
| Bank of China Co., Ltd. - China AMC 5G Communication Themed ETF | 3,799,069 | RMB ordinary shares | 3,799,069 | |||||
2021 Annual Report
| Li Yalian | 3,573,900 | RMB ordinary shares | 3,573,900 |
| Zhang Fangzheng | 3,280,500 | RMB ordinary shares | 3,280,500 |
| Lu Jinghua | 2,424,512 | RMB ordinary shares | 2,424,512 |
| Particulars on the special buy-back securities account of the top ten shareholders | At the end of the reporting period, there were 25,313,205 tradable shares not subject to selling restrictions in the Company's special buy-back securities account. Changes during the reporting period were as follows: 1. On December 31, 2020, there were 11,332,177 tradable shares not subject to selling restrictions in the Company's special buy-back securities account; 2. On September 22, 2021, 281,200 shares were transferred from the Company's special buy-back securities account to the Company's 2021 employee stock ownership plan account in the form of non-trade transfer; 3. On December 21, 2021, 1,780,050 shares were transferred from the Company's special buy-back securities account to the Company's second-phase core employee stock ownership plan account in the form of non-trade transfer; 4. As of December 31, 2021, 16,042,278 shares were increased in the Company's special buy-back securities account due to the Company's share repurchase in the secondary market. | ||
| Particulars on the above-mentioned shareholders' entrusting voting rights, entrusted voting rights and abstention from voting rights | None | ||
| Related or acting-in-concert parties among the shareholders above | The actual controllers of the Company are Mr. Jason C.S. Chang and Mr. Richard H.P. Chang, who are brothers and ultimately control the Company through indirect shareholding by controlling USI Enterprise Limited and ASE (Shanghai) Inc., two of the Company’s shareholders. The Company does not know whether there are related relationships and concerted actions among other shareholders. | ||
| Particulars on the preference shareholders with voting rights restored and their shareholdings | None | ||
Number of shares held by the top ten shareholders subject to trading restrictions and trading restrictions
√ Applicable □Not Applicable
Unit: Share
| Serial Number | Name of shareholders subject to selling restrictions | Number of shares held subject to selling restrictions | Listing and trading of shares subject to selling restrictions | Selling restrictions | |
| Listing and trading time | Number of new shares that can be listed and traded | ||||
| 1 | ASDI ASSISTANCE DIRECTION | 25,939,972 | December 11, 2023 | 0 | 36 months from the delivery date of the new shares |
| Particulars on the related relationship or parties acting in concert among the above shareholders | None | ||||
2021 Annual Report
(III) Strategic investors or general legal persons becoming the top ten shareholders because ofplacing of new shares
□Applicable √Not Applicable
IV. Controlling shareholder and beneficial controllers(I) Controlling shareholder1 Legal person
√Applicable □Not Applicable
| Name | USI Enterprise Limited |
| Person in charge of the Company or legal representative | Chen-Yen Wei |
| Establishment date | November 13, 2007 |
| Main operation businesses | Investment consulting services and warehouse management services |
| Equity of other domestic and overseas listed companies controlled or invested during the reporting period | None |
| Particulars on other information | None |
2 Natural person
□Applicable √Not Applicable
3 Special particulars on the Company not having controlling shareholders
□Applicable √Not Applicable
4 Changes in controlling shareholders during the reporting period
□Applicable √Not Applicable
5 Diagram of the ownership and controlling relationship between the Company and its controllingshareholders
□Applicable √Not Applicable
(II) Actual controller1 Legal person
□Applicable √Not Applicable
2 Natural person
√Applicable □Not Applicable
| Name | Jason C.S. Chang |
| Nationality | Singapore |
| Acquire right of residence in other countries or regions or not | No |
USI Enterprise Limited
USI Enterprise Limited
USI
2021 Annual Report
| Main job and title | Since 2018, Mr. Chang has served as the chairman and group CEO of ASE Technology Holding Co., Ltd.; since 1984, he has served as the chairman of Advanced Semiconductor Engineering, Inc. |
| Shareholdings in other domestic or overseas listed companies over the past 10 years | Mr. Chang currently controls 21.55% equity in ASE Investment Holding Co., Ltd. (a company listed in Taiwan, with the stock code of 3711), holds 32.23% equity in Hung Ching Development & Construction Co. (a company listed in Taiwan, with the stock code of 2527) including 26.22% through ASE Investment Holding Co., Ltd., and controls 48.69% equity in SINO HORIZON (a company listed in Taiwan, with the stock code of 2923). He once controlled Advanced Semiconductor Engineering, Inc., a company listed on the Taiwan Stock Exchange, with the stock code of 2311, which was terminated from listing on April 30, 2018, and held Universal Scientific Industrial Co., Ltd., a company listed on the Taiwan Stock Exchange, with the stock code of 2311, which was terminated from listing on April 30, 2018. |
| Name | Richard H.P. Chang |
| Nationality | Hong Kong, China |
| Acquire right of residence in other countries or regions or not | No |
| Main job and title | Since 2018, has been serving as vice chairman, general manager and director (representative) of ASE Technology Holding Co., Ltd. |
| Shareholdings in other domestic or overseas listed companies over the past 10 years | As a brother of Jason C.S. Chang, holds 2.85% equity in ASE Investment Holding Co., Ltd. (a company listed in Taiwan, with the stock code of 3711) and 12.90% equity in Hung Ching Development & Construction Co. (a company listed in Taiwan, with the stock code of 2527), and controls 48.69% equity in SINO HORIZON (a company listed in Taiwan, with the stock code of 2923). Once held the equity of ASE Co., Ltd., a company listed on the Taiwan Stock Exchange, with a stock code of 2311, which was terminated from listing on April 30, 2018. |
3 Special particulars on the Company not having actual controllers
□Applicable √Not Applicable
4 Particulars on changes in the Company's control during the reporting period
□Applicable √Not Applicable
5 Diagram of the ownership and controlling relationship between the Company and its actualcontrollers
√Applicable □Not Applicable
2021 Annual Report
Note: The data in the diagram is as of December 31, 2021.
6 Control of the Company by actual controllers by way of trust or other means of assetmanagement
□Applicable √Not Applicable
(III) Other particulars regarding the controlling shareholders and the actual controllers
□Applicable √Not Applicable
V. Shares accumulatively pledged by the Company's controlling shareholder or largestshareholder and its persons acting in concert account for more than 80% of the Company's sharesheld by them
□Applicable √Not Applicable
VI. Other legal person shareholders with more than 10% shareholdings
□Applicable √Not Applicable
VII. Particulars on restrictions on reduction of shareholding
□Applicable √Not Applicable
VIII. Specific implementation of share repurchase during the reporting period
√Applicable □Not Applicable
Unit: Yuan Currency: RMB
| Name of the share repurchase plan | 2021 Plan for Repurchasing Shares through Centralized Bidding |
Actuall Controllers Jason Chang and Richard Chang
Actuall Controllers Jason Chang and Richard ChangASE Technology Holding Co., Ltd.
ASE Technology Holding Co., Ltd.USI Inc.
USI Inc.ASE Technology Holding Co., Ltd.
ASE Technology Holding Co., Ltd.USI Enterprise Limited
USI Enterprise LimitedUSI
USIASE(Shanghai)Inc.
ASE(Shanghai)Inc.AdvancedSemiconductorEngineering,Inc.
AdvancedSemiconductorEngineering,
Inc.Special buy-back securitiesaccount of USI
2021 Annual Report
| Disclosure time of share repurchase plan | August 26, 2021 |
| Proportion (%) of proposed repurchase shares in total share capital | 1.01 |
| Proposed repurchase amount | RMB 200 million - RMB 400 million |
| Proposed repurchase period | August 24, 2021 – February 23, 2022 |
| Repurchase purpose | Employee stock ownership plan, equity incentive plan, conversion of convertible corporate bonds issued by the listed company |
| Number of repurchased shares (share) | 16,042,278 |
| Proportion of repurchased shares in the target shares involved in the equity incentive plan (if any) | N/A |
| Progress of reducing shares repurchased by the Company through centralized bidding | N/A |
Note: The proposed repurchase amount is calculated based on the upper limit of the total repurchasefunds of RMB 400 million and the upper limit of the price of RMB 18 per share.As of February 23, 2022, this share repurchase plan was completed, and the Company repurchased atotal of 17,223,278 shares of the Company, accounting for about 0.78% of the Company's current totalshare capital
2021 Annual Report
Section VIII Related Information of Preferred Stocks
□Applicable √Not Applicable
| Universal Scientific Industrial (Shanghai) Co., Ltd. | 中文草稿 | ||||
Section IX Related Information of BondsI. Corporate bonds, corporate bonds and non-financial corporate debt financing instruments
□Applicable √Not Applicable
II. Convertible corporate bonds
√ Applicable □Not Applicable
(I) Issuance of convertible bonds
√ Applicable □Not Applicable
After being approved by the China Securities Regulatory Commission with a document (Z.J.X.K. [2021] No. 167), theCompany publicly issued 34.5 million convertible corporate bonds on March 4, 2021, each with a face value of RMB 100,amounting to RMB 3,450 million in total. After being approved by the Shanghai Stock Exchange with the Self-RegulatorySupervision Decision Letter ([2021] No. 133), the convertible corporate bonds were listed and traded on the Shanghai StockExchange on April 2, 2021. The bonds are abbreviated as "USI Convertible Bonds", with the bond code of 113045.
(II) Convertible bond holders and guarantors during the reporting period
√ Applicable □Not Applicable
| Name of convertible corporate bonds | Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | |
| Number of convertible bond holders at the end of the period | 12,914 | |
| Guarantor of the Company's convertible bonds | None | |
| Top ten convertible bond holders: | ||
| Name of holders of convertible corporate bonds | Amount (RMB) of bonds held as at the end of the period | Holding ratio (%) |
| USI Enterprise Limited | 2,641,802,000 | 76.57 |
| Industrial and Commercial Bank of China Limited - China Universal Convertible Bond Securities Investment Fund | 39,986,000 | 1.16 |
| Wisdomshire Asset Management Co., Ltd. - Wisdomshire Zhiyuan No. 1 Private Equity Investment Fund | 39,240,000 | 1.14 |
| Zhongtai Securities Co., Ltd. | 38,548,000 | 1.12 |
| UBS AG | 33,103,000 | 0.96 |
| ASE (Shanghai) Inc. | 28,397,000 | 0.82 |
| The Hongkong and Shanghai Banking Corporation Limited | 21,897,000 | 0.63 |
| Guoyuan International Holding Co., Ltd. - Customer funds (Exchange) | 21,634,000 | 0.63 |
| Fullgoal Fuyi Progressive Fixed-income Pension Products - Industrial and Commercial Bank of China Limited | 21,045,000 | 0.61 |
| Agricultural Bank of China Co., Ltd. - Penghua Convertible Bond Securities Investment Fund | 18,427,000 | 0.53 |
(III) Changes in convertible bonds during the reporting period
√ Applicable □Not Applicable
Unit: Yuan Currency: RMB
| Name of convertible corporate bonds | Before the change | Change | After the change | ||
| Transferred into shares | Redeemed | Put | |||
| Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | 3,450,000,000 | 26,000 | 0 | 0 | 3,449,974,000 |
| Universal Scientific Industrial (Shanghai) Co., Ltd. | 中文草稿 | ||||
Cumulative conversion of convertible bonds during the reporting period
√ Applicable □Not Applicable
| Name of convertible corporate bonds | Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 |
| Conversion amount (RMB) during the reporting period (share) | 26,000 |
| Conversion number during the reporting period (share) | 1,310 |
| Cumulative conversion number (share) | 1,310 |
| Proportion (%) of cumulative conversion number to the total number of issued shares of the Company before the conversion | 0.0001 |
| Unconverted amount (RMB) | 3,449,974,000 |
| Proportion (%) of unconverted convertible bonds to the total convertible bonds issued | 99.9992 |
(IV) Historical adjustments of conversion price
√ Applicable □Not Applicable
Unit: Yuan Currency: RMB
| Name of convertible corporate bonds | Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | |||
| Conversion price adjustment date | Adjusted conversion price | Disclosure time | Disclosure media | Particulars on conversion price adjustment |
| June 3, 2021 | 19.75 | June 1, 2021 | Shanghai Securities News, China Securities Journal, Securities Times, and Securities Daily | The implementation of the profit distribution plan for 2020 |
| The latest conversion price as of the end of the reporting period | 19.75 | |||
(V) The Company's liabilities, changes in credit and cash arrangements for debt repayment in future years
√ Applicable □Not Applicable
At the beginning of the reporting period, the Company had total assets of RMB 31.07 billion and total liabilities of RMB
19.02 billion, with the debt/asset ratio of 61.22%; at the end of the reporting period, the Company had total assets of RMB
35.86 billion and total liabilities of RMB 22.77 billion, with the debt/asset ratio of 63.51%. The Company's debt/asset ratioincreased by 2.29% over the same period of the previous year. On May 27, 2021, China Chengxin International CreditRating Co., Ltd. issued the Tracking Rating Report on Universal Scientific Industrial (Shanghai) Co., Ltd.'s Public Issuanceof Convertible Corporate Bonds (2021): The Company's main credit rating was AA+, the credit rating for USI ConvertibleBonds remained at AA+, and the rating outlook was stable. The Company adopts the method of paying interest once a year,and repays the principal and pays the interest of the last interest-bearing year at maturity.(VI) Particulars on other information of convertible bonds
□Applicable √Not Applicable
| Universal Scientific Industrial (Shanghai) Co., Ltd. | 中文草稿 | ||||
Section X Financial StatementsI. Auditor’s reportThe Company's annual financial report has been audited and given a standard unqualified opinion by Chinese CertifiedPublic Accountant Yuan Shouqing and Hu Ke of Deloitte Touche Tohmatsu Certified Public Accountants LLP.
II. Financial statements and notesPlease refer to the attached financial statements and notes for more details.
| Universal Scientific Industrial (Shanghai) Co., Ltd. | 中文草稿 | ||||
Financial Statements and Auditor's ReportFor the year ended 31 December 2021
Contents Page(s)
Auditor's report 115 - 119
Consolidated balance sheet 120 - 121
Balance sheet of the Company 122 - 123
Consolidated income statement 124
Income statement of the Company 125
Consolidated cash flow statement 126
Cash flow statement of the Company 127
Consolidated statement of changes in shareholders' equity 128 - 129
Statement of changes in shareholders' equity of the Company 130 - 131
Notes to the financial statements 132 - 258
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (22) No. P01010
(Page 1 of 5)
To the Shareholders of Universal Scientific Industrial (Shanghai) Co., Ltd.
1. Opinion
We have audited the financial statements of Universal Scientific Industrial (Shanghai) Co., Ltd. (the"Company"), which comprise the consolidated and Company's balance sheets as at 31 December 2021,and the consolidated and Company's income statements, the consolidated and Company's cash flowstatements and the consolidated and Company's statements of changes in shareholders' equity for the yearthen ended, and the notes to the financial statements.
In our opinion, the accompanying financial statements of Universal Scientific Industrial (Shanghai) Co.,Ltd. are prepared and present fairly, in all material respects, the consolidated and Company's financialposition as of 31 December 2021, and the consolidated and the Company's results of operations and cashflows for the year then ended in accordance with Accounting Standards for Business Enterprises.
2. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities underthose standards are further described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with the code ofethics for Chinese Certified Public Accountants, and we have fulfilled our other ethical responsibilities inaccordance with the Code. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in ouraudit of the financial statements of the current period. These matters were addressed in the context of ouraudit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on these matters. We determine the followings are key audit matters in need ofcommunication in our report.
AUDITOR'S REPORT - CONTINUED
De Shi Bao (Shen) Zi (22) No. P01010
(Page 2 of 5)
3. Key Audit Matters
Cut-off of Revenue Recognition
Matter Description
As set out in Notes(V)-45 to the financial statements, the Company's revenue in 2021 in theconsolidated financial statements is RMB 55,299,654,770.21, which is significant. The Company’ssales mainly include sales of goods, and the revenue is recognized at the time point when thecustomer obtains the control over the commodity. Under the terms of different sales contracts andtrade terms, the time point of the transfer of commodity control is different. As revenue is one of thekey performance indicators of the Company, and the control over various transaction models thatrevenue involves in may be transferred at different time points, there is a risk that revenue is notrecognized in the appropriate accounting period. Therefore, we consider whether revenue isrecorded in the appropriate accounting period as a key audit matter.
Audit Response
Our procedures in relation to above key audit matter mainly included:
1. Understand the Company's key internal control related to the cut-off of revenue recognition,evaluate the design and implementation of relevant internal control, and test the effectivenessof its operation;
2. Check the Company's material sales contracts, identify the contract terms and trade termsrelated to the time point of product control transfer, and evaluate whether the time point ofrevenue recognition of the Company according to the contract terms meets the provisions of theaccounting standards for business enterprises;
3. Select samples for the sales transactions recorded before and after the balance sheet date, andcheck the accounting records, delivery orders, cargo right transfer documents and othersupporting documents related to revenue recognition, so as to evaluate whether the revenue isrecorded in the appropriate accounting period.
AUDITOR'S REPORT - CONTINUED
De Shi Bao (Shen) Zi (22) No. P01010
(Page 3 of 5)
4. Other Information
The management of the Company is responsible for other information. The other information comprisesthe information included in the Company’s annual report of 2021, but does not include the financialstatements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financialstatements 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 otherinformation, we are required to report that fact. We have nothing to report in this regard.
5. Responsibilities of the Management and Those Charged with Governance for the FinancialStatements
The management of the Company is responsible for the preparation and fair presentation of the financialstatements in accordance with Accounting Standards for Business Enterprises, and designing,implementing and maintaining internal control that is necessary to enable that the financial statements arefree from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company's abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless the management either intends to liquidate the Company or tocease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
6. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion solely to you. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with China Standards on Auditing will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these financial statements.
AUDITOR'S REPORT - CONTINUED
De Shi Bao (Shen) Zi (22) No. P01010
(Page 4 of 5)
6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
As part of an audit in accordance with China Standards on Auditing, we exercise professional judgmentand maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than that resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the management.
(4) Conclude on the appropriateness of the management's use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company's ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor'sreport to the related disclosures in the financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Company to cease to continue asa going concern.
(5) Evaluate the overall presentation (including the disclosures), structure and content of the financialstatements, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
(6) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Company to express an opinion on the financial statements. We areresponsible for the direction, supervision and performance of the group audit. We remain solelyresponsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.
AUDITOR'S REPORT - CONTINUED
De Shi Bao (Shen) Zi (22) No. P01010
(Page 5 of 5)
6. Auditor's Responsibilities for the Audit of the Financial Statements - continued
From the matters communicated with those charged with governance, we determine those matters thatwere of most significance in the audit of the financial statements of the current period and are thereforethe key audit matters. We describe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when, in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant:
Shanghai, China (Engagement partner)
Yuan, Shou Qing
Chinese Certified Public Accountant:
Hu, Ke
25 March 2022
The auditor's report and the accompanying financial statements are English translations of the Chinese auditor's report andstatutory financial statements prepared under accounting principles and practices generally accepted in the People’sRepublic of China. These financial statements are not intended to present the financial position and results of operationsand cash flows in accordance with accounting principles and practices generally accepted in other countries andjurisdictions. In case the English version does not conform to the Chinese version, the Chinese version prevails.
At 31 December 2021
Consolidated Balance Sheet
Unit: RMB
| ITEM | Notes | 31/12/2021 | 31/12/2020 (Restated) |
| Current Assets: | |||
| Cash and bank balances | (V)1 | 6,034,204,042.25 | 6,332,982,117.63 |
| Held-for-trading financial assets | (V)2 | 96,480,087.56 | 182,315,272.70 |
| Notes receivable | (V)3 | 78,960,907.84 | 70,395,770.23 |
| Accounts receivable | (V)4 | 12,459,388,852.15 | 10,468,619,520.16 |
| Prepayments | (V)5 | 51,467,608.39 | 41,561,467.16 |
| Other receivables | (V)6 | 129,254,194.21 | 125,282,807.18 |
| Inventories | (V)7 | 9,037,562,662.64 | 6,765,336,245.29 |
| Non-current assets due within one year | (V)8 | 991,195.08 | 813,785.46 |
| Other current assets | (V)9 | 606,392,327.15 | 596,958,856.20 |
| Total Current Assets | 28,494,701,877.27 | 24,584,265,842.01 | |
| Non-current Assets: | |||
| Long-term receivables | (V)10 | 11,164,116.06 | 10,380,472.81 |
| Long-term equity investments | (V)11 | 542,549,818.63 | 531,527,769.52 |
| Other equity instrument investments | (V)12 | 75,957,194.28 | 41,351,831.65 |
| Other non-current financial assets | (V)13 | 236,978,820.68 | 152,935,434.70 |
| Fixed assets | (V)14 | 3,442,205,758.01 | 2,928,598,187.59 |
| Construction in progress | (V)15 | 798,015,703.22 | 431,942,421.24 |
| Right-of-use assets | (V)16 | 562,990,794.23 | 629,762,039.36 |
| Intangible assets | (V)17 | 453,460,831.12 | 504,241,510.99 |
| Goodwill | (V)18 | 559,021,157.88 | 618,094,641.27 |
| Long-term prepaid expenses | (V)19 | 227,576,284.98 | 250,549,262.26 |
| Deferred tax assets | (V)20 | 315,295,836.27 | 297,009,500.16 |
| Other non-current assets | (V)21 | 136,815,311.18 | 89,743,706.46 |
| Total Non-current Assets | 7,362,031,626.54 | 6,486,136,778.01 | |
| TOTAL ASSETS | 35,856,733,503.81 | 31,070,402,620.02 |
At 31 December 2021
Consolidated Balance Sheet – continued
Unit: RMB
| ITEM | Notes | 31/12/2021 | 31/12/2020 (Restated) |
| Current Liabilities: | |||
| Short-term borrowings | (V)22 | 2,480,500,031.68 | 375,341,430.81 |
| Derivative financial liabilities | (V)23 | 976,413.16 | 18,402,480.68 |
| Accounts payable | (V)24 | 12,558,598,243.17 | 11,835,239,734.29 |
| Contract liabilities | (V)25 | 311,988,551.56 | 300,864,893.86 |
| Employee benefits payable | (V)26 | 831,186,986.48 | 869,508,823.23 |
| Taxes payable | (V)27 | 238,676,479.75 | 179,000,709.13 |
| Other payables | (V)28 | 423,509,465.51 | 399,836,932.07 |
| Non-current liabilities due within one year | (V)29 | 720,507,781.49 | 934,981,355.04 |
| Total Current Liabilities | 17,565,943,952.80 | 14,913,176,359.11 | |
| Non-current Liabilities: | |||
| Long-term borrowings | (V)30 | 1,101,220,467.55 | 3,011,668,944.64 |
| Bonds payable | (V)31 | 3,115,505,143.28 | - |
| Lease liabilities | (V)32 | 475,125,597.24 | 534,968,764.47 |
| Long-term payables | (V)33 | 45,581,055.62 | 43,287,736.00 |
| Long-term employee benefits payable | (V)34 | 297,331,160.14 | 335,569,680.50 |
| Provisions | (V)35 | 10,046,914.77 | 11,353,780.46 |
| Deferred income | (V)36 | 59,791,942.70 | 32,724,563.92 |
| Deferred tax liabilities | (V)20 | 98,179,611.96 | 132,486,298.52 |
| Other non-current liabilities | (V)37 | 5,642,575.13 | 4,960,300.38 |
| Total Non-current Liabilities | 5,208,424,468.39 | 4,107,020,068.89 | |
| TOTAL LIABILITIES | 22,774,368,421.19 | 19,020,196,428.00 | |
| SHAREHOLDERS' EQUITY: | |||
| Share capital | (V)38 | 2,210,172,782.00 | 2,209,343,372.00 |
| Other equity instruments | (V)39 | 409,902,116.17 | - |
| Capital reserve | (V)40 | 2,242,456,606.22 | 2,180,964,177.00 |
| Less: Treasury shares | (V)41 | 341,236,339.88 | 134,707,206.58 |
| Other comprehensive income | (V)42 | (83,600,398.95) | (91,215,977.01) |
| Surplus reserve | (V)43 | 738,004,669.96 | 542,610,242.85 |
| Retained profits | (V)44 | 7,906,260,771.90 | 7,342,825,571.69 |
| Total owners' equity attributable to equity holders of the Company | 13,081,960,207.42 | 12,049,820,179.95 | |
| Minority interests | 404,875.20 | 386,012.07 | |
| TOTAL SHAREHOLDERS' EQUITY | 13,082,365,082.62 | 12,050,206,192.02 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 35,856,733,503.81 | 31,070,402,620.02 |
The accompanying notes form an integral part of these financial statements.
The financial statements on pages 6 to 144 were signed by the following:
Jeffrey Chen Tan-Yang Liu Chern Yuh-Huah
Legal Representative Chief Financial Officer Head of Accounting Department
At 31 December 2021
Balance Sheet of the Company
Unit: RMB
| ITEM | Notes | 31/12/2021 | 31/12/2020 (Restated) |
| Current Assets: | |||
| Cash and bank balances | 2,490,051,993.72 | 1,347,901,732.05 | |
| Held-for-trading financial assets | 8,624,935.00 | 1,344,484.55 | |
| Notes receivable | (XV)1 | 66,256,985.55 | 58,278,567.16 |
| Accounts receivable | (XV)2 | 3,902,440,554.02 | 3,473,614,442.75 |
| Prepayments | 4,622,731.01 | 112,463.31 | |
| Other receivables | (XV)3 | 635,383,876.68 | 12,674,360.46 |
| Inventories | 1,922,768,039.29 | 1,652,295,785.91 | |
| Other current assets | 133,024,889.75 | 210,124,342.62 | |
| Total Current Assets | 9,163,174,005.02 | 6,756,346,178.81 | |
| Non-current Assets: | |||
| Long-term equity investments | (XV)4 | 5,227,065,594.74 | 4,439,380,452.93 |
| Other non-current financial assets | 21,000,000.00 | - | |
| Fixed assets | 1,277,668,269.11 | 1,064,804,401.63 | |
| Construction in progress | 289,944,861.14 | 138,283,974.66 | |
| Right-of-use assets | 63,430,169.07 | 75,813,653.53 | |
| Intangible assets | 10,937,758.57 | 11,119,026.98 | |
| Long-term prepaid expenses | 67,180,541.49 | 48,389,460.39 | |
| Deferred tax assets | 48,694,006.86 | 25,362,680.78 | |
| Other non-current assets | 20,979,926.13 | 17,127,475.53 | |
| Total Non-current Assets | 7,026,901,127.11 | 5,820,281,126.43 | |
| TOTAL ASSETS | 16,190,075,132.13 | 12,576,627,305.24 |
At 31 December 2021
Balance Sheet of the Company - continued
Unit: RMB
| ITEM | Notes | 31/12/2021 | 31/12/2020 (Restated) |
| Current Liabilities: | |||
| Derivative financial liabilities | 43,425.46 | - | |
| Accounts payable | 4,298,264,852.06 | 4,055,255,014.35 | |
| Contract liabilities | 51,371,004.77 | 55,907,249.31 | |
| Employee benefits payable | 108,433,802.08 | 104,198,915.69 | |
| Taxes payable | 65,202,444.73 | 37,538,094.59 | |
| Other payables | 42,476,124.59 | 934,374,184.23 | |
| Non-current liabilities due within one year | 14,159,853.97 | 13,517,397.67 | |
| Total Current Liabilities | 4,579,951,507.66 | 5,200,790,855.84 | |
| Non-current Liabilities: | |||
| Bonds payable | 3,115,505,143.28 | - | |
| Lease liabilities | 56,699,264.24 | 69,076,116.12 | |
| Deferred income | 26,066,087.94 | 14,294,776.44 | |
| Other non-current liabilities | 1,035,426.50 | 2,148,500.00 | |
| Total Non-current Liabilities | 3,199,305,921.96 | 85,519,392.56 | |
| TOTAL LIABILITIES | 7,779,257,429.62 | 5,286,310,248.40 | |
| SHAREHOLDERS' EQUITY: | |||
| Share capital | 2,210,172,782.00 | 2,209,343,372.00 | |
| Other equity instruments | 409,902,116.17 | - | |
| Capital reserve | 2,302,358,003.50 | 2,240,865,574.28 | |
| Less: Treasury shares | 341,236,339.88 | 134,707,206.58 | |
| Surplus reserve | 738,004,669.96 | 542,610,242.85 | |
| Retained profits | 3,091,616,470.76 | 2,432,205,074.29 | |
| TOTAL SHAREHOLDERS' EQUITY | 8,410,817,702.51 | 7,290,317,056.84 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 16,190,075,132.13 | 12,576,627,305.24 |
For the year ended 31 December 2021
Consolidated Income Statement
Unit: RMB
| ITEM | Notes | Amount incurred in the current year | Amount incurred in the prior year (Restated) |
| I. Revenue | (V)45 | 55,299,654,770.21 | 47,696,228,222.53 |
| Less: Costs | (V)45 | 49,981,479,197.84 | 42,809,550,114.14 |
| Taxes and levies | (V)46 | 49,817,665.75 | 61,708,512.55 |
| Selling expenses | (V)47 | 311,480,902.10 | 219,892,291.75 |
| Administrative expenses | (V)48 | 1,169,173,384.77 | 1,123,158,982.65 |
| Research and development expenses | (V)49 | 1,641,398,512.61 | 1,576,363,064.48 |
| Financial expenses | (V)50 | 203,398,590.62 | 95,750,510.66 |
| Including: Interest expenses | 201,328,552.68 | 90,186,351.24 | |
| Interest income | 67,779,611.82 | 60,445,860.19 | |
| Add: Other income | (V)51 | 50,678,106.85 | 76,779,477.12 |
| Investment income | (V)52 | 111,678,979.96 | 83,440,494.33 |
| Including: Income from investments in associates and joint ventures | 22,116,497.85 | 19,752,692.15 | |
| Gains (losses) from changes in fair values | (V)53 | 44,588,222.60 | (6,272,200.14) |
| Impairment gains (losses) of credit | (V)54 | (1,706,888.48) | 7,894,930.75 |
| Impairment gains (losses) of assets | (V)55 | (18,746,153.38) | (11,792,788.58) |
| Gains (losses) from disposal of assets | (V)56 | 2,414,697.02 | 1,796,090.81 |
| II. Operating profit | 2,131,813,481.09 | 1,961,650,750.59 | |
| Add: Non-operating income | (V)57 | 19,628,576.06 | 14,978,610.83 |
| Less: Non-operating expenses | (V)58 | 12,583,134.08 | 3,066,306.86 |
| III. Total profit | 2,138,858,923.07 | 1,973,563,054.56 | |
| Less: Income tax expenses | (V)59 | 282,165,880.75 | 239,997,822.59 |
| IV. Net profit | 1,856,693,042.32 | 1,733,565,231.97 | |
| (I) Net profit classified by operating continuity: | |||
| 1. Net profit from continuing operations | 1,856,693,042.32 | 1,733,565,231.97 | |
| 2. Net profit from discontinued operations | - | - | |
| (II) Net profit classified by ownership ascription: | |||
| 1. Net profit attributable to owners of the Company | 1,857,968,074.82 | 1,739,435,448.10 | |
| 2. Profit or loss (net losses) attributable to minority interests | (1,275,032.50) | (5,870,216.13) | |
| V. Other comprehensive income, net of tax | (V)42 | 8,909,473.69 | (97,879,854.60) |
| Other comprehensive income attributable to owners of the Company, net of tax | 7,615,578.06 | (98,160,522.46) | |
| (I) Other comprehensive income that cannot be subsequently reclassified to profit or loss | 36,407,012.60 | (9,966,805.24) | |
| 1. Changes from re-measurement of defined benefit plans | 1,971,353.84 | (10,568,410.72) | |
| 2. Changes in fair values of investments in other equity instruments | 34,435,658.76 | 601,605.48 | |
| (II) Other comprehensive income that will be reclassified to profit or loss | (28,791,434.54) | (88,193,717.22) | |
| 1. Other comprehensive income that can be reclassified to profit or loss under the equity method | 7,230,128.54 | 18,090,277.18 | |
| 2. Translation differences of financial statements denominated in foreign currencies | (206,339,508.32) | 25,410,896.65 | |
| 3. Hedging reserves of net investment in foreign operations | 170,317,945.24 | (131,694,891.05) | |
| Other comprehensive income attributable to minority interests, net of tax | 1,293,895.63 | 280,667.86 | |
| VI. Total comprehensive income | 1,865,602,516.01 | 1,635,685,377.37 | |
| Total comprehensive income attributable to owners of the Company | 1,865,583,652.88 | 1,641,274,925.64 | |
| Total comprehensive income attributable to minority interests | 18,863.13 | (5,589,548.27) | |
| VII. Earnings per share | |||
| (I) Basic earnings per share | (XVI)2 | 0.85 | 0.80 |
| (II) Diluted earnings per share | (XVI)2 | 0.83 | 0.80 |
For the year ended 31 December 2021
Income Statement of the Company
Unit: RMB
| ITEM | Notes | Amount incurred in the current year | Amount incurred in the prior year (Restated) |
| I. Revenue | (XV)5 | 18,335,131,740.71 | 17,598,964,107.12 |
| Less: Costs | (XV)5 | 16,637,188,631.60 | 15,916,701,463.45 |
| Taxes and levies | 11,586,536.18 | 11,855,339.99 | |
| Selling expenses | 36,138,632.62 | 58,397,221.62 | |
| Administrative expenses | 173,389,504.17 | 160,325,958.90 | |
| Research and development expenses | 641,883,187.54 | 584,315,079.87 | |
| Financial expenses | 89,326,653.62 | (19,049,606.59) | |
| Including: Interest expenses | 116,199,066.57 | 18,390,966.24 | |
| Interest income | 41,448,876.53 | 19,159,866.33 | |
| Add: Other income | 22,684,102.57 | 14,487,455.41 | |
| Investment income | (XV)6 | 1,216,843,686.33 | 707,491,553.58 |
| Gains (losses) from changes in fair values | 14,537,089.99 | 944,484.55 | |
| Impairment gains (losses) of credit | 149,203.74 | (179,723.41) | |
| Impairment gains (losses) of assets | (3,920,601.29) | (5,885,658.10) | |
| Gains (losses) from disposal of assets | 277,783.36 | (925,848.81) | |
| II. Operating profit | 1,996,189,859.68 | 1,602,350,913.10 | |
| Add: Non-operating income | 2,715,835.51 | 1,743,218.99 | |
| Less: Non-operating expenses | 93,892.75 | 52,041.99 | |
| III. Total profit | 1,998,811,802.44 | 1,604,042,090.10 | |
| Less: Income tax expenses | 44,867,531.36 | 86,483,029.82 | |
| IV. Net profit | 1,953,944,271.08 | 1,517,559,060.28 | |
| (I) Net profit from continuing operations | 1,953,944,271.08 | 1,517,559,060.28 | |
| (II) Net profit from discontinued operations | - | - | |
| V. Other comprehensive income, net of tax | - | - | |
| VI. Total comprehensive income | 1,953,944,271.08 | 1,517,559,060.28 |
For the year ended 31 December 2021
Consolidated Cash Flow Statement
Unit: RMB
| ITEM | Notes | Amount incurred in the current year | Amount incurred in the prior year |
| I. Cash Flows from Operating Activities: | |||
| Cash receipts from the sale of goods and the rendering of services | 53,578,337,998.60 | 45,468,811,547.15 | |
| Receipts of tax refunds | 558,689,618.99 | 340,578,159.52 | |
| Other cash receipts relating to operating activities | (V)60(1) | 172,788,684.87 | 187,105,390.24 |
| Sub-total of cash inflows from operating activities | 54,309,816,302.46 | 45,996,495,096.91 | |
| Cash payments for goods purchased and services received | 50,505,722,379.91 | 40,923,196,400.49 | |
| Cash payments to and on behalf of employees | 3,856,150,432.44 | 2,717,199,681.64 | |
| Payments of various types of taxes | 419,132,561.12 | 409,820,523.85 | |
| Other cash payments relating to operating activities | (V)60(2) | 631,257,907.89 | 509,754,816.83 |
| Sub-total of cash outflows from operating activities | 55,412,263,281.36 | 44,559,971,422.81 | |
| Net Cash Flow from Operating Activities | (V)61(1) | (1,102,446,978.90) | 1,436,523,674.10 |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from disposals and recovery of investments | 6,647,452,170.32 | 9,172,427,960.13 | |
| Cash receipts from investment income | 98,129,245.61 | 64,140,453.41 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 50,849,009.78 | 19,108,054.99 | |
| Other cash receipts relating to investing activities | (V)60(3) | - | 13,522,846.50 |
| Sub-total of cash inflows from investing activities | 6,796,430,425.71 | 9,269,199,315.03 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 1,514,592,361.01 | 1,056,333,146.16 | |
| Cash payments to acquire investments | 6,723,070,803.21 | 9,243,640,394.90 | |
| Net cash payments for acquisitions of subsidiaries and other business units | (V)61(2) | 45,321,801.82 | 1,980,146,094.91 |
| Sub-total of cash outflows from investing activities | 8,282,984,966.04 | 12,280,119,635.97 | |
| Net Cash Flow from Investing Activities | (1,486,554,540.33) | (3,010,920,320.94) | |
| III. Cash Flows from Financing Activities: | |||
| Cash receipts from capital contributions | 11,406,983.00 | 67,060,849.80 | |
| Including: cash receipts from capital contributions from minority shareholders of subsidiaries | - | - | |
| Cash receipts from borrowings | 13,985,813,402.73 | 13,803,036,236.54 | |
| Cash receipts from issuing bonds | 3,427,301,047.72 | - | |
| Other cash receipts relating to financing activities | 39,236,933.03 | 23,486,155.84 | |
| Sub-total of cash inflows from financing activities | 17,463,758,366.48 | 13,893,583,242.18 | |
| Cash repayments of borrowings | 13,530,805,981.18 | 11,474,728,199.05 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 1,172,715,392.19 | 444,227,133.59 | |
| Other cash payments relating to financing activities | (V)60(4) | 368,852,689.67 | 150,150,075.22 |
| Sub-total of cash outflows from financing activities | 15,072,374,063.04 | 12,069,105,407.86 | |
| Net Cash Flow from Financing Activities | 2,391,384,303.44 | 1,824,477,834.32 | |
| IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (87,413,972.12) | (29,496,833.12) | |
| V. Net Increase (Decrease) in Cash and Cash Equivalents | (285,031,187.91) | 220,584,354.36 | |
| Add: Opening Balance of Cash and Cash Equivalents | (V)61(3) | 6,303,224,304.50 | 6,082,639,950.14 |
| VI. Closing Balance of Cash and Cash Equivalents | (V)61(3) | 6,018,193,116.59 | 6,303,224,304.50 |
For the year ended 31 December 2021
Cash Flow Statement of the Company
Unit: RMB
| ITEM | Notes | Amount incurred in the current year | Amount incurred in the prior year |
| I. Cash Flows from Operating Activities: | |||
| Cash receipts from the sale of goods and the rendering of services | 17,991,191,683.40 | 16,354,018,830.88 | |
| Receipts of tax refunds | 295,444,045.61 | 144,654,241.67 | |
| Other cash receipts relating to operating activities | 84,581,382.97 | 31,995,115.48 | |
| Sub-total of cash inflows from operating activities | 18,371,217,111.98 | 16,530,668,188.03 | |
| Cash payments for goods purchased and services received | 16,905,058,714.58 | 14,784,024,458.76 | |
| Cash payments to and on behalf of employees | 576,858,051.86 | 475,732,315.68 | |
| Payments of various types of taxes | 106,103,694.13 | 113,552,029.55 | |
| Other cash payments relating to operating activities | 189,144,854.22 | 121,869,207.26 | |
| Sub-total of cash outflows from operating activities | 17,777,165,314.79 | 15,495,178,011.25 | |
| Net Cash Flow from Operating Activities | (XV)7 | 594,051,797.19 | 1,035,490,176.78 |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from disposals and recovery of investments | 3,927,400,000.00 | 15,000,000.00 | |
| Cash receipts from investment income | 1,216,889,084.23 | 707,491,553.58 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 169,779,958.45 | 42,338,215.51 | |
| Other cash receipts relating to investing activities | - | 100,000,000.00 | |
| Sub-total of cash inflows from investing activities | 5,314,069,042.68 | 864,829,769.09 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 635,551,425.24 | 788,916,610.61 | |
| Cash payments to acquire investments | 4,694,086,300.00 | 765,242,490.67 | |
| Net cash payments for acquisitions of subsidiaries and other business units | 631,413,000.00 | - | |
| Sub-total of cash outflows from investing activities | 5,961,050,725.24 | 1,554,159,101.28 | |
| Net Cash Flow from Investing Activities | (646,981,682.56) | (689,329,332.19) | |
| III. Cash Flows from Financing Activities: | |||
| Cash receipts from capital contributions | 11,406,983.00 | 67,060,849.80 | |
| Cash receipts from borrowings | 1,989,243,101.73 | 3,407,214,816.84 | |
| Cash receipts from issuance of bonds | 3,427,301,047.72 | - | |
| Other cash receipts relating to financing activities | 22,515,886.36 | 16,859,099.00 | |
| Sub-total of cash inflows from financing activities | 5,450,467,018.81 | 3,491,134,765.64 | |
| Cash repayments of borrowings | 2,869,866,674.48 | 3,040,310,216.03 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 1,111,561,940.64 | 391,543,142.44 | |
| Other cash payments relating to financing activities | 247,108,961.01 | 19,931,490.47 | |
| Sub-total of cash outflows from financing activities | 4,228,537,576.13 | 3,451,784,848.94 | |
| Net Cash Flow from Financing Activities | 1,221,929,442.68 | 39,349,916.70 | |
| IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (26,849,295.64) | (13,418,485.16) | |
| V. Net Increase in Cash and Cash Equivalents | 1,142,150,261.67 | 372,092,276.13 | |
| Add: Opening Balance of Cash and Cash Equivalents | 1,347,901,732.05 | 975,809,455.92 | |
| VI. Closing Balance of Cash and Cash Equivalents | 2,490,051,993.72 | 1,347,901,732.05 |
For the year ended 31 December 2021
Consolidated Statement of Changes in Shareholders' Equity
Unit: RMB
| ITEM | 2021 | ||||||||
| Attributable to owners of the Company | Minority interests | Total shareholders' equity | |||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Closing balance of the preceding year | 2,209,343,372.00 | 2,180,964,177.00 | (134,707,206.58) | (91,215,977.01) | 542,610,242.85 | 7,342,825,571.69 | (978,434.26) | 12,048,841,745.69 | |
| Add: Business combinations not involving enterprises under common control (Note V, 18) | - | - | - | - | - | - | - | 1,364,446.33 | 1,364,446.33 |
| II. Opening balance of the current year (Restated) | 2,209,343,372.00 | - | 2,180,964,177.00 | (134,707,206.58) | (91,215,977.01) | 542,610,242.85 | 7,342,825,571.69 | 386,012.07 | 12,050,206,192.02 |
| III. Changes for the year | |||||||||
| (I) Total other comprehensive income | - | - | - | - | 7,615,578.06 | - | 1,857,968,074.82 | 18,863.13 | 1,865,602,516.01 |
| (II) Owners’ contributions and reduction in capital | |||||||||
| 1. Ordinary shares contributed by shareholders (Note V, 38) | 828,100.00 | - | 10,578,883.00 | - | - | - | - | - | 11,406,983.00 |
| 2. Capital contribution by owners of other equity instruments (Note V, 38) | 1,310.00 | 409,902,116.17 | 25,033.02 | - | - | - | - | - | 409,928,459.19 |
| 3. Share-based payment recognized in shareholders' equity (Note V, 40) | - | - | 52,875,000.00 | - | - | - | - | - | 52,875,000.00 |
| 4. Transfer from treasury shares (Note V, 41) | - | - | (1,986,486.80) | 24,502,373.16 | - | - | - | - | 22,515,886.36 |
| 5. Others (Note V, 41) | - | - | (231,031,506.46) | - | - | - | - | (231,031,506.46) | |
| (III) Profit distribution | |||||||||
| 1. Transfer to surplus reserve | - | - | - | - | - | 195,394,427.11 | (195,394,427.11) | - | - |
| 2. Distributions to shareholders | - | - | - | - | - | - | (1,099,138,447.50) | - | (1,099,138,447.50) |
| IV. Closing balance of the current year | 2,210,172,782.00 | 409,902,116.17 | 2,242,456,606.22 | (341,236,339.88) | (83,600,398.95) | 738,004,669.96 | 7,906,260,771.90 | 404,875.20 | 13,082,365,082.62 |
For the year ended 31 December 2021
Consolidated Statement of Changes in Shareholders' Equity - continued
Unit: RMB
| ITEM | 2020 (Restated) | |||||||
| Attributable to owners of the Company | Minority interests | Total shareholders' equity | ||||||
| Share capital | Capital reserve | Less: Treasury shares | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Opening balance | 2,179,088,030.00 | 1,719,118,051.70 | (154,978,351.25) | 6,944,545.45 | 390,854,336.82 | 6,134,589,055.19 | 31,244,571.54 | 10,306,860,239.45 |
| II. Changes for the year | ||||||||
| (I) Total other comprehensive income | - | - | - | (98,160,522.46) | - | 1,739,435,448.10 | (5,589,548.27) | 1,635,685,377.37 |
| (II) Owners’ contributions and reduction in capital | ||||||||
| 1. Ordinary shares contributed by shareholders | 30,255,342.00 | 424,877,744.65 | - | - | - | - | - | 455,133,086.65 |
| 2. Share-based payment recognized in shareholders' equity | - | 44,786,016.39 | - | - | - | - | - | 44,786,016.39 |
| 3. Transfer from treasury shares | - | (3,412,045.67) | 20,271,144.67 | - | - | - | - | 16,859,099.00 |
| 4. Purchase of minority interests | - | (4,405,590.07) | - | - | - | - | (25,355,724.00) | (29,761,314.07) |
| 5. Business combination (Restated) | - | - | - | - | - | - | 86,712.80 | 86,712.80 |
| (III) Profit distribution | ||||||||
| 1. Transfer to surplus reserve | - | - | - | - | 151,755,906.03 | (151,755,906.03) | - | - |
| 2. Distributions to shareholders | - | - | - | - | - | (379,443,025.57) | - | (379,443,025.57) |
| III. Closing balance of the current year (Restated) | 2,209,343,372.00 | 2,180,964,177.00 | (134,707,206.58) | (91,215,977.01) | 542,610,242.85 | 7,342,825,571.69 | 386,012.07 | 12,050,206,192.02 |
Universal Scientific Industrial (Shanghai) Co., Ltd.
For the year ended 31 December 2021
Statement of Changes in Shareholders' Equity of the Company
Unit: RMB
| 2021 | |||||||
| ITEM | Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Surplus reserve | Retained profits | Total shareholders' equity |
| I. Opening balance of the current year | 2,209,343,372.00 | - | 2,240,865,574.28 | (134,707,206.58) | 542,610,242.85 | 2,432,205,074.29 | 7,290,317,056.84 |
| II. Changes for the year | |||||||
| (I) Total other comprehensive income | - | - | - | - | - | 1,953,944,271.08 | 1,953,944,271.08 |
| (II) Owners’ contributions and reduction in capital | |||||||
| 1. Ordinary shares contributed by shareholders | 828,100.00 | - | 10,578,883.00 | - | - | - | 11,406,983.00 |
| 2. Capital contribution by owners of other equity instruments | 1,310.00 | 409,902,116.17 | 25,033.02 | - | - | - | 409,928,459.19 |
| 3. Share-based payment recognized in shareholders' equity | - | - | 52,875,000.00 | - | - | - | 52,875,000.00 |
| 4. Transfer from treasury shares | - | - | (1,986,486.80) | 24,502,373.16 | - | - | 22,515,886.36 |
| 5. Others | - | - | - | (231,031,506.46) | - | - | (231,031,506.46) |
| (III) Profit distribution | |||||||
| 1. Transfer to surplus reserve | - | - | - | - | 195,394,427.11 | (195,394,427.11) | - |
| 2. Distributions to shareholders | - | - | - | - | - | (1,099,138,447.50) | (1,099,138,447.50) |
| III. Closing balance of the current year | 2,210,172,782.00 | 409,902,116.17 | 2,302,358,003.50 | (341,236,339.88) | 738,004,669.96 | 3,091,616,470.76 | 8,410,817,702.51 |
Universal Scientific Industrial (Shanghai) Co., Ltd.
For the year ended 31 December 2021
Statement of Changes in Owners’ Equity of the Company - continued
Unit: RMB
| 2020 | ||||||
| ITEM | Share capital | Capital reserve | Less: Treasury shares | Surplus reserve | Retained profits | Total shareholders' equity |
| I. Opening balance of the current year | 2,179,088,030.00 | 1,774,632,757.86 | (154,978,351.25) | 390,854,336.82 | 1,445,844,945.61 | 5,635,441,719.04 |
| II. Changes for the year | ||||||
| (I) Total other comprehensive income | - | - | - | - | 1,517,559,060.28 | 1,517,559,060.28 |
| (II) Owners’ contributions and reduction in capital | ||||||
| 1. Ordinary shares contributed by shareholders | 30,255,342.00 | 424,877,744.65 | - | - | - | 455,133,086.65 |
| 2. Share-based payment recognized in shareholders' equity | - | 44,767,117.44 | - | - | - | 44,767,117.44 |
| 3. Transfer from treasury shares | - | (3,412,045.67) | 20,271,144.67 | 16,859,099.00 | ||
| (III) Profit distribution | ||||||
| 1. Transfer to surplus reserve | - | - | - | 151,755,906.03 | (151,755,906.03) | - |
| 2. Distributions to shareholders | - | - | - | - | (379,443,025.57) | (379,443,025.57) |
| III. Closing balance of the current year | 2,209,343,372.00 | 2,240,865,574.28 | (134,707,206.58) | 542,610,242.85 | 2,432,205,074.29 | 7,290,317,056.84 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(I) BASIC INFORMATION ABOUT THE COMPANY
Universal Scientific Industrial (Shanghai) Co., Ltd. (环旭电子股份有限公司) ("Company" or "the Company")is a joint-stock limited company changed from Universal Scientific Industrial (Shanghai) Co., Ltd. (环旭电子(上海)有限公司) (the "Limited Company") on an overall basis.
The Limited Company is a foreign-funded enterprise invested and established in Zhangjiang Integrated CircuitPort, Pudong New District, Shanghai on 2 January 2003.
On 17 June 2008, the Limited Company was approved to be changed into a foreign-invested joint-stockcompany and renamed as Universal Scientific Industrial (Shanghai) Co., Ltd. (环旭电子股份有限公司) inaccordance with the Official Reply (Shang Zi Pi No. [2008] 654) of the Ministry of Commerce of the People’sRepublic of China. As of 31 December 2021, the registered capital of the Company was RMB 2,209,609,072.00.
The Company was listed on the Shanghai Stock Exchange in February 2012 and publicly issued Class AOrdinary shares in RMB in China.
The Company is headquartered in Shanghai, the People’s Republic of China, which is mainly engaged inproviding design and manufacturing services (DMS) for electronic products, designing, producing andprocessing new electronic components, high-performance motherboard for computers, wireless networkcommunication components, mobile communication products and modules, spare parts, repairing the aboveproducts, selling self-produced products, and providing relevant technical consulting services; wholesale, importand export of electronic products, communication products and related spare parts, and providing relevantsupporting services. See Notes (VII), 1 for the business nature of the Company's subsidiaries.
The Company's and consolidated financial statements were approved by the board of directors of the Companyand authorized for issue on 25 March 2022.
The details of scope of the consolidated financial statements for the year are set out in Note (VII) "Interests inOther Entities". The change of the consolidated financial statements mainly lay in more subsidiaries of theCompany in the current year, please refer to Note (VI) "Changes in Scope of Consolidation" for more details.
(II) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Basis of preparation
The Company and its subsidiaries (collectively referred to as the "Group") have adopted the AccountingStandards for Business Enterprises ("ASBE") and relative regulations issued by the Ministry of Finance("MoF"). In addition, the Group has disclosed relevant financial information in accordance with InformationDisclosure and Presentation Rules for Companies Offering Securities to the Public No. 15 - General Provisionson Financial Reporting (Revised in 2014).
Going concern
The Group assessed its ability to continue as a going concern for the 12 months from 31 December 2021 anddid not notice any events or circumstances that may cast significant doubt upon its ability to continue as a goingconcern. Therefore, the financial statements have been prepared on a going concern basis.
Basis of accounting and principle of measurement
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which aremeasured at fair value, the Group adopts the historical cost as the principle of measurement in the financialstatements. Where assets are impaired, provisions for asset impairment are made in accordance with relevantrequirements.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(II) BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued
Basis of accounting and principle of measurement – continued
Where the historical cost is adopted as the measurement basis, assets are recorded at the amount of cash andcash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition.Liabilities are recorded at the amount of proceeds or assets received or the contractual amounts for assumingthe present obligation, or, at the amounts of cash and cash equivalents expected to be paid to settle the liabilitiesin the normal course of business.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurements date, regardless of whether that price is directlyobservable or estimated using valuation technique. Fair value measurement and disclosure in the financialstatements are determined according to the above basis.
The capacity of market participants to realize the maximum profit of non-financial assets, or the capacity ofother participants who acquired non-financial assets to realize the maximum profit will be considered whenmeasuring fair values of such non-financial assets.
For a financial asset taking the transaction price as its fair value on initial recognition and using valuationtechniques involving unobservable inputs in subsequent measurement of fair value, such valuation technique iscorrected in the valuation process, as to ensure that the initial recognition result determined by valuationtechniques is equal to the transaction price.
Fair value measurements are categorized into Level 1, 2 or 3 based on degree to which the inputs to the fairvalue measurements are observable and the significance of the inputs to the fair value measurement in itsentirety, which are described as follows:
? Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that theentity can access at the measurement date;? Level 2 inputs are inputs, other than inputs within Level 1, that are observable for the asset or liability? Level 3 inputs are unobservable inputs for the asset or liability.
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of compliance with the ASBE
The financial statements of the Company have been prepared in accordance with ASBE, and present truly andcompletely, the Company's and consolidated financial position as of 31 December 2021, and the Company's andconsolidated results of operations, changes in the shareholders' equity and cash flows for the year then ended.
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
3. Operating cycle
An operating cycle refers to the period since when an enterprise purchases assets for processing purpose till therealization of those assets in cash or cash equivalents. The Group's operating cycle is less than 12 months, andthe Group takes 12 months as the criteria for determining liquidity of assets and liabilities.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
4. Functional currency
Renminbi (“RMB”) is the currency of the primary economic environment in which the Company and itsdomestic subsidiaries operate. Therefore, the Company chooses RMB as its functional currency, while itsdomestic subsidiaries adopts RMB as their functional currency except those adopt USD as their functionalcurrency as their sales of goods, purchase of raw materials and other expenses are settled in USD and theirfinancing is made in USD. The Company's foreign subsidiary chooses USD, JYP, TWD, PLN, EUR or TND asits functional currency on the basis of the primary economic environment in which it operates. The Groupadopts RMB to prepare its financial statements.
5. The accounting treatment of business combinations involving enterprises under common control andbusiness combinations not involving enterprises under common control
5.1 Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business combination in which allof the combining enterprises are not ultimately controlled by the same party or parties before and after thecombination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilitiesincurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquire. Theintermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancyservices, etc. and other associated administrative expenses attributable to the business combination arerecognized in profit or loss when they are incurred.
The acquiree's identifiable assets, liabilities and contingent liabilities, acquired by the acquirer in a businesscombination, that meet the recognition criteria shall be measured at fair value at the acquisition date.
When the business combination contract provides that, upon the occurrence of multiple future contingencies,the acquirer shall pay an additional or request for recovery of part of the previously paid consideration for thecombination, such contingent consideration as set out in the contract shall be recognized as a liability or assetby the Group as a part of the aggregate consideration transferred in the business combination, and be includedin the cost of combination at the fair value at the acquisition date. Within twelve months after the acquisition, ifthe contingent consideration needs to be adjusted as new or further evidences are obtained in respect ofcircumstances existed as of the acquisition date, the amount preciously included in the goodwill shall beadjusted. A change in or adjustment to the contingent consideration under other circumstances shall bemeasured in accordance with the Accounting Standards for Business Enterprises No. 22 – FinancialInstruments: Recognition and Measurement and the Accounting Standards for Business Enterprises No. 13 –Contingencies. Any change or adjustment is included in profit or loss for the current period].
Where the cost of combination exceeds the acquirer's interest in the fair value of the acquiree's identifiable netassets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on initialrecognition. Where the cost of combination is less than the acquirer's interest in the fair value of the acquiree'sidentifiable net assets, the acquirer firstly reassesses the measurement of the fair values of the acquiree'sidentifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after thatreassessment, the cost of combination is still less than the acquirer's interest in the fair value of the acquiree'sidentifiable net assets, the acquirer recognizes the remaining difference immediately in profit or loss for thecurrent period.
If either the fair values of identifiable assets, liabilities and contingent liabilities acquired in a combination orthe cost of business combination can be determined only provisionally by the end of the period in which thebusiness combination was effected, the acquirer recognizes and measures the combination using thoseprovisional values. Any adjustments to those provisional values within twelve months after the acquisition dateare treated as if they had been recognized and measured on the acquisition date.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and ispresented separately in the consolidated financial statements.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
6. Preparation of consolidated financial statements
6.1 Preparation of consolidated financial statements
The scope of consolidation in the consolidated financial statements is determined on the basis of control.Control is the power over the investee, exposures or rights to variable returns from its involvement with theinvestee, and the ability to use its power over the investee to affect the amount of the investor's returns. Ifchanges of related facts and situations lead to changes of related elements of control, the Group will conductreassessment.
The combination of subsidiaries begins with the Group's control over the subsidiary, and ceases with theGroup's losing control of the subsidiary.
For a subsidiary disposed by the Group, the operating results and cash flows before the date of disposal (the datewhen control is lost) are included in the consolidated income statement and consolidated statement of cashflows, as appropriate.
For a subsidiary acquired through a business combination not involving enterprises under common control[orthe combined party under combination by merge, the operating results and cash flows from the acquisition date(the date when control is obtained) are included in the consolidated income statement and consolidatedstatement of cash flows, as appropriate.
No matter when the business combination occurs in the reporting period, subsidiaries acquired through abusiness combination involving enterprises under common control are included in the Group's scope ofconsolidation as if they had been included in the scope of consolidation from the date when they first cameunder the common control of the ultimate controlling party. Their operating results and cash flows from thebeginning of the earliest reporting period or from the date when they first came under the common control ofthe ultimate controlling party are included in the consolidated income statement and consolidated statement ofcash flows, as appropriate.
The significant accounting policies and accounting periods adopted by the subsidiaries are determined based onthe uniform accounting policies and accounting periods set out by the Company.
Influence over the consolidated financial statements arising from significant intra-group transactions areeliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority interests andpresented as "minority interests" in the consolidated balance sheet within shareholders' equity. The portion ofnet profits or losses of subsidiaries for the period attributable to minority interests is presented as "Profit or lossattributable to minority interests" in the consolidated income statement below the "net profit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds theminority shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount isstill allocated against minority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of controlover the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests andminority interests are adjusted to reflect the changes in their relative interests in the subsidiary. The differencebetween the amount by which the minority interests are adjusted and the fair value of the consideration paid orreceived is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb thedifference, the excess are adjusted against retained profits.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
7. Classification of joint arrangements and accounting treatments of joint operations
A joint arrangement is classified into joint operation and joint venture, depending on the rights and obligationsof the parties to the arrangement, which is assessed by considering the structure and the legal form of thearrangement, the terms agreed by the parties in the contractual arrangement and, when relevant, other facts andcircumstances. A joint operation is a joint arrangement whereby the parties that have joint control of thearrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A jointventure is a joint arrangement whereby the parties that have joint control of the arrangement have rights to thenet assets of the joint arrangement.
The Group accounts for investments in joint ventures using equity method. Refer to Note (III) 13.3.2 "Long-term equity investments accounted for using the equity method" for details.
8. Recognition criteria of cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are theGroup's short-term (generally refers to expiration within three months from the date of purchase), highly liquidinvestments that are readily convertible to known amounts of cash and which are subject to an insignificant riskof changes in value.
9. Translation of transactions and financial statements denominated in foreign currencies
9.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying an exchange rate thatapproximates the actual spot exchange rate on the date of transaction. The exchange rate that approximates theactual spot exchange rate on the date of transaction is calculated and determined according to the middle priceof the market exchange rate at the beginning of the month in which the transaction occurs.
At the balance sheet date, foreign currency monetary items are translated into functional currency using the spotexchange rates at the balance sheet date. Exchange differences arising from the differences between the spotexchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balancesheet date are recognized in profit or loss for the period, except that (1) exchange differences related to aspecific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized aspart of the cost of the qualifying asset during the capitalization period; (2) exchange differences related tohedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedgeaccounting; (3) exchange differences arising from changes in the carrying amounts (other than the amortizedcost) of monetary items at fair value through other comprehensive income are recognized as othercomprehensive income.
When the consolidated financial statements include foreign operation(s), if there is foreign currency monetaryitem constituting a net investment in a foreign operation, exchange difference arising from changes in exchangerates are recognized as "exchange differences arising on translation of financial statements denominated inforeign currencies " in other comprehensive income, and in profit and loss for the period upon disposal of theforeign operation.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functionalcurrency at the spot exchange rates on the dates of the transactions and the amounts in functional currencyremain unchanged. Foreign currency non-monetary items measured at fair value are re-translated at the spotexchange rate on the date the fair value is determined. Difference between the re-translated functional currencyamount and the original functional currency amount is treated as changes in fair value (including changes ofexchange rate) and is recognized in profit and loss or as other comprehensive income.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
9 Translation of transactions and financial statements denominated in foreign currencies – continued
9.2 Translation of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreign operationare translated from the foreign currency into RMB using the following method: assets and liabilities on thebalance sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equityitems are translated at the spot exchange rates at the dates on which such items arose; all items in the incomestatement as well as items reflecting the distribution of profits are translated at an exchange rates thatapproximate the actual spot exchange rates on the dates of the transactions; The difference between thetranslated assets and the aggregate of liabilities and shareholders' equity items is recognized as othercomprehensive income and included in shareholders' equity.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreign subsidiary aretranslated at an exchange rate which approximates the spot exchange rate on the date of the cash flows. Theeffect of exchange rate changes on cash and cash equivalents is regarded as a reconciling item and presentedseparately in the cash flow statement as "effect of exchange rate changes on cash and cash equivalents".
The closing balances and the actual amounts of previous year are presented at the translated amounts in theprevious year's financial statements.
On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreign operation dueto disposal of certain equity investments or other reasons, the Group transfers the accumulated exchange differencesarising on translation of financial statements of this foreign operation attributable to the owners' equity of theCompany and presented under owners' equity, to profit or loss in the period in which the disposal occurs.
In case of a disposal of part equity investments or other reason leading to lower interest percentage in foreignoperations but does not result in the Group's losing control over a foreign operation, the proportionate share ofaccumulated exchange differences arising on translation of financial statements are re-attributed to minority interestsand are not recognized in profit and loss. For partial disposals of equity interests in foreign operations which areassociates or joint ventures, the proportionate share of the accumulated exchange differences arising on translation offinancial statements of foreign operations is reclassified to profit or loss.
10. Financial instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractualprovisions of the instrument. Financial assets and financial liabilities are initially measured at fair value.
For financial assets purchased or sold in a regular way, the Group recognizes assets acquired and liabilitiesassumed on a trade date basis, or derecognizes the assets sold on a trade date basis.
The Group recognizes a financial asset or a financial liability when it becomes a party to the contractualprovisions of a financial instrument.
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.
Financial assets and financial liabilities are initially measured at fair value. For financial assets and financialliabilities at fair value through profit or loss, relevant transaction costs are directly recognized in profit or loss;transaction costs relating to other categories of financial assets and financial liabilities are included in the valueinitially recognized. For accounts receivable recognized that do not contain a significant financing componentor a financing component included in the contracts less than one year which are not considered by the Group,which are within the scope of Accounting Standards for Business Enterprises No.14 - Revenue (hereinafterreferred to as "revenue standards"), transaction prices defined in the standards shall be adopted on initialrecognition.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
The effective interest method is a method that is used in the calculation of the amortized cost of a financial assetor a financial liability and in the allocation of the interest income or interest expense in profit or loss over therelevant period.
The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected lifeof the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortizedcost of a financial liability. When calculating the effective interest rate, the Group estimates future cash flowsby considering all the contractual terms of the financial asset or financial liability (for example, prepayment,extension, call option or similar options) but shall not consider the expected credit losses.
The amortized cost of a financial asset or a financial liability is the amount of a financial asset or a financialliability initially recognized net of principal repaid, plus or less the cumulative amortized amount arising fromamortization of the difference between the amount initially recognized and the amount at the maturity date usingthe effective interest method, net of cumulative credit loss allowance (only applicable to financial assets).
10.1 Classification, recognition and measurement of financial assets
Subsequent to initial recognition, the Group's financial assets of various categories are subsequently measuredat amortized cost, at fair value through other comprehensive income or at fair value through profit or loss.
If contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding, and the financial asset is held within a businessmodel whose objective is to hold financial assets in order to collect contractual cash flows, such asset isclassified into financial assets measured at amortized cost, which include cash and bank balances, notesreceivable, accounts receivable, other receivables, non-current assets due within one year and long-termreceivables and etc.
Financial assets are subsequently measured at fair value through other comprehensive income ("FVOCI") when
(1) the financial asset is held within a business model whose objective is achieved by both collecting contractualcash flows and selling; and (2) the contractual terms give rise on specified dates to cash flows that are solelypayments of principal and interest on the principal amount outstanding. Such financial assets due over one yearsince acquisition are presented as other debt investments. Other debt investments due within one year (inclusive)since the balance sheet date are presented as non-current assets due within one year. Accounts receivable andnotes receivable at FVTOCI since acquisition are presented as factoring with receivables, other items due withinone year (inclusive) are presented as other current assets.
On initial recognition, the Group may irrevocably designate non-trading equity instruments, other thancontingent consideration recognized through business combination not involving enterprises under commoncontrol, as financial assets at FVTOCI on an individual basis. Such financial assets at FVTOCI are presented asother equity instrument.
A financial asset is classified as held-for-trading if one of the following conditions is satisfied:
22.? It has been acquired principally for the purpose of selling in the near term; or
? On initial recognition it is part of a portfolio of identified financial instruments that the Group manages togetherand there is objective evidence that the Group has a recent actual pattern of short-term profit-taking; or
? It is a derivative that is not a financial guarantee contract or designated and effective as a hedging instrument.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.1 Classification, recognition and measurement of financial assets - continued
Financial assets measured at fair value through profit or loss ("FVTPL") include those classified as financialassets at FVTPL and those designated as financial assets at FVTPL.
? Any financial assets that does not qualify for amortized cost measurement or measurement at FVTOCI ordesignated at FVTOCI are classified into financial assets at FVTPL.
? Upon initial recognition, in order to eliminate or significantly reduce accounting mismatch and qualified hybrid
financial instrument combines financial asset with embedded derivatives, the Group will irrevocably designated itas financial liabilities at FVTPL.
Financial assets at FVTPL assets other than derivative financial assets are presented as "held-for-tradingfinancial assets". Such financial assets at FVTPL which may fall due more than one year (or without fixed term)since the balance sheet date and will be held more than one year are presented as other non-current financialassets.
10.1.1 Financial assets measured at amortized cost
The financial assets measured at amortized cost are subsequently measured at amortized cost using the effectiveinterest method. Gain or loss arising from impairment or derecognition is recognized in profit or loss.
The Group recognizes interest income from financial assets classified as financial assets at amortized cost usingthe effective interest method. The Group calculates and recognizes interest income through account balance offinancial assets multiplying effective interest, except for the following circumstances:
? For purchased or originated credit-impaired financial assets, the Group calculates and recognizes itsinterest income based on amortized cost of the financial asset and the effective interest through creditadjustment since initial recognition.23.? For purchased or originated financial assets without credit impairment incurred while with credit
impairment incurred in subsequent periods, the Group calculates and recognizes its interest incomebased on amortized cost of the financial asset and the effective interest in subsequent periods. If thecredit risk of the financial asset is reduced during subsequent periods and credit impairment does notexist, and the improvement can be related to an event occurring after application of aforesaidprovisions, the Group shall calculate and recognize interest income through account balance offinancial assets multiplying effective interest.
10.1.2 Financial assets at FVTOCI
Impairment losses or gains related to financial assets at FVTOCI, interest income measured using effectiveinterest method and exchange gains or losses are recognized into profit or loss for the current period, except forthe above circumstances, changes in fair value of the financial assets are included in other comprehensiveincome. Amounts charged to profit or loss for every period equal to the amount charged to profit or loss as it ismeasured at amortized costs. When the financial asset is derecognized, the cumulative gains or lossespreviously recognized in other comprehensive income shall be removed from other comprehensive income andrecognized in profit or loss.
Changes in fair value of non-trading equity instrument investments designated as financial assets at FVTOCIare recognized in other comprehensive income, and the cumulative gains or losses previously recognized inother comprehensive income allocated to the part derecognized are transferred and included in retained earnings.During the period in which the Group holds the non-trading equity instrument, revenue from dividends isrecognized in profit or loss for the current period when (1) the Group has established the right of collecting
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
dividends; (2) it is probable that the associated economic benefits will flow to the Group; and (3) the amount ofdividends can be measured reliably.
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.1 Classification, recognition and measurement of financial assets - continued
10.1.3 Financial assets at FVTPL
Financial assets at FVTPL are subsequently measured at fair value. Gain or loss arising from changes in fairvalues and dividends and interests related to the financial assets are recognized in profit or loss.
10.2 Impairment of financial instruments
The Group makes accounting treatment on impairment and recognizes loss allowance for expected credit losses("ECL") on financial assets measured at amortized cost, financial assets classified as at FVTOCI and leasereceivables.
The Group makes a loss allowance against amount of lifetime ECL of notes receivable and accounts receivablearising from transactions adopting the Revenue Standard as well as lease receivables arising from transactionsadopting ASBE No. 21- Leases.
For other financial instruments, except for the purchased or originated credit-impaired financial assets, at eachbalance sheet date, the Group assess changes in credit risk of relevant financial instruments since initialrecognition. If the credit risk of the above financial instruments has increased significantly since initialrecognition, the Group measures loss allowance based on the amount of full lifetime; if credit risk of thefinancial instrument has not increased significantly since initial recognition, the Group recognizes lossallowance based on 12-month ECL of the financial instrument. Increase in or reversal of credit loss allowance isincluded in profit or loss as loss/gain on impairment, except for financial assets classified as at fair valuethrough other comprehensive income. For the financial assets classified as at FVTOCI, the Group recognizescredit loss allowance in other comprehensive income and recognizes the loss/gain on impairment in profit orloss, while the Group does not decrease the carrying amount of such financial assets in the balance sheet.
In the previous accounting period, the Group has measured the loss allowance according to the amount of ECLfor the entire period of the financial instrument, but on the current balance sheet date, the financial instrument isno longer a significant increase in credit risk since the initial recognition. The Group measures the lossallowance for the financial instrument on the balance sheet date based on the amount of ECL in the next 12months. The reversal amount of the loss allowance formed is recognized in profit and loss for the period as animpairment gain.
10.2.1 Significant increase of credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group compares therisk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurringon the financial instrument as at the date of initial recognition.
In particular, the following information is taken into account when assessing whether credit risk has increasedsignificantly:
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.2 Impairment of financial instruments - continued
10.2.1 Significant increase of credit risk - continued
(1) Significant changes in internal price indicators of credit risk as a result of a change in credit risk;
(2) Significant changes in external market indicators of credit risk for a particular financial instrument orsimilar financial instruments with the same expected life. These indicators include the credit spread, thecredit swap prices for the borrower, the length of time or the extent to which the fair value of a financialasset has been less than its amortized cost and other market information related to the borrower, such aschanges in the price of a borrower's debt and equity instruments.
(3) Significant changes in actual or expected external credit rating for the financial instruments;
(4) An actual or expected internal credit rating downgrade for the borrower
(5) Adverse changes in business, financial or economic conditions that are expected to cause a significantchange in the debtor's ability to meet its debt obligations;
(6) An actual or expected significant change in the operating results of the debtor;
(7) Significant adverse change in the regulatory, economic, or technological environment of the debtor;
(8) Significant changes in circumstances expected to reduce the debtor's economic incentive to make
scheduled contractual payments;
(9) Significant changes in the expected performance and behavior of the debtor;
(10) Changes in the entity's credit management approach in relation to the financial instrument;
No matter whether credit risk has increased significantly or not subsequent to aforementioned assessment, theGroup considers credit risk of financial instruments has increased significantly when contractual payments offinancial instruments past due over 30 days (inclusive).
The Group assumes that the credit risk on a financial instrument has not increased significantly since initialrecognition if the financial instrument is determined to have lower credit risk at the balance sheet date. Afinancial instrument is determined to have lower credit risk if: i) it has a lower risk of default, ii) the borrowerhas a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes ineconomic and business conditions in the longer term may, but will not necessarily, reduce the ability of theborrower to fulfil its contractual cash flow obligations.
10.2.2 Credit-impaired financial assets
When the Group expected occurrence of one or more events which may cause adverse impact on future cashflows of a financial asset, the financial asset will become a credit-impaired financial assets. Objective evidencethat a financial asset is impaired includes but not limited to the following observable events:
(1) Significant financial difficulty of the issuer or debtor;
(2) A breach of contract by the debtor, such as a default or delinquency in interest or principal payments;
(3) The creditor, for economic or legal reasons relating to the debtor's financial difficulty, granting aconcession to the debtor;
(4) It becoming probable that the debtor will enter bankruptcy or other financial reorganizations;
(5) Purchase or originate a financial asset with a large scale of discount, which reflects facts of credit lossincurred.
Whatever the aforementioned assessment results are, the Group presumes that the financial instruments hasdefaulted when contractual payments of financial instruments past due over 90 days (inclusive).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.2 Impairment of financial instruments - continued
10.2.3 Determination of expected credit loss
Lease receivables are assessed for ECL individually by the Group. In addition, the Group uses provision matrixto calculate ECL for notes receivable and accounts receivable based on aging. According to the Group'sassessment of the credit risk of accounts receivable, the aging information can reflect the customer's ability ofrepayment at the maturity of accounts receivable.
For other receivables, the credit loss of relevant financial instruments shall be determined on a portfolio basis inaddition to those individually significant. The Group classifies financial instruments into different groups basedon common risk characteristics. Common credit risk characteristics include the date of initial recognition,remaining contractual maturity, etc.
The Group determines expected credit losses of relevant financial instruments using the following methods:
? For a financial asset, a credit loss is the present value of the difference between the contractual cashflows that are due to the Group under the contract and the cash flows that the Group expects to receive;? For a lease receivable, a credit loss is the present value of the difference between the contractual cash
flows that are due to the Group under the contract and the cash flows that the Group expects to receive;? For a financial asset with credit-impaired at the balance sheet date, but not purchased or originatedcredit-impaired, a credit losses is the difference between the asset's gross carrying amount and thepresent value of estimated future cash flows discounted at the financial asset's original effective interestrate.
The factors reflected in methods of measurement of expected credit losses include an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; time value of money;reasonable and supportable information about past events, current conditions and forecasts on future economicstatus at balance sheet date without unnecessary additional costs or efforts.
10.2.4 Write-down of financial assets
When the Group will no longer reasonably expect that the contractual cash flows of financial assets can becollected in aggregate or in part, the Group will directly write down the carrying amount of the financial asset,which constitutes derecognition of relevant financial assets.
10.3 Transfer of financial assets
The Group will derecognize a financial asset if one of the following conditions is satisfied: (i) the contractualrights to the cash flows from the financial asset expire; (ii) the financial asset has been transferred andsubstantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or (iii)although the financial asset has been transferred, the Group neither transfers nor retains substantially all therisks and rewards of ownership of the financial asset but has not retained control of the financial asset.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.3 Transfer of financial assets - continued
24.If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset,and it retains control of the financial asset, the Group will recognize the financial asset to the extent of itscontinuing involvement in the transferred financial asset and recognize an associated liability. The Group willmeasure relevant liabilities as follows:
? For transferred financial assets carried at amortized cost, the carrying amount of relevant liabilities is thecarrying amount of financial assets transferred with continuing involvement less amortized cost of theGroup's retained rights (if the Group retains relevant rights upon transfer of financial assets) with additionof amortized cost of obligations assumed by the Group (if the Group assumes relevant obligations upontransfer of financial assets). Relevant liabilities are not designated as financial liabilities at fair valuethrough profit or loss.? For transferred financial assets carried at fair value, the carrying amount of relevant financial liabilities isthe carrying amount of financial assets transferred with continuing involvement less fair value of theGroup's retained rights (if the Group retains relevant rights upon transfer of financial assets) with additionof fair value of obligations assumed by the Group (if the Group assumes relevant obligations upontransfer of financial assets). Accordingly, the fair value of relevant rights and obligations shall bemeasured on an individual basis.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (1)the carrying amount of the financial asset transferred at the derecognition date; and (2) the sum of theconsideration received from the transfer of financial assets and any cumulative gain or loss allocated to the partderecognized which has been previously recognized in other comprehensive income, is recognized in profit orloss. If the financial assets transferred by the Group are designated as equity instrument investments at fairvalue through other comprehensive income that are not held for trading, the cumulative gains or lossespreviously recognized in other comprehensive income are transferred out and included in retained earnings.
If a part of the transferred financial asset qualifies for derecognition, the overall carrying amount of the financialasset prior to transfer is allocated between the part that continues to be recognized and the part that isderecognized, based on the respective fair value of those parts at the date of transfer. The difference between (1)the carrying amount allocated to the part derecognized on the date of derecognition; and (2) the sum of theconsideration received for the part derecognized and any cumulative gain or loss allocated to the partderecognized which has been previously recognized in other comprehensive income, is recognized in profit orloss. If the financial assets transferred by the Group are designated as equity instrument investments at fair valuethrough other comprehensive income that are not held for trading, the cumulative gains or losses previouslyrecognized in other comprehensive income are transferred out and included in retained earnings.
For a transfer of a financial asset in its entirety that does not satisfy the derecognition criteria, the Group willcontinue to recognize the transferred financial asset in its entirety and recognize the consideration received asfinancial liabilities.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.4 Classification of financial liabilities and equity instruments
The Group classifies the financial instrument or its components into financial liabilities or equity instruments atinitial recognition on the basis of the terms of the contract of the financial instruments, the economic substanceas well as legal form reflected, and the definition of financial liabilities or equity instruments.
10.4.1 Classification, recognition and measurement of financial liabilities
On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit orloss and other financial liabilities.
10.4.1.1 Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading (including derivatives that arefinancial liabilities) and financial liabilities designated as at FVTPL. Except that the derivative financial liabilityis presented separately, financial liabilities at FVTPL are presented as financial liabilities held-for-trading.
A financial liability is classified as held-for-trading if one of the following conditions is satisfied:
? It has been assumed principally for the purpose of repurchasing in the near term.? On initial recognition, it is part of a portfolio of identified financial instruments that the Group managestogether and there is objective evidence that the Group has a recent actual pattern of short-term profit-taking.? It is a derivative that is not designated as a financial guarantee contract and effective as a hedginginstrument.
On initial recognition, financial liabilities that meet one of the following conditions are designated as financialliabilities at fair value through profit or loss: (1) Such designation eliminates or significantly reduces accountingmismatch; (2) The financial liability forms part of a group of financial liabilities or a group of financial assetsand financial liabilities, which is managed and its performance is evaluated on a fair value basis, in accordancewith the documented risk management or investment strategy, and information about the grouping is reported tokey management personnel on that basis; (3) The qualified hybrid financial instrument combines financialliability with embedded derivatives.
Held-for-trading financial liabilities are subsequently measured at fair value, and any gains or losses arisingfrom changes in fair value and any dividend or interest income earned on the financial liabilities are recognizedin profit or loss.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
1 10.4 Classification of financial liabilities and equity instruments - continued
10.4.1 Classification, recognition and measurement of financial liabilities - continued
10.4.1.1 Financial liabilities at FVTPL - continued
The amount of change in the fair value of the financial liability that is attributable to changes in the credit risk ofthat liability shall be presented in other comprehensive income, and upon the derecognition of such liability, theaccumulated amount of change in fair value that is attributable to changes in the credit risk of that liability,which is recognized in other comprehensive income, is transferred to retained earnings. Other gains or lossesarising from changes in fair value and any dividend or interest income earned on the financial liabilities arerecognized in profit or loss. If the impact of the change in credit risk of such financial liability dealt with in theabove way would create or enlarge an accounting mismatch in profit or loss, the Group shall present all gains orlosses on that liability (including the effects of changes in the credit risk of that liability) in profit or loss.
10.4.1.2 Other financial liabilities
Other financial liabilities except for the financial liabilities arising from the transferred financial assets that donot qualify for derecognition or financial liabilities arising from continuing involvement in the transferredfinancial asset are classified as financial liabilities measured at amortized cost, and are subsequently measuredat amortized cost, with gain or loss arising from derecognition or amortization recognized in profit or loss.
If the Group modifies or renegotiates the contract with the counterparty and the financial liability subsequentlymeasured at amortized cost is not derecognized, but the cash flow of the contract changes, the Group shall re-calculate the carrying amount of the financial liability and recognize the relevant gains or losses in profit or lossof the period. The re-calculated carrying amount of the financial liability shall be determined by the Groupaccording to the cash flow of the renegotiated or modified contract based on the present value discounted at theoriginal effective interest rate of the financial liability. For all the costs or expenses arising from themodification or renegotiation of the contract, the Group shall adjust the modified carrying amount of thefinancial liability and amortize them within the remaining term of the financial liability.
10.4.2 Derecognition of financial liabilities
The Group derecognizes a financial liability (or part of it) only when the underlying present obligation (or partof it) is discharged. An agreement between the Group (an existing borrower) and an existing lender to replacethe original financial liability with a new financial liability with substantially different terms is accounted for asan extinguishment of the original financial liability and the recognition of a new financial liability.
When the Group derecognizes a financial liability or a part of it, it recognizes the difference between thecarrying amount of the financial liability (or part of the financial liability) derecognized and the considerationpaid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.
10.4.3 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deductingall of its liabilities. Equity instruments issued (including refinanced), repurchased, sold and cancelled by theGroup are recognized as changes in equity. Change in fair value of equity instruments is not recognized by theGroup. Transaction costs related to equity transactions are deducted from equity.
The Group recognizes the distribution to holders of the equity instruments as distribution of profits, anddividends paid do not affect total amount of shareholders' equity.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.5 Derivatives and embedded derivatives
Derivative financial instruments include forward exchange contracts, resale option and redemption option forconvertible bonds, etc. Derivatives are initially measured at fair value at the date when the derivative contractsare entered into and are subsequently re-measured at fair value.
Derivatives embedded in hybrid contracts that contain financial asset hosts are not separated. The entire hybridcontract is classified and subsequently measured in its entirety as either amortized cost or fair value asappropriate.
If the host contract included in the hybrid contract is not a financial asset and meet all of the following criteria,the embedded derivative shall be separated from the hybrid contract by the Group and treated as a stand-alonederivative.
(1) The economic characteristics and risks of the embedded derivative are not highly related to the
economic characteristics and risks of the host contract;
(2) A separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and
(3) The hybrid instrument is not designated as a financial asset or financial liability at fair value through
profit or loss.
If the embedded derivative is separated from the hybrid contract, the host contract shall be accounted for inaccordance with the applicable standards. If the Group is unable to measure reliably the fair value of anembedded derivative on the basis of its terms and conditions, the fair value of the embedded derivative is thedifference between the fair value of the hybrid contract and the fair value of the host contract. If the Group isstill unable to measure the fair value of the embedded derivative separately either at acquisition or at asubsequent balance sheet date after the above methods are applied, it designates the entire hybrid contract as afinancial instrument at fair value through profit or loss.
10.6 Offsetting financial assets and financial liabilities
Financial assets and liabilities are offset and the net amount is reported in the balance sheet if, and only if, theCompany has a current enforceable legal right to set off the recognized amounts and intends to settle on a netbasis, or to realize an asset and settle the liability simultaneously. In all other situations, they are presentedseparately in the balance sheet and are not offset.
10.7 Compound instruments
Convertible bonds issued by the Group that contain both the liability, the conversion option, the resale optionand redemption option are classified separately into respective items on initial recognition. Conversion optionthat is settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of theCompany's own equity instruments is an equity instrument. At the date of issue, the liability, resale optionderivatives and redemption option derivatives are initially measured at fair value. The difference between thegross proceeds of the issue of the convertible bonds and the fair value assigned to the liability, resale optionderivatives and redemption option derivatives, representing the conversion option for the holder to convert thebonds into equity instrument, is included in other equity instruments.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Financial instruments - continued
10.7 Compound instruments - continued
In subsequent periods, the liability component of the convertible bonds is carried at amortized cost using theeffective interest method. The resale option derivatives and redemption option derivatives are measured at fairvalue with changes in fair value recognized in profit or loss. The conversion option classified as equityinstruments remains in equity instruments. No gain or loss is recognized in profit or loss upon conversion orexpiration of the option.
Transaction costs incurred for the issue of the convertible bonds are allocated to the liability, equity instruments,resale option derivative components and redemption option derivative components in proportion to theirrespective fair values. Transaction costs relating to the resale option derivative components and redemptionoption are charged to profit or loss. Transaction costs relating to the liability component are included in thecarrying amount of the liability component and amortized over the period of the convertible loan notes using theeffective interest method. Transaction costs relating to the equity instruments component are charged directly toequity instruments.
11. Inventories
11.1 Categories of inventories
The Group's inventories mainly include raw materials, work in progress, finished goods, reusable materials, etc.Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs ofconversion and other expenditures incurred in bringing the inventories to their present location and condition.
11.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
11.3 Basis for determining net realizable value of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the netrealizable value is below the cost of inventories, a provision for decline in value of inventories is made.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value isdetermined on the basis of clear evidence obtained, and takes into consideration the purposes of holdinginventories and effect of post balance sheet events.
For large quantity and low value items of inventories, provision for decline in value is made based on categoriesof inventories. Provision for decline in value of other inventories is made based on the excess of cost ofinventory over its net realizable value on an item-by-item basis.
After the provision for decline in value of inventories is made, if the circumstances that previously causedinventories to be written down below cost no longer exist so that the net realizable value of inventories is higherthan their cost, the original provision for decline in value is reversed and the reversal is included in profit or lossfor the period.
11.4 Inventory count system
The perpetual inventory system is maintained for stock system.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Inventories - continued
11.5 Amortization method for other reusable materials
Other reusable materials are amortized using the multiple-stage amortization method.
12. Assets classified as held-for-sale
Non-current assets and disposal groups are classified as held for sale category when the Group recovers thebook value through a sale (including an exchange of non-monetary assets that has commercial substance) ratherthan continuing use.
Non-current assets or disposal groups classified as held for sale are required to satisfy the following conditions:
(1) the asset or disposal group is available for immediate sale in its present condition subject only to terms thatare usual and customary for sales of such asset or disposal group; (2) the sale is highly probable, i.e. the Grouphas made a resolution about selling plan and obtained a confirmed purchase commitment and the sale isexpected to be completed within one year.
The Group measures the no-current assets or disposal groups classified as held for sale at the lower of theircarrying amount and fair value less costs to sell. Where the carrying amount is higher than the net amount offair value less costs to sell, the carrying amount should be reduced to the net amount of fair value less costs tosell, and such reduction is recognized in impairment loss of assets and included in profit or loss for the period.Meanwhile, provision for impairment of held-for-sale assets are made. When there is increase in the net amountof fair value of non-current assets held for sale less costs to sell at the balance sheet date, the original deductionshould be reversed in impairment loss of assets recognized after the classification of held-for-sale category, andthe reverse amount is include in profit or loss for the period. Losses of assets that are classified as held for saleare not reversed.
Non-current assets classified as held-for-sale or disposal groups are not depreciated or amortized, interest andother costs of liabilities of disposal group classified as held for sale continue to be recognized.
All or part of equity investments in an associate or joint venture are classified as held-for-sale assets. For thepart that is classified as held-for-sale, it is no longer accounted for using the equity method since the date of theclassification.
13. Long-term equity investments
13.1 Determination criteria of joint control and significant influence
Control is achieved when the Group has the power over the investee, is exposed or, has the rights to, variablereturns from its involvement with the investee; and has the ability to use its power to affect its return. Jointcontrol is the contractually agreed sharing of control over an economic activity, and exists only when thestrategic financial and operating policy decisions relating to the activity require the unanimous consent of theparties sharing control. Significant influence is the power to participate in the financial and operating policydecisions of the investee but is not control or joint control over those policies. When determining whether aninvesting enterprise is able to exercise control or significant influence over an investee, the effect of potentialvoting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises orother parties that are currently exercisable or convertible shall be considered.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
13. Long-term equity investments - continued
13.2 Determination of initial investment cost
For a long-term equity investment acquired through business combination not involving enterprises undercommon control, the investment cost of the long-term equity investment is the cost of acquisition at the date ofcombination.
The expenses incurred by the acquirer or in respect of auditing, legal services, valuation and consultancyservices and other associated administrative expenses attributable to the business combination are recognized inprofit or loss when they are incurred.
Long-term equity investment acquired otherwise than through a business combination is initially measured at itscost. When the entity is able to exercise significant influence or joint control (but not control) over an investeedue to [additional investment], the cost of long-term equity investments is the sum of the fair value ofpreviously-held equity investments determined in accordance with Accounting Standards for BusinessEnterprises No.22 - Financial Instruments; Recognition and Measurement (CAS 22) and the additionalinvestment cost.
13.3 Subsequent measurement and recognition of profit or loss
13.3.1 Long-term equity investment accounted for using the cost method
The Company's separate financial statements adopted cost method to account for the long-term equityinvestments of subsidiaries. A subsidiary is an investee that is controlled by the Group.
Under the cost method, a long-term equity investment is measured at initial investment cost. When additionalinvestment is made or the investment is recouped, the cost of the long-term equity investment is adjustedaccordingly. Investment income is recognized in the period in accordance with the attributable share of cashdividends or profit distributions declared by the investee.
13.3.2 Long-term equity investment accounted for using the equity method
The Group accounts for investment in associates and joint ventures using the equity method. An associate is anentity over which the Group has significant influence and a joint venture is an entity over which the Groupexercises joint control along with other investors.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds theGroup's share of the fair value of the investee's identifiable net assets at the time of acquisition, no adjustment ismade to the initial investment cost. Where the initial investment cost is less than the Group's share of the fairvalue of the investee's identifiable net assets at the time of acquisition, the difference is recognized in profit orloss for the period, and the cost of the long-term equity investment is adjusted accordingly.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
13. Long-term equity investments - continued
13.3 Subsequent measurement and recognition of profit or loss - continued
13.3.2 Long-term equity investment accounted for using the equity method - continued
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensiveincome of the investee for the period as investment income and other comprehensive income for the period.Meanwhile, carrying amount of long-term equity investment is adjusted: the carrying amount of long-termequity investment is decreased in accordance with its share of the investee's declared profit or cash dividends;Other changes in owners' equity of the investee other than net profit or loss and other comprehensive income arecorrespondingly adjusted to the carrying amount of the long-term equity investment, and recognized in thecapital reserve. The Group recognizes its share of the investee's net profit or loss based on the fair value of theinvestee's individual identifiable assets, etc. at the acquisition date after making appropriate adjustments. Whenthe investors' accounting policies and accounting period are inconsistent with those of the Company, theCompany recognizes investment income and other comprehensive income after making appropriate adjustmentsto conform to the Company's accounting policies and accounting period. However, unrealized gains or lossesresulting from the Group's transactions with its associates and joint ventures, which do not constitute a business,are eliminated based on the proportion attributable to the Group and then investment gains or losses or isrecognized. However, unrealized losses are not eliminated if they result from the Group's transactions with itsassociates and joint ventures which represent impairment losses on the transferred assets.
The Group discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of its net investment inthe investee is reduced to zero. If the Group has incurred obligations to assume additional losses of the investee,a provision is recognized according to the expected obligation, and recorded as investment loss for the period.Where net profits are subsequently made by the investee, the Group resumes recognizing its share of thoseprofits only after its share of the profits exceeds the share of losses previously not recognized.
13.4 Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actually received andreceivable and the carrying amount is recognized in profit or loss for the period.
14. Fixed assets
14.1 Recognition criteria for fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rentalto others, or for administrative purposes, and have useful lives of more than one accounting year. A fixed assetis recognized only when it is probable that economic benefits associated with the asset will flow to the Groupand the cost of the asset can be measured reliably. Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it isprobable that economic benefits associated with the asset will flow to the Group and the subsequentexpenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is derecognized.Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred.
14.2 Depreciation method
In addition of lands operated overseas for which no depreciation is provided, a fixed asset is depreciated over itsuseful life using the straight-line method since the month subsequent to the one in which it is ready for intendeduse.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
14. Fixed assets - continued
14.2 Depreciation method - continued
The useful life, estimated net residual value rate and annual depreciation rate of each category of fixed assetsare as follows:
| Category | Depreciation period (years) | Residual value rate (%) | Annual depreciation rate (%) |
| Buildings | 12-35 years | - | 2.86-8.33 |
| Machinery and equipment | 3-8 years | - | 12.50-33.33 |
| Transportation vehicles | 2-6 years | - | 16.67-50.00 |
| Electronic equipment, fixtures and furniture | 3-10 years | - | 10.00-33.33 |
| Decoration costs | 3-10 years | - | 10.00-33.33 |
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain fromdisposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and inthe condition expected at the end of its useful life.
14.3 Other descriptions
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use ordisposal, the fixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amountof any proceeds on disposal of the asset net of the carrying amount and related taxes is recognized in profit orloss for the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation methodapplied at least once at each financial year-end, and account for any change as a change in an accountingestimate.
15. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various constructionexpenditures during the construction period, borrowing costs capitalized before it is ready for intended use andother relevant costs. Construction in progress is not depreciated. Construction in progress is transferred to afixed asset when it is ready for intended use.
16. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset arecapitalized when expenditures for such asset and borrowing costs are incurred and activities relating to theacquisition, construction or production of the asset that are necessary to prepare the asset for its intended use orsale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired,constructed or produced becomes ready for its intended use or sale. Other borrowing costs are recognized as anexpense in the period in which they are incurred.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is theactual interest expense incurred on that borrowing for the period less any bank interest earned from depositingthe borrowed funds before being used on the asset or any investment income on the temporary investment ofthose funds. Where funds are borrowed under general-purpose borrowings, the Group determines the amount ofinterest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of theexcess of cumulative expenditures on the asset over the amounts of specific-purpose borrowings. Thecapitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
17. Intangible asset
17.1 Valuation method, useful life and impairment test of intangible assets
Intangible assets include software, patents, trademarks, land use rights and customer relations, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life is available foruse, its original is amortized over its estimated useful life using the straight-line method.
The amortization methods, useful lives, and estimated net residual value rates of each class of fixed assets are asfollows:
17.1 Valuation method, useful life and impairment test of intangible assets - continued
| Category | Amortization method | Useful life (Years) | Residual value rate (%) |
| Land Use Rights | Straight-line method | 50 years | - |
| Software | Straight-line method | 3-10 years | - |
| Patents | Straight-line method | 3-20 years | - |
| Trademarks | Straight-line method | 10 years | - |
| Customer relation | Straight-line method | 16 years | - |
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at theend of the year, and makes adjustments when necessary.
For the impairment test of intangible assets, see Notes (III), 18 for details.
17.2 Accounting policies on research and development expenditure
Expenditure during the research phase is recognized as an expense in the period in which it is incurred.
Expenditure during the development phase that meets all of the following conditions at the same time isrecognized as intangible asset. Expenditure during development phase that does not meet the followingconditions is recognized in profit or loss for the period.
(1) It is technically feasible to complete the intangible asset so that it will be available for use or sale;
(2) The Group has the intention to complete the intangible asset and use or sell it;
(3) The Group can demonstrate the ways in which the intangible asset will generate economic benefits,including the evidence of the existence of a market for the output of the intangible asset or the intangibleasset itself or, if it is to be used internally, the usefulness of the intangible asset;
(4) The availability of adequate technical, financial and other resources to complete the development and theability to use or sell the intangible asset; and
(5) The expenditure attributable to the intangible asset during its development phase can be reliablymeasured.
If the expenditures cannot be distinguished between the research phase and development phase, the Grouprecognizes all of them in profit or loss for the period. The cost of intangible assets formed in internaldevelopment activities only includes the total amount of expenditures from the time point when thecapitalization conditions are met to the time when the intangible assets reach the predetermined uses. For thesame intangible asset, the expenditures that have been expensed into profit and loss before the capitalizationconditions are met in the development process will not be adjusted.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
18. Impairment of long-term assets
The Group reviews the long-term equity investments, fixed assets, construction in progress, intangible assetswith a finite useful life, and assets relating to contract cost at each balance sheet date to determine whether thereis any indication that they have suffered an impairment loss. If an impairment indication exists, the recoverableamount is estimated. Intangible assets not yet available for use are tested for impairment annually, irrespectiveof whether there is any indication that the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount ofan individual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. Therecoverable amount of an asset or asset group is the higher of its fair value less costs of disposal and the presentvalue of the future cash flows expected to be derived from the asset.
If such recoverable amount is less than its carrying amount, a provision for impairment losses in respect of thedeficit is recognized in profit or loss for the period.
In determining impairment loss of assets associated with contract costs, impairment loss shall be determined inaccordance with other assets associated with contracts and recognized in according to other relevant accountingstandards for business enterprises; then, the Group shall make impairment allowance and recognize animpairment loss in profit or loss to the extent that the carrying amount of an asset associated with contract costsrecognized exceeds: (i) the remaining amount of consideration that the Group expects to receive in exchange forthe goods or services to which the asset relates; less (ii) the costs expected to be incurred to transfer the relativegoods or services.
Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment testing,goodwill is considered together with the related assets group(s), i.e., goodwill is reasonably allocated to therelated assets group(s) or each of assets group(s) expected to benefit from the synergies of the combination. Animpairment loss is recognized if the recoverable amount of the assets group or sets of assets groups (includinggoodwill) is less than its carrying amount. The impairment loss is firstly allocated to reduce the carrying amountof any goodwill allocated to such assets group or sets of assets groups, and then to the other assets of the groupon the pro-rata basis of the carrying amount of each asset (other than goodwill) in the group.
Except for impairment loss of assets related to contract costs, once an impairment loss of assets above isrecognized, it will not be reversed in any subsequent period. The Group shall recognize in profit or loss areversal of an impairment loss previously recognized when the impairment conditions have changed. Thereversed carrying amount of the asset at the reversal date shall not exceed the amount that would have beendetermined if no impairment loss had been recognized previously.
19. Long-term prepaid expenses
Long-term prepaid expenses represent expenses incurred that should be borne and amortized over the currentand subsequent periods (together of more than one year). Long-term prepaid expenses are amortized using thestraight-line method over the expected periods in which benefits are derived.
20. Contract liabilities
A contract liability represents the Group's obligation to transfer goods or services to a customer for which theGroup has received consideration (or an amount of consideration is due) from the customer.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
21. Employee benefits
21.1 Accounting treatment of short-term benefits
Actually occurred short-term employee benefits are recognized as liabilities, with a corresponding charge to theprofit or loss for the period or in the costs of relevant assets in the accounting period in which employeesprovide services to the Group. Staff welfare expenses incurred by the Group are recognized in profit or loss forthe period or the costs of relevant assets based on the actually occurred amounts when it actually occurred. Non-monetary staff welfare expenses are measured at fair value.
Payment made by the Group of social security contributions for employees such as premiums or contributionson medical insurance, work injury insurance and maternity insurance, etc. and payments of housing funds, aswell as trade union fund and employee education fund provided in accordance with relevant requirements, arecalculated according to prescribed bases and percentages in determining the amount of employee benefits andrecognized as relevant liabilities, with a corresponding charge to the profit or loss for the period or the costs ofrelevant assets in the accounting period in which employees provide services.
21.2 Accounting treatment of post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans.
During the accounting period of rendering service to employees of the Group, amount which should be paidaccording to defined contribution plans is recognized as liabilities, and recognized in profit or loss or relatedcosts of assets.
For defined benefit plans, the Group calculates defined benefit plan obligations using projected unit creditmethod and the service cost resulting from employee service in the current period is recorded in profit or loss orthe cost of relevant assets. Defined benefit costs are categorized as follows:
? service cost (including current service cost, past service cost, as well as gains and losses on settlements);? net interest of net liabilities or assets of defined benefit plan(including interest income of planned assets,
interest expenses of defined benefit plan obligations and effect of asset ceiling); and? Changes arising from re-measurement of net liabilities or net assets of defined benefit plans
Service costs and net interest of net liabilities and net assets of defined benefit plans are recognized in profit orloss of current period or costs of related assets. Re-measurements of the net defined benefit liability (asset)(including actuarial gains and losses, the return on plan assets, excluding amounts included in net interest on thenet defined benefit liability (asset), and any change in the effect of the asset ceiling, excluding amounts includedin net interest on the net defined benefit liability (asset)) are recognized in other comprehensive income.
Deficit or surplus from present value of obligation of defined benefit plans less fair value of planned asset ofdefined benefit plans are recognized as net liabilities or net assets of a defined benefit plan.
21.3 Accounting treatment of termination benefits
A liability for a termination benefit is recognized in profit or loss for the period at the earlier of when the Groupcannot unilaterally withdraw from the termination plan or the redundancy offer and when the Group recognizesany related restructuring costs or expenses.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
22. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency such as productsquality assurance, it is probable that an outflow of economic benefits will be required to settle the obligation,and the amount of the obligation can be measured reliably
The amount recognized as a provision is the best estimate of the consideration required to settle the presentobligation at the balance sheet date, taking into account factors pertaining to a contingency such as the risks,uncertainties and time value of money. Where the effect of the time value of money is material, the amount ofthe provision is determined by discounting the related future cash outflows.
23. Share-based payments
A share-based payment is a transaction which the Group grants equity instruments, or incurs liabilities foramounts that are determined based on the price of equity instruments, in return for services rendered byemployees. The Group's share-based payments include equity-settled share-based payments and cash-settledshare-based payments.
23.1 Equity-settled share-based payments
Equity-settled share-based payments granted to employees
Equity-settled share-based payments in exchange for services rendered by employees are measured at the fairvalue of the equity instruments granted to employees at the grant date. Such amount is recognized as relatedcosts or expenses on a straight-line basis over the vesting period, based on the best estimate of the number ofequity instruments expected to vest, with a corresponding increase in capital reserve.
23.2 Accounting treatment related to implementation, modification and termination of share-based paymentarrangement
At each balance sheet date during the vesting period, the Group makes the best estimate according to thesubsequent latest information of change in the number of employees who are granted with options that may vest,etc. and revises the number of equity instruments expected to vest. The effect of the above estimate isrecognized as related costs or expenses, with a corresponding adjustment to capital reserve.
In case the Group modifies a share-based payment arrangement, if the modification increases the fair value ofthe equity instruments granted, the Group will include the incremental fair value of the equity instrumentsgranted in the measurement of the amount recognized for services received. If the modification increases thenumber of the equity instruments granted, the Group will include the fair value of additional equity instrumentsgranted in the measurement of the amount recognized for services received. The increase in the fair value of theequity instruments granted is the difference between fair value of the equity instruments before and after themodification on the date of the modification. If the Group modifies the terms or conditions of the share-basedpayment arrangement in a manner that reduces the total fair value of the share-based payment arrangement, or isnot otherwise beneficial to the employee, the Group will continue to account for the services received as if thatmodification had not occurred (other than a cancellation of some or all of the equity instruments granted).
If cancellation of the equity instruments granted occurs during the vesting period, the Group will account for thecancellation of the equity instruments granted as an acceleration of vesting, and recognize immediately theamount that otherwise would have been recognized over the remainder of the vesting period in profit or loss forthe period, with a corresponding recognition in capital reserve. When the employee or counterparty can choosewhether to meet the non-vesting condition but the condition is not met during the vesting period, the Grouptreats it as a cancellation of the equity instruments granted.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
24. Revenue
The revenue of the Group mainly comes from the sales of electronic products. The products sold by the Groupmainly include communication products, consumer electronic products, computer and storage products,industrial products, automotive electronic products, medical products and other products. Other operatingincome is mainly waste sales income.
When (or as) a performance obligation in a contract is satisfied, i.e., when (or as) the customer obtains controlof relevant goods or services, the Group recognizes as revenue the amount of the transaction price that isallocated to that performance obligation. A performance obligation is the Group's promise to transfer to acustomer a good or service (or a bundle of goods or services) that is distinct, in a contract with the customer.The transaction price is the amount of consideration to which the Group expects to be entitled in exchange fortransferring promised goods or services to a customer, excluding amounts collected on behalf of third partiesand amounts that the Group expects to refund to the customer.
If there are two or more of performance obligations included in the contract, at the contract inception, the Groupallocates the transaction price to each single performance obligation based on the proportion of stand-aloneselling price of goods or services promised in each stand-alone performance obligation. However, if there isconclusive evidence indicating that the contract discount or variable consideration is only relative with one ormore (not the whole) performance obligations in the contract, the Group will allocate the contract discount orvariable consideration to relative one or more performance obligation. Stand-alone selling price refers to theprice of single sales of goods or services. If the stand-alone selling price cannot be observed directly, the Groupestimates the stand-alone selling price through comprehensive consideration of all reasonably acquired relativeinformation and maximum use of observable inputs.
For contracts that contain variable consideration, the Group estimates the amount of consideration to which itwill be entitled using either (a) the expected value method or (b) the most likely amount. The estimated amountof variable consideration is included in the transaction price only to the extent that it is highly probable that suchan inclusion will not result in a significant revenue reversal in the future when the uncertainty associated withthe variable consideration is subsequently resolved. At each balance sheet date, the Group updates the estimatedtransaction price.
For sales with sales return terms attached, as the customer obtains ownership of related goods, the Grouprecognizes revenue in accordance with the consideration (excluding expected refund amounts due to salesreturns) that the Group is expected to charge due to the transfer of goods to the customer, and recognizesliabilities in accordance with expected refund amounts due to sales returns. Meanwhile, the carrying amount atthe time of transfer of goods expected to be returned, subsequent to deduction of expected costs from collectingthe goods (including the decrease in value of the returned goods), is recognized as an asset and carried forwardto cost at the carrying amount at which goods are transferred, net of the cost of asset.
For sales with warranties, if the warranties are separate services to the customer other than serving as anassurance that the products sold comply with agreed-upon specifications, the warranties constitute singleperformance obligations. Otherwise, the Group accounts for warranties in accordance with the AccountingStandards for Business Enterprises No. 13 – Contingencies (ASBE No.13).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
24. Revenue - continued
The Group determines whether it is a principal or an agent at the time of the transaction based on whether itowns the "control" of the goods or services before the transfer of such goods or services to the customer. TheGroup is a principal if it controls the specified good or service before that good or service is transferred to acustomer, and the revenue shall be recognized based on the total consideration received or receivable; otherwise,the Group is an agent, and the revenue shall be recognized based on the amount of commission or handling feethat is expected to be charged, and such amount is determined based on the net amount of the total considerationreceived or receivable after deducting the prices payable to other related parties or according to the establishedcommission amount.
Where payment is received in advance, the advance payment received shall be recorded as a liability andrecognized as revenue when the relevant performance obligation is satisfied.
25. Contract costs
Costs of obtaining a contract
If the incremental costs (costs that will not occur if no contract obtained) incurred for obtaining the contract areexpected to be recovered, the Company recognizes it as an asset and the asset shall be amortized on a basis thatis consistent with the transfer to the customer of the goods or services to which the asset relates and recognizedin profit or loss for the period. If the amortization period of the asset does not exceed one year, it is recognizedin profit or loss for the period in which it occurs. Other expenses incurred by the Company for obtaining thecontract are recognized in profit or loss for the period in which it occurs, except as expressly borne by thecustomer.
Costs to fulfill a contract
If the costs incurred in fulfilling a contract are not within the scope of any standards other than RevenueStandards, the Group recognizes an inventory from the costs incurred to fulfill a contract only if those costsmeet all of the following criteria: (1) the costs relate directly to a contract or to an anticipated contract that theGroup can specifically identify; (2) the costs generate or enhance resources of the Group that will be used insatisfying performance obligations in the future; and (3) the costs are expected to be recovered. The assetmentioned above shall be amortized on a basis that is consistent with the revenue recognition of the goods orservices to which the asset relates and recognized in profit or loss for the period.
26. Government grants
Government grants are monetary assets and non-monetary assets from the government to the Group at noconsideration. A government grant is recognized only when the Group can comply with the conditions attachingto the grant and the Group will receive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received orreceivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fairvalue cannot be reliably determined, it is measured at a nominal amount. A government grant measured at anominal amount is recognized immediately in profit or loss for the period.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
26. Government grants - continued
26.1 Determination basis and accounting treatment of government grants related to assets
See Notes (V), 36 for details of the Group's government grants related to assets.
A government grant related to an asset is recognized as deferred income and included in profit or loss over theuseful life of the related asset with the straight-line method.
26.2 Determination basis and accounting treatment of government grants related to income
See Notes (V), 51 for details of the Group's government grants related to income. The Group classifiesgovernment grants that are difficult to be distinguished as government grants related to income aggregately.
For a government grant related to income, if the grant is a compensation for related expenses or losses to beincurred in subsequent periods, the grant is recognized as deferred income over the periods in which the relatedcosts or losses are recognized; If the grant is a compensation for related expenses or losses already incurred, thegrant is recognized immediately in profit or loss.
A government grant related to the Group's daily activities is recognized in other income based on the nature ofeconomic activities; a government grant not related to the Group's daily activities is recognized in non-operatingincome and expenses.
27. Deferred tax assets/ deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
27.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measuredat the amount expected to be paid (or recovered) according to the requirements of tax laws.
27.2 Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, orbetween the carrying amount of those items that are not recognized as assets or liabilities and their tax base thatcan be determined according to tax laws, deferred tax assets and liabilities are recognized using the balancesheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductible temporarydifferences are recognized to the extent that it is probable that taxable profits will be available against which thedeductible temporary differences can be utilized. However, for temporary differences associated with the initialrecognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not abusiness combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at thetime of transaction, no deferred tax asset or liability is recognized.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
27. Deferred tax assets/ deferred tax liabilities - continued
27.2 Deferred tax assets and deferred tax liabilities - continued
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extentthat it is probable that future taxable profits will be available against which the deductible losses and tax creditscan be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments insubsidiaries and associates, and interests in joint ventures, except where the Group is able to control the timingof the reversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future. Deferred tax assets arising from deductible temporary differences associated with suchinvestments and interests are only recognized to the extent that it is probable that there will be taxable profitsagainst which to utilize the benefits of the temporary differences and they are expected to reverse in theforeseeable future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws,that are expected to apply in the period in which the asset is realized or the liability is settled.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except when theyarise from transactions or events that are directly recognized in other comprehensive income or in shareholders'equity, in which case they are recognized in other comprehensive income or in shareholders' equity; and whenthey arise from business combinations, in which case they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longerprobable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets tobe utilized. Such reduction in amount is reversed when it becomes probable that sufficient taxable profits will beavailable.
27.3 Income tax offsetting
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realizethe assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset andpresented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assetsand deferred tax liabilities relate to income taxes levied by the same taxation authority on either the sametaxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a netbasis or to realize the assets and liabilities simultaneously, in each future period in which significant amounts ofdeferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities areoffset and presented on a net basis.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
28. Leases
Lease is a contract that conveys the right to use an asset for a period of time in exchange for consideration.
For contracts that are signed or modified after the date of initial application, at inception/modification of thecontracts, the Group assesses whether the contract is, or contains, a lease. Unless the terms and conditions of thecontract are changed, the Group does not reassess whether a contract is, or contains, a lease.
28.1 The Group as Lessee
28.1.1 Right-of-use assets
Except for short-term leases and leases for which the underlying asset is of low value, at the commencementdate of the lease, the Group recognizes a right-of-use assets. The commencement date of the lease is the date onwhich a lessor makes an underlying asset available for use by the Group. The Group measures the right-of-useassets at cost. The cost of the right-of-use assets comprises:
? the amount of the initial measurement of the lease liabilities;? any lease payments made at or before the commencement date, less any lease incentives;? any initial direct costs incurred by the Group;? an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset,restoring the site on which it is located or restoring the underlying asset to the condition required by theterms and conditions of the lease.
Right-of-use assets are depreciated by the Group in accordance with the ASBE No.4 Fixed Assets. If the Groupis reasonably certain, that the lease will transfer ownership of the underlying asset to the Group by the end ofthe lease term, the right-of-use assets is depreciated from the commencement date to the end of the useful life ofthe underlying asset. Otherwise, the right-of-use assets is depreciated from the commencement date to theearlier of the end of the useful life of the right-of-use assets or the end of the lease term.
The Group applies ASBE No. 8 Impairment of Assets, to determine whether the right-of-use assets are impairedand perform accounting treatment to identified impairment loss.
28.1.2 Lease liabilities
Except for short-term leases and leases for which the underlying asset is of low value, at the commencementdate of the lease, the Group measures the lease liabilities at the present value of the lease payments that are notpaid at that date. If the interest rate implicit in the lease cannot be readily determined, the lessee shall use thelessee's incremental borrowing rate.
The lease payments comprise the following payments by the Group for the right to use the underlying assetduring the lease term:
(1) Fixed payments (including in-substance fixed payments), less any lease incentives;
(2) The exercise price of a purchase option if the Group is reasonably certain to exercise that option;
(3) Payments for terminating the lease, if the lease term reflects the Group exercising an option toterminate the lease;
(4) Amounts expected to be payable by the Group under residual value guarantees.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
28. Leases - continued
28.1 The Group as Lessee - continued
28.1.2 Lease liabilities - continued
After the lease commencement date, interest expenses on lease liabilities in each period during the lease termare recognized by the Group by using the fixed periodic rate of interest, and recognized in profit or loss orrelated costs of assets.
After the lease commencement date, the Group re-measures lease liabilities and makes a correspondingadjustment to the related right-of-use assets in case of the following conditions. Where the carrying amount ofthe right-of-use assets has been reduced to zero and the lease liabilities still need to be reduced, the deficit isrecognized in profit or loss:
? there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, theGroup re-measures the lease liabilities, on the basis of the revised lease term and the revised discount rate;? there is a change in the amounts expected to be payable under a residual value guarantee, or in future leasepayments resulting from a change in an index or a rate used to determine those payments, the Group re-measures the lease liabilities, on the basis of the revised lease payments and the unchanged discount rate.
28.1.3 Short-term leases and leases of low-value assets
For short-term leases of machinery and equipment and leases of low-value assets to which the recognitionexemption is applied by the Group, right-of-use assets and lease liabilities are not recognized. A short-termlease refers to a lease that, at the commencement date, has a lease term of 12 months or less and do not contain apurchase option. A lease of low value asset refers to a single lease asset, when new, is of low value. Leasepayments on short-term leases and leases of low-value assets are recognized in profit or loss or the cost ofunderlying assets on a straight-line basis over the lease term.
28.1.4 Lease modifications
A lease modification should be accounted for as a separate lease if both of the following apply:
? the modification increases the scope of the lease by adding the right to use one or more underlying assets;and? the consideration for the lease increases by an amount commensurate with the stand-alone price for the
increase in scope and any appropriate adjustments to that stand-alone price according to thecircumstances of the particular contract
For a lease medication that is not accounted for as a separate lease, at the effective date of the lease modification,the Group should allocate the consideration in the modified contract, determine the lease term of the modifiedlease and remeasure the lease liability by discounting the revised payments using a revised discount rate.
For lease modifications that decrease the scope of the lease or narrow the term of the lease, the Group shoulddecrease the carrying amount of the right-of-use asset with any gain or loss relating to the partial or fulltermination of the lease should be recognized in profit or loss. For remeasurement of lease liabilities from allother lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset.
28.2 The Group as Lessor
28.2.1 Classification of leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership. All other leases are classified as operating leases.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
28.2 The Group as Lessor – continued
28.2.1.1 The Group as lessor under operating leases
The Group recognizes lease payments from operating leases as income on a straight-line basis. The Groupcapitalizes initial direct costs incurred in obtaining an operating lease and recognizes those costs as an expenseover the lease term on the same basis as the lease income.
28.2.2 Subleases
As a lessor of the sublease, the Group accounts for the original lease contract and the sublease contract as twoseparate contracts. The Group classifies the subleases based on the right-of-use assets generating from theoriginal lease rather than the underlying assets of the original lease.
29. Hedge accounting
29.1. Basis for using hedge accounting and accounting treatment method
Certain financial instruments are used as hedging instruments by the Group for the purpose of managing the riskexposure arising from specific risk, such as exchange rate risk, etc. The Group applies hedging accounting for ahedge that satisfies the prescribed conditions. Hedging activities of the Group include hedges of net investmentin foreign operations.
At the inception of hedging, the Group officially designated hedging instruments and hedged items, andprepared written documents recording the nature of hedging instruments, hedged items, hedged risks, and hedgeeffectiveness evaluation methods (including the analysis of the causes of invalid hedges and methods todetermine the hedge ratio).
The Group will discontinue hedge accounting when one of the following conditions occurs:
? Due to changes in risk management objectives, the hedging relationship no longer meets the riskmanagement objectives.? The hedging instrument expires, or is sold, terminated or exercised.? There is no longer an economic relationship between the hedged item and the hedging instruments, or inthe changes of the value arising from the economic relationship between the hedged item and the hedginginstrument, the impact of credit risk begins to dominate.? The hedging relationship no longer meets other conditions for using the hedge accounting methods.
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain orloss on the hedging instrument relating to the effective portion of the hedge is recognized in othercomprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit orloss.
When disposing of all or part of foreign operations, the profits or losses of the above hedging instrumentsincluded in other comprehensive income shall be reclassified in the current profits and losses.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
29 Hedge accounting – continued
29.2 Methods of assessing effectiveness of hedges
The Group continuously evaluates whether the hedging relationship meets the requirements of hedgingeffectiveness on and after the inception date of hedging. If the hedging meets the following conditions at thesame time, the Group will determine that the hedging relationship meets the requirements for hedgingeffectiveness:
? There is an economic relationship between hedged items and hedging instruments.? Among the value changes caused by the economic relationship between hedged items and hedging
instruments, the impact of credit risk does not dominate.? The hedging ratio of the hedging relationship will be equal to the ratio of the actual number of the
Group's hedging items to the actual number of hedging instruments.
If the hedging relationship no longer meets the requirement of hedging effectiveness due to the hedging ratio,but the risk management objectives of the hedging relationship have not changed, the Group will rebalance thehedging relationship. The number of hedged items or hedging instruments in the hedging relationship isadjusted so that the hedging ratio meets the requirements of hedging effectiveness again.
30. Critical Judgments in Applying Accounting Policies and Key Assumptions and Uncertainties in
Accounting EstimateIn the application of the Group's accounting policies, which are described in Note (III), the Group is required tomake judgments, estimates and assumptions about the carrying amounts of items in the financial statements thatcannot be measured accurately, due to the internal uncertainty of the operating activities. These judgments,estimates and assumptions are based on historical experiences of the Group's management as well as otherfactors that are considered to be relevant. Actual results may differ from these estimates.
The aforementioned judgments, estimates and assumptions are reviewed regularly on a going concern basis. Theeffect of a change in accounting estimate is recognized in the period of the change, if the change affects thatperiod only; or recognized in the period of the change and future periods, if the change affects both.
-Key assumptions and uncertainties in accounting estimates
At balance sheet date, the following are the key assumptions and uncertainties in accounting estimates, it isprobable that carrying amounts of assets and liabilities in future periods may be significantly adjusted:
Impairment of accounts receivable
The Group's accounts receivable arise from transactions under the Revenue Standards and contain no significantfinancing component. When evaluating the provision for ECL of the accounts receivable, the managementneeds to collect the existing information and use significant accounting estimates, as well as collect informationincluding historical bad debt records, default or delayed payment, as well as aging of accounts receivable andother factors to estimate and review the amount of lifetime ECL of the accounts receivable. As of 31 December2021, the balance of the Group's provision for credit losses of accounts receivable was RMB 9,974,696.34 (31December 2020: RMB 5,521,456.88).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
30. Critical Judgments in Applying Accounting Policies and Key Assumptions and Uncertainties inAccounting Estimate - continued
Inventories
The Group makes provision for the decline in the value of inventory according to the difference between theinventory costs beyond its net realizable value. The recognition of the net realizable value of inventoriesrequires the estimation of the expected sales in the future and the estimation of the costs, expenses and taxes tobe incurred. The differences (if any) between the re-estimated value and the current estimate will impact thecarrying amount of the inventories over the period in which the estimate is changed. As of 31 December 2021,the balance of the Group's provision for the decline in the value of inventories was RMB 107,428,347.47 (31December 2020: RMB 98,947,405.40).
Deferred tax assets
The benefit of the deferred tax assets may depend on the future taxable profits and the expected tax rate whenassociated deductible temporary differences is realized. If future taxable profits or actual tax rate is less thanexpected, the carrying amounts of deferred tax assets will be reduced and the reduction will be reversed toprofits or losses in the corresponding period. As of 31 December 2021, the Group had recognized the deferredtax assets of RMB 324,056,763.90 (31 December 2020: RMB 312,238,903.06).
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires anestimation of the present value of the future expected cash flows from the asset groups or set of assetgroups to which the goodwill is allocated. Estimating the present value requires the Group to make anestimate of the expected future cash flows from the asset groups or set of asset groups and also choose asuitable discount rate in order to calculate the present value of those cash flows. When considering future
cash flows and discount rates, changes in key assumptions such as discount rates and long-term growth ratesused by the Group may have a significant impact on the present value of future cash flows used in theimpairment testing.
Useful life and estimated net residual value of fixed assets
As disclosed in Note (III) 14, the Group reviews the useful life and estimated net residual value of a fixed assetat least once at each financial year-end. Technological innovations and intense competition in the industry havea significant impact on the estimation of useful life. The Group's management did not find anything that mightshorten or extend the useful life of fixed assets of the Group or require changing the estimated net residual value.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
31. Changes in important accounting policies and accounting estimates
31.1 Changes in important accounting policies
Interpretation of accounting standards for Business Enterprises No. 14
The implementation of the accounting standards for business enterprises (hereinafter referred to as "the
interpretation of the accounting standards for business enterprises reform No. 14" issued by the Ministry ofFinance on 26 January 2021) resulted in the change of the basis of interest rate.
Accounting treatment for changes in the basis for determining the cash flow of relevant contracts caused by the
reform of benchmark interest rate
In the case that the benchmark interest rate reform leads to the change of the basis for determining the cash
flow of relevant contracts, when only the benchmark interest rate reform directly leads to the change of the basisfor determining the cash flow of financial assets or financial liabilities that use the effective interest rate methodto determine the interest income or expenses, and the determination basis before and after the change iseconomically equivalent, the group refers to the treatment method of the change of floating interest rate, Theeffective interest rate is recalculated according to the future cash flow changed only due to the benchmarkinterest rate reform, and subsequent measurement is carried out on this basis.
In addition to the above changes, if there are other changes in the financial assets or financial liabilities that use
the effective interest rate method to determine the interest income or expenses at the same time, the group willconduct accounting treatment for the changes caused by the reform of the benchmark interest rate according tothe above provisions, and then evaluate whether other changes lead to the termination of the recognition of thefinancial assets or financial liabilities according to the accounting standards for Business Enterprises No. 22 -recognition and measurement of financial instruments.
Since January 1, 2021, the group has handled the business related to the benchmark interest rate reform in
accordance with the provisions of Interpretation No. 14. After evaluation, the Group believes that the adoptionof this provision has no significant impact on the financial statements of the group.
Interpretation of accounting standards for Business Enterprises No. 15
The Ministry of Finance issued and implemented the interpretation of accounting standards for Business
Enterprises No. 15 (hereinafter referred to as "Interpretation No. 15") on December 30, 2021, whichstandardized the presentation of centralized and unified management of the funds of the parent company andmember units through internal settlement centers and financial companies. According to Interpretation No. 15,the group adjusted the presentation of the parent company's financial statements and adjusted the data ofcomparable periods accordingly. The specific adjustments are as follows:
| Item | Note | 31 December 2020 | Adjustment | 1 January 2021 |
| Short-term borrowings | Note(XV), 8 | 880,570,700.00 | (880,570,700.00) | - |
| Other payables | Note(XV), 8 | 53,803,484.23 | 880,570,700.00 | 934,374,184.23 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
31. Changes in important accounting policies and accounting estimates- continued
Presentation of freight expense
According to the question and answer on the implementation of the fifth batch of accounting standards forbusiness enterprises in 2021 issued by the accounting department of the Ministry of Finance on 1 November2021, the relevant transportation costs incurred by the group for the transportation services that do not constitutea single performance obligation in order to perform the customer's contract before the transfer of commoditycontrol to the customer are regarded as the contract performance costs, amortized on the same basis as therecognition of commodity income and included in the current profit and loss, Listed in "operating costs" in theincome statement.
The group adjusted the data of comparable periods as follows:
Consolidated income statement:
Unit:
RMB
| Item | 2020 not adjusted | Adjustment | 2020 adjusted |
| Operating costs | 42,710,970,315.86 | 98,579,798.28 | 42,809,550,114.14 |
| Selling expense | 318,472,090.03 | (98,579,798.28) | 219,892,291.75 |
Income statement of the Company:
Unit: RMB
| Item | 2020 not adjusted | Adjustment | 2020 adjusted |
| Operating costs | 15,910,266,317.21 | 6,435,146.24 | 15,916,701,463.45 |
| Selling expense | 64,832,367.86 | (6,435,146.24) | 58,397,221.62 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(IV) TAXES
Major Categories of Taxes and Tax Rates
| Category of tax | Basis of tax computation | Tax rate |
| Value-added tax-Chinese (Note 1) | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income, interest income and lease income. The Company and its domestic subsidiaries are general VAT taxpayers | 13%, 9%, 6%, 5% and 3% |
| Non-resident enterprises obtain commission income within China | 6% | |
| Value-added tax-French | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income | 20% |
| Value-added tax-German | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income | 19% |
| Value-added-Tunisian | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income | 19% |
| Enterprise income tax | Taxable income | Note 2 |
| Non-resident enterprises obtain investment income and property transfer income from within China | 10% | |
| Property tax-Chinese | Residual value after deducting 30% from the original value of the property at one time | 1.2% |
| City maintenance and construction tax-Chinese | Turnover tax actually paid | 7% and 5% |
| Education surcharge-Chinese | Turnover tax actually paid | 3% |
| Local education surcharge-Chinese | Turnover tax actually paid | 2% |
Note 1: The Company and its subsidiaries in China shall apply the measures for the administration of VAT
exemption, credit and tax refund for the export of self-produced goods. The export tax refund rate isdifferent according to the scope of export goods.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VI) TAXES - continued
1. Major Categories of Taxes and Tax Rates - continued
Note 2: Description of enterprise income tax rate of main companies of the Group:
| Name of taxpayer | Income tax rate |
| Universal Scientific Industrial (Shanghai) Co., Ltd. | 15% (Note 1) |
| USI Electronics (Shenzhen) Co., Ltd. | 15% (Note 2) |
| Universal Global Technology (Kunshan) Co., Ltd. | 15% (Note 3) |
| Universal Global Technology (Shanghai) Co., Ltd. | 15% (Note 4) |
| Universal Global Electronics (Shanghai) Co., Ltd. | 25% |
| Universal Global Technology(Huizhou) Co., Ltd. | 25% |
| Universal Global Technology Co., Limited | 16.5% (Note 5) |
| Universal Global Industrial Co., Ltd. | 16.5% (Note 5) |
| Universal Global Electronics Co., Ltd. | 16.5% (Note 5) |
| Universal Global Scientific Industrial Co., Ltd. | Note 6 |
| Universal Scientific Industrial Co., Ltd. | Note 6 |
| USI Japan Co., Ltd. | 30% (Note 7) |
| USI America.Inc. | 21% (Note 8) |
| Universal Scientific Industrial De México S.A. De C.V. | 30% (Note 9) |
| Universal Scientific Industrial Poland Sp. z o.o. | 19% (Note 10) |
| Universal Scientific Industrial (France) | 31% (Note 11) |
| Universal Scientific Industrial Vietnam Company Limited | 20% (Note 12) |
| FINANCI?RE AFG S.A.S. ("FAFG") | 26.5% (Note 13) |
| USI (Shenzhen) Electronic Technology Innovation Co., Ltd. | 20% (Note 14) |
The enterprise income tax rate applicable to the Company and its subsidiaries in China is 25%.
Note 1 The Company was approved as a high-tech enterprise by Science and Technology Commission of
Shanghai Municipality, Shanghai Municipal Finance Bureau, Shanghai Municipal Office of the StateAdministration of Taxation and Shanghai Municipal Bureau of Local Taxation in 2020, and obtainedthe High-tech Enterprise Certificate (Certificate No. is GR202031004105), which was valid for 3 years.The Company applies the enterprise income tax rate of 15% from 2020 to 2022.
Note 2 USI Electronics (Shenzhen) Co., Ltd. was approved as a high-tech enterprise by Science and
Technology Innovation Commission of Shenzhen Municipality, Shenzhen Municipal Finance Bureau,Shenzhen Municipal Office of the State Administration of Taxation and Shenzhen Municipal Bureau ofLocal Taxation in 2020, and obtained the High-tech Enterprise Certificate (Certificate No. isGR202044206366 respectively), which was valid for 3 years. USI Electronics (Shenzhen) Co., Ltd.applies the enterprise income tax rate of 15% from 2020 to 2022.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VI) TAXES - continued
1. Major Categories of Taxes and Tax Rates - continued
Note 3 Universal Global Technology (Kunshan) Co., Ltd. was approved as a high-tech enterprise by Jiangsu
Provincial Department of Science and Technology, Department of Finance of Jiangsu Province, JiangsuProvincial Office of State Administration of Taxation and Jiangsu Provincial Bureau Local Taxation in2019, and obtained the High-tech Enterprise Certificate (Certificate No.: GR201932005665), which wasvalid for 3 years. Universal Global Technology (Kunshan) Co., Ltd. applies the enterprise income taxrate of 15% from 2019 to 2021.
Note 4 Universal Global Technology (Shanghai) Co., Ltd. was approved as a high-tech enterprise by Science
and Technology Commission of Shanghai Municipality, Shanghai Municipal Finance Bureau, ShanghaiMunicipal Office of the State Administration of Taxation and Shanghai Municipal Bureau of LocalTaxation in 2019, and obtained the High-tech Enterprise Certificate (Certificate No.:
GR201931000765), which was valid for 3 years. Universal Global Technology (Shanghai) Co., Ltd.applies the enterprise income tax rate of 15% from 2019 to 2021.
Note 5 Universal Global Technology Co., Limited, Universal Global Industrial Co., Ltd. and Universal Global
Electronics Co., Ltd. (“UGE”) are companies in Hong Kong, China. The applicable enterprise incometax rate is 8.25% for the part with operating profits not exceeding HKD2 million; and 16.5% for the partwith operating profits exceeding HKD2 million.
Note 6 Universal Global Scientific Industrial Co., Ltd. (“UGTW”) and the Universal Scientific Industrial Co.,
Ltd. (“USITW”) are registered and established in Taiwan, China. According to the income taxregulations in China's Taiwan region, (1) the enterprises with profit taxable income less than TWD120,000 is exempt from profit tax; (2) the enterprises with the annual taxable income more than TWD120,000 shall be levied at 20% of its total taxable income. But its taxable amount shall not exceed halfof the taxable income of a profit-making enterprise exceeding TWD 120,000. At the same time, theincome tax law in Taiwan stipulates that an additional 10% income tax shall be levied on theundistributed surplus of the current year, which shall be listed as the income tax expense of the yeardecided by the board of directors.
Note 7 USI Japan Co., Ltd. is established and registered in Japan and is subject to the national tax law of Japan.
According to the provisions of Japan's national tax law, the applicable tax rate is 30% to enterprisestaking the taxable income as the tax base. If the taxable income of an enterprise is negative and isreported with a cyan E-Tax return (i.e. self-accounting, self-reporting and self-taxation), theaccumulated deductible loss can be deducted within 9 years after the year in which the loss occurs.
Note 8 USI America. Inc. is incorporated and registered in the United States, and the applicable enterprise
income tax rate is 21%. According to the tax law of California where the enterprise is registered, even ifthere is no profit in establishing or engaging in commercial activities in the state, it is required to payCalifornia Regional Income Tax of USD800 per year according to the Alternative Minimum Tax.
Note 9 Universal Scientific Industrial De México S.A. De C.V. is registered and established in Mexico, and the
applicable enterprise income tax rate is 30%.
Note 10 Universal Scientific Industrial Poland Sp. z o.o. (formerly known as "Chung Hong Electronics Poland
sp. z o.o.", hereinafter referred to as "USI Poland") is established and registered in Poland. Theapplicable enterprise income tax rate is 19%. As it is located in a special economic region, it enjoys thetax preference of temporarily exempting enterprise income tax within 40% of the initial investment in2026 and previous years.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VI) TAXES - continued
1. Major Categories of Taxes and Tax Rates - continued
Note 11 Universal Scientific Industrial (France) ("USI France") is established and registered in France, and the
applicable enterprise income tax rate is 26.5%.
Note 12 Universal Scientific Industrial Vietnam Company Limited is established and registered in Vietnam,
and the applicable enterprise income tax rate is 20%.
Note 13 FAFG is established and registered in France, and the applicable enterprise income tax rate is 26.5%
(2020: 28%). The corporate income tax rate applicable to German subsidiary is 30%. The enterpriseincome tax rate applicable to the Tunisian subsidiary is 10%. The corporate income tax rate applicable toits U.S. subsidiaries is 21%.
Note 14 USI (Shenzhen) Electronic Technology Innovation Co., Ltd. is a small low profit enterprise with an
annual taxable income of no more than 1 million yuan, and the applicable enterprise income tax rate is20%. On the basis of the preferential policies stipulated in Article 2 of the notice of the Ministry ofFinance and the State Administration of Taxation on the implementation of the preferential tax reductionand exemption policy for small and micro enterprises (Cai Shui [2019] No. 13), the enterprise income taxshall be reduced by half.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank balances
Unit: RMB
| 31/12/2021 | 31/12/2020 | |||||
| Item | Foreign currency | Exchange rate | RMB | Foreign currency | Exchange rate | RMB |
| Cash: | ||||||
| RMB | 33,087.14 | 57,879.64 | ||||
| USD | 1,780.99 | 6.3757 | 11,355.06 | 3,079.62 | 6.5249 | 20,094.21 |
| EUR | 6,615.80 | 7.2211 | 47,773.35 | 7,381.41 | 8.0132 | 59,148.93 |
| HKD | 3,449.00 | 0.8176 | 2,819.90 | 3,449.00 | 0.8416 | 2,902.68 |
| GBP | 88.69 | 8.6064 | 763.30 | 245.77 | 8.8733 | 2,180.79 |
| MXN | 58,724.73 | 0.3097 | 18,187.05 | 95,028.58 | 0.3279 | 31,155.21 |
| TWD | - | 0.2303 | - | 7,000.00 | 0.2291 | 1,603.73 |
| PLN | 872.35 | 1.5717 | 1,371.07 | 3,996.09 | 1.7520 | 7,000.99 |
| TND | 3,575.10 | 2.2027 | 7,874.87 | 4,065.80 | 2.4220 | 9,847.42 |
| CZK | 11,354.00 | 0.2905 | 3,298.34 | 307.11 | 0.3052 | 93.74 |
| Bank balances: | ||||||
| RMB | 3,223,904,450.96 | 2,424,611,902.07 | ||||
| USD | 354,462,759.18 | 6.3757 | 2,259,948,213.70 | 489,746,536.78 | 6.5249 | 3,195,519,234.87 |
| EUR | 31,246,531.53 | 7.2211 | 225,634,328.83 | 55,369,519.99 | 8.0132 | 443,688,681.50 |
| HKD | 1,620,167.96 | 0.8176 | 1,324,649.32 | 678,266.20 | 0.8416 | 570,828.83 |
| JPY | 156,717,025.00 | 0.0554 | 8,682,123.19 | 154,186,212.00 | 0.0632 | 9,750,736.05 |
| GBP | 2,048,505.76 | 8.6064 | 17,630,259.97 | 1,444,985.22 | 8.8733 | 12,821,787.35 |
| MXN | 24,473,638.08 | 0.3097 | 7,579,485.71 | 41,664,873.91 | 0.3279 | 13,659,870.58 |
| TWD | 789,726,120.00 | 0.2303 | 181,873,925.44 | 524,752,787.00 | 0.2291 | 120,223,277.36 |
| SGD | 10,662.56 | 4.7179 | 50,304.89 | - | - | - |
| TND | 2,197,327.05 | 2.2027 | 4,840,052.29 | 2,562,784.67 | 2.4220 | 6,207,095.22 |
| CZK | - | 0.2905 | - | 337,377.20 | 0.3052 | 102,982.03 |
| PLN | 28,624,457.86 | 1.5717 | 44,989,060.42 | 40,036,621.39 | 1.7520 | 70,142,559.21 |
| VDN | 138,699,105,966.00 | 0.0003 | 41,609,731.79 | 20,259,512,680.00 | 0.0003 | 5,733,442.09 |
| Other currency funds: | ||||||
| RMB | 6,000,000.00 | 3,052,500.00 | ||||
| TWD | 28,000,000.00 | 0.2303 | 6,449,408.00 | 28,000,000.00 | 0.2291 | 6,414,928.80 |
| JPY | 1,000,000.00 | 0.0554 | 55,420.00 | 1,000,000.00 | 0.0632 | 63,240.00 |
| USD | 549,915.72 | 6.3757 | 3,506,097.66 | 3,099,993.00 | 6.5249 | 20,227,144.33 |
| Total | 6,034,204,042.25 | 6,332,982,117.63 | ||||
| Including: Total amounts kept in a foreign country | 1,534,415,183.17 | 1,331,906,175.91 | ||||
As at 31 December 2021, the Group's restricted cash and bank balances included in other cash and bankbalances amounted to RMB 16,010,925.66 (31 December 2020: RMB 29,757,813.13), of which RMB12,504,828.00 (31 December 2020: RMB 9,530,668.80) was the customs deposit and RMB 3,506,097.66 (31December 2020: RMB 20,227,144.33) was the interest deposit for long-term borrowings. The restricted othercash and bank balances aforementioned are not included in cash and cash equivalents in the preparation of thecash flow statements.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Held-for-trading financial assets
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Financial assets at fair value through profit or loss | 96,480,087.56 | 182,315,272.70 |
| Including: Accounts receivable factoring (Note 1) | 87,238,983.18 | 174,458,243.25 |
| Convertible bonds option (Note 2) | 8,624,935.00 | - |
| Derivative financial assets (Note 3) | 616,169.38 | 2,582,926.51 |
| Financial products | - | 5,274,102.94 |
Note 1: The accounts receivable are classified as financial assets at fair value through profit or loss since theGroup manages accounts receivable from certain specific customers only for the purpose of selling suchfinancial assets through factoring.
Note 2: See Note V, 31 for details of convertible bonds.
Note 3: The derivative financial assets held by the Group are foreign exchange forward contract.
3. Notes receivable
(1) Categories of notes receivable
Unit: RMB
| Category | 31/12/2021 | 31/12/2020 |
| Bank acceptances | 78,960,907.84 | 70,395,770.23 |
(2) As of 31 December 2021, the Group had no notes receivable that have been pledged as security.
(3) As of 31 December 2021, the Group had no notes receivable that have been endorsed or discounted and
were not yet matured at the balance sheet date.
(4) As of 31 December 2021, the Group had no notes that were converted to accounts receivable due to thedefault of the issuer.
(5) As of 31 December 2021, the Group made no provision for credit loss since the Group considered that the
accepting banks of the bank acceptances held by it were of high ratings and no significant credit risk wasexpected to exist.
(6) In 2021, the Group had no notes receivable that have been written off.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Accounts receivable
(1) Categories of accounts receivable
Unit: RMB
| Category | 31/12/2021 | 31/12/2020 |
| Accounts receivable arising from contracts with customers | 12,469,363,548.49 | 10,474,140,977.04 |
| Less: Bad debt provision | 9,974,696.34 | 5,521,456.88 |
| Total | 12,459,388,852.15 | 10,468,619,520.16 |
(2) Disclosure of provision made for bad debts
As part of the Group's credit risk management, the expected credit losses on accounts receivable are assessedusing the aging analysis approach. According to the Group's assessment on credit risk, the aging reflects thesolvency of customers when the receivables are due.
At 31 December 2021, the credit risk and expected credit losses on accounts receivable were as follows:
Unit: RMB
| Aging | 31/12/2021 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within the credit term | 0.01 | 12,037,509,644.74 | 1,771,899.34 | 12,035,737,745.40 |
| 1-30 days overdue | 0.25 | 365,030,750.34 | 915,092.02 | 364,115,658.32 |
| 31-60 days overdue | 2.67 | 48,524,104.67 | 1,297,712.21 | 47,226,392.46 |
| 61-90 days overdue | 18.18 | 6,754,233.22 | 1,227,837.25 | 5,526,395.97 |
| 91-180 days overdue | 26.63 | 9,244,001.65 | 2,461,341.65 | 6,782,660.00 |
| More than 180 days overdue | 100.00 | 2,300,813.87 | 2,300,813.87 | - |
| Total | 0.08 | 12,469,363,548.49 | 9,974,696.34 | 12,459,388,852.15 |
At 31 December 2020, the credit risk and expected credit losses on accounts receivable were as follows:
Unit: RMB
| Aging | 31/12/2020 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within the credit term | 0.01 | 9,958,975,472.79 | 1,452,775.43 | 9,957,522,697.36 |
| 1-30 days overdue | 0.30 | 448,110,129.83 | 1,340,723.77 | 446,769,406.06 |
| 31-60 days overdue | 2.75 | 51,312,360.95 | 1,411,540.48 | 49,900,820.47 |
| 61-90 days overdue | 1.88 | 8,497,077.27 | 159,908.63 | 8,337,168.64 |
| 91-180 days overdue | 2.51 | 6,245,971.95 | 156,544.32 | 6,089,427.63 |
| More than 180 days overdue | 100.00 | 999,964.25 | 999,964.25 | - |
| Total | 0.05 | 10,474,140,977.04 | 5,521,456.88 | 10,468,619,520.16 |
The expected average loss rate mentioned above is based on the historical actual credit loss rates and thecurrent conditions as well as the forecast of future economic conditions. In 2021, the Group's valuationmethod remains unchanged.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Accounts receivable - continued
(3) Changes in bad debt provisions
Unit: RMB
| Category | 31/12/2020 | Changes for the year | 31/12/2021 | ||
| Provision (Reversal) | Write-off or elimination | Exchange differences arising on translation of financial statements denominated in foreign currencies | |||
| Provision for expected credit loss by aging matrix | 5,521,456.88 | 4,542,957.48 | - | (89,718.02 ) | 9,974,696.34 |
Changes in bad debt provisions for accounts receivable:
Unit: RMB
| Provision for credit loss | Lifetime ECL |
| Balance at 1 January 2021 | 5,521,456.88 |
| ECL accrued (reversed) | 4,542,957.48 |
| Effect of changes in exchange rate | (89,718.02) |
| Balance at 31 December 2021 | 9,974,696.34 |
(4) There are no accounts receivable that have been actually written off in the year.
(5) Top five accounts receivable at 31 December 2021 categorized by debtor
Unit: RMB
| Company name | Relationship with the Company | Book value | Bad debt provision at 31 December 2021 | Percentage of the total accounts receivable at 31 December 2021(%) |
| Company A | Third party | 3,435,277,354.94 | 505,666.52 | 27.55 |
| Company B | Third party | 1,534,343,092.30 | 225,852.49 | 12.30 |
| Company C | Third party | 875,805,385.24 | 128,916.95 | 7.02 |
| Company D | Third party | 616,852,259.82 | 90,799.52 | 4.95 |
| Company E | Third party | 583,233,323.28 | 85,850.88 | 4.68 |
| Total | 7,045,511,415.58 | 1,037,086.36 | 56.50 |
(6) As of 31 December 2021, no accounts receivable were derecognized due to transfer of financial assets.
(7) As of 31 December 2021, no accounts receivable were reclassified into assets and liabilities arising fromtransfer of accounts receivable and continuing involvement.
5. Prepayments
(1) Aging analysis of prepayments is as follows:
Unit: RMB
| Aging | 31/12/2021 | 31/12/2020 | ||
| Amount | Proportion (%) | Amount | Proportion (%) | |
| Within 1 year | 51,467,608.39 | 100.00 | 41,561,467.16 | 100.00 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
5. Prepayments - continued
(2) Top five balances of prepayments categorized by receivers
Unit: RMB
| Company name | Relationship with the Company | Book value | Proportion of the total prepayments at 31 December 2021(%) |
| Company F | Third party | 3,175,518.70 | 6.17 |
| Company G | Third party | 2,959,999.99 | 5.75 |
| Company H | Third party | 2,072,168.72 | 4.03 |
| Company I | Third party | 1,972,192.80 | 3.83 |
| Company J | Third party | 1,876,877.29 | 3.65 |
| Total | 12,056,757.50 | 23.43 |
6. Other receivables
25. (1) Disclosure of other receivables by aging
26. Unit: RMB
| Aging | 31/12/2021 | ||
| Amount | Provision for credit loss | Proportion of provision (%) | |
| Within 1 year | 129,254,194.21 | - | - |
(2) Classification by the nature of other receivables
Unit: RMB
| Nature of other receivables | Book value at 31 December 2021 | Book value at 31 December 2020 |
| Advances for third parties | 78,923,587.52 | 81,317,146.05 |
| Service and purchase rebates receivable | 23,606,656.50 | 7,792,501.06 |
| Advance payments for employees | 5,160,900.36 | 3,180,842.98 |
| Performance bonds | 87,000.03 | 12,704,509.96 |
| Receivables from equipment transfer | - | 534,280.90 |
| Others | 21,476,049.80 | 22,753,526.23 |
| Total | 129,254,194.21 | 128,282,807.18 |
(3) Accrual of provision for losses
Unit: RMB
| Category | 31/12/2020 | Changes for the year | 31/12/2021 | ||
| Provision | Reversal | Write-off or elimination | |||
| Provision for expected credit loss accrued on an individual basis | 3,000,000.00 | - | (2,836,069.00) | (163,931.00) | - |
Changes in the credit provision for other receivables:
Unit: RMB
| Credit provision | Stage I | Stage II | Stage III | Total |
| 12-month ECL | Lifetime ECL (not credit-impaired) | Lifetime ECL (credit-impaired) | ||
| Balance at 1 January 2021 | - | - | 3,000,000.00 | 3,000,000.00 |
| Reversal | - | - | (2,836,069.00) | (2,836,069.00) |
| Written-off | - | - | (163,931.00) | (163,931.00) |
| Balance at 31 December 2021 | - | - | - | - |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
6. Other receivables - continued
(3) Accrual of provision for losses - continued
In the current period, significant reversal or recovery of bad debt provision are as follows:
Unit: RMB
| Company name | Reversal or recovery | Mode |
| Company M | 2,836,069.00 | Received in Cash |
(4) In the current year, other receivables actually written off are as follows:
Unit: RMB
| Company name | Write-off |
| Other receivables actually written off | 163,931.00 |
(5) Top five other receivables at 31 December 2021 categorized by debtor
Unit: RMB
| Company name | Nature of the amount | Closing balance | Aging | Proportion of the total other receivables at 31 December 2021(%) | Bad debt provision at 31 December 2021 |
| Company K | Advances | 23,397,708.09 | Within one year | 18.10 | - |
| Company D | Advances | 17,302,290.36 | Within one year | 13.39 | - |
| Company L | Advances | 5,333,890.23 | Within one year | 4.13 | - |
| Company N | Advances | 4,325,986.35 | Within one year | 3.35 | - |
| Company O | Advances | 1,751,592.51 | Within one year | 1.36 | - |
| Total | 52,111,467.54 | 40.33 | - |
As of 31 December 2021, there were no other receivables related to government grants.
As of 31 December 2021, there were no other receivables derecognized due to the transfer of financial assets.
As of 31 December 2021, there was no amount of assets and liabilities arising from transfer of other receivablesand continuing involvement.
7. Inventories
(1) Categories of inventories
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 (Restated) | ||||
| Book value | Provision for decline in value of inventories | Carrying amount | Book value | Provision for decline in value of inventories | Carrying amount | |
| Raw materials | 5,795,831,890.76 | 65,100,181.38 | 5,730,731,709.38 | 3,411,091,344.14 | 63,081,191.37 | 3,348,010,152.77 |
| Work-in-progress | 1,506,240,181.84 | - | 1,506,240,181.84 | 1,359,250,181.51 | - | 1,359,250,181.51 |
| Finished goods | 1,761,692,388.59 | 42,328,166.09 | 1,719,364,222.50 | 2,035,065,474.29 | 35,866,214.03 | 1,999,199,260.26 |
| Reusable materials | 81,226,548.92 | - | 81,226,548.92 | 58,876,650.75 | - | 58,876,650.75 |
| Total | 9,144,991,010.11 | 107,428,347.47 | 9,037,562,662.64 | 6,864,283,650.69 | 98,947,405.40 | 6,765,336,245.29 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
7. Inventories - continued
(2) Provision for decline in value of inventories
27. Unit:
RMB
| Item | 31/12/2020 | Provision | Decrease in the year | Exchange differences arising on translation of foreign currencies | 31/12/2021 | |
| Reversal | Write-off | |||||
| Raw materials | 63,081,191.37 | 73,509,068.19 | 61,738,736.48 | 8,627,390.46 | (1,123,951.24) | 65,100,181.38 |
| Finished goods | 35,866,214.03 | 63,733,497.16 | 56,757,675.49 | - | (513,869.61) | 42,328,166.09 |
| Total | 98,947,405.40 | 137,242,565.35 | 118,496,411.97 | 8,627,390.46 | (1,637,820.85) | 107,428,347.47 |
| Item | Specific determination basis of net realizable value | Reasons for reversal/ provision for decline in value of inventories |
| Raw materials | The higher of the value of estimated selling price of raw materials less estimated costs necessary to make the sale as well as related taxes and the value of estimated selling price of finished goods less estimated costs of completion and estimated costs necessary to make the sale as well as related taxes | Sold or net realizable value recovered |
| Work-in-progress | Value of estimated selling price less estimated costs of completion and estimated costs necessary to make the sale as well as related taxes | Sold or net realizable value recovered |
| Finished goods | Value of estimated selling price less estimated costs necessary to make the sale and related taxes | Sold or net realizable value recovered |
8. Non-current assets due within one year
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Lease receivables | 991,195.08 | 813,785.46 |
9. Other current assets
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Tax refunds receivable | 153,785,608.36 | 129,990,309.17 |
| FPC expenses to be amortized | 150,053,586.17 | 75,122,983.26 |
| Input taxes to be deducted | 131,285,700.65 | 203,977,541.73 |
| Prepaid income tax | 94,493,879.13 | 66,270,120.55 |
| Mold costs to be amortized | 68,803,773.16 | 68,438,440.79 |
| Others | 7,969,779.68 | 53,159,460.70 |
| Total | 606,392,327.15 | 596,958,856.20 |
10. Long-term receivables
(1) Long-term receivables
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Lease receivables | 920,486.03 | 884,745.44 |
| Employee borrowings for house purchasing | 10,243,630.03 | 9,116,442.42 |
| Others | - | 379,284.95 |
| Total | 11,164,116.06 | 10,380,472.81 |
(2) As of 31 December 2021, no provision for expected credit loss has been made as the Group's long-term
receivables are less likely to be uncollectable.
(3) As of 31 December 2021, there were no long-term receivables derecognized due to transfer of financialassets.
(4) As of 31 December 2021, there was no amount of assets and liabilities arising from transfer of long-term
receivables and continuing involvement.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Long-term equity investments
Unit: RMB
| Investee | 1/1/2021 | Changes for the year | 31/12/2021 | Impairment provision at 31/12/2021 | |||||||
| Additional investment | Reduction in investment | Investment profit or loss recognized under equity method | Other comprehensive income adjustments | Other equity changes | Cash dividends or profit declared | Impairment provision | Exchange differences arising on translation of financial statements denominated in foreign currencies | ||||
| I. Joint ventures | |||||||||||
| SUMA-USI Electronics Co., Ltd. (Note 1) | 108,007,637.50 | - | - | 6,222,797.18 | - | - | - | - | - | 114,230,434.68 | - |
| II. Associates | |||||||||||
| M-Universe Investments Pte. Ltd. (Note 2) | 423,520,132.02 | - | - | 15,893,700.67 | 7,230,128.54 | - | 8,521,365.60 | - | (9,803,211.68) | 428,319,383.95 | - |
| Total | 531,527,769.52 | - | - | 22,116,497.85 | 7,230,128.54 | - | 8,521,365.60 | - | (9,803,211.68) | 542,549,818.63 | - |
Note 1: In April 2019, Universal Global Technology (Kunshan) Co., Ltd., the Company's wholly-owned subsidiary, established a joint venture, SUMA-USI ElectronicsCo., Ltd. ("SUMA-USI") with Cancon Information Industry Co., Ltd. ("Cancon"). According to the Shareholder Agreement, Universal Global Technology (Kunshan) Co.,Ltd. intends to contribute RMB 107,800,000, with a capital contribution of 49%. As of 31 December 2021, Universal Global Technology (Kunshan) Co., Ltd. has actuallycontributed RMB 107,800,000.00 in total, accounting for 49% of the capital contribution. According to the articles of association of SUMA-USI, the board of directors iscomposed of 5 directors, 2 of whom are appointed by Universal Global Technology (Kunshan) Co., Ltd., and ordinary resolutions need to be approved by more than halfof the directors attending the board meeting while special matters need to obtain the unanimous consent of all directors. Special matters include: deciding the Company'sbusiness plan and investment scheme, formulating the Company's annual financial budget plan and final accounting plan, formulating the Company's profit distributionplan and loss recovery plan, etc. In shareholders' meeting, approval for ordinary resolutions require assent by shareholders representing over ? voting rights, whileapproval for special resolutions require assent by shareholders representing over ? voting rights. Therefore, SUMA-USI is a joint venture of Universal Global Technology(Kunshan) Co., Ltd., and the Group accounts for it under the equity method.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Long-term equity investments - continued
Note 2: In July 2019, Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary, made an additional contribution of SGD 79,862,500 to M-Universe Investments Pte. Ltd. ("M-Universe"), a sub-subsidiary of it established in Singapore, to publicly acquire the ordinary shares of Memtech International Ltd.("Memtech"), a company listed in Singapore. Pursuant to the Equity Acquisition Agreement, M-Universe acquired 42.23% of Memtech's equity interest at the market priceof SGD1.35 per share on 30 June 2019, meanwhile, M-Universe issued new shares at the same subscription price to Keytech Investment Pte. Ltd. ("Keytech"), the originalshareholder of Memtech, i.e., M-Universe exchanged its 57.77% equity interest in Memtech for the same percentage of shares held by Keytech. As a result, UniversalGlobal Technology Co., Limited's shareholding in M-Universe was reduced from 100 % to 42.23%. According to the Shareholder Agreement of M-Universe, the board ofdirectors is composed of 3 directors, 2 of which are appointed by Keytech and 1 by Universal Global Technology Co., Limited, and the resolutions need to be approved bythe majority of the directors attending the board meeting, so the Group accounts for it under the equity method.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Other equity instrument investments
(1) Other equity instrument investments
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Shiding Venture Capital Co., Ltd. | 75,957,194.28 | 41,351,831.65 |
(2) Non-trading equity instrument investments
Unit: RMB
| Item | Dividend income recognized in the year | Accumulated gains | Reasons for designation as at fair value through other comprehensive income |
| Shiding Venture Capital Co., Ltd. (Note) | 14,910,026.14 | 10,694,774.12 | Non-trading equity investments that the Group does not expect to dispose of in the foreseeable future |
Note: The Group invested in Shiding Venture Capital Co., Ltd. in 2016, accounting for 5% of the equity interests inthe investee.
13. Other non-current financial assets
Unit: RMB
| Item | 31/12/2021 | 31/12/2020(Restated) |
| PHI FUND, L.P. (Note IX, 4 and Note XII, 1(1)) | 93,130,696.47 | 64,091,002.18 |
| Contingent consideration (Note) | 90,969,658.89 | 88,844,432.52 |
| GaN System Inc. Series (Note IX, 4) | 31,878,465.32 | - |
| Senscomm Semiconductor Co., Ltd. (Note IX, 4) | 20,000,000.00 | - |
| Suzhou Yaotu Equity Investment Partnership (Note IX, 4 and Note XII, 1(1)) | 1,000,000.00 | - |
| Total | 236,978,820.68 | 152,935,434.70 |
Note: USI France which was incorporated by the Company through its wholly subsidiary Universal GlobalTechnology Co., Limited, entered into the Share Purchase Contracts with FAFG's shareholders including SPFHHolding Korlatolt Felelossegu Tarsasag, ASDI and Arkéa Capital Investissement S.A., etc. on 12 December 2019to acquire the 100% equity of FAFG. The parties to the transaction agreed that an adjustment might be madeaccordingly based on the present transaction consideration according to the accumulative performance achievedfor the two years from 1 January 2021 to 31 December 2022.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
14. Fixed assets
(1) Fixed assets
Unit: RMB
| Item | Land operated overseas | Buildings | Machinery equipment | Transportation | Electronic equipment, appliances and furniture | Decoration cost | Total |
| I. Original carrying amount | |||||||
| 1. 31/12/2020 (Restated) | 206,534,814.31 | 884,731,867.01 | 5,247,844,751.47 | 28,942,852.21 | 329,750,572.98 | 114,789,338.64 | 6,812,594,196.62 |
| 2. Increase in the year | - | 412,526,033.07 | 799,305,977.96 | 462,809.37 | 121,934,501.36 | 10,536,000.00 | 1,344,765,321.76 |
| (1) Purchase | - | 8,508,679.66 | 7,313,748.39 | 164,995.85 | 15,553,361.30 | - | 31,540,785.20 |
| (2) Transfer from construction in progress | - | 402,869,263.57 | 785,796,195.50 | 297,813.52 | 106,253,195.75 | 10,536,000.00 | 1,305,752,468.34 |
| (3) Increase from business combination | - | 1,148,089.84 | 6,196,034.07 | - | 127,944.31 | - | 7,472,068.22 |
| 3. Decrease in the year | - | 16,419,875.06 | 132,533,035.09 | 11,629,426.49 | 4,686,725.77 | 2,887,261.57 | 168,156,323.98 |
| (1) Disposal or retirement | - | 16,419,875.06 | 132,533,035.09 | 11,629,426.49 | 4,686,725.77 | 2,887,261.57 | 168,156,323.98 |
| 4. Exchange differences arising on translation of foreign currencies | (5,051,417.53) | (15,601,320.66) | (16,961,932.48) | (1,021,539.34) | (5,106,859.20) | - | (43,743,069.21) |
| 5. 31/12/2021 | 201,483,396.78 | 1,265,236,704.36 | 5,897,655,761.86 | 16,754,695.75 | 441,891,489.37 | 122,438,077.07 | 7,945,460,125.19 |
| II. Accumulated depreciation | |||||||
| 1. 31/12/2020 | - | 396,999,360.24 | 3,136,699,071.87 | 10,187,424.58 | 229,776,229.70 | 110,333,922.64 | 3,883,996,009.03 |
| 2. Increase in the year | - | 57,205,912.27 | 629,787,346.24 | 1,766,011.52 | 50,969,163.52 | 4,270,184.48 | 743,998,618.03 |
| (1) Provision | - | 57,205,912.27 | 629,787,346.24 | 1,766,011.52 | 50,969,163.52 | 4,270,184.48 | 743,998,618.03 |
| 3. Decrease in the year | - | 11,169,198.75 | 90,035,316.10 | 22,759.50 | 3,542,507.74 | 2,887,261.57 | 107,657,043.66 |
| (1) Disposal or retirement | - | 11,169,198.75 | 90,035,316.10 | 22,759.50 | 3,542,507.74 | 2,887,261.57 | 107,657,043.66 |
| 4. Exchange differences arising on translation of foreign currencies | - | (3,291,216.92) | (11,569,797.48) | 7,626.92 | (2,229,828.74) | - | (17,083,216.22) |
| 5. 31/12/2021 | - | 439,744,856.84 | 3,664,881,304.53 | 11,938,303.52 | 274,973,056.74 | 111,716,845.55 | 4,503,254,367.18 |
| III. Provision for impairment loss | |||||||
| 31/12/2020 & 31/12/2021 | - | - | - | - | - | - | - |
| IV. Carrying amount | |||||||
| 1. 31/12/2021 | 201,483,396.78 | 825,491,847.52 | 2,232,774,457.33 | 4,816,392.23 | 166,918,432.63 | 10,721,231.52 | 3,442,205,758.01 |
| 2. 31/12/2020 (Restated) | 206,534,814.31 | 487,732,506.77 | 2,111,145,679.60 | 18,755,427.63 | 99,974,343.28 | 4,455,416.00 | 2,928,598,187.59 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
14. Fixed assets - continued
(2) As of 31 December 2021, the Group had no significant temporarily idle fixed asset.
(3) As of 31 December 2021, the Group had no fixed assets of which certificates of title have not been obtained
(4) As of 31 December 2021, the Group had no fixed assets that have been pledged.
15. Construction in progress
(1) Construction in progress
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 | ||||
| Book value | Provision for impairment losses | Carrying amount | Book value | Provision for impairment losses | Carrying amount | |
| Shengxia factory-Chip module production project | 179,188,077.68 | - | 179,188,077.68 | 54,061,530.54 | - | 54,061,530.54 |
| Vietnam factory-Wearable device production project | 6,601,158.52 | - | 6,601,158.52 | 17,480,353.06 | - | 17,480,353.06 |
| Huizohu factory-Electronic product production project | 310,085,666.90 | - | 310,085,666.90 | 48,165,498.02 | - | 48,165,498.02 |
| Other construction, decoration and equipment funds | 302,140,800.12 | - | 302,140,800.12 | 312,235,039.62 | - | 312,235,039.62 |
| Total | 798,015,703.22 | - | 798,015,703.22 | 431,942,421.24 | - | 431,942,421.24 |
(2) Changes in construction in progress
Unit: RMB
| Item name | Budget | 31/12/2020 | Increase in the year | Increase from business combination | Transfer to fixed assets | Transferred to long-term prepaid expenses in the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2021 | Amount injected as a proportion of budget amount (%) | Amount of accumulated capitalized interest | Including: capitalized interest for the year | Interest capitalization rate for the year (%) | Source of funds |
| Shengxia factory-Chip module production project | 910,000,000.00 | 54,061,530.54 | 438,697,671.47 | - | (279,159,169.33) | (34,411,955.00) | - | 179,188,077.68 | 60% |
-
| - |
| - |
| - |
| - | - | Self-owned funds / Raised funds | |||||||||||
| Vietnam factory-Wearable device production project | 1,400,000,000.00 | 17,480,353.06 | 338,446,713.50 | - | (349,050,294.25) | - | (275,613.79) | 6,601,158.52 | 36% | - | - | - | Self-owned funds / Raised funds |
| Huizohu factory-Electronic product production project | 1,350,000,000.00 | 48,165,498.02 | 279,401,914.74 | - | (17,481,745.86) | - | 310,085,666.90 | 26% | - | - | - | Self-owned funds / Raised funds | |
| Other construction, decoration and equipment funds | N/A | 312,235,039.62 | 681,724,184.76 | 1,104,633.49 | (660,061,258.90) | (28,279,099.42) | (4,582,699.43) | 302,140,800.12 | N/A | - | - | - | Self-owned funds |
| Total | 431,942,421.24 | 1,738,270,484.47 | 1,104,633.49 | (1,305,752,468.34) | (62,691,054.42) | (4,858,313.22) | 798,015,703.22 |
(3) As of 31 December 2021, the Group had no construction in progress that requires provision for impairment
losses.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Right-of-use assets
(1) Right-of-use assets
Unit: RMB
| Item | Buildings | Machinery equipment | Transportation | Others | Total |
| I. Original carrying amount | |||||
| 1. 31/12/2020 | 787,300,810.44 | 1,122,244.22 | 6,154,901.18 | 2,166,997.46 | 796,744,953.30 |
| 2. Increase in the year | |||||
| (1) Increase | 20,463,295.65 | 66,390.18 | 2,854,843.51 | 332,101.11 | 23,716,630.45 |
| (2) Increase from business combination | 41,087,402.27 | - | - | - | 41,087,402.27 |
| 3. Decrease in the year | |||||
| (1) Disposal or retirement | 47,756,612.87 | 87,134.92 | 2,843,665.19 | 148,788.41 | 50,836,201.39 |
| 4. Exchange differences arising on translation of foreign currencies | (6,565,560.49) | (53,114.44) | (408,461.50) | (1,477.74) | (7,028,614.17) |
| 5. 31/12/2021 | 794,529,335.00 | 1,048,385.04 | 5,757,618.00 | 2,348,832.42 | 803,684,170.46 |
| II. Accumulated depreciation | |||||
| 1. 31/12/2020 | 164,371,539.58 | 55,240.88 | 2,065,263.31 | 490,870.17 | 166,982,913.94 |
| 2. Increase in the year | |||||
| (1) Provision | 122,173,196.12 | 737,357.35 | 2,552,132.22 | 571,872.83 | 126,034,558.52 |
| 3. Decrease in the year | |||||
| (1) Disposal or retirement | 47,127,624.74 | 87,134.92 | 2,358,287.03 | 148,788.41 | 49,721,835.10 |
| 4. Exchange differences arising on translation of foreign currencies | (2,441,672.06) | (39,302.06) | (116,910.98) | (4,376.03) | (2,602,261.13) |
| 5. 31/12/2021 | 236,975,438.90 | 666,161.25 | 2,142,197.52 | 909,578.56 | 240,693,376.23 |
| III. Provision for impairment loss | |||||
| 31/12/2020 & 31/12/2021 | - | - | - | - | - |
| IV. Carrying amount | |||||
| 1. 31/12/2021 | 557,553,896.10 | 382,223.79 | 3,615,420.48 | 1,439,253.86 | 562,990,794.23 |
| 2. 31/12/2020 | 622,929,270.86 | 1,067,003.34 | 4,089,637.87 | 1,676,127.29 | 629,762,039.36 |
The Group has leased a number of assets, including office, plants, dormitories, machinery equipment andtransportation equipment, with a lease term ranging from 2 to 10 years.
In 2021, the short-term lease expenses included in the profit or loss for the current period and treated under asimplified method is RMB 9,020,463.27 (2020: RMB 4,133,482.5), and the cash outflows related to leases areRMB 145,961,156.97 (2020: RMB 100,152,845.92).
The assets leased in shall not be used as collateral for borrowings.
As at 31 December 2021, the Group's short-term lease portfolio was similar to the short and medium-term leaseportfolio in the lease expenses described above.
The Group's potential future cash flows not included in the measurement of lease liabilities are mainly derived fromthe rentals that will be adjusted to the market levels upon renewal of the lease contracts relating to buildings. As of31 December 2021, the Group had no leases committed but not yet commenced.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Intangible assets
(1) Intangible assets
Unit: RMB
| Item | Software | Patents | Trademark right | Land use rights | Customer relation | Total |
| I. Original carrying amount | ||||||
| 1. 31/12/2020 (Restated) | 343,804,124.52 | 1,954,137.15 | 412,426.27 | 130,069,025.23 | 180,098,504.72 | 656,338,217.89 |
| 2. Increase in the year | 77,582,417.08 | - | - | - | - | 77,582,417.08 |
| (1) Purchase | 77,498,662.16 | - | - | - | - | 77,498,662.16 |
| (2) Increase from business combination | 83,754.92 | - | - | - | - | 83,754.92 |
| 3. Decrease in the year | ||||||
| (1) Disposal or retirement | 83,196.15 | - | - | - | - | 83,196.15 |
| 4. Exchange differences arising on translation of foreign currencies | (7,530,490.59) | (42,985.85) | 1,215.34 | (3,530,135.12) | (17,802,829.74) | (28,905,225.96) |
| 5. 31/12/2021 | 413,772,854.86 | 1,911,151.30 | 413,641.61 | 126,538,890.11 | 162,295,674.98 | 704,932,212.86 |
| II. Accumulated amortization | ||||||
| 1. 31/12/2020 | 140,667,895.23 | 1,954,137.15 | 393,796.27 | 9,080,878.25 | - | 152,096,706.90 |
| 2. Increase in the year | 87,987,951.35 | - | 18,630.00 | 3,358,936.03 | 11,441,925.13 | 102,807,442.51 |
| (1) Provision | 87,987,951.35 | - | 18,630.00 | 3,358,936.03 | 11,441,925.13 | 102,807,442.51 |
| 3. Decrease in the year | 83,196.15 | - | - | - | - | 83,196.15 |
| (1) Disposal or retirement | 83,196.15 | - | - | - | - | 83,196.15 |
| 4. Exchange differences arising on translation of foreign currencies | (2,608,837.46) | (42,985.85) | 1,215.34 | (78,484.20) | (620,479.35) | (3,349,571.52) |
| 5. 31/12/2021 | 225,963,812.97 | 1,911,151.30 | 413,641.61 | 12,361,330.08 | 10,821,445.78 | 251,471,381.74 |
| III. Provision for impairment loss | ||||||
| 31/12/2020 & 31/12/2021 | - | - | - | - | - | - |
| IV. Carrying amount | ||||||
| 1. 31/12/2021 | 187,809,041.89 | - | - | 114,177,560.03 | 151,474,229.20 | 453,460,831.12 |
| 2. 31/12/2020 (Restated) | 203,136,229.29 | - | 18,630.00 | 120,988,146.98 | 180,098,504.72 | 504,241,510.99 |
28. (2) As at 31 December 2021, the Group had no land use right of which the certificate of title was still in progress.29.30.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Goodwill
(1) Original book value of goodwill
Unit: RMB
| Name of investee | 31/12/2020 (Restated) | Changes for the year | 31/12/2021 | |
| Arising from business combination | Exchange differences arising on translation of financial statements denominated in foreign currencies | |||
| USI Poland | 26,656,694.79 | - | (609,538.67) | 26,047,156.12 |
| FAFG | 591,437,946.48 | - | (58,463,944.72) | 532,974,001.76 |
| Total | 618,094,641.27 | - | (59,073,483.39) | 559,021,157.88 |
(2) Impairment provision of goodwill
As of 31 December 2021, there is no impairment provision of goodwill.31.
(3) Relative information of asset group or a set of asset groups where the goodwill is related
USI Poland is located in the southwest of Poland and mainly engages in the manufacture and sale of mainboardsand adapter cards. This acquisition is part of the Group's global industrial layout and is of strategic importanceto the Group, facilitating the acquisition of new production capacity in Eastern Europe rapidly.
FAFG is located in France and mainly engages in the manufacture and sale of mainboards and adapter cards.This acquisition is part of the Group's global industrial layout and is of strategic importance to the Group.
(4) Specify test procedure, key parameters and recognition method for impairment loss of goodwill
The Group divides reporting segments geographically. For the purpose of impairment testing, the Groupallocates goodwill to three asset groups. As at 31 December 2021, the carrying amount of the goodwill allocatedto the three asset groups and their impairment provision were as below:
Unit: RMB
| Asset group of goodwill | Cost | Impairment provision | Net book value |
| European region—USI Poland | 26,047,156.12 | - | 26,047,156.12 |
| European region—FAFG Europe | 178,597,316.70 | - | 178,597,316.70 |
| China mainland—FAFG China | 354,376,685.06 | - | 354,376,685.06 |
| Total | 559,021,157.88 | - | 559,021,157.88 |
As at 31 December 2021, the Group assessed the recoverability of goodwill related to the USI Poland assetgroup, and the recoverable amount of USI Poland asset group was determined based on the present value ofestimated future cash flows. Future cash flows are determined based on the management's projections. Theprojections for next five years are based on the financial budgets approved by the management using a discountrate of 8.70%, while the cash flows in excess of five years are calculated on the basis of a 3% annualincremental growth rate. Such increasing growth rate is determined on the basis of the estimated growth ofrelated industries and will not exceed the long-term average growth rate of such industry. The Group'smanagement believes that any reasonable change in the above assumptions would not cause the carrying amountof USI Poland asset group to exceed its recoverable amount and therefore has determined that the goodwill isnot impaired.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Goodwill - continued
(4) Specify test procedure, key parameters and recognition method for impairment loss of goodwill - continued
As at 31 December 2021, the Group assessed the recoverability of goodwill related to FAFG Europe asset group,and the recoverable amount of FAFG Europe asset group was determined based on the present value ofestimated future cash flows. Future cash flows are determined based on the management's projections. Theprojections for next five years are based on the financial budgets approved by the management using a discountrate of 12.24%, while the cash flows in excess of five years are calculated on the basis of a 2.5% annualincremental growth rate. Such increasing growth rate is determined on the basis of the estimated growth ofrelated industries and will not exceed the long-term average growth rate. The Group's management believes thatany reasonable change in the above assumptions would not cause the carrying amount of FAFG Europe assetgroup to exceed its recoverable amount and therefore has determined that the goodwill is not impaired.
As at 31 December 2021, the Group assessed the recoverability of goodwill related to FAFG China asset group,and the recoverable amount of FAFG China asset group was determined based on the present value of estimatedfuture cash flows. Future cash flows are determined based on the management's projections. The projections fornext five years are based on the financial budgets approved by the management using a discount rate of 12.43%,while the cash flows in excess of five years are calculated on the basis of a 2.5% annual incremental growth rate.Such increasing growth rate is determined on the basis of the estimated growth of related industries and will notexceed the long-term average growth rate. The Group's management believes that any reasonable change in theabove assumptions would not cause the carrying amount of FAFG China asset group to exceed its recoverableamount and therefore has determined that the goodwill is not impaired.
(5) Adjustment on the recognized temporary value within 12 months subsequent to acquisition date
The Group acquired FAFG in December 2020. The Group employed an appraisal agency Duff & PhelpsConsulting (Shenzhen) Limited to assess the fair value of identifiable net assets of FAFG, but the Group has notreceived the appraisal report as at the issuance of 2020 Financial Report. Where the fair value of eachidentifiable asset, liability and contingent liability acquired in a merger or the cost of a business combination canonly be determined provisionally, the Group recognizes and measures the merger of FAFG on the basis of thetemporary value so determined. The Group recognized inventories, fixed assets and intangible assets as per theirtemporary value at RMB 1,080,142,123.19, RMB 380,277,087.35 and RMB 138,226,853.29, respectively, inthe 2020 Consolidated Financial Statements. On the acquisition date, the Group recognized goodwill of RMB1,048,855,739.68.
In June 2021, the Group obtained the appraisal report of identifiable net assets and recognized RMB1,096,828,257.66 of inventories, increasing by RMB 16,686,134.47 compared with the original temporary value;recognized RMB 661,970,691.35 of fixed assets, increasing by RMB 281,693,604.00 compared with theoriginal temporary value; recognized RMB 348,799,624.31 of intangible assets, increasing by RMB210,572,771.02 compared with the original temporary value; recognized RMB 87,471,785.94 of other non-current financial assets; recognized RMB 128,525,419.47 of deferred tax liabilities; and recognized an increaseof RMB 1,343,365.74 of minority interests, the total of which were RMB 466,555,510.22 higher than theirtemporary value. Therefore, the Group should reduce RMB 466,555,510.22 of goodwill on the acquisition date.The comparative financial statements have been restated.
19. Long-term prepaid expenses
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Transfer from construction in progress | Amortization for the year | Translation of financial statements denominated in foreign currencies | 31/12/2021 |
| Leased-in plant decoration works | 250,549,262.26 | 9,142,213.08 | 62,691,054.42 | (94,475,344.98) | (330,899.80) | 227,576,284.98 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
20. Deferred tax assets/deferred tax liabilities
(1) Deferred tax assets that are not offset
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 | ||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Provision for impairment losses of assets | 193,821,682.25 | 42,612,195.77 | 193,865,832.65 | 44,046,762.07 |
| Provision for credit loss | 13,223,761.97 | 3,596,532.84 | 15,912,392.17 | 4,051,200.76 |
| Deferred income | 57,000,065.25 | 8,550,009.79 | 28,622,780.00 | 4,293,417.00 |
| Employee benefits payable | 199,308,548.75 | 30,589,364.52 | 205,940,048.57 | 31,790,009.74 |
| Defined benefit plans | 223,818,884.41 | 52,394,385.80 | 289,264,664.53 | 71,648,237.56 |
| Depreciation differences | 10,242,956.06 | 1,536,443.41 | 11,328,867.72 | 1,699,330.16 |
| Provisions | 1,293,497.27 | 194,024.59 | 1,265,203.27 | 189,780.49 |
| Unrealized profit | 63,019,597.45 | 11,638,477.17 | 65,509,806.30 | 12,272,798.46 |
| Deductible losses | 270,300,755.99 | 73,237,594.45 | 232,110,435.75 | 67,704,334.28 |
| Sales discount | 394,837,081.32 | 67,996,678.40 | 221,495,157.72 | 41,958,778.64 |
| Others | 143,546,039.53 | 31,711,057.16 | 163,766,794.31 | 32,584,253.90 |
| Total | 1,570,412,870.25 | 324,056,763.90 | 1,429,081,982.99 | 312,238,903.06 |
(2) Deferred tax liabilities that are not offset
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 (Restated) | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Depreciation differences in research and development equipment tax credits | - | - | 548,175.46 | 82,226.32 |
| Depreciation differences | 15,127,571.63 | 4,538,271.49 | 41,169,648.33 | 12,350,894.50 |
| Fair value adjustment for business combination involving enterprise not under common control | 372,779,957.00 | 98,179,611.96 | 431,335,768.39 | 132,486,298.52 |
| Others | 14,075,520.47 | 4,222,656.14 | 9,320,940.27 | 2,796,282.08 |
| Total | 401,983,049.10 | 106,940,539.59 | 482,374,532.45 | 147,715,701.42 |
(3) Deferred tax assets and deferred tax liabilities that are presented at the net amount after offsetUnit: RMB
| Item | 31/12/2021 | 31/12/2020 (Restated) | ||
| Offset amount between deferred tax assets and liabilities at the end of the year | Deferred tax assets or liabilities after offset | Offset amount between deferred tax assets and liabilities at the beginning of the year | Deferred tax assets or liabilities after offset | |
| Deferred tax assets | (8,760,927.63) | 315,295,836.27 | (15,229,402.90) | 297,009,500.16 |
| Deferred tax liabilities | 8,760,927.63 | 98,179,611.96 | 15,229,402.90 | 132,486,298.52 |
Deferred tax assets are recognized for deductible temporary differences and deductible losses as the Group
believes that it is probable that sufficient taxable profits will be available in the future.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
20. Deferred tax assets/deferred tax liabilities - continued
(4) Deferred tax assets not recognized
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Deductible temporary differences | 8,989,736.44 | 2,918,452.30 |
| Deductible losses | 178,137,952.50 | 125,253,995.60 |
| Total | 187,127,688.94 | 128,172,447.90 |
(5) Deductible losses, for which no deferred tax assets are recognized, will expire in the following years
Unit: RMB
| Year | 31/12/2021 | 31/12/2020 |
| 2026 | 30,775,200.93 | - |
| No time limit | 147,362,751.57 | 125,253,995.60 |
| Total | 178,137,952.50 | 125,253,995.60 |
No deferred tax assets are recognized for deductible temporary differences and deductible losses due to theuncertainty in certain subsidiaries whether sufficient taxable profits will be available in the future.
21. Other non-current assets
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Prepayment for equipment | 91,927,638.00 | 45,040,502.27 |
| Prepayment for enterprise income tax | 33,173,383.08 | 36,812,297.60 |
| Guarantee and deposit | 11,240,266.61 | 7,470,169.68 |
| Others | 474,023.49 | 420,736.91 |
| Total | 136,815,311.18 | 89,743,706.46 |
22. Short-term borrowings
(1) Categories of short-term borrowings:
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Credit loans | 2,480,500,031.68 | 375,341,430.81 |
As at 31 December 2021, the Group's short-term borrowings are all composed of credit loans with no pledged,mortgaged or guaranteed borrowings.
(2) As at 31 December 2021, the Group has no short-term borrowings overdue but not yet repaid.
23. Derivative financial liabilities
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Financial liabilities at FVTPL | 976,413.16 | 18,402,480.68 |
| Including: Derivative financial assets (Note) | 976,413.16 | 18,402,480.68 |
Note: The derivative financial liabilities held by the Group are foreign exchange forward contract.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
24. Accounts payable
(1) Accounts payable
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Payable for materials | 11,527,517,322.76 | 11,148,789,280.06 |
| Payable for assets | 577,303,942.61 | 190,850,342.60 |
| Expenses payable | 453,776,977.80 | 495,600,111.63 |
| Total | 12,558,598,243.17 | 11,835,239,734.29 |
(2) As at 31 December 2021, the Group has no significant accounts payable aged more than one year.
25. Contract liabilities
(1) Contract liabilities
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Receipts in advance | 311,988,551.56 | 300,864,893.86 |
The Group's revenue from sales of goods is recognized when the control over related goods is transferred to thecustomer. A contractual liability is recognized at the time of the transaction for goods paid for in advance by thecustomer until the goods are shipped to or delivered to the customer, i.e. when control is transferred to thecustomer.
The carrying amount of contract liabilities of RMB 300,864,893.86 at the beginning of the year has beenrecognized as revenue in the current year, while that of RMB 311,988,551.56 at the end of the year is expectedto be recognized as revenue in 2022.
26. Employee benefits payable
(1) Employee benefits payable
32. Unit:
RMB
| Item | 31/12/2020 | Increase from business combination | Increase in the year | Decrease in the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2021 |
| 1. Short-term benefits | 826,428,786.98 | 24,093,177.03 | 3,425,309,380.16 | 3,476,872,693.74 | (5,585,552.82) | 793,373,097.61 |
| 2. Post-employment benefits-defined contribution plan | 29,744,216.98 | - | 203,954,853.38 | 205,581,964.75 | (1,001,676.23) | 27,115,429.38 |
| 3. Long-term employee benefits payable due within one year | 13,335,819.27 | - | 13,813,862.35 | 16,526,112.29 | 74,890.16 | 10,698,459.49 |
| Total | 869,508,823.23 | 24,093,177.03 | 3,643,078,095.89 | 3,698,980,770.78 | (6,512,338.89) | 831,186,986.48 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
26. Employee benefits payable - continued
(2) Short-term employee benefits
Unit: RMB
| Item | 31/12/2020 | Increase from business combination | Increase in the year | Decrease in the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2021 |
| 1. Wages or salaries, bonuses, allowances and subsidies | 768,913,089.78 | 21,426,000.79 | 2,861,376,060.45 | 2,918,765,470.60 | (2,384,626.41) | 730,565,054.01 |
| 2. Staff welfare | 12,267,107.72 | - | 231,001,247.97 | 224,816,725.73 | (1,516,465.82) | 16,935,164.14 |
| 3. Social security contributions | 40,622,040.65 | 2,667,176.24 | 265,245,344.15 | 265,895,880.75 | (1,533,667.45) | 41,105,012.84 |
| Including: Medical insurance | 32,821,439.60 | 2,667,176.24 | 158,726,585.96 | 160,193,404.23 | (1,407,938.32) | 32,613,859.25 |
| Work injury insurance | 6,045,891.40 | - | 49,288,756.04 | 48,133,007.90 | (47,688.58) | 7,153,950.96 |
| Maternity insurance | 122,757.56 | - | 1,560,120.91 | 1,649,938.82 | (766.53) | 32,173.12 |
| Overseas comprehensive insurance expenses | 1,631,952.09 | - | 55,669,881.24 | 55,919,529.80 | (77,274.02) | 1,305,029.51 |
| 4. Housing funds | 3,866,916.07 | - | 59,723,375.76 | 60,130,643.00 | (117,407.93) | 3,342,240.90 |
| 5. Union running costs and employee education cost | 759,632.76 | - | 7,963,351.83 | 7,263,973.66 | (33,385.21) | 1,425,625.72 |
| Total | 826,428,786.98 | 24,093,177.03 | 3,425,309,380.16 | 3,476,872,693.74 | (5,585,552.82) | 793,373,097.61 |
(3) Defined contribution plan (Note)
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Decrease in the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2021 |
| 1. Basic pensions | 28,147,217.16 | 192,429,296.31 | 193,348,594.20 | (910,603.88) | 26,317,315.39 |
| 2. Unemployment insurance | 1,596,999.82 | 11,525,557.07 | 12,233,370.55 | (91,072.35) | 798,113.99 |
| Total | 29,744,216.98 | 203,954,853.38 | 205,581,964.75 | (1,001,676.23) | 27,115,429.38 |
Note: The Group participates, as required, in the pension insurance and unemployment plan established byChinese government authorities, Mexican authorities and French authorities, etc. According to such plans, theGroup contributes monthly to such plans based on corresponding percentages of contribution base. Except forabove monthly contributions, the Group does not assume further payment obligations. The related expendituresare either included in cost of related assets or charged to profit or loss in the period when they are incurred.
In this year, the Group should contribute pension insurance and unemployment plans amounting to RMB192,429,296.31 and RMB 11,525,557.07 (2020: RMB 144,750,813.18 and RMB 2,738,579.86). As at 31December 2021, the Group has outstanding contributions to pension insurance and unemployment plans thatare accrued but not yet paid in the current reporting period amounting to RMB 26,317,315.39 and RMB798,113.99 (31 December 2020: RMB 28,147,217.16 and RMB 1,596,999.82). The outstanding contributionshave been paid after the reporting period.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
27. Taxes payable
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Enterprise income tax | 162,797,690.95 | 104,540,485.44 |
| VAT | 42,307,371.96 | 44,484,394.96 |
| Surcharges | 12,844,623.85 | 12,127,282.66 |
| Withholding of income tax | 6,774,673.16 | 3,916,487.97 |
| Stamp duties | 5,657,760.52 | 6,024,978.80 |
| Individual income tax | 5,288,608.50 | 2,769,891.38 |
| Withholding of VAT and levies | 499,635.84 | 268,118.37 |
| Others | 2,506,114.97 | 4,869,069.55 |
| Total | 238,676,479.75 | 179,000,709.13 |
28. Other payables
(1) Summary of other payables
| Item | 31/12/2021 | 31/12/2020 |
| Interest payable | 9,995,478.63 | 8,855,328.84 |
| Other payables | 413,513,986.88 | 390,981,603.23 |
| Total | 423,509,465.51 | 399,836,932.07 |
(2) Interest payable
| Item | 31/12/2021 | 31/12/2020 |
| Interest payable of short-term borrowings | 4,242,576.34 | 2,307,997.54 |
| Interest payable of long-term borrowings | 2,888,951.29 | 6,547,331.30 |
| Interest payable of bonds | 2,863,951.00 | - |
| Total | 9,995,478.63 | 8,855,328.84 |
As at 31 December 2021, the Group has no significant interest payables overdue.
(3) Other payables by nature
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Collection on behalf of third parties | 209,375,088.52 | 172,552,996.84 |
| Professional services fee | 76,878,779.18 | 66,663,965.24 |
| Accrued expenses | 65,543,584.98 | 82,584,370.68 |
| Utilities, storage and transportation costs | 18,201,801.15 | 20,199,333.63 |
| Miscellaneous fees | 15,962,956.95 | 17,368,159.74 |
| Procurement of non-raw materials | 7,554,988.90 | 7,757,290.05 |
| Others | 19,996,787.20 | 23,855,487.05 |
| Total | 413,513,986.88 | 390,981,603.23 |
As at 31 December 2021, the Group has no significant other payables aged more than one year.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
29. Non-current liabilities due within one year
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Long-term borrowings due within one year (Note (V). 30) | 589,495,046.10 | 798,170,519.68 |
| Lease liabilities due within one year (Note (V). 32) | 131,012,735.39 | 136,810,835.36 |
| Total | 720,507,781.49 | 934,981,355.04 |
30. Long-term borrowings
Details of long-term borrowings
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Credit loans (Note 1) | 1,690,715,513.65 | 2,862,475,218.51 |
| Pledged borrowings (Note 2) | - | 947,364,245.81 |
| Less: Long-term borrowings included in non-current liabilities due within one year (Note (V). 29) | 589,495,046.10 | 798,170,519.68 |
| Total | 1,101,220,467.55 | 3,011,668,944.64 |
Note 1: In October 2019 (the "effective date"), Universal Global Technology Co., Limited, a subsidiary of theGroup, entered into the Loan Agreement with the bank in the total limit of USD 420,000,000.00. In July 2020,Universal Global Technology Co., Limited borrowed USD 161,271,000.00 and EUR 225,000,000.00 from thebank, equivalent to RMB 1,059,505,218.51 and RMB 1,802,970,000.00, respectively, within the limit agreed inthe Loan Agreement. The borrowings shall be repaid at 10%, 15%, 20% and 55% of the borrowings 18 months,24 months, and 30 months after the effective date of the contract and in October 2022, the final maturity date,respectively. The interest rate for USD borrowings is three-month or six-month LIBOR plus 95 basis points, andthat for EUR borrowings is three-month or six-month plus 115 basis points. In 2021, Universal GlobalTechnology Co., Limited repaid a part of long-term borrowings in advance. As at 31 December 2021, thebalance of above borrowings was USD 92,459,658.72, equivalent to RMB 589,495,046.10, which was includedin non-current liabilities due within one year.
In July 2021, Universal Global Technology Co., Limited acquired another EUR 152,500,000.00 (equivalent toRMB 1,101,220,467.55 as at 31 December 2021) of long-term borrowings bearing an interest rate of 0.4%,which should be repaid in a lump sum when due.
Note 2: In March 2020, USI France, a subsidiary of the Group, borrowed EUR 118,225,020.68 from the bank,equivalent to RMB 947,364,245.81. The borrowings shall be repaid at 8.33%, 8.33%, 8.34%, 10%, 10%,
13.75%, 13.75%, 13.75% and 13.75% of the borrowings 12 months, 18 months, 24 months, 30 months, 36months, 42 months, 48 months, 54 months after the effective date of the contract and in January 2025, the finalmaturity date, respectively. The interest rate is EURIBOR plus 195 basis points, and the borrowings areguaranteed by 100% of the equity interest in FAFG acquired by the Group during the year. In 2021, USI Francerepaid such long-term borrowings in advance.
As at 31 December 2021, the Group had no long-term borrowings that were due but not yet repaid.
31. Bonds payable
(1) Bonds payable
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Convertible corporate bonds | 3,115,505,143.28 | - |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
31. Bonds payable - continued
(2) Movements in bonds payable
Unit: RMB
| Name of bonds | Nominal value | Date of issue | Term | Amount | 31/12/2020 | Issued in this year | Interest accrued as per nominal value | Amortization of premiums or discounts | Swap to equity | 31/12/2021 |
| Universal Global Convertible Bonds | 100 | 2021/3/4 | 6 years | 3,450,000,000.00 | - | 3,010,541,240.32 | 2,863,951.00 | 107,851,300.34 | 23,446.38 | 3,115,505,143.28 |
(3) Description on issuing, conversion condition and conversion time of convertible corporate bonds
As approved by CSRC with "Zheng Jian Xu Ke [2021] No. 167", the Company issued 34,500,000 convertiblebonds at nominal value of RMB 100 (the "convertible bonds"), with annual coupon rate of 0.1%, 0.2%, 0.6%,
1.3%, 1.8% and 2.0%, respectively for the 1
st year, 2
nd year, 3
rd
year, 4
th
year, 5
th
year and 6
th
year, and theannual interest is payable at the date of each full year from the first date of issue of the convertible bonds in thisissue. Holders of the convertible bonds may exercise their right to convert the convertible bonds in this issuanceinto A shares of the Company at the current conversion price during the period commencing from the firsttrading day after the expiry of nine months from the date of completion of the issue of the convertible bonds (i.e.10 March 2021) to the maturity date of the convertible bonds (the "conversion period"). Within five trading daysafter the expiry of the convertible bonds in this issuance, the Company will redeem the unconverted convertiblebonds at a price of 108.00% (including the last interest) of the face value of the bonds.
During the conversion period of this issuance of convertible bonds, if the closing price of the company's shareson at least 20 trading days in any 30 consecutive trading days is not less than 130% (including 130%) of thecurrent conversion price, with the approval of relevant regulatory authorities (if necessary), the company has theright to redeem all or part of the convertible bonds that have not been converted according to the face value ofthe bonds plus the accrued interest in the current period. If the company's share conversion price is adjusted dueto ex rights and ex dividend on the above trading days, it shall be calculated according to the share conversionprice and closing price before the adjustment on the trading day before the adjustment, and according to theadjusted share conversion price and closing price on the trading day after the adjustment. In addition, when thetotal face value of the convertible bonds not converted into shares issued is less than RMB 30,000,000, thecompany has the right to redeem all the convertible bonds not converted into shares at the price of face valueplus accrued interest in the current period.
In the last two interest bearing years of the issuance of convertible bonds, if the closing price of the Company'sshares on any consecutive 30 trading days is lower than 70% of the current conversion price, the holders ofconvertible bonds have the right to resell all or part of the convertible bonds to the company at the price of facevalue plus accrued interest for the current period. If the conversion price has been adjusted due to bonus shares,conversion to share capital, issuance of new shares, allotment of shares or distribution of cash dividends(excluding the increased share capital due to the conversion of convertible bonds into shares), it shall becalculated according to the conversion price and closing price before the adjustment on the trading day beforethe adjustment, and according to the conversion price and closing price after the adjustment on the trading dayafter the adjustment. In case of downward correction of the conversion price, the above "Thirty consecutivetrading days" shall be recalculated from the first trading day after the conversion price adjustment. In the lasttwo interest bearing years of the convertible bonds issued this time, the holders of the convertible bonds canexercise the resale right once according to the above agreed conditions after the resale conditions are met for thefirst time. If the holders of the convertible bonds fail to declare and implement the resale within the resalereporting period announced by the company at that time, the resale right shall not be exercised in the interestbearing year, and the holders of the convertible bonds cannot exercise part of the resale right multiple times.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
31. Bonds payable - continued
During the duration of the convertible bonds issued this time, if the company is deemed to change the purposeof the raised funds or recognized by the CSRC as changing the purpose of the raised funds in accordance withthe relevant provisions of the CSRC, the holders of the convertible bonds have the right to sell back at one time.The holders of convertible bonds have the right to resell all or part of the convertible bonds held by them to thecompany at the price of the face value of the bonds plus the accrued interest of the current period. After theadditional resale conditions are met, the holders of convertible bonds may carry out the resale within theadditional resale reporting period after the announcement of the company. If the resale is not carried out duringthe additional resale reporting period, they shall not exercise the additional resale right.
When the convertible bonds have been issued for three years, the holders of the convertible bonds have the rightto sell back at one time, that is, they have the right to sell back all or part of the convertible bonds held by themto the company at 102.00% (including the interest of the third year). After the conditions for the option of resaleterms are met, the holders of convertible bonds may carry out resale within the reporting period for the option ofresale after the announcement of the company; Those who do not carry out resale within the reporting period ofselective resale shall no longer enjoy the rights agreed in the terms of selective resale.
The initial conversion price of convertible bonds issued this time is RMB 20.25 per share. According to theresolution of the general meeting of shareholders on 23 April 2021, the Company distributed cash dividends toall shareholders, with a cash dividend of RMB 5.00 per 10 shares. Therefore, as of 31 December 2021, theconversion price was adjusted to RMB 19.75 per share.
When the convertible corporate bonds issued by the company are initially measured, the amount of the fairvalue of the corresponding liability component after deducting the issuance expenses to be apportioned is RMB3,010,541,240.32, which is included in the bonds payable; The corresponding amount of redemption right andput back right is RMB 6,900,000.00, which is included in derivative financial liabilities; The amount of issuanceexpenses to be apportioned for the derivative financial liabilities is RMB 45,397.90, which is included in thecurrent profit and loss; The fair value of the corresponding equity part after deducting the apportioned issuanceexpenses is RMB 409,905,205.31, which is included in other equity instruments. The amortized cost of theadjusted liability is RMB 107,851,300.34 withdrawn according to the effective interest rate method in thecurrent period.
As of 31 December 2021, the Company has accumulated assets with face value of RMB 26,000 (book value ofRMB 23,446.38) convertible bonds are converted into A-share ordinary shares, and the number of sharesconverted is 1,310 shares.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
32. Lease liabilities
(1) Details of lease liabilities
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Lease liabilities | 606,138,332.63 | 671,779,599.83 |
| Less: Lease liabilities included in non-current liabilities due within one year (Note (V). 29) | 131,012,735.39 | 136,810,835.36 |
| Total | 475,125,597.24 | 534,968,764.47 |
33. Long-term payables
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Software licensing fee (Note) | 59,328,067.47 | 55,184,703.96 |
| Less: Long-term payables due within one year | 13,747,011.85 | 11,896,967.96 |
| Total | 45,581,055.62 | 43,287,736.00 |
Note: It refers to software licensing fee payable by the Group, in which the portion due within one year isincluded in accounts payable.
34. Long-term employee benefits payable
(1) Details of long-term employee benefits payable
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| 1. Post-employment benefits- net liability of defined benefit plans | 296,461,708.74 | 334,565,722.46 |
| 2. Termination benefits | 869,451.40 | 1,003,958.04 |
| Total | 297,331,160.14 | 335,569,680.50 |
(2) Changes in defined benefit plans
Net liability of defined benefit plans
Unit: RMB
| Item | 2021 | 2020 |
| I. 31/12/2020 | 347,901,541.73 | 116,214,486.00 |
| II. Increase from business combination | - | 230,957,112.54 |
| III. Defined benefits costs recognized in profit or loss for the year | 2,233,934.44 | 2,127,295.09 |
| IV. Defined benefits costs recognized in other comprehensive income | (4,677,068.45) | 13,198,594.17 |
| V. Amount contributed and paid during the year | (16,526,112.29) | (16,318,412.08) |
| VI. Exchange differences arising on translation of foreign currencies | (21,772,127.20) | 1,722,466.01 |
| VII. 31/12/2021 | 307,160,168.23 | 347,901,541.73 |
| Less: Long-term employee benefits payable due within one year | 10,698,459.49 | 13,335,819.27 |
| Long-term employee benefits payable paid after one year | 296,461,708.74 | 334,565,722.46 |
Contents of defined benefit plans and related risks, and its impact over the Group's future cash flows, timing anduncertainty:
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
34. Long-term employee benefits payable - continued
(2) Changes in defined benefit plans - continued
UGTW and USITW, the Group's subsidiaries, provide retirement benefit plan for full-time regular employeeshired before 1 July 2005. The Group acquired FAFG in 2020. FAFG provides retirement benefit plan for itsemployees, which provides a pension for some employees who have worked for more than 10 years accordingto the working years and certain rate of their salaries in recent 10 years, and a pension for some employees whohave worked for more than 2 years according to the working years and certain rate of their salaries in recent 12months.
The defined benefit plans expose the Group to actuarial risks such as discount rate, future salary growth rate, etc.
The Group hired Towers Watson Business Management Consulting Co., Ltd. to estimate the present value ofretirement benefit plan of UGTW and USITW by actuary in accordance with the projected unit credit method.Future salary growth rate and mortality rate are used to estimate the future cash outflows to recognize thepresent value of the plan at a discounted rate which is determined in accordance with the market interest rate ofhigh-quality corporate bonds at the balance sheet date. In countries where there is no market for such bonds, themarket interest rate for government bonds (at the balance sheet date) shall be used. Since the Group's post-employment benefit obligations remain effective for 11 to 13 years, the discount rate is determined by referenceto the bonds with a similar duration to the post-employment benefit obligations. Therefore, the average interestrate for government bonds with a duration of 11 years or more is referenced. The Group recognizes liabilitiesbased on the actuarial result, with gains or losses arising from actuary recognized in other comprehensiveincome and not to be reversed to profit or loss in subsequent accounting periods. Past service cost is included inprofit or loss for the period when the modification to the plan is made. And net interest is recognized as theamount of net liabilities or assets of the defined benefit plan multiplying by an appropriate discount rate.
The following table lists the significant actuarial assumptions used by UGTW and USITW in determining thepresent value of the defined benefit plan obligations:
| 31/12/2021 | 31/12/2020 | |
| Discount rate | 0.75% | 0.9% |
| Future salary growth rate | 2.25% | 2.25% |
| Mortality rate | Assumptions made based on the sixth Mortality Table in Taiwan | Assumptions made based on the fifth Mortality Table in Taiwan |
Sensitive analysis as below is based on reasonable changes of corresponding assumptions at the end of thereporting period (all other assumptions remain unchanged):
? When the discount rate is up (down) 0.5%, the present value of defined benefit plan obligations ofUGTW and USITW will be decreased by RMB 6,009,465.79 (increased by RMB 6,475,205.14) andRMB4,927,577.68 (increased by RMB 5,309,705.07), respectively.
? When the future salary growth rate is up (down) 0.5%, the present value of defined benefit planobligations of UGTW and USITW will be increased by RMB 10,858,959.57 (decreased by RMB10,181,311.11) and RMB 675,345.10 (decreased by RMB 636,418.32), respectively.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
34. Long-term employee benefits payable - continued
(2) Changes in defined benefit plans - continued
The Group hired Willis Towers Watson to estimate the present value of retirement benefit plan obligation ofFAFG by actuary in accordance with the projected unit credit method. Future salary growth rate is used toestimate the future cash outflows to recognize the present value of the plan at a discounted rate.
The following table lists the significant actuarial assumptions used by FAFG in determining the present value ofthe defined benefit plan obligations:
| 31/12/2021 | 31/12/2020 | |
| Discount rate | 0.85%~0.93% | 0.65%~0.66% |
| Future salary growth rate | 1%-2% | 1%-2% |
| Mortality rate | Life expectancy table of local National Bureau of Statistics | Life expectancy table of local National Bureau of Statistics |
Sensitive analysis as below is based on reasonable changes of corresponding assumptions at the end of thereporting period (all other assumptions remain unchanged):
? When the discount rate is up (down) 0.5%, the present value of defined benefit plan obligations ofFAFG will be decreased by RMB 11,517,357.97 (increased by RMB 12,718,085.44).
? When the future salary growth rate is up (down) 0.5%, the present value of defined benefit planobligations of FAFG will be increased by RMB 2,679,222.46 (decreased by RMB 2,536,049.36).
As it is unlikely that an assumption can change in an isolated manner due to correlations among certainassumptions, the sensitivity analysis above may not reflect actual changes in present value of defined benefitplans.
In sensitivity analysis above, the method used to calculate net liabilities of defined benefit plans at the end of theperiod is the same with that used to recognize related liabilities in balance sheet.
Compared with previous years, methods and assumptions adopted to analyze sensitivity remain unchanged.
35. Provisions
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| Products quality warranty | 10,046,914.77 | 11,353,780.46 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
36. Deferred income
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Decrease in the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2021 | Reason |
| Government grants | 30,407,540.72 | 45,910,000.00 | 17,980,271.33 | (348,176.24) | 57,989,093.15 | Note 1 |
| Subsidies for purchase of fixed assets | 2,317,023.20 | 249,645.43 | 757,533.60 | (6,285.48) | 1,802,849.55 | |
| Total | 32,724,563.92 | 46,159,645.43 | 18,737,804.93 | (354,461.72) | 59,791,942.70 |
Note 1: Items involving government grants:
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Amount recognized in other income of the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2021 | Asset-related / Income-related |
| Funding item for industrialization technology upgrading | 12,147,608.87 | 1,160,000.00 | 4,710,284.57 | - | 8,597,324.30 | Asset-related |
| Manufacturing technology reform item for high transmission, high density and miniaturized wireless communication module | 9,722,221.90 | - | 8,333,333.40 | - | 1,388,888.50 | Asset-related |
| Technology reform item for ultra-thin communication module deep intelligent production line | 4,435,926.03 | 22,200,000.00 | 1,975,253.19 | - | 24,660,672.84 | Asset-related |
| Upgrading subsidies for Poland technology | 4,101,783.92 | - | 1,205,090.18 | (348,176.24) | 2,548,517.50 | Asset-related |
| Government grant income from matching funds for key transformation projects for the automation of the production of smart wearable products | - | 11,250,000.00 | 205,875.00 | - | 11,044,125.00 | Asset-related |
| Government grants for the sixth batch of high quality special projects (technological transformation) | - | 11,300,000.00 | 1,550,434.99 | - | 9,749,565.01 | Asset-related |
| Total | 30,407,540.72 | 45,910,000.00 | 17,980,271.33 | (348,176.24) | 57,989,093.15 |
37. Other non-current liabilities
Other non-current liabilities refer to guarantee deposits and margins received from suppliers.
38. Share capital
Unit: RMB
| 31/12/2020 | Changes for the year | 31/12/2021 | ||
| New issue of shares (Note 1) | Convertible bonds transferred to equity (Note 2) | |||
| Total shares | 2,209,343,372.00 | 828,100.00 | 1,310.00 | 2,210,172,782.00 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
38. Share capital - continued
Note 1: In November 2015 and November 2019, the Company implemented the Stock Option Incentive Plan forUniversal Scientific Industrial (Shanghai) Co., Ltd. and the Stock Option Incentive Plan for Universal ScientificIndustrial (Shanghai) Co., Ltd. in 2019 to grant a certain number of stock options to eligible employees tosubscribe for ordinary shares of the Company. In 2021, 318,800 ordinary shares and 509,300 ordinary sharesgranted by the Company were exercised at RMB 15.54 per share and RMB 12.67 per share, respectively, andregistered in China Securities Depository and Clearing Co., Ltd. Shanghai Branch, totally increasing the sharecapital by RMB 828,100.00 and capital reserve by RMB 10,578,883.00.
Note 2: See Note V, 31 for convertible bonds to equity swap.
39. Other equity instruments
Unit: RMB
| Outstanding financial instruments | Opening balance | Increase | Decrease | Closing balance | ||||
| Qty. | Book value | Qty. | Book value | Qty. | Book value | Qty. | Book value | |
| Convertible corporate bonds | - | - | 34,500,000.00 | 409,905,205.31 | 260.00 | 3,089.14 | 34,499,740.00 | 409,902,116.17 |
Note: Other equity instruments are formed by the equity part of convertible corporate bonds. For the details, seeNote (V), 31.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
40. Capital reserve
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Decrease in the year | 31/12/2021 |
| Share premium | 2,045,171,620.81 | 14,136,893.22 | - | 2,059,308,514.03 |
| Including: Share capital invested by investors (Note V. (38)) | 3,079,826,697.17 | 10,578,883.00 | - | 3,090,405,580.17 |
| Purchase of minority interests | (4,405,590.07) | - | - | (4,405,590.07) |
| Differences resulting from combination involving enterprise under common control | (5,621,108.53) | - | - | (5,621,108.53) |
| Transfer of capital reserve to share capital | (1,087,961,790.00) | - | - | (1,087,961,790.00) |
| Share-based payment exercise included in owners' equity | 66,745,457.91 | 5,519,464.00 | - | 72,264,921.91 |
| Treasury shares transferred out (Note (V). 41) | (3,412,045.67) | (1,986,486.80) | - | (5,398,532.47) |
| Exercise of convertible bonds (Note (V). 31) | - | 25,033.02 | - | 25,033.02 |
| Other capital reserve (Note (V). 48) | 135,792,556.19 | 52,875,000.00 | 5,519,464.00 | 183,148,092.19 |
| Total | 2,180,964,177.00 | 67,011,893.22 | 5,519,464.00 | 2,242,456,606.22 |
41. Treasury shares
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Decrease in the year | 31/12/2021 |
| Employee stock ownership plan | 134,707,206.58 | 231,031,506.46 | 24,502,373.16 | 341,236,339.88 |
According to the Proposal on the Plan to Repurchase the Company's Shares in the Form of CentralizedCompetitive Bidding at the Twelfth Meeting of the Fifth Session of the Board of Directors held on 26 August2021 and other proposals, from 1 September 2021 to 31 December 2021, the Company repurchased a total of16,042,278 shares of the Company in the form of centralized competitive bidding, totaling RMB231,031,506.46. In 2021, the Group exercised the employee stock ownership plan based on the Core EmployeeStock Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. (Draft) and Core Employee StockOwnership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 (Draft), using 1,780,050treasury shares to exercise the employee stock ownership plan and transferring 281,200 treasury shares toemployee stock ownership platform in a non-trading manner. A total of 2,061,250 treasury shares weretransferred out, totaling RMB 24,502,373.16. The Group received RMB 22,515,886.36 from employees for theexercise of the stock ownership plan, with the difference of RMB 1,986,486.80 included in capital reserve.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
42. Other comprehensive income
Unit: RMB
| Item | 31/12/2020 | Amount incurred in the current year | 31/12/2021 | ||||
| Amount incurred for current year before tax | Less: Amount previously included in other comprehensive income and transferred to profit or loss for the period | Less: Income tax expenses | Attributable to owners of the company after tax | Attributable to minority interests after tax | |||
| I. Other comprehensive income that cannot be subsequently reclassified to profit or loss | (79,239,470.64) | 39,112,727.21 | - | 2,704,676.57 | 36,407,012.60 | 1,038.04 | (42,832,458.04) |
| Including: Recalculation of the changes in defined benefit plans | (55,498,586.00) | 4,677,068.45 | - | 2,704,676.57 | 1,971,353.84 | 1,038.04 | (53,527,232.16) |
| Fair value changes in other equity instruments investment | (23,740,884.64) | 34,435,658.76 | - | - | 34,435,658.76 | - | 10,694,774.12 |
| II. Other comprehensive income that will be reclassified to profit or loss | (11,976,506.37) | (27,498,576.95) | - | - | (28,791,434.54) | 1,292,857.59 | (40,767,940.91) |
| Including: Other comprehensive income that can be reclassified to profit or loss under equity method | 14,257,376.56 | 7,230,128.54 | - | - | 7,230,128.54 | - | 21,487,505.10 |
| Exchange differences arising on translation of financial statements denominated in foreign currencies | 105,461,008.12 | (205,046,650.73) | - | - | (206,339,508.32) | 1,292,857.59 | (100,878,500.20) |
| Net investment hedging for overseas operations | (131,694,891.05) | 170,317,945.24 | - | - | 170,317,945.24 | - | 38,623,054.19 |
| Total other comprehensive income | (91,215,977.01) | 11,614,150.26 | - | 2,704,676.57 | 7,615,578.06 | 1,293,895.63 | (83,600,398.95) |
43. Surplus reserve
Unit: RMB
| Item | 31/12/2020 | Increase in the year | Decrease in the year | 31/12/2021 |
| Statutory surplus reserve (Note) | 542,610,242.85 | 195,394,427.11 | - | 738,004,669.96 |
Note: According to the Articles of Association, Universal Scientific Industrial (Shanghai) Co., Ltd. is requiredto transfer 10% of its net profit in 2021 to the statutory surplus reserve. Statutory surplus reserve can be usedto cover the Company's losses, expand the Company's production and operation or increase the Company'scapital.
44. Retained profits
Unit: RMB
| Item | 2021 | 2020 |
| Retained profits at the end of prior year | 7,342,825,571.69 | 6,134,589,055.19 |
| Add: Net profit attributable to owners of the Company for the year | 1,857,968,074.82 | 1,739,435,448.10 |
| Less: Appropriation to statutory surplus reserve (Note 1) | 195,394,427.11 | 151,755,906.03 |
| Dividends on ordinary shares payable (Note 2) | 1,099,138,447.50 | 379,443,025.57 |
| Retained profits at the end of the year (Note 3) | 7,906,260,771.90 | 7,342,825,571.69 |
(1) Appropriation to statutory surplus reserve
According to the Articles of Association, the Company is required to transfer 10% of its net profit to thestatutory surplus reserve. The transfer may be ceased if the balance of the statutory surplus reserve hasreached 50% of the Company's registered capital.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Retained profits - continued
33.
(2) Profit distribution approved in shareholders' meeting during the year
According to the resolution of the Ninth Meeting of the Fifth Session of the Board of Directors of theCompany held on 26 March 2021, a cash dividend of RMB 5.00 (including tax) per 10 shares will bedistributed on the basis of the total share capital at the equity registration date less the number of the sharesrepurchased by the Company from special accounts, with no bonus issue and no increase in share capital.34.
(3) Profit distribution decided after the balance sheet date
35.As proposed by the resolution of the Fifteenth Meeting of the Fifth Session of the Board of Directors of theCompany held on 25 March 2022, a cash dividend of RMB 2.60 (including tax) per 10 shares will bedistributed on the basis of the total share capital at the equity registration date less the number of the sharesrepurchased by the Company from special accounts, with no bonus issue and no increase in share capital.The above proposal regarding dividends distribution is yet to be approved in a shareholders' meeting.
(4) Appropriation to surplus reserve by subsidiaries
36.
37. As at 31 December 2021, the balance of the Group's retained profits include appropriation to surplusreserve by subsidiaries amounting to RMB 1,192,741,399.36 (31 December 2020: RMB 1,110,302,383.39).
45. Revenue and Costs
(1) Details of Revenue and costs
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year (Restated) | ||
| Revenue | Costs | Revenue | Costs | |
| Principal operating activities | 55,253,601,963.75 | 49,978,169,386.77 | 47,672,101,126.45 | 42,805,901,732.50 |
| Other operating activities | 46,052,806.46 | 3,309,811.07 | 24,127,096.08 | 3,648,381.64 |
| Total | 55,299,654,770.21 | 49,981,479,197.84 | 47,696,228,222.53 | 42,809,550,114.14 |
(2) Analysis of revenue and costs from principal operating activities by product categories:
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year (Restated) | ||
| Revenue | Costs | Revenue | Costs | |
| Communication products | 21,211,368,145.31 | 19,799,912,823.21 | 20,283,864,099.07 | 18,821,255,507.78 |
| Consumer electronic products | 18,566,021,687.70 | 16,886,497,387.85 | 17,214,810,675.04 | 15,524,198,157.79 |
| Industrial products | 7,276,135,793.13 | 6,074,544,645.90 | 4,350,075,411.92 | 3,450,426,871.41 |
| Computer and storage products | 4,793,053,315.18 | 4,079,381,724.91 | 3,825,855,621.16 | 3,207,733,423.12 |
| Automotive electronic products | 2,605,088,256.75 | 2,402,266,475.48 | 1,691,018,757.11 | 1,570,822,919.34 |
| Medical products | 280,679,550.41 | 264,285,249.66 | 71,996,638.77 | 65,180,848.67 |
| Others | 521,255,215.27 | 471,281,079.76 | 234,479,923.38 | 166,284,004.39 |
| Total | 55,253,601,963.75 | 49,978,169,386.77 | 47,672,101,126.45 | 42,805,901,732.50 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
45. Revenue and costs - continued
(3) Revenue and costs from other operating activities:
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | ||
| Revenue | Costs | Revenue | Costs | |
| Scrap income | 39,880,978.46 | - | 16,404,990.55 | - |
| Others | 6,171,828.00 | 3,309,811.07 | 7,722,105.53 | 3,648,381.64 |
| Total | 46,052,806.46 | 3,309,811.07 | 24,127,096.08 | 3,648,381.64 |
(4) Fulfillment of contractual obligations with customers:
The Group's sales include domestic sales and export sales. The Group's performance obligation is to providegoods to customers, including communication products, consumer electronic products, computer and storageproducts, industrial products, automotive electronic products, medical products and other products.
The Group recognizes revenue at the time when the customer obtains control of the goods. The Grouprecognizes revenue at the time when the goods leave the factory, when the goods are delivered to the carrier,when the goods are delivered to the port, when the goods are loaded onto an aircraft or ship, or when the goodsare delivered to the customer or when the goods are delivered to the customer or to a location designated by thecustomer or when the goods are delivered to the warehouse designated by the customer and the customer signsfor them on the receipt, respectively, according to the specific sales terms or trade terms agreed in the contract.
46. Taxes and levies
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Stamp duties | 19,880,734.34 | 18,669,620.96 |
| City construction and maintenance tax | 11,208,526.66 | 13,467,342.74 |
| Education surcharges | 8,532,615.47 | 10,759,570.57 |
| Real estate tax | 2,937,961.06 | 2,063,216.19 |
| Urban land use tax | 900,287.63 | 655,818.97 |
| Property transfer tax | - | 13,695,041.12 |
| Others | 6,357,540.59 | 2,397,902.00 |
| Total | 49,817,665.75 | 61,708,512.55 |
47. Selling expenses
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year (Restated) |
| Staff costs | 211,759,131.73 | 160,134,549.21 |
| Royalty fees | 31,098,633.03 | 17,325,403.34 |
| Depreciation and amortization | 16,027,092.26 | 3,550,147.86 |
| Labor costs | 10,077,652.76 | 6,709,004.28 |
| After-sales service fee | 6,394,645.51 | 3,116,687.86 |
| Traveling expenses | 3,876,257.29 | 3,004,701.45 |
| Utilities | 2,030,392.60 | 1,996,159.29 |
| Entertainment expenses | 1,665,596.94 | 1,532,933.93 |
| Commission | 1,640,768.47 | 469,481.07 |
| Others | 26,910,731.51 | 22,053,223.46 |
| Total | 311,480,902.10 | 219,892,291.75 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
48. Administrative expenses
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Staff costs | 726,688,773.52 | 790,997,524.16 |
| Labor costs and professional services fee | 132,225,618.10 | 87,529,615.76 |
| Depreciation and amortization | 110,545,311.91 | 94,852,567.56 |
| Share-based payments | 52,875,000.00 | 44,777,233.10 |
| Renovation costs | 27,748,073.54 | 23,084,604.23 |
| Traveling expenses | 17,718,452.02 | 11,483,892.35 |
| Software costs | 13,172,412.70 | 6,265,866.72 |
| Utilities | 12,473,730.18 | 10,225,115.70 |
| Insurance | 10,571,950.20 | 4,234,388.75 |
| Material consumption | 9,656,422.95 | 5,913,389.86 |
| Others | 55,497,639.65 | 43,794,784.46 |
| Total | 1,169,173,384.77 | 1,123,158,982.65 |
49. Research and development expenses
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Staff costs | 743,076,797.95 | 723,044,138.85 |
| Material and sample costs | 439,215,347.10 | 504,747,674.29 |
| Work order expense | 180,452,175.26 | 114,837,338.65 |
| Depreciation and amortization | 99,178,889.07 | 89,082,892.15 |
| Mold costs | 44,165,226.63 | 36,738,835.19 |
| Utilities | 21,466,113.30 | 20,584,510.89 |
| Software | 16,600,013.19 | 6,654,800.09 |
| Renovation costs | 16,097,717.66 | 15,034,257.06 |
| Labor costs | 11,803,055.92 | 13,930,177.23 |
| Consumables and miscellaneous | 10,880,322.68 | 10,061,809.70 |
| Traveling expenses | 2,914,798.18 | 3,471,546.74 |
| Others | 55,548,055.67 | 38,175,083.64 |
| Total | 1,641,398,512.61 | 1,576,363,064.48 |
50. Financial expenses
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Interest expenses | 201,328,552.68 | 90,186,351.24 |
| Including: Interest expenses on lease liabilities | 21,624,108.86 | 19,570,082.83 |
| Interest expenses on issue of convertible bonds | 107,851,300.34 | - |
| Less: Interest income | 67,779,611.82 | 60,445,860.19 |
| Exchange differences | 62,658,120.37 | 63,269,271.70 |
| Others | 7,191,529.39 | 2,740,747.91 |
| Total | 203,398,590.62 | 95,750,510.66 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
51. Other income
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Government grants | 50,678,106.85 | 76,779,477.12 | 50,678,106.85 |
Government grants in other income included in profit or loss for the period
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | Asset-related/ Income-related |
| Import interest subsidies | 6,519,680.00 | 3,474,981.00 | Income-related |
| 2021 Economic grants by Head Office of Pudong New Area Large Enterprises | 4,970,000.00 | - | Income-related |
| French government grants for science and technology research | 4,751,654.62 | - | Income-related |
| R&D Funding for Shenzhen Science and Technology Innovation Enterprise | 2,388,000.00 | 3,084,000.00 | Income-related |
| Subsidy for named class of high-skilled talent in Kunshan | 1,562,500.00 | - | Income-related |
| 2021 Integrated subsidy for Technical Transformation of Industrial Enterprises in Kunshan | 1,350,000.00 | - | Income-related |
| 2021 Special subsidy for staying in Kunshan in the Spring Festival and stable yield by Qiandeng Township | 1,002,800.00 | - | Income-related |
| Nurturing grants for High-tech Enterprises by Nanshan Science and Technology Innovation Bureau | 1,000,000.00 | - | Income-related |
| Shenzhen government subsidies for commercial and industrial electricity consumption | 961,114.00 | 4,379,089.00 | Income-related |
| Vocational training subsidies by Kunshan Social Insurance Fund Management Center | 791,300.00 | - | Income-related |
| Individual tax service fee refund | 664,628.80 | 1,129,561.66 | Income-related |
| Subsidies for VAT deduction for enterprises employing poor people with established cards | 559,180.13 | - | Income-related |
| Award for outstanding contribution to high quality development in the 30th Anniversary of Kun-Tai Integrated Development | 500,000.00 | - | Income-related |
| Intellectual property subsidies of Shanghai Zhangjiang Science City Construction and Management Office | 410,800.00 | 927,402.00 | Income-related |
| Social Security Bureau stabilization subsidy | 150,811.51 | 8,391,393.09 | Income-related |
| Enterprise social security returned by Shenzhen Social Security Bureau | - | 13,981,600.51 | Income-related |
| Incentives for additional industrial value of Industry and Information Technology Bureau of Shenzhen Nanshan District | - | 5,000,000.00 | Income-related |
| Subsidies for expansion and capital increase item from Industry and Information Technology Bureau of Shenzhen | - | 4,765,000.00 | Income-related |
| 2020 Integrated subsidies for technological reform of Kunshan industrial enterprises | - | 1,683,400.00 | Income-related |
| French R&D subsidies | - | 1,589,547.98 | Income-related |
| Top ten growing Taiwanese enterprises awarded by the Qiandeng Branch of Kunshan Finance Bureau | - | 1,000,000.00 | Income-related |
| Poland COVID-19 prevention subsidy | - | 917,604.61 | Income-related |
| District incentives for boiler improvement area in Shanghai Jinqiao | - | 780,000.00 | Income-related |
| Taiwan industry innovation platform subsidy | - | 734,930.47 | Income-related |
| Intellectual property funding in science and technology development fund | - | 293,500.00 | Income-related |
| Others | 5,115,366.46 | 5,795,469.70 | Income-related |
| Sub-total | 32,697,835.52 | 57,927,480.02 | |
| Amortization of asset-related government grants (Note (V). 36) | 17,980,271.33 | 18,851,997.10 | Asset-related |
| Total | 50,678,106.85 | 76,779,477.12 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
52. Investment income
(1) Details of investment income
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Income from long-term equity investments under equity method | 22,116,497.85 | 19,752,692.15 |
| Investment income from other equity instruments during the hold period | 14,910,026.14 | - |
| Investment income of other non-current financial assets during the hold period | 1,208,019.49 | 159,135.20 |
| Investment income on disposal of held-for-trading financial assets | 73,489,834.38 | 63,528,666.98 |
| Other | (45,397.90) | - |
| Total | 111,678,979.96 | 83,440,494.33 |
53. Gains (losses) from changes in fair values
Unit: RMB
| Source resulting in gains from changes in fair values | Amount incurred in the current year | Amount incurred in the prior year |
| Held-for-trading financial assets | 15,525,000.00 | 2,293,920.33 |
| Including: Gains (losses) from changes in fair values arising from derivative financial assets | 15,525,000.00 | - |
| Derivative financial liabilities | 14,031,052.68 | (4,968,603.17) |
| Other non-current financial assets | 15,032,169.92 | (3,597,517.30) |
| Total | 44,588,222.60 | (6,272,200.14) |
54. Impairment gains (losses) of credit
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Gains (losses) from bad debts of accounts receivable | (4,542,957.48) | 7,894,930.75 |
| Gains (losses) from bad debts of other receivables | 2,836,069.00 | - |
| Total | (1,706,888.48) | 7,894,930.75 |
55. Impairment gains (losses) of assets
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Gains (losses) on decline in value of inventories | (18,746,153.38) | (11,792,788.58) |
56. Gains (losses) from disposal of assets
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Gains from disposal of non-current assets | 5,290,613.92 | 3,024,576.57 | 5,290,613.92 |
| Less: Losses from disposal of non-current assets | 2,875,916.90 | 1,228,485.76 | 2,875,916.90 |
| Total | 2,414,697.02 | 1,796,090.81 | 2,414,697.02 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
57. Non-operating income
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Sporadic income | 19,628,576.06 | 14,978,610.83 | 19,628,576.06 |
58. Non-operating expenses
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Losses on retirement of non-current assets | 11,530,686.66 | 623,754.22 | 11,530,686.66 |
| Others | 1,052,447.42 | 2,442,552.64 | 1,052,447.42 |
| Total | 12,583,134.08 | 3,066,306.86 | 12,583,134.08 |
59. Income tax expenses
(1) Statement of income tax expenses
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Income tax expenses for the current period | 367,358,199.12 | 282,034,396.01 |
| Settlement differences in income tax | (21,432,389.61) | (34,737,533.12) |
| Deferred income taxes | (63,759,928.76) | (7,299,040.30) |
| Total | 282,165,880.75 | 239,997,822.59 |
(2) Reconciliation of income tax expenses to the accounting profit
Unit: RMB
| Amount incurred in the current year | Amount incurred in the prior year | |
| Total profit | 2,138,858,923.07 | 1,973,563,054.56 |
| Applicable tax rate | 15% | 15% |
| Income tax expenses calculated based on applicable tax rate | 320,828,838.43 | 296,034,458.18 |
| Effect of non-deductible cost, expense and loss | 33,989,887.10 | 25,564,146.43 |
| Effect of deemed sales on income taxes | 3,153,974.75 | 846,732.13 |
| Effect of non-taxable income | (615,775.56) | (5,265,214.57) |
| Tax effect of additional deductible expenses | (109,649,252.29) | (69,986,753.57) |
| Effect of deductible temporary difference or deductible loss not recognized for deferred tax assets for the current year | 8,850,428.82 | 13,674,720.96 |
| Effect of utilizing deductible temporary differences or deductible loss not recognized for deferred tax assets for prior period | (7,142.67) | (6,881,354.58) |
| Share based incentive scheme | 6,239,839.26 | - |
| Settlement differences in income tax | (21,432,389.61) | (34,737,533.12) |
| Effect of different tax rates applied by subsidiaries | 30,384,135.90 | 12,866,903.28 |
| Effect of levy on undistributed earnings of Taiwan subsidiaries | - | 4,774,002.78 |
| Effect of changes in income tax rates of subsidiaries on the opening balance of deferred tax assets | 6,004,696.00 | - |
| Others | 4,418,640.62 | 3,107,714.67 |
| Income tax expenses | 282,165,880.75 | 239,997,822.59 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
60. Items in the cash flow statement
(1) Other cash receipts relating to operating activities
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Interest income | 72,145,391.15 | 56,728,713.26 |
| Subsidy income | 78,607,835.52 | 57,927,480.02 |
| Others (Note) | 22,035,458.20 | 72,449,196.96 |
| Total | 172,788,684.87 | 187,105,390.24 |
Note: It mainly refers to advance payment on behalf of third parties.
(2) Other cash payments relating to operating activities
Unit: RMB
| Amount incurred in the current year | Amount incurred in the prior year | |
| Export expenses and freight paid | 156,029,510.00 | 88,461,795.13 |
| Other expenses paid | 472,254,238.69 | 411,762,352.90 |
| Payment of customs deposit | 2,974,159.20 | 9,530,668.80 |
| Total | 631,257,907.89 | 509,754,816.83 |
(3) Other cash receipts relating to investing activities
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Subsidy for purchase of fixed assets | - | 13,522,846.50 |
(4) Other cash payments relating to financing activities
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Repurchase of treasury shares | 231,031,506.46 | - |
| Payment of lease principal and interest | 136,940,693.70 | 100,152,845.92 |
| Payment of deposits on long-term loans | - | 20,227,144.33 |
| Purchase of minority interests | - | 24,500,000.00 |
| Others | 880,489.51 | 5,270,084.97 |
| Total | 368,852,689.67 | 150,150,075.22 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
61. Supplementary information to the cash flow statement
(1) Supplementary information to the cash flow statement
Unit: RMB
| Supplementary information | 2021 | 2020 |
| 1. Reconciliation of net profit to cash flow from operating activities: | ||
| Net profit | 1,856,693,042.32 | 1,733,565,231.97 |
| Add: Losses (gains) on impairment of assets | 18,746,153.38 | 11,792,788.58 |
| Gains on impairment of credit | 1,706,888.48 | (7,894,930.75) |
| Depreciation of fixed assets | 743,998,618.03 | 461,584,134.19 |
| Depreciation of right-of-use assets | 126,034,558.52 | 94,604,372.28 |
| Amortization of intangible assets | 102,807,442.51 | 40,126,621.54 |
| Amortization of long-term prepaid expenses | 94,475,344.98 | 79,481,660.45 |
| Amortization of deferred income | (18,737,804.93) | (20,865,298.64) |
| Gains on disposal of fixed assets, intangible assets and other long-term assets | (2,414,697.02) | (1,796,090.81) |
| Losses on retirement of fixed assets | 11,530,686.66 | 623,754.22 |
| Losses (gains) on changes in fair values | (44,588,222.60) | 6,272,200.14 |
| Financial expenses (income) | 263,986,673.05 | 35,304,650.47 |
| Gains arising from investments | (111,678,979.96) | (83,440,494.33) |
| Share-based payments settled by equity | 52,875,000.00 | 44,786,016.39 |
| Decrease (increase) in deferred tax assets | (18,286,336.11) | 16,583,165.40 |
| Increase in deferred tax liabilities | (34,306,686.56) | (23,882,205.70) |
| Decrease (increase) in inventories | (2,203,751,438.05) | (1,381,853,828.82) |
| Decrease (increase) in receivables from operating activities | (2,319,617,462.56) | (2,611,537,261.99) |
| Increase (decrease) in payables from operating activities | 378,080,240.96 | 3,043,069,189.51 |
| Net cash flow from operating activities | (1,102,446,978.90) | 1,436,523,674.10 |
| 2. Significant investing and financing activities that do not involve cash receipts and payments: | ||
| Acquisition of long-term assets with debt | 601,020,573.06 | 297,166,665.61 |
| 3. Net changes in cash and cash equivalents: | ||
| Closing balance of cash | 6,018,193,116.59 | 6,303,224,304.50 |
| Less: Opening balance of cash | 6,303,224,304.50 | 6,082,639,950.14 |
| Add: Closing balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase (decrease) in cash and cash equivalents | (285,031,187.91) | 220,584,354.36 |
(2) Net cash payments to acquire subsidiaries for the year
Unit: RMB
| Item | Amount |
| Cash or cash equivalents paid in current year for business combination incurred in current year | 49,613,369.15 |
| Less: Cash and cash equivalents held by subsidiaries at the date of purchase | 4,291,567.33 |
| Net cash paid to acquire subsidiaries | 45,321,801.82 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
61. Supplementary information to the cash flow statement - continued
(3) Composition of cash and cash equivalents
Unit: RMB
| Item | 31/12/2021 | 31/12/2020 |
| I. Cash | 6,018,193,116.59 | 6,303,224,304.50 |
| Including: Cash on hand | 126,530.08 | 191,907.34 |
| Bank deposits that can be readily withdrawn on demand | 6,018,066,586.51 | 6,303,032,397.16 |
| II. Cash equivalents | - | - |
| III. Closing balance of cash and cash equivalents | 6,018,193,116.59 | 6,303,224,304.50 |
62. Assets with limited ownership or use right
Unit: RMB
| Item | Closing balance of carrying amount | Reasons for the restrictions |
| Other cash and bank balances | 12,504,828.00 | Customs deposit |
| Other cash and bank balances | 3,506,097.66 | Deposit for interest on long-term loans |
| Total | 16,010,925.66 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
63. Foreign currency monetary items
(1) Foreign currency monetary items
Unit: RMB
| Item | Closing balance of foreign currency | Exchange rate | Closing RMB equivalent |
| Cash and bank balances | |||
| Including: RMB | 41,632,970.98 | 1.0000 | 41,632,970.98 |
| USD | 196,270,303.76 | 6.3757 | 1,251,360,575.68 |
| EUR | 1,101,362.38 | 7.2211 | 7,953,047.88 |
| HKD | 1,623,616.96 | 0.8176 | 1,327,469.23 |
| JPY | 36,727,091.00 | 0.0554 | 2,034,680.84 |
| MXN | 24,532,362.81 | 0.3097 | 7,597,672.76 |
| SGD | 10,662.56 | 4.7179 | 50,304.89 |
| CZK | 11,354.00 | 0.2905 | 3,298.34 |
| TND | 2,197,327.05 | 2.2027 | 4,840,052.28 |
| VDN | 138,699,105,966.00 | 0.0003 | 41,609,731.79 |
| Accounts receivable | |||
| Including: USD | 1,536,343,162.72 | 6.3757 | 9,795,263,102.55 |
| EUR | 2,279,934.40 | 7.2211 | 16,463,634.30 |
| MXN | 5,750,025.93 | 0.3097 | 1,780,783.03 |
| Other receivables | |||
| Including: USD | 2,116,392.86 | 6.3757 | 13,493,485.96 |
| EUR | 50,847.34 | 7.2211 | 367,173.73 |
| MXN | 19,982,224.39 | 0.3097 | 6,188,494.89 |
| VDN | 1,193,942,258.00 | 0.0003 | 358,182.68 |
| Short-term borrowings | |||
| Including: USD | 74,414,621.52 | 6.3757 | 474,445,302.43 |
| EUR | 173,000,000.00 | 7.2211 | 1,249,250,300.00 |
| Accounts payable | |||
| Including: USD | 1,380,870,716.48 | 6.3757 | 8,804,017,427.06 |
| EUR | 4,080,014.21 | 7.2211 | 29,462,190.61 |
| HKD | 2,415,775.14 | 0.8176 | 1,975,137.75 |
| JPY | 751,300,626.00 | 0.0554 | 41,622,054.68 |
| MXN | 122,504,778.30 | 0.3097 | 37,939,729.84 |
| VDN | 115,144,116,687.00 | 0.0003 | 34,543,235.01 |
| Other payables | |||
| Including: USD | 25,567,860.44 | 6.3757 | 163,013,007.81 |
| EUR | 5,100.00 | 7.2211 | 36,827.61 |
| MXN | 36,418,224.24 | 0.3097 | 11,278,724.05 |
| VDN | 3,655,122,490.00 | 0.0003 | 1,096,536.75 |
| Long-term borrowings | |||
| Including: EUR | 152,500,000.00 | 7.2211 | 1,101,220,467.55 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
63. Foreign currency monetary items - continued
(2) Description of overseas operating entities
38.
| Full name of subsidiary | Major operation place | Functional currency | Choosing basis |
| Universal Global Technology Co., Limited ("UGT") | Hong Kong | USD | Major currencies used in operating and financing activities |
| Universal Global Industrial Co., Limited ("UGI") | Hong Kong | USD | Major currencies used in operating activities |
| Universal Global Electronics Co., Limited ("UGE") | Hong Kong | USD | Major currencies used in operating activities |
| UGTW | Taiwan | TWD | Currency in major economic environment |
| USITW | Taiwan | TWD | Currency in major economic environment |
| USI America Inc. | USA | USD | Currency in major economic environment |
| USI Japan Co., Ltd. | Japan | JPY | Currency in major economic environment |
| Universal Scientific Industrial De México S.A. De C.V. | Mexico | USD | Major currencies used in operating and financing activities |
| Universal Scientific Industrial Poland Sp. z o.o. | Poland | PLN | Currency in major economic environment |
| Universal Scientific Industrial (France) | France | EUR | Currency in major economic environment |
| FINANCI?RE AFG S.A.S. | France | EUR | Currency in major economic environment |
| Universal Scientific Industrial Vietnam Company Limited | Vietnam | USD | Major currencies used in operating activities |
64. Hedge
Disclose by category the following information: hedge items, related hedging instruments, the qualitative andquantitative information of hedged risks:
The Group acquired FAFG through USI France under Universal Global Technology Co., Limited, its wholly-owned subsidiary, in order to expand its global operations and market layout in electronic design andmanufacturing. The Group's net investment in FAFG's foreign operations with EUR as the functional currencyis exposed to risks of exchange rate changes in EUR. The Group uses loan contracts in EUR to manage theforeign exchange risk of the net investment in FAFG's foreign operations. The Group's foreign borrowings arein EUR, which is also the functional currency of FAFG. The exchange rate of EUR is the basic variable for boththe hedging instrument (short-term and long-term borrowings) and the hedged item (the Group's net investmentin foreign operations of FAFG). The Group designates the overall foreign exchange risk component of short-term and long-term borrowings as the hedging instrument and designates a portion of the Group's net investmentin foreign operations of FAFG as the hedged item, which are equal in quantity. The Group uses hedges for netinvestment in foreign operations.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
64. Hedge - continued
Hedging instrument
A summary of hedging instrument:
Unit: EUR
| 31/12/2021 | ||||
| Hedging instrument | Within 6 months | 6 to 12 months | After 12 months | |
| Hedges for net investment in foreign operations (Note (V). 22 and 30) | ||||
| Foreign exchange risk -Short-term borrowings in EUR | Nominal amount | 120,000,000.00 | - | - |
| Foreign exchange risk -Long-term borrowings in EUR | Nominal amount | - | - | 152,500,000.00 |
Unit: RMB
| 31/12/2021 | 31/12/2021 | Items presented for assets and liabilities that include hedging instruments | 2021 | ||
| Nominal amount of the hedging instrument | Carrying amount of the hedging instrument | Changes in fair value of the invalid part of hedge | |||
| Assets | Liabilities | ||||
| Hedges for net investment in foreign operations | |||||
| Foreign exchange risk -Short-term borrowings in EUR | 866,534,138.40 | - | 866,534,138.40 | Short-term borrowings | - |
| Foreign exchange risk -Long-term borrowings in EUR | 1,101,220,467.55 | - | 1,101,220,467.55 | Long-term borrowings | - |
| Total | 1,967,754,605.95 | - | 1,967,754,605.95 | - | |
Details of hedged items:
Unit: RMB
| Carrying amount of hedged items at 31/12/2021 | Items presented for assets and liabilities that include hedged instruments | Changes in fair value of the invalid part of hedged items in 2021 | Hedge reserve for net investment in foreign operations at 31/12/2021 | ||
| Assets | Liabilities | ||||
| Hedges for net investment in foreign operations | |||||
| Foreign exchange risk - Long-term equity investment | 1,967,754,605.95 | - | The Group's net investment in FAFG's foreign operations | - | 38,623,054.19 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
64. Hedge - continued
Hedge effect
Unit: RMB
| 2021 | 2021 | Items listed in the income statement including invalid part of hedge recognized | Amount reclassified from hedge reserves for net investment in foreign operations to profit or loss for the current period in 2021 | Items listed in the income statement including reclassification adjustment | |
| Hedges for net investment in foreign operations | |||||
| Changes in hedge reserves for net investment in foreign operations of hedging instruments included in other comprehensive income | The invalid part of hedge included in profit or loss for the current period | ||||
| Foreign exchange risk -Short-term borrowings in EUR | 70,928,489.69 | - | N/A | N/A | N/A |
| Foreign exchange risk -Long-term borrowings in EUR | 99,389,455.55 | - | N/A | N/A | N/A |
| Total | 170,317,945.24 | - | N/A | N/A | N/A |
(VI) CHANGES IN SCOPE OF CONSOLIDATION
1. Business combinations not involving enterprises under common control
(1) Business combinations not involving enterprises under common control incurred in the current year
Unit: RMB
| Name of acquiree | Timing of equity acquisition | Acquisition cost | Proportion acquired (%) | Acquisition approach | Acquisition date | Determination basis of acquisition date | Revenue of the acquiree from the date of purchase to the year-end | Net loss of the acquiree from the date of purchase to the year-end |
| SER S.A.S (“SER”) | 2 November 2021 | 49,613,369.15 | 100% | Cash | 2 November 2021 | Acquisition of control | 51,748,866.10 | (116,814.90) |
Note: The Company entered into the Share Purchase Agreement with Idemia Identity & Security France (theformer shareholder of SER) through Asteelflash France (the subsidiary of the Company's wholly-ownedsubsidiary FAFG) to acquire the 100% equity interest of SER. At 2 November 2021, Asteelflash Francecompleted the delivery of the 100% equity interest of SER to acquire the control over SER and thus includedSER in the scope of consolidation.
(2) Combination cost and goodwill
Unit: RMB
| Combination cost | SER |
| Cash | 49,613,369.15 |
| Less: Share of fair value of identifiable net asset acquired | 49,613,369.15 |
| Goodwill | - |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VI) CHANGES IN SCOPE OF CONSOLIDATION - continued
1. Business combinations not involving enterprises under common control - continued
(3) Identifiable assets and liabilities of the acquiree at the date of acquisition
Unit: RMB
| Item | SER | |
| Fair value at acquisition date | Carry amount at acquisition date | |
| Assets: | ||
| Cash and bank balances | 4,291,567.33 | 4,291,567.33 |
| Accounts receivable | 8,146,821.67 | 8,146,821.67 |
| Inventories | 85,583,311.83 | 85,583,311.83 |
| Other current assets | 1,095,235.04 | 1,095,235.04 |
| Fixed assets | 7,472,068.22 | 7,472,068.22 |
| Construction in progress | 1,104,633.49 | 1,104,633.49 |
| Right-of-use assets | 41,087,402.27 | 41,087,402.27 |
| Intangible assets | 83,754.92 | 83,754.92 |
| Other non-current assets | 1,362,253.79 | 1,362,253.79 |
| Liabilities: | ||
| Accounts payable | 18,893,268.66 | 18,893,268.66 |
| Taxes payable | 5,935,563.37 | 5,935,563.37 |
| Employee benefits payable | 24,093,177.03 | 24,093,177.03 |
| Other payables | 10,541,727.40 | 10,541,727.40 |
| Non-current liabilities due within one year | 3,939,488.59 | 3,939,488.59 |
| Lease liabilities | 37,210,454.36 | 37,210,454.36 |
| Net assets | 49,613,369.15 | 49,613,369.15 |
Determination of fair value of intangible assets and liabilities:
The management of the Group believes that there is no significant difference between the fair value andcarrying amount of SER's identifiable assets and liabilities on the acquisition date.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VII) EQUITY IN OTHER ENTITIES
1. Equity in major subsidiaries
(1) Composition of enterprise group
| Name of subsidiary | Principal operation place | Registered place | Business nature | Proportion of shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| Universal Global Electronics (Shanghai) Co., Ltd. | Shanghai | Room 229, 2nd Floor, No.8 Jia Feng Road, China (Shanghai) Pilot Free Trade Zone | Trade and investment | 100 | - | Acquisition through establishment |
| Universal Global Technology (Shanghai) Co., Ltd. | Shanghai | No.501 Longgui Road, Jinqiao Export Processing Zone, Pudong New Area, Shanghai | Production and sales, product design and research development | 100 | - | Acquisition through establishment |
| Universal Global Technology (Kunshan) Co., Ltd. | Kunshan | No.397 Huangpu Road, Qiandeng Town, Kunshan City, Jiangsu Province | Production and sales | 100 | - | Acquisition through establishment |
| UGTW | Taiwan | No. 141, Lane 351, Sec. 1, Taiping Road, Caotun Town, Nantou County, Taiwan | Production and sales, product design and research development | - | 100 | Acquisition through establishment |
| USITW | Taiwan | No. 141, Lane 351, Sec. 1, Taiping Road, Caotun Town, Nantou County, Taiwan | Production and sales, product maintenance | - | 100 | Acquisition through business combinations involving enterprises under common control |
| Universal Global Technology Co., Limited | Hong Kong | Room 2702-3, 27th Floor, Bank of East Asia Harbour Centre, No. 56 Gloucester Road, Wanchai, Hong Kong | Trade and investment | 100 | - | Acquisition through establishment |
| Universal Global Industrial Co., Ltd. | Hong Kong | Room 2702-3, 27th Floor, Bank of East Asia Harbour Centre, No. 56 Gloucester Road, Wanchai, Hong Kong | Trade and investment | - | 100 | Acquisition through establishment |
| UGE | Hong Kong | Room 2702-3, 27th Floor, Bank of East Asia Harbour Centre, No. 56 Gloucester Road, Wanchai, Hong Kong | Trade and investment | - | 100 | Acquisition through establishment |
| USI Electronics (Shenzhen) Co., Ltd. | Shenzhen | Huanxu Electronics Park, North of Hi-Tech Park , Nanshan District, Shenzhen City, Guangdong Province | Production and sales | 50 | 50 | Acquisition through business combinations involving enterprises under common control |
| USI America Inc. | America | 1255 East Arques Avenue Sunnyvale, CA 94085 | Contractual manufacturing, product maintenance and related services | - | 100 | Acquisition through business combinations involving enterprises under common control |
| USI Japan Co., Ltd. | Japan | Sumitomo Fudosan Shin-yokohama Bldg. 10F 2-5-5. Shin-yokohama, Kouhoku-ku, Yokohama, Japan | Product maintenance and related services | - | 100 | Acquisition through business combinations involving enterprises under common control |
| Universal Scientific Industrial De México S.A. De C.V. | Mexico | Anillo Periferico Manuel Gomez Morin 656 Residental Santa Isabel CP44290, Guadalajara, Jalisco, México | Contractual manufacturing, product maintenance and related services | - | 100 | Acquisition through business combinations involving enterprises under common control |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VII) EQUITY IN OTHER ENTITIES - continued
1. Equity in major subsidiaries - continued
(1) Composition of enterprise group - continued
| Name of subsidiary | Principal operation place | Registered place | Business nature | Proportion of shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||
| Universal Global Technology (Huizhou) Co., Ltd. | Huizhou | 8th Floor, Innovation Building, No.1 Science and Technology Road, Middle Shihua Avenue, Daya Wan, Huizhou | Production and sales | 100 | - | Acquisition through establishment |
| Universal Scientific Industrial (France) | France | 95 rue La Boetie 75008 Paris, France | Investment | - | 100 | Acquisition through establishment |
| Universal Scientific Industrial Poland Sp. z o.o. | Poland | Biskupice Podgórne ul. Innowacyjna 4, 55-040, Wroc?aw, Polska | Production and sales | - | 100 | Acquisition through business combinations not involving enterprises under common control |
| Universal Scientific Industrial Vietnam Company Limited | Vietnam | Land Plot CN4.1H, Dinh Vu Industrial Zone, Dinh Vu – Cat Hai Economic Zone, Dong Hai 2 Ward, Hai An District, Hai Phong City, Vietnam | Production and sales, product design and research & development | - | 100 | Acquisition through establishment |
| USI (Shenzhen) Electronic Technology Innovation Co., Ltd. | Shenzhen | 101 Huanxu Electronics Factory, Gaoxin North District, Songpingshan North Ring Road, Songpingshan Community, Xili Street, Nanshan District, Shenzhen | Product design and research & development, real estate development and operation | - | 100 | Acquisition through establishment |
| FINANCI?RE AFG S.A.S. | France | 6 Rue Vincent Van Gogh 93360 Neuilly-Plaisance | Production and sales | 10.42 | 89.58 | Acquisition through business combinations not involving enterprises under common control |
(2) The Group has no significant non-wholly subsidiaries.
2. Equity in joint ventures or associates
(1) Significant associates or joint ventures
| Name of associate or joint venture | Principal operating place | Registered place | Business nature | Shareholding proportion (%) | Accounting treatments for investments in joint ventures or associates | |
| Direct | Indirect | |||||
| I. Joint venture | ||||||
| SUMA-USI | Kunshan | Room 8, No. 232, Yuanfeng Road, Yushan Town, Kunshan City | Production and sales, product design and research development | - | 49.00 | Equity method |
| II. Associate | ||||||
| M-Universe | Singapore | 1 Marina Boulevard #28-00, Singapore | Production and sales | - | 42.23 | Equity method |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VII) EQUITY IN OTHER ENTITIES - continued
2. Equity in joint ventures or associates - continued
(2) Major financial information of significant joint ventures
Unit: RMB
| SUMA-USI | ||
| 31/12/2021/Amount incurred in the current period | 31/12/2020/Amount incurred in the prior period | |
| Current assets | 639,944,748.59 | 314,624,525.13 |
| Including: Cash and cash equivalent | 96,396,102.06 | 171,416,102.88 |
| Non-current assets | 14,238,749.45 | 14,056,139.00 |
| Total assets | 654,183,498.04 | 328,680,664.13 |
| Current liabilities | 421,010,161.96 | 108,206,914.14 |
| Non-current liabilities | 50,000.00 | 50,000.00 |
| Total liabilities | 421,060,161.96 | 108,256,914.14 |
| Total shareholders' equity | 233,123,336.08 | 220,423,749.99 |
| Share of net assets calculated based on shareholding proportion | 114,230,434.68 | 108,007,637.50 |
| Carrying amount of equity investments in joint ventures | 114,230,434.68 | 108,007,637.50 |
| Fair value of equity investments in joint ventures where there is quoted price | N/A | N/A |
| Revenue | 424,530,768.25 | 109,828,047.02 |
| Income tax expenses | 3,758,368.69 | 3,909.15 |
| Net profit | 12,699,586.09 | 596,512.39 |
| Total comprehensive income | 12,699,586.09 | 596,512.39 |
39.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VII) EQUITY IN OTHER ENTITIES - continued
2. Equity in joint ventures or associates - continued
(3) Major financial information of significant associates
Unit: RMB
| M-Universe | ||
| 31/12/2021/Amount incurred in the current period | 31/12/2020/Amount incurred in the prior period | |
| Current assets | 986,288,911.50 | 969,698,013.50 |
| Including: Cash and cash equivalent | 148,547,434.30 | 171,996,364.00 |
| Non-current assets | 484,452,265.86 | 442,341,620.01 |
| Total assets | 1,470,741,177.36 | 1,412,039,633.51 |
| Current liabilities | 401,547,961.70 | 363,547,853.30 |
| Non-current liabilities | 52,746,166.10 | 44,010,450.50 |
| Total liabilities | 454,294,127.80 | 407,558,303.80 |
| Minority interests | 2,193,240.80 | 1,592,075.60 |
| Equity attributable to shareholders of the Company | 1,014,253,808.76 | 1,002,889,254.11 |
| Share of net assets calculated based on shareholding proportion | 428,319,383.95 | 423,520,132.02 |
| Carrying amount of equity investments in joint ventures | 428,319,383.95 | 423,520,132.02 |
| Fair value of equity investments in joint ventures where there is quoted price | N/A | N/A |
| Revenue | 1,341,385,113.60 | 1,153,224,305.60 |
| Net profit attributable to owners of the Company | 37,636,042.32 | 46,081,934.83 |
| Other comprehensive income attributable to owners of the Company, net of tax | 17,120,834.81 | 42,837,502.20 |
| Total comprehensive income attributable to owners of the Company | 54,756,877.13 | 88,919,437.03 |
| Dividends received from joint ventures in the current period | 8,521,365.60 | 8,879,460.13 |
(4) There is no significant limitations over the ability of joint ventures or associates to transfer funds to the
Group.
(5) The Group has no unrecognized commitment relating to investments in joint ventures.
(6) The Group has no contingent liabilities relating to investments in joint ventures and associates.
(VIII) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
The Group's major financial instruments include cash and bank balances, held-for-trading financial assets, notesreceivable, accounts receivable, other receivables, non-current assets due within one year, other current assets,long-term receivables, other equity instrument investment, other non-current financial assets, other non-currentassets, borrowings, derivative financial liabilities, accounts payable, other payables, non-current liabilities duewithin one year, bonds payable, lease liabilities, long-term payables and other non-current liabilities, etc. Detailsof these financial instruments are disclosed in Note (V). Risks associated with these financial instruments andthe policies on how to mitigate these risks are set out below. Management manages and monitors theseexposures to ensure the risks are monitored at a certain level.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VIII) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
Unit: RMB
| 31/12/2021 | 31/12/2021 (Restated) | |
| Financial assets | ||
| At FVTPL | ||
| Held-for-trading financial assets | 96,480,087.56 | 182,315,272.70 |
| Other non-current financial assets | 236,978,820.68 | 152,935,434.70 |
| Subtotal | 333,458,908.24 | 335,250,707.40 |
| At FVTOCI | ||
| Other equity instrument investment | 75,957,194.28 | 41,351,831.65 |
| Subtotal | 75,957,194.28 | 41,351,831.65 |
| Measured at amortized cost | ||
| Cash and bank balances | 6,034,204,042.25 | 6,332,982,117.63 |
| Notes receivable | 78,960,907.84 | 70,395,770.23 |
| Accounts receivable | 12,459,388,852.15 | 10,468,619,520.16 |
| Other receivables | 124,093,293.85 | 121,079,752.84 |
| Other current assets | 153,785,608.36 | 129,990,309.17 |
| Non-current assets due within one year | 991,195.08 | 813,785.46 |
| Long-term receivables | 11,164,116.06 | 10,380,472.81 |
| Other non-current assets | 11,240,266.61 | 7,470,169.68 |
| Subtotal | 18,873,828,282.20 | 17,141,731,897.98 |
| Total financial assets | 19,283,244,384.72 | 17,518,334,437.03 |
| Financial liabilities | ||
| At FVTPL | ||
| Derivative financial liabilities | 976,413.16 | 18,402,480.68 |
| Measured at amortized cost | ||
| Short-term borrowings | 2,480,500,031.68 | 375,341,430.81 |
| Accounts payable | 12,558,598,243.17 | 11,835,239,734.29 |
| Other payables | 397,047,553.23 | 382,052,467.52 |
| Non-current liabilities due within one year | 720,507,781.49 | 934,981,355.04 |
| Long-term borrowings | 1,101,220,467.55 | 3,011,668,944.64 |
| Bonds payable | 3,115,505,143.28 | - |
| Lease liabilities | 475,125,597.24 | 534,968,764.47 |
| Long-term payables | 45,581,055.62 | 43,287,736.00 |
| Other non-current liabilities | 5,642,575.13 | 4,960,300.38 |
| Subtotal | 20,899,728,448.39 | 17,122,500,733.15 |
| Total financial liabilities | 20,900,704,861.55 | 17,140,903,213.83 |
The Group adopts sensitivity analysis technique to analyze how the profit and loss for the period orshareholders' equity would have been affected by reasonably possible changes in the relevant risk variables. Asit is unlikely that risk variables will change in an isolated manner, and the interdependence among risk variableswill have significant effect on the amount ultimately influenced by the changes in a single risk variable, thefollowing are based on the assumption that the change in each risk variable is on a stand-alone basis.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VIII) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies
The Group's risk management objectives are to achieve a proper balance between risks and yield, minimize theadverse impacts of risks on the Group's operation performance, and maximize the benefits of the shareholdersand other stakeholders. Based on these risk management objectives, the Group's basic risk management strategyis to identify and analyze the Group's exposure to various risks, establish an appropriate maximum tolerance torisk, implement risk management, and monitors regularly and effectively these exposures to ensure the risks aremonitored at a certain level.
1.1 Market risk
1.1.1. Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. The Group'sexposure to the currency risk is primarily associated with USD and EUR. The Group's subsidiaries located inChina have some purchases, sales and financing activities denominated in USD and EUR while other principalactivities are denominated and settled in RMB; The Group's subsidiaries located in Taiwan have some purchasesand sales denominated in USD and EUR while other principal activities are denominated and settled in TWD; TheGroup's subsidiaries located in Japan have some purchases and sales denominated in USD while other principalactivities are denominated and settled in JPY; The Group's subsidiaries located in Hong Kong have somefinancing activities denominated in EUR while other principal activities are denominated and settled in USD; TheGroup's subsidiary, USI Poland, located in Europe has some purchases and sales denominated in USD and EURwhile other principal activities are denominated and settled in PLN; The Group's other subsidiaries located inEurope have principal activities denominated and settled in EUR; The Group's subsidiaries located in Americaand Mexico have activities denominated and settled in USD. As at 31 December 2021 and 31 December 2020, thebalance of the Group's significant assets and liabilities set out below are both denominated in foreign currencies(non-functional currency and translated to RMB). Currency risk arising from the assets and liabilitiesdenominated in foreign currencies may have impact on the Group's performance.
Unit: RMB'000
| Item | 31/12/2021 | 31/12/2020 |
| USD | ||
| Cash and bank balances | 1,251,361 | 2,559,972 |
| Accounts receivable | 9,795,263 | 8,635,997 |
| Other receivables | 13,493 | 26,823 |
| Short-term borrowings | (474,445) | (15,396) |
| Accounts payable | (8,804,017) | (8,552,722) |
| Other payables | (163,013) | (123,925) |
| Subtotal | 1,618,642 | 2,530,749 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VIII) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies - continued
1.1 Market risk - continued
1.1.1. Currency risk - continued
Unit: RMB'000
| Item | 31/12/2021 | 31/12/2020 |
| EUR | ||
| Cash and bank balances | 7,953 | 8,481 |
| Accounts receivable | 16,464 | 21,040 |
| Other receivables | 367 | 230 |
| Short-term borrowings | (1,249,250) | - |
| Accounts payable | (29,462) | (22,747) |
| Other payables | (37) | (14) |
| Non-current liabilities due within one year | - | (450,743) |
| Long-term borrowings | (1,101,220) | (1,352,228) |
| Subtotal | (2,355,185) | (1,795,981) |
The Group closely monitors the effects of changes in the foreign exchange rates on the Group's currency riskexposures, and uses foreign currency forward contracts to reduce part of the currency exposures.
Sensitivity analysis on currency risk
Where all other variables are held constant, reasonably possible changes in the foreign exchange rate may havethe following pre-tax effect on the profit or loss for the year and shareholders' equity:
Unit: RMB'000
| Item | Change in exchange rate | 2021 | 2020 | ||
| Effect on profit | Effect on shareholders' equity | Effect on profit | Effect on shareholders' equity | ||
| USD | 5% appreciation against RMB | (13,736) | (13,736) | 27,023 | 27,023 |
| USD | 5% depreciation against RMB | 13,736 | 13,736 | (27,023) | (27,023) |
| USD | 5% appreciation against TWD | 122,196 | 122,196 | 81,662 | 81,662 |
| USD | 5% depreciation against TWD | (122,196) | (122,196) | (81,662) | (81,662) |
| USD | 5% appreciation against EUR | (21,539) | (21,539) | 17,642 | 17,642 |
| USD | 5% depreciation against EUR | 21,539 | 21,539 | (17,642) | (17,642) |
| USD | 5% appreciation against PLN | 1,972 | 1,972 | 210 | 210 |
| USD | 5% depreciation against PLN | (1,972) | (1,972) | (210) | (210) |
| EUR | 5% appreciation against RMB | (380) | (380) | 149 | 149 |
| EUR | 5% depreciation against RMB | 380 | 380 | (149) | (149) |
| EUR | 5% appreciation against TWD | (23) | (23) | (13) | (13) |
| EUR | 5% depreciation against TWD | 23 | 23 | 13 | 13 |
| EUR | 5% appreciation against USD | (117,802) | (117,802) | (90,295) | (90,295) |
| EUR | 5% depreciation against USD | 117,802 | 117,802 | 90,295 | 90,295 |
| EUR | 5% appreciation against PLN | 284 | 284 | 360 | 360 |
| EUR | 5% depreciation against PLN | (284) | (284) | (360) | (360) |
1.1.2. Interest rate risk - risk of changes in cash flows
The Group's cash flow interest rate risk of financial instruments relates primarily to variable-rate bankborrowings (see Note (V). 22 & 30 for details). The Group closely monitors the effects of changes in the interestrates on the Group's interest rate risk exposures. It is the Group's policy to keep its borrowings at floating rate ofinterests with no other arrangements such as interest rate swaps.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VIII) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies - continued
Sensitivity analysis on interest rate risk
Where all other variables are held constant, reasonably possible changes in the interest rate may have thefollowing pre-tax effect on the profit or loss for the year and shareholders' equity:
Unit: RMB’000
| Item | Change in interest rate | 2021 | 2020 | ||
| Effect on profit | Effect on shareholders' equity | Effect on profit | Effect on shareholders' equity | ||
| Financial instruments at floating interest rate | +100 basis points | (13,465) | (13,465) | (22,024) | (22,024) |
| Financial instruments at floating interest rate | -100 basis points | 13,465 | 13,465 | 22,024 | 22,024 |
1.1.3. Other price risk
The price risk of the Group mainly arises from held-for-trading equity instrument investment and other equityinstrument investment. The Group reduces the price risk of equity instrument investment by holding a variety ofequity securities portfolio.
1.2 Credit risk
40.As at 31 December 2021, the Group's maximum exposure to credit risk which will cause a financial loss to theGroup due to failure to discharge an obligation by the counterparties is arising from: cash and bank balances(Note (V). 1), held-for-trading financial assets (Note (V). 2), notes receivable (Note (V). 3), accounts receivable(Note (V). 4), portion of other receivables (Note (V). 6), non-current assets due within one year (Note (V). 8),portion of other current assets (Note (V). 9), long-term receivables (Note (V). 10), portion of other non-currentassets (Note (V). 21) and non-current financial assets at FVTPL that are not included in the impairmentassessment (Note (V). 13). As at the balance sheet date, the carrying amount of the Group's financial assets is itsmaximum exposure to credit risk.
In order to minimize the credit risk, the Group has delegated a team responsible for determination of creditlimits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recoveroverdue debts. In addition, the Group reviews the recoverable amount of financial assets at each balance sheetdate to ensure that adequate provision for credit loss is made for relevant financial assets. In this regard, themanagement of the Group considers that the Group's credit risk is significantly reduced.
The credit risk on cash and bank balances is limited because they are deposited with banks with high creditratings.
As of 31 December 2021, the balance of bank acceptance bills held by the Group was RMB 78,960,907.84, ofwhich all issuing banks were banks with high credit rating. Therefore, the management of the Group believesthat the credit risk of relevant bank acceptance bills is low.
As at 31 December 2021, the balance of accounts receivable of the Group's top 5 customers wasRMB 7,045,433,457.45 (31 December 2020: RMB 6,418,226,754.66), accounting for 56.50% (31 December2020: 61.28%) of the Group's accounts receivable. Except for that, the Group has no other significant credit riskexposures concentrated on a single financial asset or a portfolio of financial assets with similar characteristics.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(VIII) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies - continued
1.3 Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalentsdeemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuationsin cash flows. The management monitors the utilization of bank borrowings and ensures compliance with loancovenants.
The Group relies on cash generated from production and operations and bank borrowings as significant sourcesof liquidity. As at 31 December 2021, the Group has available unutilized bank loan facilities of approximatelyRMB 17.539 billion.
The following is the maturity analysis for liabilities held by the Group which is based on undiscountedremaining contractual obligations:
Unit: RMB
| Less than 1 year | 1 to 5 years | Over 5 years | Total | |
| Short-term borrowings | 2,484,292,320.15 | - | - | 2,484,292,320.15 |
| Accounts payable | 12,558,598,243.17 | - | - | 12,558,598,243.17 |
| Other payables | 423,509,465.51 | - | - | 423,509,465.51 |
| Long-term borrowings | 599,204,325.22 | 1,103,789,981.98 | - | 1,702,994,307.20 |
| Long-term payables | 14,603,600.51 | 34,229,123.85 | 13,083,682.23 | 61,916,406.59 |
| Bonds payable | 3,449,974.00 | 134,548,986.00 | 3,656,972,440.00 | 3,794,971,400.00 |
| Lease liabilities | 141,162,788.40 | 404,952,136.09 | 109,594,213.94 | 655,709,138.43 |
| Other non-current liabilities | - | 5,642,575.13 | - | 5,642,575.13 |
| Derivative financial liabilities | 976,413.16 | - | - | 976,413.16 |
(IX) DISCLOSURE OF FAIR VALUE
1. Closing fair value of assets and liabilities measured at fair value
Unit: RMB
| Item | Closing balance | |||
| Level 1 | Level 2 | Level 3 | Total | |
| I. Continuous fair value measurement | ||||
| (I) Financial assets at FVTPL | ||||
| 1. Derivative financial assets | - | 616,169.38 | 8,624,935.00 | 9,241,104.38 |
| 2. Fund investment | - | - | 94,130,696.47 | 94,130,696.47 |
| 3. Accounts receivable factoring | - | - | 87,238,983.18 | 87,238,983.18 |
| 4. Equity instrument investment | - | - | 51,878,465.32 | 51,878,465.32 |
| 5. Contingent consideration | - | - | 90,969,658.89 | 90,969,658.89 |
| (II) Financial assets at FVTOCI | ||||
| 1. Equity instrument investments | - | - | 75,957,194.28 | 75,957,194.28 |
| Total assets continuously measured at fair value | - | 616,169.38 | 408,799,933.14 | 409,416,102.52 |
| (III) Derivative financial liabilities | ||||
| 1. Financial liabilities at FVTPL | - | 976,413.16 | - | 976,413.16 |
2. Basis for determining the market price of continuous and non-continuous level 1 fair valuemeasurement items
The fair value of continuous level 1 fair value measurement items is derived from quotes in an active market.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(IX) DISCLOSURE OF FAIR VALUE - continued
3. Valuation techniques and qualitative and quantitative information of key parameters adopted for level2 fair value measurement items
Unit: RMB
| Fair value at 31 December 2021 | Valuation technique | Inputs | |
| Derivative financial assets (Note (V). 2) | 616,169.38 | Method of discounted cash flow analysis | Forward exchange rate |
| Discount rate reflecting credit risk of counterparties | |||
| Derivative financial liabilities (Note (V). 23) | 976,413.16 | Method of discounted cash flow analysis | Forward exchange rate |
| Discount rate reflecting credit risk of counterparties |
4. Valuation techniques and qualitative and quantitative information of key parameters adopted for level3 fair value measurement items
Unit: RMB
| Fair value at 31 December 2021 | Valuation technique | Significant unobservable inputs | |
| Accounts receivable factoring (Note (V). 2) | 87,238,983.18 | Method of discounted cash flow analysis | Discount rate reflecting credit risk of counterparties |
| Convertible bond option (Note V, 2) | 8,624,935.00 | Binomial tree evaluation model | Risk free interest rate, discount rate and Volatility |
| Contingent consideration (Note (V). 13) | 90,969,658.89 | Monte-Carlo analogy method | Net interest rate |
| Fund investment (Note (V). 13) | 94,130,696.47 | Market approach | Liquidity discount |
| Equity instrument investments (Note (V). 12 & 13) | 127,835,659.60 | Market approach | Liquidity discount |
5. Reconciliation between opening and closing carrying amounts for continuous level 3 fair value
measurement items
Unit: RMB
| Item | 1 January 2021 (Restated) | Recognized in profit or loss | Recognized in other comprehensive income | Translation of financial statements denominated in foreign currencies | Purchase /Increase | Settlement | 31 December 2021 | Changes in unrealized gains or losses for assets held at the end of the reporting period |
| (I) Financial assets at FVTPL | ||||||||
| 1. Financial products | 5,274,102.94 | 73,489,834.38 | - | - | 6,643,000,000.00 | 6,721,763,937.32 | - | - |
| 2. Accounts receivable factoring | 174,458,243.25 | - | - | (13,234,738.22) | 715,060,459.12 | 789,044,980.97 | 87,238,983.18 | - |
| 3. Fund investment | 64,091,002.18 | 4,990,173.85 | - | (1,934,797.96) | 28,192,337.89 | 1,208,019.49 | 94,130,696.47 | 3,782,154.36 |
| 4. Equity instrument investment | - | - | - | - | 51,878,465.32 | - | 51,878,465.32 | - |
| 5. Contingent consideration | 88,844,432.52 | 11,250,015.56 | - | (9,124,789.19) | - | - | 90,969,658.89 | 11,250,015.56 |
| 6. Convertible bond option | - | 15,525,000.00 | - | - | (6,900,000.00) | 65.00 | 8,624,935.00 | 8,624,935.00 |
| (II) Financial assets at FVTOCI | ||||||||
| Other equity instrument | 41,351,831.65 | 14,910,026.14 | 34,435,658.76 | 169,703.87 | - | 14,910,026.14 | 75,957,194.28 | - |
6. There are no changes in valuation techniques in the year.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(IX) DISCLOSURE OF FAIR VALUE - continued
7. Fair value of financial assets and financial liabilities not measured at fair value
The Group's management has assessed cash and bank balances, notes receivable, accounts receivable, otherreceivables, other current assets, non-current assets due within one year, long-term receivables, short-termborrowings, accounts payable, other payables, non-current liabilities due within one year, lease liabilities, long-term borrowings, bonds payable, long-term payables, other non-current liabilities, etc. and considers that theircarrying amount approximates to the fair value of these assets and liabilities.
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS
1. Parent of the Company
| Name of the parent | Place of incorporation | Nature of business | Registered capital | Proportion of the Company's ownership interest held by the parent (%) | Proportion of the Company's voting power held by the parent (%) |
| USI Enterprise Limited | Room A, 7/F, Yuen Long Technology Centre, No. 11 Wang Yip Street West, Yuen Long, New Territories, Hong Kong | Investment holding | USD 210,900,000.00 | 76.18 | 77.06 |
The ultimate controlling party of the Company is ASE Investment Holding Limited, which is listed on theTaiwan Stock Exchange with the listing code as 3711.
2. Subsidiaries of the Company
The details of the subsidiaries of the Company are set out in Note (VII). 1.
3. Associates and joint ventures of the Company
The details of the associates and joint ventures of the Company are set out in Note (VII). 2.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
4. Other related parties of the Company
| Name of other related party | Relationship between other related parties and the Company |
| USI Inc. | Indirect holding company |
| ASE (Shanghai) Inc. | The same ultimate holding company |
| ASE (KunShan) Inc. (Note) | The same ultimate holding company |
| ASE Inc. | The same ultimate holding company |
| ASE Assembly & Test (Shanghai) Limited | The same ultimate holding company |
| Suzhou ASEN Semiconductors Co., Ltd. (Note) | The same ultimate holding company |
| ASE(US)Inc. | The same ultimate holding company |
| ASE KOREA, Inc. | The same ultimate holding company |
| ASE Electronics Inc. | The same ultimate holding company |
| ISE Labs, Inc. | The same ultimate holding company |
| Advanced Semiconductor Engineering (China) Ltd. | The same ultimate holding company |
| ASE Test Inc. | The same ultimate holding company |
| ASE Marketing & Service Japan Co., Ltd. | The same ultimate holding company |
| Shanghai Ding Hui Real Estate Development Co., Ltd. | The same ultimate holding company |
| SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | The same ultimate holding company |
| Wuxi Tongzhi Microelectronics Co., Ltd. | The same ultimate holding company |
| ISE labs, China. Ltd. | The same ultimate holding company |
| Shanghai Youhong Electronic Engineering Technology Consulting Co., Ltd. | The same ultimate holding company |
| Rirong Semiconductor (Shanghai) Co., Ltd. (Note) | The same ultimate holding company |
| Shanghai Ding Gu Estate Management Co., Ltd. | The same ultimate holding company |
| Siliconware Precision Industries Co., Ltd | The same ultimate holding company |
| DECELECT SOISSONS | Company controlled by key management |
| DECELECT SAINT VIT | Company controlled by key management |
| ASDI Assistance Direction | Company controlled by key management |
| SHANGHAI HONGRONG PROPERTY MANAGEMENT CO., LTD. | Associate of the ultimate holding company |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Subsidiary of an associate |
| Memtech Development (H.K.) Co., Limited | Subsidiary of an associate |
| Dongguan Memtech Electronics Co., Ltd. | Subsidiary of an associate |
| Nantong Memtech Technologies Co., Ltd. | Subsidiary of an associate |
Note: In 2021, the Company's ultimate controlling company ASE Investment Holding Limited sold all of itsequity interests of Rirong Semiconductor (Shanghai) Co., Ltd., Suzhou ASEN Semiconductors Co., Ltd. andASE (KunShan) Inc. to independent third parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - CONTINUED
5. Related party transactions
(1) Sales and purchase of goods, provision and receipt of services
Purchase of goods/receipt of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Purchase of materials | 44,964,569.02 | 37,669,511.29 |
| ASE Electronics Inc. | Purchase of materials | 35,395,020.12 | 36,974,401.57 |
| Memtech Development (H.K.) Co., Limited | Purchase of materials | 33,805,960.04 | 29,025,496.83 |
| Dongguan Memtech Electronics Co., Ltd. | Purchase of materials | 21,142,669.59 | 13,751,524.45 |
| Siliconware Precision Industries Co., Ltd | Purchase of materials | 2,396,432.75 | - |
| DECELECT SAINT VIT | Purchase of materials | 1,419,113.28 | - |
| Nantong Memtech Technologies Co., Ltd. | Purchase of materials | 1,244,612.87 | 998,543.35 |
| ASE Inc. | Purchase of materials | 887,380.86 | 2,036,861.76 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Purchase of materials | 567,548.09 | - |
| SUMA-USI | Purchase of materials | 329,035.08 | 17,200.09 |
| ASE KOREA, Inc. | Purchase of materials | 185,560.55 | 27,356.06 |
| DECELECT SOISSONS | Purchase of materials | 162,939.14 | - |
| Wuxi Tongzhi Microelectronics Co., Ltd. | Purchase of materials | - | 30,450.93 |
| Total | 142,500,841.39 | 120,531,346.33 | |
| ASE Inc. | Receipt of services | 1,485,559,571.92 | 2,205,671,003.49 |
| ASE (Shanghai) Inc. | Receipt of services | 38,163,009.12 | 40,295,014.64 |
| ASE (KunShan) Inc. | Receipt of services | 36,299,124.27 | 33,258,241.10 |
| USI Inc. | Receipt of services | 15,146,692.07 | 14,081,791.53 |
| USI Enterprise Limited | Receipt of services | 3,450,020.58 | 3,044,204.41 |
| ASDI Assistance Direction | Receipt of services | 1,976,673.00 | - |
| SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | Receipt of services | 1,953,179.19 | 2,364,304.11 |
| ASE KOREA, Inc. | Receipt of services | 1,133,819.86 | 10,409,020.39 |
| ASE Marketing & Service Japan Co., Ltd. | Receipt of services | 846,602.40 | 930,315.60 |
| ASE (US) Inc. | Receipt of services | 106,965.60 | 35,969.09 |
| SUMA-USI | Receipt of services | 61,627.40 | 106,790.49 |
| Memtech Development (H.K.) Co., Limited | Receipt of services | 23,377.92 | - |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Receipt of services | 17,500.00 | 23,270.00 |
| Dongguan Memtech Electronics Co., Ltd. | Receipt of services | 13,613.15 | - |
| SHANGHAI HONGRONG PROPERTY MANAGEMENT CO., LTD. | Receipt of services | - | 364,492.80 |
| ASE Assembly & Test (Shanghai) Limited | Receipt of services | - | 56,463.78 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Receipt of services | - | 14,238.32 |
| Total | 1,584,751,776.48 | 2,310,655,119.75 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - CONTINUED
5. Related party transactions - continued
(1) Sales and purchase of goods, provision and receipt of services - continued
Sales of goods/provision of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| ASE Inc. | Sales of goods | 6,524,003.25 | 3,619,961.48 |
| SUMA-USI | Sales of goods | 107,841.18 | 8,340,234.29 |
| DECELECT SOISSONS | Sales of goods | 25,590.38 | - |
| ASE Test Inc. | Sales of goods | - | 2,537,953.91 |
| Suzhou ASEN Semiconductors Co., Ltd. | Sales of goods | - | 41,004.00 |
| Total | 6,657,434.81 | 14,539,153.68 | |
| ASE Inc. | Provision of services | 4,186,289.70 | 2,053,269.85 |
| ISE labs, China. Ltd. | Provision of services | 611,327.88 | 757,657.98 |
| SUMA-USI | Provision of services | 603,545.70 | 1,286,929.02 |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Provision of services | 276,588.89 | 48,042.45 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Provision of services | 4,500.00 | - |
| ASE Assembly & Test (Shanghai) Limited | Provision of services | - | 1,957,515.58 |
| Advanced Semiconductor Engineering (China) Ltd. | Provision of services | - | 377,182.30 |
| Suzhou ASEN Semiconductors Co., Ltd. | Provision of services | - | 109,150.94 |
| Shanghai Ding Gu Estate Management Co., Ltd. | Provision of services | - | 17,711.25 |
| Shanghai Ding Hui Real Estate Development Co., Ltd. | Provision of services | - | 3,542.18 |
| Total | 5,682,252.17 | 6,611,001.55 |
The above transactions are executed at the prices agreed on by both parties.
(2) Leases with related parties
Leases where the Group is the lessor
Unit: RMB
| Name of lessee | Type of leased assets | Lease income recognized in the current year | Lease income recognized in the prior year |
| ASE Inc. | Plant | 3,597,504.88 | 3,642,717.71 |
| ISE labs, China. Ltd. | Machinery and equipment | 200,510.00 | 462,889.00 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Machinery and equipment | 105,000.00 | - |
| Suzhou ASEN Semiconductors Co., Ltd. | Machinery and equipment | - | 1,322,782.94 |
| Total | 3,903,014.88 | 5,428,389.65 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - CONTINUED
5. Related party transactions - continued
(2) Leases with related parties - continued
Leases where the Group is the lessee
Unit: RMB
| Name of lessor | Type of leased assets | Right-of-use assets leased in this year | Lease interest for the year | Deposit interest income |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 3,668,609.46 | - |
| ASE (KunShan) Inc. | Leasing of business premises | - | 4,517,463.39 | 29,894.40 |
| Advanced Semiconductor Engineering (China) Ltd. | Leasing of business premises | - | 1,908,208.31 | 36,050.71 |
| USI Inc. | Leasing of business premises | - | 3,127,879.21 | - |
| ISE Labs, Inc. | Leasing of business premises | - | 20,231.02 | 14.84 |
| Total | 13,242,391.39 | 65,959.95 |
Unit: RMB
| Name of lessor | Type of leased assets | Right-of-use assets leased in prior year | Lease interest for prior year | Deposit interest income |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 3,837,597.08 | - |
| ASE (KunShan) Inc. | Leasing of business premises | 47,559.64 | 4,521,389.29 | 23,001.49 |
| Advanced Semiconductor Engineering (China) Ltd. | Leasing of business premises | - | 2,566,545.47 | 35,255.51 |
| USI Inc. | Leasing of business premises | - | 3,759,869.12 | - |
| ASE (US) Inc. | Leasing of business premises | - | 8,500.76 | 220.06 |
| ISE Labs, Inc. | Leasing of business premises | - | 35,258.99 | 16.56 |
| Total | 47,559.64 | 14,729,160.71 | 58,493.62 |
Unit: RMB
| Name of lessor | Type of leased assets | Lease income recognized in the current year | Lease income recognized in the prior year |
| ASE (US) Inc. | Leasing of business premises | 458,432.15 | - |
| SUMA-USI | Machinery and equipment | 32,312.09 | - |
| ASE (KunShan) Inc. | Machinery and equipment | 24,162.60 | - |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 39,691.43 |
| ASE KOREA, Inc. | Staff dormitory | - | 46,768.85 |
| Total | 514,906.84 | 86,460.28 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - CONTINUED
5. Related party transactions - continued
(3) Assets transfer/debt restructuring with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| ASE Test Inc. | Sales of fixed assets | 12,545,380.16 | - |
| ASE Test Inc. | Purchase of fixed assets | - | 13,211,965.96 |
| ISE labs, China. Ltd. | Sales of fixed assets | 10,071,875.88 | - |
| ASE Inc. | Sales of fixed assets | 3,478,999.00 | - |
| Shanghai Youhong Electronic Engineering Technology Consulting Co., Ltd. | Purchase of fixed assets | 505,387.14 | 1,883,582.14 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Sales of fixed assets | 21,740.65 | - |
| Total | 26,623,382.83 | 15,095,548.10 |
The above transactions are executed at the prices agreed on by both parties.
(4) Interest expenses with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| USI Enterprise Limited | Interest expenses on convertible bonds | 80,914,020.40 | - |
| ASE (Shanghai) Inc. | Interest expenses on convertible bonds | 869,753.10 | - |
| Total | 81,783,773.50 | - |
In 2021, the Group issued 34,500,000 convertible bonds with a face value of RMB 100. See Note (V), 31 fordetails, of which 26,418,020 were subscribed by USI Enterprise Limited and 283,970 by ASE (Shanghai) Inc.
(5) Compensation for key management personnel
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Compensation for key management personnel | 30,519,010.96 | 19,963,423.42 |
6. Amounts due from / to related parties
(1) Amounts due from related parties
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 | ||
| Book value | Bad debt provision | Book value | Bad debt provision | ||
| Accounts receivable | ASE Inc. | 1,158,180.69 | - | 1,658,203.45 | - |
| Accounts receivable | SUMA-USI | 160,167.11 | - | 382,002.29 | - |
| Accounts receivable | ASE Test Inc. | - | - | 363,853.44 | - |
| Total | 1,318,347.80 | - | 2,404,059.18 | - | |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
6. Amounts due from / to related parties - continued
(1) Amounts due from related parties - continued
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 | ||
| Book value | Bad debt provision | Book value | Bad debt provision | ||
| Other receivables | ASE Inc. | 1,144,700.73 | - | 3,232,749.33 | - |
| Other receivables | ISE labs, China. Ltd. | 192,606.48 | - | 339,909.17 | - |
| Other receivables | USI Inc. | 55,570.86 | - | 64,882.44 | - |
| Other receivables | ASE Assembly & Test (Shanghai) Limited | - | - | 407,122.42 | - |
| Total | 1,392,878.07 | - | 4,044,663.36 | - | |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 | ||
| Book value | Bad debt provision | Book value | Bad debt provision | ||
| Other non-current assets | Advanced Semiconductor Engineering (China) Ltd. | 1,412,962.98 | 1,412,962.98 | - | |
| Other non-current assets | ISE Labs, Inc. | 21,644.74 | 22,151.25 | - | |
| Other non-current assets | ASE (KunShan) Inc. | - | 1,366,613.20 | - | |
| Other non-current assets | ASE (US) Inc. | - | 391,494.00 | - | |
| Total | 1,434,607.72 | 3,193,221.43 | - | ||
(2) Amounts due to related parties
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Accounts payable | ASE Inc. | 340,399,410.06 | 873,672,163.55 |
| Accounts payable | Taitech Precision Electronic (Kunshan) Co., Ltd. | 27,560,169.90 | 21,613,585.65 |
| Accounts payable | Memtech Development (H.K.) Co., Limited | 15,169,729.44 | 16,910,583.12 |
| Accounts payable | USI Inc. | 11,616,822.99 | 11,457,428.86 |
| Accounts payable | ASE Electronics Inc. | 10,591,402.08 | 4,647,678.81 |
| Accounts payable | Dongguan Memtech Electronics Co., Ltd. | 9,476,508.78 | 8,811,288.04 |
| Accounts payable | SUMA-USI | 320,185.81 | 139,767.99 |
| Accounts payable | USI Enterprise Limited | 288,607.33 | 254,216.81 |
| Accounts payable | Nantong Memtech Technologies Co., Ltd. | 164,619.78 | 496,816.60 |
| Accounts payable | ASDI Assistance Direction | 86,739.49 | - |
| Accounts payable | DECELECT SAINT VIT | 59,874.12 | - |
| Accounts payable | DECELECT SOISSONS | 56,411.81 | - |
| Accounts payable | Siliconware Precision Industries Co., Ltd | 6,694.49 | - |
| Accounts payable | ASE KOREA, Inc. | - | 1,671,206.97 |
| Accounts payable | ASE (KunShan) Inc. | - | 8,687.56 |
| Total | 415,797,176.08 | 939,683,423.96 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(X) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
6. Amounts due from / to related parties - continued
(2) Amounts due to related parties - continued
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Other payables | ASE (Shanghai) Inc. | 3,898,185.67 | 4,485,287.19 |
| Other payables | ASE Inc. | 2,682,192.50 | 4,766,284.80 |
| Other payables | USI Enterprise Limited | 2,193,057.52 | - |
| Other payables | Memtech Development (H.K.) Co., Limited | 667,119.11 | 39,998.69 |
| Other payables | SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | 240,956.60 | 167,348.25 |
| Other payables | Siliconware Precision Industries Co., Ltd | 234,039.09 | - |
| Other payables | USI Inc. | 7,370.75 | 7,331.35 |
| Other payables | ASE (KunShan) Inc. | - | 5,023,662.49 |
| Other payables | Dongguan Memtech Electronics Co., Ltd. | - | 873,921.64 |
| Other payables | ASE Assembly & Test (Shanghai) Limited | - | 24,275.32 |
| Other payables | Rirong Semiconductor (Shanghai) Co., Ltd. | - | 16,089.31 |
| Total | 9,922,921.24 | 15,404,199.04 |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Long-term payables | USI Inc. | 37,610,084.54 | 43,287,736.00 |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Bonds payable | USI Enterprise Limited | 2,399,279,839.68 | - |
| Bonds payable | ASE (Shanghai) Inc. | 25,790,104.50 | - |
| Total | 2,425,069,944.18 | - |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Lease liabilities | USI Inc. | 145,924,337.73 | 174,470,551.10 |
| Lease liabilities | ASE Assembly & Test (Shanghai) Limited | 70,337,306.54 | 82,153,151.12 |
| Lease liabilities | Advanced Semiconductor Engineering (China) Ltd. | 46,106,208.08 | 46,379,823.96 |
| Lease liabilities | ASE (KunShan) Inc. | - | 99,034,866.63 |
| Total | 262,367,852.35 | 402,038,392.81 |
7. Related party commitments
As at 31 December 2021, there are no related party commitments.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS
1. Summary of share-based payments
Unit: share
| 2021 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2015 (Note 1) | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 (Note 2) | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 (Note 3) | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 (Note 4) | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 (Note 5) | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 (Note 6) | |
| Total number of the Company's equity instruments outstanding at the beginning of the year | 13,416,130 | 16,710,000 | 5,122,400 | 1,140,000 | 424,700 | - | |
| Total number of the Company's equity instruments granted during the year | - | - | - | - | - | 281,200 | |
| Total number of the Company's equity instruments vested during the period | 318,800 | 509,300 | 1,780,050 | - | - | - | |
| Total number of the Company's equity instruments lapsed during the period | 178,200 | 624,100 | 461,000 | 150,000 | 22,100 | - | |
| Total number of the Company's equity instruments outstanding at the end of the year | 12,919,130 | 15,576,600 | 2,881,350 | 990,000 | 402,600 | 281,200 | |
| Total number of equity instruments exercisable at the end of the year | 12,919,130 | 5,933,700 | - | 396,000 | - | - | |
| Range of exercise prices and remaining contractual life of the Company's stock options outstanding at the end of the year | Exercise prices of stock options | RMB 15.54 | RMB 12.67 | RMB 12.67 | RMB 21.25 | RMB 0 | RMB 0 |
| Remaining contractual life | About 4 years | About 3 years | About 2.5 years | About 3 years | About 1 years | About 2 years | |
| Range of exercise prices and remaining contractual life of the Company's other equity instruments outstanding at the end of the period | None | None | None | None | None | None | |
Note 1: In November 2015, in order to further improve the corporate governance structure of the Company, to
promote the Company to establish and improve the incentive and restraint mechanism, to fully mobilizethe enthusiasm of the Company's middle-level managers and employees, effectively combine the interestsof shareholders, the Company and the personal interests of operators, and to make all parties jointly focuson the long-term development of the Company, the Company formulated the "Stock Option IncentivePlan of Universal Scientific Industrial (Shanghai) Co., Ltd." to grant qualified employees a certainnumber of stock options to subscribe for the Company's general shares. During the service period of theemployees granted stock options for the Group, the fair value of the corresponding equity instrumentsshall be included in the costs or expenses of the Group on a straight-line basis during the vesting period,and the capital reserve shall be increased accordingly.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 25 November 2015 | 25 November 2015 to 24 November 2020 | 25 November 2017 to 24 November 2025 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for two years and meeting the performance assessment in thecompany and individual level.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 1: - continued
| Accumulated maximum vested proportion | |
| 2 years after the grant date | 40% |
| 3 years after the grant date | 60% |
| 4 years after the grant date | 80% |
| 5 years after the grant date | 100% |
If the stock options are not exercised 10 years after the grant date, the options will lapse. If the incentiverecipient leaves the Company due to resignation or layoffs, the stock options that have been approved toexercise but have not been exercised by the incentive recipient shall be terminated and the unapprovedoptions will be null and void on the date thereof. If the incentive recipient leaves the Company due toretirement, the incentive recipient shall continue to retain the exercise right for the stock options thathave been approved to exercise but have not been exercised, and the options that have not been approvedto exercise shall be invalidated on the date thereof.
Note 2: In November 2019, in order to establish and improve the Company's long-term incentive, assessment and
restraint mechanism, to attract and retain excellent talents, to fully mobilize the enthusiasm of theCompany's directors (excluding independent directors), senior managers, core managers, middle-levelmanagers and core business (technical) staff, and to effectively combine the interests of shareholders, theCompany and the personal interests of the core team, as well as to make all parties jointly focus on thelong-term development of the Company, the Company formulated the "Stock Option Incentive Plan ofUniversal Scientific Industrial (Shanghai) Co., Ltd." to grant qualified employees a certain number ofstock options to subscribe for the Company's general shares. During the service period of the employeesgranted stock options for the Group, the fair value of the corresponding equity instruments shall beincluded in the costs or expenses of the Group on a straight-line basis during the vesting period, and thecapital reserve shall be increased accordingly.
The Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd in 2019 (Draft)
stipulates: "from the date of announcement of the draft incentive plan to the date when the incentiveobject completes the exercise of stock options, if the Company converts capital reserve into share capital,distributes stock dividends, allotments, dividends and other matters, the exercise price of stock optionswill be adjusted accordingly." The 13th meeting of the 5th board of directors held on 26 October 2021approved the proposal on adjusting and canceling some rights and interests related to the first grant ofstock option incentive plan in 2019, and the exercise price was adjusted from RMB13.34 to RMB 12.67per share.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 28 November 2019 | 28 November 2019 to 27 November 2023 | 28 November 2021 to 27 November 2024 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for two years and meeting the performance assessment in thecompany and individual level.
| Accumulated maximum vested proportion | |
| 2 years after the grant date | 40% |
| 3 years after the grant date | 70% |
| 4 years after the grant date | 100% |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 2: - continued
If the stock options are not exercised 5 years after the grant date, the options will lapse. If the incentiverecipient leaves the Company due to resignation or layoffs, the stock options that have been approved toexercise but have not been exercised by the incentive recipient shall be terminated and the unapprovedoptions will be null and void on the date thereof. If the incentive recipient leaves the Company due toretirement, the incentive recipient shall continue to retain the exercise right for the stock options thathave been approved to exercise but have not been exercised, and the options that have not been approvedto exercise shall be invalidated on the date thereof.
Note 3: In November 2019, in order to enrich the salary system of employees, establish and improve the benefit
sharing mechanism between workers and owners, realize the consistency of the interests of the Company,shareholders and employees, and promote all parties to jointly focus on the long-term development of theCompany, so as to bring more efficient and lasting returns to shareholders; to further improve thecorporate governance structure, improve the Company's long-term and effective incentive and restraintmechanism, and ensure the long-term and stable development of the Company; to effectively mobilizethe enthusiasm of managers and employees, attract and retain excellent management talents and businessbackbones, and improve the cohesion of employees and the competitiveness of the Company, theCompany formulated the "Core Employee Share Ownership Plan of Universal Scientific Industrial(Shanghai) Co., Ltd." to grant qualified directors (excluding independent directors), supervisors, seniormanagers, middle-level managers and core employees (including those for research and development,sales, production and management, etc.) of the Company and its holding subsidiaries a certain number ofstock options to subscribe for the general shares of the Company. During the service period of theemployees granted stock options for the Group, the fair value of the corresponding equity instrumentsshall be included in the costs or expenses of the Group on a straight-line basis during the vesting period,and the capital reserve shall be increased accordingly.
According to the Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co.,Ltd. (Draft) (Revised), "the price of transfer for the Core Employee Share Ownership Plan will beadjusted accordingly in the event of any capitalization of capital reserves, issue of stock dividends,allotment of shares or distribution of dividends by the Company from the date of announcement of thisdraft employee share ownership plan to the implementation of the second and third phases of theEmployee Share Ownership Plan". In 2021, the transfer price of the Company's core employee shareownership plan was adjusted from RMB 13.17 per share to RMB 12.67 per share as a result ofdistribution of profits in 2020.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 18 November 2019 | 18 November 2019 to 17 November 2022 | 30 April 2020 to 30 April 2024 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for one year and meeting the performance assessment in thecompany level.
| Accumulated maximum vested proportion | |
| 1 year after the grant date | 20% |
| 2 years after the grant date | 55% |
| 3 years after the grant date | 100% |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 3: - continued
The current stock options that fails to be exercised by the incentive recipient shall be terminated after theend of each exercise period of the stock options. If the incentive recipient leaves the Company due toresignation or layoffs, the stock options that have been approved to exercise but have not been exercisedby the incentive recipient shall be terminated and the unapproved options will be null and void on thedate thereof. If the incentive recipient leaves the Company due to retirement, the incentive recipient shallcontinue to retain the exercise right for the stock options that have been approved to exercise but havenot been exercised, and the options that have not been approved to exercise shall be invalidated on thedate thereof.
Note 4: In September 2020, in order to establish and improve the Company's long-term incentive, assessment
and restraint mechanism, to attract and retain excellent talents, to fully mobilize the enthusiasm of theCompany's directors (excluding independent directors), senior managers, core managers, middle-levelmanagers and core business (technical) staff, and to effectively combine the interests of shareholders, theCompany and the personal interests of the core team, as well as to make all parties jointly focus on thelong-term development of the Company, the Company formulated the "Stock Option Incentive Plan ofUniversal Scientific Industrial (Shanghai) Co., Ltd." to grant qualified employees a certain number ofstock options to subscribe for the Company's general shares. During the service period of the employeesgranted stock options for the Group, the fair value of the corresponding equity instruments shall beincluded in the costs or expenses of the Group on a straight-line basis during the vesting period, and thecapital reserve shall be increased accordingly.
The Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd in 2019 (Draft)stipulates: "from the date of announcement of the draft incentive plan to the date when the incentiveobject completes the exercise of stock options, if the Company converts capital reserve into share capital,distributes stock dividends, allotments, dividends and other matters, the exercise price of stock optionswill be adjusted accordingly." The 13th meeting of the 5th board of directors held on 26 October 2021approved the proposal on adjusting and canceling some rights and interests related to the reserved grantof stock option incentive plan in 2019, and the exercise price was adjusted from RMB 24.65 to RMB
21.15 per share.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 9 September 2020 | 9 September 2020 to 8 November 2023 | 9 November 2021 to 8 November 2024 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 14 months and meeting the performance assessment inthe company and individual level.
| Accumulated maximum vested proportion | |
| 14 months after the grant date | 40% |
| 26 months after the grant date | 70% |
| 38 months after the grant date | 100% |
The stock options that fails to be exercised by the incentive recipient will be lapsed after the end of eachexercise period of the stock options. If the incentive recipient leaves the Company due to resignation orlayoffs, the stock options that have been approved to exercise but have not been exercised by theincentive recipient shall be terminated and the unapproved options will be null and void on the datethereof. If the incentive recipient leaves the Company due to retirement, the incentive recipient shallcontinue to retain the exercise right for the stock options that have been approved to exercise but havenot been exercised, and the options that have not been approved to exercise shall be invalidated on thedate thereof.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 5: In September 2020, in order to enrich the salary system of employees, establish and improve the benefit
sharing mechanism between workers and owners, realize the consistency of the interests of the Company,shareholders and employees, and promote all parties to jointly focus on the long-term development ofthe Company, so as to bring more efficient and lasting returns to shareholders; to further improve thecorporate governance structure, improve the Company's long-term and effective incentive and restraintmechanism, and ensure the long-term and stable development of the Company; to effectively mobilizethe enthusiasm of managers and employees, attract and retain excellent management talents and businessbackbones, and improve the cohesion of employees and the competitiveness of the Company, theCompany formulated the "Core Employee Share Ownership Plan of Universal Scientific Industrial(Shanghai) Co., Ltd." to grant qualified core talents with strategic value to the Company, including keyemployees in key positions of the Company and holding subsidiaries that are important to theimplementation of the Company's development strategy and business objectives a certain number ofstock options to subscribe for the general shares of the Company. During the service period of theemployees granted stock options for the Group, the fair value of the corresponding equity instrumentsshall be included in the costs or expenses of the Group on a straight-line basis during the vesting period,and the capital reserve shall be increased accordingly.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 25 September 2020 | 25 September 2020 to 24 January 2022 | 25 January 2022 to 15 September 2022 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 16 months and meeting the individual performanceassessment.
| Accumulated maximum vested proportion | |
| 16 months after the grant date | 100% |
The current stock options that fails to be exercised by the incentive recipient shall be terminated after theend of each exercise period of the stock options. If the incentive recipient leaves the Company due toresignation or layoffs of the Company, the qualification to participate in the employee share ownershipplan will be cancelled, and the corresponding shares will be transferred back to the special account forrepurchase of the Company. The shares derived from the distribution of share dividends and the transferof capital reserve by the listed company will be reversed to the special account for repurchase of theCompany. If cash dividends are obtained, they will be returned to the Company. If the incentive recipientleaves the company due to retirement, the rights and interests will retain unchanged.
Note 6: In September 2021, in order to enrich the salary system of employees, establish and improve the benefit
sharing mechanism between workers and owners, realize the consistency of the interests of the Company,shareholders and employees, and promote all parties to jointly focus on the long-term development ofthe Company, so as to bring more efficient and lasting returns to shareholders; to further improve thecorporate governance structure, improve the Company's long-term and effective incentive and restraintmechanism, and ensure the long-term and stable development of the Company; to implement thedevelopment strategies of the Company, effectively mobilize the enthusiasm of employees, and retainexcellent key technical talents and business backbones, and improve the cohesion of employees and thecompetitiveness of the Company, the Company formulated the "Core Employee Share Ownership Planof Universal Scientific Industrial (Shanghai) Co., Ltd." to grant the qualified core talents who hold keypositions in the Mexico Plant, Vietnam Plant and Huizhou Plant as designated by the Company with acertain number of stock options to subscribe for the general shares of the Company. During the serviceperiod of the employees granted stock options for the Group, the fair value of the corresponding equityinstruments shall be included in the costs or expenses of the Group on a straight-line basis during thevesting period, and the capital reserve shall be increased accordingly.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 6: -continued
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 13 September 2021 | 13 September 2021 to 12 January 2023 | 13 January 2023 to 13 September 2023 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 16 months and meeting the individual performanceassessment.
| Accumulated maximum vested proportion | |
| 16 months after the grant date | 100% |
The current stock options that fails to be exercised by the incentive recipient shall be terminated after theend of each exercise period of the stock options. If the incentive recipient leaves the Company due toresignation or layoffs of the Company, the qualification to participate in the employee share ownershipplan will be cancelled, and the corresponding shares will be transferred back to the special account forrepurchase of the Company. The shares derived from the distribution of share dividends and the transferof capital reserve by the listed company will be reversed to the special account for repurchase of theCompany. If cash dividends are obtained, they will be returned to the Company. If the incentive recipientleaves the company due to retirement, the rights and interests will retain unchanged.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XI) SHARE-BASED PAYMENTS - continued
2. Equity-settled share-based payments
Unit: RMB
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2015 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | |
| The method of determining the fair value of equity instruments at the grant date | Black-Scholes Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model |
| The basis of determining the number of equity instruments expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the company level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the individual level, and the corresponding equity instrument is that expected to be vested |
| Reasons for the significant difference between the estimate in the current year and that in the prior year | None | None | None | None | None | N/A |
| Amounts of equity-settled share-based payments accumulated in capital reserve | 139,923,402.85 | 81,395,000.00 | 563,000.00 | 5,179,000.00 | 6,848,000.00 | 688,000.00 |
| Total expenses recognized arising from equity-settled share-based payments | - | 42,747,000.00 | 238,000.00 | 3,859,000.00 | 5,343,000.00 | 688,000.00 |
Method of determining the fair value of equity instruments: Fair values are calculated by using Black-ScholesModel or Binomial Tree Model and the inputs to the model at the grant date are as follows:
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2015 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. In 2019 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | |
| Weighted average share price | RMB 15.54 | RMB 13.34 | RMB 13.34 | RMB 21.65 | RMB 0 | RMB 0 |
| Weighted average exercise price | RMB 15.54 | RMB 13.34 | RMB 13.34 | RMB 21.65 | RMB 0 | RMB 0 |
| Expected volatility | 40.33%~45.00% | 45.07%~51.8% | 47.77% | 48.14%~53.57% | 57.21% | 47.15% |
| Expected life | 6 years ~ 7.5 years | 3 years ~ 5 years | 1.5 years ~ 3.5 years | 2.17 years ~4.17 years | 1.33 years | 1.33 years |
| Risk-free interest rate | 3.06%~3.13% | 2.80%-2.97% | 2.7% | 2.80%-2.99% | 2.63% | 2.34% |
| Expected dividend yield | 0.87% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Expected volatility is calculated based on the volatility of the share prices of similar companies during the pastcertain years. Expected life used in the model is based on the best estimate of management after theadjustments of the effects of inconvertibility, exercise restriction and exercise pattern.
3. In this year, the Group has no cash-settled share-based payments.
41.
4. In this year, the Group has no modification to or termination of share-based payments.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XII) COMMITMENTS AND CONTINGENCIES
1. Significant commitments
(1) Capital commitments
Unit: RMB’000
| Closing balance | Opening balance | |
| Capital commitments that have been entered into but have not been recognized in the financial statements: | ||
| - Commitment for acquisition and construction of long-term assets (Note 1) | 224,350 | 769,169 |
| - External investment commitment (Note 2) | 92,757 | 92,816 |
| Total | 317,107 | 861,985 |
Note 1: As at 31 December 2021, the construction of long-term asset commitments mainly included equipmentpurchased by the Company and its subsidiary Universal Global Technology (Kunshan) Co., Ltd. and FAFG,equivalent to RMB 41,212,848.73, RMB 44,406,793.92 and RMB 31,566,331.66, respectively.
Note 2: For the commitment of foreign investment, according to the partnership agreement concluded betweenUGE and the investee PHI FUND, L.P., UGE needs to pay a total subscription amount of USD 25,000,000.00,in which the amount of USD 4,201,990.00, equivalent to RMB 27,192,337.89 has been paid this period. As at31 December 2021, the Group has paid USD 15,000,000.00, equivalent to RMB 95,635,500.00 in total; butremains a subscription amount of USD 10,000,000.00, equivalent to RMB 63,757,000.00 unpaid.
For the commitment of foreign investment, according to the partnership agreement concluded between theCompany and the investee Suzhou Yaotu Equity Investment Partnership, the Company needs to pay a totalsubscription amount of RMB 30,000,000.00, in which the amount of RMB 1,000,000.00 has been paid thisperiod. As at 31 December 2021, the Group has paid RMB 1,000,000.00 in total; but remains a subscriptionamount of RMB 29,000,000.00 unpaid.
2. Contingencies
The Group has no significant contingencies to be disclosed.
(XIII) EVENTS AFTER THE BALANCE SHEET DATE
1. Profit appropriation
42.As proposed by the resolution of the Fifteenth Meeting of the Fifth Session of the Board of Directors of theCompany held on 25 March 2022, a cash dividend of RMB 2.60 (including tax) per 10 shares will be distributedon the basis of the total share capital at the equity registration date less the number of the shares repurchased bythe Company from special accounts, with no bonus issue and no increase in share capital. The above proposalregarding dividends distribution is yet to be approved in a shareholders' meeting.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XIV) OTHER SIGNIFICANT EVENTS
1. Segment reporting
(1) Determination basis and accounting policies of reporting segments
Based on the Group's internal organization structure, management requirements and internal reporting system, the operations of the Group are classified into 4 reporting segmentsaccording to the manufacturing location, which are Chinese mainland, Taiwan, China, Europe and other countries/regions. At the same time, the products are divided intocommunication products, consumer electronics products, computer and storage products, industrial products, automotive electronics products and other products according tocategories in each region. These report segments are recognized on the basis of manufacturing location and product category. The Group's management periodically evaluates theoperating results of these reporting segments to make decisions about resources to be allocated to the segments and assess their performance.
Segment information is disclosed in accordance with the accounting policies and measurement criteria adopted by each segment when reporting to management. The measurementcriteria are consistent with the accounting and measurement criteria in the preparation of the financial statements. Due to the acquisition of FAFG in 2020, the Group's internalorganizational structure changes, resulting in changes in the composition of reporting segments. The Group restates the previous data.
(2) Financial information of reporting segments
2021
Unit: RMB’000
| Chinese mainland | Taiwan, China | Europe | Other countries/regions | Inter-segment offsetting | Total | |||||||||||||
| Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment total | |
| Communication products | 12,743,061 | 11,600,159 | 1,142,902 | 8,230,235 | 8,017,048 | 213,187 | 373,154 | 369,499 | 3,655 | 621,725 | 622,895 | (1,170) | (756,807) | (809,688) | 52,881 | 21,211,368 | 19,799,913 | 1,411,455 |
| Consumer electronics products | 17,456,916 | 15,933,736 | 1,523,180 | 1,735,643 | 1,578,573 | 157,070 | 277,744 | 277,398 | 346 | 3,313,241 | 3,313,902 | (661) | (4,217,522) | (4,217,112) | (410) | 18,566,022 | 16,886,497 | 1,679,525 |
| Computer and storage products | 3,393,072 | 2,827,357 | 565,715 | 2,522,317 | 2,345,820 | 176,497 | 84,748 | 84,212 | 536 | 1,572,519 | 1,590,865 | (18,346) | (2,779,603) | (2,768,872) | (10,731) | 4,793,053 | 4,079,382 | 713,671 |
| Industrial products | 3,461,571 | 3,077,203 | 384,368 | 4,072,604 | 3,442,420 | 630,184 | 1,266,377 | 1,135,812 | 130,565 | 3,927,362 | 3,864,155 | 63,207 | (5,451,778) | (5,445,045) | (6,733) | 7,276,136 | 6,074,545 | 1,201,591 |
| Automotive electronics products | 980,758 | 852,615 | 128,143 | 123,458 | 109,548 | 13,910 | 370,951 | 275,905 | 95,046 | 1,285,923 | 1,331,823 | (45,900) | (156,001) | (167,624) | 11,623 | 2,605,089 | 2,402,267 | 202,822 |
| Medical products | 29,779 | 30,094 | (315) | - | - | - | 249,760 | 233,171 | 16,589 | 1,140 | 1,020 | 120 | - | - | - | 280,679 | 264,285 | 16,394 |
| Others | 234,398 | 177,183 | 57,215 | 367,115 | 160,838 | 206,277 | 180,476 | 166,466 | 14,010 | 244,766 | 177,440 | 67,326 | (505,500) | (210,646) | (294,854) | 521,255 | 471,281 | 49,974 |
| Revenue/cost from principle operating activity of segment | 38,299,555 | 34,498,347 | 3,801,208 | 17,051,372 | 15,654,247 | 1,397,125 | 2,803,210 | 2,542,463 | 260,747 | 10,966,676 | 10,902,100 | 64,576 | (13,867,211) | (13,618,987) | (248,224) | 55,253,602 | 49,978,170 | 5,275,432 |
| Other operating income/cost of segment | 24,042 | 330 | 23,712 | 6,390 | 3,239 | 3,151 | 94 | - | 94 | 22,701 | 12,888 | 9,813 | (7,174) | (13,147) | 5,973 | 46,053 | 3,310 | 42,743 |
| Total operating revenue/cost of segment | 38,323,597 | 34,498,677 | 3,824,920 | 17,057,762 | 15,657,486 | 1,400,276 | 2,803,304 | 2,542,463 | 260,841 | 10,989,377 | 10,914,988 | 74,389 | (13,874,385) | (13,632,134) | (242,251) | 55,299,655 | 49,981,480 | 5,318,175 |
| Less: Taxes and levies | 42,271 | 1,261 | 6,088 | 198 | - | 49,818 | ||||||||||||
| Selling expenses | 186,704 | 95,387 | 30,754 | 35,714 | (37,078) | 311,481 | ||||||||||||
| Administrative expenses | 474,417 | 466,044 | 147,812 | 139,217 | (58,317) | 1,169,173 | ||||||||||||
| R&D expenses | 1,226,244 | 500,895 | 1,305 | 15,514 | (102,559) | 1,641,399 | ||||||||||||
| Financial expenses | 78,559 | 8,350 | 62,470 | 54,776 | (758) | 203,399 | ||||||||||||
| Including: Interest expenses | 120,745 | 11,034 | 34,371 | 44,508 | (9,330) | 201,329 | ||||||||||||
| Interest income | 77,163 | 759 | 2,407 | 6,581 | (19,130) | 67,780 | ||||||||||||
| Add: Other income | 42,837 | 238 | 7,603 | - | - | 50,678 | ||||||||||||
| Investment income | 79,307 | 17,426 | (2,297) | 17,243 | - | 111,679 | ||||||||||||
| Including: Investment income from associates and joint ventures | 6,223 | - | - | 15,894 | - | 22,117 | ||||||||||||
| Gains (losses) from changes in fair value | 13,686 | (1,737) | 28,845 | 3,793 | - | 44,588 | ||||||||||||
| Gains (losses) from credit impairment | 4,098 | 842 | (1,378) | (5,269) | - | (1,707) | ||||||||||||
| Gains (losses) from assets impairment | 5,473 | (11,523) | (830) | (11,866) | - | (18,746) | ||||||||||||
| Gains (losses) from disposal of assets | 764 | 93 | (18) | 1,576 | - | 2,415 | ||||||||||||
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
| Operating income | 1,962,890 | 333,678 | 44,337 | (165,552) | (43,541) | 2,131,812 | ||||||||||||
| Net profit | 1,777,455 | 281,203 | 38,666 | (219,748) | (20,883) | 1,856,693 |
(XIV) OTHER SIGNIFICANT EVENTS - continued
1. Segment reporting - continued
(2) Financial information of reporting segments - continued
2020(Restated):
Unit: RMB’000
| Chinese mainland | Taiwan, China | Europe | Other countries/regions | Inter-segment offsetting | Total | |||||||||||||
| Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment sub-total | Revenue | Costs | Segment total | |
| Communication products | 12,452,107 | 11,373,825 | 1,078,282 | 8,020,296 | 7,752,302 | 267,994 | 6,423 | 11,844 | (5,421) | 788,671 | 791,856 | (3,185) | (983,633) | (1,108,572) | 124,939 | 20,283,864 | 18,821,255 | 1,462,609 |
| Consumer electronics products | 16,951,794 | 15,394,748 | 1,557,046 | 1,431,129 | 1,305,608 | 125,521 | 9,007 | 9,419 | (412) | 2,146,849 | 2,140,871 | 5,978 | (3,323,968) | (3,326,448) | 2,480 | 17,214,811 | 15,524,198 | 1,690,613 |
| Computer and storage products | 2,508,190 | 2,062,275 | 445,915 | 2,183,090 | 2,019,993 | 163,097 | 2,598 | 2,338 | 260 | 1,143,992 | 1,143,049 | 943 | (2,012,014) | (2,019,921) | 7,907 | 3,825,856 | 3,207,734 | 618,122 |
| Industrial products | 2,333,854 | 2,018,558 | 315,296 | 3,279,129 | 2,767,949 | 511,180 | 179,185 | 163,355 | 15,830 | 2,989,180 | 2,938,045 | 51,135 | (4,431,273) | (4,437,480) | 6,207 | 4,350,075 | 3,450,427 | 899,648 |
| Automotive electronics products | 696,893 | 592,979 | 103,914 | 129,685 | 127,284 | 2,401 | 135,942 | 99,555 | 36,387 | 877,386 | 889,085 | (11,699) | (148,887) | (138,079) | (10,808) | 1,691,019 | 1,570,824 | 120,195 |
| Medical products | 33,697 | 28,562 | 5,135 | - | - | - | 38,300 | 36,634 | 1,666 | - | - | - | - | (15) | 15 | 71,997 | 65,181 | 6,816 |
| Others | 191,956 | 117,809 | 74,147 | 451,827 | 160,459 | 291,368 | 2,538 | 2,060 | 478 | 162,152 | 115,095 | 47,057 | (573,993) | (229,139) | (344,854) | 234,480 | 166,284 | 68,196 |
| Revenue/cost from principle operating activity of segment | 35,168,491 | 31,588,756 | 3,579,735 | 15,495,156 | 14,133,595 | 1,361,561 | 373,993 | 325,205 | 48,788 | 8,108,230 | 8,018,001 | 90,229 | (11,473,769) | (11,259,654) | (214,114) | 47,672,102 | 42,805,903 | 4,866,199 |
| Other operating income/cost of segment | 19,747 | 2,306 | 17,441 | 6,070 | 3,307 | 2,763 | 1,537 | - | 1,537 | 144 | - | 144 | (3,371) | (1,965) | (1,406) | 24,127 | 3,648 | 20,479 |
| Total operating revenue/cost of segment | 35,188,238 | 31,591,062 | 3,597,176 | 15,501,226 | 14,136,902 | 1,364,324 | 375,530 | 325,205 | 50,325 | 8,108,374 | 8,018,001 | 90,373 | (11,477,140) | (11,261,619) | (215,520) | 47,696,229 | 42,809,551 | 4,886,678 |
| Less: Taxes and levies | 44,460 | 1,415 | 1,188 | 14,646 | - | 61,709 | ||||||||||||
| Selling expenses | 154,326 | 85,875 | 5,833 | 20,926 | (47,067) | 219,893 | ||||||||||||
| Administrative expenses | 447,484 | 586,716 | 16,926 | 118,508 | (46,475) | 1,123,159 | ||||||||||||
| R&D expenses | 1,207,856 | 480,522 | 856 | 9,013 | (121,884) | 1,576,363 | ||||||||||||
| Financial expenses | 13,544 | 11,066 | 15,593 | 55,705 | (157) | 95,751 | ||||||||||||
| Including: Interest expenses | 36,426 | 11,921 | 5,170 | 56,164 | (19,495) | 90,186 | ||||||||||||
| Interest income | 64,210 | 5,995 | 1,678 | 7,138 | (18,575) | 60,446 | ||||||||||||
| Add: Other income | 72,195 | 735 | 3,850 | - | - | 76,779 | ||||||||||||
| Investment income | 60,024 | 1,204 | 2,223 | 19,989 | - | 83,440 | ||||||||||||
| Including: Investment income from associates and joint ventures | 292 | - | - | 19,460 | - | 19,753 | ||||||||||||
| Gains (losses) from changes in fair value | 2,290 | 853 | (5,827) | (3,588) | - | (6,272) | ||||||||||||
| Gains (losses) from credit impairment | 3,830 | (803) | 654 | 4,214 | - | 7,895 | ||||||||||||
| Gains (losses) from assets impairment | 15,128 | (18,483) | 119 | (8,557) | - | (11,792) | ||||||||||||
| Gains (losses) from disposal of assets | 1,627 | 145 | 25 | - | - | 1,798 | ||||||||||||
| Operating income | 1,884,602 | 182,382 | 10,972 | (116,366) | 62 | 1,961,651 | ||||||||||||
| Net profit | 1,682,647 | 173,942 | 8,271 | (129,164) | (2,131) | 1,733,565 | ||||||||||||
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XIV) OTHER SIGNIFICANT EVENTS - continued
1. Segment reporting - continued
(2) Financial information of reporting segments - continued
Closing balance
Unit: RMB’000
| Chinese mainland | Taiwan, China | Europe | Other countries/regions | Inter-segment offsetting | Total | |
| Total assets of segment | 20,740,377 | 7,945,438 | 5,770,751 | 7,931,818 | (7,171,046) | 35,217,338 |
| Total liabilities of segment | 13,528,439 | 5,672,142 | 2,309,205 | 7,991,935 | (6,727,353) | 22,774,368 |
Opening balance (Restated)
Unit: RMB’000
| Chinese mainland | Taiwan, China | Europe | Other countries/regions | Inter-segment offsetting | Total | |
| Total assets of segment | 20,297,817 | 8,083,869 | 4,167,032 | 3,466,360 | (5,446,353) | 30,568,725 |
| Total liabilities of segment | 10,253,273 | 6,126,772 | 2,858,429 | 5,320,432 | (5,538,710) | 19,020,196 |
External revenue by geographical area of source and non-current assets by geographicallocation of assets
Unit: RMB
| Item | 2021 | 2020 |
| External revenue from Chinese mainland | 1,849,642,217.15 | 1,552,658,131.45 |
| External revenue outside Chinese mainland | 53,450,012,553.06 | 46,143,570,091.08 |
| Total | 55,299,654,770.21 | 47,696,228,222.53 |
Unit: RMB
| Item (Note) | Closing balance | Opening balance (Restated) |
| Non-current assets located in Chinese mainland | 3,670,766,522.73 | 3,187,435,517.86 |
| Non-current assets located in France | 861,843,609.68 | 1,046,354,493.35 |
| Non-current assets located in Taiwan, China | 716,969,088.71 | 782,649,415.64 |
| Non-current assets located in Mexico | 466,431,691.41 | 337,432,330.20 |
| Non-current assets located in Hong Kong | 428,342,492.16 | 423,590,922.10 |
| Non-current assets located in Vietnam | 367,247,653.39 | 55,988,428.34 |
| Non-current assets located in Poland | 134,049,045.77 | 149,103,465.85 |
| Non-current assets located in the United States | 76,599,618.10 | 1,686,773.50 |
| Non-current assets located in Japan | 385,937.29 | 218,191.85 |
| Total | 6,722,635,659.24 | 5,984,459,538.69 |
Note: The above non-current assets exclude long-term receivables, investments in other equityinstruments, other non-current financial assets and deferred tax assets.Degree of reliance on major customersInformation of major customers whose revenue accounts for 10% or more of the total revenue
Unit: RMB
| Customer name | 2021 | 2020 | ||
| Total revenue | Proportion in total revenue (%) | Total revenue | Proportion in total revenue (%) | |
| Entity A | 18,036,500,419.83 | 32.62 | 19,926,626,059.23 | 41.78 |
| Entity B | 8,388,844,842.56 | 15.17 | 7,691,845,393.04 | 16.13 |
| Total | 26,425,345,262.39 | 47.79 | 27,618,471,452.27 | 57.91 |
Inter-segment transfers are measured on the basis of actual transaction prices. Segment revenue andsegment expenses are determined on the basis of actual revenue and expenses of each segment.Segment assets and liabilities are allocated according to the attributable assets employed by asegment in its operating activities and the attributable liabilities resulting from the operatingactivities of a segment.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIALSTATEMENTS
1. Notes receivable
(1) Categories of notes receivable
Unit: RMB
| Category | 31/12/2021 | 31/12/2020 |
| Bank acceptances | 66,256,985.55 | 58,278,567.16 |
(2) As of 31 December 2021, the Company had no notes receivable that have been pledged as
security.
(3) As of 31 December 2021, the Company had no notes receivable that have been endorsed ordiscounted and were not yet matured at the balance sheet date.
(4) As of 31 December 2021, the Company had no notes that were converted to accounts
receivable due to the default of the issuer.
(5) As of 31 December 2021, the Company made no provision for credit loss since the
Company considered that the accepting banks of the bank acceptances held by it were ofhigh ratings and no significant credit risk was expected to exist.
(6) As of 31 December 2021, the Company had no notes receivable that have been actuallywritten off.
2. Accounts receivable
(1) Categories of accounts receivable
Unit: RMB
| Category | 31/12/2021 | 31/12/2020 |
| Accounts receivable arising from contracts with customers | 3,902,506,561.61 | 3,473,829,654.08 |
| Less: Bad debt provision | 66,007.59 | 215,211.33 |
| Total | 3,902,440,554.02 | 3,473,614,442.75 |
(2) Disclosure of accrual method for credit loss
As part of the Company's credit risk management, the expected credit losses on accountsreceivable are assessed using the aging analysis approach. According to the Company'sassessment on credit risk, there is no significant difference in the losses among differentcustomer groups, and the aging reflects the solvency of customers when the receivables aredue.
At 31 December 2021, the credit risk and expected credit losses on accounts receivable wereas follows:
Unit: RMB
| Aging | 31/12/2021 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within the credit term | - | 3,842,770,679.08 | - | 3,842,770,679.08 |
| 1-30 days overdue | 0.01 | 58,521,002.52 | 260.56 | 58,520,741.96 |
| 31-60 days overdue | 5.18 | 1,203,660.94 | 62,381.31 | 1,141,279.63 |
| 61-90 days overdue | 30.00 | 11,219.07 | 3,365.72 | 7,853.35 |
| Total | 0.01 | 3,902,506,561.61 | 66,007.59 | 3,902,440,554.02 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
2. Accounts receivable - continued
(2) Disclosure of accrual method for credit loss - continued
At 31 December 2020, the credit risk and expected credit losses on accounts receivable wereas follows:
Unit: RMB
| Aging | 31/12/2020 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within the credit term | 0.01 | 3,391,437,624.66 | 204,604.27 | 3,391,233,020.39 |
| 1-30 days overdue | 0.01 | 81,315,730.50 | 8,131.57 | 81,307,598.93 |
| 31-60 days overdue | 0.23 | 1,076,298.92 | 2,475.49 | 1,073,823.43 |
| Total | 0.01 | 3,473,829,654.08 | 215,211.33 | 3,473,614,442.75 |
The expected average loss rate mentioned above is based on the historical actual credit lossrates and the current conditions as well as the forecast of future economic conditions. In 2021,the Group's valuation method and significant assumptions remain unchanged.
(3) Changes in bad debt provisions
Unit: RMB
| Category | 31/12/2020 | Changes for the year | 31/12/2021 | |
| Provision (Reversal) | Write-off or elimination | |||
| Bad debt provisions by ageing matrix | 215,211.33 | (149,203.74) | - | 66,007.59 |
(4) There are no accounts receivable that have been actually written off in the year.
(5) Top five accounts receivable at 31 December 2021 categorized by debtor
Unit: RMB
| Company name | Relationship with the Company | Book value | Bad debt provision at 31 December 2021 | Proportion of the total accounts receivable at 31 December 2021(%) |
| Company B | Third party | 1,534,265,134.17 | - | 39.32% |
| Company A | Third party | 985,937,436.05 | - | 25.26% |
| Company E | Third party | 583,233,323.28 | - | 14.95% |
| Company P | Third party | 139,373,167.97 | - | 3.57% |
| Company Q | Third party | 125,365,514.19 | - | 3.21% |
| Total | 3,368,174,575.66 | - | 86.31% |
(6) As at 31 December 2021, there is no accounts receivable derecognized due to the transfer offinancial assets.
(7) As at 31 December 2021, there is no amount of assets and liabilities arising from transfer of
accounts receivable and continuing involvement.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
3. Other receivables
(1) Disclosure of other receivables by aging
Unit: RMB
| Aging | 31/12/2021 | ||
| Amount | Bad debt provision | Proportion of provision (%) | |
| Within 1 year | 635,383,876.68 | - | - |
(2) Classification by the nature of other receivables
Unit: RMB
| Nature of other receivables | Book value at 31/12/2021 | Book value at 31/12/2020 |
| Cash pooling receivables from related parties | 624,818,600.00 | - |
| Advances for third parties | 5,333,890.23 | 1,897,188.07 |
| Amounts due from related parties | 2,370,349.91 | 5,439,431.58 |
| Advance payments for employees | 1,487,451.18 | 430,997.72 |
| Others | 1,373,585.36 | 4,906,743.09 |
| Total | 635,383,876.68 | 12,674,360.46 |
(3) Provision for ECL is neither made nor reversed or recovered since the Company's other
receivables are less likely to be unrecovered.
(4) There were no other receivables actually written off in the year.
(5) As of 31 December 2021, there were no other receivables related to government grants.
(6) As of 31 December 2021, there were no other receivables derecognized due to the transfer offinancial assets.
(7) As of 31 December 2021, there was no amount of assets and liabilities arising from transferof other receivables and continuing involvement.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
4. Long-term equity investments
Details of long-term equity investments:
Unit: RMB
| Investee | Accounting methodology | 1/1/2021 | Changes for the year | 31/12/2021 | Proportion of the ownership interest held in investee (%) | Proportion of the voting power held in investee (%) | Explanation of the inconsistency between the proportions of the ownership interest and the voting power in the investee | Cash dividends for this year | |
| Capital increase in the year | Increase from stock option grants (Note) | ||||||||
| Universal Global Technology Co., Limited | Cost method | 1,768,859,657.00 | 421,086,300.00 | - | 2,189,945,957.00 | 100 | 100 | N/A | - |
| USI Electronics (Shenzhen) Co., Ltd. | Cost method | 388,998,994.64 | - | 3,322,155.99 | 392,321,150.63 | 50 | 100 | The remaining 50% equity interest is held by Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary. | 675,000,000.00 |
| Universal Global Technology (Kunshan) Co., Ltd. | Cost method | 263,577,336.48 | - | 3,492,605.32 | 267,069,941.80 | 100 | 100 | N/A | 200,000,000.00 |
| Universal Global Technology (Shanghai) Co., Ltd. | Cost method | 1,343,726,297.88 | - | 4,192,911.52 | 1,347,919,209.40 | 100 | 100 | N/A | 300,000,000.00 |
| Universal Global Electronics (Shanghai) Co., Ltd. | Cost method | 50,000,000.00 | - | - | 50,000,000.00 | 100 | 100 | N/A | - |
| UGTW | N/A | 99,955,754.29 | - | 30,591,168.98 | 130,546,923.27 | N/A | N/A | The 100% equity interest is held by Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary. | - |
| Universal Global Technology (Huizhou) Co., Ltd. | Cost method | 130,920,090.82 | 325,000,000.00 | - | 455,920,090.82 | 100 | 100 | N/A | - |
| FAFG | Cost method | 393,342,321.82 | - | - | 393,342,321.82 | 10.42 | 100 | The remaining 89.58% equity interest is held by Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary. | - |
| Total | 4,439,380,452.93 | 746,086,300.00 | 41,598,841.81 | 5,227,065,594.74 | 1,175,000,000.00 | ||||
Note: The amount refers to the share-based payments settled under equity in 2021 arising fromthe stock option incentive plan offered by the Company to relevant personnel of USI Electronics(Shenzhen) Co., Ltd., Universal Global Technology (Kunshan) Co., Ltd., Universal GlobalTechnology (Shanghai) Co., Ltd. and UGTW.
As at 31 December 2021, the ability of the investee, in which the Company holds long-termequity investments, to transfer funds to the Company is not restricted.
5. Revenue and costs
(1) Revenue and costs
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | ||
| Revenue | Cost | Revenue | Cost | |
| Principal operating activities | 18,331,017,029.05 | 16,637,068,444.96 | 17,595,425,180.82 | 15,915,867,003.76 |
| Other operating activities | 4,114,711.66 | 120,186.64 | 3,538,926.30 | 834,459.69 |
| Total | 18,335,131,740.71 | 16,637,188,631.60 | 17,598,964,107.12 | 15,916,701,463.45 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
5. Revenue and costs - continued
(2) Analysis of revenue and costs from principal operating activities by product categories:
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | ||
| Revenue | Cost | Revenue | Cost | |
| Communication products | 12,086,981,745.92 | 11,027,496,344.34 | 11,656,912,252.68 | 10,680,017,144.99 |
| Consumer electronic products | 5,315,414,614.15 | 4,926,749,381.37 | 5,138,470,453.70 | 4,665,877,385.73 |
| Computer and storage products | 494,840,322.98 | 318,826,137.31 | 335,952,886.48 | 204,878,855.06 |
| Automotive electronic products | 407,360,175.63 | 351,751,177.93 | 419,604,035.04 | 346,901,820.92 |
| Others | 26,420,170.37 | 12,245,404.01 | 44,485,552.92 | 18,191,797.06 |
| Total | 18,331,017,029.05 | 16,637,068,444.96 | 17,595,425,180.82 | 15,915,867,003.76 |
(3) Revenue and costs from other operating activities:
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year | ||
| Revenue | Cost | Revenue | Cost | |
| Scrap income | 3,598,507.79 | - | 1,777,533.15 | - |
| Others | 516,203.87 | 120,186.64 | 1,761,393.15 | 834,459.69 |
| Total | 4,114,711.66 | 120,186.64 | 3,538,926.30 | 834,459.69 |
6. Investment income
Details of investment income
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Cash dividends of subsidiaries | 1,175,000,000.00 | 700,000,000.00 |
| Investment income on disposal of held-for-trading financial assets | 41,843,686.33 | 7,491,553.58 |
| Investment income of held-for-trading financial assets during the hold period | - | - |
| Total | 1,216,843,686.33 | 707,491,553.58 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
7. Supplementary information to the cash flow statement
Unit: RMB
| Supplementary information | 2021 | 2020 |
| 1. Reconciliation of net profit to cash flow from operating activities: | ||
| Net profit | 1,953,944,271.08 | 1,517,559,060.28 |
| Add: Provision for impairment losses of assets | 3,920,601.29 | 5,885,658.10 |
| Provision for impairment of credit | (149,203.74) | 179,723.41 |
| Depreciation of fixed assets | 270,000,465.98 | 200,404,712.46 |
| Depreciation of right-of-use assets | 13,036,830.13 | 10,864,733.80 |
| Amortization of intangible assets | 1,419,871.53 | 940,875.52 |
| Amortization of long-term prepaid expenses | 21,476,416.14 | 15,749,595.46 |
| Amortization of deferred income | (14,487,455.41) | (14,487,455.41) |
| Losses (gains) on disposal of fixed assets, intangible assets and other long-term assets | (277,783.36) | 925,848.81 |
| Losses (gains) on changes in fair values | (14,537,089.99) | (944,484.55) |
| Financial expenses (income) | 149,695,634.97 | (38,209,472.92) |
| Losses (gains) arising from investments | (1,216,843,686.33) | (707,491,553.58) |
| Share-based payments settled by equity | 11,276,158.19 | 8,471,385.42 |
| Decrease (increase) in deferred tax assets | (23,331,326.08) | (7,443,985.91) |
| Decrease (increase) in inventories | (274,392,854.67) | (527,177,277.49) |
| Decrease (increase) in receivables from operating activities | (364,746,551.48) | (1,317,311,951.12) |
| Increase (decrease) in payables from operating activities | 78,047,498.94 | 1,887,574,764.50 |
| Net cash flow from operating activities | 594,051,797.19 | 1,035,490,176.78 |
| 2. Significant investing and financing activities that do not involve cash receipts and payments: | ||
| Acquisition of long-term assets with debt | 352,812,380.40 | 22,639,986.00 |
| 3. Net changes in cash and cash equivalents: | ||
| Closing balance of cash | 2,490,051,993.72 | 1,347,901,732.05 |
| Less: Opening balance of cash | 1,347,901,732.05 | 975,809,455.92 |
| Add: Closing balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase in cash and cash equivalents | 1,142,150,261.67 | 372,092,276.13 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
8. Related party relationship and transactions
(1). Related parties of the Company
The details of the subsidiaries of the Company are set out in Note (VII). 1. The details of theassociates and joint ventures of the Company are set out in Note (VII). 2. The details of otherrelated parties are set out in Note (X). 4.
(2). Related party transactions
(2.1) Sales and purchase of goods, provision and receipt of services
Purchase of goods/receipt of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Universal Global Technology Co., Limited | Purchase of materials | 568,153,489.57 | 821,941,909.66 |
| ASE Electronics Inc. | Purchase of materials | 5,994,201.48 | 23,518,506.57 |
| Universal Global Industrial Co., Ltd. | Purchase of materials | 3,575,706.92 | 3,396,636.89 |
| Universal Global Technology (Kunshan) Co., Ltd. | Purchase of materials | 2,040,667.28 | 1,764,033.53 |
| Universal Scientific Industrial De México S.A. De C.V. | Purchase of materials | 653,887.18 | 754,652.06 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Purchase of materials | 567,548.09 | - |
| Universal Global Technology (Shanghai) Co., Ltd. | Purchase of materials | 254,978.42 | 121,979.78 |
| ASE Inc. | Purchase of materials | 254,237.55 | 1,261,004.02 |
| USI Electronics (Shenzhen) Co., Ltd. | Purchase of materials | 21,271.35 | 22,421.08 |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Purchase of materials | 5,548.00 | 4,191.00 |
| Wuxi Tongzhi Microelectronics Co., Ltd. | Purchase of materials | - | 9,987.29 |
| Total | 581,521,535.84 | 852,795,321.88 | |
| UGTW | Test service fee | 60,434,620.49 | 33,083,680.00 |
| ASE (Shanghai) Inc. | Receipt of services | 25,363,860.80 | 23,840,115.72 |
| Universal Global Technology Co., Limited | Receipt of services | 11,577,370.00 | 3,626,759.60 |
| UGTW | Sales commission | 8,497,870.63 | 33,083,680.96 |
| USI (Shenzhen) Electronic Technology Innovation Co., Ltd. | Receipt of services | 3,981,132.13 | 452,830.19 |
| SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | Receipt of services | 1,953,179.19 | 2,364,304.11 |
| SHANGHAI HONGRONG PROPERTY MANAGEMENT CO., LTD. | Receipt of services | - | 198,880.00 |
| ASE Inc. | Receipt of services | - | 184,953.65 |
| ASE Assembly & Test (Shanghai) Limited | Receipt of services | - | 56,463.78 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Receipt of services | - | 14,238.32 |
| Total | 111,808,033.24 | 96,905,906.33 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
8. Related party relationship and transactions - continued
(2). Related party transactions - continued
(2.1) Sales and purchase of goods, provision and receipt of services - continuedSales of goods/provision of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Universal Global Industrial Co., Ltd. | Sales of goods | 327,749,153.96 | 30,526,790.53 |
| Universal Global Technology (Shanghai) Co., Ltd. | Sales of goods | 96,252,005.06 | 126,445,788.88 |
| Universal Global Technology Co., Limited | Sales of goods | 77,760,751.81 | 8,147,037.40 |
| Universal Scientific Industrial De México S.A. De C.V. | Sales of goods | 5,663,804.25 | 983,857.57 |
| Universal Global Technology (Kunshan) Co., Ltd. | Sales of goods | 1,496,435.78 | 2,251,464.78 |
| USI Electronics (Shenzhen) Co., Ltd. | Sales of goods | 23,291.50 | 248,323.42 |
| Universal Scientific Industrial Poland Sp. z o.o. | Sales of goods | 13,879.96 | 10,825.36 |
| FINANCI?RE AFG S.A.S. | Sales of goods | 1,715.83 | - |
| USI Japan Co., Ltd. | Sales of goods | - | 42,660.02 |
| Total | 508,961,038.15 | 168,656,747.96 | |
| Universal Global Technology (Kunshan) Co., Ltd. | Provision of services | 10,092,815.02 | 10,073,636.64 |
| ISE labs, China. Ltd. | Provision of services | 611,327.88 | 757,657.98 |
| ASE Inc. | Provision of services | 12,374.95 | - |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Provision of services | 4,500.00 | - |
| Universal Global Industrial Co.,Ltd | Provision of services | 3,206.33 | - |
| USI Electronics (Shenzhen) Co., Ltd. | Provision of services | - | 13,996,248.00 |
| ASE Assembly & Test (Shanghai) Limited | Provision of services | - | 1,957,515.58 |
| Suzhou ASEN Semiconductors Co., Ltd. | Provision of services | - | 109,150.94 |
| Universal Scientific Industrial De México S.A. De C.V. | Provision of services | - | 57,097.87 |
| Total | 10,724,224.18 | 26,951,307.01 |
The above transactions are executed at the prices agreed on by both parties.(2.2) Leases with related partiesLeases where the Company is the lessor
Unit: RMB
| Name of lessee | Type of leased assets | Lease income recognized in the current year | Lease income recognized in the prior year |
| ISE labs, China. Ltd. | Office | 200,510.00 | 462,889.00 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Machinery and equipment | 105,000.00 | - |
| Universal Global Technology (Shanghai) Co., Ltd. | Machinery and equipment | 49,285.70 | - |
| Suzhou ASEN Semiconductors Co., Ltd. | Machinery and equipment | - | 797,224.26 |
| Total | 354,795.70 | 1,260,113.26 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - continued
8. Related party relationship and transactions - continued
(2). Related party transactions - continued
(2.2) Leases with related parties - continued
Leases where the Company is the lessee
Unit: RMB
| Name of lessor | Type of leased assets | Right-of-use assets leased in this year | Lease interest for the year |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 3,668,609.46 |
The above transactions are executed at the prices agreed on by both parties.
Unit: RMB
| Name of lessor | Type of leased assets | Right-of-use assets leased in prior year | Lease interest for prior year |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 3,837,597.08 |
The above transactions are executed at the prices agreed on by both parties.
Unit: RMB
| Name of lessor | Type of leased assets | Short-term lease payments for the year | Short-term lease payments for prior year |
| Universal Global Technology (Shanghai) Co., Ltd. | Machinery and equipment | 210,232.57 | 1,103,234.91 |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 39,691.43 |
| Total | 210,232.57 | 1,142,926.34 |
The above transactions are executed at the prices agreed on by both parties.
(2.3) Borrowings/loans with related parties
Unit: RMB
| Related party | Annual interest rate | Amount incurred in the current year | Amount at the end of the year | |
| Amount lent | Amount collected | Amount | ||
| Lent to - Cash pool trading (Note 1) | ||||
| Universal Scientific Industrial Vietnam Company Limited | One month Libor +40 basis points | 438,213,000.00 | - | 433,547,600.00 |
| Universal Scientific Industrial De México S.A. De C.V. | One month Libor +40 basis points | 193,200,000.00 | - | 191,271,000.00 |
Unit: RMB
| Related party | Annual interest rate | Amount incurred in the prior year | Amount at the end of prior year | |
| Amount lent | Amount collected | Amount | ||
| Lent to - Cash pool trading (Note 1) | ||||
| Universal Global Technology (Shanghai) Co., Ltd. | 1.75% | - | 100,000,000.00 | - |
The interest income for 2021 is RMB 762,855.43 (2020: RMB 395,125.80 yuan), and there is no interest yet
received at the end of the year (31 December 2020: None).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - CONTINUED
8. Related party relationship and transactions - continued
(2). Related party transactions - continued
(2.3) Borrowings/loans with related parties - continued
The interest income for the year is RMB 762,855.43 (2020: RMB 395,125.80), and there is nooutstanding interest at the end of the year (31 December 2020: None).
Unit: RMB
| Related party | Annual interest rate | Amount incurred in the current year | Amount at the end of the year | |
| Amount borrowed | Amount repaid | Amount | ||
| Borrowed from - Cash pool trading (Note 1) | ||||
| USI Electronics (Shenzhen) Co., Ltd. | 1.75% | - | 782,697,200.00 | - |
| Universal Global Technology (Shanghai) Co., Ltd. | 0.60% | - | 97,873,500.00 | - |
Unit: RMB
| Related party | Annual interest rate | Amount incurred in the prior year | Amount at the end of prior year | |
| Amount borrowed | Amount repaid | Amount | ||
| Borrowed from - Cash pool trading (Note 1) | ||||
| USI Electronics (Shenzhen) Co., Ltd. | 1.75% | 782,697,200.00 | - | 782,697,200.00 |
| Universal Global Technology (Shanghai) Co., Ltd. | 0.60% | 97,873,500.00 | - | 97,873,500.00 |
The interest paid in this year was RMB 2,620,456.27 (2020: RMB 7,771,090.02), and theoutstanding interest at the end of the year was RMB 0 (31 December 2020: RMB 7,765,440.12).
Note 1: The Company entered into a cash pool entrustment loan agreement with the bank for
entrusted loans in which the Company is the leading party and Universal GlobalTechnology (Shanghai) Co., Ltd., USI Electronics (Shenzhen) Co., Ltd., UniversalGlobal Technology Co., Limited, Universal Global Technology (Kunshan) Co., Ltd,Universal Scientific Industrial Vietnam Company Limited and Universal ScientificIndustrial De México S.A. De C.V. are participants,
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - CONTINUED
8. Related party relationship and transactions - continued
(2). Related party transactions - continued
(2.4) Assets transfer with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Universal Global Technology (Shanghai) Co., Ltd. | Purchase of fixed assets | 13,231,008.93 | 76,016,365.58 |
| Universal Global Technology (Kunshan) Co., Ltd. | Purchase of fixed assets | 21,201.96 | 150,051.15 |
| ASE Test Inc. | Purchase of fixed assets | - | 13,211,965.96 |
| Total | 13,252,210.89 | 89,378,382.69 | |
| Universal Global Technology (Shanghai) Co., Ltd. | Sales of fixed assets | 35,820,700.83 | 447,016.60 |
| Universal Scientific Industrial Vietnam Company Limited | Sales of fixed assets | 25,213,949.19 | - |
| ASE Test Inc. | Sales of fixed assets | 12,545,380.16 | - |
| ISE labs, China. Ltd. | Sales of fixed assets | 10,071,875.88 | - |
| ASE Inc. | Sales of fixed assets | 3,478,999.00 | - |
| Universal Global Technology (Kunshan) Co., Ltd. | Sales of fixed assets | 187,724.78 | 2,051,002.83 |
| UGTW | Sales of fixed assets | 29,304.00 | 6,688.10 |
| Rirong Semiconductor (Shanghai) Co., Ltd. | Sales of fixed assets | 21,740.65 | - |
| USI Electronics (Shenzhen) Co., Ltd. | Sales of fixed assets | - | 297,333.64 |
| Total | 87,369,674.49 | 2,802,041.17 | |
| Universal Global Technology (Shanghai) Co., Ltd. | Sales of intangible assets | 984,479.74 | 983,362.50 |
| USI Electronics (Shenzhen) Co., Ltd. | Sales of intangible assets | 232,446.60 | 232,182.81 |
| Universal Global Technology (Kunshan) Co., Ltd. | Sales of intangible assets | 150,406.63 | - |
| Total | 1,367,332.97 | 1,215,545.31 | |
| Universal Global Technology (Shanghai) Co., Ltd. | Sales of molds | 1,945,670.63 | - |
The above transactions are executed at the prices agreed on by both parties.
(2.5) Interest expenses with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| USI Enterprise Limited | Interest expenses on convertible bonds | 80,914,020.40 | - |
| ASE (Shanghai) Inc. | Interest expenses on convertible bonds | 869,753.10 | - |
| Total | 81,783,773.50 | - |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - CONTINUED
8. Related party relationship and transactions - continued
(2). Related party transactions - continued
(2.6) Compensation for key management personnel
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Compensation for key management personnel | 30,519,010.96 | 19,963,423.42 |
(2.7) Others
The Company offers stock option incentive plan for relevant personnel of USI Electronics(Shenzhen) Co., Ltd., Universal Global Technology (Kunshan) Co., Ltd., Universal GlobalTechnology (Shanghai) Co., Ltd. and UGTW. See Note (XV) 4 for details.
(3). Amounts due from / to related parties
(3.1) Amounts due from related parties
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Book value | Book value | ||
| Accounts receivable | Universal Global Industrial Co., Ltd. | 196,438,433.79 | 5,044,052.76 |
| Accounts receivable | Universal Global Technology (Shanghai) Co., Ltd. | 34,233,779.97 | 43,823,875.48 |
| Accounts receivable | Universal Scientific Industrial De México S.A. De C.V. | 462,683.64 | 60,592.43 |
| Accounts receivable | Universal Global Technology (Kunshan) Co., Ltd. | 353,769.09 | 804,623.10 |
| Accounts receivable | Universal Global Technology Co., Limited | 132,622.23 | 7,997,863.50 |
| Accounts receivable | FINANCI?RE AFG S.A.S. | 1,938.89 | - |
| Accounts receivable | USI Electronics (Shenzhen) Co., Ltd. | 1,436.31 | 81,254.29 |
| Accounts receivable | Universal Scientific Industrial Poland Sp. z o.o. | - | 10,718.76 |
| Total | 231,624,663.92 | 57,822,980.32 |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Book value | Book value | ||
| Other receivables | Universal Scientific Industrial Vietnam Company Limited (Note) | 433,547,600.00 | - |
| Other receivables | Universal Scientific Industrial De México S.A. De C.V. (Note) | 191,271,000.00 | - |
| Other receivables | Universal Global Technology (Kunshan) Co., Ltd. | 2,177,743.43 | 1,331,910.52 |
| Other receivables | ASE Assembly & Test (Shanghai) Limited | 192,606.48 | 339,909.17 |
| Other receivables | USI Electronics (Shenzhen) Co., Ltd. | - | 3,358,627.98 |
| Other receivables | ISE labs, China. Ltd. | - | 407,122.42 |
| Other receivables | Universal Global Industrial Co., Ltd. | - | 1,861.49 |
| Total | 627,188,949.91 | 5,439,431.58 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XV) NOTES TO MAJOR ITEMS IN THE PARENT COMPANY'S FINANCIAL
STATEMENTS - CONTINUED
8. Related party relationship and transactions - continued
(3). Amounts due from / to related parties - continued
(3.2) Amounts due to related parties
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Accounts payable | Universal Global Technology Co., Limited | 187,121,413.66 | 189,755,304.27 |
| Accounts payable | Universal Global Technology (Shanghai) Co., Ltd. | 7,576,389.56 | 2,209,450.45 |
| Accounts payable | USI (Shenzhen) Electronic Technology Innovation Co., Ltd. | 1,170,000.00 | - |
| Accounts payable | Universal Global Industrial Co., Ltd. | 797,128.16 | 985,111.56 |
| Accounts payable | Universal Global Technology (Kunshan) Co., Ltd. | 534,179.42 | 190,570.56 |
| Accounts payable | ASE Electronics Inc. | 472,446.13 | 1,228,898.49 |
| Accounts payable | Universal Scientific Industrial De México S.A. De C.V. | 327,441.04 | 34,821.69 |
| Accounts payable | USI Electronics (Shenzhen) Co., Ltd. | 4,186.46 | 5,460.39 |
| Accounts payable | UGTW | - | 10,584,600.33 |
| Accounts payable | ASE Inc. | - | 33,113.85 |
| Total | 198,003,184.43 | 205,027,331.59 |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 (Restated) |
| Other payables | USI Enterprise Limited | 2,193,057.52 | - |
| Other payables | ASE (Shanghai) Inc. | 2,035,944.03 | 2,229,775.05 |
| Other payables | SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | 240,956.60 | 167,348.25 |
| Other payables | USI Electronics (Shenzhen) Co., Ltd. (Note) | - | 782,697,200.00 |
| Other payables | Universal Global Technology (Shanghai) Co., Ltd. (Note) | - | 97,873,500.00 |
| Other payables | USI Electronics (Shenzhen) Co., Ltd. | - | 7,659,410.58 |
| Other payables | USI (Shenzhen) Electronic Technology Innovation Co., Ltd. | - | 480,000.00 |
| Other payables | Universal Global Technology (Shanghai) Co., Ltd. | - | 284,123.26 |
| Other payables | ASE Assembly & Test (Shanghai) Limited | - | 24,275.32 |
| Other payables | Rirong Semiconductor (Shanghai) Co., Ltd. | - | 16,089.31 |
| Total | 4,469,958.15 | 891,431,721.77 |
Note: The Company entered into a cash pool entrustment loan agreement with the bank for
entrusted loans in which the Company is the leading party and Universal GlobalTechnology (Shanghai) Co., Ltd., USI Electronics (Shenzhen) Co., Ltd., UniversalGlobal Technology Co., Limited, Universal Global Technology (Kunshan) Co., Ltd,Universal Scientific Industrial Vietnam Company Limited and Universal ScientificIndustrial De México S.A. De C.V are participants.
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Lease liabilities | ASE Assembly & Test (Shanghai) Limited | 70,337,306.54 | 82,153,151.12 |
Unit: RMB
| Item | Related party | 31/12/2021 | 31/12/2020 |
| Bonds payable | USI Enterprise Limited | 2,399,279,839.68 | - |
| Bonds payable | ASE (Shanghai) Inc. | 25,790,104.50 | - |
| Total | 2,425,069,944.18 | - |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(XVI) SUPPLEMENTARY INFORMATION
1. Breakdown of non-recurring profit or loss for the current period
Unit: RMB
| Item | Amount | Description |
| Profit or loss on disposal of non-current assets | (9,115,989.64) | See Notes (V), 56 and 58 for details |
| Government grants recognized in profit or loss (other than grants which are closely related to the Company's business and are either in fixed amounts or determined under quantitative methods in accordance with the national standard) | 50,678,106.85 | See Notes (V), 51 for details |
| Profit or loss on changes in the fair value of held-for-trading financial assets and held-for-trading financial liabilities and investment income on disposal of held-for-trading financial assets, held-for-trading financial liabilities and available-for-sale financial assets, other than those used in the effective hedging activities relating to normal operating business | 134,150,704.71 | See Notes (V), 52 and 53 for details |
| Reversal of impairment losses for accounts receivable and contract assets of which impairment loss is tested individually | 2,836,069.00 | See Notes (V), 6 for details |
| Other non-operating income or expenses other than the above | 18,576,128.64 | See Notes (V), 57 and 58 for details |
| Tax effects | (34,238,090.20) | |
| Effects attributable to minority interests (After tax) | (2,710.00) | |
| Total | 162,884,219.36 |
2. Return on net assets and earnings per share ("EPS")
The return on net assets and EPS have been prepared by Universal Scientific Industrial (Shanghai) Co., Ltd.in accordance with Information Disclosure and Presentation Rules for Companies Making Public Offering ofSecurities No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings per Share (Revised 2010)issued by China Securities Regulatory Commission.
Unit: RMB
| Profit for the reporting year | Weighted average return on net assets (%) | EPS | |
| Basic EPS | Diluted EPS | ||
| Net profit attributable to ordinary shareholders of the Company | 14.83% | 0.85 | 0.83 |
| Net profit after deduction of non-recurring profits or losses attributable to ordinary shareholders of the Company | 13.53% | 0.77 | 0.76 |