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歌尔股份:2021年年度报告(英文版) 下载公告
公告日期:2022-04-29

Goertek Inc.Annual Report 2021

March 2022

Section Ⅰ Important Notes, Contents and Interpretations

The Board of Directors, the Board of Supervisors, directors, supervisorsand senior management of the Company guarantee that the informationpresented in this report shall be together be wholly liable for the truthfulness,accuracy and completeness of its contents and free of any false records,misleading statements or material omissions, and will undertake individual andjoint legal liabilities.

Jiang Bin, the person in charge of the Company, and Li Yongzhi, the personin charge of accounting and the accounting department (accounting supervisor)guarantee that the financial report in this annual report is authentic, accurateand complete.

All directors have attended the board meeting to review the annual report.

The Company faces the risks in market, operation and management.Investors are kindly reminded to pay attention to possible investment risks. Fordetails, see "Section III Discussion and Analysis of Management of the Company,XI Outlook for the Future Development of the Company" in this report.

The future plans and some forward-looking statements mentioned hereinare planned matters which shall not constitute a substantial commitment of theCompany to investors. Therefore, both investors and relevant persons shouldmaintain their risk awareness and understand the differences among plan,

forecast and commitment. Please pay attention to investment risks.

The profit distribution proposal considered and approved by the Board ofDirectors of the Company is as follows: based on the total share capitalregistered on the record date of equity distribution minus the repurchasedshares in the Company's special repurchase account, the Company willdistribute cash dividend of RMB 2.00 (tax inclusive) for per 10 shares to all theshareholders, as well as 0 bonus shares (tax inclusive), and there is no conversionof capital reserves into share capital.

If any discrepancy between the English version and the Chinese version ofthe annual report, the Chinese version shall prevail.

Contents

SectionⅠImportant Notes, Contents and Interpretations ...... 2

SectionⅡCompany Information and Key Financial Indicators ...... 8

Section III Discussion and Analysis of Management of the Company ...... 13

Section IV Corporate Governance ...... 48

Section V Environmental and social responsibilities ...... 86

Section VI Important Matters ...... 90

Section VII. Changes in Shares and Information about Shareholders ............................................................................ 112

Section VIII Information of Preferred Shares ...... 121

Section IX Information on the Bonds ...... 122

Section X Financial Report ...... 123

Directory of Reference Files

(1) Financial statements with signatures and seals of the legal representative, the person in charge of accounting and the person incharge of accounting department (accounting supervisor);

(2) The originals of 2021 annual report and its abstract signed by the legal representative of the Company;

(3) The originals of the audit report with the seal of Zhongxi Certified Public Accountants (special general partnership) Co., Ltd. andthe signature and seal of the certified public accountants;

(4) The originals of all company documents and announcements publicly disclosed in newspapers designated by China SecuritiesRegulatory Commission (CSRC) during the reporting period.

Interpretation

TermsRefers toContent of interpretation
Company, the Company, Goertek Inc.Refer toGoertek Inc.
Goertek GroupRefers toGoertek Group Co., Ltd., Controlling shareholder of the Company
Weifang GoertekRefers toWeifang Goertek Electronics Co., Ltd., wholly owned subsidiary of the Company
Weifang Goertek MicroelectronicsRefers toWeifang Goertek Microelectronics Co., Ltd., controlled subsidiary of the Company
Goertek OpticalRefers toGoertek Optical Technology Co., Ltd., wholly owned subsidiary of the Company
Goertek Technology (Vietnam)Refers toGoertek Technology Vina Company Limited, wholly owned subsidiary of the Company
ODMRefers toOriginal Design and Manufacturing
JDMRefers toJoint Design and Manufacturing
Micro speakerRefers toThe micro electro-acoustic components that transform electrical signal into acoustic signal, generate driving force, through the magnetic line cutting of voice coil in magnetic field, to drive the diaphragm vibration, which then pushes the air for sounding. Compared with the micro receiver, it's characterized by higher power, wide frequency response and high fidelity, which is generally used for playing the sound.
MEMSRefers toBased on micron/nano technology, Micro electro mechanical system (MEMS) is a technology developed for designing, processing, manufacturing, measuring and controlling micron/nano materials. MEMS can integrate mechanical components, optical system and electric control system of driving components into a whole unit of micro system, featured with miniaturization, intelligence, multi-function, high integration and being suitable for mass production
Speaker moduleRefers toThe acoustic component composed of one or several micro speakers and other electronic devices, which are assembled together through an injection molded housing.
Smart wearable devicesRefers toA portable device that can be worn or carried directly, or integrated into the user's clothes or accessories
Virtual Reality/VRRefers toA computer simulation system that can create and experience virtual
world by using computer to generate a simulation environment into which the users immerse.
Augmented Reality/ARRefers toA technology that perfectly integrates virtual information with the real world. By making extensive use of multimedia, 3D modeling, real-time tracking and registration, intelligent interaction, sensing and other technical means, it applies the computer-generated text, images, 3D models, music, video and other virtual information to the real world after simulation. These two kinds of information complement each other to enhance the real world.
Smart wireless earphonesRefers toThe new types of smart wireless earphones represented by TWS (True Wireless Stereo) earphones connect the left and right earphones with smart phones and other terminal devices through Bluetooth technology to form an independent stereo system, which realizes touch control, voice control, body information collection and other functions by adding various sensors.
Micro-system moduleRefers toAlso known as SiP (System in Package) packaging module at the system level, it integrates multiple chips and passive components into the same package through advanced packaging such as technologies 3D packaging to form a module with whole or main functions of an electronic system, so as to realize the optimal combination of performance, volume, weight and other indicators. It is a comprehensive emerging microelectronics technology.
SensorRefers toA detection device that is capable of feeling the measured information, and able to transform the perceived information into electrical signals or other required forms of information for output based on certain rules, in order to meet the requirements of information transmission, processing, storage, display, recording and control.
Company LawRefers toCompany Law of the People's Republic of China
Securities LawRefers toSecurities Law of the People's Republic of China
Articles of AssociationRefers toArticles of Association of Goertek Inc.
CSRCRefers toChina Securities Regulatory Commission
RMB, RMB 10,000, RMB 100,000,000Refer toyuan (RMB), ten thousand yuan (RMB), hundred million yuan (RMB)
Reporting periodRefers toJanuary 1, 2021 to December 31, 2021

Explanation on Other MattersIn this report, any difference between the sum of partial sums and the sum of detailed items is due to rounding.

Section II Company Information and Key Financial IndicatorsI. Company Information

Stock abbreviationGoertek Inc.Stock code002241
The stock exchange where stocks are listedShenzhen Stock Exchange
Name of the Company in Chinese歌尔股份有限公司
Abbreviation of the Company in Chinese歌尔股份
Name of the Company in English (if any)Goertek Inc.
Abbreviation of the Company in English (if any)Goertek
Legal representative of the CompanyJiang Bin
Registered address268 Dongfang Road, High-tech Industrial Development District, Weifang
Postal code of registered address261031
Previous changes of registered address of the CompanyNo change
Business address268 Dongfang Road, High-tech Industrial Development District, Weifang
Postal code of business address261031
Company websitehttp://www.goertek.com
E-mailir@goertek.com

II. Contacts and Contact Information

Board SecretarySecurities Affairs Representative
NameJia Jun'anXu Yanqing, Xu Dapeng
Contact address268 Dongfang Road, High-tech Industrial Development District, Weifang268 Dongfang Road, High-tech Industrial Development District, Weifang
Tel.0536-30556880536-3055688
Fax0536-30567770536-3056777
E-mailir@goertek.comir@goertek.com

III. Information Disclosure and Place of the Report

Website of the stock exchange for release of the Annual ReportShenzhen Stock Exchange (http://www.szse.cn)
Name and website of the media for release of the Annual ReportSecurities Times, China Securities Journal, Shanghai Securities News, Securities Daily, CNINFO(http://www.cninfo.com.cn)
Place where the Annual Report is available for inspectionOffice of Board of Directors of the Company

IV. Changes in Registration

Organization code91370700729253432M
The changes in main business since the Company was listed (if any)No change
Changes of controlling shareholders of the Company (if any)No change

V. Other Relevant Information

Accounting firm engaged by the Company

Name of the accounting firmZhongxi Certified Public Accountants (special general partnership) Co., Ltd.
Business addressRoom 1101, No. 11, Chongwenmenwai Street, Dongcheng District, Beijing
Names of accountants signing the reportDu Yeqin, Mou Huiling

The sponsor institution engaged by the Company to perform continuous supervision during the reporting period

√ Applicable □ Not applicable

Name of the sponsor institutionBusiness address of the sponsor institutionName of sponsor representativeDuration of continuous supervision
China Securities Co., Ltd.9th Floor, Building B, Kayheng Center, No.2 Chaoyangmennei Street, Dongcheng District, BeijingGuan Feng, Huang ZhenyueFrom June 12, 2020 to December 31, 2021

The financial advisor engaged by the Company to perform continuous supervision during the reporting period

□ Applicable √ Not applicable

Ⅵ. Key Accounting Data and Financial Indicators

Whether the Company performed a retrospective adjustment or restatement of previous accounting data

□ Yes √ No

20212020Year-on-year change2019
Operating revenue (RMB)78,221,418,618.0257,742,742,893.9635.47%35,147,806,427.74
Net profit attributable to shareholders of the Company (RMB)4,274,702,999.382,848,007,269.6150.09%1,280,542,212.61
Net profit attributable to shareholders of the Company excluding non-recurring profits and losses (RMB)3,832,421,177.272,758,911,040.0338.91%1,348,634,308.27
Net cash flow from operating activities (RMB)8,598,475,527.887,682,256,113.6811.93%5,451,430,414.59
Basic earnings per share (RMB / share)1.290.8944.94%0.40
Diluted earnings per share (RMB / share)1.280.8943.82%0.40
Weighted average return on net assets17.61%16.40%1.21%8.19%
December 31, 2021December 31, 2020Year-on-year changeDecember 31, 2019
Total assets (RMB)61,079,051,133.2749,117,826,313.4124.35%34,660,304,627.21
Net assets attributable to shareholders of the Company (RMB)27,327,747,993.9719,653,252,273.2639.05%16,107,163,639.60

The Company's net profit before and after deducting non-recurring profits and losses in the last three fiscal years, whichever is lower,is negative, and the audit report of last year shows that there is uncertainty in company's ability to continue as a going concern.

□ Yes √ No

The net profit before and after deducting non-recurring profits and losses, whichever is lower, is negative.

□ Yes √ No

Ⅶ. Differences in accounting data between domestic and foreign accounting standards

1. Differences in net profits and net assets in the financial reports disclosed according to internationalaccounting standards and Chinese accounting standards

□ Applicable √ Not applicable

During the reporting period, there is no difference in net profits and net assets in the financial reports disclosed pursuant tointernational accounting standards and Chinese accounting standards

2. Differences in net profits and net assets in the financial reports disclosed according to foreign accountingstandards and Chinese accounting standards

□ Applicable √ Not applicable

During the reporting periods no differences in net profits and net assets in the financial reports disclosed according to foreignaccounting standards and Chinese accounting standards at the same time

Ⅷ. Key Quarterly Financial Indicators

Unit: RMB

The first quarterThe second quarterThe third quarterThe fourth quarter
Operating revenue14,028,169,300.8916,259,628,386.3322,501,367,860.8825,432,253,069.92
Net profit attributable to shareholders of the Company965,953,650.11765,076,109.611,601,494,203.24942,179,036.42
Net profit attributable to shareholders of the Company excluding non-recurring profits and losses (RMB)601,329,147.56808,228,696.461,609,128,973.48813,734,359.77
Net cash flow from operating activities873,274,388.663,108,904,252.541,776,650,281.672,839,646,605.01

Whether there is significant difference between the above individual or aggregate financial indicators and that of what disclosed inthe quarterly reports and semi-annual reports disclosed by the Company

□ Yes √ No

Ⅸ. Items and Amounts of Non-recurring Profits and Losses

√ Applicable □ Not applicable

Unit: RMB

Item202120202019Explanation
Profits and losses on disposal of non-current assets (including the write-off portion of the provision for asset impairment)-122,148,708.58-219,544,001.32-195,445,840.66
Government subsidies included in the current profits and losses (except those closely related to the Company's normal business, comply with national policies and regulations, and continuously grant in accordance with a certain standard quota or quantity)464,119,437.91221,372,903.17177,315,056.36
In addition to the effective hedging business related to normal business of the Company, the profits and losses from the changes in fair value arising from holding held-for-trading financial assets and held-for-trading financial liabilities, as well as the investment income obtained from the disposal of held-for-trading financial assets, held-for-trading financial liabilities and185,179,920.90102,685,404.04-81,283,474.24
available-for-sale financial assets
Other non-operating revenue and expenditures other than those mentioned above13,554,671.715,874,633.4013,488,075.24
Other profit and loss items that meet the definition of non-recurring profit and loss2,603,363.203,236,394.55685,750.54
Less: Impact of income tax84,270,186.1521,159,380.84-17,148,337.10
Impact of minority shareholders' interest (after tax)16,756,676.883,369,723.42
Total442,281,822.1189,096,229.58-68,092,095.66--

Details of other profit and loss items that meet the definition of non-recurring profit and loss:

√ Applicable □ Not applicable

It mainly refers to returned service charge for withholding individual income tax and other fees.Description of defining the non-recurring profit and loss items, which are listed in Explanatory Announcement No. 1 on Disclosure ofthe Information regarding the Companies Offering Their Securities to the Public - Non-recurring Profit and Loss, as recurring profitand loss

□ Applicable √ Not applicable

The Company did not classify any item of the non-recurring profit and loss items listed in the Explanatory Announcement No. 1 onDisclosure of the Information regarding the Companies Offering Their Securities to the Public - Non-recurring Profit and Loss, asrecurring profit and loss in the reporting period.

Section III Discussion and Analysis of Management of the CompanyⅠ. The situation of the industry during the reporting period

During the reporting period, the Company's main business divides into three segments including precision components business,smart audio device business and smart hardware business. The main business of the company is categorized into the industry of themanufacturing of computer, communication, and other electronic equipment. The Company's main products include acoustics, optics,microelectronics, structural components and other precision components, as well as smart hardware products such as TWS smartearphones, virtual reality (VR)/augmented reality (AR) products, smart wearable devices, gaming console and accessories, and smarthome products. The Company serves the leading global customers in the technology and consumer electronics industry by providingthem with vertically integrated product solutions of precision components and smart hardware, as well as the related design, R&Dand manufacturing services.

In the mobile era when the smartphones became the core hardware devices, a large number of outstanding well-knownenterprises in technology and consumer electronics industry had emerged worldwide based on the integration of advanced hardwaredevices, software content and innovative applications, and drove the whole industry and related enterprises in its industrial chain toachieve significant growth and enterprise development through a long period of time in the past. As the growth of the smartphoneindustry has slowed down in recent years, the global technology and consumer electronics industry has begun the transition from themobile era to the post-mobile era.

According to the statistics of IDC, a well-known consulting agency, the global smartphone shipment in 2021 reached about 1.35billion units, with approximately 5.3% YoY increase, which has resumed growth in the post-epidemic era. But regarding to its overallperformance in recent years, the growth of global smartphone industry has slowed down significantly. Therefore, the players in theglobal consumer electronics industry are actively exploring and planning on new opportunities of the future growth of the business.

At the same time, advanced communication technologies such as 5G, along with AI, intelligent interaction, sensor, softwarealgorithm are further integrated into the new generation of smart hardware products, thus creating a large number of new applicationsand demands. These new smart hardware products represented by VR/AR devices, smart wireless earphones, smart wearable devicesand smart home products, have developed rapidly in recent years.

According to the statistics of IDC, the global shipment of virtual reality (VR) products reached about 9.36 million units in 2021,with approximately 68.6% YoY increase. The global shipment of augmented reality (AR) products reached about 330,000 units, withapproximately 13.8% YoY increase. The global VR industry continues its rapid development in 2021. More well-known

manufacturers in consumer electronics and Internet industries actively invest in VR, which promotes the continuous development ofrelated hardware technology and software content. The global market size of AR products is still relatively small, and AR hardwaretechnology still faces challenges in chips, optical display, communication, power consumption, size and weight. However, ARproducts have shown great market potential, and have attracted the global attention.

According to the statistics of Futuresource, a famous consulting agency, the global shipment of TWS smart earphones reachedabout 300 million units in 2021, with approximately 37% YoY increase. With more mature intelligent voice interaction functions andcontinuous improvement of user experience, the penetration rate of TWS smart earphones in overall earphone market continues toincrease and is expected to keep growing in future. According to the statistics of CCS Insight, another well-known consulting agency,the global shipment of smart wearable products represented by smart watches and smart bands reached about 232 million in 2021,with approximately 20.2% YoY increase. While the market size is growing steadily, high-accuracy health monitoring technology isalso under developing and improvement, which is expected to create new applications and market demands for smart wearableproducts in the future.

The rapid development of the new generation of smart hardware products has also boosted the demand for related precisioncomponents such as high-precision optical components and modules, precision acoustic components, MEMS sensors andmicro-system modules, haptic components, and precision structural parts, thus creating new directions and market space for precisioncomponents products.

With the new development stage of the industry and the rise of smart hardware products, the industry also shows a clearercompetition pattern. From the perspective of brand and enterprises, the global technology and consumer electronics industry shows acentralized trend in the competition. The leading enterprises with strong competitiveness and brand awareness demonstrate clearcompetitive advantages by leveraging their resource in technologies, talents, funds, brands and industrial ecosystem, and thus leadthe technology and product innovation in the industry to a certain extent.

From the perspective of supply chain, global technology and consumer electronics industry continued to shift the middle-end ofthe supply chain to China and other developing countries. In particular, with the continuous improvement of China'spolitical/economic environment, fundamental infrastructure, industrial layout, management/technical talent resources and otheraspects, the overall competitiveness of electronic manufacturing enterprises of China is improved significantly, thus effectivelyundertake the demand of global industry, and obtain new development opportunities.II. The Company’s main business during the reporting period

The Company is committed to serve the leading customers in the global technology and consumer electronics industry byproviding vertically integrated product solutions of precision components and smart hardware, as well as related design, R&D and

manufacturing services.The Company's main business divides into three segments including precision components business, smart audio devicebusiness and smart hardware business. The precision components business focuses on acoustics, optics, microelectronics, structuralcomponents, and other precision components. The related products include micro speaker/receiver, speaker module, hapticcomponent (actuator), wireless charging device, antenna, MEMS microphone, MEMS sensors, micro-system module, VR opticalcomponent and module, AR optical component, AR light engine, precision structural parts and etc. The above-mentioned productsare widely applied in devices such as smartphones, tablets, smart wireless earphones, VR, AR, smart wearable and smart homedevices. Smart audio device business focuses on providing products related to audio, voice interaction, artificial intelligence, andother technologies. The main products include smart wireless earphones (TWS), wired/wireless earphones, smart speakers, etc. Smarthardware business focuses on providing products related to entertainment, health and home security. The main products include VR,AR, smart wearable products, gaming consoles and accessories, smart home products, etc.The Company has innovative competitive advantages in the fields of acoustics, optics, MEMS microelectronics and precisionmanufacturing, and owns many intellectual property rights in the field of precision parts and components. In addition, the Companyhas accumulated rich experience in projects by cooperating with industry-leading customers in the field of smart audio device andsmart hardware through "ODM", "JDM" and other business modes. During the reporting period, the Company maintained a good,long-term cooperative relationship with leading customers in the global technology and consumer electronics industry, kept growingin the number of patent applications and in technological capabilities. As a result, the company has been constantly recognized byglobal customers for its product solutions and service capability, and remains being an industry-leading manufacturer in the fields ofmicro speakers, MEMS microphones, MEMS sensors, TWS, VR products, smart wearable products, gaming console and accessories,etc.During the reporting period, due to the continuous growth of demand of smart hardware products such as VR, TWS, smartwearable products, gaming consoles and accessories, and the related precision components, the Company has achieved significantgrowth in revenue and net profit. At the same time, the Company further improved its position in the industry. During the reportingperiod, the Company won many honors, including being ranked the 3rd company in the Top-100 China electronic componententerprises based on comprehensive economic indexes, the 86th company in the Top-500 private enterprises in China'smanufacturing industry, the 164th company in the Top-500 private enterprises in China, as well as being the executive membercompany of CITIF.

Ⅲ. Analysis of Core Competitiveness

1. Industry-leading precision and intelligent manufacturing capabilities

In technology and consumer electronics related fields, the Company has been widely recognized for precision manufacturingcapabilities and obtains great reputation. Relying on the core capabilities and long-term experience in the field of precisionmanufacturing, the Company has continuously improved the processing accuracy, efficiency and quality of precision components andsmart hardware products. The Company has in-house development capabilities of various core raw materials, and The Companyadopted multiple advanced processes and technologies such as ultra-high-precision mold, high-precision metal/non-metal processing,ultrasonic technology and laser technology, to build industry-leading precision manufacturing capabilities in the production ofprecision optical components, MEMS microphones, MEMS sensors, micro-system modules and precision structural parts, thusensuring the delivery of the products with high precision, high efficiency and high quality.At the same time, the Company actively explores the development of intelligent manufacturing mode based on the capacities ofadvanced equipment development and flexible automation production. In the fields of automation, machine vision and AI related tointelligent manufacturing, the Company has built a future-oriented core capability of intelligent manufacturing by continuinginvesting in independent R&D, introducing global advanced technologies, core equipment and best practice experience for systemintegration, thus improving the manufacturing in all aspects through the application of information, automation, artificial intelligenceand other technologies. The Company promotes the transformation of its manufacturing to a more digitalized, connected, intelligent,and service-oriented model, and to build the core capabilities of future-oriented intelligent manufacturing.

2. Multi-technologies integration platform and strong team of R&D personnel

The Company has established a product R&D and manufacturing platform integrating materials, structures, electronic circuits,software algorithms, wireless communication, advanced technology, testing, automation and other technologies. Throughcross-domain technology integration, the Company provides customers with advanced and systematic solutions for precisioncomponents and smart hardware products. The Company attaches great importance to the integration and cultivation of outstandingtalents in the fields of acoustics, optics, microelectronics, wireless communication, precision manufacturing, automation, and othersectors around the world. The Company has set up a team of technical personnel with profound technical strength and richexperience in product projects, and has made a long-term cooperation with many well-known universities and scientific researchinstitutions, such as Beijing University of Aeronautics and Astronautics, Tsinghua University, Shanghai Jiao Tong University, HarbinInstitute of Technology, Nanjing University, Southeast University, Changchun Institute of Optics, Fine Mechanics and Physics(CIOMP), Shandong University, China Ocean University(OUC), Changchun University of Science and Technology and DalianUniversity of Technology, which forms an open and comprehensive technology R&D platform in support of continuous innovationand R&D of technologies and products.

During the reporting period, the Company applied for 3,468 patents, including 2,539 invention patents. A total of 2,675 patentshas been granted, including 1,036 invention patents. Till December 31, 2021, the Company has totally applied for 25,818 patents

(including 3,322 foreign patent applications), including 13,102 invention patents; Total of 15,525 patents have been granted,including 4,165 invention patents.

3. Continuous strategic innovation and transformation, and stable high-value customer relationshipsFacing the complex macroeconomic situation of domestic and overseas and the slowdown in the growth of the smartphoneindustry, the management of the Company actively carries out strategical innovation and transformation. While continuing toconsolidate the core competitive advantages in the conventional precision component business, the Company firmly grasps theinnovation opportunities of smart hardware products in technology and consumer electronics industry. Relying on the high-valuecustomer resources and good customer relationships worldwide, the Company focuses on the market and technology and continues toexplore new business growth opportunities in the fields of TWS, VR / AR, gaming and accessories, smart wearable devices, etc. TheCompany optimizes the allocation of strategical resource, supports strategical product development, continues strengthening andfurther utilize the customer resource advantages by closely following the world-class customers, in an effort to transform the needs ofhigh-value customers into an inexhaustible driving force for the Company's sustainable development.

4. Excellent core management team

Although the Company experiences a rapid and sound development, the core management team keeps a steady and efficientstyle as always. Facing the challenges and demands of smart hardware products in the post mobile era such as rapid development,high quality, high precision manufacturing, short delivery cycle and complex customer certification process, the core managementteam promptly response to the market and makes changes and innovations continuously, to keep and enhance the Company'scapabilities of strategic management, operation, R&D, precision and intelligent manufacturing. The Company attaches importance toand promotes the internationalization, specialization and rejuvenation of its core management team, and actively brings in seniormanagement talents and professionals from many international leading enterprises. At the same time, the Company has strengthenedthe echelon of its talent team, more and more young talents grow up into the Company's core management team through training andpractice. The Company boasts a management team with both experience and vitality that continues to promote the Company's stableand fast development in the future.IV. Analysis of Main Business

1. Overview

In 2021, the national economy was recovering after the outbreak of the epidemic, new changes presented in both domestic andoverseas, and more challenges appeared in the process to maintain the stability of the economy. Under that situation, Chinagovernment maintained the continuity and pertinence of macro policies, provided necessary support for economic recovery, and

adopted a series of effective measures, such as optimizing enterprise supporting policies, improving business environment,strengthening technology innovation and stabilizing the industry and supply chain, which finally supported China's economy toachieve a relatively high growth rate among its fellow countries.Facing the complex global political and economic environment, the repeated COVID-19 outbreaks in some countries andregions, as well as the challenges in global supply chain operation, the management and all staff of the Company made their bestefforts to respond, and successfully completed business development, project delivery, epidemic prevention and control, operationimprovement and other important work. Finally, the Company has achieved excellent business results with a remarkable growth inboth revenues and profits in 2021.

In recent years, the growth of the global smartphone market has slowed down. However, COVID-19 has impacted people's livesand work style, bringing in significant increase of demand for smart hardware devices in the applications such as onlinetelecommuting, social entertainment, sports and health. As a result, the emerging market of smart hardware products represented byVR, TWS, smart wearable, gaming consoles and accessories maintained a stable and rapid growth. Due to the Company's strategicalinvestment in smart hardware business in recent years, the growth of the new smart hardware product market has accelerated thesound development of the Company's business, in both precision components, smart audio devices and smart hardware sectors.

During the reporting period, the Company continued to uphold the product strategy of "precision components + smart hardware"by actively promoting the business of precision components, such as acoustics, optics, microelectronics and structural parts, as wellas smart hardware products such as VR/AR, smart wireless earphones (TWS), smart wearable and smart home devices. Especially,the businesses in VR, TWS, gaming consoles and accessories has experienced a rapid growth. By continuing to focus on leadingcustomers in the technology and consumer electronics industry and to improve customer service and relationships, the Company’sbusiness development have also achieved fruitful results. The promotion of the internal reform of the Company has realized moreefficient decision-making process, and the continuous improvement of the internal management and operation, lays a goodfoundation for the further development of the Company in the future.

During the reporting period, the Company achieved a revenue of RMB 78,221.4186 million, with a 35.47% YoY increase. TheCompany realized a net profit attributable to shareholders of listed companies of RMB 4,274.703 million, with a 50.09% YoYincrease. The operating cost of the Company was RMB 67,167.6667 million, with a 38.54% YoY increase.

During the reporting period, the total amount of the Company's sales expenses, administrative expenses, R&D expenses andfinancial expenses was RMB 6,733.702 million, with an 11.81% YoY increase.

During the reporting period, the Company further strengthened the development of new technologies, products and techniques,actively brought in high-level R&D talents, and invested RMB 4,301.3428 million in R&D, accounting for 5.50% of the revenue and

15.40% of the latest audited net assets of the Company.

During the reporting period, the net cash flow from operating activities of the Company was RMB 8,598.4755 million, with an

11.93% YoY increase. The main reasons are as follows: during the reporting period, the Company expanded the business scale,improved the operating cycle, and thus the net cash flow from operating activities increased.

2. Revenue and cost

1) Composition of operating revenue

Unit: RMB

20212020Year-on-year change
AmountProportion in operating revenueAmountProportion in operating revenue
Total of operating revenue78,221,418,618.02100%57,742,742,893.96100%35.47%
Classified by industry
Electronic components76,946,324,805.7398.37%56,531,616,437.8497.90%36.11%
Other business income1,275,093,812.291.63%1,211,126,456.122.10%5.28%
Classified by product
Precision components13,840,133,491.3317.69%12,205,410,031.9421.13%13.39%
Smart audio device30,297,084,891.2338.73%26,674,264,183.4246.20%13.58%
Smart hardware32,809,106,423.1741.94%17,651,942,222.4830.57%85.87%
Other business income1,275,093,812.291.63%1,211,126,456.122.10%5.28%
Classified by region
Domestic7,571,525,782.789.68%6,999,168,774.1712.12%8.18%
Overseas70,649,892,835.2490.32%50,743,574,119.7987.88%39.23%
Classified by sales mode
Direct selling77,770,329,729.1399.42%57,438,222,579.6999.47%35.40%
Distribution451,088,888.890.58%304,520,314.270.53%48.13%

(2) Industries, products, regions and sales modes accounting for more than 10% of the Company'soperating revenue or operating profit

√ Applicable □ Not applicable

Unit: RMB

Operating revenueOperating costGross profit marginYoY change (%) of operating revenueYoY change (%) of operating costYoY change (%) of gross profit margin
Classified by industry
Electronic components76,946,324,805.7366,054,072,404.3514.16%36.11%39.24%-1.92%
Classified by product
Precision components13,840,133,491.3310,641,616,932.9123.11%13.39%14.57%-0.79%
Smart audio device30,297,084,891.2327,167,160,928.2410.33%13.58%19.64%-4.54%
Smart hardware32,809,106,423.1728,245,294,543.2013.91%85.87%82.89%1.40%
Classified by region
Domestic6,878,087,190.335,921,035,748.2313.91%7.59%8.97%-1.10%
Overseas70,068,237,615.4060,133,036,656.1214.18%39.75%43.15%-2.04%
Classified by sales mode
Direct selling76,499,084,617.7865,666,703,312.2314.16%36.05%39.18%-1.93%
Distribution447,240,187.95387,369,092.1213.39%47.68%50.64%-1.70%

If the statistical caliber of the Company's main business data has been adjusted in the reporting period, adjusted statistics of mainbusiness are based on the caliber at the end of the reporting period of last year.

□ Applicable √ Not applicable

(3) Whether the Company's revenue from physical products sales is greater than the revenue fromproviding services

√ Yes □ No

Classification of industryItemUnit20212020Year-on-year change
Electronic components industrySales volumeTen thousand PCS540,341.87413,499.3130.68%
Output volumeTen thousand PCS546,976.95416,352.1131.37%
Inventory volumeTen thousand PCS34,036.0927,401.0124.21%

Reasons for changes in the relevant data over 30% year-on-year

√ Applicable □ Not applicable

During the reporting period, both of the production volume and sales volume of the Company increased.

(4) Fulfillment of major sales contracts and major procurement contracts signed by the Company as of thereporting period

□ Applicable √ Not applicable

5) Composition of operating cost

Classification of industry

Unit: RMB

Classification of industryItem20212020Year-on-year change
AmountProportion in operating costAmountProportion in operating cost
Electronic componentsDirect materials55,843,214,176.7784.54%39,047,644,492.8482.31%43.01%
Direct labor expenses4,058,480,923.726.14%3,401,428,878.807.17%19.32%
Manufacturing expenses6,152,377,303.869.31%4,990,659,944.9010.52%23.28%

ExplanationDuring the reporting period, the Company's overall sales volume increased. At the same time, the sales revenue of Smart audiodevices and intelligent hardware products with relatively high material cost increased.

(6) Whether there is any change in consolidation scope during the reporting period

√ Yes □ No

During the reporting period, the Company established a subsidiary company GOERTEK MICROELECTRONICS KOREACO.,LTD.

(7) Significant changes or adjustments in the Company's business, products or services during thereporting period

□ Applicable √ Not applicable

(8) Major customers and suppliers

Major customers of the Company

Sales revenue from top five customer67,695,045,138.61
Proportion of total sales revenue from top five customers in total annual sales amount86.54%
Proportion of sales revenue from related parties among top five customers in total annual sales amount0.00%

Information of top five customers

No.Name of customerSales amount (RMB)Proportion in total annual sales amount
1Customer 133,238,529,094.5942.49%
2Customer 218,457,651,840.6923.60%
3Customer 38,715,498,516.6311.14%
4Customer 43,918,367,657.285.01%
5Customer 53,364,998,029.424.30%
Total--67,695,045,138.6186.54%

Other information of major customers

√ Applicable □ Not applicable

The top five customers do not have associated relationship with the Company, and the Company's directors, supervisors, seniormanagement, core technicians, shareholders holding more than 5% of total shares, actual controllers and other related parties do notdirectly or indirectly own rights and interests in the main customers.Major suppliers of the Company

Total purchase amount from top five suppliers (RMB)19,062,697,560.63
Proportion of total purchase amount from top five suppliers in total annual purchase amount30.54%
Proportion of purchase amount from related parties among top five suppliers in total annual purchase amount0.00%

Information of top five suppliers

No.Name of supplierPurchase amount (RMB)Proportion of total annual purchase amount
1Supplier 17,471,595,122.6511.97%
2Supplier 25,464,068,547.988.75%
3Supplier 32,732,526,729.394.38%
4Supplier 41,834,123,435.482.94%
5Supplier 51,560,383,725.132.50%
Total--19,062,697,560.6330.54%

Other information of major suppliers

√ Applicable □ Not applicable

The top five suppliers do not have associated relationship with the Company, and the Company's directors, supervisors, seniormanagement, core technicians, shareholders holding more than 5% of total shares, actual controllers and other related parties do notdirectly or indirectly own rights and interests in the main suppliers.

3. Expenses

Unit: RMB

20212020Year-on-year changeNote of significant change
Selling expenses444,869,977.08476,066,518.64-6.55%No significant change
Administrative expenses1,951,657,773.321,629,730,793.0019.75%No significant change
Financial expenses167,099,982.36490,688,772.09-65.95%The main reasons are as follows: Reduced loss on exchange during the reporting period; convertible bonds were converted into common stocks of the Company, interest expense reduced; interest income from money funds increased
R&D expenses4,170,074,282.103,425,971,011.6521.72%No significant change

4. R&D Investment

√ Applicable □ Not applicable

Names of major R&D projectsPurpose of projectStatus of projectObjectivesExpected benefits to future development of the Company
R&D project of micro speaker moduleDevelop a new generation of micro speaker module products with high sensitivity, low distortion, large amplitude, waterproof and dustproof features.In progressAccording to specific technical requirements of the customers, the Company has completed the research and development of a number of advanced micro speaker module products, and realized the mass production in smart phones, tablet computers, smart wearable and other products for main customers.The project helps consolidate the Company's competitive advantage and market share in the field of acoustic precision components.
R&D project of MEMS sensor and micro system moduleDevelop new generation of MEMS sensors and micro-system module products that are applied to smart wireless earphones, smart wearable devices and other products.In progressComplete the R&D, verification and mass production of MEMS sensors and micro-system module products for terminal products, such as TWS smart wireless earphones, smart wearable devices.The project facilitates the business expansion the Company in the field of MEMS sensors and micro-system modules, and further enhances the Company's comprehensive strength in the field of MEMS.
R&D project of VR/AR precision optical components and modulesDevelop the precision optical components and module products by using emerging optical technologies such as “Pancake” folded-lightpath lenses and waveguide technology, and promote their application inIn progressComplete the R&D and mass production of optical lens and module products for new generation of all-in-one VR products, and improve the ability of comprehensive solution of optical devices and light-engine modules for AR products.The project helps enhance the Company's competitive advantage and market share in the field of VR/AR precision optical components and modules, promote the Company's ability to provide customers with customized VR / AR optical solutions, and improve the Company's vertical integration
Names of major R&D projectsPurpose of projectStatus of projectObjectivesExpected benefits to future development of the Company
VR/AR products.ability and profitability in the field of VR/AR.
R&D project of all-in-one VR HMDDevelop lightweight all-in-one VR HMD products featured with high-definition display, precise motion tracking and other features.In progressCooperate with customers to complete R&D, validation, mass production and delivery of a variety of new-generation all-in-one VR HMD products.The project helps consolidate the Company's competitive advantage and market share in the field of VR.
R&D project of TWS smart wireless earphonesDevelop a new generation of TWS smart wireless earphonesIn progressCooperate with customers to complete R&D, validation, mass production and delivery of a variety of new-generation of TWS smart wireless earphonesIt helps consolidate the Company's competitive advantage and market share in the field of TWS smart wireless earphones.
R&D project of smart wearable devices for sport and health related applicationsDevelop a new generation of smart wearable devices with functions of independent communication, health mornitoring features and etc.In progressCooperate with customers to complete R&D, validation, mass production and delivery of a new generation of smart watches and smart bands.It helps consolidate the Company's competitive advantage and market share in smart wearable devices such as smart watches and smart bands, and supports the Company's smart wearable business for further growth.
R&D project of smart wireless lightweight AR glassesDevelop wireless lightweight AR glasses and their main functional modules for future AR applications.In progressComplete the R&D and trial production of a variety of AR glasses products that, with the functions of data processing and wireless communication, apply advanced precision optics and micro-display technologies such as optical waveguide and silicon-based LED, so as to develop the solution capability for AR glasses and their main functional modules.It helps enhance the Company's R&D experience and technology accumulation in the field of AR and facilitates the business expansion of the Company in AR field.

R&D personnel of the Company

20212020Year-on-year change
Number of R&D personnel12,89512,1775.90%
Proportion of R&D personnel13.46%13.94%-0.48%
Academic structure of R&D personnel——————
Undergraduate9,1488,4098.79%
Postgraduate2,4141,98221.80%
PhD63588.62%
Age of R&D personnel——————
Below the age of 305,1054,8215.89%
Aged between 30 to 407,1626,8384.74%
Over the age of 4062851821.24%

The Company’s investment in R&D

20212020Year-on-year change
Amount of R&D Investment (RMB)4,301,342,763.663,532,801,720.5621.75%
Proportion of R&D investment in operating revenue5.50%6.12%-0.62%
Capitalized amount of R&D investment (RMB)662,993,650.30541,498,060.6522.44%
Proportion of capitalized R&D investment in R&D investment15.41%15.33%0.08%

Reasons and impacts of significant changes in R&D personnel composition of the Company

□ Applicable √ Not applicable

Reasons for significant changes in the proportion of total R & D investment in operating revenue compared with that of previous year

□ Applicable √ Not applicable

Reasons and explanation of its reasonableness of significant changes in capitalized R & D investment

□ Applicable √ Not applicable

5. Cash flow

Unit: RMB

Item20212020Year-on-year change
Sub-total of cash inflow from operating activities85,523,439,745.1560,932,031,432.7340.36%
Sub-total of cash outflow from operating activities76,924,964,217.2753,249,775,319.0544.46%
Net cash flow from operating activities8,598,475,527.887,682,256,113.6811.93%
Sub-total of cash inflow from investment activities3,276,323,800.48505,861,986.28547.67%
Sub-total of cash outflow from investment activities10,044,700,261.355,806,999,821.9572.98%
Net cash flow from investing activities-6,768,376,460.87-5,301,137,835.6727.68%
Sub-total of cash inflow from financing activities14,003,754,499.9715,780,475,210.72-11.26%
Sub-total of cash outflow from financing activities13,616,577,139.6914,138,013,422.54-3.69%
Net cash flow from financing activities387,177,360.281,642,461,788.18-76.43%
Net increase in cash and cash equivalents2,224,708,917.503,818,588,192.22-41.74%

Main influencing factors of significant year-on-year changes in relevant data

√ Applicable □ Not applicable

(1) The sub-total of cash inflow from operating activities was RMB 85,523.4397 million, with year-on-year increase of 40.36%,mainly due to the expansion of the Company's sales and the increase of sales receipts and advances received during the reportingperiod.

(2) The sub-total of cash outflow from operating activities was RMB 76,924.9642 million, with year-on-year increase of 44.46%,mainly due to the increase of the Company's purchase of raw materials and payment of employee salaries during the reporting period.

(3) The sub-total of cash inflow from investment activities was RMB 3,276.3238 million, with year-on-year increase of

547.67%, mainly due to the fact that the structural deposits purchased by the Company were collected at maturity during thereporting period.

(4) The sub-total of cash outflow from investment activities was RMB 10,044.7003 million, with year-on-year increase of

72.98%, mainly due to the increase of the Company's purchase of fixed assets and other long-term assets, and purchase of structureddeposits during the reporting period.

(5) The net cash flow from financing activities was 387.1774 million, with a year-on-year decrease of 76.43%, mainly due toRMB 3,995 million in cash received by the Company from issuing bonds during the previous reporting period.The reason for significant difference between the net cash flow from the Company's operating activities during the reporting periodand net profit in current year.

√ Applicable □ Not applicable

The net cash flow from operating activities exceeded the net profit of current year by 99.64%, mainly due to the improvement ofthe Company's refined operation capacity, optimization of operation cycle and reduction of capital occupation.

V. Analysis of Non-main Business

√ Applicable □ Not applicable

Unit: RMB

AmountProportion in totalExplanation of the causeWhether it is
profitsustainable
Investment income469,239,884.7910.19%It is mainly due to the investment income obtained from transaction of foreign exchange and equity disposal of the CompanyNo
Gains from changes in fair value-48,848,625.93-1.06%It is mainly due to the change in valuation of the Company's stock foreign exchange derivativesNo
Asset impairment-241,075,506.45-5.23%It is mainly due to the provision for inventory depreciationNo
Non-operating revenue22,444,738.180.49%It is mainly due to the unpayable payments and liquidated damages receivedNo
Non-operating expenditure99,858,949.062.17%It is mainly due to the losses on scrapping of non-current assets of the CompanyNo

VI. Analysis of Assets and Liabilities

1. Major changes in asset composition

Unit: RMB

December 31, 2021January 1, 2021YoY change (%)Note of significant change
AmountProportion in total assetsAmountProportion in total assets
Cash and bank balances10,048,521,696.0916.45%7,788,139,761.6815.72%0.73%No significant change
Accounts receivable11,899,214,525.9219.48%9,951,611,596.6520.09%-0.61%No significant change
Inventories12,082,308,485.3819.78%9,170,731,903.1918.52%1.26%During the reporting period, inventory reserves increased along with business growth of the Company
Long-term equity investments437,402,203.910.72%337,410,802.560.68%0.04%No significant change
Fixed assets18,123,352,480.7629.67%14,674,535,924.1529.63%0.04%During the reporting period, the Company raised funds to invest in projects, increased the purchase of production equipment, and transferred of part of the infrastructure projects reached usable state to fixed assets
Construction in progress2,127,055,853.773.48%2,078,910,639.924.20%-0.72%No significant change
Right-of-use assets330,796,520.660.54%462,821,988.610.93%-0.39%No significant change
Short-term borrowings4,284,859,347.027.02%3,189,865,281.206.44%0.58%During the reporting period, the demand for daily operating funds increased and short-term borrowings increased
Contract liabilities2,210,825,761.693.62%772,033,187.851.56%2.06%During the reporting period, the goods were prepared for customers, and advance from customers increased
Long-term borrowings2,204,215,784.743.61%2,754,299,262.025.56%-1.95%No significant change
Lease liabilities210,209,955.400.34%298,830,498.840.60%-0.26%From January 1, 2021, the Company implemented the new lease rules, and payed the rent as agreed

Foreign assets account for a relatively high proportion

□ Applicable √ Not applicable

2. Assets and liabilities measured at fair value

√ Applicable □ Not applicable

Unit: RMB

ItemOpening balanceProfit and loss from changes in fair value in the report periodCumulative changes in fair value included in equityImpairment accrued in current periodPurchase amount in the reporting periodSales amount in the reporting periodOther changesClosing balance
Financial assets
1. Held-for-trading financial assets (excluding derivative financial assets)125,327,442.6264,914,061.442,745,091,734.732,635,098,910.00300,234,328.79
2.125,462,174.67-104,999,182.3120,462,992.36
Derivative financial assets
3. Other debt investments
4. Investment in other equity instruments357,307,056.6553,916,285.45129,080,638.6464,601,040.12465,677,764.54
Sub-total of financial assets608,096,673.94-40,085,120.8753,916,285.452,874,172,373.372,699,699,950.12786,375,085.69
Total of above amounts608,096,673.94-40,085,120.8753,916,285.452,874,172,373.372,699,699,950.12786,375,085.69
Financial liabilities43,578,775.71-8,763,505.066,427,059.2843,578,775.7115,190,564.34

Other changesNoneWhether the measurement attributes of major assets of the Company have changed significantly during the reporting period

□ Yes √ No

3. Restrictions on asset rights as of the end of reporting period

ItemsBook value at year end (RMB)Reasons for restrictions

Cash and bank balances

Cash and bank balances910,620,794.05Deposit for bills and borrowings
Notes receivable6,095,782.39Bill pledge and others
Other non-current assets122,540,194.44When large-denomination certificates of deposit was pledged to the bank, the bank issued a financing guarantee
Accounts receivable5,000,000.00Re-insurance accounts receivable not derecognized

Total

Total1,044,256,770.88

Ⅶ. Analysis of Investment

1. Overall situation

√ Applicable □ Not applicable

Investment amount in 2021 (RMB)Investment amount in 2020 (RMB)YoY change (%)
533,092,515.56207,730,344.46156.63%

2. Major equity investments acquired during the reporting period

□ Applicable √ Not applicable

3. Major non-equity investments in progress during the reporting period

√ Applicable □ Not applicable

Unit: RMB

Name of projectInvestment modeWhether it is the investment in fixed assetsProject industryAmount invested during the reporting periodAccumulated actual investment by the end of the reporting periodSource of fundsProject progressEstimated incomeAccumulated income by the end of the reporting periodReasons for failure to reach the planned progress and expected benefitsDisclosure date (if any)Disclosure index (if any)
Project of Dongguan Songshan Lake Goertek Industrial ParkSelf-builtYesElectronic components119,630,009.50310,725,561.33Self-raised funds13.93%Not applicableNot applicableNot applicableJanuary 3, 2019For details, see Announcement of Goertek Inc. on Signing of Investment Cooperation Agreement between the Wholly-owned Subsidiary of the Company and the Management Committee of Dongguan Songshan Lake High-tech Industrial Development Zone published in the information disclosure media such as CNINFO (http://www.cninfo.com.cn), Securities Times, China Securities Journal,
Shanghai Securities News, Securities Daily.
Total------119,630,009.50310,725,561.33----------

4. Financial asset investment

(1) Securities investment

√ Applicable □ Not applicable

Unit: RMB

Type of securitySecurity codeShort nameInitial investment costAccounting measurement modelBook value at the beginningProfit and loss from changes in fair value in the report periodCumulative changes in fair value included in equityPurchase amount in the reporting periodSales amount in the reporting periodProfit and loss in the reporting periodBook value at the end of the reporting periodAccounting itemsSource of funds
Domestic and foreign stocksKOPNKOPN169,951,481.05Fair value measurements120,327,442.6263,575,754.0485,098,910.0069,142,817.1898,804,286.66Held-for-trading financial assetsSelf-raised funds
Total169,951,481.05--120,327,442.6263,575,754.0485,098,910.0069,142,817.1898,804,286.66----
Date of announcement disclosure by the Board of Directors for approval of securities investmentFebruary 11, 2017
Date of announcement disclosure by shareholders meeting for approval of securities investmentMarch 2, 2017

(2) Derivatives investment

√ Applicable □ Not applicable

Unit: RMB 10,000

Name of derivative investment operatorAssociated relationshipWhether it is related party transactionType of derivatives investmentInitial amount of derivative investmentStart dateEnd dateOpening balanceAmount of purchase during the reporting periodAmount of sales during the reporting periodAmount of provision for impairment (if any)Closing balanceProportion of investment amount in the Company's net asset at the end of the reporting periodActual profit and loss amount in the reporting period
BankNon associated relationshipNoOption330,812.43330,812.43243,551.74453,225.87121,138.304.34%4,083.00
BankNon associated relationshipNoForward515,467.10515,467.101,288,528.971,285,014.09518,981.9818.58%25,495.32
BankNon associated relationshipNoSwap214,630.06214,630.06191,271.00227,381.46178,519.606.39%4,766.87
Total1,060,909.59----1,060,909.591,723,351.711,965,621.42818,639.8829.31%34,345.19
Source of funds for derivatives investmentSelf-raised funds
Litigation involved (if any)None
Date of announcement disclosure by the Board of Directors for approval of the investment in derivativesMarch 27, 2021
Date of announcement disclosure by shareholders meeting for approval of the investment in derivativesMay 8, 2021
Risk analysis and control measures for derivatives positions during the reporting period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.)1. The financial derivatives transactions carried out by the Company are for the purpose of fixing costs, avoiding and preventing risks of foreign exchange rate and interest rate, and prohibiting any risk speculation. The trading quota of the Company's financial derivatives shall not exceed the authorized quota as reviewed and approved by the Board of Directors or the general meeting of shareholders. 2. The Company has formulated a strict management system for financial derivatives transactions, which clearly stipulates the operating principles, approval authority, responsible departments and persons, internal operating procedures, information isolation measures, internal risk reporting system and risk handling procedures, and information disclosure of financial derivatives transactions, in order to control trading risks arising therefrom. 3. The Company shall carefully review the terms of contracts signed with qualified banks and other financial institutions, and strictly implement the risk management system to prevent legal risks. 4. The Company's business personnel will continue to track the changes in the open market price or fair value of financial derivatives, timely assess the changes in risk exposure of financial derivatives transactions, and regularly report to the management of the Company. If any abnormal situation, inform the Board of Directors of the risk and take emergency measures accordingly. 5. The internal audit department regularly conducts internal audit on the compliance of financial derivatives transactions.
In case of changes in market price or fair value of invested derivatives during the reporting period, the analysis of fair value of the derivatives shall disclose the specific methods used and the setting of relevant assumptions and parametersChanges in the fair value of foreign exchange derivatives are calculated based on the difference between the fair market price and the contract price in the month of the settlement date determined by the Company.
Description of whether the accounting policies and specific accounting principles for the Company's derivatives have changed significantly compared with that of previous reporting periodThe accounting policies and specific accounting principles for the Company's derivatives have no significant change compared with that of previous reporting period.
Special opinions of independent directors on the Company's derivatives investment and risk controlThe Company carries out financial derivatives transactions mainly to avoid foreign exchange risks associated with RMB exchange rate fluctuations and effectively control the cost uncertainty caused by foreign exchange risks. The Company has formulated the Management System of Goertek's Financial Derivatives Trading Business, which is conducive to strengthen the management and control of the risks associated with financial derivatives transactions. The deliberation, approval, voting and other procedures of this proposal are in line with the relevant provisions of Company Law, Articles of Association, and overall interests of the Company, without damage to the legitimate rights and interests of minority shareholders. Therefore, the Company has been approved to carry out the

5. Use of raised funds

√ Applicable □ Not applicable

(1) Overall use of raised funds

√ Applicable □ Not applicable

Unit: RMB 10,000

Year of raisingMeans of raisingTotal fund raisedThe total amount of raised funds used during the reporting periodAccumulated amount of raised funds that have been usedTotal amount of raised funds with changed purposes during the reporting periodAccumulated total amount of raised funds with changed purposesProportion of accumulated total amount of raised funds with changed purposesTotal amount of raised funds that have not been yet usedPurpose of the raised funds that have not been yet usedThe amount of raised funds that have been idle for more than two years
2020Public issuance of convertible bonds398,903.00129,831.49207,055.930.000.000.00%191,847.07Supplementing working capital and deposited in the special account for raised funds0.00
Total--398,903.00129,831.49207,055.930.000.000.00%191,847.07--0.00
Description of overall use of raised funds
The Company actually invested RMB 1,298.3149 million in current period. As of December 31, 2021, the Company had used a total of RMB 2,070.5593 million of raised funds. The amount of unused raised funds was RMB 1,918.4707 million (interest excluded), of which RMB 1,200 million was used to temporarily supplement the working capital, and the remaining funds was deposited in the special account for raised funds of the Company.

(2) Projects in which the raised funds were proposed to be invested

√ Applicable □ Not applicable

Unit: RMB 10,000

Committed investment projects and investment of over-raised fundsWhether the project has beenTotal committed investmeTotal investment after adjustmeAmount invested during theAccumulated investmentInvestment progress at the endThe date on which the projectBenefits realized during theWhether it achieved theWhether there is any significan
changed (including partial changes)nt of raised fundsnt (1)reporting periodamount at the end of the reporting period (2)of the period (3)=(2)/(1)reaches its intended usage statereporting periodexpected benefitst change in the feasibility of the project
Committed investment projects
The project of true wireless smart earphonesNo218,903218,90393,433164,620.275.20%August 31, 202233,365.12Not applicableNo
AR/VR and related optical module project - AR/VR projectNo60,00060,00030,375.7730,375.7750.63%August 31, 202246,014.2YesNo
AR/VR and related optical module project - optical module projectNo40,00040,0003,168.43,168.47.92%August 31, 2022825.17Not applicableNo
Qingdao R&D center projectNo80,00080,0002,854.328,891.5611.11%August 31, 2022Not applicableNot applicableNo
Sub-total of committed investment projects--398,903398,903129,831.49207,055.93----80,204.49----
Direction of the investment with over raised funds
Not applicable
Total--398,903398,903129,831.49207,055.93----80,204.49----
Descriptions and reasons for failure of meeting the planned schedule or expected revenue (by project)Due to the impact of the project and the actual needs of the Company, the project of Qingdao R&D Center was behind schedule. The Company may accelerate subsequent investment according to the actual needs, and will strive to achieve the maximum efficiency of the raised funds.
Description of significant change in the feasibility of the projectNot applicable
Amount, use of over-raised funds and progress of use thereofNot applicable
Change in location of the project invested with raised fundsApplicable
Occurred in previous years
On August 20, 2020, the Company held the 8th meeting of the 5th Board of Directors and the 6th meeting
of the 5th Board of Supervisors, which reviewed and approved the Proposal on Changing the Implementation Subject and Implementation Location of Some Investment Projects with Raised Capital and Increasing the Capital of Wholly-owned Subsidiaries, and agreed to change: the implementation subject of AR/VR and related optical module projects from Goertek Inc. to wholly-owned subsidiaries Weifang Goertek and Goertek Optical; The implementation location was changed accordingly from Goertek Photoelectric Park in Weifang High-tech Zone to Weifang Goertek Plant, east of Gaoxin No.2 Road, south of Yuqing East Street in Weifang comprehensive free trade zone and Goertek Optical Plant, phase III of Goertek Photoelectric Park in Weifang High-tech Zone; The Company increased the capital to Weifang Goertek with the raised funds of RMB 600 million and increased the capital to Goertek Optical with the raised funds of RMB 400 million, for the purpose of specific implementation of above-mentioned investment projects.
Adjustment on how to invest the projects with raised fundsNot applicable
Upfront investment of the project with raised funds and replacement thereofApplicable
On July 9, 2020, the Company held the 7th meeting of the 5th Board of Directors and the 5th meeting of the 5th Board of Supervisors, which reviewed and approved the Proposal on Replacing the Self-raised Funds Invested in the Projects in Advance with the Raised Funds, and agreed to use the raised funds to replace the self-raised funds of RMB 315.7238 million invested in the investment projects in advance. The fund replacement above has been verified by Zhongxi Certified Public Accountants (special general partnership) Co., Ltd., and an authentication report has been issued.
Temporary replenishment of working capital with idle raised fundsApplicable
On July 9, 2020, the Company held the 7th meeting of the 5th Board of Directors and the 5th meeting of the 5th Board of Supervisors, which reviewed and approved the Proposal on Temporary Replenishment of Working Capital with Idle Raised Funds. It was agreed that the Company shall use the idle raised funds not exceeding RMB 2.5 billion to temporarily supplement working capital. The use period shall not exceed 12 months from the date of approval by the Board of Directors. After expiration, it shall be returned to the special account for raised funds in a timely manner. The Company returned RMB 0.8 billion and RMB 1.7 billion of the raised funds to the special account for raised funds in advance on September 17, 2020 and November 4, 2020 respectively. On November 5, 2020, the Company held the 11th meeting of the 5th Board of Directors and the 9th meeting of the 5th Board of Supervisors, which reviewed and approved the Proposal on Temporary Replenishment of Working Capital with Partial Idle Raised Funds. It was agreed that the Company temporarily supplements the working capital with idle raised funds of no more than RMB 2,500 million. The validity period shall not exceed 12 months from the date of approval by the Board of Directors. After expiration, it shall be returned to the special account for raised funds in a timely manner. The Company returned RMB 0.5 billion and RMB 2 billion of the raised funds to the special account for raised funds in advance on October 29, 2021 and November 3, 2021 respectively. On November 8, 2021, the Company held the 24th meeting of the 5th Board of Directors and the 19th meeting of the 5th Board of Supervisors, which reviewed and approved the Proposal on Temporary Replenishment of Working Capital with Partial Idle Raised Funds. It was agreed that the Company temporarily supplements the working capital with idle raised funds of RMB 1,200 million. The validity period of which shall not exceed 12 months from the date of approval by the Board of Directors. After
expiration, it shall be returned to the special account for raised funds in a timely manner.
Amount and reasons for the balance of raised funds in the implementation of the projectNot applicable
Purpose of the raised funds that have not been yet usedThe unused raised funds shall be deposited in the special account for raised funds.
Problems or other situations in the use and disclosure of raised fundsNone

(3) Changes in the projects in which the raised funds were proposed to be invested

□ Applicable √ Not applicable

There was no change in the projects in which the raised funds were proposed to be invested during the reporting period.Ⅷ. Sales of major assets and equities

1. Sales of major assets

□ Applicable √ Not applicable

The Company did not sell any major assets during the reporting period.

2. Sales of major equity

□ Applicable √ Not applicable

Ⅸ. Analysis of major subsidiaries and associates

√ Applicable □ Not applicable

Major subsidiaries and associates with an impact of more than 10% on the Company's net profit

Unit: RMB

Name of companyType of companyMain businessRegistered capitalTotal assetsNet assetOperating revenueOperating profitNet profit
Weifang GoertekSubsidiaryElectronic component1,405,601,925.0010,971,185,728.123,904,375,154.7327,282,319,193.581,695,784,116.301,491,760,091.98
manufacturing
Goertek Technology (Vietnam)SubsidiaryElectronic component manufacturing362,762,400.009,395,840,422.982,096,244,381.2120,651,380,536.591,285,740,959.381,280,038,474.51
Goertek (HongKong) Co., LimitedSubsidiaryElectronic component manufacturing1,542,045.006,835,046,824.101,075,332,121.4419,422,367,892.29836,073,059.54706,793,733.63

Acquisition and disposal of subsidiaries during the reporting period

√ Applicable □ Not applicable

Name of companyApproach on acquisition and disposal of subsidiaries during the reporting periodImpact on overall production, operation and performance
GOERTEK MICROELECTRONICS KOREA CO.,LTD.Newly establishedNo significant impact

Description of major subsidiaries and associatesNoneⅩ. Structural Entities Controlled by the Company

□ Applicable √ Not applicable

XI. Outlook for the Future Development of the Company

1. Industry trend and competition

In the mobile era, smartphones and related smart hardware products have been the main focus of innovation and the growthdrivers of the global technology and consumer electronics industry over the past many years. However, the growth of smartphoneindustry has slowed down in recent years. According to the statistics of IDC, a well-known consulting agency, the global smartphoneshipment in 2022 is expected to reach 1.39 billion units, with year-on-year increase of approximately 3%. It is predicted that theaverage annual compound growth rate of smartphone shipments around the world will be about 3% from 2022 to 2025. As the corehardware in the mobile era, the slowdown of smartphone market also reflects the transition to the post-mobile era of the globaltechnology and consumer electronics industry.In the post-mobile era, along with the development of new technologies such as semiconductor, 5G, micro-display, sensor,intelligent interaction, battery, cloud and edge computing, the new generation of smart hardware products are greatly improved in

functions, and are suitable for more diversified applications. Many new smart hardware devices with great potential have revealedthemselves. In particular, the products such as VR/AR, smart wearable devices and smart wireless earphones have maintained a rapidgrowth in recent years, which attracts extensive attention in the global market. These products are expected to become the drivingforce for further development of global intelligent hardware market in the post-mobile era.According to the statistics of IDC, the global shipment of VR/AR products is expected to reach 19.10 million units in 2022, withapproximately 67.5% YoY increase. The CAGR of global VR shipment from 2022 to 2025 is expected to be about 59.2%. Thenumber of end users keeps growing steadily along with the upgrade of VR hardware. With the development and maturity of VRcontent and applications such as social networking, games, entertainment and live broadcasting, VR products are expected to boost inthe next few years. According to the statistics of IDC, the global shipment of AR products is expected to reach 1.35 million units in2022, with approximately 309% YoY increase. The CAGR of global AR shipment from 2022 to 2025 is expected to reachapproximately 121.4%. With the concept of "integration of virtual content and real life" and the ability to seamlessly connect tosmartphone ecosystem, AR product shows unlimited future possibilities and great market potentials, and is expected to become oneof the core smart hardware products in consumer electronics industry in the post-mobile era. Many well-known brand companies andstart-ups in the industry continue to explore and tackle the key technological roadblocks in semiconductor chips, optical waveguide,micro displays, new materials and other fields. The break-thru of those technologies are also expected to create a broader path for ARproducts in the next few years.According to the statistics of CCS Insight, a famous consulting agency, the global shipment of smart wearable products isexpected to reach 270 million units in 2022, with approximately 16.4% YoY increase. In the post epidemic era, consumers paygreater attention to sports and health. For billions of people over the globe who may have hypertension, diabetes or other sub-healthsituations, high precision and reliable health monitoring technologies, especially blood pressure monitoring and non-invasive bloodsugar level monitoring technology, are the focus of innovation in smart wearable devices, and have attracted significant amount ofinvestment from many industry leaders. The maturity and application of above technologies are expected to bring dramatic growthfor smart wearable products in future.According to the statistics of Futuresource, a well-known consulting agency, the global shipment of smart wireless earphones isexpected to keep growing steadily in the next few years, and the CAGR of TWS earphones from 2021 to 2025 is expected to reachabout 21.8%. With improved voice interaction function, more product choices, better features and user experience, the TWS productpenetration in the global earphone market is expected to increase continuously.The rapid development of emerging intelligent hardware products has also boosted the demand for related precision componentssuch as precision optics and modules, precision acoustic components, MEMS sensors and micro system modules, haptic componentsand precision structural parts, which creates new business opportunities for the precision components of the Company.

From the perspective of competition among brand companies, the global technology and consumer electronics industry maycontinue to demonstrate a centralized trend. In the post-mobile era, massive investment in technological innovation and R&D isrequired for the development of smart hardware products, for which the "soft power" of the ecosystem, such as developer base, userbase, software applications, entertainment content, community loyalty and data monetization, becomes more and more crucial. Theleading enterprises with capital, talent, technology and ecosystem advantages are expected to strengthen their competitive advantages,so as to lead technology and product innovation in the industry.From the perspective of supply chain, the middle-end of supply chain is expected to remain relying on developing countries.The electronic manufacturers in China are strengthening their overall competitiveness, and continue to expand their business in othercountries. China manufacturers are expected to meet the needs of smart hardware production in the post-mobile era and gain the newopportunities of development. At the same time, we also need to pay attention to the development and changes of internationalpolitical and economic situation. The changes in science, technology, trade and other policies between countries, as well as majorinternational events and their development, may also have significant impact to the competition and supply chain of global industry.Therefore, we need to pay continuous attention and respond positively.

2. Strategy for future development

Looking into the future, the Company will actively respond to the strategy of actualizing innovation-driven development andaccelerating the development of modern industrial system, and grasp the opportunities of transformation from the mobile era to thepost-mobile era by closely following the development of 5G, AI, IoT, cloud computing and other advanced technologies. TheCompany will continue to strengthen its development in the field of advanced precision components and next generation smarthardware products, constantly consolidate the strategical cooperation with world-class customers, and earnestly fulfill the economicand social responsibilities of the enterprises, thus achieving a long-term, stable and healthy growth of the business, and maximize theenterprise value and the return to shareholders.

(1) Actively grasp the new opportunities in the post-mobile era, and further promote the Company's strategy of "precisioncomponents + smart hardware". Further develop the businesses of precision components, such as acoustics, optics, microelectronicsand structural parts, and the businesses of smart hardware devices, such as VR/AR, smart wireless earphones, smart wearable andsmart home devices. Continue to strengthen the advantages of precision components business in smartphone and other traditionalhardware, and actively develop precision components and system hardware business related to new generation of smart hardwareproducts. Utilize the synergy between the Company's component and hardware device business, continue to strengthen the corecompetence in precision manufacturing and intelligent manufacturing, and provide customers with the first-class vertically integratedproduct solutions and "one-stop" R&D and manufacturing services.

(2) Continue the key-account strategy, remain customer orientation, and utilize the Company's advantages in customer resource.

Focus on serving leading customers in the global technology and consumer electronics industry, and continue to consolidatelong-term strategic cooperation with customers. Closely follow the strategical planning and development of world-class customers,and to create a global system of R&D, manufacturing and sales services accordingly. Continue to satisfy our customers with ourbusiness, technology, engineering, operation and delivery services, in order to achieve win-win cooperation and to grow with theworld-class customers.

(3) Adhere to technological innovation and continue to invest in R&D. Constantly improve the Company's technicalcompetitiveness in acoustics, optics, microelectronics, precision manufacturing, automation, IT technology, software algorithm andso on, and actively expand the layout in emerging technologies such as micro system modules, optical waveguide, nano-imprinting,haptics and etc., to build the core technical competitiveness of the enterprise. Firmly implement the talent strategy by integrating theoutstanding talents in management and technology fields around the world, build and effectively motivate a first-class talent team,thus to provide sufficient talents for future development of the Company.

(4) Constantly improve corporate governance and management, and promote the standardized and efficient internal operation.Continuously improve the internal structure, processes and internal management system. Strengthen the awareness of lean operation,improve the level of lean operation and seek benefits from it. Being market-oriented and customer-oriented, continues to pushforward internal reform and innovation, and to build core competitiveness upon continuous reform and innovation activities. Createan excellent corporate culture, undertake the core values of "customer orientation, personnel growth, integrity and pragmatism,win-win cooperation", and earnestly fulfill the economic and social responsibilities of the enterprise, to become a respectedworld-class enterprise.

3. Business operation during the reporting period and business plan for next year

In 2021, the Company grasped the business opportunities of the new generation of smart hardware such as VR, TWS, smartwearable devices, gaming consoles and accessories, implement the "precision components + smart hardware" strategy and utilizedthe synergy between the components business and system device business. The Company adhered to customer-orientation philosophyand focused on key business accounts, provided customers with high-quality R&D and manufacturing “one-stop” service, andachieved customer satisfaction. The Company also explored new business opportunities in precision optical components and modules,micro-system modules, MEMS sensors, haptic components, etc. From internal operation perspective, the Company continuouslyimproved the level of lean operation, and obtained solid progresses in input/output efficiency, operation cycle, inventory turnover,and capital cost. The Company continued to invest in R&D and technological innovation, increased the quantity of both patentapplications and patent approvals, strengthened the capabilities of R&D and talent team, and thus further consolidated the corecompetitiveness in technology field. The Company also formulated and implemented effective systems and measures to ensure stableoperation of business activities and control the risks. With all the measures above, the Company has finally achieved an excellent

business performance in 2021.Looking into the year of 2022, the Company still faces many challenges due to the ongoing global epidemic, the slow recoveryof global economy, the high and fluctuated commodity prices, and other complexities and uncertainties that may applied to theexternal environment. On the bright side, there are also new opportunities in global technology and consumer electronics industry.With the further integration and development of advanced technologies such as 5G, AI and the new generation of smart hardwareproducts, the Company faces new opportunities in both precision components and smart hardware business. The management and allstaff of the Company will continue to implement our strategy and to achieve business objectives, so as to return the shareholders andinvestors with excellent business performance and continuous growth of enterprise value.

(1) Maintain strategic focus and grasp development opportunities. The Company will seize the business opportunities of smarthardware products in the post-mobile era by adhering to the "precision components + smart hardware" strategy and utilize thesynergy between the components and system device business. With core technological capabilities and advanced precisioncomponent solutions, the Company will further enhance the effort in business development of smart hardware products. And throughthat business development, the Company will create more applications and demand for the precision components. By integrating thecore capabilities in precision manufacturing and intelligent manufacturing, the Company will be able to provide first-class "one-stop"R&D and manufacturing services to global customers.

(2) Adhere to the customer-orientation philosophy and key-accounts strategy, and identify and serve strategic customers. Followthe strategy and business plan of core customers, the Company will carry out corresponding business, products and capacity plans,work with the customer in their frameworks and schedules and provide industry-leading R&D and manufacturing services. TheCompany will continuously build excellent customer service team to satisfy our customers in long term in all aspects of business,technology, engineering, operation, and delivery, to enhance customer loyalty and achieve win-win cooperation with customers.

(3) Empower business expansion and create new opportunities. Based on the consolidation of the existing business advantagesin precision components and smart hardware products, the Company will further explore new directions and opportunities. Bygrasping the opportunities in micro-system modules, MEMS sensors, precision optical components and modules, haptic components,precision structured parts, VR, smart home products and other products, the Company will secure the key projects of core customers,and also follow up with new directions and opportunities in automotive electronics, advanced materials, micro-display technologyand other fields with future potentials.

(4) Improve lean operation and complete successful delivery of key projects. The Company will continue to promote theawareness and improve the level of lean operation, and to support the business objectives with high-quality and efficient operation.The Company will make thorough planning of its resources, ensure the delivery of key projects that closely related to the strategy andthe business objectives, and to achieve the goals of the Company.

(5) Continue to invest in R&D and technological innovation, strengthen core competitiveness with talent strategy. The Companywill continue to invest in R&D and technological innovations centered on future strategic directions, and strengthen the technicalcapabilities in the fields of acoustics, optics, microelectronics, precision manufacturing, and intelligent manufacturing. The Companywill embrace the management and technical talents globally, keep bringing in high-level talents, carry out solid efforts in the selection,cultivation, motivation and retention of talents, and to support the Company's strategic implementation and business developmentwith high-quality talent echelon.

(6) Effectively control risks and maintain healthy operation. The Company will continue to maintain a sound business strategy,strengthen risk awareness, pay close attention to changes in the external environment, perform effective control on risk indicators inproduction operation of the Company, take the initiative to identify and resolve potential risks, and ensure sustainable development ofproduction and operation activities.

4. The demand and planning of fund

The Company maintains a healthy asset and liability structure, and obtained a good long-term cooperative relationship withbanks and other major financial institutions. In 2021, the Company successfully completed the conversion and delisting of thepreviously issued convertible bonds, and successfully completed the signing of long-term loan agreements between its subsidiarycompanies and International Finance Corporation, which further improved the Company's balance sheet structure and cost of funds.The Company will continue to improve the management of cash, asset-liability ratio and debt structure, to actively avoid liquidityrisks and foreign exchange risks, to control financial derivatives trading activities with strict standards, and thus providing stable andsufficient financial support to the development of the Company.

5. Future risks

(1) Macroeconomic risks

COVID-19 pandemic has not yet stopped globally, and the global economy is still in recovery. Unfavorable factors that affectinginvestment and consumption still exist, which may hinder global technology and consumer electronics industry from rapiddevelopment in the short term. The world political and economic situation remains complex and grim. Trade disputes between majorcountries and geopolitical events have brought uncertainties to global economy, which may adversely affect the business ofenterprises. The slow growth of some smart hardware products such as smartphones, may affect the market demand of precisioncomponents, which may bring negative impact to the Company's performance.

(2) Operational risks

① Risks of concentrated customer structure

The competitive pattern of global technology and consumer electronics industry, along with the Company's business model andkey account strategy, determined a relatively concentrated customer structure. As a result, the business income from a few core

customers accounts for a large proportion of the Company's overall revenue. Although the above customers are global industryleaders who have significant competitive advantages and market position, and have maintained long-term and stable cooperativerelations with the Company, under some special circumstances, they may bring fluctuations and risks to the Company's business iftheir business activities fluctuate.

② Risks of exchange rate fluctuation

The export business accounts for a high proportion of the Company's overall revenue. At the same time, the Company alsoimports a considerable number of raw materials, equipment and other products from overseas. These import and export businessesare primarily settled in US dollars. Although the Company has adopted appropriate risk hedging tools, the significant fluctuation ofRMB/US dollar exchange rate may still bring certain exchange rate risks to the Company.

③ Risks of the leaving of core technical talents

The technology and consumer electronics industry is a talent intensive industry. Therefore, the demand for core technical talentsis strong, and the competition for talents is very fierce. Core technical talents are the key resources for the Company to continuouslyimprove its core competitiveness and realize long-term development. For this reason, the Company will continue to improve variousincentive and restraint mechanisms in order to retain core technical talents. But due to the fierce competition, loss of core technicaltalents may still occur, which may put the Company at a disadvantage in the competition and affect the business development insome cases.

(3) Risks of management

In recent years, the Company has successfully expanded its business in each product line. The business scale has been expandedsignificantly, as well as the variety of products and the size of the staff has grown rapidly. The growing business brings higherrequirements to the Company in overall operation and management ability. The Company implements the strategic plan ofdeveloping core customer business and exploring new opportunities, which also requires the Company's management to maintainexcellent abilities of judgment, execution and management. If the Company's management fails to match the business growth, or failsto be improved to meet the needs of the Company's development, it may affect the execution of strategic planning and the delivery ofbusiness objectives, thus bringing management risks to the Company.Ⅻ. Reception, research, communication, interview and other activities during the reportingperiod

√ Applicable □ Not applicable

Reception timeReception placeReception modeType of reception objectReception objectMain content of discussion and informationIndex of basic information of survey
provided
March 30, 2021The CompanyOtherInstitutionInvestors participating in the Company's performance presentation meeting of 2020The Company's operation and business developmentRefer to the record of investor relations activities on March 30, 2021 published on www.cnifo.com.cn
April 22, 2021The CompanyCommunication over phoneInstitutionE Fund, Bosera Fund, Dacheng Fund, Hua An Fund and other fundsThe Company's operation and business developmentRefer to the record of investor relations activities on April 22, 2021 published on www.cnifo.com.cn
July 22, 2021The CompanyCommunication over phoneInstitutionSOOCHOW Fund, CR Yuanta Fund, BOC Fund, YINHUA Fund and other fundsThe Company's operation and business developmentRefer to the record of investor relations activities on July 22, 2021 published on www.cnifo.com.cn
August 27, 2021The CompanyCommunication over phoneInstitutionFullgoal Fund, Xingquan Fund, 99 Fund, CCB Fund and other fundsThe Company's operation and business developmentRefer to the record of investor relations activities on August 27, 2021 published on www.cnifo.com.cn
October 27, 2021The CompanyCommunication over phoneInstitutionE Fund, Hua An Fund, GF Securities, Harvest Fund and other fundsThe Company's operation and business developmentCninfo.com, record of investor relations activities on October 27, 2021 published on www.cnifo.com.cn

Section IV Corporate GovernanceⅠ. Corporate Governance in PracticeDuring the reporting period, the Company continuously improved the corporate governance structure, the internal managementand control system, and continued to carry out corporate governance activities in strict accordance with the requirements of relevantlaws, regulations and normative documents such as Company Law, Securities Law, Corporate Governance of Listed Companies,Rules Governing the Listing of Shares on Shenzhen Stock Exchange as well as with relevant documents of China SecuritiesRegulatory Commission and the relevant instructions of Shandong Securities Regulatory Bureau, so as to further standardize theCompany's operation and improve the level of corporate governance.

By the end of the reporting period, the actual practice of corporate governance met the relevant requirements of the above laws,administrative regulations, departmental rules and normative documents on the governance of listed companies, and no documentsconcerning administrative supervision measures taken by the supervised departments was received.By the end of the reporting period, the details of actual practice of corporate governance are as follows:

1. Shareholders and shareholders' meetings: The Company has convened and held shareholders' meetings in strict accordancewith the Rules for General Meeting of Shareholders of Listed Companies and the Company’s Rules of Procedure of Shareholders'Meetings, so as to ensure that all shareholders, especially minority shareholders, enjoy equal status and fully exercise their rights; Inaddition, lawyers were engaged to witness the legitimacy of the convening, holding and voting procedures of each general meeting ofshareholders.

2. The Company and controlling shareholders: The Company, with independent business and operation autonomy, isindependent of the controlling shareholders in business, personnel, assets, organisations and finance. The Board of Directors, Boardof Supervisors and internal institutions of the Company operate independently. The controlling shareholders exercise their rightsthrough shareholders’ meeting , and there was no direct or indirect interference with the Company’s operations and decision-makingbeyond the general meeting of shareholders.

3. Directors and the Board of Directors: The Company elects directors in strict accordance with the selection and appointmentprocedures stipulated in the Articles of Association. There are three independent directors in the Board, the number of directors andthe composition of the Board of Directors meet the requirements of laws and regulations and the Articles of Association. All directorscan carry out their work in accordance with Rules of Procedure of the Board of Directors and Working System for IndependentDirectors, they attended all the Board of Directors meetings, and all the related trainings as required.

4. Supervisors and the Board of Supervisors: The election of supervisors and the composition of the Board of Supervisors werein strict accordance with relevant provisions of Company Law and Articles of Association. The Company's supervisors strictlyfollowed the Rules of Procedure of the Board of Supervisors, All supervisors scrupulously attended the sessions, seriously fulfilledtheir duties diligently, and supervised and issued opinions for major issues, related-party transactions, and financial status.

5. Performance appraisals and incentives: The Company has gradually improving its fair and transparent performance evaluationstandards and incentive a restraint mechanisms for directors, supervisors and senior management. The appointment of Company’ssenior management is open and transparent, and in line with the provisions of laws and regulations.

6. Stakeholders: The Company fully respects and safeguards the legitimate rights and interests of stakeholders, activelycommunicates and coordinates with stakeholders, to r balance the interests of the society, shareholders, the Company, employees andother parties, and jointly promotes the Company's development in a sustainable and steady manner.

7. Information disclosure and transparency: The Company duly performed the disclosure obligations in accordance with theprovisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange, Articles of Association and Investor RelationsManagement Rules, and discloses information as per the law, so as to ensure that the information disclosure is true, timely, accurateand complete. All shareholders were given equal access to the information. The Company has gradually revised and improved theInsider Information Management Rules, further improved the insider information management, strengthened the confidentiality ofinsider information, maintained the fair principle of information disclosure and protected the legitimate rights and interests ofinvestors. The Company has appointed the secretary of the Board of Directors as the head of investor relations management of theCompany, responsible for the Company's information disclosure and investor relations management. The Company has designatedSecurities Times, China Securities Journal, Shanghai Securities News, Securities Daily and cninfo.com.cn to disclose Company’sinformation in a faithful, accurate and timely manner, strictly in accordance with relevant laws and regulations, so that allshareholders have a fair chance to get information.Whether there is any significant difference between actual situation of corporate governance and laws, administrative regulations andthe provisions on governance of listed companies issued by CSRC

□ Yes √ No

There is no significant difference between the actual situation of corporate governance and the laws, administrative regulations andthe provisions on governance of listed companies issued by CSRC

Ⅱ. Particulars about the independence of the Company from controlling shareholder andactual controller in terms of the assets, personnel, finance, organization and business

The Company is completely separated from the controlling shareholders in terms of business, personnel, assets, organizationand finance. The ownership of the assets are clear and belongs to the Company. The Company has the capability of self-operation in

its marketing, production and procurement, does not depend on major shareholders or their affiliated enterprises. There is no mixedoperation with major shareholders.

1. Business independence: The Company had its own production, procurement and sales system, and was completelyindependent of controlling shareholder in terms of business.

2. Personnel separation: There is a department responsible for the Company's labor, personnel and salary management in theCompany, and rules and regulations has been established for appraisal of employees’ performance. Personnel of the Company wereindependent from the controlling shareholder. The Senior Management of the Company did not hold any positions other than directorand supervisor in the related shareholders and other entities with same or similar business.

3. Institutional independence: The Board of Directors, Board of Supervisors, Senior Management and other internal organizationof the Company operated independently, and each functional department is completely independent from controlling shareholder interms of authority, personnel, production operation premises and there is no subordinate relationship between the controllingshareholder and its functional departments.

4. Asset independence: The title relationship between the Company and the controlling shareholder was clear. The Company’sassets were complete. The Company has independent and complete production system, auxiliary production system and supportingfacilities, as well as land use right, industrial property right, patented technology and other assets.

5. Financial independence: The Company has its own separate financial department and an independent accounting system andfinancial management system from the controlling shareholder. The Company makes financial decisions on its own according to therequirements of relevant accounting systems of listed companies. At the same time, implement vertical and straight-line managementon financial affairs of its subsidiaries. The Company opened accounts in the bank independently, made tax declarations andperformed tax obligations independent of shareholders according to law.Ⅲ. Horizontal Competition

□ Applicable √ Not applicable

Ⅳ. Annual General Meeting and Extraordinary General Meeting held during the Reporting Period

1. General meeting of shareholders during the reporting period

SessionType of meetingPercentage of investor participationConvening dateDisclosure dateMeeting resolution
General meeting of shareholders of 2020Annual general meeting of shareholders35.29%May 7, 2021May 8, 2021Resolutions for the Annual General Meeting of Shareholders disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 8 May 2021(Announcement No 2021-083)
The first extraordinary general meeting of shareholders in 2021Extraordinary general meeting of shareholders48.53%November 25, 2021November 26, 2021Resolutions for the First Extraordinatry General Meeting of Shareholders in 2021 disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 26 November 2021(Announcement No 2021-125)
The second extraordinary general meeting of shareholders in 2021Extraordinary general meeting of shareholders45.94%December 16, 2021December 17, 2021Resolutions for the Second Extraordinatry General Meeting of Shareholders in 2021 disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 17 December 2021(Announcement No 2021-132)

2. Extraordinary general meeting of shareholders requested by the Preferred shareholders with voting rights restored

□ Applicable √ Not applicable

V. Directors, Supervisors and Senior Management

1. Basic Information

NamePositionAppointment statusGenderAgeTerm start dateTerm end dateNumber of shares held at the beginning of the periodNumber of shares increased during the periodNumber of shares decreased during the periodOther increase or decrease changesNumber of shares held at the end of the periodReason for change in shares
Jiang BinChairmanIncumbentMale56July 27, 2007November 7, 2022373,487,40686,090,000287,397,406Shareholding reduction; transfer to persons acting in concert
Jiang LongVice ChairmanIncumbentMale48July 27, 2007November 7, 2022197,255,19753,090,000250,345,197Shares granted to persons acting in concert
PresidentOctober 30, 2014November 12, 2022
Duan HuiluDirectorIncumbentMale46February 4, 2016November 7, 20224,474,5001,000,0003,474,500Reduction
Vice PresidentIncumbentMarch 25, 2011November 12, 2022
Chief Financial OfficerResignedAugust 12, 2010January 27, 2021
Liu ChengminDirectorIncumbentMale51November 29, 2016November 7, 2022
Xia ShanhongIndependent DirectorIncumbentFemale64October 20, 2016November 7, 2022
Wang KunIndependent DirectorIncumbentFemale46November 8, 2019November 7, 2022
Wang TianmiaoIndependent DirectorIncumbentMale62October 20, 2016November 7, 2022
Sun HongbinChairman of Board of SupervisorsIncumbentMale56September 17, 2013November 7, 20228,889,5341,800,0007,089,534Reduction
Feng JianliangEmployee representative SupervisorResignedMale48July 27, 2007April 27, 2021
Xu XiaofengEmployee representative SupervisorIncumbentFemale45September 17, 2013October 17, 2022
Gao XiaoguangVice PresidentIncumbentMale46April 12, 2012November 12, 2022
Liu ChunfaVice PresidentIncumbentMale46October 10, 2013November 12, 20221,151,864287,864864,000Reduction
Jiang HongzhaiVice PresidentIncumbentMale52October 10, 2013November 12, 2022
Jia Jun'anVice President, Secretary of the BoardIncumbentMale51October 10, 2013November 12, 2022200,000200,000
Feng PengboVice PresidentResignedMale54October 24, 2016September 10, 2021
Yu DachaoVice PresidentIncumbentMale44October 24, 2016November 12, 2022
Kazuyoshi YoshinagaVice PresidentIncumbentMale55October 24, 2016November 12, 2022
Li YongzhiChief Financial OfficerIncumbentMale44January 27, 2021November 12, 2022
Wei WenbinEmployee representative SupervisorAppointedMale44April 27, 2021October 17, 2022
Li YouboVice PresidentAppointedMale45June 2, 2021November 12, 2022
Zhu ShengboVice PresidentAppointedMale48June 2, 2021November 12, 2022
Total------------585,458,50153,090,00089,177,864549,370,637--

Whether there is any resignation of directors, supervisors and senior management during the reporting period

√ Yes □ No

During the reporting period, chief financial officer Duan Huilu and vice president Feng Pengbo resigned because of jobre-arrangement, and the employee representative supervisor Feng Jianliang resigned during the term of office due to job adjustment.Changes in directors, supervisors and senior management

√ Applicable □ Not applicable

NamePositionTypeDateReason
Duan HuiluChief Financial OfficerResignedJanuary 27, 2021Job arrangement
Feng JianliangEmployee representative supervisorResignedApril 26, 2021Job adjustment
Wei WenbinEmployee representative supervisorElectedApril 27, 2021Job arrangement
Li YouboVice PresidentAppointedJune 2, 2021Job arrangement
Zhu ShengboVice PresidentAppointedJune 2, 2021Job arrangement
Feng PengboVice PresidentResignedSeptember 10, 2021Job arrangement

2. Biographical Information

Professional backgrounds, main working experience and current duties of the Directors, Supervisors and the SeniorManagement

Directors:

Mr. Jiang Bin:

Mr. Jiang, Chairman of the company, master's degree holder of business administration from Tsinghua University, bachelor'sdegree holder of electronic engineering from Beihang University. Mr. Jiang founded Goertek Inc. in 2001. He has more than 30 yearsof working experience in the electro-acoustic industry. He also serves as standing member of the 12th executive committee of theAll-China Federation of Industry and Commerce, rotating chairman of China Electronic Components Association, and vice chairmanof Industry of Virtual Reality Alliance. He has successively won the titles of National Model Worker, Outstanding Entrepreneur ofChinese Electronic Information Industry, National Labor Medal of Shandong Province, Labor Model of Shandong Province,Outstanding Entrepreneur of Shandong Province, etc.

Mr. Jiang Long:

Mr. Jiang , Vice Chairman and President of the company, Ph.D in strategic management, the University of Maryland, a master'sdegree holder in management science from Renmin University of China, and a bachelor's degree holder in materials engineeringfrom Tsinghua University. Joined the Company in 2004, Mr. Jiang successively served as vice president, senior vice president andexecutive vice president of the company. Mr. Jiang is also the Vice President of China Audio Industry Association and the chairmanof China Electronic Components Association-Electroacoustic Chapter. Mr. Jiang has extensive experience in marketing, sales andbusiness management.Mr. Duan Huilu:

Mr. Duan, Director and Vice President of the company, bachelor's degree holder from Shandong University of Finance andEconomics. He joined the company in 2001 and successively served as the company's accountant, finance manager, financedepartment manager and chief financial officer. Mr. Duan has more than 20 years of working experience.

Mr. Liu Chengmin:

Mr. Liu, Director of the company, master's degree holder in mechanics from Harbin Institute of Technology. Mr. Liu currentlyserves as chairman of Beijing Fargo Capital Co., Ltd., managing partner of Tianjin Longyuan Yunteng Investment ManagementPartnership, and technology consultant of China Ping An Trust Co., Ltd. Mr. Liu used to serve as director of the telecom division ofHuawei's domestic marketing department, senior executive vice president of Tencent and president of Tencent Wireless InternetBusiness Group. He has rich experience in telecom and Internet.

Ms. Xia Shanhong:

Ms. Xia, Independent Director of the company. Ms. Xia used to serve as deputy director of the Institute of Electronics, ChineseAcademy of Sciences, director, researcher and doctoral supervisor of the State Key Laboratory of Transducer Technology, andreceived special government allowance from the State Council. She received a bachelor's degree from Tsinghua University, amaster's degree from the Chinese Academy of Sciences and a doctorate from the University of Cambridge in England. Ms. Xia is theRoyal Fellowship visiting scholar of the Royal Society and the Berkeley Scholarship visiting scholar of the University of California,Berkeley. She used to be the chief scientist of the National 973 Project, member of the MEMS overall expert group of the National863 Program and member of its advanced manufacturing technology expert group, member of the expert review team of theDepartment of Information Sciences of the National Natural Science Foundation of China, and chairman of the Transducers. Ms. Xiacurrently serves as member and director of Chinese Institute of Electronics, director of China Instrument and Control Society as wellas vice chairman of its sensor branch, member of Chinese Society of Micro-Nano Technology, and editorial board member of manyinternational academic journals.

Mr. Wang Tianmiao:

Mr. Wang, Independent Director of the company. Professor and Ph.D Tutor of Beihang University o, Honorary Director ofInstitute of Robotics at Beijing University of Aeronautics and Astronautics, Dean of Zhongguancun College of Innovation Angel.He received a doctorate and masters’ degree holder from Northwestern Polytechnic University and a bachelor's degree holder fromXi'an Jiaotong University. He is one of the distinguished professors of the Changjiang Scholars, winner of the National Science Fundfor Distinguished Young Scholars, member of the Advanced Robot Technology Innovation Team for National Defense, chief expertgroup leader in the field of advanced manufacturing under 863 National High-tech R&D Program in the 11th Five-Year Plan, head ofthe expert group of the Service Robotics program in the 12th Five-Year Plan, and president of the IEEE Robotics and AutomationSociety (Beijing region). He is mainly engaged in the research of advanced robot theory and technology, including bionic structure,medical robot, service robot and so on. Mr. Wang has won two second-class awards of National Science and Technology ProgressAward and one first-class award of Beijing Science and Technology Progress Award. He is also an independent director of ShanghaiSTEP Electric Corporation.Ms. Wang Kun:

Ms. Wang, Independent Director of the company. She serves as an associate professor in the School of Accounting, School ofEconomics and Management at Tsinghua University. She received her doctorate in Accounting from Hong Kong University ofScience and Technology and her bachelor's degree in Accounting from Nankai University. She joined the School of Accounting,School of Economics and Management at Tsinghua University in April 2003, and worked as a lecturer and associate professor. Sheserved as deputy director and senior researcher of the Research Center of Corporate Governance of Tsinghua University fromJanuary 2010. Ms. Wang served as the Ph. D. program director of the Accounting Department of the School of Economics andManagement of Tsinghua University from January 2011 to December 2013. She has won the Excellence in Teaching Award of theSchool of Economics and Management of Tsinghua University for several times. Ms. Wang is also an Independent Director of ChinaInternational Futures Co., Ltd. Ms. Wang used to be the Independent Director of Beijing Thunisoft Co., Ltd. and IntegratedElectronic Systems Lab Co., Ltd. Ms. Wang has rich experience in the fields of finance and auditing.

Supervisors:

Mr. Sun Hongbin:

Chairman of the Board of Supervisors. Bachelor in industrial automation from Shandong University. He used to serve as deputygeneral manager of the company, manager and director of the business department of China Electronics Import and export ShandongCorporation. Mr. Sun owns more than 30 years of working experience in marketing, and import & export business.

Ms. Xu Xiaofeng:

Employee Representative of the Board of Supervisors. Bachelor of Business Administration, China University of Petroleum.She graduated from the Zhengzhou University of Aeronautics, Electrical Technology Major. Ms. Xu joined the company in 2001,

and successively served as the assistant manager of the quality control department, the enterprise development department and theoperation department, and is now in charge of the company's employee service center. Ms. Xu has rich experience in businessmanagement.

Mr. Wei Wenbin:

Employee Representative of the Board of Supervisors. Graduated from Jilin University majoring in material forming and controlengineering, he is currently in charge of the staff management department of the company. Mr. Wei joined the company in 2004, andsuccessively served as the head of the company's production and operation management department, human resources managementdepartment, lean manufacturing management department and other related departments.Senior Management:

Mr. Jiang Long:

Refer to the resume above for details.

Mr. Duan Huilu:

Refer to the resume above for details.

Mr. Gao Xiaoguang:

Vice President of the company. Master's Degree in business administration from Southern Cross University in Australia. Hejoined the company in 2001, and successively served as manager of the device marketing department, deputy manager of the devicemarketing department, general manager of the device business department and head of the marketing. He has rich experience inmarket developing and key client maintaining.

Mr. Liu Chunfa:

Vice President of the company. Mr. Liu graduated from Lanzhou Railway Institute. He successively served as engineer of R &D department, chief of quality assurance department, assistant manager, technical manager of technical engineering department,senior product manager, head of manufacturing department, senior manager of R & D department, etc. Mr. Liu has rich experience inthe fields of electroacoustic components, especially in miniature loudspeakers and receivers.

Mr. Jiang Hongzhai:

Vice President of the company. Mr. Jiang graduated from Shandong College of Information Technology.. Joined the companyin 2006, Mr. Jiang is mainly responsible for the management of mold, injection molding, stamping and so on. Mr. Jiang used to serveas factory director of Yuefeng Electronic Technology (Dongguan) Co., Ltd., and engineer of Weifang Radio Eighth Factory. Mr.Jiang has more than 20 years of technical management experience in the field of precision machining.

Mr. Jia Junan:

Vice President and the Secretary of the Board. Ph.D in Economics, Xiamen University, Master of Economics, ShandongUniversity, Bachelor of Economics, Shandong University of Finance and Economics. Mr. Jia is the member of the Chinese Instituteof Certified Public Accountants(CICPA)and the Association of Chartered Certified Accountants(ACCA). Mr. Jia joined thecompany in 2010 and served as deputy general manager of financial department. He used to serve as the tax manager of KPMGEnterprise Consulting (China) Co., Ltd., Qingdao Branch. Mr. Jia holds the Certificate for Secretary of the Board of Directors, andhis qualification complies with relevant provisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange and theArticles of Association.

Mr. Yu Dachao:

Vice President of the company. Bachelor's in computer science and engineering, Tianjin University of Technology. He was incharge of the company's Bluetooth headsets, active 3D glasses and accessories for household video games. He has rich experience inthe R&D and manufacturing of electronic accessories.

Mr. Kazuyoshi Yoshinaga:

Vice President of the company. Japanese. He holds a master's degree in business administration from University of Washingtonand a bachelor's degree in mechanics from Tongji University. He used to be the associate partner of IBM and has extensiveexperience in the field of strategy and transformation management. He also serves as deputy secretary-general of the China VirtualReality Industry Association.

Mr. Li Yongzhi:

Chief Financial Officer of the company and the Head of the Accounting Office. Mr. Li holds a bachelor's degree in managementand a master's degree in business management from Hefei University of Technology. He joined Goertek in 2005 and successivelyserved as accountant and financial manager of the financial department. Mr. Li is senior accountant and certified managementaccountant(CMA), with more than 15 years of experience in corporate finance. After deliberation and approval by the 14th meetingof the fifth Board of Directors, he was appointed as the Chief Financial Officer of the company. His term of office begins from theapproval date of Board of Directors to the expiration date of the current Board of Directors’ term of office.

Mr. Li Youbo:

Vice President of the company. Mr. Li holds a bachelor's degree in automation from Dalian University of Technology. Hejoined the company in 2003 and successively served as engineer, technical manager, head of the business department, etc. Mr. Li hasnearly 20 years of experience in R&D and manufacturing of electroacoustic components.

Mr. Zhu Shengbo:

Vice President of the company. Mr. Zhu graduated from Shenyang University of Technology. He joined the company in 2005and successively served as production manager, assistant minister, minister, senior minister and head of the business department. He

used to serve as production director of Dongguan Samsung Electro-Mechanics Co., Ltd. Mr. Zhu has more than 20 years ofexperience in manufacturing, operation and management of consumer electronic products such as parts, accessories and devices.Positions held in shareholders’ entities

√ Applicable □ Not applicable

NameName of the shareholder entityPosition undertaken in shareholder entityTerm start dateTerm end dateReceive remuneration or allowance from shareholders’ entity (Yes/No)
Jiang BinGoertek Group Co., Ltd.ChairmanNovember 15, 2021November 14, 2024No
Jiang LongGoertek Group Co., Ltd.DirectorNovember 15, 2021November 14, 2024No
Duan HuiluGoertek Group Co., Ltd.DirectorNovember 15, 2021November 14, 2024No
Sun HongbinGoertek Group Co., Ltd.General ManagerNovember 15, 2021November 14, 2024Yes

Positions held in other entities

√ Applicable □ Not applicable

NameName of other entityPosition undertaken in other entityTerm start dateTerm end dateReceive remuneration or allowance from shareholders’ entity (Yes/No)
Jiang BinWeifang Goertek Electronics Co., Ltd.ChairmanNovember 23, 2019November 22, 2022No
Jiang BinBeijing Goertek Investment Management Co., Ltd.Executive DirectorJanuary 22, 2019January 21, 2022No
Jiang BinWeifang Goer Education Investment Co., Ltd.Executive DirectorMarch 22, 2019March 21, 2022No
Jiang LongRongcheng Goertek Technology Co., Ltd.Executive DirectorJuly 15, 2020July 14, 2023No
Jiang LongGoertek Technology Vina Company LimitedChairmanJanuary 31, 2019December 31, 2021No
Jiang LongGoertek Electronics, Inc.Executive DirectorMay 1, 2020April 30, 2023No
Jiang LongWeifang Goertek Electronics Co., Ltd.Director / General ManagerNovember 26, 2019November 25, 2022No
Jiang LongGoertek Technology Co., Ltd.Executive Director /December 10, 2021December 9, 2026No
General Manager
Jiang LongGoertek Intelligence Technology Co., Ltd.Executive Director / General ManagerAugust 18, 2020August 17, 2023No
Jiang LongGoertek Microelectronics Inc.ChairmanOctober 20, 2020October 30, 2023No
Jiang LongQingdao Goertek Intelligent Sensor Co., Ltd.Executive DirectorOctober 22, 2021October 21, 2024No
Jiang LongWeifang Goertek Microelectronics Co., Ltd.Executive DirectorDecember 9, 2019December 8, 2022No
Jiang LongShanghai Ganyuzhi Technology Co., Ltd.Executive DirectorOctober 14, 2020October 13, 2023No
Jiang LongBeijing Goertek Microelectronics Co., Ltd.Executive DirectorAugust 7, 2020August 6, 2023No
Jiang LongWuxi Goertek Microelectronics Co., Ltd.Executive DirectorAugust 7, 2020August 6, 2023No
Jiang LongShenzhen Goertek Microelectronics Co., Ltd.Executive DirectorJuly 23, 2020July 22, 2023No
Jiang LongRongcheng Goertek Microelectronics Co., Ltd.Executive DirectorNovember 1, 2021October 31, 2024No
Jiang LongQingdao Goertek Microelectronics Research Institute Co., Ltd.Executive DirectorNovember 30, 2020November 29, 2023No
Jiang LongEnkris Semiconductor Inc.DirectorNovember 18, 2021November 17, 2024No
Duan HuiluGoertek Technology Vina Company LimitedDirectorJanuary 31, 2019December 31, 2021No
Duan HuiluGoertek Technology Co., Ltd.SupervisorAugust 14, 2021August 13, 2024No
Duan HuiluGoertek Investment Co., Ltd.Executive Director / General ManagerDecember 7, 2015December 6, 2022No
Duan HuiluWeifang Goertek Electronics Co., Ltd.DirectorNovember 23, 2021November 22, 2024No
Duan HuiluWeifang Goertek Trading Co., Ltd.Executive Director / General ManagerAugust 26, 2020August 25, 2023No
Duan HuiluBeijing Goertek Investment Management Co., Ltd.SupervisorJanuary 22, 2019January 21, 2022No
Duan HuiluGoertek (HongKong) Co., LimitedDirectorApril 26, 2019April 25, 2022No
Duan HuiluQingdao Goertek Commercial Factoring Co., Ltd.Executive Director / General ManagerJanuary 11, 2021January 10, 2024No
Sun HongbinWeifang Hanhui Enterprise Management Co., Ltd.Executive DirectorSeptember 18, 2019September 17, 2022No
Sun HongbinWeifang Gaoge Education Investment Co., Ltd.Director / General ManagerSeptember 11, 2018February 3, 2021No
Sun HongbinWeifang Hanzhi Enterprise Management Co., Ltd.Executive DirectorOctober 11, 2017October 10, 2023No
Sun HongbinWeifang Goer Education Investment Co., Ltd.General ManagerMarch 22, 2019March 21, 2022No
Sun HongbinWeifang Goer Real Estate Co., LtdExecutive Director / General ManagerAugust 4, 2018August 3, 2024No
Sun HongbinQingdao Goer Real Estate Co., Ltd.Executive Director / General ManagerMay 29, 2017May 28, 2023No
Sun HongbinWeifang Goer Farm Co., Ltd.General ManagerSeptember 23, 2017September 22, 2023No
Sun HongbinWeifang Goer Manor Trading Co., Ltd.Executive DirectorJanuary 27, 2018January 26, 2024No
Sun HongbinWeifang Goer Property Service Co., LtdExecutive Director / General ManagerFebruary 23, 2018February 22, 2024No
Sun HongbinDotcom Ivestment Co., LtdExecutive Director / General ManagerJune 4, 2015December 24, 2021No
Sun HongbinWeifang GoerHome Decoration Engineering Co., LtdExecutive Director / General ManagerApril 9, 2017July 14, 2021No
Sun HongbinShandong Goer Education Group Co., Ltd.General ManagerJanuary 3, 2020January 2, 2023No
Sun HongbinBeihang Goer (Weifang) Intelligent Robot Co., LtdDirector / General ManagerJanuary 22, 2019August 31, 2021No
Sun HongbinGoerTek Group International LimitedExecutive DirectorAugust 13, 2018No
Liu ChunfaGoertek Vina Co., Ltd.DirectorJanuary 1, 2019December 31, 2021No
Liu ChunfaGoertek Technology Vina Company LimitedDirectorJanuary 31, 2019December 31, 2021No
Liu ChunfaShanghai Goertek Technology Co., Ltd.SupervisorApril 25, 2020April 24, 2023No
Jiang HongzhaiYili Precision Manufacturing Co., Ltd.Executive DirectorJuly 5, 2019July 4, 2022No
Jiang HongzhaiWeifang Goertek Communication Technology Co., Ltd.Executive DirectorJune 26, 2021June 25, 2024No
Jiang HongzhaiDongguan JoyForce Precision Manufacturing Co., Ltd.Executive DirectorDecember 11, 2019December 10, 2022No
Jiang HongzhaiKunshan Goertek Electronics Co., Ltd.Executive DirectorNovember 9, 2020November 8, 2023No
Jiang HongzhaiNanning Goertek Electronics Co., Ltd.ChairmanNovember 12, 2021November 11, 2024No
Jiang HongzhaiNanning Goertek Trading Co., Ltd.ChairmanNovember 29, 2021November 28, 2024No
Yu DachaoBeijing Goertek Technology Co., Ltd.Executive Director / General ManagerNovember 30, 2019November 29, 2022No
Yu DachaoXian Goertek Electronic Technology Co., Ltd.Executive DirectorMay 7, 2019May 6, 2022No
Yu DachaoQingdao Goertek Acoustics Technology Co., Ltd.Executive Director / General ManagerDecember 10, 2021December 9, 2024No
Yu DachaoYishui TECO Electronic Technology Co., Ltd.Chairman / General ManagerDecember 10, 2019December 9, 2022No
Yu DachaoGoertek Technology Vina Company LimitedDirectorJanuary 31, 2021January 30, 2024No
Gao XiaoguangYishui Goertek Electronics Co., Ltd.Executive Director / GeneralFebruary 13, 2021February 12, 2024No
Manager
Gao XiaoguangShenzhen Goertek Technology Co., Ltd.Executive Director / General ManagerOctober 29, 2021October 28, 2024No
Gao XiaoguangShanghai Goertek Technology Co., Ltd.Executive DirectorApril 25, 2020April 24, 2023No
Gao XiaoguangGoertek Electronics, Inc.ManagerDecember 19, 2018December 18, 2021No
Gao XiaoguangAKM Industrial Company LimitedNon-executive directorMarch 12, 2015No
Jia Jun'anGoertek Investment Co., Ltd.SupervisorDecember 7, 2021December 6, 2024No
Jia Jun'anWeifang Goertek Electronics Co., Ltd.SupervisorNovember 26, 2019November 25, 2022No
Jia Jun'anAKM Industrial Company LimitedNon-executive directorNovember 17, 2015No
Li YongzhiGoertek Optical Technology Co., Ltd.SupervisorMarch 23, 2021March 22, 2024No
Li YongzhiGoertek Intelligence Technology Co., Ltd.SupervisorAugust 18, 2020August 17, 2023No
Li YongzhiKunshan Goertek Electronics Co., Ltd.SupervisorNovember 9, 2020November 8, 2023No
Li YongzhiQingdao Goertek Commercial Factoring Co., Ltd.SupervisorJanuary 11, 2021January 10, 2024No
Li YongzhiNanning Goertek Electronics Co., Ltd.SupervisorNovember 12, 2021November 11, 2024No
Li YongzhiNanning Goertek Trading Co., Ltd.SupervisorNovember 29, 2021November 28, 2024No
Li YongzhiXian Goertek Electronic Technology Co., Ltd.SupervisorMay 7, 2019May 6, 2022No
Li YongzhiYishui TECO Electronic Technology Co., Ltd.SupervisorDecember 10, 2019December 9, 2022No
Li YongzhiRongcheng Goertek Technology Co., Ltd.SupervisorJuly 15, 2020July 14, 2023No
Li YongzhiGoertek Technology Vina Company LimitedSupervisorJanuary 31, 2019January 30, 2022No
Li YongzhiGoertek Microelectronics Inc.DirectorDecember 23, 2020December 22, 2023No
Kazuyoshi YoshinagaGoertek Vina Co., LtdGeneral ManagerDecember 20, 2021No
KazuyoshiGoertek Technology Vina CompanyGeneralSeptember 1, 2021No
YoshinagaLimitedManager
Kazuyoshi YoshinagaGoertek Precision Industry Vietnam Company LimitedGeneral ManagerSeptember 1, 2021No
Li YouboShanghai Goertek Technology Co., Ltd.General ManagerJuly 23, 2020July 22, 2023No
Zhu ShengboNanning Goertek Electronics Co., Ltd.DirectorNovember 12, 2021November 11, 2024No
Zhu ShengboNanning Goertek Trading Co., Ltd.DirectorNovember 29, 2021November 28, 2024No
Zhu ShengboGoertek Vina Co., LtdChairmanJanuary 1, 2019December 31, 2021No
Zhu ShengboGoertek Technology Vina Company LimitedDirectorJanuary 31, 2019January 30, 2022No
Zhu ShengboGoertek Precision Industry Vietnam Company LimitedExecutive DirectorOctober 30, 2020October 29, 2025No
Zhu ShengboGoertek Technology (Hong Kong)Co., Ltd.Executive DirectorAugust 7, 2020No
Wei WenbinWeifang Goertek Communication Technology Co., Ltd.General ManagerJune 26, 2021June 25, 2024No
Description of incumbency in other unitsNone

Penalties imposed by securities regulatory authorities on current and outgoing directors, supervisors and senior management of thecompany in the past three years

□ Applicable √ Not applicable

3. Remuneration of Directors, Supervisors and Senior Management

The decision-making procedure, basis and actual payment of the remuneration of directors, supervisors and senior managementThe remuneration plan of directors and supervisors of the company shall be formulated by the remuneration and assessmentcommittee of the Board of Directors, which shall be approved by the Board of Directors and submitted to the general meeting ofshareholders for approval before implementation.The remuneration standard for senior management shall be formulated by the remuneration and assessment committee, andimplemented after approval by the Board of Directors. Allowances for independent directors shall be paid on a regular basis.Remuneration of directors, supervisors and senior management during reporting period

Unit: RMB 10,000

NamePositionGenderAgeAppointment statusThe total amount of pre-tax remuneration received from theWhether to get paid by the related party of the company
company
Jiang BinChairmanMale56Incumbent180No
Jiang LongVice Chairman, PresidentMale48Incumbent180No
Xia ShanhongDirectorFemale64Incumbent18No
Wang KunIndependent DirectorFemale46Incumbent18No
Sun HongbinChairman of Board of SupervisorsMale56Incumbent0Yes
Feng JianliangEmployee Representative SupervisorMale48Resigned15No
Xu XiaofengEmployee representative SupervisorFemale45Incumbent45No
Duan HuiluDirector, Vice PresidentMale46Incumbent120No
Gao XiaoguangVice PresidentMale46Incumbent120No
Liu ChunfaVice PresidentMale46Incumbent120No
Jiang HongzhaiVice PresidentMale52Incumbent120No
Jia Jun'anVice President, Secretary of the BoardMale51Incumbent120No
Feng PengboVice PresidentMale54Resigned83No
Yu DachaoVice PresidentMale44Incumbent120No
Kazuyoshi YoshinagaVice PresidentMale55Incumbent120No
Liu ChengminDirectorMale51Incumbent18No
Wang TianmiaoIndependent DirectorMale62Incumbent18No
Li YongzhiChief Financial OfficerMale44Incumbent110No
Wei WenbinEmployee representative SupervisorMale44Incumbent30No
Li YouboVice PresidentMale45Incumbent70No
Zhu ShengboVice PresidentMale48Incumbent70No
Total--------1,695--

VI. Performance of Directors' Duties during the Reporting Period

1. Board of Directors

SessionConvening dateDisclosure dateMeeting resolution
The 13th meeting of the 5th Board of DirectorsJanuary 15, 2021January 16, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 16 January 2021(Announcement No 2021-002)
The 14th meeting of the 5th Board of DirectorsJanuary 27, 2021January 28, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 28 January 2021(Announcement No 2021-012)
The 15th meeting of the 5th Board of DirectorsJanuary 29, 2021January 30, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 30 January 2021(Announcement No 2021-018)
The 16th meeting of the 5th Board of DirectorsFebruary 9, 2021February 10, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 10 February 2021(Announcement No 2021-031)
The 17th meeting of the 5th Board of DirectorsMarch 1, 2021March 2, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 2 March 2021(Announcement No 2021-044)
The 18th meeting of the 5th Board of DirectorsMarch 26, 2021March 27, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 27 March 2021(Announcement No 2021-050)
The 19th meeting of the 5th Board of DirectorsApril 16, 2021April 17, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 17 April 2021(Announcement No 2021-068)
The 20th meeting of the 5th Board of DirectorsApril 21, 2021April 22, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 22 April 2021(Announcement No 2021-074)
The 21st meeting of the 5th Board of DirectorsJune 2, 2021June 3, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 3 June 2021(Announcement No 2021-088)
The 22nd meeting of the 5th Board of DirectorsAugust 26, 2021August 27, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 27 August 2021(Announcement No 2021-100)
The 23rd meeting of the 5th Board of DirectorsOctober 26, 2021The board approved: Proposal on the examination of "Goertek Quarterly Report in Q3 2021”
SessionConvening dateDisclosure dateMeeting resolution
The 24th meeting of the 5th Board of DirectorsNovember 8, 2021November 9, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 8 November 2021(Announcement No 2021-116)
The 25th meeting of the 5th Board of DirectorsNovember 30, 2021December 1, 2021Resolutions were disclosed by the Company on Cninfo (www.cninfo.com.cn) and the four designated newspapers on 1 December 2021(Announcement No 2021-127)

2. Directors’ attendance at Board of Directors and general meeting of shareholders

Directors’ attendance at Board of Directors and general meeting of shareholders
NameNumber of Attendance required during the reporting period (times)Attendance in person (times)Attendance by Tele-communication (times)Entrusted presence (times)Absence (times)Whether there is absence in person for two consecutive timesAttendance of the general meeting of shareholders (times)
Jiang Bin1312100No3
Jiang Long1311200No2
Duan Huilu1313000No3
Xia Shanhong1311200No1
Wang Tianmiao1311200No1
Liu Chengmin1311020Yes2
Wang Kun1311200No3

Statement on failure to attend the Board of Directors for two consecutive timesDue to the Corona Virus Disease, director Liu Chengmin was unable to personally attend the 16th meeting of the 5th Board ofDirectors and the 17th meeting of the 5th Board of Directors, and delegated director Duan Huilu and independent director Wang Kunto vote respectively.

3. Objections raised by directors to relevant matters of the Company

Whether directors raise any objection to relevant matters of the Company

□ Yes √ No

No objection was raised to relevant matters of the Company during the reporting period.

4. Other details on the performance of duties by directors

Whether proposals made by directors were adopted by the Company

√ Yes □ No

Statement on the adoption or non-adoption of proposals made by the directors

During the reporting period, the directors of the Company carried out work in strict accordance with Company Law, SecuritiesLaw, Corporate Governance of Listed Companies, Rules Governing the Listing of Shares on Shenzhen Stock Exchange,Self-Regulatory Directives No.1 for Listed Companies on the Shenzhen Stock Exchange - Normative Operation of Listed Companieson the Main Board, Articles of Association and Rules of Procedure of the Board of Directors. They fulfilled their duty of duediligence by forming a consensus after full discussion on major governance and business matters of the Company, and resolutelysupervising and driving the implementation of the board resolution, so as to ensure the decision-making process being scientific,

timely and efficient, play a positive role in the sustained, healthy and stable development of the Company, and effectively safeguardthe legitimate rights and interests of the Company and all shareholders.

VII. Performance of Special Committees under the Board of Directors during the Reporting Period

Committee nameMembersNumber of meetings heldConvening dateMeeting contentImportant opinions and suggestions proposedPerformance of other dutiesSpecific objections (if any)
Audit committeeWang Kun, Jiang Bin, Xia Shanhong5January 25, 2021The audit committee approved: 1.Special Audit Report on the Deposit and Use of Funds Raised in Q4 2020; 2. Inspection Report on Related Transactions and Guarantees of the Company in Q4 2020; 3. Internal Audit Work Report of 2020; 4. Internal Audit Work Plan of 2021; 5. Proposal on Nominating Mr. Du Lanzhen as Head of Internal AuditApproved
March 26, 2021The audit committee approved: 1. Proposal on Approving of Financial Accounts of 2020; 2. Proposal on Approving of Financial Report and Abstract of 2020; 3. Proposal on Approving of Self-assessment Report on Internal Control of 2020; 4. Proposal on the Re-appointment of the Accounting Firm; 5. Report on the Audit Work of the Accounting Firm of 2020; 6. Report on the Performance of the Audit Committee of the Board of Directors in 2020Approved
April 21, 2021The audit committee approved: 1. Proposal on Approving of Quarterly Report of the Company in Q1 2021 and Abstract of the Quarterly Report of the Company in Q1 2021; 2. Inspection Report on Related Transactions and Guarantees in Q1 2021; 3. Internal Audit Work Report in Q1 2021Approved
August 26, 2021The audit committee approved: 1.Proposal on approving of Interim Report of 2021 and Abstract of Interim Report of 2021; 2. Special Audit Report on the Deposit and Use of Raised FundsApproved
Committee nameMembersNumber of meetings heldConvening dateMeeting contentImportant opinions and suggestions proposedPerformance of other dutiesSpecific objections (if any)
in the Semiannual Period of 2021; 3. Inspection Report on Related Transactions and Guarantees of the Company in Q2 2021; 4. Internal Audit Work Report in Q2 2021
October 26, 2021The audit committee approved: 1. Proposal on Approving of Quarterly Report in Q3 2021 and Abstract of Quarterly Report in Q3 2021; 2. Inspection Report on Related Transactions and Guarantees in Q3 2021; 3. Internal Audit Work Report in Q3 2021; 4. Special Audit Report on the Deposit and Use of Funds raised in Q3 2021Approved
Remuneration and assessment committeeJiang Bin, Xia Shanhong, Wang Tianmiao3January 22, 2021The remuneration and assessment committee approved: Proposal on the Remuneration of the Chief Financial OfficerApproved
April 13, 2021The remuneration and assessment committee approved: 1. Proposal on approving of Goertek Home No 5 Employee Stock Ownership Plan (Draft); 2. Proposal on approving of Administrative Measures of Goertek Home No 5 ESOP; 3. Proposal on approving of Stock Option Incentive Plan of Goertek of 2021 (Draft); 4. Proposal on approving of Measures for the Examination and Administration of the Implementation of the Goertek Stock Option Incentive Plan of 2021Approved
May 31, 2021The remuneration and assessment approved: Proposal on the Remuneration of Vice PresidentApproved

VIII. Performance of the Board of Supervisors

Whether the Board of Supervisors found out any risk of the Company in its supervision activities during the reporting period.

□ Yes √ No

The Board of Supervisors has no objection to the matters supervised during the reporting period.

IX. Personnel of the Company

1. Number of staff, specialty composition and educational level

Number of staff of the parent company at the end of the Reporting Period37,319
Number of Staff of major subsidiaries at the end of the Reporting Period58,461
Total number of staff at the end of the Reporting Period95,780
Total number of staff who receive remuneration during the Reporting Period95,780
Number of retired staff the Company and its major subsidiaries are required to compensate0
Specialty composition
CategoryNumber
Production staff69,815
Sales staff670
Technical staff19,753
Financial staff306
Administrative staff5,236
Total95,780
Educational level
CategoryNumber
PhD78
Postgraduate3,435
Undergraduate16,170
College degree18,823
Below College degree57,274
Total95,780

2. Remuneration policy

Goertek continued to put emphasis on the attraction, motivation and retention of talents, implemented competitive incentivepolicies on salary and welfare, and fulfilled the cultural concept of “we make, we share, we grow”.

Facing COVID-19 and economic challenges, the Company still steadily applied employee promotion and salary adjustment planto raise the salary level of employees. The Company also implemented special remuneration policies for core positions and talents

that support the development of strategic business, so as to effectively attract and retain talents, enrich the Company’s talent pool andimprove the quality and quantity of talents. In terms of incentive policy, through the issuance of ESOPs and new stock option plans,more and more core employees can share the fruit of company growth. The cohesion of the management team and the key staffs hasbeen effectively enhanced. In addition to material incentives, the Company fully investigated in the demands of employees, strived tobuild welfare system with its own characteristics, made full use of related resources, and cared for employees in an all-round way byproviding diversified benefits in children's education, house ownership, health security, and convenient life.

3. Training programmes

In 2021, the Human Resources Management Department followed Goertek's strategy and business development requirements,improved its all-category, full-field and whole-process talent training system, carried out diversified learning and training activities,strengthened the construction of a learning organization and promoted organizational performance. Along with the business reform,after a year of construction of the training system and intensive cultivation of the project, the Company further improved the trainingorganization, operation and management system for all staffs covering cadres, technical personnel, professionals and newemployees ,Wing Project of Goertek, thus helping the Company to achieve business objectives.In 2022, the Company will focus on building a global training management center and further reforming talent training mode.The Company will increase investment in the strengthening of talents training capacity, policy management, training developmentand resource management and make substantial breakthroughs in teacher recruitment, curriculum management, organization-relatedknowledge management, informatization and digitalization of training and so on, so as to helping the Company to become a leader inthe construction of leadership college, engineering college, new employee training college and professional development college.That’s how the Company achieves its cultural concept of “we make, we share, we grow”, and its mission of a better life enriched bytechnology.

4. Labor outsourcing

□ Applicable √ Not applicable

X. Profit Distribution and Conversion of Capital Reserves into Share CapitalFormulation, execution or adjustment of profit distribution policy, especially the cash dividend during the Reporting Period

√ Applicable □ Not applicable

The Company has strictly implemented the Shareholder Return Plan for the Next Three Years (2019-2021), and clarifies thestandard, ratio, and the decision making procedures of the distribution policy, which ensures the continuity and stability of the profitdistribution policy, in order to fully protect the legitimate rights and interests of minority investors. In addition, the Company has

conducted share repurchase in 2021. In accordance with the requirements of Company Law, Rules Governing the Listing of Shares onShenzhen Stock Exchange and Implementation Rules of Shenzhen Stock Exchange on the Share Repurchase of Listed Companies: theshares repurchased can be regarded as the amount of cash dividends and shall be included in the relevant calculation of cashdividends proportion of the year.

Special description of the cash dividend policy
Whether in compliance with provisions in the Articles of Association or requirements of the resolution of the extraordinary general meeting of shareholders:Yes
Whether the dividend standard and the proportion are definite and clear:Yes
Whether the related decision-making procedures and mechanisms are complete:Yes
Whether independent directors perform their duties responsibly and play their due roles:Yes
Whether minority shareholders have the opportunity to fully express their opinions and demands and their legitimate rights and interests are fully protected:Yes
Whether the conditions and procedures are transparent and comply with regulations while the cash dividend policy is adjusted or changed:The cash dividend policy has not been adjusted.

The profits of Goertek in the Reporting Period and the parent company's profits distributable to shareholders are positive, but theCompany did not put forward a proposed plan for cash dividend distribution.

□ Applicable √ Not applicable

Profit distribution and conversion of capital reserves into share capital during the reporting period.

√ Applicable □ Not applicable

Number of bonus shares per 10 shares0
Dividend per 10 shares (RMB) (tax inclusive)2.00
Conversion of capital reserves into share capital per 10 shares (shares)0
Shares base of the distribution proposal(shares)3,342,055,585
Cash dividend amount (RMB) (tax inclusive)668,411,117.00
Cash dividend amount distributed by other means (such as shares repurchase) (RMB)1,999,998,595.63
Total cash dividends (including other means) (RMB)2,668,409,712.63
Distributable profit (RMB)15,372,823,358.48
Proportion of total cash dividends (including other means) in total profit distribution100%
Cash dividends
If the Company is in developing stage, and there are major capital expenditure arrangements, the minimum proportion of cash dividends in profit distribution should reach 20%.
Detailed description of the proposal for profit distribution or capitalization from capital reserve funds
According to the standard unqualified opinion audit report issued by ZHONGXI CPAs (Special General Partnership) for Goertek,

XI. Equity Incentive Plan, Employee Stock Ownership Plan or Other Employee Incentives

√ Applicable □ Not applicable

1. Equity incentive

Stock Option Incentive Plan in 2021(hereinafter referred to as “the Incentive Plan”):

On April 16, 2021, Goertek convened the 19th meeting of the 5th Board of Directors, which approved Proposal of 2021 StockOption Incentive Plan of Goertek Inc. (Draft) and the Summary, Proposal of Rules on the Implementation and Assessment of 2021Stock Option Incentive Plan, and Proposal of Requesting the General Meeting of Shareholders to Authorize the Board of Directors toHandle Matters Relevant to 2021 Stock Option Incentive Plan. The 14th meeting of the 5th Board of Supervisors approved relevantproposals, reviewed the list of participants awarded for the first time, and expressed the review opinions. Independent directors of theCompany expressed their agreed opinions on the Incentive Plan independently.

On April 17, 2021, Goertek disclosed the List of Participants Awarded for the First Time of the Incentive Plan on the websitehttp//:www.cninfo.com.cn. The Company publicized the names and positions of these participants from April 20 to April 29, 2021.During the publicity period, the Supervisors did not receive any objections, and no feedback was recorded. On April 30, 2021, theCompany disclosed the Result of Review by the Board of Supervisors on the List of Participants Awarded for the First Time of 2021Share Option Incentive Plan. On May 8, 2021, the Company disclosed Self-examination Report on the Trading of Shares by Insidersof the 2021 Share Option Incentive Plan.

On May 7, 2021, the proposals mentioned above were approved on the annual general meeting of 2020. The Board of Directorswere authorized to handle relevant matters regarding the Incentive Plan.

On June 2, 2021, Goertek convened the 21st meeting of the 5th Board of Directors and the 16th meeting of the 5th Board ofSupervisors. Proposal of the Adjustment of Participants Awarded for the First Time of the 2021 Share Option Incentive Plan,Number of Stock Options and Exercise Price, and the Proposal of Resolution of Grant Stock Options to the Participants wereapproved. The Board of Supervisors expressed the results of review on the list of incentive participant. Independent Directorsexpressed their agreed opinions on relevant matters independently. Beijing Tian Yuan Law Firm issued the Legal Opinions of BeijingTian Yuan Law Firm on Relevant Matters Regarding the Adjustment and First Grant of the 2021 Share Option Incentive Plan.

On June 24, 2021, Goertek completed the registration of the 2021 Incentive Plan.Stock options granted to Directors and senior management

□ Applicable √ Not applicable

The Appraisal and incentive mechanism for senior management

The remuneration plan of directors and supervisors of the company shall be formulated by the remuneration and assessmentcommittee of the Board of Directors, which shall be approved by the Board of Directors and submitted to the general meeting ofshareholders for approval before implementation. The remuneration standard for senior management shall be formulated by theremuneration and assessment committee, and implemented after approval by the Board of Directors.

2. Implementation of employee stock ownership plan

√ Applicable □ Not applicable

All valid employee stock ownership plans during the reporting period

ParticipantsNumberTotal shares heldChangesShareholding percentageSource of funds
Goertek Home No. 3 ESOP: part of Directors, Supervisors, senior management, key management personnel, and key business personnel1,6001,349,600None0.04%self-raised
Goertek Home No. 4 ESOP: Directors (excluding Independent Directors), Supervisors, senior management, key management personnel and key business personnel4,00020,539,684None0.60%n.a.
Goertek Home No. 5 ESOP: Directors (excluding Independent Directors), Supervisors, senior management, key management personnel and key business personnel2511,000,000None0.32%self-raised

Total shares held of Directors, Supervisors and senior management in ESOPs during the reporting period

NamePositionNumber of shares held at the beginning of the reporting periodNumber of shares held at the end of the reporting period at the beginning of the reporting periodShareholding percentage
Duan Huilu, Feng Jianliang,Directors,8,036,5513,289,0000.10%
Xu Xiaofeng, Wei Wenbin, Gao Xiaoguang, Liu Chunfa, Jiang Hongzhai, Jia Jun’an, Feng Pengbo, Yu Dachao, Yoshinaga Kazuyoshi, Li Yongzhi, Li Youbo, Zhu ShengboSupervisors, senior management

Changes of Asset Management Agency during the reporting period

□ Applicable √ Not applicable

Changes in shareholders' equity caused by shares disposal of the participants and other reasons during the reporting period

√ Applicable □ Not applicable

During the reporting period, the Goertek Home No. 3 ESOP, and Home No. 4 ESOP after the expiration of the lock-up period,sold part of shares in accordance with relevant regulations. By the end of the reporting period, Goertek's Home No. 3 ESOP held

1.3496 million shares, shareholding percentage was 0.04%, while the Home No. 4 ESOP held 20.5397 million shares, shareholdingpercentage was 0.60%. The Home No. 5 ESOP held 11 million shares, shareholding percentage was 0.32%.Exercise of shareholders' rights during the reporting period

During the reporting period, the ESOPs exercised the shareholders' rights to participate in cash dividend of 2020, but did notparticipate in voting of the general meeting of shareholders or exercise other shareholders' rights.Other relevant situations and descriptions related to ESOPs during the reporting period

□ Applicable √ Not applicable

Changes in members of the Management Committee of the ESOPs

□ Applicable √ Not applicable

Financial impacts of the ESOPs during the reporting period and relevant accounting treatment

√ Applicable □ Not applicable

In accordance with the Accounting Standard for Business Enterprises No.11 - Share-based Payments: if an equity-settledshare-based payment in exchange for services received from employees could not exercise until the completion of services for avesting period, or until the achievement of a specified performance condition, Goertek at each balance sheet date during the vestingperiod recognizes the services received for the current period as related costs or expenses, and capital reserve, at amount equal to thefair value of the equity instruments at the grant date, based on the best estimate of the number of equity instruments expected toexercise. The expenses amortization of the Goertek Home No. 4 ESOP and the Goertek Home No. 5 ESOP in 2021 is RMB

422.8195 million and RMB 111.0332 million respectively, which is recognized as related expenses and capital reserve.Termination of ESOP during the reporting period

□ Applicable √ Not applicable

Explanation on Other MattersNone

3. Other employee incentive measures

□ Applicable √ Not applicable

XII. Construction and implementation of the Company’s Internal Control System During theReporting Period

1. Construction and implementation of internal control

During the reporting period, in order to ensure the development of business activities and the realization of Goertek's strategicgoals, Goertek attached great importance to the construction of internal control system. We gradually established a basic compliance,sound and effective internal control system covering all aspects of operation and management in accordance with the industry andasset structure characteristics.

(1) Internal supervision

The Company has established the Internal Audit System, and has set up an independent internal audit department, which isresponsible for internal audit work, the audit and efficiency supervision of financial revenue, expenditure, the implementation offinancial system, the Company’s rules and regulations. The internal audit department also responsible for making proposals on theimprovement of the Company's internal control system.

Under the direct leadership of the Audit Committee, the audit department independently carries out internal audit andsupervision, supervising the operation and management, financial condition and internal control implementation of the Companyand its subsidiaries. Besides, the audit department issues independent audit opinions, and regularly reports summaries and workingplans to the Audit Committee.

(2) Risk assessment

In combination with characteristics of the industry and actual operating status, the Company timely assesses internal andexternal risks such as environmental risk, business risk and financial risk, weighs the risk and return according to the results of riskanalysis and risk tolerance, determines strategies, and practically makes the risk controllable.

(3) Control activities

The Company constantly implements the workings of internal control in all kinds of business processes, conducts variousinternal controls, avoids the mere formality of internal policies and regulations, and improves the effectiveness and soundness ofinternal control.

(4) Information disclosure

The Company formulated the Information Disclosure Policy, the Accountability System Regarding Major Errors in the AnnualReport Information Disclosure and the Policy on Management of the Personnel with Inside Information. According to the

requirements of relevant laws and regulations, the Policy on Management of the Personnel with Inside Information has been revisedin time, which has detailed the scope of inside information and related personnel, and the administrative measures on registration ofpersonnel with inside information in material matters. The Company's information disclosure in 2021 complied with the relevantlaws and regulations of the regulatory authorities and the provisions of the above-mentioned control system.

2. Details of material defects of internal control detected during the Reporting Period

□ Yes √ No

XIII. Management and controls of subsidiaries during the Reporting PeriodNot applicableXIV. Self-assessment Report on Internal Control or Audit Report on Internal Control

1. Self-assessment on internal control

Disclosure date of the Internal Control Self-assessment ReportMarch 30, 2022
Disclosure index of the Internal Control Self-assessment ReportDisclosed on www.cninfo.com.cn on March 30, 2022
Proportion of the total assets of entities included in the assessment scope to the total assets of the Company’s consolidated financial statements100.00%
Proportion of the total revenue of entities included in the assessment scope to the total revenue of the Company’s consolidated financial statements100.00%
Defect Identification Standard
CategoryFinancial reportNon-financial report
Qualitative criteriaThe qualitative standard of the assessment of internal control defects in financial reporting are as follows: Signs of material defects in financial reporting include: (1) Fraud of directors, supervisors and senior management on the financial report; (2) Corrections of previously disclosed financialThe qualitative standard of the assessment of internal control defects in non-financial reporting determined by Goertek are as follows: The identification of defects in non-financial report is mainly determined by the impact of defects on the effectiveness of business processes and the possibility of
reports; (3) Material misstatement of current period financial statements identified by certified public accountant but not identified by the Company’s internal control; (4) Ineffective supervision on the financial statements by the audit committee and the internal audit department. Signs of important defects in financial reporting include: (1) Failure to select and apply accounting policies in accordance with Generally Accepted Accounting Principles; (2) No anti-fraud procedures and control measures have been established; (3) No corresponding control mechanism has been established or implemented for the accounting treatment of unconventional or special transactions, and there is no corresponding compensatory control; (4) One or more defects is or are existing in the control of the financial reporting process, that the prepared financial statements cannot be reasonably guaranteed to be true and complete. General defects: other internal control defects.occurrence. If the possibility of defect occurrence is low, and the defect will reduce the efficiency and effectiveness of work, or increase the uncertainty of the effectiveness, or make it deviate from the expected goal, it is a general defect. If the possibility of defect occurrence is relatively high, and the defect will significantly reduce the efficiency or effectiveness of work, or significantly increase the uncertainty of the effectiveness, or make it significantly deviate from the expected goal, it is an important defect. If the possibility of defect occurrence is high, and the defect will seriously reduce the efficiency or effectiveness of work, or seriously increase the uncertainty of the effectiveness, or make it seriously deviate from the expected goal, it is a material defect
Quantitative criteria(2) If one of the following conditions is met, it may be recognized as an important defect:The quantitative standard of the assessment of internal control defects in non-financial reporting is in accordance with the quantitative standard of defects in financial reporting.
ItemImpact of defects
Potential misstatement of total profit3%≤misstatement <5%
Potential misstatement of total assets0.5≤misstatement <1%
Potential misstatement of revenue0.5≤misstatement <1%

(3) If one of the following conditions is met, it may be

recognized as a minor defect:

Number of material defects in financial reporting0
Number of material defects in non-financial reporting0
Number of important defects in financial reporting0
Number of important defects in non-financial reporting0

2. Audit Report on internal control

□ Applicable √ Not applicable

Audit Opinion in Audit Report on Internal Control
In our opinion, the Company has maintained effective internal control of financial reports in accordance with the Basic Rules for Internal Control of Enterprises as of 31 December 2021.
Disclosure of the Audit Report on Internal ControlDisclosed
Disclosure date of the Audit ReportMarch 30, 2022
on Internal Control
Disclosure index of the Audit Report on Internal Controlwww.cninfo.com.cn, March 30, 2022
Type of internal control audit report opinionsstandard unqualified opinion
Material defects found in non-financial reportingNo

Whether the Auditor set out the Audit Report on internal control with any opinions of non-standardization.

□ Yes √ No

Whether the Audit Report on internal control is consistent with the Self-assessment Report on internal control opinion.

√ Yes □ No

XV. Rectification of Problems Identified by Self-examination in the Special Actions onGovernance of Listed Companies

Not applicable

Section V Environmental and social responsibilitiesI. Major Environmental Issues

Whether the listed company or its subsidiaries are entities with pollutant discharges announced by local environmental protectionauthorities

√ Yes □ No

Name of the Company or subsidiariesType of major pollutants and name of particular pollutantsType of dischargeNumber of discharging portsLocations of discharging portsConcentration of pollutant dischargedEnforced standards of pollutant concentrationTotal discharge volumeTotal approved discharge volumeDischarge exceeding the standard
Goertek Inc.Hazardous wasteIndirect dischargeNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNone
Yili Precision Manufacturing Co., Ltd.COD; ammonia nitrogenIntermittent discharge1In the plantCOD: 50mg/L; ammonia nitrogen: 5mg/LCOD: 500mg/L; ammonia nitrogen: 45mg/LCOD: 8.523t/a; ammonia nitrogen: 0.168t/aCOD: 23.189t/a; ammonia nitrogen: 2.3389t/aNone

Construction and operation of pollution prevention facilities

In accordance with The Environmental Impact Assessment and Approval, the Company establishes supporting measures forsolid waste storage, disposal and comprehensive utilization, along with leakage prevention and seepage prevention measures, andensures the normal operation of all above measures.In accordance with The Environmental Impact Assessment and Approval, Yili Precision Manufacturing Co., Ltd. constructssupporting treatment facilities for water and gas waste. Takes measures of noise reduction measures, storage, disposal andcomprehensive utilization of solid waste, and leakage and seepage prevention, and ensures the normal operation of all abovemeasures.Environmental impact assessment of construction projects and other administrative licenses for environmental protectionThe construction projects of Goertek Inc. have obtained The Environmental Impact Assessment and Approval from theHigh-tech Branch of Weifang Municipal Ecology and Environment Bureau in accordance with the regulations, and have obtainedenvironmental protection acceptance opinions according to The Interim Measures for Environmental Protection Acceptance ofConstruction Project Completion.

The construction projects of Yili Precision Manufacturing Co., Ltd. have obtained The Environmental Impact Assessment andApproval from the Anqiu Branch of Weifang Municipal Ecology and Environment Bureau in accordance with the regulations, andhave obtained environmental protection acceptance opinions according to The Interim Measures for Environmental ProtectionAcceptance of Construction Project Completion.Emergency response plan for unexpected environmental eventsIn view of various risk factors, combined with The National Environmental Emergency Response Plan and The Guidelines toDevelop Emergency Response Plan for Environmental Pollution Accidents, Goertek has formulated The Environmental EmergencyResponse Plan, and has reported the plan to the High-tech Branch of Weifang Municipal Ecology and Environment Bureau forrecording (No. 370708-2021-079-L). Goertek also organizes relevant training and drills on a regular basis, in order to improve theemergency response ability of employees and achieve continuous improvement.In view of various risk factors, Yili Precision Manufacturing Co., Ltd. refers to the National Environmental Emergency Planand Guidelines to Develop Emergency Response Plan for Environmental Pollution Accidents, formulates the Yili EnvironmentalEmergency Plan, and puts it on record in Anqiu Branch of Weifang Ecological Environment Bureau (record No.370784-2020-004-H). Relevant training and drills are organized on a regular basis to further improve employees’ ability to deal withemergency events and achieve continuous improvement.Environmental self-monitoring programmeThe Company entrusts third-party monitoring organization to monitor the environmental factors of the plant area and issue aninspection report every year.The main waste water outlet of Yili Precision Manufacturing Co., Ltd. is equipped with on-line monitoring equipment of COD,ammonia nitrogen, flow rate and PH value, which is connected with the local department of environmental protection authorities.Environmental self-monitoring of waste water, waste gas, groundwater and soil pollutants is carried out in strict accordance with therequirements of the pollutant discharge permit, and related information is disclosed as required. Environmental self-monitoring ofwaste water, waste gas, groundwater and soil pollutants is carried out in strict accordance with the requirements of the pollutantdischarge permit, and related information is disclosed as required.Administrative penalties received for environmental issues during the reporting periodNoneOther environmental information that should be disclosedNoneMeasures taken to reduce carbon emissions during the reporting period and their effects

√ Applicable □ Not applicable

The Company took “compliant use of energy, improved efficiency, reduce emission, full participation of all staffs and greendevelopment” as its energy management policy, and implemented this policy onto its product manufacturing chain. By taking theestablishment of energy management system as a scientific management basis, the Company optimized its organizational structure ofmanagement, improved systems and processes, and emphasized the focus of management, so as to tap the potential of energy saving,actively improve the overall level of energy efficiency, and integrate emission reduction and green development targets into itsinternal operation.The Company strived to promote clean energy application, increased the proportion of green energy in all energy sources,introduced distributed photovoltaic power generation and solar heat collection projects, and successfully achieved the annualemission reduction of 32,993tCO2e. It also conducted energy-saving-oriented technological transformation to improve equipmentenergy efficiency, applied energy-saving technologies such as vacuum pump, frequency conversion, automatic control and so on. Anannual emission reduction of 25,492tCO2e has been reached.Other information related to environmental protectionNoneII. Performance of Social Responsibility

During the reporting period, while the Company was committed to achieving its own development, it has also performed well inthe protection of the rights and interests of shareholders, creditors, employees, suppliers, customers and consumers, as well as inenvironmental protection and sustainable development, public relations and social public welfare undertakings. For details, see theCorporate Social responsibility Report of 2021 released on "www.cninfo.com.cn" on March 30, 2022. For details, see the CorporateSocial responsibility Report of 2021 released on "www.cninfo.com.cn" on March 30, 2022.

III. Consolidate and Carry Forward the Achievements of Poverty Alleviation and RuralRevitalization

The Company has always responded positively to relevant calls of the authorities at all levels on targeted poverty alleviation,such as The Poverty Alleviation Plan for the 13th Five-Year Plan Period (2016-2020) issued by the State Council. In addition, theCompany has carried out tailored accurate poverty alleviation efforts according to The Circular on Information Disclosure of PovertyAlleviation Work of Listed Companies issued by Shenzhen Stock Exchange, and implements relevant arrangements and requirementsof The Opinions of the China Securities Regulatory Commission on Giving Full Play to the Role of the Capital Market to Serve theNational Poverty Alleviation Strategy.

In September, 2020, the Company renewed The Agricultural and Sideline Products Purchasing Agreement with the AnqiuBangquan Fruit and Vegetable Planting Professional Cooperative. The Company will purchase products from the cooperative and

keep the price from fluctuation to reduce the production and operation risk of poor households, and ensure that the per capita incomeof registered poor households will increase by no less than RMB 2,000 each year. The support duration will be no less than 2 years,and the agreements could be renewed.

Section VI Important MattersI. Fulfilment of Commitments

1. The commitments of the Company's actual controllers, shareholders, related parties, purchasers and companies that have been completely fulfilledduring the reporting period or remain valid by the end of the reporting period.

√ Applicable □ Not applicable

Commitment mattersCommitment partyCommitment typeCommitment contentCommitment timeCommitment periodPerformance of commitments
Commitments made during the share merger reformNot applicable
Commitments made in the report of acquisition or in the report of equity changesNot applicable
Commitments made during asset restructuringNot applicable
Commitments made during initial public offering or refinancingMr. Jiang Bin, the actual controller, and Mr. Jiang long, shareholder and the related party of the actual controllerCommitment to restricted stockMr. Jiang Bin and Mr. Jiang Long promise that the Company shares transferred each year during their tenure will not exceed 25% of the total company shares held by them, and the shares will not be transferred within six months after their resignation in futureOctober 8, 2007Long-term standingStrictly fulfilled
Mr. Jiang Bin and Ms. Hu Shuangmei, the actual controllers of the Company,Horizontal competition relatedAt present, there is no competition between the main businesses of Goertek Inc. and the commitment parties (company and persons) in this clause or other entitiesOctober 8, 2007Long-term standingStrictly fulfilled
Goertek Group Co., Ltd and Mr. Jiang Long, the shareholders who hold more than 5% of the Company sharescommitmentcontrolled by the commitment parties (company and persons). In future, in order to fundamentally avoid the possibility of competing with Goertek Inc., the commitment parties (company and persons) promise as follows: 1) The commitment parties (company and persons) will not engage in the same or similar business as Goertek Inc. in order to avoid direct or indirect competition to the production and operation of Goertek Inc. Efforts will be made to urge other entities controlled by the commitment parties (company and persons) not to directly or indirectly participate in or carry out any business activity that compete with the production and operation of Goertek Inc. 2) If the commitment parties (company and persons) and the other entities controlled by the commitment parties (company and persons) except Goertek Inc., have competitive businesses of the same kind with Goertek Inc., which may bring unfair impacts on Goertek Inc. in terms of market share, business opportunities and resource allocation, etc. The commitment parties (company and persons) and other entities controlled by the commitment parties (company and persons) except Goertek Inc. will voluntarily give up business competition with Goertek Inc. 3) The commitment parties (company and persons) undertake to give Goertek Inc. the pre-emption right on the purchase of any assets and business to be sold, and will do its best to ensure that the price of the transaction is determined on the basis of fair, reasonable and normal commercial transactions with independent third parties. 4) The commitment parties (company and persons) will not be
restricted from engaging in or continuing to engage in existing production business, in particular to provide Goertek Inc. with relevant materials and services needed for its operation. Since the date of issuance of this letter of commitment, the commitment parties (company and persons) undertake to indemnify Goertek Inc. for any loss or expense suffered or incurred in violation of any of the terms of this commitment.
Controlling shareholderOther commitments1. In addition to setting a guarantee for the non-public offering of the exchangeable bonds, the stocks to be exchanged shall not be subject to other restrictions such as freeze by judicial domicile before the bond issue. No restriction is imposed on the sale of shares prepared for exchange when entering the stock exchange period, and the transfer of this part of shares does not violate the controlling shareholder's commitments to the Company, investors and Shenzhen Stock Exchange. 2. The controlling shareholder will not increase its holdings of the Company shares within six months before and after current holders exercise the stock exchanges. 3. The controlling shareholder does not have situation stipulated in Article 6 of the Several Provisions on Shareholding Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies (Announcement [2017] No. 9, CSRC). 4. The controlling shareholder will not directly transfer control of Goertek Inc. to others through the current issuance of exchangeable bonds; 5. During the stock exchange period, if there are situations not allowed as stipulated by the Several Provisions on Shareholding Reduction by Shareholders, Directors,January 11, 2021From the issuance date of the commitment to the completion of current non-public offering of exchangeable bondsThe 2021 Goertek Exchangeable Bonds was delisted on January 17, 2022, thus the commitment has been completely fulfilled
Supervisors and Senior Executives of Listed Companies and the Implementing Rules of the Shenzhen Stock Exchange for the Sale of Shares by Shareholders, Directors, Supervisors and Senior Management of Listed Companies, the controlling shareholder undertakes to suspend the application for share exchange until relevant circumstances are eliminated.
Equity incentive commitmentsThe CompanyOthers commitmentsStock option incentive plan of 2021: The Company undertakes not to provide loans or any other form of financial assistance to any participants to obtain relevant rights and interests under this incentive plan, including guarantee for their loansApril 16, 2021From the issuance date of the commitment to the completion of the implementation of the stock option incentive plan of 2021Strictly fulfilled
Other commitments made to minority shareholdersControlling shareholders and actual controllerCommitment of profit dilution counter-measuresCommitment of profit dilution counter-measures in accordance with relevant regulations of China Securities Regulatory CommissionSeptember 10, 2019From the issuance date of the commitment to the completion of the convertible bondsGoertek Convertible Bond No.2 was delisted on March 11, 2021, thus the commitment has been completely fulfilled
Directors and seniorCommitment ofCommitment of profit dilution counter-measures inSeptemberFrom theGoertek
managementprofit dilution counter-measuresaccordance with relevant regulations of China Securities Regulatory Commission10, 2019issuance date of the commitment to the completion of the convertible bondsConvertible Bond No.2 was delisted on March 11, 2021, thus the commitment has been completely fulfilled
The CompanyOthers commitmentsFrom March 5, 2020 to the end of the use of the funds raised from convertible bonds issuing or within 36 months after the funds raised are in place, the Company will no longer increase the funds usage in financial business (including capital investment, borrowing, guarantee and other forms of capital investment). The Company will not use the funds raised directly or in disguise for financial businessMarch 5, 2022From March 5, 2020 to the end of the use of funds raised or within 36 months after the funds raised are in placeStrictly fulfilled
The CompanyOthers commitmentsThe Company promises not to carry out venture capital investment during the period of temporary liquidity replenishment with raised funds, and undertakes to use these raised funds during temporary liquidity replenishment only for production and operation related to the main business. The Company shall not directly or indirectly use raised funds for the Subscription or placement of stocks, or for the trading of stocks and their derivatives, convertible bonds, etc.November 5, 2020During the time period of temporary liquidity replenishment with raised funds starting from November 5, 2020All raised funds have been returned on November 3, 2021, thus the commitment has been completely fulfilled
The CompanyOthersThe Company promises not to carry out venture capitalNovember 8,During theStrictly
commitmentsinvestment during the period of temporary liquidity replenishment with raised funds, and undertakes to use these raised funds during temporary liquidity replenishment only for production and operation related to the main business. The Company shall not directly or indirectly use raised funds for the Subscription or placement of stocks, or for the trading of stocks and their derivatives, convertible bonds, etc.2021time period of temporary liquidity replenishment with raised funds starting from November 8, 2021fulfilled
Directors and senior managementCommitment to restricted stockThe directors and senior management of the Company promise not to reduce their holdings of company shares within 6 months from November 18, 2020, not to engage in insider trading or short-swing trading, and not to buy or sell company stocks during sensitive time periodsNovember 17, 2020In the next six consecutive months from November 18, 2020Completely fulfilled on May 17, 2021
The Company, actual controller of the CompanyHorizontal competition related commitment1. The commitment parties (company and persons) are committed, during the time period of being the controlling shareholders or actual controller of Goertek Microelectronics Co., Ltd. (hereafter referred to as “Goermicro”), to making Goermicro (including its holding subsidiaries and branches) the only company engaged in the R&D, production and sales of MEMS devices and micro-system modules, among all entities controlled by the commitment parties (company and persons) 2. During the time period when the commitment parties (company and persons) are the controlling shareholder or actual controller of Goermicro,the commitment parties (company and persons) undertake that after the completion of the spin-off of Goermicro, all reasonable efforts will be made to ensure that, except Goermicro and its holdingNovember 8, 2021During the period that the Company and the actual controller of the Company act as the controlling shareholder or actual controller of GoermicroStrictly fulfilled
persons) violates the above commitments, the commitment parties (company and persons) will compensate Goermicro and/or its holding subsidiaries with the benefits and gains obtained from the transaction. If the violation of the above commitments causes economic losses to Goermicro and/or its holding subsidiaries, the commitment parties (company and persons) will bear the corresponding liability of compensation in accordance with laws
The Company, actual controller of the CompanyCommitments related to affiliate transactions1. After the completion of the spin-off of Goermicro, the commitment parties (company and persons) will exercise and perform rights and obligations as a micro-shareholder or actual controller of Goermicro in good faith, fully respect the independent legal entity status of Goermicro, and guarantee its independent operation and decision-making process. 2. After the completion of the spin-off, the commitment parties (company and persons) will try its best to avoid and reduce affiliate transactions between Goermicro and/or its holding subsidiaries and the commitment parties (company and persons) and their controlled companies (except Goermicro and/or its holding subsidiaries, hereafter referred to as "affiliated enterprises" ) . For affiliate transactions that cannot be avoided or can be conducted with reasonable causes, the commitment parties (company and persons) and their affiliated enterprises will follow the principles of fairness and openness. Agreements with Goermicro and/or its holding subsidiaries will be signed in accordance with relevant laws and regulations. The approval procedures andNovember 8, 2021Long-term standingStrictly fulfilled
the commitment parties (company and persons) will compensate for Goermicro and/or its holding subsidiaries with the benefits and gains obtained from the transaction. If the violation of the above commitments causes economic losses to Goermicro and/or its holding subsidiaries, the commitment parties (company and persons) will bear the corresponding liability for compensation in accordance with laws
Whether the commitments are fulfilled on timeYes
If the commitments are not fulfilled within the time limit, specific reasons for the failure of complying and the work plan for the next step shall be explained in detailsNot applicable

2. If the Company's assets or projects have profit forecasts and the report period is still in the profit forecasting period, the Company shall make statementon whether the assets or projects reach the original profit forecast and provide relevant reasons

□ Applicable √ Not applicable

II. Non-operational Occupation of Funds by Controlling Shareholders and Other Related Parties to Listed Companies

□ Applicable √ Not applicable

During the reporting period of the Company, there is no non-operational occupation of funds by controlling shareholders or other related parties to the Company.III. External Guarantee in Violation of Regulations

□ Applicable √ Not applicable

The Company has no violation of external guarantee during the reporting period.

IV. Explanation of the Board of Directors on the Relevant Information of the Latest “Qualified Audit Report”

□ Applicable √ Not applicable

V. Explanation of the Accounting Firm's “Non-standard Audit Report” by the Board of Directors, the Board of Supervisors andIndependent Directors (if Any) During the Reporting Period

□ Applicable √ Not applicable

VI. Explanation of changes in Accounting Policies, Accounting Estimates or Correction ofMajor Accounting Errors Compared with the Financial Report of Previous Year

√ Applicable □ Not applicable

1. Accounting policy changes caused by the implementation of the new accounting standards of leaseOn December 7, 2018, the Ministry of Finance issued The Accounting Standards for Enterprises No.21–Leases (2018 Revision)(Finance and Accounting [2018] No. 35) (hereinafter referred to as “new standards of lease”). With the resolution of the 18thmeeting of the 5th board of directors on March 26, 2021, the Company has implemented the above-mentioned new standards of leasefrom January 1, 2021, and related accounting policies has been changed in accordance with the provisions of the new standards oflease. For details, see “Section 10, Financial Report, V, 37, (1) Important accounting policy changes” in this report.

2. There is no change in accounting estimates during the reporting period.

3. There is no correction of major accounting errors during the reporting period.

VII. Explanation of Changes in the Scope of the Consolidated Statements Compared withPrevious Year's Financial Report

√ Applicable □ Not applicable

During the reporting period, the Company established a subsidiary company GOERTEK MICROELECTRONICS KOREA CO.,LTD.VIII. Appointment and Dismissal of Accounting FirmsAccounting firm currently appointed

Name of the domestic accounting firmZhongxi Certified Public Accountants (special general partnership) Co., Ltd.
Remuneration of the domestic accounting firm (RMB million)200
Consecutive audit service years of the domestic accounting firm3
Name of certified public accountant of the domestic accounting firmDu Yeqin, Mou Huiling
Consecutive audit service years of certified public accountant of the domestic accounting firmDu Yeqin for 2 years and Mou Huiling for 1 year

Whether to reappoint accounting firm in current period

□ Yes √ No

Employment of internal control audit accounting firms, financial consultants or sponsors

√ Applicable □ Not applicable

Due to the demand of public issuance of convertible bonds in 2020, the Company hired China Securities Co., Ltd. as its sponsor,and the sponsor's representatives were Guan Feng and Huang Zhenyue. The continuous supervision period was from June 12, 2020 toDecember 31, 2021. No remuneration was paid during the supervision period of 2021.

IX. Delisting After the Disclosure of Annual Report

□ Applicable √ Not applicable

X. Bankruptcy or Reorganization Related Events

□ Applicable √ Not applicable

No bankruptcy reorganization related events occurred during the reporting period.XI. Significant Lawsuit and Arbitration Events

□ Applicable √ Not applicable

No significant litigation or arbitration events occurred during the reporting period.XII. Punishment and Rectification

□ Applicable √ Not applicable

No punishment and rectification occurred during the reporting period.XIII. Integrity Issues of the Company, Controlling Shareholders and Actual Controllers

□ Applicable √ Not applicable

XIV. Significant Affiliated Transactions

1. Affiliated transactions related to daily operations

□ Applicable √ Not applicable

No significant affiliated transactions related to daily operations occurred during the reporting period.

2. Affiliated transactions involving the acquisition or sale of assets or equity

□ Applicable √ Not applicable

No significant affiliated transactions involving the acquisition or sale of assets or equity occurred during the reporting period.

3. Affiliated transactions of joint external investment

□ Applicable √ Not applicable

No significant affiliated transactions of joint external investment occurred during the reporting period.

4. Affiliated transactions of credits and liabilities

□ Applicable √ Not applicable

No significant affiliated transactions of credits and liabilities occurred during the reporting period.

5. Business with affiliated financial company

□ Applicable √ Not applicable

There was no deposit, loan, credit granting or other financial business between the Company and the affiliated financial company andits related parties.

6. Business between the affiliated parties and the financial company controlled by the Company

□ Applicable √ Not applicable

There was no deposit, loan, credit granting or other financial business between the affiliated parties and the financial companycontrolled by the Company.

7. Other significant affiliated transactions

□ Applicable √ Not applicable

No other significant affiliated transactions occurred during the reporting period.

XIV. Significant Contracts and Their Executions

1. Trusteeship, contracting and leasing

(1) Trusteeship

□ Applicable √ Not applicable

No trusteeship occurred during the reporting period.

(2) Contracting

□ Applicable √ Not applicable

No contracting occurred during the reporting period.

(3) Leasing

□ Applicable √ Not applicable

No significant leasing occurred during the reporting period.

2. Significant guarantees

√ Applicable □ Not applicable

Unit: RMB 10,000

External guarantee of the Company and its subsidiaries (excluding guarantees for subsidiaries)
Name of guaranteed partyDisclosure date of the amount limit of the guaranteeThe amount limit of the guaranteeActual occurrence dateActual amount guaranteedGuarantee typeCollateral (if any)Counter-guarantee (if any)Guarantee periodWhether the guarantee is completeWhether guarantee for affiliated parties
Not applicable
Total amount of external guarantee limit approved during the reporting period (A1)Total amount of actual external guarantee occurred during the reporting period (A2)
Total amount of external guarantee limit approved at the end of the reporting period (A3)Total balance of actual external guarantee occurred at the end of the reporting period (A4)
The Company's guarantee to its subsidiaries
Name of guaranteed partyDisclosure date of the amount limit of the guaranteeThe amount limit of the guaranteeActual occurrence dateActual amount guaranteedGuarantee typeCollateral (if any)Counter-guarantee (if any)Guarantee periodWhether the guarantee is completeWhether guarantee for affiliated parties
Goertek (HongKong) Co., LimitedApril 17, 2020191,271.00September 10, 20206,375.70Joint liability guarantee1 yearYesNo
Goertek (HongKong) Co., LimitedMarch 27, 2021191,271.00September 10, 20216,375.70Joint liability guarantee1 yearNoNo
Goertek (HongKong) Co., LimitedApril 17, 2020191,271.00October 20, 20206,375.70Joint liability guarantee1 yearYesNo
Goertek (HongKong) Co., LimitedMarch 27, 2021191,271.00October 20, 20216,375.70Joint liability guarantee1 yearNoNo
GoertekApril 20,191,271.00January 16,72,667.04Joint3 yearsNoNo
(HongKong) Co., Limited20192020liability guarantee
Goertek (HongKong) Co., LimitedApril 20, 2019191,271.00January 17, 20203,203.79Joint liability guarantee3 yearsNoNo
Goertek (HongKong) Co., LimitedApril 20, 2019191,271.00February 24, 202070,132.70Joint liability guarantee3 yearsYesNo
Goertek (HongKong) Co., LimitedApril 20, 2019191,271.00February 24, 202045,267.47Joint liability guarantee3 yearsNoNo
Goertek (HongKong) Co., LimitedApril 17, 2020191,271.00May 19, 20204,239.84Joint liability guarantee1 yearYesNo
Goertek (HongKong) Co., LimitedApril 17, 2020191,271.00November 29, 20209,563.55Joint liability guarantee6 monthsYesNo
Goertek Technology Vina Company LimitedSeptember 11, 201963,757.00August 14, 2020318.79Joint liability guarantee1 yearYesNo
Goertek (HongKong) Co., LimitedApril 17, 2020191,271.00August 20, 202015,939.25Joint liability guarantee1 yearYesNo
Goertek (HongKong) Co., LimitedMarch 27, 2021191,271.00August 20, 202115,939.25Joint liability guarantee1 yearNoNo
Goertek Technology Vina Company LimitedSeptember 11, 201963,757.00September 24, 20206,056.92Joint liability guarantee1 yearYesNo
Goertek Technology Co., Ltd.August 22, 201880,000.00September 20, 201839,682.93Joint liability guarantee8 yearsYesNo
Goertek Technology Vina Company LimitedMarch 27, 2021191,271.00August 16, 202119,127.10Joint liability guarantee1 yearYesNo
Goertek Technology Vina Company LimitedJanuary 18, 202045,000.00June 10, 20202,689.37Joint liability guarantee1 yearYesNo
Goertek Technology Vina Company LimitedJuly 10, 202084,000.00December 1, 2020862.42Joint liability guarantee1 yearYesNo
Goertek Technology Vina Company LimitedMarch 27, 2021156,500.00August 1, 20211,434.22Joint liability guarantee1 yearNoNo
Goertek Technology Vina Company LimitedMarch 27, 2021156,500.00June 6, 20211,391.11Joint liability guarantee1 yearNoNo
Goertek Technology Vina Company LimitedMarch 27, 2021156,500.00June 6, 2021193.18Joint liability guarantee1 yearNoNo
Goertek Technology Vina Company LimitedJanuary 18, 202045,000.00February 21, 202028,390.00Joint liability guarantee1 yearYesNo
Goertek Technology Vina CompanyMarch 27, 2021156,500.00July 30, 202125,928.34Joint liability guarantee1 yearNoNo
Limited
Goertek Technology Vina Company LimitedJanuary 18, 202045,000.00August 27, 2020270.28Joint liability guarantee1 yearYesNo
Goertek Technology Vina Company LimitedJuly 10, 202084,000.00August 20, 20201,748.52Joint liability guarantee1 yearYesNo
Goertek Technology Vina Company LimitedMarch 27, 2021156,500.00October 18, 20213,595.59Joint liability guarantee1 yearNoNo
Goertek Technology Vina Company LimitedMarch 27, 2021156,500.00June 29, 20216,216.41Joint liability guarantee1 yearNoNo
Weifang Goertek Microelectronics Co., Ltd.January 18, 20204,000.00March 2, 2020882.99Joint liability guarantee1 yearYesNo
Weifang Goertek Microelectronics Co., Ltd.January 18, 20204,000.00March 10, 2020138.75Joint liability guarantee1 yearYesNo
Weifang Goertek Microelectronics Co., Ltd.March 27, 2021650.00March 27, 202111.00Joint liability guarantee1 yearNoNo
Goertek Microelectronics Inc.July 10, 202032,000.00November 19, 202026.34Joint liability guarantee1 yearYesNo
Goertek MicroelectrMarch 27, 20212,640.00November 19, 202147.93Joint liability1 yearNoNo
onics Inc.guarantee
Goertek Intelligence Technology Co., Ltd.March 27, 20211,500.00June 10, 2021196.26Joint liability guarantee1 yearNoNo
Total amount of guarantee limit to subsidiaries approved during the reporting period (B1)1,080,040.8Total amount of actual guarantee to subsidiaries occurred during the reporting period (B2)401,664.13
Total amount of guarantee limit to subsidiaries approved at the end of the reporting period (B3)1,271,311.8Total balance of actual guarantee to subsidiaries occurred at the end of the reporting period (B4)188,842.99
The guarantee of subsidiaries to subsidiaries
Name of guaranteed partyDisclosure date of the amount limit of the guaranteeThe amount limit of the guaranteeActual occurrence dateActual amount guaranteedGuarantee typeCollateral (if any)Counter-guarantee (if any)Guarantee periodWhether the guarantee is completeWhether guarantee for affiliated parties
Not applicable
Total amount of guarantee limit to subsidiaries approved during the reporting period (C1)Total amount of actual guarantee to subsidiaries occurred during the reporting period (C2)
Total amount of guarantee limit to subsidiaries approved at the end of the reporting period (C3)Total balance of actual guarantee to subsidiaries occurred at the end of the reporting period (C4)
Total amount of company guarantee (namely the sum of the previous three items)
Total amount of guarantee limit approved during the reporting period (A1+B1+C1)1,080,040.8Total amount of actual external guarantee occurred during the reporting period (A2+B2+C2)401,664.13
Total amount of external guarantee limit approved at the1,271,311.8Total balance of actual external guarantee188,842.99
end of the reporting period (A3+B3+C3)occurred at the end of the reporting period (A4+B4+C4)
The proportion of the total amount of actual guarantee (i.e. A4+B4+C4) to the net assets of the Company6.91%
Including:
Balance of guarantees for shareholders, actual controllers and their affiliate parties (D)
Debt guarantee balance provided directly or indirectly to the guaranteed parties with an asset-liability ratio of more than 70% (E)188,784.06
Amount of total guarantees exceeding 50% of net assets (F)
Total amount of the above three kinds of guarantees (D+E+F)188,784.06
Explanation of unexpired guarantee contracts that have occurred liabilities during the reporting period or where there is evidence that they may bear possible joint and several liabilities (if any)None
Description of external guarantees provided in violation of prescribed procedures (if any)None

Specific description of complex guaranteesNone

3. Management trust of cash assets

(1) Entrusted financial investment

□ Applicable √ Not applicable

No entrusted financial management occurred during the reporting period.

(2) Entrusted loans

□ Applicable √ Not applicable

No entrusted loans occurred during the reporting period.

4. Other major contracts

□ Applicable √ Not applicable

No other significant contracts occurred during the reporting period.

XVI. Explanation of Other Significant Matters

√ Applicable □ Not applicable

In accordance with the requirements of laws and regulations, the Company has disclosed the significant matters that occurredduring the reporting period on http://www.cninfo.com.cn, Securities Times, China Securities Journal, Shanghai Securities News andSecurities Daily. Other than that, no other significant matters occurred.XVII. Significant Matters Occurred to Subsidiaries of the Company

√ Applicable □ Not applicable

On November 10, 2020, the Company held the 12th meeting of the 5th board of directors and the 10th meeting of the 5th boardof supervisors, which approved The Proposal of Planning the Spin-off of the Holding Subsidiary. It agreed to plan and prepare thespin-off of the Company's holding subsidiary Goertek Microelectronics Co., Ltd. For details, please see The InformativeAnnouncement of Goertek Inc. on Planning and Preparing the Spin-off of Holding Subsidiary issued on November 11, 2020.

The 17th meeting of the 5th board of directors and the 12th meeting of the 5th board of supervisors were held on March 1, 2021to approve The Proposal on the Introduction of External Investors of the Holding Subsidiary and Affiliate Transactions. It agreed toaccept a total of RMB 2,149.987749 million capital investment from 15 external investors, including Qingdao MicroelectronicsInnovation Center Co., Ltd., Mr. Tang Wenbo, Gongqingcheng Chunlin Equity Investment Partnership (L.P.), Qingdao HenghuitaiIndustry Development Fund Co., Ltd., and Goertek Group Co., Ltd., in exchange of 10.4075% of Goermicro's equity after abovecapital increase and share expansion. After the above investment, the percentage of shares of Goermicro held by the Company wasdiluted from 95.8773% to 85.8989%, which did not change the accounting consolidation scope of the financial statements of theCompany. Details can be found in The Announcement of Goertek Inc. on the Introduction of External Investors of the HoldingSubsidiary and Affiliate Transactions issued on March 2, 2021.

On April 21, 2021, the Company held the 20th meeting of the 5th board of directors and the 15th meeting of the 5th board ofsupervisors, which approved The Proposal of “Planning on the Spin-off of Goertek Microelectronics Inc. and Listing on the GrowthEnterprise Board of Shenzhen Stock Exchange” and other related proposals. Details can be found in related announcementspublished in China Securities Journal, Securities Times, Shanghai Securities News, Securities Daily and http://www.cninfo.com.cnon April 22, 2021.

On November 8, 2021, the Company held the 24th meeting of the 5th board of directors and the 19th meeting of the 5th board ofsupervisors, which approved The Proposal of “Planning on the Spin-off of Goertek Microelectronics Inc. and Listing on the GrowthEnterprise Board of Shenzhen Stock Exchange (Revised)” and other related proposals. The above-mentioned proposals have beenreviewed and approved by the Company's first extraordinary general meeting of shareholders in 2021. Details can be found in related

announcements published in China Securities Journal, Securities Times, Shanghai Securities News, Securities Daily andhttp://www.cninfo.com.cn on November 9, 2021 and November 26, 2021.On December 28, 2021, Goermicro received The Notice of Acceptance of Application Documents for Initial Public Offering ofShares and Listing on GEM of Goertek Microelectronics Inc. (Shenzhen Stock Exchange (2021) No. 549). In accordance with relatedregulations, the Shenzhen Stock Exchange checked the application report and related application documents submitted by Goermicrofor initial public offering and listing on GEM, and decided to accept the application. Details can be found in The InformativeAnnouncement of Goertek on The Acceptance of Shenzhen Stock Exchange of The Application Documents of The Spin-off of GoertekMicroelectronics Inc. and Listing on GEM issued by the Company on December 29, 2021.

Section VII. Changes in Shares and Information about Shareholders

I. Changes in Shares

1. Changes in shares

Unit: share

Before the changeIncreases or decreases (+, -)After the change
NumberPercentageNew sharesBonus sharesTransferred from reservesOthersSub-totalNumberPercentage
I. Shares Subject to Selling Restrictions486,567,82514.86%-7,656,450-7,656,450478,911,37514.02%
1. State shareholding
2. Shares held by state-owned corporates
3. Shares held by other domestic shareholders486,567,82514.86%-7,656,450-7,656,450478,911,37514.02%
Including: held by domestic corporates
held by domestic individuals486,567,82514.86%-7,656,450-7,656,450478,911,37514.02%
4. Shares held by foreign shareholers
Including: held by foreign corporates
held by foreign individuals
II. Shares Without Restrictions2,788,870,60285.14%148,539,059148,539,0592,937,409,66185.98%
1. RMB ordinary shares2,788,870,60285.14%148,539,059148,539,0592,937,409,66185.98%
2. Domestic listed foreign shares
3. Overseas listed foreign
shares
4. Others
III. Total Number of Shares3,275,438,427100.00%140,882,609140,882,6093,416,321,036100.00%

Reasons for changes in shares

√ Applicable □ Not applicable

In accordance with the provisions of the relevant regulations and The Prospectus for the Public Offering of Convertible Bondsby Goertek Inc., the “Goertek Convertible Bond No.2” issued by the Company can be converted into shares from December 18, 2020.As of the end of the reporting period, the number of converted shares was 171,217,088 (of which 140,882,609 shares were convertedduring the reporting period), and the total share capital of the Company increased to 3,416,321,036 shares.Approval of changes in shares

√ Applicable □ Not applicable

The 23rd meeting of the 4th board of directors was held on September 10, 2019. The board of directors deliberated andapproved The Proposal on the Public Issuance of Convertible Bonds and other proposals. On September 27, 2019, the Company heldthe 2nd extraordinary general meeting of shareholders. The meeting approved the Proposal on “The Plan for the Public Issuance ofConvertible Bonds" and other proposals. Approved by the CSRC Permission [2020] No. 780, the Company publicly issued 40 millionconvertible bonds on June 12, 2020, each with par value of RMB 100, and the total issue amount was RMB 4,000 million. With theconsent of “Shen Zheng Shang [2020] No. 610" issued by the Shenzhen Stock Exchange, RMB 4,000 million of convertible bondswere listed for trading on the Shenzhen Stock Exchange since July 13, 2020. The bond is referred to as “Goertek Convertible BondNo. 2” and the bond code is “128112”. According to the relevant regulations and The Prospectus for the Public Offering ofConvertible Bonds by Goertek Inc., the “Goertek Convertible Bond No.2” issued by the Company can be converted into shares fromDecember 18, 2020. The Company has fully redeemed all registered “Goertek Convertible Bond No. 2", as of the redemptionregistration date (one trading day before the redemption date: March 2, 2021) Since March 3, 2021, " Goertek Convertible Bond No.2" was no longer traded or convertible. “Goertek Convertible Bond No. 2" was delisted on March 11, 2021. “Goertek ConvertibleBond No. 2" was delisted on March 11, 2021.Transfer of ownership change of shares

□ Applicable √ Not applicable

The impact of share changes on the financial indicators such as basic earnings per share, diluted earnings per share and net assets pershare attributable to the Company's common shareholders in the latest year and the latest period

√ Applicable □ Not applicable

During the reporting period, the partial conversion of convertible bonds into shares correspondingly affected basic earnings pershare and diluted earnings per share, but did not have a significant impact. The impact on the net assets per share attributable to thecommon shareholders of the Company is as follows:

Financial indicators20212020
Before share changesAfter share changesBefore share changesAfter share changes
Net assets per share attributable to shareholders of the Company (RMB)7.398.005.866.00

Other content that the Company considers necessary or that the securities regulator requires to be disclosed

□ Applicable √ Not applicable

2. Changes in restricted shares

√ Applicable □ Not applicable

Unit: share

Name of shareholderStarting number of restricted shares in reporting periodIncreased in reporting periodDecreased in current periodClosing number of restricted shares in reporting periodType for restricted sharesDate of the removal of restrictions
Jiang Bin305,989,50425,873,950280,115,554Restricted shares of senior executivesJanuary 1, 2021
Jiang Long147,941,39839,817,500187,758,898Restricted shares of senior executivesJanuary 1, 2021
Hu Shuangmei21,600,0005,400,00016,200,000Restricted shares of senior executivesJanuary 16, 2021
Sun Hongbin6,667,1506,667,150Restricted shares of senior executivesJanuary 1, 2021
Duan Huilu3,355,8753,355,875Restricted shares of senior executivesJanuary 1, 2021
Jia Jun'an150,000150,000Restricted shares of senior executivesJanuary 1, 2021
Liu Chunfa863,898863,898Restricted shares of senior executivesJanuary 1, 2021
Total486,567,82539,817,50031,273,950495,111,375----

II. Issuance and Listing of Securities

1. Securities issuance (excluding preferred shares) during the reporting period

□ Applicable √ Not applicable

2. Description of changes in the total number of shares, the structure of shareholders, and the structure ofassets and liabilities

√ Applicable □ Not applicable

The 40 million convertible bonds, referred to as “Goertek Convertible Bond No.2”, publicly issued by the Company on June 12,2020, were listed for trading on the Shenzhen Stock Exchange since July 13, 2020. “Goertek Convertible Bond No.2” could beconverted into shares of the Company since December 18, 2020, and the total share capital changed from 3,275,438,427 to3,416,321,036 during the reporting period due to the convertion of Goertek Convertible Bond No.2. The changes in the structure ofthe Company's assets and liabilities are detailed in Section X Financial Report.

3. Existing internal employee shares

□ Applicable √ Not applicable

III. Shareholders and actual controllers

1. Number of shareholders and corresponding shareholding

Unit: share

Total number of common shareholders at the end of the reporting period178,252Total number of common shareholders as the end of the previous month before disclosure date of the annual report198,374Total number of preferred shareholders whose voting rights were restored at the end of the reporting period (if any)0Total number of preferred shareholders whose voting rights were restored at the end of the previous month before disclosure date of the annual report0
Shareholding of shareholders with more than 5% of shares or the top 10 shareholders
Name of shareholderType of shareholderPercentageTotal common shares held at the end of the reporting periodIncrease/decrease during the reporting periodThe number of common shares held with trading restrictionsThe number of shares held without trading restrictionsPledge or freeze status
Share statusNumber
Goertek Group Co., Ltd.Domestic non-state-owned corporation15.37%525,183,974-58,599,695525,183,974Pledged100,400,305
Hong Kong Securities Clearing Company Ltd. (HKSCC)Overseas corporation9.36%319,905,460156,836,627319,905,460
Jiang BinDomestic Individual8.41%287,397,406-86,090,000280,115,5547,281,852
Jiang LongDomestic Individual7.33%250,345,19753,090,000187,758,89862,586,299Pledged15,000,000
China Securities Finance Corporation LimitedOthers2.43%83,044,01183,044,011
National Social Security Fund Portfolio 103Others0.74%25,299,92225,299,922
National Social Security Fund Portfolio 601Others0.71%24,132,74524,132,745
Shanghai Pudong Development Bank Co., Ltd. - E-fund Yuxiang Return Bond Type Securities Investment FundOther0.69%23,636,36123,636,361
Bank of Communications Co., Ltd. - E-fund Compet Adv Enterprises Alloc Type Securities Investment FundOthers0.62%21,089,33721,089,337
Abu Dhabi Investment AuthorityOverseas corporation0.60%20,654,58120,654,581
Strategic investors or general legal entities who become the top 10 shareholders as a result of the placement of new shares (if any)None
Explanation of the associationJiang Bin and Jiang Long are brothers; Goertek Group Co., Ltd. is a company controlled by Jiang
of the above shareholders or their action in concertBin and Jiang Long.
Explanation on entrustment/acceptance and waiver of voting rights by the aforesaid shareholdersNone
Special notes on the existing special account of securities repurchasing in the Top 10 shareholders (if any)The special account of securities repurchasing of Goertek Inc. holds 74,265,451 ordinary shares, accounting for 2.17%.
Shareholding of top 10 shareholders of shares without sales restrictions
Name of shareholderNumber of shares without sales restrictions held at the end of the reporting periodType of shares
Type of sharesNumber
Goertek Group Co., Ltd.525,183,974Ordinary shares in RMB525,183,974
Hong Kong Securities Clearing Company Ltd. (HKSCC)319,905,460Ordinary shares in RMB319,905,460
China Securities Finance Corporation Limited83,044,011Ordinary shares in RMB83,044,011
Jiang Long62,586,299Ordinary shares in RMB62,586,299
National Social Security Fund Portfolio 10325,299,922Ordinary shares in RMB25,299,922
National Social Security Fund Portfolio 60124,132,745Ordinary shares in RMB24,132,745
Shanghai Pudong Development Bank Co., Ltd. - E-fund Yuxiang Return Bond Type Securities Investment Fund23,636,361Ordinary shares in RMB23,636,361
Bank of Communications Co., Ltd. - E-fund Compet Adv Enterprises Alloc Type Securities Investment Fund21,089,337Ordinary shares in RMB21,089,337
Abu Dhabi Investment Authority20,654,581Ordinary shares in RMB20,654,581
Industrial And Commercial Bank of China Limited - Selected Stock-type Securities Fund of E Fund20,562,486Ordinary shares in RMB20,562,486
Explanation on association orJiang Bin and Jiang Long are brothers; Goertek Group Co., Ltd. is a company controlled by Jiang
action in concert among top 10 shareholders of shares without sales restrictions, or between top 10 shareholders of shares without sales restrictions and top 10 shareholdersBin and Jiang Long.
Explanation on the top ten common shareholders’ participation in the financing and loan businesses of securities trades (if any)At the end of the reporting period, the shares held by Goertek Group Co., Ltd., the controlling shareholder of the Company include the 150,000,000 shares held in the customer credit transaction guarantee securities account of Southwest Securities Co., Ltd.

Whether the Company’s top 10 common shareholders and top 10 common shareholders without share sales restrictions agreed on anyrepurchase transaction in the reporting period

□ Yes √ No

None of the Company’s top 10 common shareholders and top 10 common shareholders without share sales restrictions agreed on anyrepurchase in the reporting period.

2. Particulars about the controlling shareholder

Nature of the controlling shareholder: Private corporateType of the controlling shareholder: Legal entity

Name of the controlling shareholderLegal representative/Head of the CompanyDate of establishmentOrganization codeBusiness scope
Goertek Group Co., Ltd.Jiang BinApril 24, 2001913707007286084226Residential interior decoration; medical services; technology import and export; investment activities conducted with own funds; non-residential real estate leasing; technical services; wholesale of edible agricultural products; tree planting management; electronic products sales, etc.
Shareholdings of the controlling shareholder in other listed companiesNone

Change of the controlling shareholders in the reporting period

□ Applicable √ Not applicable

No change on the controlling shareholder of the Company in the reporting period

3. Actual controllers of the Company and persons acting in concert with the actual controllerNature of the actual controllers: Domestic individualType of the actual controllers: Individual

Name of the actual controllerRelationship with the actual controllerNationalityWhether he/she has obtained the right of residence in another country or region
Jiang BinHimselfChinaNo
Hu ShuangmeiHimselfChinaNo
Jiang LongActing in concert (including agreement, relative and common control)ChinaNo
Main occupation and titleMr. Jiang Bin is the current chairman of the Company; and Mr. Jiang Long is the current vice chairman and president of the Company.
Information about other listed companies at home and abroad controlled in the last ten yearsGoertek Inc.

Change on the actual controllers in the reporting period

□ Applicable √ Not applicable

No change on the actual controllers of the Company in the reporting periodBlock Diagram for Property Right and Control Relationship Between the Company and its Actual Controllers

The actual controller controls the Company via trust or other ways of asset management

□ Applicable √ Not applicable

4. All the pledged shares account for 80% of the total shares held by the controlling shareholder or No.1shareholder of the Company and their persons acting in concert

□ Applicable √ Not applicable

5. Particulars about other corporate shareholders with over 10% shares of the Company

□ Applicable √ Not applicable

6. Particulars on share sales restrictions for controlling shareholders, actual controllers, or other partiesinvolved in the reorganization of the Company or in any commitments related to the sales of share

□ Applicable √ Not applicable

IV. Specific Implementation of Share Repurchase in the Reporting PeriodProgress of share repurchase

√ Applicable □ Not applicable

Repurchasing plan disclosure dateAmount of shares to be repurchase according to the planPercentage of the total share capital to be repurchase according to the planRMB amount of shares to be repurchased according to the planDuration for repurchasePurpose of repurchaseAmount of shares actually repurchasedProportion of repurchased shares to the total underlying stocks involved in the equity incentive plan (if any)
January 30, 2021No less than RMB 1,000,000,000 and no more than RMB 2,000,000,000January 29, 2021 - July 29, 2021, within six months since the date of the board of directors approved the repurchase planEmployee stock ownership plan or equity incentive plan for the employees of the Company59,929,533

Progress on reduction and repurchase of shares through centralized bidding

□ Applicable √ Not applicable

Section VIII Information of Preferred Shares

□ Applicable √ Not applicable

There are no preferred shares in the reporting period.

Section IX Information on the Bonds

□ Applicable √ Not applicable

Section X Financial Report

I. Audit Report

Audit OpinionStandard unqualified audit opinion
Audit Report Sign-off DateMarch 29, 2022
Name of the audit institutionZhongxi Certified Public Accountants (special general partnership) Co., Ltd.
Audit Report NumberNo. 2022S00281 of Zhong Xi Cai Shen
Name of the Certified Public AccountantDu Yeqin, Mou Huiling

Text of the auditor’s reportAuditor’s Report

No. 2022S00281 of Zhong Xi Cai ShenTo all the shareholders of Goertek Inc.,I. Audit opinionWe have audited the accompanying financial statements of Goertek Inc. (hereinafter referred to as "Goertek"), which comprisethe consolidated and company’s balance sheet as of December 31, 2021, consolidated and company’s income statements,consolidated and company’s cash flow statements, consolidated and company’s statements of changes in shareholder' equity, andnotes to the financial statements for the year then ended.

In our opinion, the accompanying financial statements have been prepared in all material aspects in accordance with theAccounting Standards for Business Enterprises, giving a true and fair view of the consolidated and company’s financial position as at31 December 2021 and of the consolidated and company’s financial performance and cash flows for 2021.

II. Basis for Opinion

We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants of China. Ourresponsibilities under those Standards are further described in the “Certified Public Accountants’ Responsibilities for the Audit of theFinancial Statements” section of the audit report. We are independent of Goertek in accordance with the Code of Ethics for CertifiedPublicAccountants of China (“Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, are of most significance in our audit of the financialstatements of the current period. These matters were addressed in the context of our audit of the financial statements, and in formingour opinion thereon, and we do not provide a separate opinion on these matters. We determine that the following matters are criticalaudit matters that need to be communicated in the audit report.

(I) Revenue recognition

1. Description of the matters

Goertek is mainly in the business of producing and selling electron components, and for the accounting policy of revenuerecognition, please refer to “32. Income” in “V. Significant Accounting Policies and Accounting Estimates” of notes to the financialstatements. In 2021, the operating revenue in the consolidated financial statements of Goertek is RMB 78,221,418,618.02. Revenueis one of the key performance indicators of Goertek and is the major source of profit of the Company, and the accuracy andcompleteness of revenue recognition has a significant impact on the profits of the Company. Therefore, we identified the recognitionof Goertek’s revenue as a key audit matter.

2. Audit Measures

We performed the following audit procedures in recognition of the operating revenue:

(1) Understood, evaluated, and tested the design and operation effectiveness of internal control related to revenue recognition;

(2) Performed analytical review procedure to analyze the rationality of changes in the operating revenue and gross profits;

(3) Identified the risk in the commodity ownership and the contractual terms related to remuneration transfer, evaluated whetherthe accounting policies for revenue recognition in different modes were appropriate, and evaluated whether the time point forrevenue recognition of the Company was consistent with the requirements in the Accounting Standards for Business Enterprises bychecking the major sales contracts or orders, understanding the policies for receipt and return of goods, communicating with themanagement and other procedures;

(4) Selected samples to check the sales contracts or orders, sales invoices, shipping orders, declarations for exportation, waybills(receipt forms), bank slips and other supporting documents related to revenue recognition, and executed external confirmationprocedures on a sampling basis;

(5) Selected samples to reconcile the shipping orders, declarations for exportation, waybills (receipt forms) and other supportingdocuments against the product sales revenue recognized before and after the balance sheet date to evaluate whether the revenue wasrecognized in the appropriate accounting period.

(II) Government subsidies

1. Description of the matters

As stated in “36. Deferred income” of Note VII, “51. Other income” of Note VII and “65. Government subsidies” of Note VII ofthe financial statements, the government subsidies received by Goertek for the year 2021 was RMB 465,518,187.04, and thegovernment subsidies included in other income for current year was RMB 464,119,437.91. Goertek has received a large amount ofgovernment subsidies, which casted a relatively significant impact on the net profit of the current year, and appropriate recognitionand measurement of the government subsidies have a significant impact on the accuracy and rationality of financial statementsprepared. Therefore, we identified the recognition and measurement of Goertek’s government subsidies as a key audit matter.

2. Audit Measures

We preformed the following audit procedures in recognition of the government subsidy:

(1) Evaluated the accounting policies related to Goertek’s recognition and measurement of the government subsidies;

(2) Checked all the receipts and documents of Goertek related to the government subsidies for the year 2021; judged whether thetype of the government subsidies is related to assets or income and whether the conditions for government subsidiesw were metaccording to the contents of relevant documents;

(3) Checked whether the payer and fund source of the government subsidies is consistent with those in the subsidy document toevaluate the appropriateness of the fund source of the government subsidy.

(4) In respect of the government subsidies related to the income, checked whether relevant expenses incurred by the Companyas the subsidy beneficiary are included in the profit and loss, and accordingly, checked whether the profit and loss brought forward inconnection with the government subsidies was appropriate to the corresponding expense;

(5) In respect of the government subsidies related to assets, checked whether the amount of the deferred income distributed andincluded in the current profit and loss within the service life of relevant asset was correct.

IV. Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management of Goertek (hereinafter referred to as “Management”) is responsible for the preparation and fair presentation of thefinancial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation andmaintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whetherdue to fraud or error.

In preparing the financial statements, Management is responsible for assessing the ability of Goertek to continue as a goingconcern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unlessManagement intends to liquidate Goertek or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial reporting process of Goertek.

V. Certified Public Accounts’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a highlevel of assurance, but is not a guarantee that an audit conducted in accordance with the Auditing Standards will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financialstatements.

As part of an audit in accordance with the Auditing Standards, we exercise professional judgment and maintain professionalskepticism 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 andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, asfraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate forthe circumstances.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and relateddisclosures made by Management.

4. Conclude on the appropriateness of Management’s use of the going concern basis of accounting. And, based on the auditevidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Goertek’sability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditreport to the related disclosures in the financial statements or, if such disclosures are inadequate, to express a qualified opinion. Ourconclusions are based on the information obtained up to the date of our audit report. However, future events or conditions may causeGoertek to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities withinGoertek to express an opinion on the financial statements. We are responsible for the instruction, supervision and execution of theGroup’s audit, and assume full responsibility for the audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the auditand significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirementsregarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear onour independence and, where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in ouraudit report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, wedetermine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably beexpected to outweigh the public interest benefits of such communication.

Zhongxi Certified Public Accountants (special general partnership) Co., Ltd.Certified Public Accountant in China (Project partner): Du Yeqin
Beijing, ChinaCertified Public Accountant in China: Mou Huiling

March 29, 2022

II. Financial StatementsThe currency in the notes to the financial statements is: RMB

1. Consolidated Balance Sheet

Prepared by: Goertek Inc.

December 31, 2021

Unit: RMB

ItemDecember 31, 2021December 31, 2020
Current assets:
Cash and bank balances10,048,521,696.097,788,139,761.68
Deposit reservation for balance
Lending funds
Held-for-trading financial assets119,267,279.02250,789,617.29
Derivative financial assets
Notes receivable50,094,700.4793,015,027.25
Accounts receivable11,899,214,525.929,951,611,596.65
Receivable financing14,575,230.24
Prepayments97,544,817.98295,557,594.21
Premiums receivable
Reinsurance accounts receivable
Provision of cession receivable
Other receivables374,669,355.9856,282,930.78
Including: Interest receivable
Dividend receivable
Redemptory monetary capital for sale
Inventories12,082,308,485.389,170,731,903.19
Contract assets
Assets held for sale
Non-current assets due within one year67,724.41
Other current assets475,772,227.60522,858,736.68
Total current assets35,161,968,318.6828,129,054,892.14
Non-current assets:
ItemDecember 31, 2021December 31, 2020
Loans and advances disbursed
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments437,402,203.91337,410,802.56
Investments in other equity instruments465,677,764.54357,307,056.65
Other non-current financial assets201,430,042.13
Investment properties
Fixed assets18,123,352,480.7614,674,535,924.15
Construction in progress2,127,055,853.772,078,910,639.92
Manufacturing biological assets
Oil and gas assets
Right-of-use assets330,796,520.66
Intangible assets2,762,793,788.852,730,415,540.35
Development expenditure242,956,092.44107,970,366.02
Goodwill16,859,185.0816,859,185.08
Long-term deferred expenses207,195,490.25152,215,032.28
Deferred tax assets495,124,421.81275,559,445.74
Other non-current assets506,438,970.39257,587,428.52
Total non-current assets25,917,082,814.5920,988,771,421.27
Total assets61,079,051,133.2749,117,826,313.41
Current liabilities:
Short-term borrowings4,284,859,347.023,189,865,281.20
Borrowings from banks and other financial institutions
Borrowing funds
Held-for-trading financial liabilities15,190,564.3443,578,775.71
Derivative financial liabilities
Notes payable2,742,876,464.231,797,630,927.08
Accounts payable18,529,609,655.4015,526,558,924.33
Advances from customers
Contract liabilities2,210,825,761.69772,033,187.85
ItemDecember 31, 2021December 31, 2020
Financial assets sold for repurchase
Customer deposits and deposits from banks and other financial institutions
Receivings from vicariously traded securities
Receivings from vicariously sold securities
Payroll payable1,066,570,159.631,136,453,967.56
Taxes payable356,610,000.28195,498,317.72
Other payables80,187,733.1767,844,709.64
Including: Interest payable8,911,319.91
Dividends payable
Handling charges and commissions payable
Dividend payable for reinsurance
Liabilities held for sale
Non-current liabilities due within one year501,408,170.04
Other current liabilities14,844,359.017,012,595.33
Total current liabilities29,802,982,214.8122,736,476,686.42
Non-current liabilities:
Reserve fund for insurance contracts
Long-term borrowings2,204,215,784.742,754,299,262.02
Bonds payable3,031,391,335.56
Including: Preferred shares
Perpetual bonds
Lease liabilities210,209,955.40
Long-term payables
Long-term payroll payable
Provisions
Deferred income540,321,080.65538,922,331.52
Deferred tax liabilities389,933,389.40323,065,909.80
ItemDecember 31, 2021December 31, 2020
Other non-current liabilities
Total non-current liabilities3,344,680,210.196,647,678,838.90
Total liabilities33,147,662,425.0029,384,155,525.32
Owners' equity:
Share capital3,416,321,036.003,275,438,427.00
Other equity instruments317,690,852.25
Including: Preferred shares
Perpetual bonds
Capital reserves9,478,106,194.303,811,658,791.28
Less: Treasury shares2,291,973,146.75516,007,644.95
Other comprehensive income-100,146,769.57-112,010,012.52
Special reserves
Surplus reserves1,446,536,121.511,370,122,868.85
General risk reserve6,081,200.006,081,200.00
Retained earnings15,372,823,358.4811,500,277,791.35
Total equity attributable to the owners of the Company27,327,747,993.9719,653,252,273.26
Minority equity603,640,714.3080,418,514.83
Total owners' equity27,931,388,708.2719,733,670,788.09
Total liabilities and owners' equity61,079,051,133.2749,117,826,313.41

Legal representative: Jiang Bin Person in charge of accounting: Li Yongzhi Head of the accountinginstitution: Li Yongzhi

2. Parent company balance sheet

Unit: RMB

ItemDecember 31, 2021December 31, 2020
Current assets:
Cash and bank balances4,068,082,163.752,834,936,444.19
Held-for-trading financial assets102,214,286.66182,338,601.65
Derivative financial assets
Notes receivable15,951,819.7975,154,389.95
Accounts receivable8,009,174,174.209,745,537,067.95
Receivable financing12,277,005.37
ItemDecember 31, 2021December 31, 2020
Prepayments33,005,000.3437,867,760.48
Other receivables3,927,667,930.143,761,565,682.66
Including: Interest receivable
Dividend receivable
Inventories5,386,290,840.962,307,402,064.65
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets89,132,401.04132,090,455.49
Total current assets21,643,795,622.2519,076,892,467.02
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments6,182,937,106.095,896,926,627.12
Investments in other equity instruments
Other non-current financial assets81,254,792.77
Investment properties
Fixed assets9,979,950,421.038,801,650,213.78
Construction in progress1,083,563,418.24313,889,183.09
Manufacturing biological assets
Oil and gas assets
Right-of-use assets70,843,695.85
Intangible assets2,283,338,054.042,258,621,419.91
Development expenditure105,363,784.9412,173,386.98
Goodwill
Long-term deferred expenses6,206,772.89417,895.69
Deferred tax assets233,025,132.4354,618,987.06
Other non-current assets297,122,363.13110,169,734.82
Total non-current assets20,323,605,541.4117,448,467,448.45
Total assets41,967,401,163.6636,525,359,915.47
Current liabilities:
ItemDecember 31, 2021December 31, 2020
Short-term borrowings3,346,827,327.532,426,635,181.20
Held-for-trading financial liabilities4,080,000.00
Derivative financial liabilities
Notes payable2,348,480,930.591,616,583,704.36
Accounts payable9,328,493,202.637,583,147,844.25
Advances from customers
Contract liabilities340,559,741.33363,007,702.67
Payroll payable550,001,996.91606,402,939.12
Taxes payable37,673,083.3234,135,334.79
Other payables3,270,836,911.141,440,612,669.29
Including: Interest payable6,306,124.36
Dividends payable
Liabilities held for sale
Non-current liabilities due within one year412,234,240.19
Other current liabilities9,670,427.109,707,204.85
Total current liabilities19,648,857,860.7414,080,232,580.53
Non-current liabilities:
Long-term borrowings990,921,555.56400,000,000.00
Bonds payable3,031,391,335.56
Including: Preferred shares
Perpetual bonds
Lease liabilities52,713,002.49
Long-term payables
Long-term payroll payable
Provisions
Deferred income186,139,483.46202,689,088.19
Deferred tax liabilities373,963,793.59299,192,361.87
Other non-current liabilities
Total non-current liabilities1,603,737,835.103,933,272,785.62
Total liabilities21,252,595,695.8418,013,505,366.15
Owners' equity:
Share capital3,416,321,036.003,275,438,427.00
ItemDecember 31, 2021December 31, 2020
Other equity instruments317,690,852.25
Including: Preferred shares
Perpetual bonds
Capital reserves7,706,634,091.213,815,383,616.46
Less: Treasury shares2,291,973,146.75516,007,644.95
Other comprehensive income
Special reserves
Surplus reserves1,446,533,339.111,370,120,086.45
Retained earnings10,437,290,148.2510,249,229,212.11
Total owners' equity20,714,805,467.8218,511,854,549.32
Total liabilities and owners' equity41,967,401,163.6636,525,359,915.47

3. Consolidated income statement

Unit: RMB

Item20212020
I. Total operating revenue78,221,418,618.0257,742,742,893.96
Including: Operating revenue78,221,418,618.0257,742,742,893.96
Interest income
Earned premium
Total revenue from handling charges and commissions
II. Total Operating Cost74,123,260,660.0254,706,662,977.17
Including: Operating cost67,167,666,659.6648,483,805,411.74
Interest expense
Handling charge and commission expense
Surrender value
Net payments for insurance claims
Net amount of withdrawal of insurance contract reserve
Expenditures of policy dividend
Amortized reinsurance expenditures
Taxes and surcharges221,891,985.50200,400,470.05
Selling expenses444,869,977.08476,066,518.64
Item20212020
Administrative expenses1,951,657,773.321,629,730,793.00
R&D expenses4,170,074,282.103,425,971,011.65
Financial expenses167,099,982.36490,688,772.09
Including: Interest expenses209,622,292.85276,706,601.19
Interest income91,492,632.7239,217,451.01
Add: Other income466,722,801.11224,609,297.72
Investment income ("-" for loss)469,239,884.79138,553,145.35
Including: Investment gains in associated enterprise and joint-venture enterprise23,111,753.4125,126,283.51
Profit or loss arising from derecognition of financial assets measured at amortised costs-7,852,608.05
Exchange gains ("-" for loss)
Net exposure hedging income ("-" for loss)
Gains from changes in fair value ("-" for loss)-48,848,625.93160,215,070.58
Credit impairment losses ("-" for loss)-29,693,677.67-28,402,825.32
Asset impairment losses ("-" for loss)-241,075,506.45-207,798,137.99
Gains on disposal of assets ("-" for loss)-31,179,825.99-62,250,234.59
III. Operating Profit ("-" for loss)4,683,323,007.863,261,006,232.54
Add: Non-operating revenue22,444,738.1818,801,027.06
Less: Non-operating expenses99,858,949.0657,841,977.98
IV. Total Profit (“-” for total losses)4,605,908,796.983,221,965,281.62
Less: Income tax expenses298,842,312.64370,078,167.44
V. Net profit ("-" for net loss)4,307,066,484.342,851,887,114.18
(I) Classification by business continuity
1. Net profit from continuing operations (“-” for net loss)4,307,066,484.342,851,887,114.18
2. Net profit from discontinued operations (“-” for net loss)
(II) Classification by ownership
1. Net profit attributable to the shareholders of the Company4,274,702,999.382,848,007,269.61
2. Minority interests32,363,484.963,879,844.57
VI. Other comprehensive income, net of tax21,620,809.04-27,186,319.43
Other comprehensive income, net of tax attributable to the owners of the Company11,863,242.95-27,509,272.02
Item20212020
(I) Other comprehensive income items which will not be reclassified subsequently to profit or loss39,220,079.947,711,365.44
1. Changes arising from remeasurement of defined benefit plan
2. Other comprehensive income that will not be transferred subsequently to profit or loss under the equity method
3. Changes in fair value of investments in other equity instruments39,220,079.947,711,365.44
4. Changes in the fair value of the Company’s credit risk
5. Others
(II) Other comprehensive income items which will be reclassified subsequently to profit or loss-27,356,836.99-35,220,637.46
1. Other comprehensive income that will be transferred subsequently to profit or loss under the equity method7,950,273.1623,160,776.33
2. Changes in fair value of debt investments
3. Amount of financial assets reclassified into other comprehensive income
4. Credit impairment provision of other debt investments
5. Effective portion of cash flow hedging gains or losses
6. Differences on translation of foreign currency financial statements-35,307,110.15-58,381,413.79
7. Others
Net other comprehensive income, net of tax, attributable to minority shareholders9,757,566.09322,952.59
VII. Total comprehensive income4,328,687,293.382,824,700,794.75
Total comprehensive income attributable the owners of the Company4,286,566,242.332,820,497,997.59
Total comprehensive income attributable to minority shareholders42,121,051.054,202,797.16
VIII. Earnings per share:
(I) Basic earnings per share1.290.89
(II) Diluted earnings per share1.280.89

In case of consolidation of enterprises under common control during current period, the net profit before consolidation realized byconsolidated party is RMB 0.00. The net profit realized by the consolidated party in the previous period is RMB 0.00.Legal representative: Jiang Bin Person in charge of accounting: Li Yongzhi Head of the accountinginstitution: Li Yongzhi

4. Parent Company Income Statement

Unit: RMB

Item20212020
I. Operating revenue38,570,677,177.7034,110,338,839.51
Less: Operating costs33,462,769,638.7628,351,975,958.13
Taxes and surcharges154,866,730.44170,319,519.27
Selling expenses366,931,444.56314,460,991.97
Administrative expenses1,596,480,325.171,328,539,562.59
R&D expenses2,398,742,531.342,064,307,059.29
Financial expenses194,864,359.66432,277,098.79
Including: Interest expenses146,895,744.91224,966,925.23
Interest income46,415,186.2327,722,299.33
Add: Other income219,224,748.0442,807,336.38
Investment income ("-" for loss)197,716,898.27694,476,722.54
Including: Investment gains in associated enterprise and joint-venture enterprise
Profit or loss arising from derecognition of financial assets measured at amortised costs (“-” for loss)-2,297,194.72
Net exposure hedging income ("-" for loss)
Gains from changes in fair value ("-" for loss)-12,391,097.59115,960,471.31
Credit impairment losses ("-" for loss)-9,464,407.8522,732,822.75
Asset impairment losses ("-" for loss)-60,378,317.10-77,813,666.52
Gains on disposal of assets ("-" for loss)-19,259,431.72-46,327,143.99
II. Operating Profit ("-" for loss)711,470,539.822,200,295,191.94
Add: Non-operating revenue14,343,882.3511,191,626.67
Less: Non-operating expenses81,884,486.8150,815,665.01
III. Total profit (“-” for total losses)643,929,935.362,160,671,153.60
Less: Income tax expenses-114,650,228.04233,595,325.88
IV. Net profit ("-" for net loss)758,580,163.401,927,075,827.72
(I) Net profit from continuing operations (“-” for net758,580,163.401,927,075,827.72
Item20212020
loss)
(II) Net profit from discontinued operations (“-” for net loss)
V. Other comprehensive income, net of tax
(I) Other comprehensive income items which will not be reclassified subsequently to profit or loss
1. Changes arising from remeasurement of defined benefit plan
2. Other comprehensive income that will not be transferred subsequently to profit or loss under the equity method
3. Changes in fair value of investments in other equity instruments
4. Changes in the fair value of the Company’s credit risk
5. Others
(II) Other comprehensive income items which will be reclassified subsequently to profit or loss
1. Other comprehensive income that will be transferred subsequently to profit or loss under the equity method
2. Changes in fair value of debt investments
3. Amount of financial assets reclassified into other comprehensive income
4. Credit impairment provision of other debt investments
5. Effective portion of cash flow hedging gains or losses
6. Differences on translation of foreign currency financial statements
7. Others
VI. Total comprehensive income758,580,163.401,927,075,827.72
VII. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share

5. Consolidated statement of cash flows

Unit: RMB

Item20212020
I. Cash flows from operating activities:
Cash received from sale of goods or rendering of services79,015,187,941.0757,009,742,269.73
Net increase in customer deposits and deposits from banks and other financial institutions
Net decrease in deposits with the Central Bank
Net increase in borrowings from other financial institutions
Cash receipts from original insurance contract premium
Net cash received from reinsurance business
Net increase in deposits and investments from policy holders
Cash received from for interests, fees and commissions
Net increase in borrowing funds
Net increase in repurchase business funds
Net cash received from securities trading brokerage
Refund of taxes and surcharges2,491,572,718.662,159,494,513.63
Cash received relating to other operating activities4,016,679,085.421,762,794,649.37
Sub-total of cash inflow from operating activities85,523,439,745.1560,932,031,432.73
Cash paid for goods and services63,038,774,946.4642,635,569,184.82
Net increase in loans and advances to customers
Net increase in deposits with central bank and other financial institutions
Payments of claims for original insurance contracts
Net increase in lending funds
Cash paid for interests, fees and commissions
Cash payments of policy dividend
Cash paid to and on behalf of employees7,719,283,934.606,749,284,393.90
Payments of taxes and surcharges748,229,544.50692,836,225.96
Item20212020
Cash paid relating to other operating activities5,418,675,791.713,172,085,514.37
Sub-total of cash outflow from operating activities76,924,964,217.2753,249,775,319.05
Net cash flow from operating activities8,598,475,527.887,682,256,113.68
II. Cash flows from investing activities
Cash received from disposal of investments3,101,972,150.22205,395,809.87
Cash received from returns on investments36,359,530.843,071,032.35
Net cash received from disposal of fixed assets, intangible assets and other long-term assets121,860,250.6250,158,655.80
Net cash received from disposal of subsidiaries and other business units6,872,916.88200,825,819.91
Cash received relating to other investing activities9,258,951.9246,410,668.35
Sub-total of cash inflow from investment activities3,276,323,800.48505,861,986.28
Cash paid to acquire fixed assets, intangible assets and other long-term assets6,961,607,745.795,599,269,477.49
Cash paid to acquire investments3,083,092,515.56207,730,344.46
Net increase in pledged loans
Net cash paid to acquire subsidiaries and other business units
Cash paid relating to other investing activities
Sub-total of cash outflow from investment activities10,044,700,261.355,806,999,821.95
Net cash flow from investing activities-6,768,376,460.87-5,301,137,835.67
III. Cash flows from financing activities
Cash received from capital contributions2,178,807,429.0150,528,721.67
Including: Cash received from capital contributions by minority shareholders of subsidiaries2,178,807,429.0150,528,721.67
Cash received from borrowings10,317,581,649.4610,493,168,094.87
Cash received from issuing bonds3,995,000,000.00
Cash received relating to other financing activities1,507,365,421.501,241,778,394.18
Sub-total of cash inflow from financing activities14,003,754,499.9715,780,475,210.72
Cash repayments of borrowings9,404,218,099.4111,495,387,428.29
Cash payments for distribution of dividends, profits, or cash payments for interest expenses674,578,631.48571,889,154.03
Including: Cash payments for dividends and profits to minority shareholders of the subsidiaries5,932,783.34
Cash payments relating to other financing3,537,780,408.802,070,736,840.22
Item20212020
activities
Sub-total of cash outflow from financing activities13,616,577,139.6914,138,013,422.54
Net cash flow from financing activities387,177,360.281,642,461,788.18
IV. Effect of foreign exchange rate changes on cash and cash equivalents7,432,490.21-204,991,873.97
V. Net Increase in cash and cash equivalents2,224,708,917.503,818,588,192.22
Add: Opening balance of cash and cash equivalents6,913,191,984.543,094,603,792.32
VI. Closing balance of cash and cash equivalents9,137,900,902.046,913,191,984.54

6. Parent company cash flow statement

Unit: RMB

Item20212020
I. Cash flows from operating activities:
Cash received from sale of goods or rendering of services41,440,959,868.6334,637,760,388.75
Refund of taxes and surcharges1,790,617,461.551,794,636,342.45
Cash received relating to other operating activities413,354,244.31991,600,112.67
Sub-total of cash inflow from operating activities43,644,931,574.4937,423,996,843.87
Cash paid for goods and services33,515,828,921.2226,854,502,114.47
Cash paid to and on behalf of employees4,068,784,659.433,352,126,718.10
Payments of taxes and surcharges194,091,540.85264,439,744.87
Cash paid relating to other operating activities1,609,432,568.102,384,116,356.74
Sub-total of cash outflow from operating activities39,388,137,689.6032,855,184,934.18
Net cash flow from operating activities4,256,793,884.894,568,811,909.69
II. Cash flows from investing activities
Cash received from disposal of investments236,295,118.62246,753,013.74
Cash received from returns on investments544,414.32619,011,093.47
Net cash received from disposal of fixed assets, intangible assets and other long-term assets323,227,247.63374,260,043.85
Net cash received from disposal of
Item20212020
subsidiaries and other business units
Cash received relating to other investing activities8,951,126,589.677,265,257,255.90
Sub-total of cash inflow from investment activities9,511,193,370.248,505,281,406.96
Cash paid to acquire fixed assets, intangible assets and other long-term assets4,448,253,564.402,931,933,621.75
Cash paid to acquire investments418,652,038.102,187,937,880.00
Net cash paid to acquire subsidiaries and other business units
Cash paid relating to other investing activities8,806,986,219.188,331,815,435.05
Sub-total of cash outflow from investment activities13,673,891,821.6813,451,686,936.80
Net cash flow from investing activities-4,162,698,451.44-4,946,405,529.84
III. Cash flows from financing activities
Cash received from capital contributions
Cash received from borrowings9,085,440,334.007,418,870,421.56
Cash received from issuing bonds3,995,000,000.00
Cash received relating to other financing activities6,191,082,902.133,252,923,797.17
Sub-total of cash inflow from financing activities15,276,523,236.1314,666,794,218.73
Cash repayments of borrowings7,202,245,451.9310,012,913,837.30
Cash payments for distribution of dividends, profits, or cash payments for interest expenses618,985,623.65470,044,905.35
Cash payments relating to other financing activities6,373,227,380.302,806,526,945.85
Sub-total of cash outflow from financing activities14,194,458,455.8813,289,485,688.50
Net cash flow from financing activities1,082,064,780.251,377,308,530.23
IV. Effect of foreign exchange rate changes on cash and cash equivalents-5,853,969.14-21,879,842.75
V. Net Increase in cash and cash equivalents1,170,306,244.56977,835,067.33
Add: Opening balance of cash and cash equivalents2,309,983,958.741,332,148,891.41
VI. Closing balance of cash and cash equivalents3,480,290,203.302,309,983,958.74

7. Consolidated statement of changes in owners' equity

Amount of current period

Unit: RMB

Item2021
Owners' equity attributable to the CompanyMinority equityTotal owners' equity
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesGeneral risk reserveRetained earningsOtherSub-total
Preferred sharesPerpetual bondsOther
I. Balance at December 31, 20203,275,438,427.00317,690,852.253,811,658,791.28516,007,644.95-112,010,012.521,370,122,868.856,081,200.0011,500,277,791.3519,653,252,273.2680,418,514.8319,733,670,788.09
Add: Changes in accounting policy
Corrections of errors in previous period
Business combination under common control
Other
II. Balance at January 1, 20213,275,438,427.00317,690,852.253,811,658,791.28516,007,644.95-112,010,012.521,370,122,868.856,081,200.0011,500,277,791.3519,653,252,273.2680,418,514.8319,733,670,788.09
III. Changes in Current Period (“-” for decrease)140,882,609.00-317,690,852.255,666,447,403.021,775,965,501.8011,863,242.9576,413,252.663,872,545,567.137,674,495,720.71523,222,199.478,197,717,920.18
(I) Total comprehensive income193,810,124.254,274,702,999.384,468,513,123.6342,121,051.054,510,634,174.68
(II) Capital invested and reduced by owners140,882,609.00-317,690,852.254,080,674,276.461,999,998,595.631,903,867,437.582,178,807,429.014,082,674,866.59
1. Ordinary shares invested by owners140,882,609.00-316,184,720.613,209,305,793.201,999,998,595.631,034,005,085.962,178,807,429.013,212,812,514.97
2. Capital contributed from other equity instrument
holders
3. Amounts of share-based payments recognized in owners' equity871,368,483.26871,368,483.26871,368,483.26
4. Other-1,506,131.64-1,506,131.64-1,506,131.64
(III) Profit distribution75,858,016.34-575,516,354.09-499,658,337.75-5,932,783.34-505,591,121.09
1. Appropriation of surplus reserves75,858,016.34-75,858,016.34
2. Appropriation of general risk reserve
3. Dividends to owners or shareholde-499,658,337.75-499,658,337.75-5,932,783.34-505,591,121.09
rs
4. Other
(IV) Internal carry-over of shareholders' equity1,585,773,126.56-224,033,093.83-181,946,881.30555,236.32173,358,921.841,801,773,497.25-1,691,773,497.25110,000,000.00
1. Capital reserves converted into capital (or share capital)
2. Surplus reserves converted into capital (or share capital)
3. Surplus reserves for making up losses
4. Carry-over retained earnings
from defined benefit plan changes
5. Carry-over retained earnings from other comprehensive income-181,946,881.30555,236.32173,358,921.84-8,032,723.148,032,723.14
6. Other1,585,773,126.56-224,033,093.831,809,806,220.39-1,699,806,220.39110,000,000.00
(V) Special reserves
1. Withdrawal in current period
2. Use in current period
(VI) Other
IV. Balance at December3,416,321,036.009,478,106,194.302,291,973,146.75-100,146,769.571,446,536,121.516,081,200.0015,372,823,358.4827,327,747,993.97603,640,714.3027,931,388,708.27

Amount in previous period

Unit: RMB

31, 2021Item

Item2020
Owners' equity attributable to the CompanyMinority equityTotal owners' equity
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesGeneral risk reserveRetained earningsOtherSub-total
Preferred sharesPerpetual bondsOther
I. Balance at December 31, 20203,245,103,948.002,996,990,669.12395,758,317.37-84,500,740.501,177,415,286.084,896,400.009,163,016,394.2716,107,163,639.6022,041,359.2716,129,204,998.87
Add: Changes in accounting policy196,303.24196,303.24196,303.24
Corrections of errors in previous period
Business combination under common
control
Other
II. Balance at January 1, 20213,245,103,948.002,996,990,669.12395,758,317.37-84,500,740.501,177,415,286.084,896,400.009,163,212,697.5116,107,359,942.8422,041,359.2716,129,401,302.11
III. Changes in Current Period (“-” for decrease)30,334,479.00317,690,852.25814,668,122.16120,249,327.58-27,509,272.02192,707,582.771,184,800.002,337,065,093.843,545,892,330.4258,377,155.563,604,269,485.98
(I) Total comprehensive income-27,509,272.022,848,007,269.612,820,497,997.594,202,797.162,824,700,794.75
(II) Capital invested and reduced by owners30,334,479.00317,690,852.251,175,630,540.76477,129,807.721,046,526,064.2950,092,419.941,096,618,484.23
1. Ordinary shares invested by owners30,334,479.00-68,078,830.06703,406,567.98477,129,807.72188,532,409.2050,092,419.94238,624,829.14
2. Capital contributed from other385,769,682.31385,769,682.31385,769,682.31
equity instrument holders
3. Amounts of share-based payments recognized in owners' equity472,223,972.78472,223,972.78472,223,972.78
4. Other
(III) Profit distribution192,707,582.771,184,800.00-510,942,175.77-317,049,793.00-317,049,793.00
1. Appropriation of surplus reserves192,707,582.77-192,707,582.77
2. Appropriation of general risk reserve1,184,800.00-1,184,800.00
3. Dividends to owners or shareholder-317,049,793.00-317,049,793.00-317,049,793.00
s
4. Other
(IV) Internal carry-over of shareholders' equity-360,962,418.60-356,880,480.14-4,081,938.464,081,938.46
1. Capital reserves converted into capital (or share capital)
2. Surplus reserves converted into capital (or share capital)
3. Surplus reserves for making up losses
4. Carry-over retained earnings
from defined benefit plan changes
5. Carry-over retained earnings from other comprehensive income
6. Other-360,962,418.60-356,880,480.14-4,081,938.464,081,938.46
(V) Special reserves
1. Withdrawal in current period
2. Use in current period
(VI) Other
IV. Balance at December 31, 20213,275,438,427.00317,690,852.253,811,658,791.28516,007,644.95-112,010,012.521,370,122,868.856,081,200.0011,500,277,791.3519,653,252,273.2680,418,514.8319,733,670,788.09

8. Parent company statement of changes in owners' Equity

Amount of current period

Unit: RMB

Item2021
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
I. Balance at December 31, 20203,275,438,427.00317,690,852.253,815,383,616.46516,007,644.951,370,120,086.4510,249,229,212.1118,511,854,549.32
Add: Changes in accounting policy
Corrections of errors in previous period
Other
II. Balance at January 1, 20213,275,438,427.00317,690,852.253,815,383,616.46516,007,644.951,370,120,086.4510,249,229,212.1118,511,854,549.32
III. Changes in Current Period140,882,609.00-317,690,852.253,891,250,474.751,775,965,501.8076,413,252.66188,060,936.142,202,950,918.50
Item2021
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
(“-” for decrease)
(I) Total comprehensive income5,552,363.15758,580,163.40764,132,526.55
(II) Capital invested and reduced by owners140,882,609.00-317,690,852.254,005,283,568.581,999,998,595.631,828,476,729.70
1. Ordinary shares invested by owners140,882,609.00-316,184,720.613,209,305,793.201,999,998,595.631,034,005,085.96
2. Capital contributed from other equity instrument holders
3. Amounts of share-based payments recognized in owners' equity795,977,775.38795,977,775.38
Item2021
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
4. Other-1,506,131.64-1,506,131.64
(III) Profit distribution75,858,016.34-575,516,354.09-499,658,337.75
1. Appropriation of surplus reserves75,858,016.34-75,858,016.34
2. Dividends to owners or shareholders-499,658,337.75-499,658,337.75
3. Other
(IV) Internal carry-over of shareholders' equity-114,033,093.83-224,033,093.83-5,552,363.15555,236.324,997,126.83110,000,000.00
1. Capital reserves converted into capital (or share capital)
2. Surplus reserves converted into
Item2021
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
capital (or share capital)
3. Surplus reserves for making up losses
4. Carry-over retained earnings from defined benefit plan changes
5. Carry-over retained earnings from other comprehensive income-5,552,363.15555,236.324,997,126.83
6. Other-114,033,093.83-224,033,093.83110,000,000.00
(V) Special reserves
1. Withdrawal in current
Item2021
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
period
2. Use in current period
(VI) Other
IV. Balance at December 31, 20213,416,321,036.007,706,634,091.212,291,973,146.751,446,533,339.1110,437,290,148.2520,714,805,467.82

Amount in previous period

Unit: RMB

Item2020
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
I. Balance at December 31, 20203,245,103,948.003,030,803,915.63395,758,317.371,177,412,503.688,831,910,760.1615,889,472,810.10
Add: Changes in accounting policy
Corrections of
Item2020
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
errors in previous period
Other
II. Balance at January 1, 20213,245,103,948.003,030,803,915.63395,758,317.371,177,412,503.688,831,910,760.1615,889,472,810.10
III. Changes in Current Period (“-” for decrease)30,334,479.00317,690,852.25784,579,700.83120,249,327.58192,707,582.771,417,318,451.952,622,381,739.22
(I) Total comprehensive income1,927,075,827.721,927,075,827.72
(II) Capital invested and reduced by owners30,334,479.00317,690,852.251,141,460,180.97477,129,807.721,012,355,704.50
1. Ordinary shares invested by owners30,334,479.00-68,078,830.06687,349,380.98477,129,807.72172,475,222.20
Item2020
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
2. Capital contributed from other equity instrument holders385,769,682.31385,769,682.31
3. Amounts of share-based payments recognized in owners' equity454,110,799.99454,110,799.99
4. Other
(III) Profit distribution192,707,582.77-509,757,375.77-317,049,793.00
1. Appropriation of surplus reserves192,707,582.77-192,707,582.77
2. Dividends to owners or shareholders-317,049,793.00-317,049,793.00
3. Other
(IV) Internal-356,880,480.14-356,880,480.1
Item2020
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
carry-over of shareholders' equity4
1. Capital reserves converted into capital (or share capital)
2. Surplus reserves converted into capital (or share capital)
3. Surplus reserves for making up losses
4. Carry-over retained earnings from defined benefit plan changes
5. Carry-over retained
Item2020
Share capitalOther equity instrumentsCapital reservesLess: Treasury sharesOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsOtherTotal owners' equity
Preferred sharesPerpetual bondsOther
earnings from other comprehensive income
6. Other-356,880,480.14-356,880,480.14
(V) Special reserves
1. Withdrawal in current period
2. Use in current period
(VI) Other
IV. Balance at December 31, 20213,275,438,427.00317,690,852.253,815,383,616.46516,007,644.951,370,120,086.4510,249,229,212.1118,511,854,549.32

III. Company ProfileGoertek Inc. (hereinafter referred to as “the Company” or “Goertek”) was established on July 27, 2007, through an overallchange of WeiFang IEA Electro-Acoustic Co., Ltd. (hereinafter referred to as "IEA”).

IEA, the predecessor of the Company that was established on June 25, 2001 was a joint venture established by law. In May,2007, the Company was changed to a domestic enterprise as approved by the document of Wei Wai Jing Mao Wai Zi (2007) No. 172.It was at the 2nd extraordinary general meeting of shareholders of IEA in 2017, held on June 26, 2007, that WeifangYitonggong Electronics Co., Ltd(the name of the Company was changed to “Goertek Group Co., Ltd. ”in October 2016, hereinafterreferred to as “Goertek group”)transferred its 29.40 million shares in IEA to 17 natural persons including Jiang Bin and Jiang Long,Langfang Development Zone Yongzhen Electronic Technology Co., Ltd.(hereinafter referred to as “Yongzheng Electronic”) andBeijing Yirun Venture Capital Investment Co., Ltd (hereinafter referred to as “Yirun VCI”).

On July 18, 2007, Goertek Group, Yongzhen Electronic, Yirun VCI and the 17 persons including Jiang Bin and Jiang Longjointly entered into an initiator agreement, changing IEA as a whole to Goertek Acoustic Inc. in the form of initiation, in which theaudited net assets of IEA as of June 30, 2007 were taken as the contribution upon stock discount at the proportion of approximately 1:

0.8.

As approved by the document of China Securities Regulatory Commission[2008]NO. 613,the principal undertaker CITICSecurities Co., Ltd. issued 30 million ordinary shares (Class A shares) ,through offline inquiry and placement in combination withonline subscription, pricing, and issue, at the price of RMB 18.78 per share. The raised funds mentioned above were verified byBandung Certified Public Accountants Co., Ltd. which issued the capital verification report (Wan Kuai Ye Zi [2008] No. 19). Thestocks of the Company were listed and traded at Shenzhen Stock Exchange on May 22, 2008.The Company changed its registeredcapital to RMB 120 million and completed the industrial and commercial change registration on July 22, 2008.

As reviewed and approved at annual general meeting of shareholders of the Company of 2008, held on April 17, 2009, thetotal share capital of the Company, namely 120 million shares as of December 31, 2008, was taken as the basis to convert capitalreserve to share capital. 10 shares for every 10 shares were converted to all shareholders, with total of 120 million shares converted.Thus, the total share capital of the Company was changed to 240 million shares. The above change in the registered capital has beenverified by Bandung Asia Certified Public Accountants Co., Ltd. which has issued the capital verification report (Wan Ya Kuai Ye Zi(2009) No. 2427), and the industrial and commercial change registration was completed on July 20, 2009.

As reviewed and approved at annual general meeting of shareholders of the Company of 2009, held on February 26, 2010, thetotal share capital of the Company, namely 240 million shares as of December 31, 2009,was taken as the basis to convert capitalreserve to share capital 5 shares for every 10 shares were converted to all shareholders, and total of 120 million shares were

converted. Thus, the total share capital of the Company was changed to 360 million shares. The above change in the registeredcapital has been verified by Crowe Horwath Certified Public Accountants Co., Ltd. which has issued the capital verification report(Hao Hua Yan Zi [2020] NO. 20). The industrial and commercial change registration was completed on March 30, 2010.

As approved through the Reply on Approving Non-public Issuing of Stocks by Goertek Acoustic Inc. of China SecuritiesRegulatory Commission (Zheng Jian Xu Ke [2010] NO. 1255), on September 29, 2010, the Company had the principal underwriterCITIC Securities Co., Ltd. to issue 15.791275 million (Class A shares) to 5 specific objects through private issuing at the price ofRMB 33.01 per share. The net amount of actual raised funds was RMB 506.21998775 million. The raised funds mentioned abovehave been verified by Crowe Horwath Certified Public Accountants Co., Ltd. which has issued the capital verification report (HaoHua Yan Zi [2010] No. 90. The Company changed its capital to RMB 375.791275 million, and completed the industrial andcommercial change registration on December 13, 2010.

As reviewed and approved at the company's annual general meeting of shareholders of 2010 on May 25, 2011, the total shareof the Company, namely 375.791275 million shares as of December 31, 2010, was taken as the basis to convert capital reserve toshare capital, and 10 shares for every 10 shares were converted to all the shareholders,with total of 375.791275 million sharesconverted. Upon such conversion, the total share capital of the Company was changed to 751.58255 million shares. The abovechange in registered capital has been verified by Crowe Horwath Certified Public Accountants Co., Ltd. which has issued the capitalverification report (Guo Hao Yan Zi [2011] No.49), and the industrial and commercial change registration was completed on June 24,2011.

As approved through the Reply on Approving Non-public Issuing of Stocks by Goertek Acoustic Inc. of China SecuritiesRegulatory Commission (Zheng Jian Xu Ke[2012] No. 108), GF Securities Co., Ltd. issued 96.434183 million shares (Class A shares)in RMB to 10 specific objects through private issuing at the price of RMB 24.69 per share,and the net amount of the actually raisedfunds was RMB 2,320.77885875 million. The raised funds mentioned above have been verified by Crowe Horwath Certified PublicAccounts Co., Ltd. (special general partnership) which has issued the capital verification report (Guo Hao Yan Zi[2012] No. 408A14).The Company changed its registered capital to RMB 848.016733 million, and completed the industrial and commercial changeregistration on May 7, 2012.

As reviewed and approved at company's general meeting of shareholders of 2012 held on May 9, 2013, the total share capitalof the Company, namely 848,016,733 shares as of December 31, 2012, was taken as the basis to distribute cash dividends of RMB

1.5 (tax inclusive) for every 10 shares to all the shareholders, with cash dividends of RMB 127,202,509.95 in total. The Companyalso converted capital reserve to share capital, and 8 shares for every 10 shares were converted to all shareholders, with total678,413,386 shares converted. Upon such conversion, the total share capital of the Company was changed to 1,526,430,119 shares.The above change in the registered capital has been verified by Crowe Horwath Certified Public Accountants Co., Ltd. (special

general partnership) which has issued the capital verification report (Guo Hao Yan Zi [2013] No. 408A0001). The industrial andcommercial change registration was completed on June 19, 2013.

On June 2, 2016, the name of Goertek Acoustic Inc. was changed to Goertek Inc. As the holder of the convertible bonds of theCompany requested conversion of shares, the registered capital of the Company was changed to RMB1,526,581,348. The scope ofbusiness was changed to development, manufacturing and sales of: Acoustic, optical and wireless communication technologies andrelated products, robots and automation equipment, intelligent electromechanical and information products, precision moulds forelectronic products, precision hardware, semiconductor products and MEMS products, consumer electronics, LED package andrelevant application products; Development and sales of the software related to the above products; Services related to the abovetechnologies and products; Import and export of goods and technologies (excluding radio transmission and satellite receivingequipment and the items prohibited by the national laws and regulations). (For the items requiring approval by law, businessactivities may only be conducted in respect thereof upon approval of relevant department)

As reviewed and approved at company’s annual general meeting of shareholders of 2016, held on April 14, 2017, the totalshare capital of the Company, namely 1,538,642,707 shares as of April 27,2017, which was the profit distribution equity registrationdate of the Company, was taken as the basis for the distribution of cash dividends RMB 1.5 (tax inclusive) for every 10 shares to allthe shareholders, with total RMB 230,796,406.05 distributed. 10 shares per every 10 shares were converted to all shareholders aswell.

According to the Proposal on Redemption of “Goertek Convertible Bonds” reviewed and approved at the 8th meeting of the4th board of directors held by the Company on May 23, 2017, it was resolved to exercise the conditional redemption right of“Goertek Convertible Bonds “which were not converted to shares at the price of the par value of the bonds plus the accrued interestfor current period. “Goertek Convertible Bonds” was no longer traded and converted from June 30, 2017. Through the above change,the Company changed its registered capital to RMB 3,245,103,948, and completed the industrial and commercial change registrationon November 3, 2017.

According to the Proposal on Early Redemption of “Goertek Convertible Bonds NO.2” reviewed and approved at the13thmeeting of the 5th board of directors and the 11th meeting of the 5th board of supervisors held by the Company on January 15,2021,it was resolved to exercise the conditional redemption right of “Goertek Convertible Bonds NO.2 2” to redeem all the “GoertekConvertible Bonds NO.2”, based on the price of the par value of the bonds plus the accrued interest for the current period. As ofMarch 3, 2021, “Goertek Convertible Bonds NO.2” was no longer traded and converted. Through the above change, the Companychanged its registered capital to RMB 3,416,321,036, and completed the industrial and commercial registration on June 22, 2021.

The registered address of the headquarters of the Company: 268 Dongfang Road, Weifang Hi-Tech Industrial DevelopmentZone.

The Company and its subsidiaries (collectively, “the Group”) are mainly in the business of operating electron components. Themain business of the Group is categorized into the industry of the manufacturing of computer, communication, and other electronicequipment. The Company's main products include acoustics, optics, microelectronics, structural components and other precisioncomponents, as well as smart hardware products such as TWS smart earphones, virtual reality (VR)/augmented reality (AR) products,smart wearable devices, gaming console and accessories, and smart home products.These financial statements have been approved by the Board of directors of the Company on March 29, 2022.As of December 31, 2021, the Group has included a total of 51 subsidiaries into its scope of consolidation, and for details,please refer to Note IX “Equity in Other Entities”. In current period, one more subsidiary has been included into its scope ofconsolidation in comparison to previous year, and for details, please refer to Note VIII “Changes in the Scope of Consolidation”.IV. Basis for Preparing the Financial Statement

1. Basis for the preparation

The Group has prepared the financial statements on a going concern basis, based on the actual transactions and matters inaccordance with The Accounting Standards for Business Enterprises - Basic Standards (issued by Order No. 33 of the Ministry ofFinance and amended by Order No. 76 of the Ministry of Finance) issued by the Ministry of Finance, 42 specific accountingstandards, application guidelines of accounting standards for business enterprises, explanations on the accounting standards forbusiness enterprises and other related regulations (hereinafter collectively referred to as "Accounting Standards for BusinessEnterprises") issued and amended on or after 15 February, 2006, and Preparation Rules for Information Disclosure by CompaniesOffering Securities to the Public No. 15 - General Provisions on Financial Reports (2014 Revision) issued by CSRC.

According to relevant provisions in the Accounting Standards for Business Enterprises, the accounting calculation of the Groupwas on the accrual basis. The value of non-current assets held for sale shall be lesser of non-current assets held for sale less the salescost at fair value, or the original book value at the time when the hold-for-sale conditions were met. In case of asset impairment, theappropriate impairment provision shall be accrued according to relevant regulations.

2. Continue as a going concern

The Company evaluated its ability to continue as a going concern for 12 months after the end of the current reporting period,without matters or circumstances causing significant doubt over the ability to continue as a going concern. Therefore, these financialstatements were prepared on a going concern basis.

V. Significant Accounting Policies and Accounting EstimatesNotes to specific accounting policies and accounting estimates:

The Group has formulated several specific accounting policies and accounting estimates in respect of the revenue recognition,R&D expenditure and other transactions and matters, according to the provisions of relevant Accounting Standards for BusinessEnterprises on the basis of the actual production and operation characteristics. For details, please refer to the descriptions in “32.Revenue” and “24(2). Accounting policy for internal research and development expenditure” of Note V. For explanation on themajor accounting judgments and estimates made by the management, please refer to “36. Other important accounting policies andaccounting policies and estimates” of Note V.

1. Statement of compliance with Accounting Standards for Business Enterprises

The financial statements have been prepared by the Group in compliance with the requirements of the Accounting Standards forBusiness Enterprises, and give a true and complete view of the financial status of the Company and the Group as at December 31,2021, as well as the business performance, and cash flows and other relevant information for the year 2021. In addition, the financialstatements of the Company and the Group comply in all material aspects with the requirements concerning disclosure of the financialstatements and the notes specified in Preparation Rules for Information Disclosure by Companies Offering Securities to the PublicNo. 15 - General Provisions on Financial Reports (2014 Revision) by CSRC.

2. Accounting period

The accounting period of the Group is divided by annual accounting period and interim accounting period. Interim accountingperiod means a reporting period that is shorter than a complete accounting year. The Company adopts the calendar year as itsaccounting year, namely January 1 to December 31 of each year.

3. Business cycle

The normal business cycle means the period from the Group’s purchase of the assets for processing to realization of cash or cashequivalents. The Group takes 12 months as a business cycle and adopts the business cycle as liquidity classification standard forassets and liabilities.

4. Functional currency

RMB is the currency in the main economic environment in which the Company and its domestic subsidiaries are operated, andthe Company and its domestic subsidiaries take RMB as the functional currency. Goertek (HongKong) Co., Limited, Goertek

Technology (Hong Kong)co.,Limited, Goertek Microelectronics (Hong Kong) Co., Ltd., OPTIMAS CAPITAL PARTNERS FUNDLP and Goertek Microelectronics Holding Co., Ltd. take USD as their functional currency, and all other overseas subsidiaries of theCompany take the lawful currency of the country or region where their registered addresses are located as their functional currency.The currency adopted by the Group in preparing these financial statements is RMB.

5. Accounting treatments for business consolidation of enterprises under and not under common controlBusiness consolidation means the transaction or matter in which two or more separate enterprises are consolidated into onereporting entity. Business consolidation is divided into business consolidation of enterprises under common control and businessconsolidation of enterprises not under common control.

(1) Business consolidation of enterprises under common control

Business consolidation of enterprises under common control is the consolidation in which enterprises consolidated arecontrolled by the same party or parties before and after the consolidation, and such control is not temporary. In the businessconsolidation of enterprises under common control, the party which acquires the control of other enterprises in the businessconsolidation is the consolidating party and the other enterprises in the business consolidation are the consolidated parties. Businessconsolidation date is the date on which the consolidating party actually acquires the control of the consolidated parties.The assets and liabilities acquired by the consolidating party are measured on the basis of book value of consolidated parties onbusiness consolidation date. The difference between the book value of the net assets acquired by the consolidating party and the bookvalue of the consideration paid for the consolidation (or total par value of the shares issued) is adjusted to capital reserves (sharepremiums). Adjustments shall be made to retained earnings in the event that the capital reserves (share premiums) are not sufficientfor write-down.Any direct costs incurred by the consolidating party as a result of the business consolidation are recognized in the profit or lossfor current period when incurred.

(2) Business consolidation of enterprises not under common control

Business consolidation of enterprises not under common control is the consolidation in which the enterprises consolidated arenot controlled by the same party or parties before and after the business consolidation. In the business consolidation of enterprises notunder common control, the party which acquires the control of other enterprises in the business consolidation on the acquisition dateis the consolidating party and the other enterprises in the business consolidation are the acquired parties. Acquisition date is the dateon which the acquiring party actually acquires the control of the acquired parties.

In the business consolidation of enterprises not under common control, the cost of consolidation includes the fair value of assetspaid, liabilities incurred or assumed and equity securities issued by the acquiring party in exchange for the control of the acquired

parties on the acquisition date, the audit, legal service, assessment, consulting and other intermediate fees incurred for businessconsolidation of enterprises, and other management fees, which are recognized in the profit or loss for the current period whenincurred. The costs of the acquiring party for issuing equity or debt securities as part of the business consideration for the businessconsolidation are included in the initially recognized amount of these equity or debt securities. The contingent business considerationshall be included in the consolidation cost at its fair value on the acquisition date, and the goodwill shall be adjusted and combinedaccordingly if the contingent consideration needs to be adjusted when new or further evidences arise in connection with thecircumstances existing on the acquisition date within 12 months after the acquisition date. The acquisition cost incurred by theacquiring party and the identifiable net assets acquired in the business consolidation shall be measured at the fair value on theacquisition date. If the consolidation cost is higher than the fair value of the identifiable net assets acquired from the acquired partieson the acquisition date, the difference thereof shall be recognized as the goodwill. If the consolidation cost is lower than the fair valueof the identifiable net assets acquired from the acquired parties in the business consolidation, the fair value of the identifiable assets,liabilities and contingent liabilities as well as the measurement of the consolidation cost shall be first reviewed. If upon review, theconsolidation cost is still lower than the fair value of the identifiable net assets acquired from the acquired parties in the businessconsolidation, such difference shall be recognized in the profit or loss for current period.If the deductible temporary difference acquired by the acquiring party from the acquired parties is not recognized for failure tomeet the conditions for recognition of the deferred tax assets on the acquisition date, and if new or further information is obtainedwithin 12 months after the acquisition date, showing that relevant circumstances on the acquisition date have already existed and it isexpected that the economic benefits brought about by the deductible temporary difference of the acquiring party on the acquisitiondate may be realized, relevant deferred tax assets shall be recognized and the goodwill shall be reduced. If the goodwill is insufficientfor write-down, the difference will be recognized in the profit or loss for current period. In addition to the above condition, thedeferred tax assets recognized in connection with the consolidation of enterprises shall be recognized in the profit or loss for currentperiod.

If the business consolidation of enterprises not under common control is realized step by step through multiple transactions,whether such transactions fall within a “package deal” shall be judged according to the standards for judgment of “package deal” inthe Notice by the Ministry of Finance of Issuing the Interpretation No. 5 of the Accounting Standards for Business Enterprises (CaiKuai [2012] No. 19) and Article 51 of the Accounting Standards for Business Enterprises No. 33 - Consolidated FinancialStatements (see 6(2) of Note V). If they fall within "package deal”, see the description in the previous paragraphs of this part and “18.Long-term equity investments” of Note V for accounting treatment. If they do not fall within “package deal”, relevant accountingtreatment shall be distinguished for individual financial statements and consolidated financial statements:

In the individual financial statements, the sum of the book value of the equity investment of the acquired parties held before theacquisition date and the increased investment cost on the acquisition date shall be taken as the initial investment cost of suchinvestment. If other comprehensive income is involved in the equity of the acquired parties held before the acquisition date, theaccounting treatment of other comprehensive incomes while disposing such investment, shall be conducted on the same basis as thedirect disposal of related assets or liabilities by the acquired parties.In the consolidated financial statements, the equity of the acquired parties held before the acquisition date shall be remeasured atthe fair value of such equity on the acquisition date, and the difference between the fair value and its book value shall be recognizedin investment income in current period. If other comprehensive income is involved in the equity of the acquired parties held beforethe acquisition date, the accounting treatment of other comprehensive incomes related, shall be conducted on the same basis as thedirect disposal of related assets or liabilities by the acquired parties.

6. Method for Preparing the Consolidated Financial Statement

(1) Principles for determination of the scope of consolidated financial statements

The scope of the consolidation of consolidated financial statements shall be determined on the basis of control. Control meansthat the Group enjoys variable returns through its power in the invested parties and its participation in relevant activities of theinvested parties, and is able to influence the amount of such returns by applying its power in the invested parties. The Company andall its subsidiaries are included in the scope of consolidation. Subsidiary means the entity controlled by the Group.

The Group shall launch re-assessment, if the changes in relevant facts and circumstances that lead to changes in relevantelements of the above control definition occur.

(2) Method for preparing the consolidated financial statements

The Company shall include the subsidiaries into the scope of consolidation from the date when it obtains the net assets andactual control over the production and operation decisions of the subsidiaries. It shall cease to do so as of the date when the actualcontrol is lost. For the disposal subsidiaries, the business performance and cash flows prior to the disposal date have beenappropriately included in the consolidated income statement and consolidated statement of cash flows. The opening balance of theconsolidated balance sheets shall not be adjusted for the subsidiaries disposed in current period. For the subsidiaries added throughthe consolidation of enterprises not under common control, the business performance and cash flows have been appropriatelyincluded in the consolidated income statement and consolidated cash flow statement after acquisition date. The opening balance andcomparative figures of consolidated financial statements shall not be adjusted. For the subsidiaries added during consolidation ofenterprises under common control and the subsidiaries under absorption consolidation, the business performance and cash flows,

from the beginning of current period to consolidation date, have been appropriately included in consolidated income statement andconsolidated cash flow statement. The comparison figures in the consolidated financial statements shall be adjusted at the same time.In preparing the consolidated financial statements, if the accounting policies or accounting periods of the subsidiaries aredifferent from those of the Company, the financial statements of the subsidiaries shall be adjusted based on the accounting policiesand accounting periods of the Company. The individual financial statements of the subsidiaries acquired from consolidation ofenterprises not under common control are adjusted based on the fair value of the identifiable net assets on the acquisition date.All the material account balances, transactions and unrealized profits within the Group shall be offset during preparation of theconsolidated financial statements.The shareholders' equity and current net profits or losses of the subsidiaries which are not owned by the Company shall beseparately listed under the shareholders' equity and net profit in the consolidated financial statements as minority equity and minorityinterests. These current profits or losses of the subsidiaries which are attributable to the minority equity shall be presented as“minority interests” under the net profit of the consolidated financial statements. If the losses of the subsidiaries attributed to theminority shareholders are more than the shareholders’ equity owned by the minority shareholders in such subsidiaries at thebeginning of the period, the minority interests shall be offset.

If the control of the previous subsidiaries is lost due to disposal of some equity investments or for any other reasons, theremaining equity shall be re-measured at fair value on the date when control is lost. The difference between the sum of considerationreceived from disposal of equity and the fair value of the remaining equity, and the Company’s share of the previous subsidiaries’ netassets calculated at the previous shareholding proportion from the acquisition date, shall be recognized in investment income in theperiod when control is lost. Other comprehensive income related to the equity investment of the previous subsidiaries shall beconducted on the same basis as the direct disposal of related assets or liabilities by the acquired parties when the control is lost(Except for the change caused by the re-measurement of net liabilities or net assets of the defined benefit plan in the previoussubsidiary, the remaining part shall be converted into investment income for current period). Thereafter, such remaining equity shallbe subject to subsequent measurement according to the Accounting Standards for Business Enterprises No. 2 - Long-term EquityInvestments or Accounting Standards for Business Enterprises No. 22 - Confirmation and Measurement of Financial Instruments andother relevant regulations. For details, please refer to “18. Long-term equity investments” of Note V or “9. Financial instruments” ofNote V.

If the Group disposes of the equity investment of the subsidiaries step by step through multiple transactions until it loses thecontrol thereof, it is necessary to determine whether such transactions fall within "a package deal". The multiple transactions shall betaken as "package deal" for accounting treatment, if the terms, conditions and economic impacts of the transactions undertaken todispose of the equity investment of the subsidiaries meet one or more of the following conditions: ① these transactions are entered

into at the same time or with their impacts on each other considered; ② a complete business result may only be achieved throughthese transactions when taken as a whole; ③ one transaction depends on at least one of the other transactions; ④ one transaction isnot economical on its own, but it is economical when considered together with other transactions. If they do not fall within "packagedeal", each of them shall be subject to accounting treatment according to the principles applicable to “Partial disposal of thelong-term equity investments in the subsidiaries without losing control” (for details, please refer to (2)④ of 18 of Note V) and “Lossof control of the previous subsidiaries due to disposal of some equity investments or for any other reasons”, as appropriate. If thetransactions taken to dispose of the equity investment in the subsidiaries until lost of control are recognized as “package deal”, thesetransactions shall be subject to accounting treatment as one transaction in which the subsidiaries are disposed and the control is lost.However, the difference between the price for each disposal before the control is lost and share of such subsidiaries’ net assets as aresult of disposal of investment, shall be recognized in other comprehensive income in the consolidated financial statements, and beincluded in profit or loss for the period when the control is lost.

7. Criteria for determining cash and cash equivalents

Cash and cash equivalents of the Group include cash on hand, deposits available at any time for payment, and short-term(generally due within three months from the date of purchase) and highly liquid investments which are readily convertible intoknown amounts of cash and subject to an insignificant risk of changes in value.

8. Foreign currency business and foreign currency statement translation

(1) Conversion method of foreign currency transaction

A foreign currency transaction of the Group is translated into the functional currency at initial recognition, using the spotexchange rate prevailing at the date of the transaction (it means, in most cases, the central parity of the foreign exchange rateannounced by the People's Bank of China on that day; the same hereinafter). However, a foreign currency exchange transaction orother foreign currency exchange involved transaction of the Group is translated into the functional currency using the actualexchange rate.

(2) Translation method of monetary items denominated in foreign currencies and non-monetary items denominated in foreigncurrencies

The foreign currency monetary items on the balance sheet date is translated at the spot exchange rate on the balance sheet date,and the exchange differences arising therefrom are included in the current profits and losses, except that ① the exchange differencearising from the special foreign currency borrowing related to the purchase and construction of assets eligible for capitalization istreated in accordance with the principle of capitalization of borrowing costs; and ② the exchange difference from changes in

carrying amounts, other than amortized cost, of available-for-sale monetary items in foreign currencies is recognized in othercomprehensive income.

Non-monetary items denominated in foreign currency that are measured at historical cost shall still be valued in the functionalcurrency and converted at the spot exchange rate as of the transaction date. Non-monetary items denominated in foreign currency thatare measured at fair value are converted by using the exchange rate at the date when fair value is determined and the differencebetween the converted functional currency amount and the prior amount in functional currency is recorded as profit or loss arisingfrom a change in fair value (including exchange rate change) for the current period or other comprehensive income.

(3) Translation method of foreign currency financial statements

The foreign currency financial statements of overseas operations shall be converted into Chinese currency statements inaccordance with the following methods: The assets and liabilities items in the balance sheet are translated at the spot exchange rateon the balance sheet date; except for "retained earnings", other items of shareholder's equity are converted at the spot exchange rate atthe time of occurrence. Revenues and expenses in the profit statement are translated using the average exchange rates prevailing inthe period of the transactions. Retained earnings in the beginning of the year are the retained earnings at the end of the prior year astranslated; retained earnings at the end of the period are calculated and presented according to the translated profit distributions;exchange differences from translation between translated assets and translated liabilities and equities are recognized in othercomprehensive income as exchange differences from translation. When the Group disposes of, and loses the control over, an overseasoperation, exchange differences from translation which are presented in “equity” of the balance sheet and related to the overseasoperation are, all or based on the disposal proportion, transferred to the profit or loss of the period of disposal.

Cash flows denominated in foreign currencies and cash flows of overseas subsidiaries are translated using the average exchangerates prevailing in the period of the cash flows. Any impact of exchange rate changes on cash is presented as a separate adjustingitem in the cash flow statement.

The amount in the beginning of the year and the actual amount of the prior year are presented as translated amounts based on theprior year’s financial statements.

When all the equities of the Group in an overseas operation are disposed, or the control over an overseas operation is lost for adisposal of partial equity investments or any other reason, exchange differences which are presented in “shareholder’s equity/owner’sequity” of the balance sheet, related to the overseas operation and attributable to the parent company are all transferred to the profitor loss of the period of disposal.

If the proportion of equities in an overseas operation declines (but the control over that overseas operation is not lost) for adisposal of partial equity investments or any other reason, exchange differences which are related to that partial disposal areattributed to minority equity and not transferred to the profit or loss of the period of disposal. When the disposal of overseas

operation involves a part of the equities in an associate or joint venture, exchange differences from translation which are related tothe overseas operation are, based on the disposal proportion, transferred to the profit or loss of the period of disposal.

For any monetary item denominated in a foreign currency which is substantially net investment in an overseas operation, in theconsolidated financial statements, exchange differences from the exchange rate changes are recognized in other comprehensiveincome as “exchange differences from translation”, and when the overseas operation is disposed, are transferred to the profit or lossof the period of disposal.

9. Financial instruments

A financial asset or financial liability shall be recognized when the Group becomes a party to a financial instrument contract.

(1) Classification, recognition and measurement of financial assets

Pursuant to the business model of managing financial assets and the contractual cash flow characteristics of financial assets,financial assets are classified by the Group into financial assets at amortized cost, financial assets at fair value through othercomprehensive income, and financial assets at fair value through profit and loss.

Financial assets, when initially recognized, shall be measured at fair value. For the financial assets measured at fair valuethrough profit and loss, the related transaction costs shall be included directly into current profits and losses. For the financial assetsor financial liabilities of other categories, the related transaction costs shall be included in the initially recognized amount. For theaccounts receivable or notes receivable arising from the sale of products or the provision of labor services, which do not include orconsider major financing components, the amount of consideration that the Group is expected to be entitled to is taken as the initiallyrecognized amount.

① Financial assets at amortized cost

The Group’s business model for managing financial assets is aimed to collect contractual cash flow, and the contractual cashflow characteristics of such financial assets are consistent with the basic lending arrangement, i.e., the cash flow generated on aspecific date is only the payment of principal and interest based on the amount of outstanding principal. For such financial assets, theGroup shall perform subsequent measurements at the amortized cost by effective interest method. The gains or losses arising fromamortization or impairment shall be included in current profits and losses.

② Financial assets at fair value through other comprehensive income

The Group's business model for managing this type of financial assets aims both to collect the contractual cash flow and to sellit, and the characteristics of contractual cash flow of this type of financial assets shall be consistent with the basic lendingarrangement. The Group measures these financial assets at fair value and the changes thereof shall be included in other

comprehensive income, but the impairment losses or gains, exchange gains and losses and interest income calculated by the effectiveinterest method shall be included in current profits and losses.Apart from that, the Group shall designate some investments in non-trading equity instruments as financial assets measured atfair value and the changes thereof shall be included in other comprehensive income. The Group will include the relevant dividendincome of this type of financial assets into current profits and losses, and the changes in fair value into other comprehensive income.Upon the termination of recognition of financial assets, the accumulated gains or losses previously included in other comprehensiveincome shall be transferred out of other comprehensive income and transferred to the retained earnings, other than being included incurrent profits and losses.

③ Financial assets at fair value through profit or loss

The financial assets except those classified into financial assets measured at amortized cost and financial assets at fair valuethrough other comprehensive income as mentioned above, are classified by the Group into those measured at fair value through profitand loss. In addition, at initial recognition, part of the financial assets can be recognized by the Group as financial assets measured atfair value through profit and loss, to eliminate or significantly reduce accounting mismatch. The financial assets are subsequentlymeasured by the Group at fair value, and changes in fair value are included in current profits and losses.

(2) Classification, recognition and measurement of financial liabilities

At initial recognition, financial liabilities are classified into financial liabilities at fair value through profit and loss, and otherfinancial liabilities. For the financial liabilities at fair value through profit and loss, the related transaction costs shall be includeddirectly in current profits and losses. For other financial liabilities, the related transaction costs shall be included in the initiallyrecognized amount.

① Financial liabilities at fair value through profit and loss

The financial liabilities at fair value through profit and loss shall include held-for-trading financial liabilities (includingderivatives falling into the category of financial liabilities) and financial liabilities designated as those measured at fair value throughprofit or loss at initial recognition.

Held-for-trading financial liabilities (including derivatives falling into the category of financial liabilities) shall be subsequentlymeasured at fair value. Except for hedging accounting, changes in fair value shall be included in current profits and losses.

The amount of change in the fair value of a financial liability which is designated as those measured at fair value through profitor loss due to change in the Group’s own credit risks shall be included in other comprehensive income. Upon the termination ofrecognition of such liability, the accumulative change in its fair value caused by the change of its own credit risk included in othercomprehensive income is transferred to retained earnings. The changes in its fair value shall be recorded in current gains and losses.If the treatment of the impact on the credit risk change of the financial liabilities in the above manner will cause or expand the

accounting mismatch in the profit and loss, the Group will recognize all the gains or losses (including the changes in the Group’sown credit risks) of the financial liabilities into current profits and losses.

② Other financial liabilities

Other financial liabilities except those caused by the transfer of financial assets that do not conform to the conditions forderecognition or continue to relate to the transferred financial assets and financial guarantee contracts shall be classified as financialliabilities measured at amortized cost, which shall be subsequently measured at amortized cost, and the gains or losses arising fromderecognition or amortization shall be included in current profits and losses.

(3) Principle of recognition and measurement method of financial asset transfer

The financial asset shall be de-recognized if: ① The contractual right to receive cash flows of the financial asset is terminated;

② The financial asset has been transferred and almost all risks and rewards in the ownership of the financial asset have beentransferred to the transferee; or ③ The financial asset has been transferred and the enterprise has neither transferred nor retainedalmost all risks and rewards in the ownership of the financial asset, but has waived its control over the financial asset.

If the enterprise does not transfer or retain substantially all of the risks and rewards related to the ownership of a financial assetand if the enterprise does not waive its control over the financial asset, it shall, according to the extent of its continuous involvementin the transferred financial asset, recognize the relevant financial asset and recognize the relevant liabilities accordingly. The extentof involvement in the financial asset transferred, refers to the company’s exposure to changes in the value of the financial assets.

If the overall transfer of a financial asset meets the conditions for de-recognition, the difference between the carrying value ofthe transferred financial asset and the sum of the transfer consideration received and the change in fair value originally recognized inother comprehensive income will be recognized in current profits and losses.

If the partial transfer of financial assets meets the conditions for derecognition, the carrying value of the transferred financialassets is apportioned between the derecognized part and the non-derecognized part according to their respective relative fair values,and the difference between the sum of the transfer consideration received and the change in fair value originally recognized in othercomprehensive income and apportioned to the de-recognition component and the aforesaid attributed carrying value will berecognized in current profits and losses.

If a financial asset is sold with the right of recourse or an endorsement, the Group needs to determine whether almost all therisks and rewards related to the ownership of the financial asset have been transferred. If all the risks and rewards related to theownership of the financial asset have been transferred to the transferee, the Group shall de-recognize the financial asset; If all therisks and rewards related to the ownership of the financial asset have been retained, the Group shall not de-recognize the financialasset. If none of the risks and rewards related to the ownership of the financial asset has been transferred or retained, the Group shall

continue to determine whether it retains the control over the asset, and the accounting standard stated in the aforesaid paragraphsshall apply.

(4) Derecognition of financial liabilities

When the current obligations of a financial liability (or part of it) have been discharged, the financial liability (or that part of thefinancial liability) shall be de-recognized by the Group accordingly. When the Group (borrower) signs an agreement with a lender toreplace a financial liability with a new one, in case of substantially different terms of contract between the new one and the originalone, the Group shall derecognize the original one and recognize the new one. If a substantial modification is made to all (or part of)the original financial liabilities by the Group, the original financial liabilities shall be de-recognized, and at the same time, a newfinancial liability shall be recognized in accordance with the modified terms.If all (or a part of) the financial liability is de-recognized, the difference between the carrying value allocated to thederecognized part and the consideration paid (including the transferred non-cash assets or the liabilities assumed) is included incurrent profits and losses by the Group.

(5) Offset of financial assets and financial liabilities

When the Group has the legal right to offset the recognized financial assets and financial liabilities, which is enforceable for thetime being, and the Group plans to settle on a netting basis or capitalize financial assets and serve financial liabilities, any net amountfrom netting of financial assets and financial liabilities shall be included in the balance sheet. Otherwise financial assets and financialliabilities shall be included separately in the balance sheet and shall not offset each other.

(6) Method of determining the fair value of financial assets and financial liabilities

Fair value refers to the price that market participants can receive by selling an asset or need to pay by transferring a liability inthe orderly transactions on the measurement date. The fair value of a financial instrument in an active market is determined by theGroup at the price quoted in the active market. The quotation in an active market refers to the price that is easily acquired fromexchanges, brokers, industry associations, pricing service agencies, and the like on a regular basis and represents the actual markettransactions in fair trade. If there is no financial instrument in an active market, its fair value shall be determined by the Group viavaluation techniques. Valuation techniques include looking into the prices used in recent market transactions by parties who refer tofamiliar situations and trade voluntarily and the current fair value of other financial instruments which are essentially the same, aswell as using the discounted cash flow method, the option pricing model and the like. During valuation, the Group shall adopt thevaluation techniques applicable under the current circumstances and supported by sufficient available data and other information,select the input values consistent with the characteristics of assets or liabilities considered by market participants in the transactionsof related assets or liabilities, and give priority to the relevant observable input values as much as possible. The unobservable inputvalues are used only when the relevant input values are unavailable or impracticable.

(7) Equity instruments

An equity instrument is a contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.The Group’s issuance (including refinancing), repurchase, sales or cancellation of an equity instrument shall be accounted for as achange to equity. Transaction costs of an equity transaction are accounted for as a deduction from equity. The Group does notrecognize changes in the fair value of equity instruments.If the Group's equity instruments distribute dividends (covering "interest" incurred by instruments classified as equityinstruments) during the existence thereof, the dividends shall be treated as profit distribution.

10. Impairment of financial assets

The financial assets for which the Group needs to recognize the impairment losses are financial assets measured at amortizedcost, which mainly include notes receivable, accounts receivable, other receivables, contract assets, and so on.

(1) Method for recognizing provision for impairment

Based on the expected credit loss, the Group shall make provision for impairment of the aforementioned items by its applicablemeasurement method (general method or simplified method) of expected credit loss and recognize the credit impairment losses.

Credit loss means the difference between all contractual cash flows receivable by the Group in accordance with the contract andall cash flows expected to be received, discounted at the original actual interest rate, i.e., the present value of all cash shortages.Purchased or originated credit-impaired financial assets shall be discounted by the Group according to credit-adjusted effectiveinterest rate adjusted by credit of such financial assets.

According to the general methods to measure expected credit impairment losses, the Group evaluates whether the credit risk ofthe financial assets (including other applicable items; the same hereinafter) has increased significantly since the initial recognition ateach balance sheet date. If the credit risk of the financial instrument has increased significantly since the initial recognition, theGroup measures its loss allowance according to the amount equivalent to the expected credit loss of the financial instrument over itsexpected lifetime; if the credit risk has not increased significantly since initial recognition, the Group measures its loss allowanceaccording to the amount equivalent to the expected credit loss of the financial instrument in the next 12 months. When assessingexpected credit loss, the Group gives consideration to all reasonable and well-founded information, including forward-lookinginformation.

For financial instruments with relatively low credit risks on the balance sheet date, the Group assumes that their credit risks havenot increased significantly since initial recognition, and measures loss allowance based on the expected credit loss within the next 12months.

(2) Criteria for judging whether the credit risks have increased significantly since initial recognition

When the default probability of a financial asset within the expected duration determined on the balance sheet date issignificantly higher than that in initial recognition, it suggests that the credit risks of the financial asset have significantly increased.Except under special circumstances, the Group determines whether credit risks have increased significantly since initial recognitionby estimating the changes in lifetime risk of default occurring based on the changes in 12-month risk of default occurring as areasonable .

(3) Grouping method for assessing the expected credit risks

The Group carries out separate credit risk evaluation for financial assets with significantly different credit risks, includingreceivables in dispute with the other party or involving litigation or arbitration; accounts receivable where there are obvious signsthat the debtor may not be able to fulfill the repayment obligation, etc.

Except for the financial assets that are individually assessed for credit risks, the Group shall classify the financial assets intodifferent groups in view of the common risk characteristics, and assess the credit risks on the basis of groups.

(4) Accounting treatment methods for impairment of financial assets

At the end of a period, the Group shall calculate the expected credit loss of all types of financial assets. If the expected creditloss is greater than the carrying value of its current provision for impairment, the difference shall be recognized as impairment loss; ifit is less than the carrying value of current provision for impairment, the difference shall be recognized as impairment gain.

(5)Determination method for measurement of credit impairment losses of various financial assets

①Notes receivable

For accounts receivable, the Group measures loss allowance according to the amount equivalent to the expected credit loss overthe lifetime. Depending on their credit risk characteristics, notes receivable are classified into different groups:

ItemsBasis for determining groups
Bank acceptance notesThe accepter is a bank with low credit risk
Commercial acceptance notesBy accepter’s credit risk (the same as that of accounts payable)

②Accounts receivable

For accounts receivable not containing significant financing components, the Group measures loss allowance according to theamount equivalent to the expected credit loss over the lifetime.

Except for accounts receivable for which credit risk is assessed separately, depending on their credit risk characteristics,accounts receivable are classified into different groups:

ItemsBasis for determining groupsMethods of calculation
Accounts receivable aging groupExcept for the receivables for which the loss allowance of impairment has been calculated separately, the Group shall determine, through present situation analysis, the proportion of allowance for bad debt based on the expected creditAging analysis method
loss rate of identical or similar receivables in previous years with similar credit risk characteristics classified by aging
Accounts receivable factoring aging groupAccounts receivable arising from factoring business of factoring companiesAging analysis method
Related party groupThe parent and subsidiary companies included in the consolidated financial statements are divided into groups according to equity relationship.No allowance for bad debt

③ Other receivables

Impairment loss is measured by the Group as the amount equivalent to the expected credit loss in the next 12 months or over thelifetime, based on whether the credit risk of other receivables has increased significantly since initial recognition. Except for otherreceivables for which credit risk are assessed separately, depending on their credit risk characteristics, they are classified intodifferent groups in such way as “accounts receivable” are classified.

11. Notes receivable

For further details, please see this Note V. 9. “Financial Instruments” and 10. “Impairment of Financial Assets”.

12. Accounts receivable

For further details, please see this Note V. 9. “Financial Instruments” and 10. “Impairment of Financial Assets”.

13. Receivable financing

Notes receivable and accounts receivable which are classified as measured at fair value through other comprehensive income arepresented under “financing of receivable” if they have original maturity up to one year (including one year) or under other debtinvestment if they have original maturity more than one year. For relevant accounting policies, please see this Note V. 9. “FinancialInstrument” and 10. “Impairment of Financial Assets”.

14. Other receivables

For further details, please see this Note V. 9. “Financial Instruments” and 10. “Impairment of Financial Assets”.

15. Inventories

(1) Classification of inventory

Inventory types include among others raw materials, goods in stock, revolving materials and unfinished in process.

(2) Valuation methods of inventory acquired and sold

When inventory is acquired, it is measured based on actual cost, including purchase cost, processing cost and other costs. Wheninventory is acquired and sold, it is priced according to the monthly weighted average method.

(3) Determination method of the net realizable value of inventory and calculation method of depreciation allowance

Net realizable value means the estimated selling price of inventory less the estimated cost to be incurred by the time ofcompletion, the estimated selling expense and related taxes. In determining the net realizable value of inventory, based on obtainedevidence, the Group considers the purpose of the inventory and the impact of any matters occurring after the balance sheet date.

On the balance sheet date, inventory is measured at cost or net realizable value (whichever is lower). If the net realizable valueis lower than its cost, the Group will make provision for inventory depreciation. The provision for inventory depreciation is generallymade at the difference between an inventory item’s cost and its net realizable value. For the inventory with a large quantity andrelatively low unit price, the inventory depreciation allowance is accrued based on the inventory category; for inventories associatedwith product series manufactured and sold in the same area, with the same or similar end use or purpose, and are difficult to bemeasured separately from other items, the depreciation allowances are consolidated and accrued. For raw materials with a largequantity and low unit price, the provision of inventory depreciation is generally made according to the time the inventory has beenkept.

After the provision of inventory depreciation is made, if the original trigger for inventory write-down has disappeared so that thenet realizable value of the inventory is higher than the carrying value, the amount of provision of inventory depreciation shall bereversed, and the reversed amount shall be recognized in current profits and losses.

(4) The inventory system is a perpetual inventory system.

(5) Amortization method of revolving materials

The Group’s revolving materials include low-value consumables and packaging materials. Large revolving materials areamortized at the time of receipt over months of the expected service life. Other low-value consumables are amortized at the time ofreceipt using the one-off amortization method. Packaging materials are amortized at the time of receipt using the one-offamortization method.

16. Contract assets

The Group records the right where the customer has not paid the contract consideration but the Group has performed its contractobligation and the Group is not prevented from being unconditionally paid by the customer (depending on the lapse of time only) as acontract asset in the balance sheet. Contract assets and contract liabilities under the same contract are listed on a net basis. Contractassets and contract liabilities under different contracts will not be offset.

Please refer to this Note V. 10. "Impairment of financial assets" for details of the determination method and accountingtreatment method of the expected credit loss of contract assets.

17. Contract costs

If the incremental cost incurred by the Group to acquire the contract is expected to be recovered, it is recognized as an asset asthe contract acquisition cost. However, if the amortization period for the asset does not exceed one year, the asset shall be recorded incurrent profits and losses at the time of occurrence.

A cost incurred for performing a contract which does not fall within the regulated scope of accounting standards for businessenterprises other than Accounting Standards for Business Enterprises No. 14 - Income (revised in 2017) shall be recognized as anasset if: ① such cost directly relates to a current or expected contract, including direct labor, direct materials, manufacturing costs(or similar costs), costs clearly borne by customers and other costs only incurred due to the contract; ② such cost increases theresources of the Group to fulfill its obligations in the future; and ③ such cost is expected to be recoverable.

The assets related to contract costs are amortized on the same basis as the revenue recognition of goods related to the assets, andare recorded in the current profits and losses.

18. Long-term equity investments

Long-term equity investment in this part refers to the long-term equity investment through which the Group has control, jointcontrol or significant influence over investee. The long-term equity investments through which the Group does not have control, jointcontrol or significant influence over investee, is taken as a financial asset at fair value recorded in current profits and losses. If it isnon-trading, the Group can choose to designate it as a financial asset at fair value recorded in other comprehensive income at initialrecognition. For details about the relevant accounting policy, please see this Note V. 9. “Financial Instrument”.

Joint control refers to the Group’s common control of an arrangement in accordance with relevant agreement, and the relevantactivities of the arrangement must be unanimously agreed by the participants sharing the control before a decision can be made.Significant influence refers to the Group’s right to participate in the decision-making of an invested entity's financial and operationalpolicies, but not to control or jointly control the formulation of these policies with other parties.

(1) Determination of investment cost

For long-term equity investments arising from business combination under the same control, the proportion of the carrying valueof the stakeholders’ equity of the merged party in the consolidated financial statements of the final controlling party is regarded asthe initial investment cost of long-term equity investments on the combination date. If there is a difference between the initialinvestment cost of long-term equity investments and the cash paid, non-cash assets transferred, and carrying value of liabilities

assumed, the capital reserve shall be adjusted. Where the capital reserve is insufficient to absorb the difference, retained earningsshall be adjusted. The investments cost which adopts the equity securities issued as the consideration should be adopted as the initialinvestments cost of the long-term equity investments according to the proportion of the carrying value of the stakeholders’ equity ofthe merged party in the consolidated financial statements of the final controlling party, and adjust the capital reserve by the differencebetween the initial investments cost of long-term equity investments and the amount of issued stock’s face value (regarded as capitalstock). If the capital reserve is insufficient to absorb the difference, retained earnings should be adjusted. If the equity of the acquireeunder the same control is acquired step by step through multiple transactions leading to a merger of enterprises under the samecontrol, the transactions shall be confirmed whether they belong to a “package transaction”: If they belong to a “package transaction”,all transactions shall be treated as one transaction over which the acquiree has control. If it is not a “package transaction”, the Groupregards the initial cost of the long-term equity investments as the proportion of the shareholders' equity/owners' equity of the acquiredenterprise to the carrying amount in the consolidated financial statements of the final controller at the date of combination. If there isa difference between the initial investments cost of long-term equity investments on the date of combination and the sum of thecarrying value of the long-term equity investments before the merger plus the carrying value of the new share payment considerationon the date of combination, the capital reserve shall be adjusted. Where the capital reserve is insufficient to absorb the difference,retained earnings shall be adjusted. If the equity investment held before the combination date is measured using the equity method orrecorded as a financial asset at fair value in other comprehensive income. The other comprehensive income recognized as a resultwill not be accounted temporarily.For the acquisition of long-term equity investments involving enterprises under common control, the Group regards the initialcost of the long-term equity investments at that date as business combination cost, including the sum of fair values of assets paid,liabilities incurred or borne, and equity securities issued, by the buyer. If the equity of the acquiree is acquired step by step throughmultiple transactions leading to a merger of enterprises under different control, the transactions shall be confirmed whether theybelong to a “package transaction”: If they belong to a “package transaction”, all transactions shall be treated as one transaction overwhich the acquiree has control. If it is not a “package transaction”, the sum of the carrying value of the original equity investmentsplus the new investments cost is regarded as the initial investments cost calculated by the cost method. If the previous equity ismeasured using the equity method, the relevant other comprehensive income will not be accounted temporarily.Acquisition-related costs including auditing fees, legal services fees, valuation advice fees and other relevant management feesare generally recognized in profit or loss as incurred.A long-term equity investments acquired other than through a business combination is initially measured at the cost, and suchcost is determined at the amount of cash paid by the Group, the fair value of the equity securities issued by the Group, the valueagreed in an investments contract or agreement, the fair value or carrying value of asset exchanged in the non-monetary asset

exchange, or the fair value of the long-term equity investments. Costs, taxes and other necessary expenses directly related to theacquisition of the long-term equity investments are also included in the investments cost. If an investments addition results in thejoint control or significant influence over investee, other than the control over investee, the cost of long-term equity investments isthe sum of the fair value of the original equity investments determined according to Accounting Standards for Business EnterprisesNo. 22 - Recognition and Measurement of Financial Instruments and the cost of the investments addition.

(2) Method of subsequent measurement and recognition of profits and losses

The long-term equity investments through which the Group has joint control (except for joint operation) or significant influenceover investee shall be calculated by the equity method. The Group's financial statements use the cost method to calculate long-termequity investments that constitutes control over invested entities.

① Long-term equity investments calculated by cost method

Under the cost method, a long-term equity investments is measured at initial investments cost. Increasing or reducinginvestments will adjust the cost of long-term equity investments accordingly. Except for actual price paid when the investment isobtained or the cash dividends or profits that are included in the consideration that has been declared but not yet disbursed, thecurrent investment income shall be recognized according to the cash dividends or profits declared by the invested entity.

② Long-term equity investments accounted under equity method

When the initial investments cost of long-term equity investments accounted under equity method is greater than theinvestments, the difference in the fair value share of the identifiable net assets of the invested entity is enjoyed, without adjusting theinitial investments cost of long-term equity investments; when the initial investments cost is less than the investments, the differencein the fair value share of the identifiable net assets of the invested entity is included in the current profits and losses, and the cost oflong-term equity investments shall be adjusted accordingly.

When the equity method is adopted, according to the share of the net profit and loss and other comprehensive income realizedby the invested entity, the investments income and other comprehensive income shall be recognized respectively, and the book valueof the long-term equity investments shall be adjusted; the book value of the long-term equity investments is reduced correspondinglyin accordance with the portion of the profits or cash dividends declared and distributed by the invested entity; for changes in owner’sequity other than net profit and loss, other comprehensive income and profit distribution of the invested entity, the book value oflong-term equity investments shall be adjusted and included in capital reserve. The share of net profit and loss of the invested entityshall be recognized, based on the fair value of various identifiable assets of the invested entity when the investment is made, afteradjustment of the net profit of the invested entity. When the accounting policy and accounting period adopted by the invested entityare inconsistent with those of the Group, the investment income and other comprehensive income shall be recognized based on theadjusted financial statements of the invested entity in accordance with the Group's accounting policies and accounting period. For the

Group's transactions with its associates and joint ventures, if the invested or sold asset does not constitute a business, unrealizedprofits or losses resulting from the transactions are recognized as investment income or loss to the extent that those attributable to theGroup's equity interest are eliminated. However, unrealized losses resulting from the Group's transactions with its invested entity inrespect of impairment losses on the transferred assets should not be eliminated. If the asset invested by the Group to its associates andjoint ventures constitutes a business, to the extent that the investor realizes long-term equity investments other than control, the fairvalue of the invested business shall be the initial investments cost of the additional long-term equity investments, and the differencebetween the initial investments cost and the carrying value of the invested business shall be recorded in the profit or loss of thecurrent period. If the asset sold by the Group to its associates and joint ventures constitutes a business, the difference between theconsideration received and the carrying value of the invested business shall be recorded in the profit or loss of the current period. Ifthe Group acquires an asset that is a business from its associates or joint ventures, the accounting treatment pursuant to theAccounting Standards for Business Enterprises No. 20 - Business Combination shall apply, the gain or loss from the transaction shallbe fully recognized.

The Group de-recognizes its share of net losses of the invested entity after the carrying amount of the long-term equityinvestments together with any long-term interests that substantially constitute part of its net investments in the invested entity shall bewritten down to zero. In addition, if the Group has the obligation to bear additional losses to the invested entity, the expectedliabilities shall be recognized according to the expected obligations and be recorded in the investment losses of the current period.Where net profits are subsequently made by the invested entity, the Group resumes recognizing its share of those profits only after itsshare of the profits exceeds the share of losses previously not recognized.

③ Acquisition of minority equity

When preparing consolidated financial statements, if there is a difference between the new long-term equity investmentsacquired as a result of the purchase of minority shares and the share of net assets continuously calculated from the date of purchase(or merger) of the subsidiary based on the new shareholding ratio, the capital reserve shall be adjusted. Where capital reserve isinsufficient to offset the difference, the retained earnings are adjusted.

④ Long-term equity investments disposal

In consolidated financial statements, where a parent company disposes of a long-term equity investments in a subsidiary whilethe control over the subsidiary is reserved, the difference between the disposing price and the net assets of the subsidiary obtainedfrom disposal of the long-term equity investments shall be recognized in the shareholder’s equity. If partial disposal by a parentcompany of a long-term equity investments in a subsidiary and the control over the subsidiary is lost, the accounting policy stipulatedin this Note V. 6.(2) “Method for Preparing the Consolidated Financial Statements” shall apply.

For disposal of long-term equity investments in other situations, the difference between the disposed equity’s book value and theactual proceeds is included in the current profits and losses.When the Group reduces its ownership interest in investee but continues to use the equity method, other comprehensive incomepreviously recorded as owners' equity is disposed in proportion, subject to the accounting treatment applicable to the assets orliabilities related to direct disposal of the invested entity. The equity recognized by the Group, other than the change of the net profitsand loss, other comprehensive income and profit distribution of the invested entity, is transferred to current profits and losses inproportion.When the Group reduces its ownership interest but the Group continues to use the cost method, for the other comprehensiveincome recognized by the Group using equity method prior to the control over the investee or under financial instrument recognitionand measurement standard, other comprehensive income previously recorded as owners' equity is subject to the accounting treatmentapplicable to the assets or liabilities related to direct disposal of the invested entity and is transferred to current profits and losses inproportion. Then the other changes in owners’ equity recognized by the Group using equity method, not arising from the change ofthe net profits and loss, other comprehensive income or profit distribution of the invested entity, are reclassified to profit and loss inproportion.If the Group loses its control over the invested entity due to the disposal of a portion of an equity investment, the equity methodis adopted in the preparation of individual financial statements when the remaining equity allows the Group to exercise joint controlor hold significant influence on the invested entity, and the remaining equity after disposal is regarded as being adjusted by the equitymethod at the time of acquisition; if the remaining equity after disposal does not allow the Group to exercise joint control or holdsignificant influence on the invested entity, it is calculated in accordance with the relevant provisions of financial instrumentrecognition and measurement standards, and the difference between the fair value and the book value on the day when the control islost is recorded in current profits and losses. If other comprehensive income recognized, using the equity method or under thestandards for recognition and measurement of financial instruments before the Group obtains the control over the invested entity, issubject to the accounting treatment applicable to the assets or liabilities related to direct disposal of the invested entity when thecontrol over the invested entity is lost, changes in the owners’ equity of the net assets of the invested entity recognized using theequity method, except for net profits and losses, other comprehensive income and profit distributions, shall be transferred to currentprofits and losses when the control over the invested entity is lost. Other comprehensive income and other owners’ equity aretransferred in proportion when the remaining equity after disposal is calculated by the equity method. If the remaining equity afterdisposal is calculated in accordance with the standards for recognition and measurement of financial instruments, othercomprehensive income and other owners’ equity are transferred in full.

If joint control or significant influence on the invested entity is lost by the Group due to the disposal of some equity investments,the remaining equity after disposal is calculated according to the financial instrument recognition and measurement standards. Thedifference between the fair value and the book value on the day when joint control or significant influence is lost is recorded incurrent profits and losses. Other comprehensive income of the equity investment previously recognized using the equity method issubject to the accounting treatment applicable to the assets or liabilities related to direct disposal of the invested entity when theGroup stops using the equity method. Owners' equity recognized by the Group, other than the change of the net profits and loss, othercomprehensive income and profit distribution of the invested entity, is reclassified to profit and losses fully when the Group stopsusing the equity method.The equity investments in the subsidiary is disposed of step by step by the Group through multiple transactions until the controlis lost. The aforementioned transactions, if belong to package transactions, are disposed as one transaction for disposal of the equityinvestments of the subsidiary and loss of control. The difference between the price of each disposal before the control is lost and thecarrying value of long-term equity investments related to the disposed equity are recorded in other comprehensive income, and thentransferred to the profit or loss of the current period when the control is lost.

19. Investment properties

Measurement of investment propertiesMeasurement by cost methodDepreciation or amortization method

Investment property means the property held for the purpose of rent earning or capital appreciation, or both. It includes the landuse rights that have been leased, the land use rights that are held for transfer upon appreciation, and the leased buildings. In addition,the vacant buildings held by the Group for the purpose of leases will also be reported as investment property, if the board of directors(or similar authority) makes a resolution in written form that expressly indicates that the buildings will be used for leases and theintention of holding will not change in the short term.

Investment property is initially measured at cost. Subsequent expenses related to investment property shall, if economic profitsrelated to the property are likely to be gained and its costs can be measured reliably, be recorded as the cost of investment property.Other subsequent expenditures are recorded in the current profits and losses when incurred.

The Group adopts the cost model for subsequent measurement of investment property. The investment property is depreciated oramortized in accordance with policies consistent with building or land use rights.

For method of impairment test and method of provision for impairment of investment property, please see this Note V. 25.“Impairment of Long-term Assets”.

When self-use property or inventory is converted to investment property, or investment property is converted to self-useproperty, the value after the conversion shall be recognized at the carrying value before the conversion.When investment property is disposed or permanently withdrawn from use and is not expected to obtain economic benefits fromits disposal, the investment property shall be de-recognized. The disposal income from the sale, transfer, abandonment or destructionof investment property less its carrying value and relevant taxes shall be recognized in current losses and profits.

20. Fixed assets

(1) Recognition criteria

Fixed assets mean the tangible assets held with a service life exceeding one fiscal year for the production of goods, provision oflabor services, leasing or management. A fixed asset may be recognized when it satisfies the following conditions: Economic benefitsrelating to the fixed asset are likely to be gained by the Group, and the cost of the fixed asset can be measured reliably. Fixed assetsare initially measured at cost, with the influence of estimated abandonment cost taken into account.

(2) Depreciation methods

CategoryDepreciation methodsDepreciable lifeRatio of remaining valueAnnual depreciation
Houses and buildingsStraight-line method20-30 years5%-10%3%-4.75%
Production equipmentStraight-line method5-10 years5%-10%9%-19%
Test equipmentStraight-line method5-10 years5%-10%9%-19%
Office equipmentStraight-line method5 years5%-10%18%-19%
Transportation equipmentStraight-line method5 years5%-10%18%-19%

Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of theasset, after the estimated costs of disposal is deducted, if the asset were already of the age and in the condition expected at the end ofits useful life.

(3) Recognition basis, valuation and depreciation method of fixed assets leased by financing

See Note 35. “Lease “for details

21. Construction in progress

The cost of construction in progress is determined at the actual construction expense, including various constructionexpenditures incurred during the period of construction, capitalized borrowing costs and other related expenses before the project

reaches the predetermined conditions for use. Construction in progress is transferred to fixed assets when it has reached the workingcondition for its intended use.For the method of impairment test and method of provision for impairment of construction in progress, please see this Note V.

25. “Impairment of Long-term Assets”.

22. Borrowing costs

Borrowing costs include interest on borrowing, amortization of discount or premium, auxiliary expenses and exchangedifferences due to foreign currency borrowing, etc. Borrowing costs that can be directly attributable to the acquisition, constructionor production of assets eligible for capitalization shall be capitalized when the asset expenditure has been incurred, the borrowingcost has been incurred, and the acquisition, construction or production necessary to make the asset reach the predeterminedconditions for use or sale has started, and the capitalization shall discontinue when the constructed or produced assets eligible forcapitalization reach the predetermined conditions for use or sale. The remaining borrowing costs are recognized as costs at the timeof occurrence.The amount to be capitalized is the actual interest expense incurred on the specific borrowings less any bank interest earnedfrom unused funds of the designated borrowings or any investment income arising from the temporary investment of those funds.The amount to be capitalized on the general borrowings is calculated by applying a capitalization rate to the weighted average of theexcess amounts of cumulative expenditures on the asset over and above the amounts of the specific borrowings. Capitalization rate iscalculated and determined based on the weighted average interest rate of general borrowings.During the period of capitalization, exchange differences arising from special borrowings in a foreign currency shall be fullycapitalized, and exchange differences arising from general borrowings in a foreign currency shall be recognized in profits and losses.

Assets eligible for capitalization refer to fixed assets, investment properties, inventories and other assets that need to go throughquite a long time of acquisition or production activities to reach the predetermined usable or salable state.

If an abnormal interruption of assets eligible for capitalization occurs in the process of acquisition, construction or productionand continues over 3 months, the capitalization of borrowing costs shall cease and shall not restart until the acquisition, constructionor production of such assets resume.

23. Right-of-use assets

For recognition methods and accounting of right-of-use assets, please see this Note V. 35. “Lease”.

24. Intangible assets

(1) Valuation method, service life and impairment test

Intangible assets mean the identifiable non-monetary assets owned or controlled by the Group without physical substance.The intangible assets shall be initially measured at cost. Expenses related to the intangible assets are recognized in the cost ofintangible assets when it is likely that the associated economic benefits will be gained by the Group and the associated costs can bemeasured reliably. Other expenses related to the intangible assets are recognized in profit or loss for the period in which it is incurred.

The acquired land use right is generally recognized as intangible assets. Expenses related to land use right and construction costfrom buildings such as self-built factory, etc. are recognized as intangible assets and fixed assets, respectively. In the case ofpurchased buildings, related costs are shared between the cost of land use rights and the cost of buildings. The related costs thatcannot be allocated reasonably are recognized as fixed assets.When an intangible asset with a finite useful life is available for use, its original cost is amortized over its estimated useful lifeusing the straight-line method. Intangible assets with uncertain service life shall not be amortized.

For an intangible asset with a finite useful life, the Group reviews its useful life and amortization method at the end of theperiod, and accounts for any change as a change in an accounting estimate. For an intangible asset with uncertain service life, theGroup reviews its useful life. If it is evident that the duration of associated economic benefits is predictable, the useful life isestimated and the asset is amortized pursuant to amortization policies for intangible assets with finite useful life.

(2) Accounting policy for internal research and development expenditure

The expenditure for research and development projects in the Group is divided into research phase expenditure and developmentphase expenditure.

The classification into the expenditure in the research phase or the expenditure in the development phase in relation to internalR&D projects of the Group conforms to the following standards:

Expenditures in the research phase are defined as those spent in an innovative, explorative and planned investigation to acquireand understand new scientific or technical knowledge. The research is the preparation in documents and other aspects for furtherdevelopment. It is very uncertain whether the completed research will move onto the development phase and whether thedevelopment will lead to the emergence of an intangible asset. Therefore, the Group includes the expenditures in the research phasein expenses and recognize them in the profit or loss of the current period.

Expenditures in the development phase refer to the expenditures incurred during the stage of applying research results or otherknowledge to a project or design to produce new or substantially improved materials, devices and products before commercial mass

production or use. As the development phase comes after the research phase, the majority of basic conditions for a new product ortechnology have been established. Thus, the Group recognizes the expenditures in development phase eligible for capitalization asintangible assets. Gross expenditures incurred in the period from the point when the conditions for capitalization are satisfied to thepoint when intangible assets are ready for the intended purpose are capitalized. No adjustment will be made further for anyexpenditure that has been included in expense and recognized in profit or loss before the same intangible asset has met the conditionsfor capitalization in the development phase.

Expenditures in the research phase are included in the current profits and losses when incurred.Expenditures in the development phase are recognized as intangible assets only when the following conditions are all satisfied,or are included in the profit or loss of the current period:

① Having completed the intangible assets, enabling them to be technically feasible for use or sale;

② Having the intention to complete the intangible assets and use or sell them;

③ Having the proof that the intangible asset can generate economic benefits, that there is a market for the product producedusing the intangible asset or for the intangible asset itself, and that the intangible asset is useful and will be used internally;

④ Having sufficient technical, financial and other resources to complete the development of the intangible assets, and havingthe ability to use or sell the intangible asset;

⑤ Expenditures attributable to the development phase of the intangible asset can be measured reliably.

If it is impossible to distinguish between expenditures in the research phase and expenditures in the development phase, theR&D expenditures incurred shall be included in the profit or loss of the current period.

(3) Method of impairment test and method of provision for impairment of intangible assets

For the method of impairment test and method of provision for impairment of intangible assets, please see this Note V. 25“Impairment of Long-term Assets”.

25. Impairment of long-term assets

For non-current and non-financial assets including fixed assets, construction in progress, intangible assets with finite useful life,investments properties measured at cost, and long term equity investments in subsidiaries, associates and joint ventures, the Groupassesses whether there is an indication of impairment at the date of balance sheet. If there is such an indication, the Group estimatesthe recoverable amount and carries out an impairment test. An impairment test shall be conducted every year for intangible assetswith uncertain goodwill and service life and those have not yet reached the usable state, regardless of whether there are signs ofimpairment.

If the impairment test results show that the recoverable amount of an asset is lower than its book value, the provision forimpairment is accrued according to the difference and is recorded in the impairment loss. The recoverable amount is the higher of thenet amount of the fair value of the asset less the disposal expenses and the present value of the expected future cash flow of the asset.The fair value of an asset is measured as the price agreed in a sales contract concluded in good faith. In absence of any such salescontract, if there is an active market for the asset, the best information available is used as a basis to estimate the fair value of theasset. Disposal expenses include legal fees, taxes and transportation fees related to the disposal of an asset, and direct expensesincurred to make the asset salable. The present value of expected future cash flows of an asset is measured by applying anappropriate discount rate to the expected future cash flows generated during the continuous use of the asset at the time of finaldisposal. The asset impairment provision is calculated and recognized on the basis of individual assets. In the case of difficulty inestimating the recoverable amount of an individual asset, the recoverable amount of the asset group to which the individual assetbelong is calculated. An asset group is the smallest unit of combined assets that can generate cash inflows independently.For goodwill listed separately in the financial statements, the carrying amount of such goodwill arising from businesscombinations is allocated to relevant asset groups or asset group portfolios. If the test results show that the recoverable amount ofasset groups or asset group portfolio containing allocated goodwill is lower than its book value, the corresponding impairment lossshall be recognized. The amount of impairment loss shall firstly be deducted from the carrying amount of goodwill embodied in theasset groups or asset group portfolios, then be deducted from the carrying amounts of other assets based on the proportions of theircarrying amounts in the asset groups or asset group portfolios.The impairment losses of assets will not be reversed in subsequent periods once recognized.

26. Long-term deferred expenses

Long-term deferred expenses refer to expenses that have already incurred but should be borne by the current and futureinstalments for a period of more than one year. Long-term deferred expenses shall be amortized according to the straight-line methodwithin the estimated period of benefit.

27. Contract liabilities

Contract liability is defined as the Group's obligation to transfer goods to a customer for received or receivable considerationfrom the customer. The Group presents as a contract liability, at the earlier time point of actual payment by a customer or thepayment due, if the Group has paid the contract consideration or the Group has acquired the right to collect unconditionally beforethe goods are transferred by the Group to the customer. Contract assets and contract liabilities under the same contract are listed on anet basis. Contract assets and contract liabilities under different contracts will not be offset.

28. Employee remuneration

(1) Accounting treatment of short-term remuneration

Short-term employee benefits include employee wages or salaries, bonuses, allowances and subsidies, employee welfare fees,medical insurance contributions, maternity insurance contributions and work injury insurance contributions, housing provident fundcontributions, union running costs and employee education costs, and non-monetary benefits. During the accounting period when theemployees provide services for the Group, the short-term remuneration actually incurred is recognized as a liability and recorded inthe current profits and losses or related asset costs. The non-monetary welfare in short-term remuneration should be measured at fairvalue.

(2) Accounting treatment of post-employment benefits

Post-employment benefit mainly covers basic pension insurance and unemployment insurance. Most of post-employmentbenefit plans are mainly defined benefit plans. The defined benefit plans of the Group are basic pension insurance and unemploymentinsurance, and the contributions thereto are recorded in the asset cost or the profit or loss of the current period when they occur.

(3) Accounting treatment of dismission welfare

Where the Group terminates the labor relationship with an employee before the labor contract expires, or offers proposedcompensation for encouraging the employee to accept the redundancies voluntarily, if the Group cannot unilaterally withdraw thetermination benefits provided by the termination of labor relations plan or reduction proposal, and the Group recognizes the costsrelated to the reorganization involving the payment of the termination benefits (whichever comes first), the employee remunerationliabilities arising from the termination benefits are recognized and recorded in the current profits and losses. However, terminationbenefits which are expected not to be fully paid within twelve months after the end of the annual reporting period are accounted foras other long-term employee remuneration.

Internal employee retirement programs are accounted for, using the above method applicable to termination benefits. The Grouprecognizes in the profit or loss of the current period (termination benefits) employee salaries and contributions to the employee'ssocial insurance covered by its internal retirement program from the day when the employees stop their services until their statutoryretirement dates, when the conditions for recognizing liabilities are satisfied.

(4) Accounting treatment of other long-term employee benefits

If other long-term employee benefit provided by the Group for its employees constitutes the defined contribution plan, theaccounting treatment for the defined contribution plan applies. In any other circumstance, the accounting treatment for the definedbenefit plan applies.

29. Lease liabilities

For recognition methods and accounting of lease liabilities, please see this Note V. 35. “Lease”.

30. Provisions

An obligation relating to a contingent is recognized as a provision when it meets the following conditions: (1) the Group has apresent obligation related to a contingency; (2) it is probable that an outflow of economic benefits will be required to settle theobligation; and (3) the amount of the obligation can be measured reliably.

A provision is measured against the best estimate of the consideration required to settle the present obligation at the balancesheet date, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money.

If all or part of the expenses required to settle the provision are expected to be compensated by a third party, the amount ofcompensation is recognized separately as an asset when it is basically recognized that it can be received, and the recognizedcompensation amount doesn’t exceed the book value of the provision.

31. Share-based payment

(1) Accounting treatment of share-based payment

Share-based payment is a transaction where equity instruments are granted or equity instrument-based liabilities are assumed forthe consideration of the services provided by employees or other parties. Share-based payment is classified into cash-settledshare-based payment and equity-settled share-based payment.

① Equity-settled share-based payment

Equity-settled share-based payments made for the consideration of the services provided by the employees, is measured at thefair value of equity instruments on the date of grant to the employees. In the case that the right can be exercised after the completionof services in the waiting period or satisfaction of stipulated performance conditions, the fair value amount shall, on the basis of thebest estimate of the quantity of equity instruments with vesting in the waiting period, be recorded in relevant cost or expense using

the straight-line method. In the case that the right can be exercised immediately after the grant, it is recorded in relevant cost orexpense on the grant date, and the capital reserve is increased accordingly.On each balance sheet date during the waiting period, the Group makes the best estimate based on the latest available follow-upinformation such as changes in the number of employees with vested rights, and revises the estimated number of equity instrumentswith vesting. The impact of the above estimation is recorded in the cost or expense of the current period, and the capital reserveadjusted accordingly.

Equity-settled share-based payments made for the consideration of the services provided by other parties shall, if the fair valueof the services can be measured reliably, is measured at fair value at the date of acquisition, and if the fair value of the servicescannot be measured reliably but the fair value of the equity instruments can be measured reliably, is measured at fair value at the dateof acquisition. They are recorded in the cost or expense, and the shareholder’s equity is increased accordingly.

② Cash-settled share-based payment settled

Cash-settled share-based payment shall be measured according to the fair value of liabilities determined on the basis of shares orother equity instruments undertaken by the Group. In the case that the right is exercised immediately after the grant, it is recorded inrelevant cost or expense, and the liability is increased accordingly. If the right is exercised only after the completion of services in thewaiting period and satisfaction of stipulated performance conditions, on each balance sheet date within the waiting period, based onthe best estimate of the vesting condition and according to the fair value of the liabilities assumed by the Group, the services acquiredin the current period are recorded in the costs or expenses, and the liability is increased accordingly.

On each balance sheet date and settlement date before the settlement of related liabilities, the fair value of liabilities shall bere-measured, and the changes shall be recorded in the current profits and losses.

(2) Accounting treatment related to modification and termination of share-based payment plan

When the Group modifies the share-based payment plan, if the fair value of the granted equity instruments is increased bymodification, the increase of the services acquired shall be recognized according to the increase of the fair value of the equityinstruments. The increase of fair value of equity instruments refers to the difference between the fair values of equity instrumentsbefore and after modification on the modification date. If the total fair value of share-based payment is reduced by modification orother ways that are unfavorable to employees, the accounting treatment of the acquired services will continue, as if the change neverhappened unless the Group cancels some or all of the granted equity instruments.

During the waiting period, if the granted equity instruments are cancelled, the Group will treat the cancellation of the grantedequity instruments as accelerated exercise, and immediately record the amount to be recognized in the remaining waiting period intothe current profits and losses, and recognize the capital reserve at the same time. If the employee or other party can choose to meet

the non-vesting condition but fails to meet it during the waiting period, the Group will treat it as cancellation for granting equityinstruments.

32. Revenue

Accounting policies adopted for revenue recognition and measurement

(1) Principles of revenue recognition

If a contract between the Group and a customer meets the following conditions, revenue is recognized when the customerobtains the control over the goods: the parties to the contract have approved the contract and pledged to perform their obligations; thecontract defines the rights and obligations of the parties about transfer of the goods or provision of the services; the contract containspayment terms about the proposed transferred goods; the contract has commercial substance, which means that the performance ofthe contract would change the risks, time distribution or amount of the future cash flows of the Group; and the consideration to whichthe Group is entitled for transferring the goods to the customer is very likely to be recovered.At the contract commencement date, the Group identifies each individual performance obligation existing under the contract,and apportions the trading price to each individual performance obligation based on the proportion of the selling prices of the goodscommitted by the individual performance obligations. The trading price is determined by taking into account of the influence ofvariable consideration, major financing components in the contract, non-cash consideration, consideration payable to customers andother factors.

If each individual performance obligation under the contract meets any of the following conditions, the Group will, according tothe progress of performance in the relevant performance period, recognize the part of trading price apportioned to the individualperformance obligation as a revenue: the customer obtains and consumes economic benefits from the performance by the Group atthe time of performance; the customer has control over the goods in production during the performance by the Group; the goodsproduced during the performance by the Group have irreplaceable use, and the Group is entitled to be paid for the completed part ofthe obligation up to now in the entire contract period. The performance schedule is determined by output method or input methodaccording to the nature of the goods transferred. If the performance schedule cannot be reasonably determined and the incurred costsof the Group are expected to be compensated, the revenue is recognized according to the amount of the incurred costs until theperformance schedule can be reasonably determined.

If none of the above condition is met, the Group will, at the point when the customer obtains the control over the goods,recognize the part of trading price apportioned to the individual performance obligation as a revenue. To determine whether thecustomer obtains the control over the goods, the Group considers the following indications: the Group enjoys the current right to bepaid for the goods, and the customer has the current obligation to pay for the goods; the Group has transferred legal ownership of the

goods to the customer, and the customer has owned the legal ownership over the goods; the Group has delivered the goods physicallyto the customer, and the customer has possessed the goods in kind; the Group has passed on to the customer major risks and rewardsof the ownership of the goods, and the customer has received the major risks and rewards of the ownership of the goods; thecustomer has accepted the goods; and any other indication that the customer has obtained the control over the goods.

(2) Specific methods for revenue recognition

① Domestic sales

A. General sales modeThe Group arranges production according to a sales contract or order with a customer; upon shipment from the warehouse, theproducts are transported and delivered to the place of delivery designated by the customer; the customer’s warehousing employeechecks the quantity of the products and also carries out a spot check for the quality of the products; after the quantity and quality areaccepted, the employee will sign and stamp on the receipt for confirmation. The revenue is recognized when the Group obtains thesigned and stamped receipt or when the Group obtains the signed and stamped receipt and makes a reconciliation with the customer.B. VMI sales modeThe Group arranges production according to a sales contract or order with a customer; upon shipment from the warehouse, theproducts are transported and delivered to the place of delivery designated by the customer; the customer’s warehousing employeechecks the quantity of the products and also carries out a spot check for the quality of the products; after the quantity and quality areaccepted, the employee will sign and stamp on the receipt for confirmation. The revenue is recognized after the customer accepts theproducts.

② Overseas sales

A. General sales modeThe Group arranges production according to a sales contract or order with a customer; the export delivery is made throughcustoms clearance after the products are verified as qualified through inspection; for the purpose of delivering the products, therevenue is recognized at the time of control transfer depending on specific terms of trade.B. VMI sales modeThe Group arranges production according to a sales contract or order with a customer; the export is made through customsclearance after the products are verified as qualified through inspection; after the Group completes export declaration formalities andobtains an export declaration form, and the products are transported to the place designated by the customer, the revenue isrecognized when the customer accepts the products.Different operating modes in the same kind of business lead to different accounting policies for revenue recognition

None

33. Government subsidies

Government subsidies refer to the monetary assets and non-monetary assets obtained by the Group from the government free ofcharge, excluding the investment made by the government as an investor which enjoys the corresponding owner's equity.Government subsidies are divided into asset-related government subsidies and income-related government subsidies. Asset-relatedgovernment subsidies refer to the government subsidies obtained by the Group and used for acquiring or forming long-term assets byother means. Other government subsidies are defined as government subsidies related to income. If no target of grants is specified ingovernment documents, government subsidies are classified into government subsidies related to assets and government subsidiesrelated to income as follows: (1) if the government document stipulates grants for a defined project, the grants will be dividedaccording to the proportion of expenditures transformed into assets and expenditures recorded in expenses in the budget of thedefined project, and the proportion will be reviewed at each balance sheet date and be changed if necessary; and (2) if thegovernment document contains general statement on the purpose of grants, other than a defined project, the grants will be treated asgovernment subsidies related to income. Government subsidies in the form of monetary assets shall be measured at the amountreceived or receivable. Government subsidies in the form of non-monetary assets shall be measured at fair value. If the fair valuecannot be reliably acquired, the government subsidies shall be measured at nominal amount. Government subsidies measured atnominal amount shall be directly recorded in the current profits and losses.The Group recognizes and measures government subsidies generally at the time of receipt according to the actually receivedamounts. However, at the end of the period, the subsidy shall be measured according to the amount receivable when there isconclusive evidence that it can meet the relevant conditions stipulated by the financial support policy and is expected to receivefinancial support funds. A government subsidy measured at the amount receivable shall meet the following conditions: (1) theamount of grant receivable has been confirmed in a governmental document or can be reasonably estimated according to anyofficially issued measures for the management of financial support funds, without significant uncertainty in the estimated amount; (2)the measurement is based on the financial support projects and its measures for the management of financial support funds officiallyreleased and proactively disclosed by local fiscal authority according to the Government Information Disclosure Regulations, and themeasures are inclusive (applicable to any eligible enterprise), other than for specific enterprises; (3) the relevant grant approvaldocument has clearly stated the period of payment, and as the payment of the grant is guaranteed by corresponding fiscal budgets,there is reasonable assurance that the payment will be made within certain time of period; and (4) other relevant conditions should bemet according to the actual situation of the Group and the grant (if any).Asset-related government subsidies are recognized as deferred income, and shall be recorded in current profits and losses instages according to a reasonable and systematic method within the service life of the relevant assets. If income-related government

subsidies are received as compensation for related costs or losses in future periods, they are recognized as deferred income, and arerecorded in current profits and losses during the period when the related costs or losses are recognized; those received ascompensation for related costs or losses incurred are directly included in current profits and losses.

If a government subsidy contains an asset-related component and an income-related component, the two components are subjectto separate accounting treatment. If it is difficult to distinguish them, the subsidy shall be classified as income-related governmentsubsidies.Government subsidies related to the daily operating activities of the Group shall be recorded in other income according to thenature of operating business. Government subsidies unrelated to the daily activities are recorded in non-operating revenue.Where any recognized government subsidy needs to be returned, in the case of related deferred income balance, the carryingamount of the deferred income balance shall be written down, and any excess shall be recognized in the profit or loss of the currentperiod. In other circumstances, the returned subsidy is directly recorded in the profit or loss of the current period.

34. Deferred tax assets/liabilities

(1) Current income taxes

At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amountexpected to be paid (or returned) according to the requirements of tax laws. The taxable income as basis for the current income taxexpense is calculated after appropriate adjustment is made to the pre-tax accounting profit of the year according to the requirementsof tax laws.

(2) Deferred tax assets and liabilities

For temporary differences between the carrying amounts of certain assets or liabilities and their tax bases, or between thecarrying amounts of those items that are not recognized as assets or liabilities and of which the tax bases can be determined accordingto tax laws and tax bases, deferred tax assets and liabilities are recognized using the balance sheet liability method.

For temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liabilityarising from a transaction (not a business combination) that affects neither accounting profits nor taxable profits (or deductible losses)at the time of transaction, no deferred tax liability is recognized. In addition, for the taxable temporary differences associated withinvestments in subsidiaries, associates and joint ventures, if the Group is able to control the timing of the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeable future, no deferred tax liability isrecognized. Except for the above exceptions, the Group recognizes deferred tax liabilities arising from all other taxable temporarydifferences.

For temporary differences associated with the initial recognition of an asset or liability arising from a transaction (not a businesscombination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferredtax liability is recognized. In addition, for the deductible temporary differences associated with investments in subsidiaries, associatesand joint ventures, the corresponding deferred tax asset shall not be recognized if it is not probable that the temporary difference willreverse in the foreseeable future, or if it is not probable that taxable profits will be available in the future against which the deductibletemporary difference can be utilized. For the above exceptions, deferred tax assets for deductible temporary differences arerecognized by the Group to the extent that it is probable that taxable profits will be available against which the deductible temporarydifferences can be utilized.For deductible losses and tax credits that can be carried forward to later years, the corresponding deferred tax assets arerecognized to the extent that the future taxable income that can be used to offset the deductible losses and tax credits is likely to beobtained.At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws, that are expectedto be applicable when the asset is realized or the liability is settled.On the balance sheet date, the carrying amount of deferred tax assets shall be reviewed. If it is unlikely to obtain sufficienttaxable income in the future to offset against the profits arising from deferred tax assets, the carrying amount of the deferred taxassets shall be written down. When it is probable that sufficient taxable income will be available, such written-down amount shall besubsequently reversed.

(3) Income tax expenses

Income tax expenses include current income tax and deferred income tax.

Except that current income taxes and deferred taxes arising from transactions or events recognized in other comprehensiveincome or directly recorded in shareholders’ equity are recorded in other comprehensive income or shareholders’ equity, and thatdeferred taxes arising from business combinations adjust the carrying amount of goodwill, all other current income taxes anddeferred tax expenses or gains are recorded in the profit or loss of the current period.

(4) Income tax offset

When there is a legal right to settle on a net basis and the intention is to settle on a net basis or to realize assets and to settleliabilities simultaneously, the current income tax assets and current income tax liabilities of the Group are offset and presented as netamount.

When there is a legal right to settle current income tax assets and current income tax liabilities on a net basis, and the deferredtax assets and deferred tax liabilities are related to the income tax levied by the same tax administration department on the same taxpayer or to different tax payers, but in each future period of reversing material deferred tax assets and liabilities, the tax payers

involved intend to settle the current income tax assets and liabilities on a net basis or realize assets and settle liabilities at the sametime, the deferred tax assets and deferred tax liabilities of the Group are offset and presented as net amount.

35. Lease

(1) Accounting treatment method of operating lease

For more information, see this section (3) - the determination method and accounting treatment method of leasing under the newleasing standard.

(2) Accounting treatment method of financial lease

For more information, see this section (3) - the determination method and accounting treatment method of leasing under the newleasing standard.

(3) The determination method and accounting treatment method of leasing under the new leasing standard

Lease refers to a contract under which a lessor assigns the right to use an asset to a lessee for consideration, for a defined period.

If a contract is signed or changed after the date of initial implementation, the Group considers, at the date of commencement orchange, whether the contract is a lease or contains a lease. Except for changes in the terms and conditions of the contract, the Groupwill not re-consider whether the contract is a lease or contains a lease.

(1) The Group as lessee

① Right-of-use assets

Except for short-term leases and leases for low-value assets, the Group recognizes the right-of-use assets of a lease at the leasecommencement date. The lease commencement date refers to the day from which the lessor offers the leased asset to the Group forits use. The right-of-use assets shall be initially measured at cost. The cost includes:

A. initially measured amounts of lease liabilities;

B. any lease payments made at or before the lease commencement date, less the relative amount of any lease incentives enjoyedif there are lease incentives;

C. any initial direct costs incurred by the Group;

D. an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site onwhich it is located or restoring the underlying asset to the condition required by the terms of the lease.

With reference to the provisions of Accounting Standards for Business Enterprises No. 4 - Fixed Assets concerning depreciation,the Group calculates the depreciation of right-of-use assets. If the Group can reasonably determine that it will obtain the ownership ofleased assets when the lease term expires, the right-of-use assets are depreciated over the remaining service life of the leased assets.If the Group cannot reasonably determine that it will obtain the ownership of leased assets when the lease term expires, theright-of-use assets are depreciated over the shorter of the lease term and the remaining service life of the leased assets.

The Group determines whether the right-of-use assets are impaired and performs accounting treatment for recognizedimpairment loss according to the regulations of Accounting Standard for Business Enterprise No. 8 – Impairment of Assets.

② Lease liabilities

Except for short-term leases and leases for low-value assets, the Group initially measures a lease liability at the leasecommencement date according to the present value of the lease payment not made as of that date. When measuring the present valueof a lease payment, the Group uses the interest rate implicit in the lease as the discount rate, and adopts the incremental borrowingrate as the discount rate if the interest rate implicit in the lease is not determinable.

The lease payment refers to the amount paid by the Group to the lessor related to the right to use the leased assets during thelease term, including:

A. The fixed amount and substantial fixed amount less the relative amount of any lease incentives enjoyed if there are leaseincentives;

B. The index or rate based variable amount which is determined at the time of initial measurement according to the index or rateprevailing at the lease commencement date;

C. The exercise price of the call option when the Group reasonably decides to exercise the call option;

D. The payment for exercising the option to terminate the lease, provided that it is reflected in the lease period that the Groupwill exercise the option to terminate the lease; and

E. The estimated amount to be paid according to the residual value of guarantee provided by the Group.

Variable lease payments not included in the measurement of lease liabilities, when actually incurred, shall be recorded in thecurrent profits and losses or related asset costs.

From the lease commencement date, the Group calculates the interest expense of lease liabilities for each period of the leaseterm at a fixed periodic interest rate and records it in current profits and losses or related asset costs.

After the lease commencement date, the Group will re-measure a lease liability and adjust the right-of-use assets if:

A. In the case of any change to the lease term or the result of evaluation on the call option, the lease liability will be re-measuredby the Group according to the changed lease payment and the present value calculated based on the modified discount rate.

B. In the case of changes in the amount to be paid estimated based on the residual value of guarantee or the index or rate forcalculating the lease payment, the Group will re-measure the lease liability according to the changed lease payment and the presentvalue calculated from the original discounting rate.

③ Short-term leases and leases for low-value assets

For short-term leases and leases for low-value assets of buildings, transport vehicles, machinery equipment and officeequipment, the Group chooses not to recognize right-of-use assets or lease liabilities. The short-term lease refers to the lease that doesnot contain the call option and has a lease period of no more than 12 months from the lease commencement date. The lease forlow-value assets refers to the lease under which individual lease asset has a low value if it is brand new. In each period within thelease term, the Group records the lease payments of short-term leases and leases for low-value assets into the profit or loss of thecurrent period or the relevant asset cost using the straight-line method.

④ Change of lease

When a lease changes and the following conditions are satisfied, the Group will treat such change as an independent lease:

A. The Group expands the lease scope by acquiring the right to use one or more additional leased assets;

B. The increased consideration is in line with the price of the expanded part of the lease scope as adjusted for the contractchange.

If a lease change is not treated as an independent lease, at the effective date of the lease change, the Group will re-apportion thechanged contract price, re-determine the lease term, and re-measure the lease liability according to the changed lease payment andthe present value calculated based on the modified discount rate.

If the lease change narrows the lease scope or shortens the lease term, the Group will reduce the carrying value of theright-of-use assets accordingly, and record the gain or loss from the terminated or partially terminated lease in the profit or loss of thecurrent period. If any other lease change triggers the re-measurement of the lease liability, the Group will adjust the carrying value ofthe right-of-use assets accordingly.

(2) The Group as lessor

① Division of a lease

If a contract contains the lease component and the non-lease component, the Group will apportion the contract considerationaccording to the provisions of Accounting Standards for Business Enterprises No. 14 - Revenue concerning apportionment of tradingprice, and the basis for apportionment the respective prices of the lease component and the non-lease component.

② Classification of a lease

A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Leases whichare not financing leases are defined as operating leases.

A. The Group as lessor under operating leasesThe Group adopts the straight-line method in each period of the lease term, and recognizes the lease receipts arising fromoperating leases in rental income. The initial direct expenses related to an operating lease incurred by the Group are capitalized whenincurred, apportioned during the lease term on the same recognition basis as rental income, and recorded in the current profit and lossby installments.The variable lease payment received by the Group under an operating lease not included in the lease receipt is recorded in theprofit or loss of the current period at the time of actual occurrence.B. The Group as lessor under financial leasesAt the lease commencement date, the Group measures the carrying value of the financing lease receivable as net leaseinvestment, and de-recognizes the financing lease asset. The net lease investment is the sum of the unsecured residual value and thepresent value of the lease payment receivable at the lease commencement date discounted by the interest rate implicit in the lease.The lease payment refers to the amount paid by the lessee as the Group transfers the right to use the leased assets during thelease term, including:

(A). the fixed amount and substantial fixed amount paid by the lessee less the relative amount of any lease incentives received;(B). The lessee’s index or rate based variable amount which is determined at the time of initial measurement according to theindex or rate prevailing at the lease commencement date;(C). The exercise price of the call option when the Group reasonably decides that the lessee is to exercise the call option;(D). The payment made by the lessee for exercising the option to terminate the lease, provided that it is reflected in the leaseperiod that the lessee will exercise the option to terminate the lease; and(E). The residual value of guarantee provided by the lessee, a party in association with the lessee and any independent thirdparty who has economic capacity to perform the guarantee obligation.

Variable lease payment receivable not included in the measurement of lease net investment shall, when actually incurred, beincluded in the current profits and losses.The Group measures and recognizes the interest income of each period within the lease term according to the fixed periodicinterest rate.

③ Sublease

The Group as the sub-lessor considers the original lease and the sublease as two independent contracts. The Group classifies thesublease according to the right-of-use assets arising from the original lease, other than the underlying asset of the original lease.

④ Change of lease

If an operating lease changes, the Group will, from the effective date of the change, considers the change as a new lease, and thelease payment received in advance or receivable related to the lease before the change as new lease payments.When a lease changes and the following conditions are satisfied, the Group will treat such change as an independent lease:

A. The Group expands the lease scope by acquiring the right to use one or more additional leased assets;

B. The increased consideration is in line with the price of the expanded part of the lease scope as adjusted for the contractchange.

If a financing lease change is not treated as an independent lease, the Group will treat the changed lease as follows:

A. Assuming that the change takes effect at the lease commencement date, and the lease is classified as an operating lease, theGroup will, from the effective date of the lease change, consider the change as a new lease and the net lease investment prior to theeffective date of the lease commencement as the carrying value of the leased asset;

B. Assuming that the change takes effect at the lease commencement date, and the lease is classified as a financing lease, theGroup will apply the provisions of Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement ofFinancial Instruments concerning the modification or re-negotiation of contract.

36. Other important accounting policies and accounting estimates

While using accounting policies, due to the uncertainty in operating activities, the Group needs to make judgment, estimates andassumptions on the carrying value of accounts which cannot be measured accurately. The judgment, estimates and assumptions aremade based on the historical experience of the Group’s management and other factors that are considered to be relevant. Thejudgments, estimates and assumptions would affect the reported amounts of incomes, expenses, assets and liabilities, as well as thedisclosure of contingent liabilities at the balance sheet date. However, the actual results from the uncertainty in the estimates maydiffer from the current estimates made by the Group’s management, subject to further significant adjustments to the carrying amountsof the affected assets or liabilities.

The above judgments, estimates and assumptions will be reviewed periodically by the Group on the going-concern basis. If achange in accounting estimates only affects the period in which the change occurs, the affected amount will be recognized in theperiod in which the change occurs. If the change affects both the period in which the change occurs and future periods, the affectedamount will be recognized in the period in which the change occurs.

At the balance sheet date, the major fields in which the Group is required to make the judgments, estimates and assumptions onthe amounts in the financial statements are shown below:

(1) Revenue recognition

As stated in this Note V. 32. “Revenue”, the Group’s revenue recognition involves the following significant accountingjudgments and estimates: identification of customer contracts; estimation of the recoverability of the considerations enjoyed due tothe transfer of goods to customers; identification of performance obligations in contracts; estimation of the variable consideration in acontract and the amount of accumulated recognized income that is unlikely to be significantly reversed when the relevant uncertaintyis eliminated; whether there is material financing component in a contract; estimation of separate selling prices of individualperformance obligations in a contract; determination on whether the performance obligation shall be performed in a time span or at apoint of time; and determination of performance progress.The Group makes judgments based on historical experience and practices, and major changes in judgments and estimates wouldhave impact (and even significant impact) on the change of operating income, operating cost, and profit and loss during the current orfuture periods.

(2) Classification of a lease

① Identification of a lease

While identifying that a contract is or contains a lease, the Group needs to assess whether there is an identified asset and thecustomer has the right to use the asset for a certain period. During assessment, the Groups shall consider the nature or substantialreplacement of the asset, and whether the customer has the right to obtain almost all economic benefits arising from the use of theasset during the period and can control the use of the asset.

② Classification of a lease

The Group as the lessor classifies leases into operating leases and financing leases. In the classification process, the managementneeds to make appropriate analysis and judgment on whether all risks and rewards related to the ownership of leased assets have beensubstantially transferred to the lessee.

③ Lease liabilities

The Group, as a lessee, initially measures the lease liability at the present value of lease payments that are unpaid at the leasecommencement date. For measuring the present value of the lease payment, the Group estimates the discounting rate in use and thelease term of the lease contract with an option of renewal or termination. For assessing the lease term, the Group considers all thefacts and circumstances related to the economic benefits brought by the exercise of the option by the Group, including expectedchanges in the facts and circumstances from the lease commencement date to the option exercise date. Different judgments andestimates would affect the recognition of lease liabilities and right-of-use assets and further affect the profit or loss of subsequentperiods.

(3) Impairment of financial assets

The Group assesses impairments of financial instruments using the expected credit loss model, where the Group is required tomake significant judgments and estimates, as well as consider all reasonable and evidence-based information, includingforward-looking information. In making the judgments and estimates, the Group predicts expected changes in debtor's credit riskbased on historical data, as well as economic policies, macroeconomic indicators, industry risks, external market conditions,technical conditions, changes in customer conditions and other factors.

(4) Provisions for the decline in value of inventories

Under accounting policies for inventories, the Group measures inventories according to the lower of cost and net realizablevalue. For the inventories with cost higher than net realizable value as well as obsolete and unsalable inventories, the Groupcalculates provisions for the impairment of inventories. The inventories are impaired to their net reliable value, depending on theassessment of salability of inventories and their net realizable value. To identify inventory impairment, the management is required tomake judgments and estimates after obtaining conclusive evidence, as well as considering the purpose of inventories held, the impactof events occurring after the balance sheet date and other factors. Any difference between actual results and prior estimates will, inthe period when relevant estimates are changed, affect the carrying amount of inventories and the provision for inventory impairmentor reversal thereof.

(5) Fair value of financial instruments

If there is no financial instrument in an active trading market, its fair value is determined by the Group through various valuationmethods. The valuation techniques include disclosed cash flow modeling,etc. In the valuation process, the Group needs to estimatefuture cash flow, credit risk, market volatility and correlation, etc. and choose an appropriate discounting rate. These relevantassumptions are uncertain, and their changes would affect the fair value of financial instruments. For equity instrument investmentsor contracts with public quotes, the Group will not regard costs as the best fair value estimate.

(6) Impairment provision for long-term assets

For non-current assets other than financial assets, the Group will, at the balance sheet date, judges whether there is an indicationof impairment. For intangible assets with an uncertain service life, the impairment test will be carried out annually and when there isan indication of impairment. The impairment test will be carried out for non-current assets other than financial assets, when there isan indication that the carrying amount cannot be recovered.

When the carrying value of an asset or group of assets is higher than the recoverable amount, the higher of the net of the fairvalue less disposal costs and the present value of estimated future cash flows represents the impairment.

The net of the fair value less disposal costs is determined by the sales agreement price or observable market price of similarassets in fair trade reduced by incremental costs directly attributable to the disposal of the asset.

Important judgments shall be made on the output, selling price, related operating costs and discount rate used in calculatingpresent value of the asset (or a group of assets) in estimation of present value of future cash flows. When estimating the recoverableamount, the Group uses all relevant information available, including the output, selling price and related operating costs predicted onthe basis of reasonable and evidence-based assumptions.The Group tests goodwill for any impairment annually at least. This requires estimating the present value of future cash flows ofan asset group or group portfolio to which goodwill has been allocated. When estimating the present value of future cash flows, theGroup needs to predict cash flows generating from an asset group or group portfolio in the future, and chooses an appropriatediscount rate to determine the present value of future cash flows.

(7) Depreciation and amortization

The Group depreciates and amortizes investment property, fixed assets and intangible assets over their respective service life,using the straight-line method, with their respective residual value taken into account. The Group periodically reviews the service lifeof assets to determine the amounts of depreciation and amortization expenses for each reporting period. The service life is determinedby the Group based on its historic experience acquired on similar assets and expected technical developments. For significantchanges in prior estimates, depreciation and amortization expenses will be adjusted in the coming periods.

(8) Development expenditures

When determining capitalized amounts, the Group’s management needs to assume estimated future cash flows, appropriatediscount rates and expected return periods of relevant assets.

The Group’s management believes that the products with its self-developed proprietary technology have a broad market andgood prospects, and the market reaction to the products produced with these intangible assets also supports the management’spre-estimated income arising from the project. However, the increasing competition makes the management reconsider theassumptions about market share and estimated gross profits of the products. After a thorough review, the Group’s managementbelieves that the carrying value of intellectual properties can be fully recovered notwithstanding a lowered rate of return of theproducts. The Group will continue to keep close attention on relevant developments. Once there is an indication that it is necessary toadjust the assumptions of relevant accounting estimates, the Group will make adjustment in the period when that indication appears.

(9) Deferred tax assets

To the extent that it is likely that there will be sufficient taxable profits to cover the losses, the Group recognizes deferred taxassets for all unused tax losses. In this case, the Group’s management shall make important judgments to estimate the time andamount of future taxable profits and, by taking into account of its tax plan, to determine the amount of deferred tax assets that shouldbe recognized.

(10) Income tax

In normal operating activities of the Group, there are some transactions with certain uncertainties in final tax treatment andcalculation. Tax deductible expenses for some items are subject to review and approval by tax authority. Any difference betweenfinal results and initially estimated amounts due to these tax matters exerts impact on income taxes and deferred taxes of the periodwhen the final results are determined.

37. Changes in important accounting policies and accounting estimates

(1) Changes in important accounting policies

√ Applicable □ Not applicable

Contents and causes of changes in accounting policiesApproval procedureNotes
On December 7, 2018, the Ministry of Finance issued The Accounting Standards for Enterprises No.21–Leases (2018 Revision) (Finance and Accounting [2018] No. 35) (hereinafter referred to as “new standards of lease”). According to the resolution adopted on March 26, 2021 at the 18th meeting of the 5th Board of Directors of the Group, the Group has implemented the above-mentioned New Lease Standards from January 1, 2021 and made changes to relevant accounting policies according to the provisions of the New Lease Standards.1. The changes are made according to state policies; 2. At the 18th meeting of the 5th Board of Directors and the 13th meeting of the 5th Board of Supervisors held on March 26, 2021, the Proposal on Changing Accounting Policies was reviewed and adopted, and the independent directors expressed the opinion of approval of the prop In accordance with relevant provisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange and Articles of Association, this issue of changing accounting policies was submitted to the Board of Directors to review and approve, without the need of the submission to the Shareholders’ Meeting.

Changes in accounting policies resulting from the implementation of the New Lease Standards:

On December 7, 2018, the Ministry of Finance issued The Accounting Standards for Enterprises No.21–Leases (2018 Revision)(Finance and Accounting [2018] No. 35) (hereinafter referred to as “new standards of lease”). According to the resolution adopted onMarch 26, 2021 at the 18th meeting of the 5th Board of Directors of the Group, the Group has implemented the above-mentionedNew Lease Standards from January 1, 2021 and made changes to relevant accounting policies according to the provisions of the NewLease Standards.

Pursuant to the new lease standards, for existing contracts prior to the initial implementation date, the Group chooses not tore-evaluate whether it is a lease or it contains a lease.

The Group chooses to adjust the cumulative impact of the lease contracts that have not been completed as of January 1, 2021only. The balances of retained earnings and other related items on financial statements at the beginning of the period when the NewLease Standards are initially implemented (i.e., January 1, 2021) are adjusted for the cumulative impact amount of the initialimplementation, and the information in the comparative period is not adjusted.

At the effective date of the New Lease Standards (i.e., January 1, 2021), the Group’s transitional measures and their impact aredescribed below:

A. The Group as lessee

The Group does not have financing lease prior to the effective date.

For the operating leases before the effective date (except for short-term leases and leases for low-value assets which areaccounted for using a simplified method), the Group has right-of-use assets measured at the amount of lease liabilities and adjustedfor prepaid rental. At the effective date, the Group tests right-of-use assets for any impairment and adjusts their carrying value.

B. The Group as lessor

For the subleases which are classified as operating leases at the effective date and are surviving after the effective date, theGroup re-values and re-classifies them as a sublessor, based on the remaining lease term and the terms and conditions of the originalleases and the subleases, at the effective date.

C. The impact from the implementation of new lease standards on financial statements as of January 1, 2021 is as follows:

Unit: RMB

Report itemsAmount as of December 31, 2020 (before change)Amount as of January 1, 2021 (after change)
Consolidated StatementsCompany’s StatementsConsolidated StatementsCompany’s Statements
Prepayments295,557,594.2137,867,760.48250,349,223.5223,024,960.48
Right-of-use assets462,821,988.61133,419,713.77
Other non-current assets257,587,428.52250,950,629.05
Accounts payable15,526,558,924.3315,525,355,089.28
Non-current liabilities due within one year113,350,154.6656,366,215.71
Lease liabilities298,830,498.8462,210,698.06

(2) Changes in important accounting estimates

□ Applicable √ Not applicable

(3) Adjustments to related items of financial statements at the beginning of the current year upon initialimplementation of the new lease standards since 2021

√ Applicable □ Not applicable

Whether it is necessary to adjust the accounting items of the balance sheet at the beginning of the year

√ Yes □ No

Consolidated Balance Sheet

Unit: RMB

ItemDecember 31, 2020January 1, 2021Amount adjusted
Current assets:
Cash and bank balances7,788,139,761.687,788,139,761.68
Deposit reservation for balance
Lending funds
Held-for-trading financial assets250,789,617.29250,789,617.29
Derivative financial assets
Notes receivable93,015,027.2593,015,027.25
Accounts receivable9,951,611,596.659,951,611,596.65
Receivable financing
Prepayments295,557,594.21250,349,223.52-45,208,370.69
Premiums receivable
Reinsurance accounts receivable
Provision of cession receivable
Other receivables56,282,930.7856,282,930.78
Including: Interest receivable
Dividend receivable
Redemptory monetary capital for sale
Inventories9,170,731,903.199,170,731,903.19
Contract assets
Assets held for sale
Non-current assets due within one year67,724.4167,724.41
Other current assets522,858,736.68522,858,736.68
Total current assets28,129,054,892.1428,083,846,521.45-45,208,370.69
Non-current assets:
Loans and advances
ItemDecember 31, 2020January 1, 2021Amount adjusted
disbursed
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments337,410,802.56337,410,802.56
Investments in other equity instruments357,307,056.65357,307,056.65
Other non-current financial assets
Investment properties
Fixed assets14,674,535,924.1514,674,535,924.15
Construction in progress2,078,910,639.922,078,910,639.92
Manufacturing biological assets
Oil and gas assets
Right-of-use assets462,821,988.61462,821,988.61
Intangible assets2,730,415,540.352,730,415,540.35
Development expenditure107,970,366.02107,970,366.02
Goodwill16,859,185.0816,859,185.08
Long-term deferred expenses152,215,032.28152,215,032.28
Deferred tax assets275,559,445.74275,559,445.74
Other non-current assets257,587,428.52250,950,629.05-6,636,799.47
Total non-current assets20,988,771,421.2721,444,956,610.41456,185,189.14
Total assets49,117,826,313.4149,528,803,131.86410,976,818.45
Current liabilities:
Short-term borrowings3,189,865,281.203,189,865,281.20
Borrowings from banks and other financial institutions
Borrowing funds
Held-for-trading financial liabilities43,578,775.7143,578,775.71
Derivative financial liabilities
ItemDecember 31, 2020January 1, 2021Amount adjusted
Notes payable1,797,630,927.081,797,630,927.08
Accounts payable15,526,558,924.3315,525,355,089.28-1,203,835.05
Advances from customers
Contract liabilities772,033,187.85772,033,187.85
Financial assets sold for repurchase
Customer deposits and deposits from banks and other financial institutions
Receivings from vicariously traded securities
Receivings from vicariously sold securities
Payroll payable1,136,453,967.561,136,453,967.56
Taxes payable195,498,317.72195,498,317.72
Other payables67,844,709.6467,844,709.64
Including: Interest payable8,911,319.918,911,319.91
Dividends payable
Handling charges and commissions payable
Dividend payable for reinsurance
Liabilities held for sale
Non-current liabilities due within one year113,350,154.66113,350,154.66
Other current liabilities7,012,595.337,012,595.33
Total current liabilities22,736,476,686.4222,848,623,006.03112,146,319.61
Non-current liabilities:
Reserve fund for insurance contracts
Long-term borrowings2,754,299,262.022,754,299,262.02
Bonds payable3,031,391,335.563,031,391,335.56
Including: Preferred shares
Perpetual bonds
ItemDecember 31, 2020January 1, 2021Amount adjusted
Lease liabilities298,830,498.84298,830,498.84
Long-term payables
Long-term payroll payable
Provisions
Deferred income538,922,331.52538,922,331.52
Deferred tax liabilities323,065,909.80323,065,909.80
Other non-current liabilities
Total non-current liabilities6,647,678,838.906,946,509,337.74298,830,498.84
Total liabilities29,384,155,525.3229,795,132,343.77410,976,818.45
Owners' equity:
Share capital3,275,438,427.003,275,438,427.00
Other equity instruments317,690,852.25317,690,852.25
Including: Preferred shares
Perpetual bonds
Capital reserves3,811,658,791.283,811,658,791.28
Less: Treasury shares516,007,644.95516,007,644.95
Other comprehensive income-112,010,012.52-112,010,012.52
Special reserves
Surplus reserves1,370,122,868.851,370,122,868.85
General risk reserve6,081,200.006,081,200.00
Retained earnings11,500,277,791.3511,500,277,791.35
Total equity attributable to the owners of the Company19,653,252,273.2619,653,252,273.26
Minority equity80,418,514.8380,418,514.83
Total owners' equity19,733,670,788.0919,733,670,788.09
Total liabilities and owners' equity49,117,826,313.4149,528,803,131.86410,976,818.45

Adjustment explanationThe Company has implemented the Accounting Standards for Business Enterprises No. 21 - Lease amended by the Ministry ofFinance from January 1, 2021.Balance Sheet of the Parent Company

Unit: RMB

ItemDecember 31, 2020January 1, 2021Amount adjusted
ItemDecember 31, 2020January 1, 2021Amount adjusted
Current assets:
Cash and bank balances2,834,936,444.192,834,936,444.19
Held-for-trading financial assets182,338,601.65182,338,601.65
Derivative financial assets
Notes receivable75,154,389.9575,154,389.95
Accounts receivable9,745,537,067.959,745,537,067.95
Receivable financing
Prepayments37,867,760.4823,024,960.48-14,842,800.00
Other receivables3,761,565,682.663,761,565,682.66
Including: Interest receivable
Dividend receivable
Inventories2,307,402,064.652,307,402,064.65
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets132,090,455.49132,090,455.49
Total current assets19,076,892,467.0219,062,049,667.02-14,842,800.00
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments5,896,926,627.125,896,926,627.12
Investments in other equity instruments
Other non-current financial assets
Investment properties
Fixed assets8,801,650,213.788,801,650,213.78
Construction in progress313,889,183.09313,889,183.09
Manufacturing biological
ItemDecember 31, 2020January 1, 2021Amount adjusted
assets
Oil and gas assets
Right-of-use assets133,419,713.77133,419,713.77
Intangible assets2,258,621,419.912,258,621,419.91
Development expenditure12,173,386.9812,173,386.98
Goodwill
Long-term deferred expenses417,895.69417,895.69
Deferred tax assets54,618,987.0654,618,987.06
Other non-current assets110,169,734.82110,169,734.82
Total non-current assets17,448,467,448.4517,581,887,162.22133,419,713.77
Total assets36,525,359,915.4736,643,936,829.24118,576,913.77
Current liabilities:
Short-term borrowings2,426,635,181.202,426,635,181.20
Held-for-trading financial liabilities
Derivative financial liabilities
Notes payable1,616,583,704.361,616,583,704.36
Accounts payable7,583,147,844.257,583,147,844.25
Advances from customers
Contract liabilities363,007,702.67363,007,702.67
Payroll payable606,402,939.12606,402,939.12
Taxes payable34,135,334.7934,135,334.79
Other payables1,440,612,669.291,440,612,669.29
Including: Interest payable6,306,124.366,306,124.36
Dividends payable
Liabilities held for sale
Non-current liabilities due within one year56,366,215.7156,366,215.71
Other current liabilities9,707,204.859,707,204.85
Total current liabilities14,080,232,580.5314,136,598,796.2456,366,215.71
Non-current liabilities:
ItemDecember 31, 2020January 1, 2021Amount adjusted
Long-term borrowings400,000,000.00400,000,000.00
Bonds payable3,031,391,335.563,031,391,335.56
Including: Preferred shares
Perpetual bonds
Lease liabilities62,210,698.0662,210,698.06
Long-term payables
Long-term payroll payable
Provisions
Deferred income202,689,088.19202,689,088.19
Deferred tax liabilities299,192,361.87299,192,361.87
Other non-current liabilities
Total non-current liabilities3,933,272,785.623,995,483,483.6862,210,698.06
Total liabilities18,013,505,366.1518,132,082,279.92118,576,913.77
Owners' equity:
Share capital3,275,438,427.003,275,438,427.00
Other equity instruments317,690,852.25317,690,852.25
Including: Preferred shares
Perpetual bonds
Capital reserves3,815,383,616.463,815,383,616.46
Less: Treasury shares516,007,644.95516,007,644.95
Other comprehensive income
Special reserves
Surplus reserves1,370,120,086.451,370,120,086.45
Retained earnings10,249,229,212.1110,249,229,212.11
Total owners' equity18,511,854,549.3218,511,854,549.32
Total liabilities and owners' equity36,525,359,915.4736,643,936,829.24118,576,913.77

Adjustment explanationThe Company has implemented the Accounting Standards for Business Enterprises No. 21 - Lease amended by the Ministry ofFinance from January 1, 2021.

(4) Explanation of comparative data at early stage of retroactive adjustment after the initialimplementation of the new lease standards in 2021

□ Applicable √ Not applicable

38. Others

NoneVI. Taxable Items

1. Main tax types and rates

Tax typesTaxation basisTax rate
VATOutput taxes are calculated by applying 13%, 9% and 6% tax rates to taxable income, and value added taxes are calculated and paid according to the difference resulting from the deduction of the allowed deductible input tax in the period.13%, 9%, 6%
City maintenance and construction tax7% and 5% of the amount of actually-paid turnover tax7%、5%
Enterprise income tax15% or 25%, or the national or local statutory tax rate prevailing in an overseas subsidiary’s jurisdiction25%、15%
Education surcharge3% of the amount of actually-paid turnover tax3%
Local education surcharges2% of the amount of actually-paid turnover tax2%

Disclose the specific information in the case of tax payers with different tax rates of enterprise income tax

Name of taxpayerRate of income tax
Goertek Inc.15%
Weifang Goertek Electronics Co., Ltd.15%
Goertek Microelectronics Inc.25%
Qingdao Goertek Microelectronics Research Institute Co., Ltd.25%
Qingdao Goertek Intelligent Sensor Co., Ltd.15%
Weifang Goertek Microelectronics Co., Ltd.15%
Rongcheng Goertek Microelectronics Co., Ltd.25%
Beijing Goertek Microelectronics Co., Ltd.25%
Shenzhen Goertek Microelectronics Co., Ltd.25%
Wuxi Goertek Microelectronics Co., Ltd.25%
Shanghai Ganyuzhi Technology Co., Ltd.25%
Goertek Microelectronics Holdings Co., Ltd.16.5%
Goertek Microelectronics (Hong Kong) Co., Ltd.16.5%
GOERTEK MICROELECTRONICS CORPORATIONThe federal tax rate for enterprise income tax is 21%, and the local enterprise income tax rate in California is 8.84%.
GOERTEK MICROELECTRONICS KOREA CO.,LTD.Tax rate is 10% if the income is less than KRW 200 million; 20% if the income is KRW 200 million-20 billion; 22% if the income is KRW 20 billion-300 billion; and 25% if the income is more than KRW 300 billion.
Weifang Goertek Trading Co., Ltd.25%
Yishui Goertek Electronics Co., Ltd.25%
Yili Precision Manufacturing Co., Ltd.15%
Weifang Goertek Communication Technology Co., Ltd.25%
Goertek Optical Technology Co., Ltd.15%
Goertek Technology Co., Ltd.25%
Beijing Goertek Technology Co., Ltd.15%
Qingdao Goertek Acoustics Technology Co., Ltd.25%
Shenzhen Goertek Technology Co., Ltd.15%
Shanghai Goertek Technology Co., Ltd.25%
Nanjing Goertek Technology Co., Ltd.25%
Shenzhen Mototek Smart Technology Co., Ltd.15%
Weifang Lokomo Precision Industry Co., Ltd.15%
Goertek Investment Co., Ltd.25%
Beijing Goertek Investment Management Co., Ltd.25%
Olive Smart Hardware Investment Center LP--
Dongguan JoyForce Precision Manufacturing Co., Ltd.15%
Goertek Intelligence Technology Co., Ltd.15%
Rongcheng Goertek Technology Co., Ltd.25%
Qingdao Goertek Commercial Factoring Co., Ltd.25%
Kunshan Goertek Electronics Co., Ltd.25%
Nanning Goertek Electronics Co., Ltd.15%
Nanning Goertek Trading Co., Ltd.25%
Xian Goertek Electronic Technology Co., Ltd.25%
Yishui TECO Electronic Technology Co., Ltd.25%
Goertek Vina Co., Ltd20%
Goertek Precision Industry Vietnam Company Limited20%
Goertek Technology Korea Co., Ltd.Tax rate is 10% if the income is less than KRW 200 million; 20% if
the income is KRW 200 million-20 billion; 22% if the income is KRW 20 billion-300 billion; and 25% if the income is more than KRW 300 billion.
Goertek (HongKong) Co., Limited8.25%/16.5%
Goertek Technology (Hong Kong)Co., Ltd.16.5%
Goertek Technology Vina Company Limited20%
GoerTek Audio Technologies Aps22%
Goertek Seiki Techonology株式会社38%
Optimas Capital Partners Fund LP--
Goertek Electronics, Inc.The federal tax rate for enterprise income tax is 21%, and the local enterprise income tax rate in California is 8.84%.
Goertek Technology Taiwan Co., Ltd.20%
Goertek Technology (Japan) Co., Ltd.38%

2. Tax preference

(1) According to the Reply to the Filings of the First Batch of High-Tech Enterprises in Shandong Province in 2020 issued bythe Office of Leading Group for the Recognition and Management of National High-Tech Enterprises, the Company and itssubsidiaries, Weifang Goertek Electronics Co., Ltd. and Weifang Goertek Microelectronics Co., Ltd., have been recognized ashigh-tech enterprises for a 3-year validity period, and their preferential period for the purpose of enterprise income tax is fromJanuary 1, 2020 to December 31, 2022. The enterprise income tax rate of 15% applies to the Company and its subsidiaries, WeifangGoertek Electronics Co., Ltd. and Weifang Goertek Microelectronics Co., Ltd., for year 2021.

(2) According to the Reply to the Filings of High-Tech Enterprises in Qingdao City in 2020 issued by the Office of LeadingGroup for the Recognition and Management of National High-Tech Enterprises on January 15, 2021, a subsidiary, Qingdao GoertekIntelligent Sensor Co., Ltd., has been recognized as a high-tech enterprise for a validity period of 3 years, and its preferential periodfor the purpose of enterprise income tax is from January 1, 2020 to December 31, 2022. The enterprise income tax rate of 15%applies to the subsidiary, Qingdao Goertek Intelligent Sensor Co., Ltd., for year 2021.

(3) According to the Reply to the Filings of the First Batch of High-Tech Enterprises in Shandong Province in 2019 issued bythe Office of Leading Group for the Recognition and Management of National High-Tech Enterprises on January 22, 2020, asubsidiary, Yili Precision Manufacturing Co., Ltd. has been recognized as a high-tech enterprise for a validity period of 3 years, andits preferential period for the purpose of enterprise income tax is from January 1, 2019 to December 31, 2021. The enterprise incometax rate of 15% applies to the subsidiary Yili Precision Manufacturing Co., Ltd. for year 2021.

(4) According to the Announcement on Filing the First Batch of High-Tech Enterprises in Shandong Province in 2021 issued by

the Office of Leading Group for the Recognition and Management of National High-Tech Enterprises on January 4, 2022, asubsidiary, Goertek Optical Technology Co., Ltd., has been recognized as a high-tech enterprise for a validity period of 3 years, andits preferential period for the purpose of enterprise income tax is from January 1, 2021 to December 31, 2023. The enterprise incometax rate of 15% applies to the subsidiary, Goertek Optical Technology Co., Ltd., for year 2021.

(5) According to the Reply to the Filings of the Third Batch of High-Tech Enterprises in Beijing City in 2020 (GKHZ [2021]No.37) issued by the Office of Leading Group for the Recognition and Management of National High-Tech Enterprises on January22, 2021, a subsidiary, Beijing Goertek Technology Co., Ltd., has been recognized as a high-tech enterprise for a validity period of 3years, and its preferential period for the purpose of enterprise income tax is from January 1, 2020 to December 31, 2022. Theenterprise income tax rate of 15% applies to the subsidiary, Beijing Goertek Technology Co., Ltd., for year 2021.

(6) According to the Reply to the Filings of the Second Batch of High-Tech Enterprises in Shenzhen City in 2019 (GKHZ [2020]No.47) issued by the Office of Leading Group for the Recognition and Management of National High-Tech Enterprises on February17, 2020, a subsidiary, Shenzhen Goertek Technology Co., Ltd., has been recognized as a high-tech enterprise for a validity period of3 years, and its preferential period for the purpose of enterprise income tax is from January 1, 2019 to December 31, 2021. Theenterprise income tax rate of 15% applies to the subsidiary, Shenzhen Goertek Technology Co., Ltd., for year 2021.

(7) According to the Announcement on Filing the First Batch of High-Tech Enterprises in Shenzhen in 2021 issued by the Officeof Leading Group for the Recognition and Management of National High-Tech Enterprises on January 17, 2022, a subsidiary,Shenzhen Mototek Smart Technology Co., Ltd., has been recognized as a high-tech enterprise for a validity period of 3 years, and itspreferential period for the purpose of enterprise income tax is from January 1, 2021 to December 31, 2023. The enterprise income taxrate of 15% applies to the subsidiary, Shenzhen Mototek Smart Technology Co., Ltd., for year 2021.

(8) According to the Notice on Publishing a List of the Second Batch of Proposed Recognized High-Tech Enterprises inShandong Province in 2020 issued by the Office of Leading Group for the Recognition and Management of National High-TechEnterprises on December 8, 2020, a subsidiary, Weifang Lokomo Precision Industry Co., Ltd. has been recognized as a high-techenterprise for a validity period of 3 years, and its preferential period for the purpose of enterprise income tax is from January 1, 2020to December 31, 2022. The enterprise income tax rate of 15% applies to the subsidiary, Weifang Lokomo Precision Industry Co., Ltd.for year 2021.

(9) According to the Notice on Publishing the Filings of the Second Batch of High-Tech Enterprises in Guangdong Province in2021 issued by the Office of Leading Group for the Recognition and Management of National High-Tech Enterprises on December20, 2021, a subsidiary, Dongguan Yili Precision Manufacturing Co., Ltd. has been recognized as a high-tech enterprise for a validityperiod of 3 years, and its preferential period for the purpose of enterprise income tax is from January 1, 2021 to December 31, 2023.The enterprise income tax rate of 15% applies to the subsidiary, Dongguan Yili Precision Manufacturing Co., Ltd. for year 2021.

(10) According to the Reply to the Filings of the Second Batch of High-Tech Enterprises in Guangdong Province in 2019(GKHZ [2020] No.50) issued by the Office of Leading Group for the Recognition and Management of National High-TechEnterprises on February 18, 2020, a subsidiary, Goertek Intelligence Technology Co., Ltd., has been recognized as a high-techenterprise for a validity period of 3 years, and its preferential period for the purpose of enterprise income tax is from January 1, 2019to December 31, 2021. The enterprise income tax rate of 15% applies to the subsidiary, Goertek Intelligence Technology Co., Ltd.,for year 2021.

(11) According to the Announcement of the Ministry of Finance, the State Taxation Administration and the NationalDevelopment and Reform Commission on Continuing the Enterprise Income Tax Policies for the Large-Scale Development ofWestern China (No. 23/2020), from January 1, 2021 to December 31, 2030, enterprise income tax will be levied at a reduced rate of15% for encouraged industrial enterprises located in the western region. The enterprise income tax rate of 15% applies to thesubsidiary, Nanning Goertek Electronics Co., Ltd., for year 2021.

(12) Goertek (HongKong) Co., Limited is an entity eligible for the two-tier profit tax system. The tax rate of 8.25% is applied tothe taxable profit which does not exceed HKD 2,000,000, and the tax rate of 16.5% is applied to the part of taxable profit whichexceeds HKD 2,000,000.

(13) According to the Announcement of the State Administration of Taxation on Issues Concerning the Implementation of theInclusive Income Tax Deduction and Exemption Policies for Small Low-Profit Enterprises (State Administration of TaxationAnnouncement No.2/2019), from January 1, 2019 to December 31, 2021, for small low-profit enterprises, 25% of the part of theannual taxable income not exceeding RMB 1 million shall be determined as valid taxable income and enterprise income tax will belevied at a reduced rate of 20%; 50% of the part of the annual taxable income between RMB 1 million and RMB 3 million shall bedetermined as valid taxable income and enterprise income tax will be levied at a reduced rate of 20%. According to theAnnouncement of the Ministry of Finance and the State Taxation Administration on Implementing the Preferential Income TaxPolicies for Micro and Small Enterprises and Individual Industrial and Commercial Households (Announcement No.12/2021 of theMinistry of Finance and the State Taxation Administration) and the Announcement of the State Taxation Administration on MattersConcerning the Implementation of Preferential Income Tax Policies Supporting the Development of Small Low-Profit Enterprisesand Individual Industrial and Commercial Households (Announcement No.8/2021 of the State Taxation Administration), fromJanuary 1, 2021 to December 31, 2022, for small low-profit enterprises, 12.5% of the part of the annual taxable income not exceedingRMB 1 million shall be determined as valid taxable income and enterprise income tax will be levied at a reduced rate of 20%. Theabove preferential tax policies are applicable to the subsidiary, Beijing Goertek Microelectronics Co., Ltd., and enterprise income taxis levied at the actual tax rate of 2.5% in 2021.

3. Others

None

VII. Notes to consolidated financial statements

1. Cash and bank balances

Unit: RMB

ItemClosing balanceOpening balance
Cash on hand160,703.83183,125.46
Bank deposits9,137,740,198.216,913,008,859.08
Other monetary capital910,620,794.05874,947,777.14
Total10,048,521,696.097,788,139,761.68
Including: Total amounts deposited abroad1,091,856,806.031,341,665,954.60
The total funds restricted by mortgage, pledge or freeze are as follows:910,620,794.05874,947,777.14

Explanation on Other MattersBalances in other currencies at the end of the year involve notes, bonds and L/C margins.

2. Held-for-trading financial assets

Unit: RMB

ItemClosing balanceOpening balance
Financial assets at fair value through profit and loss119,267,279.02250,789,617.29
Including:
Investments in equity instruments98,804,286.66125,327,442.62
Derivative financial assets20,462,992.36125,462,174.67
Total119,267,279.02250,789,617.29

3. Notes receivable

(1) Notes receivable listed by classification

Unit: RMB

ItemClosing balanceOpening balance
Bank acceptance notes48,384,771.7293,015,027.25
Commercial acceptance notes1,709,928.75
Total50,094,700.4793,015,027.25

Unit: RMB

CategoryClosing balanceOpening balance
Book balanceBad-debt provisionBook valueBook balanceBad-debt provisionBook value
AmountProportionAmountProportion of accrualAmountProportionAmountProportion of accrual
Notes receivable with bad debt reserves by group50,094,700.47100.00%50,094,700.4793,015,027.25100.00%93,015,027.25
Including:
Bank acceptance notes48,384,771.7296.59%48,384,771.7293,015,027.25100.00%93,015,027.25
Commercial acceptance notes1,709,928.753.41%1,709,928.75
Total50,094,700.47100.00%50,094,700.4793,015,027.25100.00%93,015,027.25

(2) Accrual, recovery or return of bad debt reserve in current period

None

(3) Notes receivable pledged at the end of the period

Unit: RMB

ItemAmount pledged at the end of the period
Bank acceptance notes4,385,853.64
Total4,385,853.64

(4) Notes receivable endorsed or discounted by the Group at the end of the period and not yet due on thebalance sheet date

Unit: RMB

ItemAmount derecognized at the end of the periodAmount not derecognized at the end of the period
Bank acceptance notes76,909,941.48
Commercial acceptance notes1,709,928.75
Total76,909,941.481,709,928.75

(5) Notes that have been transferred to accounts receivable by the Group at the end of the period due to thenon-performance of the contract of the drawerNone

(6) Notes receivable actually written off in the current period

None

4. Accounts receivable

(1) Accounts receivable disclosed by classification

Unit: RMB

CategoryClosing balanceOpening balance
Book balanceBad-debt provisionBook valueBook balanceBad-debt provisionBook value
AmountProportionAmountProportion of accrualAmountProportionAmountProportion of accrual
Accounts receivable for bad debt reserves by item531,002.500.01%531,002.50100.00%
Accounts receivable with bad debts reserves by group12,025,540,710.73100.00%126,326,184.811.05%11,899,214,525.9210,058,824,426.1599.99%107,212,829.501.07%9,951,611,596.65
Including:
Accounts receivable aging group11,857,375,456.0998.60%125,485,358.541.06%11,731,890,097.559,858,116,092.8198.00%106,209,287.831.08%9,751,906,804.98
Accounts receivable factoring aging group168,165,254.641.40%840,826.270.50%167,324,428.37200,708,333.342.00%1,003,541.670.50%199,704,791.67
Total12,025,540,710.73100.00%126,326,184.811.05%11,899,214,525.9210,059,355,428.65100.00%107,743,832.001.07%9,951,611,596.65

Bad debt reserves on a group basis: Accounts receivable aging group

Unit: RMB

NameClosing balance
Book balanceBad-debt provisionProportion of accrual
Within 1 year11,841,985,759.80118,419,857.601.00%
1 to 2 years3,586,193.031,075,857.9130.00%
2 to 3 years11,627,720.475,813,860.2450.00%
Over 3 years175,782.79175,782.79100.00%
Total11,857,375,456.09125,485,358.54--

Description for basis of determining the group:

For further details, please see this Note V. 10. “Impairment of financial assets”.Bad debt reserves by group: Accounts receivable factoring aging group

Unit: RMB

NameClosing balance
Book balanceBad-debt provisionProportion of accrual
Undue168,165,254.64840,826.270.50%
Overdue 1-90 days
Overdue 91-180 days
Overdue 181-360 days
Overdue more than 360 days
Total168,165,254.64840,826.27--

Description for basis of determining the group:

For further details, please see this Note V. 10. “Impairment of financial assets”.Disclosed by age of accounts receivable

Unit: RMB

AgingBook balance
Within 1 year (including 1 year)12,010,151,014.44
1 to 2 years3,586,193.03
2 to 3 years11,627,720.47
Over 3 years175,782.79
3 to 4 years68,408.50
4 to 5 years34.29
Over 5 years107,340.00
Total12,025,540,710.73

(2) Accrual, recovery or return of bad debt reserve in current period

Provision for bad debts of the current period:

Unit: RMB

CategoryOpening balanceChanges in amount of the current periodClosing balance
AccrualWithdrawal or write-backWrite-offOther
Accounts receivable for bad debt reserves by item531,002.50102,177.68633,180.18
Accounts receivable107,212,829.5019,113,355.31126,326,184.81
with bad debts reserves by group
Total107,743,832.0019,215,532.99633,180.18126,326,184.81

Among them, significant information of bad debt reserves withdrawn or written back in the current period:

None

(3) Accounts receivable actually written off in current period

Unit: RMB

ItemWritten off amount
Accounts receivable actually written off633,180.18

Among them, significant information of accounts receivable written off:

None

(4) Accounts receivable of the 5 highest closing balance by debtor

Unit: RMB

Company nameClosing balance of accounts receivableProportion of total Closing balance of accounts receivableClosing balance of bad debt provision
Customer 13,340,717,904.5327.78%33,407,179.05
Customer 22,141,740,691.9117.81%21,417,406.92
Customer 31,944,785,829.6616.17%19,447,858.29
Customer 41,146,613,449.599.54%11,466,134.49
Customer 5715,446,129.705.95%7,154,461.30
Total9,289,304,005.3977.25%

(5) Amount of assets and liabilities formed by transferring accounts receivable and continuing to beinvolved

None

(6) Accounts receivable derecognized due to transfer of financial assets

Transfer method of financial assetsAmount of receivables derecognizedGains or losses related to derecognition
Buyout factoring1,673,167,869.71-7,852,608.05

5. Receivable financing

Unit: RMB

ItemClosing balanceOpening balance
Notes receivable14,575,230.24
Total14,575,230.24

Changes in the current period of receivables financing and changes in fair value

□ Applicable √ Not applicable

If the provision for impairment of receivables financing is accrued according to the general model of expected credit loss, pleaserefer to the disclosure methods for other receivables when disclosing information related to provision for impairment:

□ Applicable √ Not applicable

6. Prepayments

(1) Presentation of prepayments by aging

Unit: RMB

AgingClosing balanceOpening balance
AmountProportionAmountProportion
Within 1 year85,353,901.1287.50%250,173,008.4999.93%
1 to 2 years12,190,916.8612.50%176,215.030.07%
Total97,544,817.98--250,349,223.52--

Explanation of reasons why prepayments aged more than 1 year with significant amount are not settled in time:

Company nameYear-end balanceReasons for no settlement
Company 112,178,509.88Prepaid goods payments
Total12,178,509.88

(2) Advance payment in the five highest closing balance by seller

The sum of the five highest prepayments in the year-end balance ranked by seller is RMB 37,372,531.31, accounting for 38.31%of the total year-end balance of prepayments.

7. Other receivables

Unit: RMB

ItemClosing balanceOpening balance
Other receivables374,669,355.9856,282,930.78
Total374,669,355.9856,282,930.78

(1) Interest receivable

None

(2) Dividend receivable

None

(3) Other receivables

1) Classification of other receivables by nature of payment

Unit: RMB

Nature of paymentClosing book balanceOpening book balance
Tax refund for export receivable107,739,537.4012,490,314.32
Security deposit90,839,988.5557,935,416.76
Current account164,646,290.053,135,180.20
Withholding and remitting social insurance and housing provident fund39,293,343.86
Reserve fund148,313.37
Other815,580.66771,845.99
Total403,334,740.5274,481,070.64

2) Provision for bad debts

Unit: RMB

Bad-debt provisionFirst stageSecond stageThird stageTotal
Expected credit impairment losses over the next 12 monthsExpected credit impairment losses for the entire life (credit impairment not occurred)Expected credit impairment losses for the entire life (credit impairment has occurred)
Balance as of January 1, 2021:18,198,139.8618,198,139.86
Balance as of January 1, 2021 in the current period————————
Accrual in the current period10,478,144.6810,478,144.68
Amount written off in the current period10,900.0010,900.00
Balance as of December 31, 202128,665,384.5428,665,384.54

Significant changes in the carrying value of changes in the allowances for losses in the current period

□ Applicable √ Not applicable

Disclosed by aging of accounts receivable

Unit: RMB

AgingBook balance
Within 1 year (including 1 year)359,333,933.07
1 to 2 years23,443,684.75
2 to 3 years5,036,365.84
Over 3 years15,520,756.86
3 to 4 years8,670,851.36
4 to 5 years5,156,222.00
Over 5 years1,693,683.50
Total403,334,740.52

3) Accrual, recovery or return of bad debt reserve in current period

Provision for bad debts of the current period:

Unit: RMB

CategoryOpening balanceChanges in amount of the current periodClosing balance
AccrualWithdrawal or write-backWrite-offOther
Accounts receivable for bad debt reserves by item10,900.0010,900.00
Accounts receivable with bad debts reserves by group18,198,139.8610,467,244.6828,665,384.54
Total18,198,139.8610,478,144.6810,900.0028,665,384.54

Among them, significant amount in bad debt reserves written back or withdrawn in the current period:

None

4) Other receivables actually written off in the current period

Unit: RMB

ItemWritten off amount
Other receivables actually written off10,900.00

Among them, write-off of other significant receivables:

None

5) Other receivables of the 5 highest closing balance by debtor

Unit: RMB

Company nameNature of paymentClosing balanceAgingRatio in the total closing balance of other receivablesClosing balance of bad debt provision
Company 1Current account157,406,315.35Within 1 year39.02%1,574,063.15
Company 2Tax refund for export receivable - VAT91,830,238.29Within 1 year22.77%918,302.38
Company 3Withholding and remitting social insurance and housing provident fund39,293,343.86Within 1 year9.74%392,933.44
Company 4Earnest money31,145,566.89Within 1 year, 2-3 years7.72%331,613.25
Company 5Tax refund for export receivable - VAT - Vietnam15,469,749.17Within 1 year, 1-2 years3.84%3,057,843.71
Total--335,145,213.56--83.09%6,274,755.93

6) Other receivables involving government subsidies

None

7) Other receivables derecognized due to transfer of financial assets

None

8) Amount of assets and liabilities formed by transferring other receivables and continuing to be involvedNone

8. Inventories

Whether the Company needs to comply with disclosure requirements of real estate industryNo

(1) Inventory classification

Unit: RMB

ItemClosing balanceOpening balance
Book balanceProvision for decline in value of inventories or provision for impairment of contract performance costBook valueBook balanceProvision for decline in value of inventories or provision for impairment of contract performance costBook value
Raw materials5,166,920,234.13110,350,236.945,056,569,997.192,281,283,533.8385,486,871.762,195,796,662.07
Products in process2,315,184,723.7759,814,311.482,255,370,412.291,191,893,176.3119,025,767.501,172,867,408.81
Goods in stock4,408,510,122.0459,150,749.514,349,359,372.535,479,699,670.1323,194,817.125,456,504,853.01
Revolving materials421,008,703.37421,008,703.37345,562,979.30345,562,979.30
Total12,311,623,783.31229,315,297.9312,082,308,485.389,298,439,359.57127,707,456.389,170,731,903.19

(2) Provision for decline in value of inventories and provision for impairment of contract performance cost

Unit: RMB

ItemOpening balanceIncreased amount in the current periodDecreased amount in the current periodClosing balance
AccrualOtherWrite-back or resaleOther
Raw materials85,486,871.76112,760,089.9187,896,724.73110,350,236.94
Products in process19,025,767.5064,384,648.2523,596,104.2759,814,311.48
Goods in stock23,194,817.1263,931,452.3827,975,519.9959,150,749.51
Total127,707,456.38241,076,190.54139,468,348.99229,315,297.93

(3) Explanation of the closing balance of inventory containing the capitalized amount of borrowing costsNone

(4) Explanation of amortization amount of contract performance cost in current periodNone

9. Non-current assets due within one year

Unit: RMB

ItemClosing balanceOpening balance
Non-current assets due within one year67,724.41
Total67,724.41

Significant debt investments/other debt investmentsNone

10. Other current assets

Unit: RMB

ItemClosing balanceOpening balance
Input tax retained for VAT326,273,163.10379,913,842.53
Input tax to be verified and to be deducted129,974,831.71116,105,675.19
Advance payment of enterprise income tax6,833,590.8326,715,612.43
Prepaid IPO fees8,983,655.49
Prepaid housing property tax and stamp tax123,606.53
Other3,706,986.47
Total475,772,227.60522,858,736.68

11. Long-term equity investments

Unit: RMB

Invested entityOpening balance (book value)Increase or decrease in the current periodBalance at the end of the period (book value)Closing balance of impairment provision
Investment additionInvestment reductionRecognized investment gain and loss under equity methodOther comprehensive income adjustmentsOther changes in equityCash dividends or profits declaredProvision for impairment reserveOther
I. Joint Venture
II. Affiliated enterprises
AKM295,656,242.725,611,552.361,189,723.344,310,075.40318,147,443.07
Industrial Company Limited7
Qingdao Virtual Reality Institute Co., Ltd.41,754,559.79-2,542,104.1939,212,455.60
Enkris Semiconductor Inc.80,000,000.0042,305.2480,042,305.24
Sub-total337,410,802.5680,000,000.0023,111,753.411,189,723.344,310,075.40437,402,203.91
Total337,410,802.5680,000,000.0023,111,753.411,189,723.344,310,075.40437,402,203.91

12. Investments in other equity instruments

Unit: RMB

ItemClosing balanceOpening balance
Investment projects of the Fund Company318,163,764.54174,609,853.97
Mobvoi Inc.127,514,000.00130,498,000.00
Shenzhen New Radio Technology Co., Ltd.20,000,000.00
WaveOptics Ltd.52,199,202.68
Total465,677,764.54357,307,056.65

Disclose investments in non-trading equity instruments of the period by item

Unit: RMB

Name of projectDividend income recognizedAccumulative gainsAccumulative lossesAmount of other consolidated income transferred to retained earningsReasons for designation of financial assets at fair value through other comprehensive incomeReasons for other comprehensive income transferred to retained earnings
Investment projects of the Fund Company95,817,145.9326,771,103.27Non-trading equity instrumentDisposal of equity
Mobvoi Inc.Non-trading equity instrument
Shenzhen New RadioNon-trading equity
Technology Co., Ltd.instrument
WaveOptics Ltd.148,122,883.71148,122,883.71Non-trading equity instrumentDisposal of equity
Total243,940,029.64174,893,986.98

Other explanations:

The accumulative gain from the disposal of the equity holded by Fund Company is RMB 34,803,826.41, of which RMB26,771,103.27 is transferred to retained earnings, and shareholder’s equity attributable to minority shareholders is RMB8,032,723.14.

13. Other non-current financial assets

Unit: RMB

ItemClosing balanceOpening balance
Financial assets classified as measured at fair value with changes recorded in current profits and losses201,430,042.13
Total201,430,042.13

14. Fixed assets

Unit: RMB

ItemClosing balanceOpening balance
Fixed assets18,123,352,480.7614,674,535,924.15
Total18,123,352,480.7614,674,535,924.15

(1) Overview of fixed assets

Unit: RMB

ItemBuilding and constructionProduction equipmentTest equipmentOffice equipmentTransportation equipmentTotal
I. Original book value:
1. Opening balance7,121,398,847.5612,070,283,197.031,795,312,380.94521,767,194.8225,875,255.7721,534,636,876.12
2. Amount increased in current period1,795,834,230.503,204,456,050.25676,309,350.27129,223,313.012,285,790.685,808,108,734.71
(1) Purchase2,036,092,696.98390,230,169.19109,666,214.072,291,943.992,538,281,024.23
(2) Transfer from construction in progress1,804,564,617.121,184,116,991.99286,722,503.3923,055,792.943,298,459,905.44
(3) Increase in business combinations
(4) Impact of difference from translation of statements in foreign currency-8,730,386.62-15,753,638.72-643,322.31-3,498,694.00-6,153.31-28,632,194.96
3. Amount decreased in current period8,653,046.23514,503,615.68200,999,682.9423,665,682.004,768,653.94752,590,680.79
(1) Disposal or scrap143,415.86505,251,114.04142,281,695.7123,665,682.004,768,653.94676,110,561.55
(2) Others8,509,630.379,252,501.6458,717,987.2376,480,119.24
4. Closing balance8,908,580,031.8314,760,235,631.602,270,622,048.27627,324,825.8323,392,392.5126,590,154,930.04
II. Accumulated depreciation
1. Opening balance1,049,234,767.804,861,162,487.45668,695,109.01262,240,878.1718,767,709.546,860,100,951.97
2. Amount increased in current period273,335,622.881,482,974,003.26271,115,007.3083,455,591.991,691,119.262,112,571,344.69
(1) Accrual274,144,247.961,485,053,048.65271,252,103.7785,426,423.541,691,449.782,117,567,273.70
(2) Impact of difference from translation of statements in foreign currency-808,625.08-2,079,045.39-137,096.47-1,970,831.55-330.52-4,995,929.01
3. Amount decreased in current period64,716.38373,347,283.58108,054,980.8220,430,045.243,972,821.36505,869,847.38
(1) Disposal or scrap64,716.38368,079,520.5984,303,154.8520,430,045.243,972,821.36476,850,258.42
(2) Others5,267,762.9923,751,825.9729,019,588.96
4. Closing balance1,322,505,674.305,970,789,207.13831,755,135.49325,266,424.9216,486,007.448,466,802,449.28
III. Impairment provision
1. Opening balance
2. Amount increased in current period
3. Amount decreased in current period
4. Closing balance
IV. Book Value
1. Closing book value7,586,074,357.538,789,446,424.471,438,866,912.78302,058,400.916,906,385.0718,123,352,480.76
2. Opening book value6,072,164,079.767,209,120,709.581,126,617,271.93259,526,316.657,107,546.2314,674,535,924.15

Explanation on Other MattersOther decrease in fixed assets represents the estimated amount of fixed assets adjusted after upgrade and renovation, astransferred to construction in progress and houses and buildings.

(2) Temporarily idle fixed assets

None

(3) Fixed assets leased out through operating leases

Unit: RMB

ItemBook value at the end of the reporting period
Houses and buildings362,897,570.63

(4) Overview of the fixed assets for which certificates of title to be obtained

Unit: RMB

ItemBook valueReasons for not obtaining the certificate of title
Qingdao 1# Office building1,208,044,858.90Property rights certificate under processing
9# Factory building149,942,591.23Approval in progress by the housing authority
55# Factory building88,592,184.60Property rights certificate under processing
56# Factory building88,253,422.34Property rights certificate under processing
57# Factory building155,315,454.77Property rights certificate under processing
23# Apartment2,707,332.15Property rights certificate under processing

(5) Liquidation of fixed assets

None

15. Construction in progress

Unit: RMB

ItemClosing balanceOpening balance
Construction in progress2,127,055,853.772,078,910,639.92
Total2,127,055,853.772,078,910,639.92

(1) Overview of construction projects in progress

Unit: RMB

ItemClosing balanceOpening balance
Book balanceDepreciation reservesBook valueBook balanceDepreciation reservesBook value
Self-made equipment453,794,330.67453,794,330.67158,433,023.54158,433,023.54
Unaccepted equipment705,426,549.35705,426,549.35205,919,906.36205,919,906.36
2# Office building160,023,622.42160,023,622.4291,982,146.2091,982,146.20
Sporadic projects157,044,940.34157,044,940.3477,163,481.1477,163,481.14
39# Factory building106,641,302.22106,641,302.2263,400,326.6063,400,326.60
42# Factory building78,086,553.6678,086,553.6643,602,044.7443,602,044.74
52# Factory building77,142,513.2077,142,513.201,920,779.741,920,779.74
37# Factory building65,991,667.3165,991,667.3158,643,938.1258,643,938.12
46# Factory building56,866,174.6156,866,174.6135,435,572.7435,435,572.74
63# Factory building38,623,187.0938,623,187.09
38# Factory building27,185,507.1427,185,507.1418,875,165.6918,875,165.69
76# Factory building22,751,748.0422,751,748.04
73# Factory building18,061,783.6718,061,783.67
74# Factory building17,779,539.8817,779,539.88
43# Factory building17,137,354.4517,137,354.4514,607,806.3914,607,806.39
75# Factory building15,726,428.0515,726,428.05
69# Factory building13,084,558.1813,084,558.18
68# Factory building13,063,930.1613,063,930.16
67# Factory building12,688,314.1512,688,314.15
72# Factory building12,277,054.1112,277,054.11
49# Factory building10,804,751.9310,804,751.935,911,524.615,911,524.61
48# Factory building9,111,894.099,111,894.091,975,767.131,975,767.13
47# Factory8,653,090.458,653,090.454,225,214.794,225,214.79
building
64# Factory building8,103,133.658,103,133.65
70# Factory building6,883,803.126,883,803.12
71# Factory building5,376,869.245,376,869.24
65# Factory building4,363,631.554,363,631.55
66# Factory building4,361,621.044,361,621.04
Qingdao 1# Office building1,230,265,550.051,230,265,550.05
55# Factory building24,550,734.5724,550,734.57
56# Factory building24,550,571.5524,550,571.55
Reconstruction and expansion of factory buildings15,829,092.9215,829,092.92
57# Factory building1,047,196.581,047,196.58
Unaccepted software570,796.46570,796.46
Total2,127,055,853.772,127,055,853.772,078,910,639.922,078,910,639.92

(2) Increase or decrease of significant construction projects in progress in current period

Unit: RMB

Name of projectBudget amountOpening balanceIncreased amount in the current periodAmount transferred to fixed assets in current periodOther amount decreased in current periodClosing balanceProportion of total project input to budgetProject progressAccumulated amount of interest capitalizationIncluding: Amount of interest capitalization in current periodInterest capitalization rate for current periodSource of funds
Self-made equipment158,433,023.54916,542,693.28621,181,386.15453,794,330.67Other
Unaccepted equipment205,919,906.361,373,401,618.69873,894,975.70705,426,549.35Other
2# Office building357,080,000.0091,982,146.2068,041,476.22160,023,622.4244.81%40%Other
Sporadic projects77,163,481.14296,869,053.18165,275,117.1151,712,476.87157,044,940.34Other
39# Factory building109,909,600.0063,400,326.6043,240,975.62106,641,302.2297.03%95%Other
42# Factory building82,826,867.0043,602,044.7434,484,508.9278,086,553.6694.28%95%Other
52# Factory building235,771,400.001,920,779.7475,221,733.4677,142,513.2032.72%35%Other
37# Factory building69,905,933.0058,643,938.127,347,729.1965,991,667.3194.40%95%Other
46# Factory building94,000,000.0035,435,572.7421,430,601.8756,866,174.6160.50%70%Other
Name of projectBudget amountOpening balanceIncreased amount in the current periodAmount transferred to fixed assets in current periodOther amount decreased in current periodClosing balanceProportion of total project input to budgetProject progressAccumulated amount of interest capitalizationIncluding: Amount of interest capitalization in current periodInterest capitalization rate for current periodSource of funds
63# Factory building172,939,700.0038,623,187.0938,623,187.0922.33%25%Other
38# Factory building28,625,600.0018,875,165.698,310,341.4527,185,507.1494.97%95%Other
76# Factory building48,563,124.7722,751,748.0422,751,748.0446.85%70%Other
73# Factory building49,331,582.5118,061,783.6718,061,783.6736.61%40%Other
74# Factory building64,324,249.1317,779,539.8817,779,539.8827.64%30%Other
43# Factory building18,670,000.0014,607,806.392,529,548.0617,137,354.4591.79%92%Other
75# Factory building56,944,053.3115,726,428.0515,726,428.0527.62%30%Other
69# Factory building38,939,639.2313,084,558.1813,084,558.1833.60%45%Other
68# Factory building38,888,118.5013,063,930.1613,063,930.1633.59%45%Other
67# Factory building37,476,058.3212,688,314.1512,688,314.1533.86%45%Other
72# Factory38,708,355.9312,277,054.1112,277,054.1131.72%45%Other
Name of projectBudget amountOpening balanceIncreased amount in the current periodAmount transferred to fixed assets in current periodOther amount decreased in current periodClosing balanceProportion of total project input to budgetProject progressAccumulated amount of interest capitalizationIncluding: Amount of interest capitalization in current periodInterest capitalization rate for current periodSource of funds
building
49# Factory building32,000,000.005,911,524.614,893,227.3210,804,751.9333.76%45%Other
48# Factory building9,200,000.001,975,767.137,136,126.969,111,894.0999.04%95%Other
47# Factory building24,500,000.004,225,214.794,427,875.668,653,090.4535.32%45%Other
64# Factory building99,555,800.008,103,133.658,103,133.658.14%10%Other
70# Factory building24,554,153.736,883,803.126,883,803.1228.04%45%Other
71# Factory building18,474,099.315,376,869.245,376,869.2429.10%45%Other
65# Factory building90,000,000.004,363,631.554,363,631.554.85%5%Other
66# Factory building90,000,000.004,361,621.044,361,621.044.85%5%Other
Qingdao 1# Office building1,500,000,000.001,230,265,550.05478,756.441,230,744,306.4982.05%100%34,278,258.453,809,576.72Other
55# Factory99,670,000.0024,550,734.5764,041,450.0388,592,184.6088.89%100%Other
Name of projectBudget amountOpening balanceIncreased amount in the current periodAmount transferred to fixed assets in current periodOther amount decreased in current periodClosing balanceProportion of total project input to budgetProject progressAccumulated amount of interest capitalizationIncluding: Amount of interest capitalization in current periodInterest capitalization rate for current periodSource of funds
building
56# Factory building99,670,000.0024,550,571.5563,702,850.7988,253,422.3488.55%100%Other
Reconstruction and expansion of factory buildings15,829,092.9259,373,965.3675,203,058.28Other
57# Factory building211,081,300.001,047,196.58154,268,258.19155,315,454.7773.58%100%Other
Unaccepted software570,796.46570,796.46Other
Total3,841,609,634.742,078,910,639.923,398,888,392.623,298,459,905.4452,283,273.332,127,055,853.77----34,278,258.453,809,576.72--

Explanation on Other Matters

Construction in progress – Other amounts decreased in the year represent the transfer of house construction fees arising from the original construction in progress to long-term deferredexpenses upon completion and the transfer of accepted software to intangible assets.

(3) Provision for impairment of construction in progress in current period

None

(4) Construction materials

None

16. Right-of-use assets

Unit: RMB

ItemBuilding and constructionTotal
I. Original book value:
1. Opening balance462,821,988.61462,821,988.61
2. Amount increased in current period16,290,960.2316,290,960.23
(1) New lease of current year22,944,855.4222,944,855.42
(2) Impact of change in the exchange rate-6,653,895.19-6,653,895.19
3. Amount decreased in current period37,447,701.5637,447,701.56
(1) Amount disposed in current year37,447,701.5637,447,701.56
4. Closing balance441,665,247.28441,665,247.28
II. Accumulated depreciation
1. Opening balance
2. Amount increased in current period122,484,411.95122,484,411.95
(1) Accrual122,484,411.95122,484,411.95
3. Amount decreased in current period11,615,685.3311,615,685.33
(1) Disposal11,615,685.3311,615,685.33
4. Closing balance110,868,726.62110,868,726.62
III. Impairment provision
1. Opening balance
2. Amount increased in current period
(1) Accrual
3. Amount decreased in current period
(1) Disposal
4. Closing balance
IV. Book Value
1. Closing book value330,796,520.66330,796,520.66
2. Opening book value462,821,988.61462,821,988.61

17. Intangible assets

(1) Overview of intangible assets

Unit: RMB

ItemLand-use rightPatent rightNon-patent technologyOtherTotal
I. Original book value
1. Opening balance1,404,807,112.858,964,410.002,922,489,842.67178,444,433.824,514,705,799.34
2. Amount increased in current period34,692,287.94529,007,097.0956,735,888.98620,435,274.01
(1) Purchase37,057,706.341,698,113.1656,772,444.8495,528,264.34
(2) Internal R&D528,007,923.88528,007,923.88
(3) Increase in business combinations
(4) Impact of difference from translation of statements in foreign currency-2,365,418.40-698,939.95-36,555.86-3,100,914.21
3. Amount decreased in current period146,000,482.71146,000,482.71
(1) Disposal146,000,482.71146,000,482.71
(2) Others - disposal of subsidiaries
4. Closing balance1,439,499,400.798,964,410.003,305,496,457.05235,180,322.804,989,140,590.64
II. Accumulated amortization
1. Opening balance145,186,227.001,942,288.831,527,411,079.54109,750,663.621,784,290,258.99
2. Amount increased in current period30,517,816.04896,441.00529,247,511.9027,289,760.40587,951,529.34
(1) Accrual30,606,695.89896,441.00529,934,168.3527,317,171.44588,754,476.68
(2) Impact of difference from translation of statements in foreign currency-88,879.85-686,656.45-27,411.04-802,947.34
3. Amount decreased in current period145,894,986.54145,894,986.54
(1) Disposal145,894,986.54145,894,986.54
(2) Others
4. Closing balance175,704,043.042,838,729.831,910,763,604.90137,040,424.022,226,346,801.79
III. Impairment provision
1. Opening balance
2. Amount increased in current period
3. Amount decreased in current period
4. Closing balance
IV. Book value
1. Closing book value1,263,795,357.756,125,680.171,394,732,852.1598,139,898.782,762,793,788.85
2. Opening book value1,259,620,885.857,022,121.171,395,078,763.1368,693,770.202,730,415,540.35

At the end of this period, the proportion of intangible assets created through internal research and development of the Company to thebalance of intangible assets is 59.04%.

(2) Overview of land-use right without certificates of title

None

18. Development expenditure

Unit: RMB

ItemOpening balanceIncreased amount in the current periodDecreased amount in the current periodClosing balance
Internal development expensesOtherRecognized as intangible assetsTransfer to current profit and loss
Self-developed technologies for electroacoustic products107,970,366.024,301,342,763.66528,007,923.883,638,349,113.36242,956,092.44
Total107,970,366.024,301,342,763.66528,007,923.883,638,349,113.36242,956,092.44

19. Goodwill

(1) Original book value of goodwill

Unit: RMB

Name of the invested entity or matterOpening balanceIncrease in the current periodDecrease in theClosing balance
forming goodwillcurrent period
Formed by business combinationsOtherDisposalOther
Goertek Electronics, Inc.1,743,540.561,743,540.56
Weifang Goertek Communication Technology Co., Ltd.15,115,644.5215,115,644.52
GoerTek Audio Technologies Aps8,831,473.298,831,473.29
Total25,690,658.3725,690,658.37

(2) Impairment provision for goodwill

Unit: RMB

Name of the invested entity or matter forming goodwillOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
AccrualOtherDisposalOther
Goertek Electronics, Inc.
Weifang Goertek Communication Technology Co., Ltd.
GoerTek Audio Technologies Aps8,831,473.298,831,473.29
Total8,831,473.298,831,473.29

Information about the asset group or portfolio of asset groups of goodwill

At December 31, 2021, net value of goodwill is RMB 16,859,185.08, of which RMB 15,115,644.52 related to acquisition ofWeifang Goertek Communication Technology Co., Ltd. No goodwill impairment is recognized in the year, as the recoverableamount of the relevant group of assets valued under the equity method is higher than its carrying value (including part of carryingvalue of goodwill apportioned).Explain the goodwill impairment test process, key parameters (such as the forecast period growth rate, stable period growth rate,profit rate, discount rate, forecast period, etc. when the present value of the future cash flow is expected) and the recognition methodof goodwill impairment lossNoneImpact of goodwill impairment testNone

20. Long-term deferred expenses

Unit: RMB

ItemOpening balanceIncreased amount in the current periodAmortized amount in the current periodOther decreased amountClosing balance
Expenditure on house improvement128,720,931.07134,846,196.6271,121,615.84192,445,511.85
Electric power facility5,867,336.485,867,336.48
Bank commission and arrangement fee16,767,021.318,574,246.818,192,774.50
Financing guarantee fee3,030,000.001,262,500.001,767,500.00
IT project service fee6,146,685.591,707,412.704,439,272.89
Other859,743.42509,312.41350,431.01
Total152,215,032.28144,022,882.2189,042,424.24207,195,490.25

21. Deferred tax assets/liabilities

(1) Deferred tax assets not offset

Unit: RMB

ItemClosing balanceOpening balance
Deductible temporary differenceDeferred tax assetsDeductible temporary differenceDeferred tax assets
Provision for impairment of assets286,270,259.1445,253,703.58201,145,010.0231,772,246.81
Unrealized profit from internal transaction1,058,642,169.31161,021,024.99917,195,852.09146,690,522.89
Deductible loss1,291,424,655.49204,109,171.19105,178,529.8725,019,797.35
Government subsidies299,191,717.9946,916,190.75322,711,738.0349,690,387.77
Held-for-trading financial assets - changes in fair value of equity instrument49,624,038.437,443,605.78
Changes in the fair value of derivative financial instruments15,190,564.342,285,343.1243,578,775.717,190,497.99
Temporary differences of fixed assets46,297,192.226,944,578.8351,682,581.017,752,387.15
Expenses of share-based payment190,629,395.6728,594,409.35
Total3,187,645,954.16495,124,421.811,691,116,525.16275,559,445.74

(2) Deferred tax liabilities not offset

Unit: RMB

ItemClosing balanceOpening balance
Taxable temporary differenceDeferred tax liabilitiesTaxable temporary differenceDeferred tax liabilities
Asset appreciation after re-evaluation following the combination with an enterprise under different control4,338,259.811,084,564.944,549,882.241,137,470.56
Changes in the fair value of derivative financial instruments29,721,944.304,739,855.81171,872,843.0226,894,130.21
Difference in time point for recognition of interest income of factoring business5,581,895.451,395,473.862,503,977.04625,994.26
Difference between the book value of fixed assets and their tax bases2,536,133,275.63380,419,991.341,962,722,098.44294,408,314.77
Held-for-trading financial assets - changes in fair value of equity instrument15,290,023.022,293,503.45
Total2,591,065,398.21389,933,389.402,141,648,800.74323,065,909.80

(3) Deferred tax assets or liabilities presented in net amount after offsetting

Unit: RMB

ItemAmount of deferred tax assets and liabilities mutually offset at the end of the periodClosing balance of deferred tax assets or liabilities after offsettingAmount of deferred tax assets and liabilities mutually offset at the beginning of the periodOpening balance of deferred tax assets or liabilities after offsetting
Deferred tax assets495,124,421.81275,559,445.74
Deferred tax liabilities389,933,389.40323,065,909.80

(4) Details of unrecognized deferred tax assets

Unit: RMB

ItemClosing balanceOpening balance
Deductible temporary difference98,037,802.8352,506,297.00
Deductible loss916,176,966.88655,499,213.78
Government subsidies3,972,247.354,940,624.12
Unrealized profit from internal transaction198,600,822.88155,348,350.40
Total1,216,787,839.94868,294,485.30

(5) Deductible loss of unrecognized deferred tax assets will expire in the following years

Unit: RMB

YearClosing balanceOpening balanceNotes
202144,036,312.92
20229,008,881.1011,479,583.03
202358,999,159.6398,173,819.34
202477,929,325.94182,554,710.09
2025160,630,241.51319,254,788.40
2026172,308,560.69
2027718,056.78
202837,679,003.68
202976,312,985.99
2030125,931,259.51
2031196,659,492.05
Total916,176,966.88655,499,213.78--

22. Other non-current assets

Unit: RMB

ItemClosing balanceOpening balance
Book balanceDepreciation reservesBook valueBook balanceDepreciation reservesBook value
Contract assets119,469.271,194.69118,274.58187,877.771,878.78185,998.99
Prepayment for long-term assets366,744,190.26366,744,190.26235,100,069.21235,100,069.21
Input tax to be deducted but expected not to be deducted within one year17,036,311.1117,036,311.1115,732,285.2615,732,285.26
Certificate of deposit of large sums122,540,194.44122,540,194.44
The part due within one year-68,408.50-684.09-67,724.41
Total506,440,165.081,194.69506,438,970.39250,951,823.741,194.69250,950,629.05

23. Short-term borrowings

(1) Types of short-term borrowings

Unit: RMB

ItemClosing balanceOpening balance
Secured borrowings1,008,216,693.01666,463,000.00
Credit borrowings3,276,642,654.012,523,402,281.20
Total4,284,859,347.023,189,865,281.20

Explanation of the types of short-term borrowings:

The year-end balance of secured borrowing is RMB 1,008,216,693.01, consisting of principle of RMB 1,005,956,500.00 andinterest of RMB 2,260,193.01. A part of the amount, RMB 719,050,000.00, is secured by a guarantee provided by Goertek Group Co.,Ltd., and the remainder is secured by a guarantee provided by its subsidiary, Goertek (HongKong) Co., Limited.

(2) Short-term borrowings that are overdue and not repaid

None

24. Held-for-trading financial liabilities

Unit: RMB

ItemClosing balanceOpening balance
Held-for-trading financial liabilities15,190,564.3443,578,775.71
Including:
Derivative financial liabilities15,190,564.3443,578,775.71
Total15,190,564.3443,578,775.71

25. Notes payable

Unit: RMB

TypeClosing balanceOpening balance
Bank acceptance notes2,742,876,464.231,797,630,927.08
Total2,742,876,464.231,797,630,927.08

The amount of bills payable due and unpaid at the end of this period is RMB 0.00.

26. Accounts Payable

(1) Presentation of accounts payable

Unit: RMB

ItemClosing balanceOpening balance
Material cost and others16,391,404,094.2914,068,333,091.24
Payment for equipment1,663,151,657.69866,620,185.20
Payment for construction projects475,053,903.42590,401,812.84
Total18,529,609,655.4015,525,355,089.28

(2) Important accounts payable aged above 1 year

Unit: RMB

ItemClosing balanceReasons for outstanding or carry-over
Payment for equipment4,553,236.38Unsettled
Payment for construction projects3,945,515.10Unsettled
Payment for equipment3,890,450.75Unsettled
Payment for construction projects3,456,102.47Unsettled
Payment for construction projects2,677,659.08Unsettled
Payment for equipment2,428,715.42Unsettled
Payment for construction projects2,057,801.58Unsettled
Payment for material1,785,884.72Unsettled
Payment for equipment1,757,381.39Unsettled
Payment for equipment1,394,369.95Unsettled
Payment for construction projects1,304,059.07Unsettled
Payment for material1,255,434.07Unsettled
Total30,506,609.98--

27. Contract liabilities

Unit: RMB

ItemClosing balanceOpening balance
Goods payments received in advance2,210,825,761.69772,033,187.85
Total2,210,825,761.69772,033,187.85

28. Payroll payable

(1) Presentation of payroll payable to employees

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
I. Short-term payroll1,136,453,967.567,477,012,054.667,546,895,862.591,066,570,159.63
II. Post-employment benefits—defined contribution plans552,597,537.13552,597,537.13
Total1,136,453,967.568,029,609,591.798,099,493,399.721,066,570,159.63

(2) Presentation of short-term payroll

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
1. Salaries, bonuses, allowances and subsidies1,126,479,091.796,610,396,096.586,681,966,133.521,054,909,054.85
2. Employee welfare fee426,845,347.70426,845,347.70
3. Social insurance premium234,362,594.89234,362,594.89
Incl.: Medical insurance premium225,409,289.39225,409,289.39
Work injury insurance premium7,404,777.317,404,777.31
Maternity insurance premium1,548,528.191,548,528.19
4. Housing provident fund182,639,259.43182,639,259.43
5. Labor union expenditure and employee education expenses9,974,875.7722,768,756.0621,082,527.0511,661,104.78
Total1,136,453,967.567,477,012,054.667,546,895,862.591,066,570,159.63

(3) Presentation of defined contribution plans

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
1. Basic endowment insurance premium530,270,151.16530,270,151.16
2. Unemployment insurance premium22,327,385.9722,327,385.97
Total552,597,537.13552,597,537.13

Other explanations:

The Group contributes to mandatory pension program and unemployment benefit program established by governmentalauthority. Under these programs, the Group makes monthly contributions to these programs respectively at 16% and 0.70% of the2021 basis for social insurance contributions. Except the above monthly contributions, the Group is not under other paymentobligations. Corresponding expenditures are recorded in the current profits and losses, or related asset costs when incurred.

29. Taxes payable

Unit: RMB

ItemClosing balanceOpening balance
VAT35,791,727.7620,952,053.68
Enterprise income tax254,141,624.62131,731,154.94
Personal income tax9,980,898.057,376,446.64
City maintenance and construction tax19,989,711.749,791,014.76
Education surcharge8,056,604.313,670,236.25
Local education surcharges5,766,024.572,474,306.23
Local water conservancy construction fund0.00703,565.32
Housing property tax16,792,720.4211,797,756.21
Land use tax2,926,628.844,682,015.07
Stamp duties tax3,141,644.181,905,608.50
Water resource tax20.0032,414.00
Environmental protection tax5,024.7319,282.98
Withholding taxes17,371.06362,463.14
Total356,610,000.28195,498,317.72

30. Other payables

Unit: RMB

ItemClosing balanceOpening balance
Interest payable8,911,319.91
Other payables80,187,733.1758,933,389.73
Total80,187,733.1767,844,709.64

(1) Interest payable

Unit: RMB

ItemClosing balanceOpening balance
Interest on long-term borrowings with payment of interest by installments and repayment of principal upon maturity1,925,046.99
Corporate bond interest4,381,543.10
Interest payable on short-term borrowings2,604,729.82
Total8,911,319.91

Important overdue and unpaid interest:

None

(2) Dividends payable

None

(3) Other payables

1) Presentation of other payables by nature of payment

Unit: RMB

ItemClosing balanceOpening balance
Current accounts payable30,175,265.1148,644,678.41
Payroll payable4,246,920.216,104,492.63
Deposit payable44,029,093.101,869,467.99
Various security deposits payable1,736,454.752,314,750.70
Total80,187,733.1758,933,389.73

2) Other important payables aged above 1 year

None

31. Non-current liabilities due within one year

Unit: RMB

ItemClosing balanceOpening balance
Long-term borrowings due within one year400,000,000.00
Lease liabilities due within one year101,408,170.04113,350,154.66
Total501,408,170.04113,350,154.66

32. Other current liabilities

Unit: RMB

ItemClosing balanceOpening balance
Notes receivable endorsed, undue and not de-recognized1,709,928.753,901,143.75
VAT payable—tax on items to be resold13,134,430.263,111,451.58
Total14,844,359.017,012,595.33

33. Long-term borrowings

(1) Types of long-term borrowings

Unit: RMB

ItemClosing balanceOpening balance
Secured borrowings1,613,294,229.182,754,299,262.02
Credit borrowings990,921,555.56
Long-term borrowings due within one year-400,000,000.00
Total2,204,215,784.742,754,299,262.02

Description of types of long-term borrowings:

The year-end balance of secured borrowing is RMB 1,613,294,229.18, consisting of RMB 1,611,383,000.00 of principle andRMB 1,911,229.18 of interest. A part of the amount, RMB 400,000,000.00 of borrowing is secured by a guarantee provided byGoertek Group Co., Ltd., and the remaining borrowings is secured by a guarantee provided by its subsidiary, Goertek (HongKong)Co., Limited.Other explanations, including interest rate range:

CreditorBorrowing Starting dateBorrowing Closing dateInterest rate (%)CurrencyClosing balanceOpening balance
Foreign currency amount (RMB 10,000)Local currency amount (RMB 10,000)Foreign currency amount (RMB 10,000)Local currency amount (RMB 10,000)
Standard Chartered Bank syndicate1/16/20201/16/20231.65-3.46USD19,000.00121,138.3030,000.00195,747.00
China Development Bank9/29/20209/28/20223.54-3.79RMB40,000.0040,000.00
Shandong Province Branch of The Export-Import Bank of China3/11/20212/24/20232.70RMB50,000.00
Shandong Province Branch of The Export-Import Bank of China5/28/20215/26/20233.40RMB49,000.00
Syndicated loans9/20/20189/21/20265.39RMB39,682.93

34. Bonds payable

(1) Bonds payable

Unit: RMB

ItemClosing balanceOpening balance
Convertible bond3,031,391,335.56
Total3,031,391,335.56

(2) Changes in bonds payable (excluding preferred shares, perpetual bonds and other financial instrumentsclassified as financial liabilities)

Unit: RMB

Bond nameFace valueIssuing dateBond periodIssued amountOpening balanceIssue in the current periodProvision interest at face valuePremium or discount amortizationRepayment in current periodShare conversion in current yearRedemption in current yearClosing balance
Convertible bond4,000,000,000.00Friday, June 12, 20206 years4,000,000,000.003,031,391,335.56687,779.5412,132,769.383,029,105,297.8414,418,807.100.00
Total------4,000,000,003,031,391,3687,779.12,132,73,029,1014,418,80.00
0.0035.565469.385,297.8407.10

(3) Explanation of conversion conditions and time of convertible bonds

As approved by the CSRC in its Reply on Approving Public Offering of Convertible Bonds by Goertek Inc. (CSRC Permit No.780/[2020]), the Group issued 40,000,000 convertible bonds with par value of RMB 100 on June 12, 2020. The coupon rate of thebonds is 0.20% for the first year, 0.40% for the second year, 0.60% for the third year, 1.50% for the fourth year, 1.80% for the fifthyear and 2.00% for the sixth year. Annual interest payment dates are each anniversary of the issuance date of convertible bonds, andthe principal and all interests accrued will be paid at maturity date.The conversion period starts from the first trading day after the expiration of six months from the issuance date of theconvertible bonds until the maturity date of the convertible bonds (from December 18, 2020 to June 11, 2026). The initial conversionprice is RMB 23.27 per share and remains unchanged up to date.For the Company’s A shares (stock abbreviation: Goertek; stock code: 002241), the closing price in more than ten trading daysin twenty consecutive trading days from December 18, 2020 to January 15, 2021 was not lower than 130% of the current “GoertekConvertible Bonds NO.2” conversion price at RMB 23.27 per share, i.e. RMB 30.26 per share. The conditional redemption of“Goertek Convertible Bonds NO.2” according to the Prospectus has been triggered.According to the Proposal on Early Redemption of “Goertek Convertible Bonds NO.2” reviewed and approved at the thirteenthsession of the fifth Board of Directors and the eleventh session of the fifth Board of Supervisors held by the Company on January 15,2021, it was resolved to exercise the conditional redemption right of “Goertek Convertible Bonds NO.2” to redeem after close ofmarket on the redemption registration date (March 2, 2021) all “Goertek Convertible Bonds NO.2” bonds at the price of the nominalvalue of the bonds plus the accrued interest for the current period. As of March 3, 2021, “Goertek Convertible Bonds NO.2” was nolonger traded and converted, and was delisted on March 11, 2021.

(4) Explanation of other financial instruments classified as financial liabilitiesNone

35. Lease liabilities

Unit: RMB

ItemClosing balanceOpening balance
Lease payment327,964,908.57441,150,002.41
Unrecognized financing fees-16,346,783.13-28,969,348.91
Lease liabilities due within one year-101,408,170.04-113,350,154.66
Total210,209,955.40298,830,498.84

36. Deferred income

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balanceCause of formation
Government subsidies538,922,331.52198,381,126.00196,982,376.87540,321,080.65
Total538,922,331.52198,381,126.00196,982,376.87540,321,080.65--

Items involving government subsidies:

Unit: RMB

Liability itemOpening balanceAmount of new subsidies in current periodAmount included in non-operating revenue of the current periodAmount included in other income in current periodAmount of cost offset in current periodOther changesClosing balanceAsset-related/income-related
Special funding for corporate innovation, technical transformation and industrial upgrading7,784,270.58140,206,700.00147,990,970.58Income-related
Special funding for corporate innovation, technical transformation and industrial upgrading489,411,393.6958,174,426.0047,364,779.64500,221,040.05Asset-related
Awards and subsidies for public leasehold houses41,726,667.251,626,626.6540,100,040.60Asset-related

37. Share capital

Unit: RMB

Opening balanceIncrease or decrease in the change (+, -)Closing balance
New sharesBonus sharesTransferred from reservesOtherSub-total
Total shares3,275,438,427.00140,882,609.00140,882,609.003,416,321,036.00

Other explanations:

(1) Due to the convertible bond holders’ request for conversion in 2021, the equity capital of the Company was changed to RMB3,416,321,036.

(2) As of December 31, 2021, the 115,400,305 shares of the Company held by the controlling shareholders and their personsacting in concert have been pledged, representing 3.38% of total shares of the Company. Including:

① Mr. Jiang Long, a shareholder of the Company, pledged his 15,000,000 shares of the Company to China MerchantsSecurities Co., Ltd. for the period from August 3, 2021 to August 3, 2022.

② Goertek Group Co., Ltd., a shareholder of the Company, pledged its 100,400,305 shares of the Company to ZhongtaiSecurities Co., Ltd. for the period from March 30, 2021 until the procedures for pledge release are completed.

38. Other equity instruments

(1) Basic information of other financial instruments such as preferred stocks and perpetual bonds issued atthe end of the period

As approved by the CSRC in its Reply on Approving Public Offering of Convertible Bonds by Goertek Inc. (CSRC Permit No.780/[2020]), the Company issued 40,000,000 convertible bonds with par value of RMB 100 on June 12, 2020. The coupon rate of thebonds is 0.20% for the first year, 0.40% for the second year, 0.60% for the third year, 1.50% for the fourth year, 1.80% for the fifthyear and 2.00% for the sixth year. Annual interest payment dates are each anniversary of the issuance date of convertible bonds, andthe principal and all interests accrued will be paid at maturity date.

According to the Proposal on Early Redemption of “Goertek Convertible Bonds NO.2” reviewed and approved at the thirteenthsession of the fifth Board of Directors and the eleventh session of the fifth Board of Supervisors held by the Company on January 15,2021, it was resolved to exercise the conditional redemption right of “Goertek Convertible Bonds NO.2” to redeem all “GoertekConvertible Bonds NO.2” bonds which were not converted to shares at the price of the nominal value of the bonds plus the accruedinterest for the current period. As of March 3, 2021, “Goertek Convertible Bonds NO.2” was no longer traded and converted, and wasdelisted on March 11, 2021.

(2) Changes in financial instruments such as preferred shares and perpetual bonds outstanding at the endof the period

Unit: RMB

Outstanding financial instrumentsBeginning of the periodIncrease in the current periodDecrease in the current periodEnd of period
QuantityBook valueQuantityBook valueQuantityBook valueQuantityBook value
Convertible bond141,560,665317,690,852.25141,560,665317,690,852.25
Total141,560,665317,690,852.25141,560,665317,690,852.25

Changes of other equity instruments in the current period, explanation of reasons for changes, and basis for relevant accountingtreatment:

The decrease in the amount of other equity instruments relates to the conversion and redemption of the convertible bonds in theyear.

39. Capital reserves

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
Capital premium (Equity premium)3,282,034,618.765,520,332,302.70128,809,946.788,673,556,974.68
Other capital reserves529,624,172.52871,368,483.26596,443,436.16804,549,219.62
Total3,811,658,791.286,391,700,785.96725,253,382.949,478,106,194.30

Other explanations, including the increase and decrease in the current period and explanation of reasons for changes:

① Capital reserves-equity premium increased by RMB 5,520,332,302.70 for the year, attributable to: 1. the conversion ofconvertible bonds, causing an increase in capital reserves-equity premium by RMB 3,209,305,793.20; 2. the share-based payment forthe first exercise related to “Homeland No. 4”, whereby other capital reserves of RMB 596,443,436.16 recognized during the waitingperiod was transferred into equity premium; and 3. an increase of RMB 1,714,583,073.34 in capital reserves-equity premium relatedto the increased holdings of the Company in a subsidiary, Goertek Microelectronics Inc. as a result of the minority shareholders’capital increase.

② Capital reserves-equity premium decreased by RMB 128,809,946.78, attributable to: 1. the non-trading transfer of the11,000,000 shares in the special securities account for repurchase to the special account for “Homeland No. 5” employee stockprogram at RMB 10 per share in the year, causing an increase in capital reserves-equity premium by RMB 114,033,093.83; and 2. theshare-based payment of Goertek Microelectronics Inc. in the year, causing an increase in minority equity and thus a decrease in

capital reserves-equity premium by RMB 14,776,852.95.

③ Capital reserves–other capital reserves increased by RMB 871,368,483.26 for the year, all related to the share-basedpayment. For the details, please see this Note XIII–Share-based Payment–2. Equity-settled share-based payment.

④ Capital reserves–other capital reserves decreased by RMB 596,443,436.16 for the year, all related to the share-basedpayment for the first exercise related to “Homeland No. 4”, with other capital reserves being transferred into equity premium.

40. Treasury shares

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
Shares of the Company acquired for employee stock programs or equity incentives516,007,644.951,999,998,595.63224,033,093.832,291,973,146.75
Total516,007,644.951,999,998,595.63224,033,093.832,291,973,146.75

Other explanations, including the increase and decrease in the current period and explanation of reasons for changes:

As of December 31, 2021, the cumulative treasury shares are 74,265,451, representing 2.17% of total equity of the Company.Details are as follows:

1. Treasury shares buyback

At the 24th meeting of the 4th Board of Directors of the Company held on October 18, 2019, the Proposal on the Plan toRe-purchase Shares of the Company and other related proposals were deliberated and adopted, approving the Company to repurchaseits own shares at a price no higher than RMB 21.00 per share for employee stock programs or equity incentives through centralizedbidding, where the total amount of funding for share repurchase shall be no less than RMB 500 million and no more than RMB 1billion. The share repurchase proposal shall be implemented within 12 months after reviewed and adopted by the Board of Directorsof the Company. As of April 27, 2020, the share repurchase plan was completely implemented, and the 25,335,918 shares werere-purchased in total. The treasury shares acquired from this share repurchase represent 0.74% of the total equity of the Company atthe year end.

At the 15th and 16th meetings of the 5th Board of Directors of the Company held on January 29, 2021 and February 9, 2021respectively, the Proposal on the Deliberation of the Plan to Re-purchase Shares of the Company and the Proposal on theAmendment of the Plan to Re-purchase Shares of the Company were deliberated and adopted successively, approving the Company touse its own funds to repurchase its shares through centralized bidding for the later implementation of employee stock plans or equityincentives. The total amount of funding for share repurchase shall be no less than RMB 1,000 million (inclusive) and no more than

RMB 2,000 million, and the re-purchase price may not exceed RMB 39.00 per share. The share repurchase proposal shall beimplemented within 6 months after reviewed and adopted by the Board of Directors of the Company. As of February 23, 2021, theimplementation of share repurchase plan was completed, and the 59,929,533 shares were re-purchased in total. The treasury sharesacquired from this share repurchase represent 1.75% of the total equity of the Company at the year end.

2. Treasury shares transfer

On July 26, 2021, the Company received the Confirmation of Securities Transfer Registration issued by China SecuritiesDepository and Clearing Corporation Limited Shenzhen Branch. The 11,000,000 shares in the special securities account forrepurchase of the Company were transferred to the special account for “Homeland No. 5” employee stock program at RMB 10 pershare on July 23, 2021. As of the reporting date, there are a total of 11,000,000 shares in the special account for “Homeland No. 5”employee stock program, accounting for 0.32% of the Company's total share capital at the end of the period

41. Other comprehensive income

Unit: RMB

ItemOpening balance2021Closing balance
Amount incurred before income tax in the current periodLess: Recorded in other comprehensive income for the previous period and transferred in profit or loss for the current periodLess: Recorded in other comprehensive income for the previous period and transferred in retained earnings for the current periodLess: Income tax expensesAmount after tax attributable to the parent companyAttributed after tax to minority shareholders
I. Other comprehensive income that cannot be subsequently reclassified into profit and loss7,711,365.44233,914,853.56173,914,158.16979,828.8239,220,079.9419,800,786.6446,931,445.38
Changes in the7,711,365.44233,914,853.56173,914,158979,828.839,220,0719,800,7846,931,4
fair value of other equity instruments.1629.946.6445.38
II. Other comprehensive income that will be reclassified into profit or loss-119,721,377.96-29,367,334.40-27,356,836.99-2,010,497.41-147,078,214.95
Including: other comprehensive income that can be converted into gains and losses under the equity method19,401,067.147,950,273.167,950,273.1627,351,340.30
Difference from translation of financial statements in foreign currency-139,122,445.10-37,317,607.56-35,307,110.15-2,010,497.41-174,429,555.25
Total other comprehensive incomes-112,010,012.52204,547,519.16173,914,158.16979,828.8211,863,242.9517,790,289.23-100,146,769.57

Other explanations, including the adjustment of the effective part of cash flow hedging gains and losses into the initially recognizedamount of the hedged item:

None

42. Surplus reserves

Unit: RMB

ItemOpening balanceIncrease in the current periodDecrease in the current periodClosing balance
Statutory surplus reserves1,370,122,868.8576,413,252.661,446,536,121.51
Total1,370,122,868.8576,413,252.661,446,536,121.51

Explanation of surplus reserves, including the increase and decrease in the current period and explanation of reasons for changes:

According to the Company Law and its Articles of Association, the Company allocates 10% of net profits to the statutorysurplus reserves. The Company does not need to allocate further amounts if the cumulative amount of the statutory surplus reservesreaches more than 50% of the reg