(Incorporated in the Cayman Islands with limited liability)
Stock Code: 2018
2022Annual Report
This annual report is printed on environmentally friendly paper.
In the event of any inconsistency between the English version and the Chinese version of this annual report, the English version shall prevail.
AAC Technologies is a leading provider
of sensory experience solutions with the
goal of building the future of interactive
sensory technologies. Through continuous
innovation and our global footprint, we
have established long-term strategic
partnerships with global smart device clients.
We have strong capabilities in Acoustics,
Optics, Electromagnetic Drives, Sensors
and Semiconductors, as well as Precision
Manufacturing based on decades of industry
experience. AAC Technologies’ mission is to
create a better sensory experience for the
world, and our vision is to become a global
leader in sensory technology with a broad
solution portfolio. We keep innovating
sensory technologies to create new interactive
experiences. In the future, we will focus our
efforts on smartphones, intelligent vehicles,
virtual reality, augmented reality and smart
homes to help create a new era of sensory
experience.
www.aactechnologies.com
Essence of AAC Technologies
Corporate Information
Core Development Strategies
Financial Highlights
Global Presence
Milestones
CEO Statement
Management Discussion and Analysis
Business and Market Review
Performance and Development of Business Segments
Financial Review
Key Risk Factors
Organization
Biographies of Directors and Senior Management
Governance and Sustainability
Directors’ Report
Corporate Governance Report
Sustainability
Auditor’s Report and Financial Statements
Independent Auditor’s Report
Consolidated Statement of Profit or Loss
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
5-Year Financial Summary
Others
Investors Information
Definition and Glossary
Contents
2
3
6
8
10
12
14
15
17
20
23
32
48
78
81
85
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87
89
91
93
182
184
186
The Company has since 2013 issued a stand-alone Sustainability Report every year.
The annual Sustainability Report discloses the details of sustainability performance,
initiatives and its progress on environmental, social and governance issues for the year.
Please visit the website www.aactechnologies.com
to download the reports.
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AAC Technologies Holdings Inc.
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Annual Report 2022
Corporate Information
BOARD OF DIRECTORS
Executive Directors
Mr. Pan Benjamin Zhengmin (Chief Executive Officer)
Mr. Mok Joe Kuen Richard
Non-executive Director
Ms. Wu Ingrid Chun Yuan
Independent Non-executive Directors
Mr. Zhang Hongjiang (Chairman of the Board)
Mr. Kwok Lam Kwong Larry
Mr. Peng Zhiyuan
Mr. Au Siu Cheung Albert
(resigned with effect from 31 August 2022)
AUDIT AND RISK COMMITTEE
Mr. Kwok Lam Kwong Larry (Chairman)
(appointed as Chairman with effect from 31 August 2022)
Mr. Au Siu Cheung Albert (Chairman)
(resigned as Chairman with effect from 31 August 2022)
Mr. Peng Zhiyuan
Mr. Zhang Hongjiang
(appointed as member with effect from 31 August 2022)
NOMINATION COMMITTEE
Mr. Zhang Hongjiang (Chairman)
Mr. Kwok Lam Kwong Larry
Mr. Peng Zhiyuan
REMUNERATION COMMITTEE
Mr. Peng Zhiyuan (Chairman)
Mr. Zhang Hongjiang
Mr. Kwok Lam Kwong Larry
(appointed as member with effect from 31 August 2022)
Mr. Au Siu Cheung Albert
(resigned as member with effect from 31 August 2022)
AUTHORIZED REPRESENTATIVES
Mr. Pan Benjamin Zhengmin
Mr. Mok Joe Kuen Richard
JOINT COMPANY SECRETARIES
Mr. Ho Siu Tak Jonathan
Ms. Guan Muyi
(appointed with effect from 1 January 2023)
AUDITOR
Deloitte Touche Tohmatsu
LEGAL ADVISORS
Herbert Smith Freehills
JunHe
PRINCIPAL PLACE OF BUSINESS IN HONG KONG
Unit 1605–7, China Evergrande Centre
38 Gloucester Road, Wanchai, Hong Kong
HONG KONG BRANCH SHARE REGISTRAR
AND TRANSFER OFFICE
Computershare Hong Kong Investor Services Limited
Shops 1712–1716, 17th Floor, Hopewell Centre
183 Queen’s Road East, Wanchai, Hong Kong
REGISTERED OFFICE
Cricket Square, Hutchins Drive
P. O. Box 2681, Grand Cayman, KY1-1111
Cayman Islands
CAYMAN ISLANDS PRINCIPAL SHARE
REGISTRAR AND TRANSFER OFFICE
Maples Fund Services (Cayman) Limited
Boundary Hall, Cricket Square
P. O. Box 1093, Grand Cayman, KY1-1102
Cayman Islands
PRINCIPAL BANKERS
Agricultural Bank of China
Bank of China
Bank of Communications
DBS Bank Limited
The Hongkong and Shanghai Banking Corporation Limited
Ping An Bank
STOCK CODE
2018
WEBSITE
www.aactechnologies.com
FINANCIAL YEAR END
31 December
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Annual Report 2022
3
Core Development
Strategies
AAC Technologies is determined to offer
advanced, proprietary technologies,
driving growth through innovation
and smart manufacturing capabilities.
We continue to penetrate new markets
including intelligent vehicles, AR/
VR, AloT, and smart homes through
technological innovation, systematic
product development and a high
standard of quality assurance. We
focus on effective management, talent
development and social responsibilities
to ensure sustainable and high-quality
growth.
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Core Development Strategies
“Two-pronged” approach:
Advanced R&D +
Precision Manufacturing
Holistic Solution Platform
STRATEGY
The Group always aims to “lead
innovation and enhance user
experiences”. Focusing on high
entry barrier technology and high
value-added precision manufacturing
business, and establishing the leading
edge in each segment, we have
achieved sustainable development
capability.
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5
Core Development Strategies
CONTINUE TO CONDUCT R&D ON CORE TECHNOLOGIES FOR MAINTAINING THE
LEADING POSITION IN THE GLOBAL TECHNOLOGY MARKET:
Since inception, the Group has identified technology leadership as its competitive strategy. With investment
in R&D accounting for 7.5% of revenue in 2022, the Group has set up 18 R&D centers all over the world, with
3,880 R&D talents, and, by 31 December 2022, obtained 6,380 patents, as well as an addition of 2,737 patent
applications.
CONTINUOUSLY DEVELOP ULTRA-PRECISION PRODUCTION TECHNIQUES AND
ENHANCE PER CAPITA OUTPUT:
The Group has implemented an integrated process of R&D and manufacturing with independent R&D
initiatives, self-developed equipment and automated production lines. Per capita output has continuously
improved by self-developed production techniques, enhanced production yield and our global presence.
Our target is to achieve the per capita output level of developed countries.
ESTABLISH A VERSATILE TECHNOLOGY PLATFORM TO ACHIEVE EFFICIENT USE AND
GREATER INTEGRATION OF R&D RESOURCES:
Our versatile technology platforms enable the Group to invest in specific R&D of these segments: optics,
WLG hybrid lens, acoustics, haptics, precision mechanics and MEMS, to maintain technology leader status
and innovative capabilities.
ESTABLISH A VERSATILE EQUIPMENT PLATFORM TO ENHANCE LEVEL OF STANDARDIZATION
AND DIGITALIZATION:
Our self-developed production equipment has been designed with the capability for continuous upgrades
and further improvements. Hence, our production lines can be modified flexibly for supporting new
requirements of the four business segments. We ensure a quick response to new requirements of production
processes for new products, so that new techniques can be implemented. Such enhanced versatility of
equipment will significantly reduce investment costs of specific production lines of specific segments.
Sensors and
Semiconductors
Acoustics Optics Electromagnetic Drives/
Precision Mechanics
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6
Financial Highlights
(RMB million) (RMB million) (RMB)
20,625
22,196
0.69
3.8%
741,963
2,520
43.5%
4,251
6.2%
Revenue EBITDA Earnings Per Share
(RMB million)
Net Asset Net Gearing Ratio ROE
(RMB million) (RMB)
Free Cash Flow CAPEX/EBITDA Per Capita Output
+16.7%
YoY
-1.4%
YoY
-37.2%
YoY
-2.3ppts
YoY
+57.9%
YoY
+285.6%
YoY
-34.8ppts
YoY
-6.2%
YoY
-2.7ppts
YoY
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7
Financial Highlights
Summary of Past 5-Year Operating Financial Data
Year ended 31 December 2022 vs 2021
2018 2019 2020 2021 2022 YoY Increase
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 /(Decrease)
Revenue 18,131,153 17,883,757 17,140,219 17,666,967 20,625,092 16.7%
Depreciation and Amortisation 1,763,627 2,176,306 2,477,529 2,702,161 2,986,999 10.5%
Finance costs 217,888 248,210 352,558 415,465 403,084 (3.0%)
Net profit attributable to
owners of the Company 3,795,885 2,222,375 1,506,707 1,316,279 821,305 (37.6%)
EBITDA 6,291,817 4,976,938 4,477,686 4,530,502 4,250,762 (6.2%)
CAPEX (3,903,282) (3,032,874) (5,087,990) (3,548,248) (1,847,510) (47.9%)
Taxation paid (676,286) (370,068) (261,953) (216,633) (303,514) 40.1%
Changes in working capital 1,149,187 (727,941) (527,278) (2,123,494) 420,039 119.8%
Free cash flow 2,861,436 846,055 (1,399,535) (1,357,873) 2,519,777
Gross margin 37.2% 28.6% 24.7% 24.7% 18.3% (6.4ppts)
R&D expenses to Revenue 8.3% 9.6% 11.2% 9.8% 7.5% (2.3ppts)
ROA 12.5% 6.9% 4.1% 3.3% 2.0% (1.3ppts)
ROE 20.8% 11.6% 7.4% 6.1% 3.8% (2.3ppts)
Per capita output
(Revenue/Employees) 504 454 508 470 742 57.9%
Net gearing ratio 6.2% 10.5% 2.2% 8.9% 6.2% (2.7ppts)
Current ratio 1.44 1.92 1.80 1.86 1.89 3.0ppts
CAPEX/EBITDA 62.0% 60.9% 113.6% 78.3% 43.5% (34.8ppts)
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Global Presence
R&D Centers
Patents by Segments
2018 2019 2020 2021 2022
3,366
4,411
7,222
6,034
6,380
Acoustics
Sensors and Semiconductors
Optics
RF
Electromagnetic Drives
Others
PatentsR&D Centers
Patent
Applications
R&D Engineers and
Technicians
2,7373,880 6,38018
Overseas:
2,355
Overseas:
922
R&D
R&D Expenses and
R&D Expenses/Revenue Ratio
(RMB million or %)
2018 2019 2020 2021
2022
1,546
7.5%
1,512
1,717
1,920
8.3%
9.6%
11.2%
1,726
9.8%
Denmark
Copenhagen
United States
Irvine
Finland
Tampere
United Kingdom
Edinburgh
Turku
Singapore
Osaka
Tokyo
Tampines
Japan
Korea
Suwon
China
Changzhou
Nanjing
Shenzhen
Shanghai
Suzhou
Beijing
Taipei
Hsinchu
Acoustics
Electromagnetic Drives
Optics
Sensors and Semiconductors
Precision Mechanics
Guangxi
Nanning
Guangdong
Sensors and Semiconductors
Automation Equipment
Shenzhen (Longgang)
Anhui
Ma’anshan
Components
Battery
Optics
Wuhan
Chongqing
Jiangsu
Changzhou
Acoustics
Electromagnetic Drives
Optics
Precision Mechanics
Shuyang
Components
Precision Mechanics
Suzhou
Precision Mechanics
Optics
Yangzhou
Precision Mechanics
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Global Presence
Denmark
Copenhagen
United States
Irvine
Finland
Tampere
United Kingdom
Edinburgh
Turku
Singapore
Osaka
Tokyo
Tampines
Japan
Korea
Suwon
China
Changzhou
Nanjing
Shenzhen
Shanghai
Suzhou
Beijing
Taipei
Hsinchu
Acoustics
Electromagnetic Drives
Optics
Sensors and Semiconductors
Precision Mechanics
Guangxi
Nanning
Guangdong
Sensors and Semiconductors
Automation Equipment
Shenzhen (Longgang)
Anhui
Ma’anshan
Components
Battery
Optics
Wuhan
Chongqing
Jiangsu
Changzhou
Acoustics
Electromagnetic Drives
Optics
Precision Mechanics
Shuyang
Components
Precision Mechanics
Suzhou
Precision Mechanics
Optics
Yangzhou
Precision Mechanics
Diversified Manufacturing Bases
China
Johor
Malaysia
Sensors and Semiconductors
Kozomín
Optical Mold
Czech
Bac Ninh
Acoustics
Vinh Phuc (under development)
Ba Thien IP Industrial Park
Bac Giang (under development)
Hoa Phu Industrial Park
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Milestones
Shenzhen Yuanyu,
manufactured
miniature acoustic
components
Mass production of
MEMS microphones
Acquired ISQR, a Japanese
lens designer
Set up Singapore RF
design laboratory
Changed Company’s
name to AAC
Technologies
Invested in MEMS
Tech, Singapore for
MEMS Die design
IPO on the Stock
Exchange
Certified supplier for top 5
global mobile phone makers
Mass production of haptics and
waterproof speakers
Invested in Kaleido,
Denmark for WLG
technology
Started fully automated
production of speakers
and receivers
Started to ship
integrated LDS
antennas on
speaker boxes
1993
2005
2007
2009
2011
2010
2008
2012
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Milestones
Non-Acoustic business
(Haptics and RF Mechanics)
ramping up, contributing
20% of revenue for the
first time
2014
Shipped SLS
acoustic products
2018
Mass production of RF
mechanical solutions
2013
Acquired WiSpry, US for
RF MEMS technology
2015
Launch of SLS platform
Mass production of
plastic lenses
2017
Top 3 global
supplier of plastic
lenses for
smartphones
2019
Mass production
of WLG hybrid
lenses ready
2020
Launched proprietary
Combo and Opera
Coaxial solutions
Mass-production and
shipment of total
automotive acoustics
solutions
2022
Launch of stereo sound
solutions
2016
Established
a new
business
unit for
operation of
Automotive
Business
2021
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CEO Statement
2022 was a challenging year, we proactively undertook steps to strengthen our operations. Despite the pandemic’s
outbreak, high inflation and relatively weak market demands, the Group strengthened its positioning in the smartphone
market with its leading capabilities in research and development and sound operational management. Against such
market backdrop, the Group achieved market share increase in businesses across acoustics, electromagnetic drives and
precision mechanics, optics, sensors and semiconductors with revenue exceeded RMB20 billion, up 16.7% year-on-year
(“YoY”).
Coping with complex external environment, the Group maintained its long-term focus to create value, and stayed
committed to navigating through economic cycles by continuously enhancing product competitiveness and ensure
prudent cash flow management. In 2022, the Group continued to strive for internal and external improvements. On one
hand, the Group deepened the cooperation with business partners and boosted its market shares. On the other hand,
the Group consistently implemented lean operational management by reducing costs and improving overall operational
efficiency, stringently managing inventory and improving inventory turnover. As a result, the free cash flow position of the
Group has improved significantly, up from RMB-1.38 billion in 2021 to RMB2.52 billion in 2022.
The Group persists in leading industry development through technological innovation and works closely with overseas
customers. By leveraging its advantages in both acoustics and electromagnetic drives, the Group launched its proprietary
Combo and Opera Cap Coaxial solutions, which enabled the Group to provide a superior tactile and auditory experience
to consumers via more cost-effective products. The Group actively prompted and implemented applications of WLG
glass lens in multiple projects including automotive, AR/VR devices, semiconductor manufacturing and testing as well
as other industrial fields. The precision mechanics business has gradually improved with value of products continuously
enhanced, and the proportion of revenue from non-smartphone business continued to rise. Market share of MEMS
products has steadily increased, and the Group has been actively developing products with high signal-to-noise ratio to
meet customers’ demand for product upgrades.
In 2022, the Group proactively forged ahead to create a second growth curve and to activate new growth trajectory.
In addition to solidifying the leading positions in the smartphone market, the Group continues to seize new market
opportunities and explore strategic new markets. The Group also achieved breakthroughs in automotive acoustics market
and the total automotive acoustics solutions business has started mass-production and shipment. In addition, the Group
successfully developed a full set of new modules for automotive MEMS microphones which is expected to be mass
produced in 2023. Other products, such as optics and haptics products, are also being actively expanded in fields such as
AR/VR and automotive applications.
The year 2023 marks the Group’s 30th anniversary. Throughout the past 30 years, AAC Technologies was not only a
contributor in the consumer electronics industry, but also a leading provider of sensory experience solutions. Going
forward, we will continue to pursue opportunities in strategic new markets and accelerate our product deployment to lead
the new era of sensory experience.
The Group will continue to improve its
operational scale and efficiency, and build up
its capability to achieve sustainable growth and
expand its diversified business development,
so as to become a world leading provider of
sensory experience solutions.
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CEO Statement
On behalf of the Group’s management team, I would like to thank our partners and shareholders for their trust, patience
and support. I would also like to thank all our employees for their creativity and positive attitude. We will continue to
forge ahead with a cohesive force to create greater value for our customers and deliver long-term stable returns to our
shareholders.
Pan Benjamin Zhengmin
Chief Executive Officer
23 March 2023
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Business and Market Review
In 2022, the Group recorded a revenue of RMB20.63 billion, up 16.7% YoY which was mainly attributed by the strong
demand from overseas customers and the increase in combined revenue contribution from electromagnetic drives and
precision mechanics business as well as optics business. Gross profit margin was 18.3%, down 6.4 percentage points
(“ppts”) YoY due to the increased revenue contribution from business segments with relatively lower gross profit margins.
Net profit was RMB821 million, down 37.6% YoY. For the fourth quarter 2022 (“Q4 2022”), the Group recorded revenue of
RMB5.84 billion, up 21.4% YoY, also due to revenue increase from these three business segments. The Gross profit margin
was 16.6%, down 3.9 ppts YoY, due to the change of product portfolio. Net profit was RMB237 million, up 12.0% YoY.
During the reporting period, the Group remains prudent in financial management and stringently manages capital
expenditure and research and development (“R&D”) expenses. The capital expenditures amounted to RMB1.85 billion in
2022. During the reporting period, the Group conducted active liability management, successfully optimized the debt
structure and maintained stable cash flow. As of 31 December 2022, the operating cash inflows were RMB4.37 billion, cash
on book (including short term fixed deposits) was RMB7.16 billion, net gearing ratio was 6.2%. A sound financial position
is essential to the sustainable growth of the Group, and ensures the Group’s ability to continue to innovate and develop
going forward.
After careful review of the Group’s financial liquidity and business development requirements, the Board of Directors
proposed to declare a final dividend of HK$0.12 per share for FY 2022 (FY 2021: Nil), implying a total annual dividend
amounted to HK$0.12 per share for FY 2022 (FY 2021: HK$0.20 per share) which represents the 15% payout ratio,
same as that of FY 2021. Amidst the dynamic macroeconomic environment, the Group will remain prudent in financial
management and strong in cash flow for business development, so as to create long-term value for shareholders.
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Performance and Development of
Business Segments
Acoustics Business
In Q4 2022, the Group’s acoustics business revenue was RMB2.38 billion, up 6.3% YoY. Gross profit margin was 31.2%, up
4.4 ppts YoY, driven by increased revenue contribution from overseas customers. In 2022, the Group’s acoustics business
revenue was RMB8.85 billion, up 3.1% YoY. Gross profit margin was 28.1%, down 1.5 ppts YoY mainly due to weaker
demand in the Android market and lower shipment of Android acoustics products, leading to a YoY decline in gross
margin.
In Q4 2022, the Group has continued to work closely with overseas customers, and enhanced its market share steadily.
Affected by the weaker demand in the Android market, the revenue and gross margin of Android acoustics decreased YoY.
To satisfy various customer needs, the Group launched its proprietary Combo and Opera coaxial solutions. This product
effectively enhances consumers’ auditory and tactile experience in application scenarios such as video and audio, gaming
and vertical screens while reducing production costs. Currently, the Group has built up an integrated solution for mobile
audio device including high-performance linear speakers, multi-speaker arrays and the proprietary algorithm. Looking
forward, the Group will provide an immersive auditory experience for customers in multiple application scenarios with
more diversified product portfolio.
In Q4 2022, the Group’s automotive acoustics solutions business has continued to accomplish mass-production and
shipment. The Group also achieved breakthroughs and acquired new landmark automotive acoustics projects. To meet
various customers’ needs and quickly break through the market, the Group provides a comprehensive solution from
ultra-flagship to high cost-performance by covering a set of audio solutions including single component, tuning services,
software systems and flexible combinations of the services. Going forward, the acoustic system will become one of the
core components of the intelligent cockpit. The Group will continue to promote the overall acoustics solution, and deepen
cooperation with partners to enhance consumers’ audio experience.
Optics Business
In Q4 2022, the Group’s optics business revenue was RMB798 million, up 55.6% YoY and 40.8% QoQ, on the back of
continued growth in shipment volume and market share expansion in both plastic lens and camera module businesses.
Benefited from the smooth progress of camera module business and the increased market share, in 2022, the Group’s
optics business revenue was RMB3.22 billion, up 34.7% YoY.
In 2022, the plastic lens business continued to consolidate market share and improve market position despite the
competitive landscape. Facing the fierce market competition, the Group will continue to optimize product portfolio by
improving the shipment proportion of high-end products, and strengthen inventory management to improve the gross
profit margin by enhancing internal management and operational efficiency. Camera module business grew steadily and
annual shipment volume delivered a YoY increase of 121.5%. OIS products have started a small-scale mass production.
WLG hybrid lenses are making good progress and 1G5P and 1G6P products are in steady mass production and delivery.
The Group will continue to enhance its vertical integration capability of optics business, optimize camera module and VCM
business, to achieve the market share gain in the mid-to-high end products.
Electromagnetic Drives and Precision Mechanics Business
For Q4 2022, given the shipment growth from both haptics and metal casing products, as well as contributions from the
acquisition of Toyo Precision, revenue from this combined segment reached RMB2.29 billion, up 27.5% YoY and 11.5%
QoQ. Gross profit margin was 22.2%, up 2.5 ppts YoY and 0.7 ppts QoQ. In 2022, revenue from this combined segment
amounted to RMB7.28 billion, up 29.0% YoY. Gross profit margin was 21.3%, down 0.4 ppts YoY and remained relatively
stable mainly because the change of product portfolio.
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Performance and Development of
Business Segments
Electromagnetic Drives Business
In 2022, the market shares of Android x-axis haptics further increased with the total shipment volume increased by 41.9%
YoY. In addition to higher penetration in smartphone market, the ultra-wide x-axis haptics motor launched by the Group
can also be used in smart watches, tablets, intelligent automobiles, game consoles, VR/AR, providing consumers with a
one-stop, multi-dimensional, full-scene high-quality tactile feedback experience. The Group has successfully entered into
VR supply chain and provided x-axis haptics motor for a leading global VR player. It is expected that the x-axis haptics will
be widely used in strategic new markets in the future.
Precision Mechanics Business
Relying on the advanced precision manufacturing capabilities, the Group’s metal casing business has gained leading
market shares in the flagship and high-end smartphones among key customers. In Q4 2022, given the strong demand
of customers’ high-end smartphone models, the utilization rate of metal casing products has increased and gross profit
margin also improved YoY. The Group will continue to explore projects with high values to optimize product portfolio
and enhance profitability. Toyo Precision’s business has integrated smoothly and provided additional growth for the
segment. The Group has been actively acquiring new projects and accelerating its pace in expanding overseas production
capacity of precision mechanics, aiming to further ramp up the revenue contribution from Toyo Precision and the overall
profitability of this business segment.
Sensor and Semiconductor Business
For Q4 2022, the Sensor and Semiconductor business recorded a revenue of RMB356 million, up by 49.5% YoY, due to
strong demand from overseas customers and increased market penetration of Android MEMS products. Gross profit
margin was 13.9%, up 1.4 ppts YoY and 6.6 ppts QoQ. In 2022, the Sensor and Semiconductor business revenue was
RMB1.26 billion, up 24.0% YoY, due to market share increase. The gross profit margin was 11.6%, down 3.5 ppts YoY,
mainly due to increased raw material costs.
In Q4 2022, the factory facility in Malaysia commenced production, which further strengthened the Group’s global
production capacity. The Group continues to promote proprietary MEMS microphones with optimized structural designs
to enhance reliability, offering proprietary and differentiated designs to cater to various specification requirements of
customers. The Group has entered into a partnership with Soundskrit in launching the world’s first high-performance
directional MEMS microphone to end users across consumer electronics and automotive markets. Alongside a gradual
increase in demand for intelligent audio interaction in fields such as artificial intelligence, smart home appliances,
automobiles and other markets, MEMS business will foresee an expansion in market demand and more market
development opportunities.
Prospect
According to International Data Corporation (“IDC”) report, the global smartphone shipment in 2023 is expected to
decline by 1.1% YoY to 1.19 billion units. Although the prospect of global smartphone shipment remains relatively
stable, the Group will continue to strengthen the collaborations with existing customers, strive for higher market shares
and continuously invest in research and development to improve the end-user experience. Combined with continued
focus in operational efficiency and cash flow management, these efforts will lay a solid foundation for the Group’s
long-term development. The development of the NEV market brings additional growth opportunities, especially with
the development of intelligent cockpit and autonomous driving technologies, which will drive a new wave of upgrades
in vehicle’s hardware and software. The Group intends to capture more opportunities in the automotive market, develop
new sources of revenue, and maximize returns for shareholders by leveraging on its leading advantages in miniaturized
technology and precision manufacturing capabilities.
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17
Financial Review
Revenue
In 2022, the Group’s revenue increased YoY by 16.7%, to RMB20.63 billion. Owing to factors discussed under “Business
and Market Review” above, revenue from the electromagnetic drives and precision mechanics and optics increased by
RMB1,637 million and RMB828 million respectively. The acoustic business was relatively stable as compare with the same
period of last year.
Gross Profit and Gross Profit Margin
In 2022, gross profit was RMB3.78 billion, representing a decrease by 13.5% from the gross profit of RMB4.36 billion in
2021. The drop in gross profit was mainly contributed by market competition in optics business and the decline was partly
offset by the improved gross profit of electromagnetic drives and precision mechanics due to increase in sales volume.
Gross profit margin decrease to 18.3% in 2022 as compared with 24.7% in 2021. The decrease in gross profit margin was
mainly contributed by the increased sales from precision mechanics and optics with lower gross profit margin.
Other income, gains and losses, and other expenses
The net other income/gains increased by RMB180 million. This was mainly contributed by the gain on repurchase of
unsecured notes of RMB169 million and increase in government grants of RMB133 million. The increment was offset by the
restructuring costs of RMB125 million.
Administrative Expenses
Administrative expenses in 2022 were RMB1,036 million, 25.7% higher, compared with RMB824 million in 2021. The
increase was mainly contributed by the increase in staff related cost, share incentive expenses and discretionary bonus. To
cope with the new strategic developments and drive long term growth, the Group had enhanced the management team
and launched share award plan.
Distribution and Selling Expenses
Distribution and selling expenses of RMB448 million in 2022, increased by 34.7%, compared with RMB333 million in
2021. The increase was mainly contributed by the increased in staff related cost, discretionary bonus and share incentive
expenses to strengthen our sales force in new market segment like automotive.
Research and Development Expenses
R&D expenses in 2022 were RMB1,546 million, 10.4% lower than RMB1,726 million in 2021. The decrease was primarily
attributable to improved cost efficiency in research and development.
Finance Costs
Finance costs in 2022 amounted to RMB403 million, representing a decrease of 3.0% compared with RMB415 million in
2021. Such decrease was mainly due to the reduction of average bank loan balance, which was offset by the additional
interest on unsecured notes accompany with the issuance of 5-year unsecured notes USD300 million at annual interest
rate 2.625% and 10-year unsecured notes USD350 million at annual interest rate 3.75% in June 2021.
Taxation
Taxation expenses of the Group were calculated based on the assessable profits of the subsidiaries at the rates prevailing
in the relevant jurisdictions. Taxation expenses in 2022 amounted to RMB231 million, representing an increase of 93.3%
from RMB120 million in 2021. The increase was mainly due the reduction of deferred tax credit relating to tax losses and
other temporary difference from RMB116 million to RMB17 million.
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Financial Review
Profit attributable to the owners of the Company
Reported net profit for 2022 was RMB0.82 billion, a decline by 37.6% compared with RMB1.32 billion in 2021. The decline
of was mainly due to the decline of gross profit and the increase in operation costs during the period which was partly
offset by the increase in other income and decrease in non-controlling interests.
LIQUIDITY AND FINANCIAL RESOURCES
The Group has always emphasized financial discipline and continues to maintain a strong liquidity position. Cash flows
from (used in) our operating, investing and financing activities, are as below:
For the year ended 31 December
2022 2021
RMB million RMB million
Net cash from operating activities 4,372.0 2,176.0
Net cash used in investing activities (2,349.3) (4,245.4)
Net cash (used in) from financing activities (1,438.7) 632.6
Operating Activities
Cash inflow from operating activities was mainly generated from cash receipts from the Group’s sales. Cash outflows were
related to raw materials purchases, payroll, distribution and selling expenses, expenses incurred in R&D, administrative
items and taxation charges. Net cash generated from operating activities was RMB4,372.0 million for 2022 (2021:
RMB2,176.0 million).
i. Trade Receivables and Payables
As at 31 December 2022, turnover days of trade receivables decreased by 5 days to 78 days as compared to 31
December 2021. Trade receivables decreased by RMB0.22 billion to RMB4.28 billion. Aging of trade receivables (net
of allowance for doubtful debts) based on invoice dates between 0–90 days, 91–180 days and over 180 days were
RMB4,098.4 million (31 December 2021: RMB4,133.2 million), RMB169.8 million (31 December 2021: RMB293.7
million) and RMB10.5 million (31 December 2021: RMB70.4 million) respectively. The Company has received
subsequent settlement totaling RMB2,678.8 million up to 28 February 2023, representing 62.6% of the total
amount outstanding, net of allowances, as at the end of the reporting period.
The Group’s trade payables turnover days decreased by 28 days to 81 days as compared to 31 December 2021.
Trade payables decreased by RMB1.02 billion to RMB3.24 billion. Aging of trade payables based on invoice dates
between 0–90 days, 91–180 days and over 180 days were RMB2,576.8 million (31 December 2021: RMB3,300.4
million), RMB654.9 million (31 December 2021: RMB949.9 million) and RMB11.2 million (31 December 2021:
RMB13.4 million) respectively.
ii. Inventory Turnover
As at 31 December 2022, the inventories have decreased by RMB1.29 billion compared to 31 December 2021.
The inventory turnover days decreased to 109 days for the year ended 31 December 2022 from 133 days for 31
December 2021.
Investing Activities
Net cash used in investing activities in 2022 amounted to RMB2,349.3 million (2021: RMB4,245.4 million). It mainly
represents the cash used in capital expenditures (“CAPEX”) of RMB1,768.0 million (2021: RMB3,738.1 million), placement
of short-term fixed deposits of RMB341.3 million (2021: Nil) and acquisition of equity instruments at FVTOCI and financial
assets at FVTPL of RMB273.4 million (2021: RMB580.3 million), offsetting by the cash inflow arising from the government
grant of RMB172.4 million (2021: RMB307.1 million) as well as the withdrawal of time deposits of RMB2.2 million for 2022
(2021: RMB92.2 million).
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Financial Review
CAPEX included acquisition of land use rights, additional production plant and property, and, latest automation machinery
and equipment for modifications and upgrades as well as capacity expansion. For 2022 and 2021, total CAPEX incurred
were RMB1,847.5 million and RMB3,548.2 million respectively. Investing activities are focused on sustained CAPEX
programs in building technology platforms per the Group’s business progress to capture new market opportunities and
support its long-term business strategies. CAPEX are funded by internal resources and bank loans, and are subject to
annual CAPEX budgeting and approval by the Board.
Financing Activities
The Group recorded net cash outflow from financing activities of approximately RMB1,438.7 million for 2022. Major
outflows from repayment of bank loans of RMB3,021.2 million (2021: RMB6,767.3 million) and payment for repurchase
of unsecured notes of RMB949.7 million, and major inflows was due to bank loans raised of RMB3,243.2 million (2021:
RMB4,114.2 million), and issuance of unsecured notes of RMB4,163.4 million in 2021.
Cash and Cash Equivalents and Short Term Fixed Deposits
As at 31 December 2022, the unencumbered cash and cash equivalents and short term fixed deposits of the Group
amounted to RMB7,155.0 million (31 December 2021: RMB6,051.4 million), of which 55.7% (31 December 2021: 57.9%) was
denominated in US dollar, 39.8% (31 December 2021: 36.1%) in RMB, 2.5% (31 December 2021: 1.3%) in Hong Kong dollar,
0.5% (31 December 2021: 1.4%) in Euros, 0.5% (31 December 2021: 1.1%) in Vietnamese Dong, 0.2% (31 December 2021:
1.0%) in Malaysian Ringgit, 0.2% (31 December 2021: 0.4%) in Japanese Yen, 0.2% (31 December 2021: 0.3%) in Singapore
dollar, and 0.4% (31 December 2021: 0.5%) in other currencies.
Gearing Ratio and Indebtedness
As at 31 December 2022, the Group’s gearing ratio, defined as total loans and unsecured notes divided by total assets, was
23.9% (31 December 2021: 23.3%). Netting off cash and cash equivalents and short term fixed deposits, net gearing ratio
was 6.2% (31 December 2021: 8.9%).
As at 31 December 2022, the unsecured notes of the Group were RMB6,087.8 million (31 December 2021: RMB6,573.2
million), the short-term bank loans and long-term bank loans of the Group amounted to RMB1,832.6 million (31 December
2021: RMB2,902.4 million) and RMB1,727.2 million (31 December 2021: RMB330.0 million) respectively.
Charges on Group Assets
Apart from bank deposits amounting to RMB0.2 million that were pledged to secure credit facilities as at 31 December
2022 (31 December 2021: RMB2.2 million), no other Group assets were charged to any financial institutions.
OFFBALANCE SHEET TRANSACTIONS
As at 31 December 2022, the Group had not entered into any material off-balance sheet transactions.
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Key Risk Factors
The Company has structured risk management and internal control systems for the management of strategic, market,
operational, financial and compliance risks. In our pursuit of technology innovation, the Company is committed to
building sustainable risk management and operational information systems. We have been focusing on systematic
review and upgrading our risk and control measures in chosen business processes, benchmarking against international
best practices. Such systems are designed to manage the risk of failure to achieve business objectives, and can provide
reasonable assurance against material misstatement or loss. Certain key risk factors affecting the Group are outlined
below. The list of these factors is non-exhaustive, and there may be other risks and uncertainties which are not known to
the Group or which may be immaterial now but could become material in the future. Besides, this annual report does not
constitute a recommendation or an advice for anyone to invest in the securities of the Company. Investors are advised to
make their own judgment or consult their own investment advisors before making any investment in the securities of the
Company.
Risks Pertaining to the Smartphones Market
A substantial part of the Group's revenue is derived from the smartphone sector of the consumer electronics market. There
are uncertainties due to the potential slow-down in global economy and the ensuing dampened consumer sentiment and
weaker demand. A decline in global economic conditions, in particular in China and other geographic regions, may affect
our operating results and financial performance. To tackle this, the Company is continuously widening its product and
technologies platforms to extend its reach to different end applications, so as to diversify the sources of revenue and profit
to reduce its dependency on any single segment.
Reliance on a Number of Key Customers
The Group's five largest customers, which accounted for 83.9% of the Group's total revenue for 2022, are all related to the
consumer electronics industry, characterized by innovation-driven and user experience-oriented business growth. Loss of
or changes in market position of any of these customers may materially and adversely affect the Group's business, financial
condition and results of operations. Nevertheless, the Group has focused on technology innovation to continuously
enhance user experience meeting customers' specification upgrade needs. We have also implemented standardized
procedures for handling all forms of customer information to ensure it is not improperly or inadvertently disclosed to third
parties. The Group has established strong relationships with these major customers; all of them have been our customers
for over 11 years. The credit terms granted to them are in the range of 60- to 90-day periods and are generally in line with
those granted to other customers.
Risks of Supply Chain and Production Disruption due to Unforeseeable Events
The COVID-19 pandemic broke out globally in 2020. The ongoing of the pandemic in 2021 and 2022 has adversely
impacted the global economy recovery. As the world gradually returns to normal after the pandemic, it is hopeful that the
disruption of the pandemic to the Company's operation will gradually diminish.
Geopolitical events between different nations may impose unpredictable impacts to the global markets and the Company,
such as disruption to the global supply of commodities including base metals and driving up the commodities' prices.
The continuous increase in the prices of raw materials might lead to margin compression. Furthermore, geopolitical
uncertainties may directly or indirectly impact the Group's customers, which in turn may disrupt supply chain and impact
end-consumer demand.
In view of the uncertain market outlook, the Group will actively monitor the market and allocate resources flexibly to meet
customers' changing demand. To mitigate the potential impacts from geopolitical events, the Group will actively manage
the procurement channels, operation and production.
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Key Risk Factors
Operational and Obsolescence Risks
The Group's operation is subject to a number of risk factors specific to designing and providing new technology solutions.
Our business continues to focus on miniature components and develop new products and technologies platforms.
In meeting future design specifications and production quality requirements, our successful track record would not
guarantee continual success. Changes in technological design and performance specifications or other external factors
may have various levels of negative impact on the results of operations. Additionally, production, data security and quality
issues may happen despite internal systems and policies set up for their prevention, which may lead to financial loss,
litigation, or damage in reputation.
We believe that the Company has a seasoned process to ensure design specifications and quality requirements are
met and possesses multiple overlapping core design and production competencies. This will put the Company in a
strong competitive position in terms of design capacity and manufacturability, time-to-market delivery and continuous
enhancement of user experience. Also, the Company continuously treats information security as a priority strategic topic,
and has implemented a comprehensive range of measures to safeguard its data assets from breaches, leaks and hacks.
In addition, the Company constantly reviews competition and market trends. The Company is committed to striving
for innovation and maintaining a competitive position with a wide lead in knowledge. The Company has reinvested
significant resources on research and development to build broad sustainable technology roadmaps and intellectual
property portfolios.
The Company has put in place a quality management system. All products are subject to thorough and comprehensive
testing to meet customers' requirements and international standards. The Company will continue to improve internal
process capability, including live surveillance management of production stations and evaluation of "big data" systems in
our operation, and set up a solid base for continual improvement in product reliability.
Liquidity and Interest Rate Risks
The Group manages liquidity risk by maintaining an adequate level of cash and cash equivalents through continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The Group is exposed to interest rate risks on its bank loans for working capital and CAPEX that are associated with the
expansion of the Group. The Group focuses on mitigating the liquidity and interest rate risks, with an appropriate mix of
RMB/USD borrowings that are constantly reviewed and adjusted. The Group's USD deposits served as a natural hedge to
the risk of interest rate volatilities to some extent. The Group also maintains an appropriate mix of fixed/floating rate debts,
an even debt repayment profile and a diversified source of funding, including the issuance of long term five-year and
ten-year unsecured notes.
The Group's financial assets include bank balances and cash, pledged bank deposits, trade and other receivables, amounts
due from related companies, derivative financial instruments, financial assets at fair value through profit or loss and equity
instruments at fair value through other comprehensive income, which represent the Group's maximum exposure to credit
risk in relation to financial assets. The credit risk on liquidity is limited because the counterparties are established banks
with good credit-ratings.
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Key Risk Factors
Foreign Exchange Risks
Given our international operations and presence, the Group faces foreign exchange exposures including transaction and
translation exposures, and is exposed to exchange rate risks that could impact financial reporting results. The Group's
reporting currency is RMB and our sales to overseas customers are predominantly denominated in USD.
It is the Group's consistent policy to centralize foreign exchange management to monitor total foreign currency exposure,
to net off affiliate positions, and, if necessary, to consolidate hedging transactions with banks. The cash inflow to the
Group in denomination of the two currencies, namely RMB and USD, are mostly, over time, in balanced proportions. In
addition, various bank facilities have been arranged in these two currencies, to meet our daily operating expenses and
capital investment requirements. Hence, in our operating business model, the Group's revenue is mostly matched to the
currencies of the outlay. As far as possible, the Group aims to achieve natural hedging by investing and borrowing in the
functional currencies. Where a natural hedge is not possible, the Group will mitigate foreign exchange risks via appropriate
foreign exchange contracts.
Intensifying Global Trade Frictions
Prolonged and intensified trade frictions might lead to a slowdown of the global consumer electronic market and a
decline of the orders by the key customers of the Group, which could have a material adverse effect on the Group's
business, results of operations and financial conditions. Furthermore, export controls and similar regulations may include
restrictions and prohibitions on the sale or supply of certain products and on the transfer of parts, components, and
related technical information and know-how to certain countries, regions, governments, persons and entities.
The Group believes that it is in compliance with applicable export control regulations, and as at the date of this annual
report, the Group's results of operations have not been materially affected by expansion of export control regulations or
the novel rules or measures adopted to counteract them. Nevertheless, depending on future developments in the global
trade tensions, there is no assurance that such regulations, rules, or measures will not have an adverse impact on the
Group's business and operations.
The Group has implemented the trade control compliance management system and has set up a trade compliance
committee for overall management of the Group's trade compliance activities initiatives. A new Trade Compliance
Department has also been established to coordinate with and support other departments on trade compliance matters.
The Group's dedication to R&D to develop proprietary innovative technologies, and the Group's strategy in integrating
R&D all over the world with our diversified manufacturing bases should help to continue to provide the best solutions to
customers and mitigate some of the adverse business impact of the trade frictions.
PAST PERFORMANCE AND FORWARDLOOKING STATEMENTS
The performance and the results of operation of the Group as set out in this annual report are historical in nature and
past performance is not a guarantee of future performance. This annual report may contain certain statements that are
forward-looking or which use certain forward-looking terminologies. These forward-looking statements are based on the
current beliefs, assumptions and expectations of the Board regarding the industry and markets in which it operates. Actual
results may differ materially from expectations discussed in such forward-looking statements and opinions. The Group,
the Directors, employees and agents of the Group assume (a) no obligation to correct or update the forward-looking
statements or opinions contained in this annual report; and (b) no liability in the event that any of the forward-looking
statements or opinions do not materialise or turn out to be incorrect.
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Biographies of Directors and Senior Management
EXECUTIVE DIRECTORS
Mr. Pan Benjamin Zhengmin (“Mr. Pan”)
Aged 54, ED and CEO
Appointed to the Board: 15 December 2003
Mr. Pan co-founded the Group in 1993. He is responsible for providing strategic direction and leadership and for
developing and implementing the Group’s strategic objectives and business plans. Specifically, Mr. Pan has held critical
leadership roles with responsibilities for overseeing the sales, marketing, research and development, manufacturing,
along with the Group’s international expansions and operations. In addition to his experience in sales and marketing,
manufacturing and management, he has also been instrumental in leading our research and development strategy, and
has developed a number of patents used in the design and manufacturing some of the Company’s acoustic products.
Mr. Pan graduated from 江蘇省武進師範學校 (Jiangsu Province Wujin Teacher School) in 1987. Mr. Pan is the spouse of
Ms. Wu Ingrid Chun Yuan (“Ms. Wu”), the non-executive Director and a substantial Shareholder of the Company; and the
father of Mr. Kelvin Pan, the Executive Vice President and Chief Innovation Officer of the Company.
Save as disclosed above, Mr. Pan does not have any relationships with other Directors, senior management, substantial
shareholders or controlling shareholders (as defined in the Hong Kong Listing Rules) of the Group.
The term of appointment of Mr. Pan and the interests of Mr. Pan in the shares (within the meaning of Divisions 7 and 8 of
Part XV of the SFO are respectively set out in the “DIRECTORS AND SERVICE CONTRACTS” section and “DIRECTORS’ AND
CHIEF EXECUTIVE’S INTEREST IN SHARES AND UNDERLYING SHARES AND DEBENTURES” section of the Directors’ Report on
pages 33 to 35 of this annual report.
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Biographies of Directors and Senior Management
Mr. Mok Joe Kuen Richard (“Mr. Mok”)
Aged 59, ED
Appointed to the Board: April 2005 as INED
Redesignated: 5 October 2009 as ED
Mr. Mok is responsible for the finance operations, and legal and compliance of the Group. He has over 20 years of
experience in the financial services industry, including employments with international accountancy firms such as KPMG,
the Hong Kong-listed South China Holdings Company Limited, the investment banking firm, Asian Capital Partners Group
and the Hong Kong-listed financial services group Dah Sing Financial Holdings Limited.
Mr. Mok is a member of the HKICPA and the Institute of Chartered Accountants in England and Wales. He graduated with
a Bachelor degree of Economics from the London School of Economics and Political Science, London University and held a
diploma in applied psychology from Hong Kong Baptist University.
Mr. Mok does not have any relationships with other Directors, senior management, substantial shareholders, or controlling
shareholders (as defined in the Hong Kong Listing Rules) of the Group.
The term of appointment of Mr. Mok and the interests of Mr. Mok in the shares (within the meaning of Divisions 7 and 8 of
Part XV of the SFO) are respectively set out in the “DIRECTORS AND SERVICE CONTRACTS” section and “DIRECTORS’ AND
CHIEF EXECUTIVE’S INTEREST IN SHARES AND UNDERLYING SHARES AND DEBENTURES” section of the Directors’ Report on
pages 33 to 35 of this annual report.
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Biographies of Directors and Senior Management
NON-EXECUTIVE DIRECTOR
Ms. Wu Ingrid Chun Yuan
Aged 52, Non-executive Director
Appointed to the Board: 4 December 2003
Ms. Wu co-founded the Group in 1993. As a non-executive Director of the Group, she is not involved in the day-to-day
operations of the Group.
Ms. Wu graduated from 常州衛生學校 (Changzhou School of Public Health) in 1989. She is the spouse of Mr. Pan, an
executive Director, CEO and a substantial Shareholder of the Company; and the mother of Mr. Kelvin Pan, the Executive
Vice President and Chief Innovation Officer of the Company. She is also a director of Sapphire Hill Holdings Limited and
K&G International Limited, both substantial Shareholders of the Company.
Save as disclosed above, Ms. Wu does not have any relationships with other Directors, senior management, substantial
shareholders, or controlling shareholders (as defined in the Hong Kong Listing Rules) of the Group.
The term of appointment of Ms. Wu and the interests of Ms. Wu in the shares (within the meaning of Divisions 7 and 8 of
Part XV of the SFO) are respectively set out in the “DIRECTORS AND SERVICE CONTRACTS” section and “DIRECTORS’ AND
CHIEF EXECUTIVE’S INTEREST IN SHARES, UNDERLYING SHARES AND DEBENTURES” section of the Directors’ Report on
pages 33 to 35 of this annual report.
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Biographies of Directors and Senior Management
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Zhang Hongjiang (“Mr. Zhang”)
Aged 62, INED, Chairman of the Board
Appointed to the Board: 1 January 2019
Chairman of Nomination Committee
Member of Audit and Risk Committee and Remuneration Committee
Mr. Zhang is currently an independent director of Zepp Health Corporation (formerly known as Huami Corp, listed in the
US), and an independent non-executive director of XPeng Inc. (listed in the US and Hong Kong). He is a venture partner
of Source Code Capital and a Senior Advisor to The Carlyle Group’s Asian private equity platform and chairman of Beijing
Academy of Artificial Intelligence.
Previously, Mr. Zhang was an independent director of Digital China Group Co., Ltd. (神州數碼集團股份有限公司) (listed
in Shenzhen) and an independent non-executive director of BabyTree Group (listed in Hong Kong), and was the chief
executive officer and executive director of Kingsoft Corporation Limited (listed in Hong Kong) and a former director of
Cheetah Mobile Inc., Xunlei Ltd. and 21Vianet Group, Inc. (all listed in the US). Mr. Zhang was a director and chief executive
officer at Kingsoft Cloud Holdings Limited. He also served as the chief technology officer at Microsoft Asia R&D Group and
assistant managing director of Microsoft Research Asia. He was appointed as one of the first 10 Microsoft Distinguished
Scientists in 2010.
Mr. Zhang is a foreign member of US National Academy of Engineering, a Fellow of IEEE and ACM. Mr. Zhang received a
Philosophy Doctor in Electrical Engineering from the Technical University of Denmark. He graduated with a Bachelor of
Science degree from Zhengzhou University.
Mr. Zhang was the recipient of the 2012 ACM SIGMM Outstanding Technical Achievement Award, the 2010 IEEE Computer
Society Technical Achievement Award, and the 2008 Asian American Engineer of the Year award.
Mr. Zhang does not have any relationships with other Directors, senior management, substantial shareholders, or
controlling shareholders (as defined in the Hong Kong Listing Rules) of the Group.
The term of appointment of Mr. Zhang is set out in the “DIRECTORS AND SERVICE CONTRACTS” section of the Directors’
Report on page 33 of this annual report.
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Biographies of Directors and Senior Management
Mr. Kwok Lam Kwong Larry (“Mr. Kwok”), SBS, JP
Aged 67, INED
Appointed to the Board: 1 February 2018
Chairman of Audit and Risk Committee
Member of Remuneration Committee and Nomination Committee
Mr. Kwok is currently an independent non-executive director of Café de Coral Holdings Limited, Shenwan Hongyuan
(H.K.) Limited, Starlite Holdings Limited (all listed in Hong Kong) and China Oilfield Services Limited (listed in Hong Kong
and Shanghai), and a non-executive director of First Shanghai Investments Limited (listed in Hong Kong). He is also an
independent non-executive director of CMB Wing Lung Bank Limited, a private company in Hong Kong, and vice-chairman
of Heep Hong Society, a non-profit organization in Hong Kong.
Mr. Kwok is a practicing solicitor in Hong Kong, and is a partner of Kwok Yih & Chan, Solicitors. He is also qualified to
practice as a solicitor in Australia, England and Wales and Singapore. Mr. Kwok is a fellow member of HKICPA, CPA Australia
and The Institute of Chartered Accountants in England and Wales. Mr. Kwok graduated from the University of Sydney,
Australia with bachelor’s degrees in economics and laws respectively as well as a master’s degree in laws. He also obtained
the Advanced Management Program Diploma from the Harvard Business School.
Mr. Kwok does not have any relationships with other Directors, senior management, substantial shareholders, or
controlling shareholders (as defined in the Hong Kong Listing Rules) of the Group.
The term of appointment of Mr. Kwok is set out in the “DIRECTORS AND SERVICE CONTRACTS” section of the Directors’
Report on page 33 of this annual report.
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Biographies of Directors and Senior Management
Mr. Peng Zhiyuan (“Mr. Peng”)
Aged 50, INED
Appointed to the Board: 1 January 2019
Chairman of Remuneration Committee
Member of Audit and Risk Committee and Nomination Committee
Mr. Peng has over 20 years of experience in corporate finance and management. He has served as senior management
in various multi-national institutions over the past 20 years. He is currently the Global Strategy Officer for Sands Capital
Management.
Previously, Mr. Peng was the founder and chief executive officer of a start-up company in Virginia in innovative
eco-friendly technology applications. He was the managing director in the Securities Division and the Investment Banking
Division at Goldman Sachs (Asia), and executive director in the Fixed Income Division at Morgan Stanley. Mr. Peng also
served in various roles with Standard Chartered Bank, Bank One (now J.P. Morgan), and AVIC International.
Mr. Peng is a board member of the board of Trustees for University of Virginia Health Foundation, and the board
of directors for CAV Angels, a non-profit early stage angel investment network affiliated with University of Virginia
community. He also served on the board of Trustees for University of Virginia Darden School Foundation, and Virginia
Foundation for Independent Colleges. Mr. Peng holds a Master of Business Administration from University of Virginia’s
Darden Business School, and a Bachelor’s degree in Engineering and Finance from Beijing University of Aeronautics and
Astronautics.
Mr. Peng does not have any relationships with other Directors, senior management, substantial shareholders, or
controlling shareholders (as defined in the Hong Kong Listing Rules) of the Group.
The term of appointment of Mr. Peng is set out in the “DIRECTORS AND SERVICE CONTRACTS” section of the Directors’
Report on page 33 of this annual report.
CHANGES IN DIRECTORS’ INFORMATION DISCLOSED UNDER RULE 13.51B(1) OF THE HONG
KONG LISTING RULES
Change(s) in Directors’ information since the date of the 2022 interim report of the Company, which are required to be
disclosed pursuant to Rule 13.51B(1) of the Hong Kong Listing Rules, are set out below:
1. Mr. Zhang Hongjiang has ceased to act as an independent non-executive director of BabyTree Group (listed in
Hong Kong) with effect from 11 August 2022.
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Biographies of Directors and Senior Management
SENIOR MANAGEMENT
Mr. Pan Kaitai Kelvin (“Mr. Kelvin Pan”)
Aged 31, Executive Vice President and Chief Innovation Officer
Date of Appointment: 1 January 2021
Mr. Kelvin Pan joined the Company in March 2014 and currently serves as the Executive Vice President (effective from 1
January 2021) and Chief Innovation Officer (effective from 24 August 2019) of AAC Technologies.
In 2016, Mr. Kelvin Pan started AAC Technologies’ first digital transformation when he served as the Vice President of IT and
R&D department, during which he led major reforms in corporate product roadmaps, new technology introductions, and
system solutions product lines.
In 2018, Mr. Kelvin Pan collaborated with McKinsey & Co and personally led the strategic corporate transformation of the
Company. This included developing the Android haptics motors business from scratch to a multi-million-dollar business,
continuously building up the system product capabilities, and leading his team to promote AAC Technologies’ automotive
audio system to market.
Since 2021, Mr. Kelvin Pan serves as the Executive Vice President and Chief Innovation Officer of the Group, and is
responsible for the Company’s overall business operation, while leading the Company’s strategic planning and execution,
new business planning and organisational structure optimisation, and introduced professional management teams and
process reforms. In 2022, Mr. Kelvin Pan led the completion of the Company’s corporate transformation, which resulted
in a remarkable increase in annual revenue amid difficult external market environment, and expansion into new business
markets such as automotive intelligent cockpit device solutions and AR/VR device products, successfully achieving mass
production. Meanwhile, Mr. Kelvin Pan was committed to promoting a vertically integrated value chain business model,
and providing sensory experience solutions integrated with hardware, chips and algorithms.
Mr. Kelvin Pan holds a Bachelor of Science degree in Mathematics and Computer Science awarded by Boston University.
He is the son of Mr. Pan, the ED and CEO of the Company, and Ms. Wu, the non-executive Director of the Company, both of
them are the substantial Shareholders of the Company.
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Biographies of Directors and Senior Management
Ms. Guo Dan (“Ms. Guo”)
Aged 40, Chief Financial Officer
Date of Appointment: 2 November 2020
Ms. Guo joined the Company in March 2020 and has been appointed as the Chief Financial Officer of the Company with
effect from 2 November 2020. Ms. Guo is responsible in leading the Group’s global finance team to formulate and execute
financial strategies to deliver the Group’s strategic growth targets and drive long term value to shareholders.
Ms. Guo has over thirteen years of investment banking experience at Goldman Sachs (Asia) L.L.C., where she served as
Executive Director, and has extensive experience in leading capital raising, investment and risk management deals. She
is active in supporting non-profit sectors across various initiatives including diversity and equal opportunities etc. She
currently serves as a Board member of HandsOn Hong Kong (HOHK), a non-profit organization promoting volunteerism
and providing broad-based support to over one hundred NGOs in Hong Kong.
Ms. Guo completed undergraduate and master’s studies at the University of Oxford and received a Master of Science
degree from the University.
Ms. Ma Nuo (“Ms. Ma”)
Aged 48, Chief Human Resources Officer
Date of Appointment: 1 October 2021
Ms. Ma joined the Company in October 2021 as Chief Human Resources Officer. Ms. Ma is responsible for leading global
human resources teams in the development and execution of human resources strategies that allow the Company
to attract, develop and retain the best talents worldwide while building a high-performance culture of engagement,
agility and innovation to support the Company’s vision, mission and long-term growth strategy. Ms. Ma brings over 27
years of business and senior human resources leadership experience in both Henkel (China) Investment Co., Ltd. and
Inventus Power. Ms. Ma is recognized as effective agent of change, culture re-shaping, cross-cultural communications,
organizational design and human resources system/process development etc.
Ms. Ma holds an MBA degree from Tianjin University in China, and an EMBA from Washington University in St. Louis, USA.
Dr. Kim Chul Ho (“Dr. Kim”)
Aged 61, Chairman of Asia Pacific Region (ex-PRC)
Date of Appointment: 20 November 2019
Dr. Kim joined the Company in December 2007. Effective from 20 November 2019, Dr. Kim serves as chairman of Asia
Pacific Region (ex-PRC), with the objective to establish a stronger corporate presence in this region and responsible for
enforcing strategic relationships with key customers, suppliers and partners, contributing to the Group’s global expansion
initiatives, establishing relations with regional governments and institutions, and locating and recruiting world-class
talents of top technical, marketing and management personnel in this region. Dr. Kim is experienced in the development
of electronic device and related mass production technologies, and also did research and development management
for over 15 years in Samsung Korea. Dr. Kim has successfully developed many key devices and related mass production
technologies for mobile terminal.
Dr. Kim obtained a Doctor’s degree of Material Science at Seoul National University and finished post doctor course in
Korean Institute of Science and Technologies (KIST).
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31
Biographies of Directors and Senior Management
Mr. David Plekenpol (“Mr. Plekenpol”)
Aged 63, Chairman of European and American Regions
Date of Appointment: 20 November 2019
Formerly our Chief Strategic Officer, Mr. Plekenpol joined the Company in February 2010. He had led the advanced
technology team to identify forward-looking technologies to be integrated with the Company’s products and solution
platforms to contribute to the creation of superior and differentiated end-user experiences. Mr. Plekenpol has been
appointed as chairman of European and American Regions, with the objective to establish a stronger corporate presence
in these regions and re-enforce strategic relationships between the Group and regional customers, suppliers and
governments. He is responsible for the investigation and tracking of new technologies from these regions and their
potential impact to AAC Technologies. Importantly, through the globalization strategy of AAC Technologies, he will assist
the Group to identify and recruit top technical, marketing and management personnel in these regions.
Mr. Plekenpol has spent over 25 years in the telecom industry, with executive positions in both Lucent and Alcatel. He has
founded two Silicon Valley venture capital backed startup companies, led sales and marketing for an optical component
startup in Scotland and spent two years with a venture capital backed Chinese mobile design startup in Shanghai before
joining AAC Technologies. Mr. Plekenpol is a member of the international advisory board for the University of Edinburgh
Business School. He has an undergraduate degree from Dartmouth College and an MBA from the Graduate School of
Business at Stanford University.
JOINT COMPANY SECRETARIES
Mr. Ho Siu Tak Jonathan (“Mr. Ho”)
Aged 50, Group Legal Director, Joint Company Secretary
Date of Appointment: 25 March 2020
Mr. Ho joined the Company in April 2018. He is the Group Legal Director and Joint Company Secretary of the Company.
He was a Hong Kong qualified solicitor with more than 20 years’ post qualification experience. He was awarded with a
Master’s degree in Economics Law from the Peking University and a Bachelor’s degree of Law from the University of Hong
Kong. Before joining the Company, Mr. Ho worked in various Hong Kong blue chip listed companies as senior role.
Ms. Guan Muyi (“Ms. Guan”)
Aged 41, Legal and Compliance Director, Joint Company Secretary
Date of Appointment: 1 January 2023
Ms. Guan joined the Company in October 2020. She is the Legal and Compliance Director and Joint Company Secretary
of the Company. Ms. Guan has over 15 years of experience in handling legal regulatory compliance and corporate
governance matters. She was awarded with a degree in Master of Laws from the City University of Hong Kong, majoring
in international business law, and a degree in Bachelor of Laws from Guangdong University of Finance and Economics.
Ms. Guan holds 中國法律職業資格 (PRC Law Practitioner Qualification), and is a member of each of The Chartered
Governance Institute and The Hong Kong Chartered Governance Institute. Before joining the Company, Ms. Guan worked
at Baker & McKenzie and various Hong Kong main board listed companies.
32
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Annual Report 2022
Directors’ Report
The Directors of the Company present their annual report and the audited consolidated financial statements for the year
ended 31 December 2022, which were approved by the Board of Directors on 23 March 2023.
PRINCIPAL ACTIVITIES
The Company acts as an investment holding company. The principal activities of its principal subsidiaries are set out in
note 43 to the consolidated financial statements.
BUSINESS REVIEW AND PERFORMANCE
A review of the business of the Group during the year and a discussion on the Group’s future business development
are provided in Management Discussion and Analysis on pages 14 to 16 of this annual report. Also, the financial risk
management objectives and policies of the Group can be found in note 38 to the consolidated financial statements.
Details of principal risks and uncertainties affecting the Company are provided in Key Risk Factors on pages 20 to 22 of
this annual report. An analysis of the Group’s performance is provided in the summary of the results and of the assets and
liabilities of the Group for the last five financial years as set out on pages 182 to 183 of this annual report. Analysis using
financial key performance indicators (KPIs) are provided in the Financial Highlights on pages 6 to 7 and Financial Review
on pages 17 to 19 of this annual report. In addition, discussions on the Group’s environmental, social and governance
policies, relationships with its key stakeholders and compliance with relevant laws and regulations which have a
significant impact on the Group are contained in the Corporate Governance Report and section of Sustainability on pages
48 to 80. The sustainability report for 2022 is available on the Company’s website on the same date as the publication of
this annual report.
RESULTS AND DIVIDENDS
The results of the Group for the year are set out in the consolidated statement of profit or loss and other comprehensive
income on pages 85 to 86.
After careful review of the Group’s financial liquidity and business development requirements, the Board of Directors
proposed to declare a final dividend of HK$0.12 per share for FY 2022 (FY 2021: Nil), implying a total annual dividend
amounted to HK$0.12 per share for FY 2022 (FY 2021: HK$0.20 per share) which represents the 15% payout ratio,
same as that of FY 2021. Amidst the dynamic macroeconomic environment, the Group will remain prudent in financial
management and strong in cash flow for business development, so as to create long-term value for shareholders.
PROPERTY, PLANT AND EQUIPMENT
Details of the movements in property, plant and equipment of the Group during the year are set out in note 13 to the
consolidated financial statements.
DISTRIBUTABLE RESERVES
The Company’s reserves available for distribution represent the aggregate of the retained earnings, the share premium
accounts and the special reserve which amounted to RMB1,102,177,000 (2021: RMB1,201,424,000). Under Section 34 of the
Companies Act of the Cayman Islands, the share premium of the Company is available for distribution or paying dividends
to Shareholders subject to the provisions of its Memorandum and the Articles and provided that immediately following
the distribution or dividend, the Company is able to pay its debts as they fall due in the ordinary course of business.
PRE-EMPTIVE RIGHT
There are no provisions for pre-emptive rights under the Articles and there are no restrictions against such rights under
the laws of the Cayman Islands which would oblige the Company to offer new shares on a pro rata basis to existing
Shareholders.
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33
Directors’ Report
SHARE CAPITAL
Details of the movements in the share capital of the Company are set out in note 33 to the consolidated financial
statements.
DIRECTORS AND SERVICE CONTRACTS
The Directors of the Company during the year and up to the date of this annual report are:
Executive Directors
Mr. Pan Benjamin Zhengmin (CEO)
Mr. Mok Joe Kuen Richard
Non-executive Director
Ms. Wu Ingrid Chun Yuan
Independent Non-executive Directors
Mr. Zhang Hongjiang (Chairman of the Board)
Mr. Kwok Lam Kwong Larry
Mr. Peng Zhiyuan
Mr. Au Siu Cheung Albert (resigned with effect from 31 August 2022)
Appointment and Re-election of the Directors of the Company
In accordance with Article 84 of the Articles, Mr. Kwok and Mr. Mok will retire by rotation at the forthcoming AGM of the
Company. Mr. Kwok and Mr. Mok being eligible, offer themselves for re-election at the forthcoming AGM of the Company.
Directors’ Service Contract
Each of Mr. Zhang, Mr. Peng, Ms. Wu, Mr. Pan and Mr. Mok will enter into a letter of appointment with the Company for a
term from the date of 2023 AGM to be held on 11 May 2023 until the conclusion of the AGM of the Company to be held in
2025, which can be terminated on whenever is the earlier of (i) the date of expiry of the above period; or (ii) ceasing to be
a Director of the Company for any reason pursuant to the Company’s Articles or any applicable law.
Mr. Kwok has entered into a letter of appointment with the Company for a term from the date of 2022 AGM held on 12
May 2022 until the conclusion of the AGM of the Company to be held in 2024, which can be terminated on whenever is the
earlier of (i) the date of expiry of the above period; or (ii) ceasing to be a Director of the Company for any reason pursuant
to the Company’s Articles or any applicable law.
No Director of the Company proposed for re-election at the forthcoming AGM has a service contract with any member
of the Group which is not determinable by the Group within one year without payment of compensation (other than
statutory compensation).
The Company confirms that it has received from each of its INEDs an annual confirmation of their independence pursuant
to Rule 3.13 of the Hong Kong Listing Rules, and considers that the INEDs are independent.
Biographical details of the Directors of the Company and senior management of the Group as at the date of this annual
report are set out on pages 23 to 31.
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Annual Report 2022
Directors’ Report
DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST IN SHARES AND UNDERLYING SHARES AND
DEBENTURES
As at 31 December 2022, the beneficial interests of the Directors of the Company and chief executive in any shares,
underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV
of the SFO) as recorded in the register of interests required to be kept by the Company under Section 352 of the SFO, or as
otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests or short positions) which they are taken or deemed to have taken under such provisions of the SFO and
pursuant to the Model Code, were as follows:
Long positions in the ordinary shares of the Company:
Number of ordinary shares
Percentage of the
Company’s issued
shares as at
31 December 2022
(1)
Name of
Directors of
the Company Capacity
Personal
interests
Corporate
interests
Spouse
interests
Other
interests
Total
number of
shares
Mr. Pan
(2)
Beneficial owner/interest of spouse/interest
of controlled corporation/founder of a
discretionary trust
70,262,162 51,439,440 263,420,525 112,795,525 497,917,652 41.38%
Ms. Wu
(3)
Interest of spouse/interest of controlled
corporation/founder of a discretionary
trust
– 263,420,525 122,952,005 111,545,122 497,917,652 41.38%
Mr. Mok
(4)
Beneficial owner/beneficiary of a trust
(other than a discretionary trust)
180,000 – – 99,195 279,195 0.02%
Notes:
(1) Percentage was computed based on the 1,203,250,000 issued shares as at 31 December 2022.
(2) Mr. Pan beneficially owns 70,262,162 shares. In addition, Mr. Pan is also deemed or taken to be interested in the
following shares for the purpose of the SFO:
(i) 51,439,440 shares which are beneficially owned by Silver Island Limited, a company wholly-owned by
Mr. Pan;
(ii) 263,420,525 shares representing the aggregate of (a) 134,828,594 shares which are beneficially owned
by Sapphire Hill Holdings Limited and (b) 128,591,931 shares which are beneficially owned by K&G
International Limited. These two companies are wholly-owned by Ms. Wu and as Ms. Wu is his spouse, he is
deemed to be interested in such 263,420,525 shares; and
(iii) 112,795,525 shares representing the aggregate of (a) 106,806,278 shares which are deemed to be
interested by Mr. Pan and Ms. Wu’s descendants, as beneficiaries of the Pan 2005 Irrevocable Trust dated 10
May 2005; (b) 4,738,844 shares which are deemed to be interested by Mr. Pan and Ms. Wu’s descendants,
as beneficiaries of the Pan 2005 Exempt Trust dated 10 May 2005. Two children of Mr. Pan and Ms. Wu are
over the age of 18 and have no discretion over distributions or investments in these trusts until distribution
is made to them; and (c) 1,250,403 shares which are deemed to be interested by Mr. Pan and Ms. Wu’s
descendant, as beneficiaries of the Pan 2020 Exempt Trust dated 3 December 2020. One child of Mr. Pan
and Ms. Wu is under the age of 18 and has no discretion over distributions or investments in the trust until
distribution is made to him.
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35
Directors’ Report
(3) Ms. Wu is deemed or taken to be interested in the following shares for the purposes of the SFO:
(i) 263,420,525 shares representing the aggregate of (a) 134,828,594 shares which are beneficially owned
by Sapphire Hill Holdings Limited; and (b) 128,591,931 shares which are beneficially owned by K&G
International Limited. These two companies are wholly-owned by Ms. Wu;
(ii) 122,952,005 shares representing the aggregate of (a) 51,439,440 shares which are beneficially owned by
Silver Island Limited, a company wholly-owned by Mr. Pan; (b) 70,262,162 shares which are beneficially
owned by Mr. Pan; and (c) 1,250,403 shares which are deemed to be interested by Mr. Pan and Ms. Wu’s
descendant, as beneficiaries of the Pan 2020 Exempt Trust dated 3 December 2020, and as Mr. Pan is her
spouse, she is deemed to be interested in such 122,952,005 shares; and
(iii) 111,545,122 shares representing the aggregate of (a) 106,806,278 shares which are deemed to be
interested by Mr. Pan and Ms. Wu’s descendants, as beneficiaries of the Pan 2005 Irrevocable Trust dated
10 May 2005; and (b) 4,738,844 shares which are deemed to be interested by Mr. Pan and Ms. Wu’s
descendants, as beneficiaries of the Pan 2005 Exempt Trust dated 10 May 2005. Two children of Mr. Pan
and Ms. Wu are over the age of 18 and have no discretion over distributions or investments in these trusts
until distribution is made to them.
(4) On 24 March 2022, Mr. Mok was granted 99,195 Awarded Shares pursuant to the 2016 Share Award Scheme
adopted by the Company on 23 March 2016, of which 33,065 Awarded Shares were vested on 24 March 2023.
Long positions in the debentures of the Company:
Name of Directors Capacity/Nature of interest
Principal amount of
debentures
(1)
held (US$)
Mr. Pan
(2)
Interest of spouse/Family interest 330,000
Ms. Wu
(3)
Interest of controlled corporation/Corporate interest 330,000
Notes:
(1) The Company issued US$388,000,000 notes (“2024 Notes”), to be matured in 2024 to third party professional
investors, and, the 2024 Notes are listed on the Hong Kong Stock Exchange (stock code: 40075). The 2024 Notes
bear interest at the rate of 3.00% per annum, payable semi-annually in arrears on 27 May and 27 November in
each year. Subsequently, the Company successfully completed the purchase of US$111,182,000 of the 2024 Notes,
thereby reducing the outstanding aggregate principal amounts of the 2024 Notes to US$276,818,000.
(2) Mr. Pan is deemed or taken to be interested in this amount of the 2024 Notes which were held by Sapphire Hill
Holdings Limited, a company wholly-owned by Ms. Wu and as Ms. Wu is his spouse, he is deemed to be interested
in such amount of the 2024 Notes.
(3) Ms. Wu is deemed or taken to be interested in this amount of the 2024 Notes which are held by Sapphire Hill
Holdings Limited, a company wholly-owned by Ms. Wu.
Other than as disclosed above, as at 31 December 2022, none of the Directors of the Company, chief executive nor their
associates had any interests or short positions in the shares, underlying shares and debentures of the Company or any of
its associated corporations as recorded in the register of interests required to be kept by the Company under Section 352
of the SFO.
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Annual Report 2022
Directors’ Report
Disclosure of Conflict of Interest
Directors are requested to declare their personal or business interests, if any, in any transactions to be considered by the
Board and such declaration of interest would be reviewed and discussed prior to the Board meetings and, as appropriate,
Directors will or will be asked to abstain from voting in the meetings.
Please refer to the section headed “MAJOR CUSTOMERS AND SUPPLIERS” on page 47 of this annual report for any
Directors’ interest in any of the five largest customers or suppliers.
Arrangements to Purchase Shares or Debentures
Save as disclosed in this annual report, at no time during the year was the Company, or any of its subsidiaries, a party to any
arrangements to enable the Directors of the Company or their close associates (as defined under the Hong Kong Listing
Rules) to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body
corporate.
MAJOR TRANSACTION
On 13 July 2022, the Company published an announcement in relation to the proposed spin-off and separate listing of
AAC Optics (Changzhou) Co., Ltd. (“AAC Optics”) on the Shanghai Stock Exchange, which, if materialised, may constitute
a deemed disposal of the interest in a subsidiary of the Company under Rule 14.29 of the Hong Kong Listing Rules
and a major transaction of the Company under Chapter 14 of the Hong Kong Listing Rules. The proposed spin-off was
approved by the Shareholders at its extraordinary general meeting convened on 20 August 2022. On 16 December
2022, the Company further announced that, in view of the external macroeconomic environment and industry market
development, the Company decided to delay the timetable for the proposed spin-off and separate listing, and, the
Shanghai Stock Exchange has accepted the application initiated by AAC Optics to withdraw the application documents in
relation to the proposed A share listing. For more details, please refer to the announcements of the Company dated 13 July
2022, 21 August 2022, 31 August 2022 and 16 December 2022 and the circular dated 3 August 2022.
AAC Technologies Holdings Inc.
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Annual Report 2022
37
Directors’ Report
CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS
During 2022, the Group had entered into the connected transactions and continuing connected transactions with certain
connected persons of the Company reported in this section. They constituted non-exempt connected transactions and
continuing connected transactions subject only to the announcement, reporting and annual review requirement under
Chapter 14A of the Hong Kong Listing Rules.
2020 Master Lease Agreements
The Group entered into certain master lease agreements (“2020 Master Lease Agreements”) with the respective lessors for
the renewing lease of offices and production facilities necessary for the business activities of the Group on 20 December
2019. A summary of the transactions is as follows:
Date of
agreement
Lessee
Group Lessor Group Property
Total Leased
Floor Area Term Usage Annual Caps 2022 Actual
(Approximately
sq.m) RMB’000* RMB’000*
20.12.2019 The Group
深圳巿遠宇實業發展有限公司
(Shenzhen Yuanyu Industrial
Development Co., Ltd.)
(“Shenzhen Yuanyu”)
The Shenzhen Yuanyu Nanda
Premises at Nanda Buildings,
Nanshan, Shenzhen, PRC.
10,540.96 1.1.2020 –
31.12.2022
Offices 2020 – 13,282
2021 – 13,282
2022 – 14,079
14,071
20.12.2019 The Group
常州巿來方圓電子有限公司
(Changzhou Laifangyuan
Electronics Co., Ltd.)
(“Changzhou LFY”)
The Changzhou LFY Gang Qiao
Premises at Nanxiashu Town,
Wujin District, Changzhou,
Jiangsu Province, PRC.
13,369 (including
ancillary areas)
1.1.2020 –
31.12.2022
Factory and
warehouse
2020 – 1,918
2021 – 1,955
2022 – 2,029
1,776
20.12.2019 The Group
江蘇遠宇電子投資集團有限公司
(Jiangsu Yuanyu Electronics
Investment Group Co., Ltd.)
(“Jiangsu Yuanyu”)
The Jiangsu Yuanyu Technologies
Building Premises at Science &
Education Mega Centre,
Wujin District, Changzhou,
Jiangsu Province, PRC.
29,736 (including
ancillary area)
1.1.2020 –
31.12.2022
Factory and
offices
2020 – 10,556
2021 – 11,082
2022 – 11,608
4,182
20.12.2019 The Group
紅光（越南）塑業有限公司
(Hongguang Viet Nam
Plastic Company Limited)
(‘’HVPC”)
The HVPC Premises at Lot E3-3
Que Vo IP, Van Duong
Commune, Bac Ninh city,
Bac Ninh Province, Vietnam.
3,344 1.1.2020 –
31.12.2022
Warehouse 2020 – US$160,600
2021 – US$160,600
2022 – US$160,600
(excluding estimated
water and electricity
costs )
US$160,512
* Unless otherwise stated.
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Directors’ Report
2020 Master Purchase Agreements
The Group entered into certain master purchase agreements (“2020 Master Purchase Agreements”) with respective
supplier in order to assure the continuous supply of production materials to cope with the Group’s expected production
needs on similar terms. A summary of the transactions is as follows:
Date of
agreement
Purchaser
Group Supplier Group Materials for purchase Term Annual Caps 2022 Actual
RMB’000 RMB’000
20.12.2019 The Group
(a) 常州凌迪電子科技有限公司
(Changzhou Lingdi Electronics Technologies
Co., Ltd.) (“Changzhou Lingdi”); and
Certain materials and products including
but not limited to foam blocks, calcium
plastic boards, load plates, carrier
bands, plastic plates and plastic trays
1.1.2020 –
31.12.2022
2020 – 120,000
2021 – 130,000
2022 – 140,000
30,807
(b) 紅光（越南）塑業有限公司
(Hongguang Viet Nam Plastic Company
Limited) (“HVPC”)
20.12.2019 The Group
常州巿友晟電子有限公司
Changzhou Yousheng Electronics Co., Ltd.)
(“Changzhou Yousheng”)
Parts for use in acoustic and optical
components e.g. foam, adhesives,
mesh, domes, ear cushions, insulation
mats and resistance neeb
1.1.2020 –
31.12.2022
2020 – 60,000
2021 – 80,000
2022 – 90,000
26,170
20.12.2019 The Group
四川茵地樂材料科技集團有限公司
(Sichuan Yindile Materials Technology Group
Co., Ltd.) (“YDL Materials”)
Materials e.g. chemical adhesives 1.1.2020 –
31.12.2022
2020 – 20,000
2021 – 25,000
2022 – 30,000
0
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Annual Report 2022
39
Directors’ Report
2023 Master Lease Agreements (Renewal of 2020 Master Lease Agreements)
In view of the expiry of the 2020 Master Lease Agreements in order to continue to secure ongoing and future office
and production premises as required, the Group renewed the 2020 Master Lease Agreements by entering into new
master lease agreements (“2023 Master Lease Agreements”) with the respective lessors for the renewing lease of offices
and production facilities necessary for the business activities of the Group on 16 December 2022. A summary of the
transactions is as follows:
Date of
agreement
Lessee
Group Lessor Group Property
Total Leased
Floor Area Term Usage
Expected Annual
Rents Payable
Renewal/
New
(Approximately
sq.m) RMB’000*
16.12.2022 The Group
深圳巿遠宇實業發展有限公司
(Shenzhen Yuanyu Industrial
Development Co., Ltd.)
(“Shenzhen Yuanyu”)
The Shenzhen Yuanyu Nanda
Premises at Nanda Buildings,
Nanshan, Shenzhen, PRC.
11,631 1.1.2023 –
31.12.2025
Offices 2023 – 15,640
2024 – 15,764
2025 – 16,682
Renewal
16.12.2022 The Group
常州巿來方圓電子有限公司
(Changzhou Laifangyuan
Electronics Co., Ltd.)
(“Changzhou LFY”)
The Changzhou LFY Gang Qiao
Premises at Nanxiashu Town,
Wujin District, Changzhou,
Jiangsu Province, PRC.
10,385 (including
ancillary areas)
1.1.2023 –
31.12.2025
Factory and
warehouse
2023 – 1,777
2024 – 1,777
2025 – 1,777
Renewal
16.12.2022 The Group
江蘇遠宇電子投資集團有限公司
(Jiangsu Yuanyu Electronics
Investment Group Co., Ltd.)
(“Jiangsu Yuanyu”)
The Jiangsu Yuanyu Technologies
Building Premises at Science &
Education Mega Centre, Wujin
District, Changzhou, Jiangsu
Province, PRC.
5,685 (including
ancillary area)
1.1.2023 –
30.6.2023
Factory and
offices
2023 – 791 Renewal
16.12.2022 The Group
越南紅光塑業有限公司
(Hongguang Viet Nam Plastic
Company Limited)
(‘’HVPC”)
The HVPC Premises at Lot E3-3
Que Vo IP, Van Duong
Commune, Bac Ninh city,
Bac Ninh Province, Vietnam.
3,344 1.1.2023 –
31.12.2025
Warehouse 2023 – US$160,600
2024 – US$160,600
2025 – US$160,600
(excluding estimated
water and electricity
costs)
Renewal
* Unless otherwise stated.
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Annual Report 2022
Directors’ Report
2023 Master Purchase Agreements (Renewal of 2020 Master Purchase Agreements)
The Group entered into certain master purchase agreements (“2023 Master Purchase Agreements”) with respective
supplier in order to assure the continuous supply of production materials to cope with the Group’s expected production
needs on similar terms. A summary of the transactions is as follows:
Date of
agreement
Purchaser
Group Supplier Group Materials for purchase Term Annual Caps
Renewal/
New
RMB’000
16.12.2022 The Group
(a) 常州凌迪電子科技有限公司
(Changzhou Lingdi Electronics
Technologies Co., Ltd.)
(“Changzhou Lingdi”); and
Certain materials and products including
but not limited to foam blocks, calcium
plastic boards, load plates, carrier
bands, plastic plates and plastic trays
1.1.2023 –
31.12.2025
2023 – 140,000
2024 – 140,000
2025 – 140,000
Renewal
(b) 越南紅光塑業有限公司
(Hongguang Viet Nam Plastic
Company Limited) (“HVPC”)
16.12.2022 The Group
常州巿友晟電子有限公司
Changzhou Yousheng Electronics
Co., Ltd.) (“Changzhou Yousheng”)
Parts for use in acoustic and optical
components e.g. foam and domes
1.1.2023 –
31.12.2025
2023 – 90,000
2024 – 90,000
2025 – 90,000
Renewal
Pursuant to the 2020 Master Lease Agreements and 2020 Master Purchase Agreements, relevant members of the Group
entered into separated leasing agreements and purchase orders with respect to each of the connected transactions and
continuing connected transactions. The terms of, and the consideration payable under each of these leasing agreements
and purchase orders were negotiated on arm’s length bases, on normal commercial terms or better, which, from the
Group’s perspective, were no less favorable than those which the relevant members of the Group could obtain from
independent third-parties. In addition to the above, to ensure the transactions contemplated under the 2020 Master
Purchase Agreements to be fair and reasonable, the Group obtained quotations from no less than two independent
third-party suppliers in addition to the quotation from connected person so that the Group will compare three quotations
for procurement of materials and products.
The Group’s internal audit function has reviewed the connected transactions and continuing connected transactions
for the year ended 31 December 2022, and the internal control systems. The Group’s internal audit function has (i)
conducted quarterly evaluation and assessment on the internal control systems, the pricing mechanism and the Group’s IT
procurement system; (ii) performed regular internal audit checking on the Group’s connected transactions and continuing
connected transactions; (iii) alerted the Group’s compliance and procurement departments on a timely basis if there is
any issue identified; and (iv) submitted a quarterly report to the Directors regarding the results of the above-mentioned
evaluation, assessment as well as internal audit checking so as to ensure that the connected transactions and continuing
connected transactions in 2022 were conducted in accordance with the terms of the 2020 Master Lease Agreements, 2020
Master Purchase Agreements, and in compliance with the internal control systems.
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Directors’ Report
Confirmation from the Directors and the Auditors
The INEDs had reviewed the connected transactions and continuing connected transactions in 2022 and the findings, and,
reports provided by the Group’s internal audit function, and are satisfied that the pricing mechanism and internal control
systems in place were sufficient, and effective, and the transactions were entered into by the Group (a) in the ordinary
and usual course of business of the Group; (b) on normal commercial terms or better; and (c) according to the agreements
governing them on terms that are fair and reasonable and in the interests of the Company and the Shareholders as a
whole.
The Company has engaged its external auditor to review the Group’s connected transactions and continuing
connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance
Engagements Other than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740
(Revised) “Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the Hong
Kong Institute of Certified Public Accountants. The Directors of the Company reported that the auditor had confirmed
the matters set out in Rule 14A.56 of the Hong Kong Listing Rules regarding the connected transactions and continuing
connected transactions for the year ended 31 December 2022.
Other than as disclosed above, no transaction, arrangement or contract of significance to which the Company or any of
its subsidiaries was a party and in which a Director of the Company or his/her connected entities had a material interest,
whether directly or indirectly, subsisted at the end of the year or at any time during the year.
The Connected Relationships
The relevant parties to the above connected transactions and continuing connected transaction with the Group and a
description of their connected relationships with the Group as at 31 December 2022 are as follows:
The connected party The person in relation with connected party
Changzhou LFY A company owned as to 50% by each of Mr. Pan Zhonglai, Mr. Pan’s father and Ms. Xie
Yufang, Mr. Pan’s mother
Changzhou Lingdi A company owned as to 51% by Ms. Ye Huamei, Ms. Wu’s mother and 49% by Ms. Wu
Yayuan, Ms. Wu’s sister
Changzhou Yousheng A company owned as to 30% by Ms. Xie Yufang and 70% by Ms. Pan Lijun, Mr. Pan’s sister as
to 70%
HVPC A company indirectly wholly-owned by Ms. Ye Huamei
Jiangsu Yuanyu A company indirectly owned as to 50% by each of Mr. Pan Zhonglai and Ms. Xie Yufang
Shenzhen Yuanyu A company wholly-owned by Ms. Ye Huamei
YDL Materials A company held by: (i) Jiangsu Yuanyu as to 13%; and (ii) a partnership enterprise as to 12%,
of which Ms. Wu Yayun, Ms. Ye Huamei and a company indirectly owned by Ms. Wu are
the partners
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RELATED PARTY TRANSACTIONS
The significant related party transactions entered into by the Group during the year are set out in note 42 to the
consolidated financial statements and include transactions that constitute connected transactions and continuing
connected transactions for which the disclosure requirements under the Hong Kong Listing Rules have been complied
with.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2022, the register of interests and short positions kept by the Company under Section 336 of the SFO,
other than the Directors of the Company and chief executive, showed that the following persons held interests or short
positions in the Company’s shares, which would fall to be disclosed to the Company under the provisions of Divisions 2
and 3 of Part XV of the SFO, some of which were represented the same batch of other interests of Mr. Pan and Ms. Wu as
disclosed in the section of “DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST IN SHARES AND UNDERLYING SHARES AND
DEBENTURES” above:
Name of
Shareholders Capacity
Number of
shares
Derivative
interest
Percentage of
the Company’s
issued shares as at
31 December
2022
(1)
JPMorgan Chase & Co.
(2)
Interest of controlled corporation/
Person have security interest in
shares/Investment Manager/
Trustee/Approved lending agent
134,885,492 (L) 2,226,000 (L) 11.39%
18,038,252 (S) 3,752,857 (S) 1.81%
4,997,517 (P) – 0.41%
L — Long position
S — Short position
P — Lending pool
Notes:
(1) Percentage was computed based on the 1,203,250,000 issued shares as at 31 December 2022.
(2) JPMorgan Chase & Co., through its various 100% controlled corporations (“JPMorgan Group”), is indirectly
interested in (i) an aggregate of 134,885,492 shares and listed derivative interests of 1,760,000 shares with
physically settled, listed derivative interests of 251,000 shares with cash settled, and unlisted derivative interests of
215,000 shares with cash settled in long position; and (ii) an aggregate of 18,038,252 shares and listed derivative
interests of 400,000 shares with physically settled, listed derivative interests of 1,262,500 shares with cash settled,
unlisted derivative interests of 581,626 shares with physically settled, and unlisted derivative interests of 1,508,731
shares with cash settled in short position. Among them, 111,545,122 shares were held by JPMorgan Group as a
trustee, which represented the same batch of other interests of Mr. Pan and Ms. Wu as disclosed in the section of
“DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST IN SHARES AND UNDERLYING SHARES AND DEBENTURES” above.
In addition to the above, JPMorgan Chase & Co. is also interested in 4,997,517 shares in lending pool as described
in the SFO. The term “lending pool” is defined as (i) shares that the approved lending agent holds as agent for a
third party which he is authorised to lend and other shares that can be lent according to the requirements of the
Securities Borrowing and Lending Rules; and (ii) shares that have been lent by the approved lending agent and
only if the right of the approved lending agent to require the return of the shares has not yet been extinguished.
(3) Please refer to the section headed “DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST IN SHARES AND UNDERLYING
SHARES AND DEBENTURES” for the interests held by Mr. Pan, Ms. Wu and their associates, who are also substantial
shareholders of the Company.
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Directors’ Report
EMOLUMENT POLICY
The Remuneration Committee assisted the Board on formulating remuneration policy and reviewing the emoluments of
senior management and the Directors of the Company. Responsibilities and work performed in 2022 by the Remuneration
Committee are stated on pages 64 to 66 in the Corporate Governance Report.
PERMITTED INDEMNITY PROVISION
Pursuant to the Company’s Articles, subject to relevant laws, every Director of the Company shall be indemnified out of the
assets of the Company against all losses and liabilities which the Directors of the Company may sustain or incur in or about
the execution of his/her office or otherwise in relation thereto. The Company has taken out insurance against the liability
and costs associated with defending any proceedings which may be brought against the Directors of the Company.
SHARE AWARD SCHEME & SUBSIDIARY SHARE INCENTIVE SCHEME
As announced by the Company on 23 March 2016, the Board resolved to adopt a share award scheme (the “2016 Share
Award Scheme”) in which Employees (other than Excluded Employees) may be selected by the Board to participate. The
purpose of the 2016 Share Award Scheme is to permit the Company to grant Awards to Selected Employees as incentives
for their contributions to the Group and to attract suitable personnel for further development of the Group. Selected
Employees are any employee (including without limitation any executive Director but excluding any non-executive
Director or independent non-executive Director) of any member of the Group selected by the Board pursuant to the
scheme rules for participation in the 2016 Share Award Scheme. Subject to any early termination as may be determined
by the Board pursuant to the scheme rules, the 2016 Share Award Scheme shall be valid and effective for a term of ten (10)
years commencing on 23 March 2016.
The maximum number of shares that may be awarded under the 2016 Share Award Scheme during its term is limited
to 1.65% (i.e. 19,775,250 shares as at 23 March 2023) of the issued share capital of the Company from time to time. The
maximum number of Awarded Shares that may be granted to any one Selected Employee shall not exceed 0.5% (i.e.
5,992,500 shares as at 23 March 2023) of the issued share capital of the Company from time to time. Pursuant to the 2016
Share Award Scheme, shares will be subscribed for at a subscription price as determined by the Board, or purchased on
the Hong Kong Stock Exchange, by Bank of Communications Trustee Limited (the “Trustee”) at the cost of the Company
and will be held by the Trustee on trust for Selected Employee(s) under the 2016 Share Award Scheme before vesting. The
2016 Share Award Scheme is a discretionary scheme of the Company. The Company will comply with the new Chapter
17 in accordance with the transitional arrangements for the existing share schemes. The capitalised terms referred in this
section shall have the same meanings as those defined in the announcement made by the Company on 23 March 2016
relating to the adoption of the 2016 Share Award Scheme.
Since the date of adoption of the 2016 Share Award Scheme and up to the date of this annual report, no new shares have
been issued to the Trustee pursuant to the scheme rules and trust deed of the 2016 Share Award Scheme. In August 2021,
March 2022 and January 2023, the Trustee of the 2016 Share Award Scheme purchased 6,042,500, 4,188,500 and 3,276,000
shares, respectively, on the Hong Kong Stock Exchange for the purpose of the 2016 Share Award Scheme, funded by
the Company’s internal resources. On 24 March 2022, 10,230,593 Awarded Shares were granted to 340 employees at nil
consideration, in which 2,722,799 Awarded Shares have been vested to employees on 24 March 2023. The Awarded Shares
shall be vested in the Grantees subject to the terms of the 2016 Share Award Scheme and the vesting conditions as set out
in the respective Grant Notice to each Grantees (including a period of continued service within the Group after the grant of
the Award and performance targets which must be attained).
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Details of the Awarded Shares and a summary of the movements under the 2016 Share Award Scheme during the year
were set out as follows:
Number of Awarded Shares
Grantees Date of grant Vesting period
Closing price
of Shares
immediately
before the
date of grant
Unvested
as at 1
January
2022
Granted
during
the year
Cancelled
during
the year
Lapsed
during
the year
Vested
during
the year
Unvested
as at 31
December
2022
HK$
Director of the Company
Mok Joe Kuen Richard 24 March 2022 24 March 2023 -
24 March 2025
(Note (3))
18.46 – 99,195 – – – 99,195
Five highest paid individuals
in aggregate (Note (1))
24 March 2022 24 March 2023 -
24 March 2025
(Note (3))
18.46 – 1,258,538 – – – 1,258,538
Other Grantees in aggregate 24 March 2022 24 March 2023 -
24 March 2025
(Note (3))
18.46 – 8,972,055 – 639,203 – 8,332,852
Total: 10,230,593 – 639,203 – 9,591,390
Notes:
(1) The five highest paid individuals included one Director of the Company, who was granted share awards under the
2016 Share Award Scheme.
(2) The maximum number of Shares that may be awarded under the 2016 Share Award Scheme during its term is
1.65% of the issued share capital of the Company from time to time. As at 1 January 2022, the Awarded Shares
available for grant under the 2016 Share Award Scheme were 19,940,250 Shares. As at 31 December 2022, the
remaining Shares which could be further awarded under the 2016 Share Award Scheme were 10,262,235 Shares.
(3) On 24 March 2022, 10,230,593 Awarded Shares were granted to 340 employees. Please refer to the announcement
of the Company dated 24 March 2022 for details including vesting conditions, performance targets and vesting
schedules, etc..
For further information regarding the fair value of the Awarded Shares at the date of grant, the accounting standard
and policy adopted, and the methodology and assumption used, please refer to Note 35 to the condensed consolidated
financial statements.
On 23 March 2023, the Company announced a proposed adoption of a new share award scheme for the employees. For
more details, please refer to the Company’s announcement dated 23 March 2023.
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Directors’ Report
In addition to the 2016 Share Award Scheme, AAC Optics, a subsidiary of the Company, operates a subsidiary share
incentive (the “Subsidiary Share Incentive Scheme”). The purpose of the Subsidiary Share Incentive Scheme is to provide
the selected employees of AAC Optics and relevant personnel a market oriented incentive scheme and attract top talents.
AAC Optics intends to incentivise and reward them for their commitment and dedication to its business expansion. Please
refer to Note 35 to the condensed consolidated financial statements for details.
EQUITY-LINKED AGREEMENTS
Save as disclosed in this annual report, no equity-linked agreements were entered into during the year or subsisted at the
end of this year.
DONATION
For the year ended 31 December 2022, the Group made donations equivalent to approximately RMB1,480,000 to various
communities related to COVID-19 precautionary measures and development of local communities.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
Share Repurchase
The Company believes that in addition to the sustained increase of earnings per share and the intrinsic value per share, the
repurchase of the Company’s shares at the appropriate timing could also be an important metric to enhance long-term
value of our shareholders.
At the AGM on 12 May 2022, the Company’s shareholders granted a general mandate to the Directors of the Company to
repurchase shares of the Company (the “Repurchase Mandate”), pursuant to which the Company is allowed to repurchase
up to 10% of the total number of issued shares of the Company as at the date of the AGM.
During the year ended 31 December 2022, the Company had repurchased, under the Repurchase Mandate, a total of
7,455,500 shares on the Hong Kong Stock Exchange for an aggregate consideration of HK$110.86 million. Out of the
consideration of HK$64.32 million for shares repurchased in December 2022, RMB34.6 million was included in other
payables. Out of the 7,455,500 shares, 5,250,000 ordinary shares were cancelled during the year and 2,205,500 ordinary
shares were cancelled in January 2023. In January 2023, the Company had repurchased, under the Repurchase Mandate, a
total of 2,544,500 shares on the Hong Kong Stock Exchange. All shares repurchased were subsequently cancelled, the total
number of shares of the Company in issue as at the date of this annual report was 1,198,500,000.
The share repurchase reflects the Company’s solid financial position and the Board’s strong confidence in the Company’s
future business prospects. The Directors of the Company believe that the share repurchase was in the interest of
Shareholders as a whole, enhancing the net asset value per share and earnings per share of the Company.
Details of the share repurchases are as follows:
Month
Total number of
the ordinary shares
Price paid per share Aggregate
consideration
(1)
Highest Lowest
HK$ HK$ HK$’000
September 2022 3,750,000 12.72 11.90 46,544
December 2022 3,705,500 17.90 16.76 64,316
January 2023 2,544,500 18.02 16.40 42,766
Note:
(1) Including brokerage, transaction levy, stamp duty and transaction cost of HK$487,000.
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Bond Purchase
The Company issued: (i) US$388,000,000 3.00 per cent. notes due 2024 (2024 Notes, stock code: 40075) in 2019; (ii)
US$300,000,000 2.625 per cent. notes due 2026 (2026 Notes, stock code: 40699) in 2021; and (iii) US$350,000,000 3.750 per
cent. notes due 2031 (2031 Notes, stock code: 40700) in 2021, to Professional Investors.
From 14 September 2022 to 12 October 2022, the Company conducted an offer to purchase for cash up to certain
maximum acceptance amount of its outstanding 2024 Notes and 2026 Notes (the “Tender Offer”) for the purpose of
optimizing its debt structure and proactive management of its liabilities.
Through the Tender Offer, the Company successfully completed the purchase of US$111,182,000 of the 2024 Notes and
US$47,396,000 of the 2026 Notes, with aggregate amount of US$133,766,000 paid by the Company, thereby reducing the
outstanding aggregate principal amounts of the 2024 Notes and the 2026 Notes to US$276,818,000 and US$252,604,000,
respectively.
Subsequently in January 2023, the Company had purchased from open market US$1,000,000 of the 2026 Notes and
US$1,000,000 of the 2031 Notes, with aggregate amount of US$1,620,000 paid by the Company, thereby reducing the
outstanding aggregate principal amounts of the 2026 Notes and the 2031 Notes to US$251,604,000 and US$349,000,000,
respectively.
Save as disclosed above, during the year ended 31 December 2022, neither the Company nor any of its subsidiaries has
purchased, sold or redeemed any of the Company’s listed securities.
HUMAN RESOURCES
As at 31 December 2022, the Group employed 27,798 permanent employees, a 26% decrease from 37,591 employees as at
31 December 2021. The reduction in total work force was the result of the Group’s continuous improvement in employees’
competencies, investment in automation and advanced production methodologies, whereas pandemic situation also
caused uncertainties in the market.
Employees of the Group are remunerated based on their individual performance, professional qualifications, experience in
the industry and relevant market trends. Management from time to time reviews the Group’s remuneration policy based
on benchmarking results, and fairly rewards its employees based on individual performance. In addition to basic salaries,
allowances, social insurance and mandatory pension fund contribution, certain employees and employee groups are also
eligible for the Group’s bonus plan and share schemes.
As required by the relevant regulations, the Group has been participating in the social insurance schemes operated by the
relevant local government authorities in the PRC, and in the mandatory pension fund as well as social insurance schemes
for its employees in the Czech Republic, Denmark, Finland, Hong Kong, India, Japan, Malaysia, Singapore, South Korea,
Taiwan, the United Kingdom, the United States and Vietnam.
The Company is committed to invest in talents to develop innovative products for next generation designs. The Company
has already established and continues to expand its various R&D centers in Asia, Europe and North America, including a
long-established collaboration with universities, and others, on many different projects.
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MAJOR CUSTOMERS AND SUPPLIERS
During the year, the aggregate sales attributable to the Group’s five largest customers comprised approximately 83.9%
of the Group’s total revenue from sales while the revenue from sales attributable to the Group’s largest customer was
approximately 43.5% of the Group’s total revenue from sales.
During the year, the aggregate purchases attributable to the Group’s five largest suppliers were 26.7% of the Group’s total
purchases while the purchases attributable to the Group’s largest supplier was approximately 10.6% of the Group’s total
purchases.
As at 31 December 2022, Ms. Wu, the non-executive Director of the Company, holding more than 5% of the Company’s
share capital, had beneficial interests in one of the Group’s five largest customers. The customer has the usual trading
terms as any other customers of the Group. At no time during the year and up to the date of this annual report, had
Ms. Wu’s interests in the customer exceeded 1%. To the knowledge of the Directors of the Company, Ms. Wu has never
been a director, nor involved in management, of these customers or suppliers.
Save as disclosed above, none of the Directors of the Company, their close associates or any Shareholder which to the
knowledge of the Directors of the Company, owns more than 5% of the Company’s share capital had an interest in any of
the five largest customers or suppliers.
DIRECTORS’ INTERESTS IN COMPETING BUSINESS
During the year, none of the Directors of the Company or their respective close associates (as defined in the Hong Kong
Listing Rules) were considered to have an interest in a business which competes or is likely to compete, either directly
or indirectly, with the business of the Group, other than those businesses of which the Directors of the Company were
appointed as Directors of the Company to represent the interests of the Company and/or the Group.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of any business of the
Company were entered into during the year or subsisted at the end of the year.
SUFFICIENCY OF PUBLIC FLOAT
Based on the publicly available information and as far as the Directors of the Company are aware, the Company has
maintained a public float of more than 25% of the Company’s issued shares throughout the financial year ended 31
December 2022 and has continued to maintain the public float as at the date of this annual report.
AUDITOR
The consolidated financial statements for the year have been audited by Deloitte. A resolution will be submitted to the
AGM of the Company to re-appoint Deloitte as auditor of the Company.
On behalf of the Board
AAC Technologies Holdings Inc.
Zhang Hongjiang
Chairman
23 March 2023
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Corporate Governance Report
CORPORATE GOVERNANCE POLICY AND PRACTICES
The Board and the Company consider effective corporate governance not only a safeguard of the interests and confidence
of our stakeholders, but also a key component in the Group’s sustainable long term development and value creation.
Our Board, which is at the centre of our corporate governance structure, has regularly reviewed and refined principles,
policies and practices on the conduct with an aim to support the growth of the Group’s operations. Our sound corporate
governance structure includes a quality Board, high standards of corporate responsibility and sustainability awareness,
a high degree of transparency, accountability and independence, and, an effective design, implementation and
enforcement of the risk management as well as internal control systems. Based on regular reviews of the Company’s actual
performance against the CG Code in Appendix 14 to the Hong Kong Listing Rules, the Board is satisfied that throughout
the financial year ended 31 December 2022, the Company has complied with all the Code Provision(s).
The Board recognizes the need to continuously adapt and improve our corporate governance policies and practices in
light of our experience, increasingly stringent regulatory requirements, international developments and stakeholders
expectations. It is committed to high standards of disclosure as well as to excellence in corporate governance. The
Company’s Corporate Governance framework comprises the following key components:
I. Board and Executive Management
II. Governance Structure and Board Committees
III. Corporate Governance Code
IV. Legal and Regulatory Compliance
V. Joint Company Secretaries
VI. Internal Audit, Risk Management and Internal Control
VII. External Statutory Audit
VIII. Code of Conduct, Whistleblowing Policy and Anti-Fraud and Anti-Bribery Policy
IX. Shareholders Engagement and Value
X. Shareholders’ Rights
Details of the key components related to Corporate Governance framework are also available on the website of the
Company.
BOARD AND EXECUTIVE MANAGEMENT
The overall stewardship of the Company’s operations is vested in the Board. Our Chairman, an INED of the Company,
is to lead the Board to take central responsibilities to formulate, approve, evaluate and regulate the overall purpose,
values, strategic directions and policies of the Company and ensure they are aligned with the Company’s culture. In
doing so, the Board will oversee and review the Company’s business including operating performance, effectiveness of
risk management and internal control systems, corporate governance policies, compliance, organization structure and
management’s performance.
The positions of Chairman and CEO are separate. Our CEO has the overall responsibility for carrying out the strategy
and direction set by the Board and, assisted by the Executive Vice President, for managing the Group’s business. During
the year, management runs the day-to-day operation following the related financial limits for a schedule of matters
designated to management approved by the Board. Management is to submit business plans or investment proposals to
the Board if they fall outside the designated limits. The Board also reviews and approves the annual operating and capital
budgets, and when appropriate, incremental items/amounts outside the approved budgets will be raised to the Board
for approval. Under the supervision of CEO and the Executive Vice President, management is responsible for the daily
operations of the Group. Key updates on business operations, financial results and strategic matters are provided to the
Board on a timely basis.
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Corporate Governance Report
GOVERNANCE STRUCTURE & BOARD COMMITTEES
Composition of Board and Committees as at 23 March 2023 (the date of this report)
Board of Directors
Zhang Hongjiang (INED & Chairman of the Board)
Kwok Lam Kwong Larry (INED)
Peng Zhiyuan (INED)
Wu Ingrid Chun Yuan (NED)
Pan Benjamin Zhengmin (ED & CEO)
Mok Joe Kuen Richard (ED)
Audit and Risk Committee*
(all INEDs)
Nomination Committee*
(all INEDs)
Remuneration Committee*
(all INEDs)
Established in April 2005 Established in April 2005 Established in April 2005
Current Members Current Members Current Members
Kwok Lam Kwong Larry (Chairman) Zhang Hongjiang (Chairman) Peng Zhiyuan (Chairman)
Peng Zhiyuan Kwok Lam Kwong Larry Zhang Hongjiang
Zhang Hongjiang Peng Zhiyuan Kwok Lam Kwong Larry
* There is no fixed term of office of the Committee members. The Board will review the same periodically.
The Board’s Roles and Responsibilities
Our Board plays more than a key role in our Corporate Governance Framework. Under the leadership of our Chairman,
the Board actively promotes the success of the Group by directing and supervising its affairs in a responsible and effective
manner.
Some of the key responsibilities of the Board include:
Strategy & Management
Corporate Governance,
Risk Management & Sustainability
• The Board will formulate, update and refine the
Group’s strategy and business objectives.
• Every quarter, major investing and financing activities
will be approved and management is evaluated on
the implementation progress to monitor the Group’s
businesses against plan and budget.
• Overseeing the Group’s relationships with
stakeholders.
• The Board will approve amendments to policies and
review implementations related to Group’s corporate
governance, internal controls, risk management and
sustainability practices.
Financial Results
Effectiveness of Board
Committees
• The Board will approve the Group’s annual budgets,
interim and annual financial statements and results
announcements, recommend reappointment
of external auditor and declare interim and final
dividends (if any).
• The performances of the Board and the Committees
are evaluated annually.
• All Board Committees are provided with sufficient
resources to discharge their duties, including access
to management or professional advice if considered
necessary.
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Board Committees & Executive Management Structure
In discharging its governance and other responsibilities, the Board has established individual Board Committees with
defined terms of reference to assist the full Board. The three Board Committees, all chaired by INEDs and comprising all
INEDs, are illustrated in the following governance structure:
BOARD OF DIRECTORS
• Collectively responsible for long-term success of the Group and interests of Shareholders
• Oversees overall governance, financial performance and sustainability development of the Group
EXECUTIVE DIRECTORS &
EXECUTIVE VICE PRESIDENT
AUDIT AND
RISK COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
• Delivers the Company’s
strategies and objectives
including assessing and
identifying technology
trends and development,
for the Company
• Day-to-day management
of the Group’s businesses
operation
• Analyses the global
market situation and
sales performance of the
Company’s products
• Provides input and
reviews on production
planning
• Conducts products and
key accounts analysis
• Implements sales &
products strategy for
business units
• Estimates products sales
status and forecast
• Ensures proper financial
reporting and disclosure
• Reviews risk
management,
compliance and internal
control systems
• Ensures prudent and
effective controls are in
place to duly assess and
manage risks
• Reviews the Company’s
policies and practices on
corporate governance
• Reviews on compliance
with legal and regulatory
requirements
• Reviews the Company’s
compliance with the CG
Code and disclosure of
the CG report
• Monitors internal audit,
oversees the relationship
and coordination
between the Company,
head of internal audit and
external auditor
• Recommends Board
appointments and
ensuring proper and
transparent procedures
• Reviews structure,
size, composition and
diversity of the Board
• Assesses independence
of INEDs
• Succession planning for
the chief officers
• Reviews and
monitors training and
continuous professional
development of Directors
• Being consulted upon the
hiring, promotion and
appointment of senior
management
• Sets remuneration
policy and structure
for executive Directors,
non-executive Directors
and senior management
• Plans and reviews
management’s
remuneration proposals
with reference to the
Board’s corporate goals
and objectives
• Determines executive
Directors’ and senior
management’s
remuneration and
incentives
Operations
Internal Audit Team/
External Auditor
Board Composition/Senior Management/
Human Resources
Details of the responsibilities of the Board Committees are set out below. Their terms of reference, including their duties,
have been published on the websites of the Hong Kong Stock Exchange and the Company.
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Corporate Governance Report
Delegation by the Board
In addition to the individual Board Committees, established to assist the full Board in specific areas, the responsibilities for
delivering the Company’s strategies and objectives, and day-to-day management of the Group’s businesses are delegated
to the executive Directors, the Executive Vice President, and the team of senior management.
Board Process
Board meetings are held regularly and at least four times a year at approximately quarterly intervals with active
participation of the Directors, either in person or through electronic communication. Apart from the regular scheduled
Board meetings, other Board meetings will be held in occasions when appropriate, such as publishing announcements
and reviewing significant investment opportunities.
Board and Committees Evaluation
Separate INED meeting
The Chairman of the Board held meetings with INEDs without the presence of other Directors and management during
2022 to evaluate the performance of the executive Directors and the effectiveness of the Board on 23 March 2022 and 24
August 2022.
Evaluation
In addition, we undertake a performance evaluation of our Board and Committees internally on a yearly basis. In March
2022 and March 2023, the Board, Audit and Risk Committee, Nomination Committee and Remuneration Committee
underwent an annual evaluation of their effectiveness and performance with regard to the years 2021 and 2022
respectively, through completion of questionnaires.
Questionnaire — Key Evaluation Areas
• Structure and Composition of the Board and Committees, such as size, selection process
• Responsiveness to special incidents, diversity of Board members
• Board culture and collegiality
• Board information quality: accuracy, relevance, digestibility, timeliness and access to management
• Board process and adequacy of meetings
• Relationship with management (performance measures, visibility, mutual trust)
The results of the evaluation were such that the Board and all Committees were found to be operating effectively,
nothing significant had affected the Board or the Committees performance and no material issue needed to be tabled for
discussion. Reporting of matters by all the Committees to the Board were found to be clear and adequate. The Directors
are satisfied that the Board and its Committees have the right mix of expertise, experience and skills.
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Independency of Directors
Ms. Wu, the non-executive Director, is not considered as independent, as she is the spouse of CEO, Mr. Pan, together with
CEO and their family trusts, has a substantial interest (holding approximately 41.38% interest in the Company as at 31
December 2022). Her knowledge and investment experience in the industry in which the Company operates continue
to contribute valuably to the functioning of the Board as a whole. In common with all Directors, she is aware of her
responsibilities as a Director to all Shareholders.
In the event that the interests of the Shareholders and the Company are not aligned, the Board prioritizes the Company’s
interests over that of any Shareholder. When the Shareholder is materially interested in a matter, the relevant Directors
will, according to the Articles, abstain from voting on such resolutions.
The Board is committed to maintain an independent Board comprising three INEDs, two executive Directors, and a
non-executive Director. We separate the roles of CEO and the Chairman of the Board since the first date of listing.
Currently, CEO is Mr. Pan and the Chairman of the Board is Mr. Zhang. We believe that this Board structure demonstrates
our commitment to good corporate governance and benefits our shareholders by enhancing the oversight of
management by the Board, and encouraging balanced decision making.
An updated list of Directors identifying their roles and functions and whether they are INEDs has been published on
31 August 2022 on the websites of the Hong Kong Stock Exchange and the Company, and under the section headed
“Biographies of Directors and Senior Management” of this annual report on pages 23 to 31. Terms of appointment for all
non-executive Directors (including INEDs) were set out in the Directors’ Report on page 33.
The independence of INEDs is reviewed by the Nomination Committee on an annual basis to ensure independent views
in the Board. The Company has received, from each of the INEDs, an annual written confirmation of his independence
pursuant to Rule 3.13 of the Hong Kong Listing Rules. Based on the assessment conducted by the Nomination Committee,
it is considered that all of the INEDs are independent.
Disclosure of Conflict of Interest
Directors are requested to declare their personal or business interests, if any, in any transactions to be considered by the
Board and such declaration of interest would be reviewed and discussed prior to the Board meetings and, as appropriate,
Directors with conflict of interest will or will be asked to abstain from voting in the meetings.
Identified related party transactions are disclosed in Directors’ Report from pages 37 to 42. Also, as disclosed on page 47,
as at 31 December 2022, Ms. Wu, the non-executive Director holding more than 5% of the Company’s share capital, had
beneficial interests in one of the Group’s five largest customers. The customer has the usual trading terms as any other
customers of the Group. At no time during the year and up to the date of this annual report, had Ms. Wu’s interests in the
customer exceeded 1%. Ms. Wu has never been director of the customer nor involved in its management.
Save as disclosed above, none of the Directors, or their close associates had an interest in any of the five largest customers
or suppliers of the Group.
Board Agenda Schedule
Sufficient notice of not less than 14 calendar days, is given for regular Board meetings to all Directors enabling them to
attend, and reasonable notice will be given in case of other Board meetings. The Directors receive details of agenda items
well in advance of each Board meeting to ensure effective participation. Board minutes are kept by the Joint Company
Secretaries and are sent to the Directors for review before sign-off and for their records. The minutes are also made
available for inspection by all the Directors and the external auditor.
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Board Activities
January - March 2022
• reporting from Audit and Risk Committee and other Committees
• 2021 annual results and report
• evaluation of Board performance for the year 2021
• audit matters for the year 2021
• re-appointment of external auditor for the year 2022
• connected transactions/continuing connected transactions
• directors’ and officers’ liability insurance
• sustainability report for the year 2021
• risk management & internal controls
• corporate governance compliance
• AGM matters of 2022
• Company’s Articles and policies
• Sustainability Working Group Terms of Reference and Climate Change policy
• retirement and re-election of Directors
• business operation and legal updates
April - June 2022
• reporting from Audit and Risk Committee and other Committees
• quarterly results
• risk management & internal controls
• connected transactions/continuing connected transactions
• business operation and legal updates
• Spin-off and separate listing of a subsidiary on the Shanghai Stock Exchange
July - September 2022
• reporting from Audit and Risk Committee and other Committees
• 2022 interim results and report
• interim dividend for the first half of 2022
• audit matters for the first half of 2022
• risk management & internal controls
• connected transactions/continuing connected transactions
• business operation and legal updates
• Company’s policies, reviewing terms of reference of the Audit and Risk Committee
• purchase of outstanding 2024 Notes and 2026 Notes
October - December 2022
• reporting from Audit and Risk Committee and other Committees
• quarterly results
• budget for the forthcoming year
• risk management & internal controls
• connected transactions/continuing connected transactions and renewal of annual cap
for the years 2023-2025
• business operation and legal updates
• repurchase of shares
• Company’s policies, reviewing terms of reference of the Remuneration Committee and
the Nomination Committee
January - March 2023
• reporting from Audit and Risk Committee and other Committees
• 2022 annual results and report
• 2022 final dividend
• evaluation of Board performance for the year 2022
• audit matters for the year 2022
• re-appointment of external auditor for the year 2023
• connected transactions/continuing connected transactions
• directors’ and officers’ liability insurance
• sustainability report for the year 2022
• risk management & internal controls
• corporate governance compliance
• AGM matters of 2023
• retirement and re-election of Directors
• business operation and legal updates
• appointment of joint company secretary
• change to bi-annual financial results reporting
• reviewing terms of reference of the Audit and Risk Committee
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Work done by the Board in 2022 and to date
During the year 2022 and up to the date of this annual report, the Board performed, considered and/or resolved the
following matters:
Policies
• reviewed the Company’s policies including Anti-Fraud and Anti-Bribery Policy,
Whistleblowing Policy, Board Diversity Policy, Nomination Policy, Corporate Disclosure
Policy, Shareholders Communication Policy and Procedures for Shareholders to Nominate
Candidates for Directors
Stakeholders
• reviewed, recommended and declared dividend payments
• reviewed investor relations program and strategies
• reviewed the Sustainability Working Group Terms of Reference and Climate Change policy
• approved and published our annual sustainability reports for the years of 2022 and 2023
Business and
Financial
Operations
• reviewed the strategic plans for the Company’s core businesses to meet short-term objectives
and to strengthen medium-term competitiveness
• ongoing assessment of the Company’s technology capabilities, with a view to enabling the
Company to reach another level of commercial success and sustainability
• reviewed new opportunities in our core business portfolio with management
• reviewed and considered the annual budget, disposals and acquisitions proposals and other
significant operational and financial matters
• reviewed accounting principles and practices and approved the relevant quarterly, interim
and annual results and financial statements and the related announcements
• reviewed monthly operations and financial updates, and, where appropriate, approved the
related announcements (if any)
• submitted resolution at the AGM for re-appointment of external auditor
• considered the proposed spin-off and separate listing of optics business
• considered and approved tender offer
Corporate
Governance
• performed the duties of corporate governance functions under Code Provision A.2.1, which
included in the Board’s terms of reference
• reviewed the segregation of duties between Chairman & CEO
• reviewed and evaluated the ERM system for the Group
• reviewed and evaluated internal audit reports and the effectiveness of the risk management
and internal control systems over financial, operational and compliance matters
Board
Committees
• reviewed terms of reference of the Audit and Risk Committee, Remuneration Committee,
Nomination Committee, Board & Directors’ Duties, and Company’s policies
• reviewed and approved the recommendations made by the Audit and Risk Committee,
Nomination Committee and Remuneration Committee
• considered retirement and re-election of Directors
• renewed the appropriate insurance coverage for Directors and Officers arranged by the
Company
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Directors’ Attendance in Board Meeting, Committee Meetings, AGM & EGM
During the financial year ended 31 December 2022, the Board convened a total of nine Board meetings, one AGM and
one EGM. Each Director is expected to attend each meeting of the Board and the Committees on which he or she serves.
Directors are also expected to attend the Company’s AGM or otherwise absent with a valid reason. All Directors attended
the Company’s 2022 AGM and the EGM in person or by electronic means.
Attendance of the Directors at Board meetings, Committee meetings, AGM and EGM during the year are as follows:
Directors Board
Audit and Risk
Committee
(Note 1)
Nomination
Committee
(Note 2)
Remuneration
Committee AGM
(Note 1)
EGM
(Note 1)
Total Number of Meetings 9 4 2 3 1 1
Executive Directors
Pan Benjamin Zhengmin (CEO) 9 N/A N/A N/A 1 1
Mok Joe Kuen Richard 9 4 2 1 1 1
Non-executive Director
Wu Ingrid Chun Yuan 9 N/A N/A N/A 1 1
Independent Non-executive Directors
Zhang Hongjiang (Chairman of the Board) 8 1
(appointed as
member with
effect from
31 August 2022)
2 3 1 1
Kwok Lam Kwong Larry 9 4 2 N/A 1 1
Peng Zhiyuan 9 4 2 3 1 1
Au Siu Cheung Albert
(resigned with effect from
31 August 2022)
5 3 1 3 1 1
Note 1: Representatives of the independent auditor participated in the Company’s interim and annual Audit and Risk
Committee meetings, AGM and EGM.
Note 2: The Nomination Committee considered and reviewed the independence of INEDs for financial year 2021.
Directors’ Time and Directorship Commitments
All INEDs are engaged by formal letters of appointment with a term of not more than three years, and they commit to the
Company that they will be able to give sufficient time and attention to meeting the high expectations placed upon them.
Directors have disclosed to the Company the number and nature of their offices held in Hong Kong and overseas listed
public companies or organizations and other significant commitments. As at 31 December 2022, none of our INEDs,
individually, held seven or more listed public companies directorship. The maximum listed companies directorship held
by one INED is six (including the Company). Our executive Directors do not hold directorship in other listed companies;
however, they are encouraged to participate in professional, public and community organizations. The Board will regularly
review the contribution required by a Director to perform his/her responsibilities to the Company and whether he/she is
spending sufficient time performing his/her duties.
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The Board was satisfied that the Directors had a strong commitment to the Company and positively contributed to the
Board through their participation in the Company’s affairs and the Board’s discussions and decisions, as reflected in their
high attendance record on the Board and its Committee meetings during the year.
In respect of the Directors who will stand for re-election at the 2023 AGM, their directorship held in listed public companies
in the past three years will be set out in the relevant circular. Directors’ biographies are on pages 23 to 28 of this Annual
Report and on the Company’s website.
Directors’ Continuous Training and Development
In addition to attendance at meetings and review of papers and materials sent by management, including regular legal
and regulatory updates, all Directors recognized the importance of continuous professional development to ensure their
contributions to the Board remains informed and relevant.
As part of the continuous professional development program, the Directors from time to time receive presentations from
senior executives regarding important business matters. Financial plans, including budgets and forecasts, are regularly
discussed at Board meetings.
During the year ended 31 December 2022, the Company provided Directors reading materials, briefings and updates
on business, operation, corporate governance regulatory development and other relevant topics. All Directors had
provided to the Company records of training they received during the year. The Board is of the view that all Directors
have demonstrated sufficient participation in developing and refreshing required knowledge and skills as part of the
continuous professional development programme during the year. The details of all Directors’ participation in continuous
professional development during the financial year ended 31 December 2022 are set out as follows:
Directors
Reading materials
in relation to
legal, regulatory &
industry updates
Briefing and
updates on
business and
operation
Training/
Seminars
Other
professional
developments
Independent Non-executive Directors
Zhang Hongjiang (Chairman of the Board)
✓ ✓
✓
✓
Kwok Lam Kwong Larry
✓ ✓
✓
✓
Peng Zhiyuan
✓ ✓
✓
✓
Non-executive Director
Wu Ingrid Chun Yuan
✓ ✓
✓
✓
Executive Directors
Pan Benjamin Zhengmin (CEO)
✓ ✓
✓
✓
Mok Joe Kuen Richard
✓ ✓
✓
✓
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Audit and Risk Committee
Roles and Authority
The Audit and Risk Committee’s responsibilities include the oversight of the integrity of the Company’s financial
statements and assisting the Board in the evaluation of management in the design, implementation and monitoring
of the Company’s risk management, compliance and internal control systems on an ongoing basis. The Company has a
structured risk management and internal control systems for the management of strategic, market, operational, financial
and compliance risks. Such systems are designed to manage rather than eliminate the risk of failure to achieve business
objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The Audit
and Risk Committee needs to oversee management while ensuring that it does not step into the management’s role. The
Audit and Risk Committee relies on management’s assessment of key risks and mitigating controls at each major operating
unit and on internal audit to provide an objective view on how effectively the risk assessments and controls are operating.
The external auditor also provides the Audit and Risk Committee with assurance regarding the Company’s financial
reporting and any material weaknesses in internal control and risk management that they might come across as part of
their review considered relevant to the audit. The Audit and Risk Committee oversees the relationship and coordination
among the Company, internal auditor and external auditor.
In August 2022, the Board, pursuant to the new requirements of the Hong Kong Listing Rules, reviewed and updated the
terms of reference of the Audit and Risk Committee. The latest terms of reference of the Audit and Risk Committee are
available on the websites of the Hong Kong Stock Exchange and the Company
Regular Review and Connected Transactions
The Audit and Risk Committee is involved in the review of the financial results and the related announcements. It meets at
least twice a year and whenever required, and meets the external auditor in the absence of management at least twice a
year.
By its terms of reference, the Audit and Risk Committee has the power and authority delegated by the Board for reviewing
any connected transactions, continuing connected transactions and conflicts of interest that may arise, and, the related
monitoring compliance with the applicable rules and regulations. The Committee will also ensure strict adherence that
Directors with a conflict of interest shall not vote on any related resolutions. The central role in determining, assessing
and approving transactions with conflicts are undertaken by the Board and, if required, independent board committee
comprising all the INEDs shall be formed.
As such, the Audit and Risk Committee will review and ensure the effectiveness of the internal control systems related to
connected transactions regularly. The identification and monitoring of the connected persons are proactively managed by
senior management of the supporting services, procurement and finance departments. The implementation and renewal
of this system are vouched by internal audit and external auditor. Major terms of the transactions with connected persons
are contracted on a formal basis. The commercially beneficial reasons and the arm’s length pricings are ascertained by
internal audit and subsequently reviewed by the external auditor. The integrity of the existing accounting system will
ensure the accounting accuracy and completeness of such transactions.
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Audit and Risk Committee Activities
January - March 2022
• annual results and report for the year 2021
• evaluation of Audit and Risk Committee performance for the year 2021
• audit review matters from Auditor
• external auditor’s audit plan and scope for the year 2021
• re-appointment of Auditors for the year 2022
• external auditor’s plan and fees for the year 2022
• connected transactions/continuing connected transactions
• internal audit function
• risk management & internal controls
• corporate governance compliance
• sustainability report for the year 2021
• accounting policy and practices as well as any accounting estimation
April - June 2022
• quarterly results
• connected transactions/continuing connected transactions
• internal audit function
• risk management & internal controls
July - September 2022
• 2022 interim results and report
• basis of interim dividend for the first half of 2022
• audit review matters from Auditor
• connected transactions/continuing connected transactions
• internal audit function
• risk management & internal controls
• accounting policy and practices as well as any account estimation
• Committee’s terms of reference and the Company’s policies
October - December 2022
• quarterly results
• connected transactions/continuing connected transactions
• internal audit function
• risk management & internal controls
January - March 2023
• annual results and report for the year 2022
• basis of final dividend for the year 2022
• evaluation of Audit and Risk Committee performance for the year 2022
• audit review matters from Auditor
• external auditor’s audit plan and scope for the year 2022
• re-appointment of Auditors for the year 2023
• external auditor’s plan and fees for the year 2023
• connected transactions/continuing connected transactions
• internal audit function
• risk management & internal controls
• corporate governance compliance
• sustainability report for the year 2021
• accounting policy and practices as well as any accounting estimation
• change to bi-annual financial results reporting
During the financial year ended 31 December 2022, the Audit and Risk Committee held 4 meetings. To reinforce the
Company’s ERM focus, high-risk areas (if any) identified in the external auditor’s planning memorandum were discussed
and special internal audit procedures were agreed where deemed appropriate.
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Review of Financial Results
On 16 March 2023, the Audit and Risk Committee reviewed this annual report, including the Corporate Governance
Report, the Directors’ Report and the Group’s financial statements for the year ended 31 December 2022 and the annual
results announcement with a recommendation to the Board for approval. The Audit and Risk Committee reviewed
changes in accounting policies arising from revised financial reporting standards, the internal audit review for 2022 and
internal audit plan for 2023.
Work done by the Audit and Risk Committee in 2022 and to date
During the year 2022 and up to the date of this annual report, the Audit and Risk Committee, performed, considered and/
or resolved the following matters:
Financial
information
• the 2021 and 2022 annual reports including the Corporate Governance Reports, the Directors
Reports and the Group’s financial statements for the years ended 31 December 2021 and 2022
and the annual results announcements, with recommendations to the Board for approval
• the 2022 first quarterly results including the Group’s first quarterly financial statements for
the three months ended 31 March 2022 and the relevant results announcement, with a
recommendation to the Board for approval
• the 2022 interim report including the Group’s interim financial statements for the six months
ended 30 June 2022 and the interim results announcement, with a recommendation to the
Board for approval
• the 2022 third quarterly results including the Group’s third quarterly financial statements for
the nine months ended 30 September 2022 and the relevant results announcement, with a
recommendation to the Board for approval
• reports on new investments of the Group
• compliance by the Company with the Code Provisions throughout the year ended 31
December 2021 and throughout the six months ended 30 June 2022
• the Company’s compliance with the Hong Kong Listing Rules, the Companies Act of the
Cayman Islands, the CO and the SFO
• overall compliance with Recommended Best Practices of the CG Code and other legal and
regulatory compliance matters
• changing to bi-annual financial results reporting
External Auditor
• the reports and management letters submitted by external auditor, which summarized
matters arising from the audit on the Group for the years ended 31 December 2021 and
2022, including auditing, accounting and tax matters, and internal controls, together with
management’s progress in addressing matters raised, and the confirmation from external
auditor that there were no high-risk matters identified which were not satisfactorily resolved
or being addressed
• the audit fees payable to external auditor for the year ended 31 December 2021 and external
auditor’s scope, plan and fees for the year ended 31 December 2022 with a recommendation
for approval by the Board
• the effectiveness of the external auditor giving due consideration to the quality and contents
of their reports to the Audit and Risk Committee, feedback from management and compliance
with relevant regulatory, professional requirements and their independence, with a
recommendation for their re-appointment for the financial year 2022, subject to final approval
by Shareholders (approved on 12 May 2022)
• the safeguard of external auditor objectivity and independence in proposed engagement in
respect of audit-related and permissible non-audit services; met with the external auditor and
discussed the audit report to management
• recommendation of re-appointment of external auditor for Shareholders’ approval in 2022
and 2023 AGM
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Risk Management
and Internal
Controls
• the adequacy of resources, staff qualifications and experience of the Group’s accounting and
financial reporting function, and that of the Group’s Internal Audit
• the quarterly reports from Internal Audit and alignment with ERM
• the IT and cyber risks referencing COBIT (Control Objectives for Information and Related
Technology)
• the risk management system including the established ERM framework
• the internal controls reviewed by Internal Audit with regard to Connected Transactions and
Continuing Connected Transactions
• the whistleblowing reports and the related follow-up process to ensure all matters of concern
were addressed
• the Committee’s reviewed and updated terms of reference and the Company’s policies
Nomination Committee
Board Diversity
The Company recognizes and embraces the benefits of having a diverse Board to enhance the quality of its performance,
and has adopted a Board Diversity Policy which is available on the Company’s website. A truly diverse Board will include
and make good use of differences in the knowledge, skills, business perspectives, geographic and industry experience,
culture, background, ethnicity, independence, gender and other qualities of Directors. These differences will be taken into
account in determining the optimum composition and complementary of the Board. All Board appointments will be based
on meritocracy while taking into account diversity including gender diversity.
Selection of candidates will be based on a range of diversity perspectives, which would include but not limited to gender,
age, cultural and educational background, ethnicity, professional experience, business perspectives, skills, knowledge and
length of service. The ultimate decision will be based on merit and contribution that the selected candidates will bring to
the Board and the strategic success of the Company.
The Board is comprised of one female Director and five male Directors. The senior management as set forth on pages 29 to
31 of this annual report consists of two females and three males. Our ultimate goal is to achieve gender parity on the Board
and senior management leadership.
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Our Directors are from diverse and complementary backgrounds. Their valuable experience and expertise are critical for
the long-term growth of the Company. The current Board’s composition under diversified perspectives is summarized as
follows:
Name
Pan Benjamin
Zhengmin
Mok Joe Kuen
Richard
Wu Ingrid
Chun Yuan
Zhang
Hongjiang
Kwok Lam
Kwong Larry
Peng
Zhiyuan
Gender Male Male Female Male Male Male
Age 54 59 52 62 67 50
Academic Background Graduated Bachelor of Graduated Ph.D in Master of Laws Master of
from the Economics from Electrical Business and
Jiangsu Changzhou Engineering Bachelor Administration
Province Wujin School of of Economics/
Teacher School Public Health Bachelor of Accounting Bachelor of
Science Engineering
and Finance
Length of service 18 years 17 years 18 years 4 years 5 years 4 years
Skills, knowledge &
professional experience
(a) Accounting & Finance
✓ ✓ ✓ ✓
(b) Corporate Responsibility/
Sustainability
✓ ✓ ✓ ✓
(c) Executive management
and leadership skills
✓ ✓ ✓ ✓ ✓ ✓
(d) Financial Service
✓ ✓
(e) Human Resources
✓ ✓
(f) Information Technology &
Security
✓
(g) Investment Banking
✓ ✓ ✓ ✓ ✓
(h) Investor Relations
✓ ✓ ✓
(i) Legal
✓ ✓
(j) Other listed Board
Experience/Role
✓ ✓ ✓
(k) Risk Management
✓ ✓ ✓
(l) Strategic Planning
✓ ✓ ✓ ✓ ✓
(m) Technologies &
Manufacturing
✓ ✓ ✓ ✓ ✓
The Nomination Committee reviewed the Board’s composition under diversified perspectives and monitored the
implementation of the Board Diversity Policy and considered that the said policy is effective.
Roles and Authority
The Nomination Committee is responsible for reviewing, advising and making recommendations to the Board on matters
in relation to the composition, structure, size and diversity of the Board, the appointment and re-appointment of Directors
and the assessment on independence of INEDs and ensuring the proper and transparent procedures for the appointment
and re-appointment of Directors, succession planning for the chief officers. The Committee is also consulted upon the
hiring, promotion and appointment of senior management.
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Nomination Policy & Practice
The Company has adopted a nomination policy for setting up a formal, considered and transparent procedure to help
identifying and nomination of candidates for Directors. All valid nomination of candidates, accompanied with details of
their biographical backgrounds, would be presented to the Board for consideration as soon as practicable. Consideration
would be given to factors such as the candidate’s integrity, experience and qualifications relevant to the Company’s
business. It is believed that members of the Nomination Committee collectively would have required relevant knowledge
and skills to identify, invite and evaluate qualifications of nominated candidates for directorship.
Process for appointing a Director
Shareholders
• Approve the election or re-election of Directors at the Company’s
general meeting.
Proposed Director
• Appointment is considered as
an individual resolution at the
general meeting.
Board
• Approve the appointment.
• Appointment made through a formal letter.
• On a term of not more than three years.
Newly appointed Directors:
• Subject to re-election by
Shareholders at the first
general meeting following the
appointment.
Existing Directors:
• One-third of existing Directors
are subject to retirement by
rotation every year, and the
retiring Directors are eligible for
re-election.
Nomination Committee
• Considers the candidates based on merit having regard to the
experience, skills and expertise as well as the overall board diversity.
• Makes recommendations to the Board as appropriate.
Interviews with candidates
Identification of candidates
Evaluation of the Board composition and
establishment of desired criteria for prospective directors
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Nomination Committee Activities
January - March 2022
• review of the structure, size and composition of the Board and its committees and Board
Diversity Policy
• evaluation of Nomination Committee performance for the year 2021
• assessment of independence of the INEDs
• review of the time commitment of Directors for performance of their responsibilities
• review of the training and continued professional development of the Directors
• recommendation to the Board on re-election of retiring Directors
• review of succession planning of the Board and the chief officers
• review and endorsement of the chief officers appointed
July - September 2022
• resignation of an INED and change of composition of Board committees
October - December 2022
• Committee’s terms of reference and the Company’s policies
January - March 2023
• review of the structure, size and composition of the Board and its committees and Board
Diversity Policy
• evaluation of Nomination Committee performance for the year 2022
• assessment of independence of the INEDs
• review of the time commitment of Directors for performance of their responsibilities
• review of the training and continued professional development of the Directors
• recommendation to the Board on re-election of retiring Directors
• review of the succession planning of the Board and the chief officers
• review and endorsement of the chief officers appointed
Work done by the Nomination Committee in 2022 and to date
During the year 2022 and up to the date of this annual report, the Nomination Committee convened one meeting and by
written resolutions to perform, consider and/or resolve the following matters:
Directors’
Independency
• reviewed and assessed the regular updates submitted by the Directors on their commitments
to other listed and/or public companies or organizations, their personal and any other
business interests, and, any circumstances that may affect independence status of the INEDs
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Board
Composition
• reviewed the Board composition to ensure that the Company meets the Board Diversity Policy
and requirements under the Hong Kong Listing Rules
• reviewed its terms of reference such that the Directors comprise a wide range of business,
operations, technology, financial and legal experience, and, based on diversity perspectives,
come from different gender, age, cultural and educational background, ethnicity and varied
lengths of service at the Company
Appointment,
retirement and
re-election of
Directors
• reviewed and recommended to the Board the terms of appointment of the non-executive
Directors (including INEDs), which are set out in the “DIRECTORS AND SERVICE CONTRACTS”
section of the “Directors’ Report” on page 33 of this annual report
• reviewed and agreed the annual list of retiring Directors in relation to the requirement set out
in the Articles and in compliance with the Code Provision B.2.2, which all Directors (including
executive Directors, non-executive Director and INEDs) are subject to retirement by rotation at
least once every three years
• reviewed the composition of the Board Committees. The Nomination Committee is of the
view that the balance of the structure, size, composition and diversity of the current Board is
adequate to its effective performance
Directors’ Biographical Information
The Directors’ biographical information is set out in the section headed “Biographies of Directors and Senior Management”
on pages 23 to 31 of this annual report. Except for the family relationship between Mr. Pan and Ms. Wu, as disclosed
in Directors’ biographical information on pages 23, 25 and 29 of this annual report respectively, there is no financial,
business, family or other material relationship between any members of the Board, and, in particular, between the
Chairman and CEO.
Remuneration Committee
Roles and Authority
The principal responsibilities of the Remuneration Committee are to advise the Board in relation to the overall
remuneration policy and structure of the executive Directors and senior management, and to review the fees and
remuneration of the Chairman and other non-executive Directors prior to the AGM. In addition, the Remuneration
Committee considers management recommendation for key terms of new compensation and benefits plans and reviews
management’s remuneration proposals with reference to the Board’s corporate goals and objectives.
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Remuneration Committee Activities
January - March 2022
• review of the policy for the remuneration package of executive Directors, assessing
performance of executive Directors, and making recommendation to the Board
• review of the Group’s 2016 Share Award Scheme and making recommendation to the
Board
• evaluation of Remuneration Committee performance for the year 2021
• review of the existing non-executive Directors’ remuneration
• review of the Group performance for 2021 and Group targets for 2022
• review of senior executive remuneration, including annual incentive payments for 2021
and 2022 and annual pay review for 2022, and making recommendation to the Board
October - December 2022
• Committee’s terms of reference and the Company’s policies
January - March 2023
• review of the policy for the remuneration package of executive Directors, assessing
performance of executive Directors, and making recommendation to the Board
• evaluation of Remuneration Committee performance for the year 2022
• review of the existing non-executive Directors’ remuneration
• review of the Group performance for 2022 and Group targets for 2023
• review of senior executive remuneration, including annual incentive payments for 2022
and 2023 and annual pay review for 2023, and making recommendation to the Board
Work done by the Remuneration Committee in 2022 and to date
During the year 2022 and up to the date of this annual report, the Remuneration Committee convened two meetings and
by written resolutions to perform, consider and/or resolve the following matters:
Terms of
Reference
• reviewed its terms of reference
Remuneration
and Performance
• reviewed the remuneration package of executive Directors, non-executive Directors and
senior executives and their incentive payments and assessed their performance for the years
of 2021 and 2022
• reviewed the Group performance for 2021 and 2022 and Group targets for 2022 and 2023
• reviewed the Group’s 2016 Share Award Scheme and discussed the proposed long-term
incentive programme for employees
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Directors & Senior Management’ Remuneration
The Remuneration Committee has adopted Code Provision E.1.2(c)(ii) to make recommendation to the Board on the
remuneration packages of the individual executive Directors and senior management of the Company.
Particulars regarding Directors’ remuneration and the five highest paid employees as required to be disclosed pursuant to
Appendix 16 to the Hong Kong Listing Rules are set out in note 9 to the financial statements.
Director Compensation Arrangements
Non-employee Directors receive only cash compensation. Directors who are employed by the Company do not receive
any additional compensation for their Board service. INEDs may not receive consulting, advisory, or other compensatory
fees from the Company in addition to their Board compensation.
The compensation amounts of the Directors are reviewed on an annual basis and recommended by the Remuneration
Committee and approved by the Board, having regard to the individuals’ qualifications, experience, responsibilities and
comparable market benchmarks. No Director takes part in any discussion on his/her own remuneration.
The current non-employee Directors’ remuneration was fixed on 1 January 2018 and the following table sets forth, by
responsibilities for their Board service, the annual Directors’ fees paid in cash to non-employee Directors during the
financial year ended 31 December 2022:
Director Compensation Retainers
Annual Director Retainer US$60,000
Chairman of the Board Annual Retainer US$85,000
Audit and Risk Committee Chairman Annual Retainer US$50,000
Audit and Risk Committee Member Annual Retainer US$25,000
Nomination Committee Chairman Annual Retainer US$9,000
Nomination Committee Member Annual Retainer US$4,500
Remuneration Committee Chairman Annual Retainer US$9,000
Remuneration Committee Member Annual Retainer US$4,500
The Company reimburses non-employee Directors for all reasonable out-of-pocket expenses incurred for attending Board
and Committees meetings.
Group Emoluments Arrangement
The emoluments of the Group including senior management team are considered having regard to their qualifications,
experience, responsibilities, comparable market benchmarks, the Company’s operating results and individual
performance. In particular, the emoluments of the senior management team are reviewed and recommended by the
Remuneration Committee and approved by the Board.
The remuneration of members of the senior management by band for the year ended 31 December 2022 is set out below:
Remuneration bands Number of individuals
HK$3,000,001 - HK$4,000,000 1
HK$4,000,001 - HK$5,000,000 1
HK$6,000,001 - HK$7,000,000 1
HK$12,000,001 - HK$13,000,000 1
HK$15,000,001 - HK$15,500,000 1
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Directors’ and Officers’ Insurance
The Directors and officers are indemnified under a directors’ and officers’ liability insurance against any liability incurred
by them in the discharge of their duties while holding offices as the Directors and officers of the Group. The Directors and
officers shall not be indemnified where there is any negligence, fraud, breach of duty or breach of trust proven against
them.
Share Award Scheme
The Company on 23 March 2016 adopted the 2016 Share Award Scheme constituted by a Trust Deed between the
Company and the Trustee, in which employees, including Directors, may be selected by the Board to participate. Pursuant
to the 2016 Share Award Scheme, shares of the Company will be subscribed for at a subscription price as determined by
the Board, or purchased on the Hong Kong Stock Exchange, by the Trustee.
On the grant of the share awards, the relevant number of shares is legally issued or transferred to the Trustee who holds
the shares for the benefit of the selected employees. A grantee shall not have any interest or rights (including the right to
receive dividends) in the shares prior to the vesting of the shares.
Please refer to the section headed “SHARE AWARD SCHEME & SUBSIDIARY SHARE INCENTIVE SCHEME” on pages 43 to 45
of this annual report for details.
CORPORATE GOVERNANCE CODE
The Company has continued to fully comply with requirements of the Code Provisions for the financial year ended 31
December 2022. The Board has ensured that all Board Committees were represented through the Directors in attendance
at the AGM to answer questions that might be raised. To ensure a balanced understanding of the views of Shareholders
is maintained by all INEDs, the Company provides Shareholders’ feedback from the Company’s investor relations reports
from time to time.
The table below illustrates how and in what way the Company has already adopted certain Recommended Best Practices
of the CG Code:
Recommended Best Practices Adopted by the Company
Regular Board Evaluation The Board conducts an annual evaluation of its and the
Committees’ performance.
p.51 has more details.
Quarterly financial results During the year, the Company has adopted quarterly reporting
of financial results. Subsequently on 23 March 2023, the
Company announced it would change to bi-annual financial
results reporting. For more details, please refer to the Company’s
announcement dated 23 March 2023.
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Recommended Best Practices Adopted by the Company
Management’s confirmation on the effectiveness of
risk management and internal control systems
The Board has received confirmation from management on a
semi-annual basis.
p.70 has more details.
A significant proportion of the executive Directors’
remuneration should link rewards to corporate and
individual performance
A significant proportion of an executive Director remuneration
has been correlated to corporate and individual performance
since his appointment.
p.48, 66 and 127 have more details.
No equity-based remuneration (e.g. share options
or grants) with performance-related elements to
independent non-executive directors
No equity-based remuneration with performance-related
elements were granted to INEDs.
Disclosure of important information to
shareholders in the corporate governance report
Details of Shareholders by type and aggregate shareholding are
included in the Corporate Governance Report and important
Shareholders’ dates in the coming financial year are indicated
under “Investors Information” section.
LEGAL AND REGULATORY COMPLIANCE
Compliance
During the year, the Board continued to review the Company’s legal framework on implementing policies and practices
to ensure the operations of the Company are in compliance with existing or any new legal and regulatory requirements of
all applicable jurisdictions, including updates of the Hong Kong Listing Rules and disclosure requirements under the Hong
Kong Securities and Futures Ordinance, the Companies Act of the Cayman Islands as well as the Hong Kong Companies
Ordinance.
The Company seeks to abide strictly by the governing laws and regulations of the jurisdictions where it operates through
its subsidiaries or branches and observes the applicable guidelines and rules issued by regulatory authorities.
Dividend Policy
In deciding whether to declare a dividend and in determining the amount and form of dividend, the Board shall take into
account the following factors:
– Financial performances;
– Working capital;
– Capital expenditure;
– Future investment; and
– Any other factors the Board may deem relevant.
The Company considers sustainable returns to its Shareholders to be its goal, and, endeavors to declare dividends twice in
each financial year, i.e. as interim dividend and final dividend. In addition to the aforesaid factors, the Board shall take into
account the Company’s prospects, historical dividend amounts and dividend yields. Nevertheless, there is no assurance
that dividends will be paid in any particular amount for any given period.
Declaration and payment of dividends are subject to compliance with applicable laws and regulations including the law of
Cayman Islands and the Company’s Articles and, dividends received from its subsidiaries.
The Board will continually review this policy for the long-term interests of the Shareholders from time to time.
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Model Code For Securities Transactions by Directors
The Company has adopted codes of conduct regarding securities transactions by Directors and by relevant employees (as
defined in the CG Code) on terms not less exacting than the required standards set out in the Model Code as mentioned in
Appendix 10 to the Hong Kong Listing Rules.
On specific enquiries made, all the Directors have confirmed that they have complied with the required standards as set
out in the Model Code and the Company’s code of conduct regarding the Directors’ securities transactions during the
year ended 31 December 2022. Furthermore, the Nomination Committee has reviewed and assessed the information
submitted by the Directors and is of the view that the Directors are in compliance with the required standard.
Securities Dealing Restriction to Management and Staff
Our management and staff are subject to the Company’s securities dealing restrictions for those who have access to
potential inside information.
JOINT COMPANY SECRETARIES
All Directors have access to the advice and the professional services of the Joint Company Secretaries, Mr. Ho Siu Tak
Jonathan (“Mr. Ho”) and Ms. Guan Muyi (“Ms. Guan”). Mr. Ho is the legal director of the Group and has been appointed
as Company Secretary with effect from 25 March 2020, and Ms. Guan is the legal and compliance director of the Group
and has been appointed as Joint Company Secretary with effect from 1 January 2023. In addition to company secretarial
matters of the Company, the Joint Company Secretaries are responsible for ensuring that Board procedures are followed
and for facilitating communications among Directors. The Joint Company Secretaries of the Company have both duly
complied with the relevant training requirement under Rule 3.29 of the Hong Kong Listing Rules.
INTERNAL AUDIT, RISK MANAGEMENT AND INTERNAL CONTROL
Effective risk management and internal control systems are fundamental to the achievement of our strategic objectives.
The Company has in place an ERM framework to effectively identify, assess, mitigate and monitor key strategy, market,
financial, operational and compliance risks. The framework enables us to adopt a proactive and structured approach to
identifying and managing risks across the organization with on-going monitoring and review. Our Board, acting through
the Audit and Risk Committee in the first instance, is responsible for overseeing and evaluating management in the design,
implementation and maintaining a sound and effective risk management and internal control systems on an ongoing
basis. The governance framework is illustrated as follows:
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Governance Framework — Internal Control & Risk Management Process
Role
Accountability/
In Charge Responsibilities
“Top-down”
Identification &
management of strategic
and business risks
at corporate level
Board
Risk Management Oversight
• Oversees the Company’s risk management policies and
process.
• Determines the nature and extent of the outstanding and
newly emerging risks.
• Reviews that the Group has maintained effective and
adequate risk management and internal control systems and
ensures that all processes are properly carried out.
Audit and Risk
Committee assisted
by Internal Audit
Regular Risk Review, Communication & Confirmation to the Board
• Conducts quarterly reviews with management the Company’s
major financial and regulatory risk exposures and the
steps management has taken to monitor and control such
exposures.
• Evaluates the management’s effectiveness in the design,
implementation and monitoring of the internal controls and
ERM.
• Reviews the adequacy of resources, staff qualifications and
experience, training programs and budget of the Group’s
accounting, internal audit and financial reporting functions
and ensure these functions were maintained properly.
• Oversees the Company’s risk profile and assesses if key risks
are appropriately mitigated.
• Ensures that an ongoing review of the effectiveness of the
risk management and internal control systems has been
conducted and provides such confirmation to the Board.
“Bottom-up”
Risk assessment,
monitoring and effective
communication through
operation units /
departments
Identification,
management & report of
risks at operation level
Heads of
departments along
with verification by
Internal Audit
Risk & Control Monitoring
• Identifies, assesses and manages the significant operating
risks facing the Company.
• Monitors the risk management and internal control systems
and implementing new controls.
Business /
Operation Units
Operation Risks & Internal Controls Ownership
• Risk identification, assessment and mitigation performed
across organization’s various departments.
• Risk management process and internal controls practised
across organization’s business operations and functional
areas.
Independent party
External
professional firm
• Reports and discusses with the Audit and Risk Committee
any weaknesses in the internal controls of the accounting
and, operating systems revealed by the specified scope of
their work.
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Risk Governance & Oversight
The Company has always valued the importance of the internal control system, and has been referencing certain critical
aspects of organizational governance, business ethics, fraud and financial reporting established by COSO. Internal Audit
has incorporated these critical aspects in its audit planning and objectives when assessing the effectiveness of internal
controls. Also, Internal Audit has already included in its work scope to cover financial reporting objectives and has
increased focus on operations and compliance aspects. IT audit focuses on IT and information security risks in respect of
strategy, operations, compliance, reputation and infrastructure. Report of the evaluation and implementation of such
information security plans, policies and processes are discussed quarterly, and modified as appropriate, by the Audit
and Risk Committee. With reference to COBIT framework, the Company continued to enhance its cyber risk vulnerability
controls management through various policies updates and employees training and again received the certification of
ISO 27001. On the basis of the evaluation carried out by Internal Audit during the year, management has formed the
conclusion that, for the financial year ended 31 December 2022, the Company’s internal controls over the Company’s
financial and non-financial reporting were effective.
It is recognized that the assessment of the internal control systems is an on-going process which will require applications
of underlying principles to the different objective categories in the changing business and operating environments.
In particular, management enhancements are required to address deficiencies in internal controls over operations,
compliance, financial and non-financial reporting. Meanwhile, the internal audit plan will continue to be based on a
risk-based approach aligned with organizational objectives and, to some extent, stakeholder priorities.
Within the Group, there is a clearly-defined management structure with specified authority limits and segregated
responsibilities to achieve business control objectives and safeguard of assets. Guidelines and approval limits for
operating (including research and development) and capital expenditure are set clearly. They include division of
operations and financial personnel to be responsible for the different approval processes. An internal system has been
implemented to enhance the controls and effectiveness embedded in the approval process. A separate finance team is
designated to ensure maintenance of proper and complete accounting records by all the Group companies for producing
reliable financial information for internal management use. Regular review of the financial information involving senior
management and the Board is carried out for verification and monitoring purposes.
The internal audit team also provides independent assurance that the internal control system is effective and efficient.
In order to carry out its function, the internal audit team is given unrestricted access to all the personnel, business files
and accounting records. The head of the team reports directly and regularly to the Audit and Risk Committee on all the
significant audit matters. Adverse implications from such findings on the accuracy and completeness of the financial
report and the effectiveness of the internal control systems are discussed in details by the Audit and Risk Committee and
rectified within a reasonable timeframe.
Key risk factors are set out on pages 20 to 22 of this annual report. The procedures and internal controls for the handling
and dissemination of inside information are set out under the below section headed “Corporate Disclosure and Inside
Information” of this annual report.
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Enterprise Risk Management
Since 2012, the Company has embarked on the journey of building an ERM system with a view to enhancing the risk
management and corporate governance practice and improving the effectiveness and efficiency of internal control
systems across the whole Company. In 2022, the Company has procured and allocated sufficient resources, including
external professional resources, to continue to refine ERM and the risk-driven approach for its internal audit plan. Relevant
departments, assisted by the additional resources, conducted reviews and updates on risk assessment and internal
controls by key management processes. The Board believes that a heightened focus on risk and compliance is beneficial
for the ongoing development and growth of the Company as well as its staff. In establishing the ERM system, all key
functions of the Company undertake the following exercises:
1. ERA — to identify and prioritize the Company’s key business risks; and
2. Process level control assessment — to assess the related internal control matters and risk mitigating measures.
The ERA is designed to be an efficient and comprehensive process which assists management in accomplishing the
following ERA objectives:
• Allows management to identify and prioritize the key risks affecting the achievement of the Company’s business
objectives;
• Assesses how those key risks are currently being managed and identifies areas where potential gaps and
inefficiencies may exist;
• Identifies opportunities for improvement; and
• Allows management to develop a coordinated and systematic approach to embed risk management activities
into the daily operations, including planning, investment and strategic decisions, so as to better balance risk and
enterprise reward.
Effectiveness Review of Risk Management and Internal Control Systems
The review of the effectiveness of the Company’s risk management and internal control systems has been discussed on
pages 69 to 71.
EXTERNAL STATUTORY AUDIT
The Directors acknowledge responsibilities for the preparation of the financial statements for each financial period which
give a true and fair view of the state of affairs of the Group and of the results and cash flows for that period. In preparing
these Financial Statements for the year ended 31 December 2022, the Directors have selected suitable and applied
consistent accounting policies, made reasonable judgments and prudent estimates in preparing the Financial Statements
on a going concern basis. Reporting responsibilities of the external auditor of the Company are set out on pages 83 to 84
of this annual report. Directors acknowledge their responsibilities for the preparation and the true and fair presentation
of the Financial Statements for the year ended 31 December 2022 in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board and the disclosure requirements of the Hong Kong
Companies Ordinance and the Hong Kong Listing Rules. Furthermore, the Directors are aware of the responsibility for
keeping proper accounting records which could provide the financial position of the Company with reasonable accuracy
at all times.
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Auditor’s Remuneration
The Company’s external auditor is Deloitte. Deloitte has confirmed to the Audit and Risk Committee that they are
independent with respect to acting as external auditor to the Company. Deloitte will not be engaged for any non-audit
work unless the non-audit work meets the criteria suggested in the Hong Kong Listing Rules and HKICPA’s Code of Ethics
for Professional Accountants and has been discussed and pre-approved by the Audit and Risk Committee.
On completion of their annual audit, Deloitte will review its audit work process and plan for the next year’s audit. A
proposed audit fee and work plan, incorporating expansion plans, new business operations and organization changes of
the Company, will be submitted to the Audit and Risk Committee. Their proposal will also be reviewed along with internal
management feedback on Deloitte’s audit work and the appointment of auditor will be discussed and recommendation
made to the Board.
During the year ended 31 December 2022, the services provided to the Company by Deloitte, and the respective fees paid
are set out below:
2022
Types of service HK$’000
Annual audit – Group audit 3,044
Annual audit – Overseas 1,491
Interim review 977
Assurance services 570
Total services relating to taxation 16
Total fees 6,098
The representative of Deloitte has attended the AGM and the EGM of the Company in 2022 as usual to answer questions
from Shareholders.
The Company has also adopted a policy of not hiring employees of the external auditor who are or have been involved
in the Company’s audit so as to ensure no impairment of the auditor’s judgment and independence with respect to its
auditing. This policy has been strictly complied with since the auditor’s appointment.
CODE OF CONDUCT, WHISTLEBLOWING POLICY AND ANTI-FRAUD AND ANTI-BRIBERY POLICY
The Company recognizes that employees form an integral part of the risk management and internal control systems
of the corporate structure. On joining the Company, all employees are encouraged to study and keep abreast of the
Company’s expectations regarding their duties and integrity as spelt out in the Staff Compliance Manual and the Code of
Ethics. The manual and the code set out the guiding principles to do what is right, behave with integrity and honesty and
treat other colleagues fairly, respect diversity and observe legal regulations, accept accountability, communicate openly
appropriately and always behave in a manner that is beyond reproach.
To build into a system where there are checks and balances such that no single party could ‘dictate/control’ a transaction,
activity or process to conceal irregularities, the Company recognizes that it is necessary to provide an environment
and a system where employees could feel free to report concerns to management. The Whistleblowing Policy, already
approved by the Board, is a key constituent of our Code of Ethics, where employees are encouraged to raise concerns in
confidence about misconduct, malpractice of matters related to the Company. The various reporting channels are already
clearly stated in the Code of Ethics. “Whistleblowers” are assured of protection against unfair dismissal, victimization or
unwarranted disciplinary action. To facilitate the implementation of the policy, the various reporting channels, the filing
of the reporting documentation and the investigation report are laid out clearly. The Audit and Risk Committee has been
delegated with overall responsibility for implementation, monitoring and periodic review of the policy.
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During the year, the Company received 16 reported cases. No senior management staff were involved in these cases
and these cases were mainly minor one-off incidents involved with employee discipline, workshop and administrative
management, engaging in malpractice/frauds and staff violations. Necessary follow-up actions have been implemented
through relevant departments as well as carry out disciplinary actions, in order to prevent reoccurrence of similar cases.
The Company does not tolerate any form of bribery, whether direct or indirect, by, or of, its Directors, officers, employees,
agents or consultants or any persons or companies acting for it or on its behalf. The Company has a clear Anti-Fraud and
Anti-Bribery policy that supports anti-corruption laws and regulations, and to promote an anti-fraud and anti-bribery
culture within the Company.
SHAREHOLDERS ENGAGEMENT AND VALUE
Shareholders
Almost all the Shareholders are holding the Company’s shares through nominees or intermediaries such as HKSCC
Nominees Limited. Hence, the register of members of the Company only had 127 direct registered Shareholders as at 31
December 2022. Separately, as the Company’s shares are eligible for trading in the Shanghai/Shenzhen-Hong Kong Stock
Connect, an aggregate shareholding was held through China Securities Depository and Clearing Corporation Limited as
one single Shareholder, which as at 31 December 2022, amounted to 71.48 million shares, or representing 5.94% of total
issued shares, of the Company.
The Company analyses its shareholding structure on a regular basis, including a review of the register of institutional
and retail investors, to keep track of changes in shareholdings by type of investors. A shareholding register analysis was
conducted as at 31 December 2022 and revealed the shareholding structure as follows:
I) Shareholders by Category:
(per Shareholder Analysis as at 31 December 2022, rounded to nearest 0.01%)
21.24%
20.86%
41.84%
0.02%
5.94%
10.33%
Interests associated with Mr. Pan and Ms. Wu,
including interest owned by their children
Institutional Investors
Retail Investors
Unidentied
Stock Connect – Shanghai and Shenzhen
Board Director(s), other than Mr. Pan and Ms. Wu
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II) Shareholders by Domicile:
% of Total Issued Shares
Hong Kong 66.33
North America 7.89
China 6.18
United Kingdom 3.73
Europe (ex-United Kingdom) 2.89
Singapore 1.74
Rest of World 11.24
Total 100
Notes:
1. The shareholding in Hong Kong included the interests associated with Mr. Pan, Ms. Wu and their children.
2. 99.99% of all issued shares were held through HKSCC Nominees Limited.
3. The approximate percentage of shareholding is calculated on the basis of 1,203,250,000 shares in issue as
at the financial year ended 31 December 2022.
Corporate Disclosure and Inside Information
The Board recognizes the significance of establishing procedures and internal controls for handling and disseminating
inside information about the Company on a timely, accurate and complete basis. The Board has reviewed and updated our
Corporate Disclosure Policy to ensure that the continuous disclosure standards and procedures are in compliance with the
requirements of the Hong Kong Listing Rules, Securities and Futures Ordinance and applicable laws and regulations of the
Cayman Islands and the Hong Kong Companies Ordinance, including the “Inside Information” legislation. The procedures
and practices are to ensure that “Inside Information” can be escalated up within the organization and appropriate decision
is made to decide if an announcement should be made. In this respect, the policy has defined “Inside Information” and the
principles of disclosure so that the public and the investment community are able to appraise the position of the Company
and its stock market activity where the shares of the Company are traded.
To facilitate the process, a Disclosure Committee has been formed and meets when necessary. Designated spokespersons
are appointed with well-defined responsibilities of communicating and monitoring information disclosure to
Shareholders, the investment community and the media, if appropriate.
Communications with Shareholders and Investment Community
The Company has established a Shareholders Communication Policy which sets out various formal channels
of communication with Shareholders. The implementation and effectiveness of the Company’s Shareholders
Communication Policy has been reviewed during the year and the Shareholders Communication Policy has been updated
and uploaded to the Company’s website on 9 December 2022. The transparent and comprehensive disclosure of the
Company’s performance and activities is to ensure that its Shareholders and the investment community are provided with
good and timely access to balanced, understandable and updated operating information about the Company, such as its
financial performance, strategic goals and plans, material developments, governance and risk profile, in order to enable
Shareholders to exercise their rights in an informed manner, and to allow Shareholders and the investment community to
engage actively with the Company.
A number of formal communication channels are used. These include the annual report, interim report, announcements/
disclosures through the Hong Kong Stock Exchange platforms, circulars and press releases of the Company. The Company
also updates its website, www.aactechnologies.com
, and IR wechat group, regularly to ensure prompt dissemination of
information about its latest development.
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General meetings are another means to enter into a direct dialogue with Shareholders. Board members (including the
Chairman), in particular, the Chairmen or members of all Committees or their delegates, and a representative (usually the
engagement partner) of the external auditor attend to answer Shareholders’ questions.
In addition, the Company strives to uphold a high level of corporate transparency and provides full support to the investor
relations team by involving senior management in ongoing dialogue with Shareholders and the investment community
to keep them abreast of the Company’s latest development strategy, business management, financial information and
business progress.
The Company’s investor relations team is committed to meeting Shareholders’ and investment community’s requests on
communicating business-related information in a timely manner, and to proactively communicate with the investment
community. This is designed to ensure the Company’s strengths and competitive advantages, as well as its ability to
manage changes in the business environment, are fully understood and hence reflected in the Company’s market
valuation. The investor relations team also reports, from time to time, to the Board to keep the Board informed of the
latest perceptions in the market regarding the Company and the issues of concern to Shareholders and the investment
community.
The Company’s investor relations team strictly controls its participation of shareholders’/ investors’ activities, telephone
conferences, and media activities during the “Quiet Periods” in order to avoid potential selective disclosure of Inside
Information or its perception of doing so. The Corporate Disclosure Policy, Shareholders Communication Policy and “Quiet
Periods” policy are all posted on the Company’s website.
During 2022, the Company held a series of activities in relation to its quarterly, interim and annual results announcements,
including panel discussions with Shareholders and the investment community via webcast/teleconferencing and
participation in different conferences, forums and virtual non-deal roadshows in Hong Kong and other parts of the
world organized by different brokers. This helps the Company to meet the goal of establishing sound relationships with
Shareholders and the investment community and maintaining a solid and diverse Shareholder base. Furthermore, there
are regular sessions held with local-based securities brokers, the local and overseas press and media representatives for
timely distribution of information to non-institutional investors.
At the 2022 AGM held on 12 May 2022 and the EGM held on 20 August 2022, a resolution was proposed by the Chairman
in respect of each separate issue itemized on the agendas. Procedures for conducting a poll were explained by the
Chairman at the meeting. The chairman of the Board and members of Board Committees were joined by video conference
or in person, prepared to answer questions, if any, from Shareholders. All resolutions were voted by way of poll. The
Company appointed the branch share registrar of the Company to act as scrutineers and to ensure votes cast were
properly counted and recorded, and announced the results of the poll on the websites of the Hong Kong Stock Exchange
and the Company in accordance with the Hong Kong Listing Rules on the same date.
The Company announced on 23 March 2023 that it will cease to voluntarily announce and publish quarterly unaudited
consolidated financial results of the Company for the first three-month and nine-month periods of each financial year
going forward. It is considered that changing to bi-annual financial results reporting will enable the management to
concentrate more on operations and development of the Company’s principal business, reducing time, efforts, costs
and administrative burden of the Company associated with the publication of quarterly financial results. A bi-annual
financial results reporting would facilitate investors to consider a more appropriate timeline on performance, strategic
deployment and development trend of the Company and that the interests of the shareholders of the Company will not be
compromised.
SHAREHOLDERS’ RIGHTS
The general meetings of the Company provide an opportunity for communication between the Shareholders and
the Board. An AGM of the Company shall be held in each year, and at the place and/or by electronic means as may be
determined by the Board. Each general meeting, other than an AGM, shall be called an EGM. Set out below are procedures
by which Shareholders may (a) convene an EGM; (b) put forward enquiries to the Board; and (c) put forward proposals at
general meetings. The procedures are subject to the Articles and applicable legislation and regulation.
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Corporate Governance Report
Procedures for Shareholders to Convene EGM
Any one or more Shareholders holding at the date of deposit of the requisition not less than one-tenth of the paid-up
capital of the Company carrying the right of voting at general meetings of the Company, shall at all times have the right,
by written requisition to the Board or the Joint Company Secretaries, to require an EGM to be called by the Board for the
transaction of any business specified in such requisition; and such meeting shall be held within two months after the
deposit of such requisition.
The written requisition must state the business to be transacted at the meeting, signed by the requisitioner and deposited
at the Company’s principal place of business in Hong Kong or the Company’s registered office for the attention of
the Board or the Company Secretary, and may consist of several documents in like form, each signed by one or more
requisitioners. The requisition will be verified with the Company’s branch share registrars in Hong Kong and upon their
confirmation that the requisition is proper and in order, the Company Secretary will ask the Board to convene an EGM by
serving sufficient notice in accordance with the requirements under the Articles to all the registered Shareholders. On the
contrary, if the requisition has been verified as invalid, the requisitioners will be advised of this outcome and accordingly,
an EGM will not be convened as requested.
If within twenty-one days from the date of the deposit of the requisition the Board fails to proceed to convene such
meeting, the requisitioner(s), may convene a meeting in the same manner, and all reasonable expenses incurred by the
requisitioner(s) as a result of the failure of the Board shall be reimbursed to the requisitioner(s) by the Company.
The notice period to be given to all the registered Shareholders for consideration of the proposal raised by the
requisitioner(s) concerned at the EGM varies according to the nature of the proposal, as follows:
• Not less than 14 clear days’ notice in writing if the proposal constitutes an ordinary resolution of the Company; and
• Not less than 21 clear days’ notice in writing if the proposal constitutes a special resolution of the Company.
Procedures for Putting Enquiries to the Board
Shareholders may, at any time, direct enquiries to the Board. All enquiries shall be in writing and sent by post to the
principal place of business of the Company in Hong Kong or by email to aac2018@aactechnologies.com
for investor
relations team to follow up.
Procedures for Putting Forward Proposals at General Meetings
To put forward proposals at a general meeting of the Company, a Shareholder should lodge a written request, duly signed
by the Shareholder concerned, setting out the proposals at the Company’s principal place of business in Hong Kong for the
attention of the Board or the Company Secretary. The request will be verified with the Company’s branch share registrars
in Hong Kong and upon their confirmation that the request is proper and in order, the Company Secretary will pass the
request to the Board. Whether a proposal will be put to a general meeting will be decided by the Board in its discretion,
unless the proposal put forward by a Shareholder is (a) pursuant to a requisition by a Shareholder to convene an EGM
referred to above or (b) forms part of ordinary business to be considered at an AGM as described in the Articles.
The procedures for Shareholders to propose a person for election as Director are posted on the Company’s website at
www.aactechnologies.com
.
Constitutional Documents
During the year ended 31 December 2022, in order to comply with the amendments to Chapter 13 and Appendix 3 of the
Hong Kong Listing Rules in relation to the enhanced listing regime for overseas issuers, certain amendments were made to
the Company’s Articles. An up-to-date consolidated version of the Memorandum and Articles is available on the websites
of the Hong Kong Stock Exchange and the Company.
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Sustainability
SUSTAINABILITY GOVERNANCE
The Board is responsible for overseeing ESG risk management and implementing the Group’s sustainability strategy
in order to ensure that the Group could respond effectively to ever-changing market developments and stakeholders’
expectations. The Group’s sustainability strategies are periodically reviewed to ensure they are relevant to identified ESG
risks and opportunities. The Board and the Sustainability Working Group will continue to work closely to ensure that the
Group’s sustainability strategies are implemented on a timely basis. Effective sustainable development requires responsive
and collective sustainability and business strategies that could embrace the evolving nature of sustainability challenges as
well as opportunities.
COLLECTIVE EFFORT AGAINST THE COVID19 PANDEMIC
The COVID-19 pandemic, in its third year, continued to impact the supply chain of our industry. Safety precautions,
practices and procedures implemented previously by the Group, promptly modified and enhanced, had obtained positive
support and results from our employees and local government. The well-being of our employees, who had demonstrated
their work dedication throughout, had been assured and our operations were not disrupted.
Key Highlights of 2022
Generated 20.0 million kWh
of renewable energy
>20%
Safety training hours
213,023
>69%
Greenhouse gas emission
intensity
>30%
Hazardous waste
12,012 tonnes
>40%
Work-related injuries
per 1,000 workers
2.53
>9%
Water consumption intensity
>20%
ENVIRONMENT AND CLIMATE CHANGE
To align with China’s national carbon neutrality goal and to reduce our environmental impacts, we continued to
strengthen our comprehensive action plans as well as our environmental management systems. A high priority has been
placed on expanding our use of renewable energy. Three new large-scale solar photovoltaic power systems were installed
at our Nanning and Changzhou plants. In 2022, over 20 million kWh of renewable energy was generated, representing a
more than 20% increase when compared to 2021.
In early 2022, the Board approved the Climate Change Policy, demonstrating its recognition of the urgency of addressing
climate change and integrating considerations of climate-related issues into the Group’s sustainability strategies. We
adhere to environmental laws and regulations in jurisdictions where the Group operates. All production sites are certified
under ISO 14001: certification for environmental management systems. Qualified independent consultants were engaged
to perform an audit to ensure all compliance issues including internal controls and related procedures are properly
complied with.
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79
Sustainability
STAKEHOLDER ENGAGEMENT
Maintaining regular communications with the Group’s stakeholders and promptly responding to their suggestions,
queries and concerns plays an essential role in the Group’s holistic approach to conducting business.
Employees
The contribution of our employees is integral to the Group’s long-term success. Therefore, we place emphasis on
cultivating a pleasant work environment, nurturing our talents and safeguarding their well-being.
In 2022, we strengthened our focus on talent acquisition by introducing a Workforce Optimisation Programme to
recruit 200 to 300 top talents across production lines and business units to support the development of new products.
Business units and functional departments underwent various process improvements to enhance team performance and
operational efficiency. A new Talent Incentive and Development Framework was implemented to clearly define rewards
and incentives and the Career Development Model was enhanced, aiming at providing clearer career pathways and
opportunities.
The Group is committed to providing its employees with a safe, fair and inclusive working environment that encourages
engagement and inspiration. We spare no efforts to optimise employees’ well-being and satisfaction by engaging
independent external consultant to perform employee satisfaction survey, and, by regularly reviewing the provision of
remuneration and benefits to adopt best employment practices.
Customers
The mission of AAC Technologies is to provide users with a differentiated experience and creating a better sensory
experience for the world. To further deepen customer engagement and gain better understanding of customer
preference, a variety of “pre-sales customer communication” activities were held on a timely basis. In particular, we held
various technical conferences with our customers to facilitate their understanding of our latest technologies and allow
for the exchange of innovative ideas. Customer feedback was collected via multiple channels and studied and taken-on
promptly to enhance customer satisfaction and stickiness. Obtaining valuable customers close cooperation, a number of
breakthrough technologies and products were successfully released in 2022, garnering industry attention.
Suppliers
Engaging with our suppliers is a crucial part of our efforts to minimise any social and environmental impact along the
value chain. A formal Supplier Code of Conduct was established to set out the Group’s expectations. One practice from
the laid out the requirement for all our suppliers to confirm formally on signing a CSR Commitment Letter on compliance
with the Code and the related applicable ethical, social, and environmental requirements and guidelines. Furthermore,
due diligence was conducted to ensure that all minerals procured from suppliers are conflict-free. We are committed
to monitoring the performance of our suppliers on an ongoing basis. There will be continual communication with
underperforming suppliers after the assessment and improvement training plans will be put forward.
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Sustainability
MAJOR ESG ACCOMPLISHMENTS AND ACCOLADES
AAC Technologies’ continuous commitment to enhancing its ESG performance can be shown through recognition from
various international and local institutions. The Group has been selected as a member of the FTSE4Good Index and
was given an “A” MSCI ESG Rating and a “Low ESG Risk” by Sustainalytics. In addition, AAC Technologies received the
Sustainable Corporate (Environmental) – Outstanding Award at the 2022 Standard Chartered Corporate Achievement
Awards, Corporate Governance Award – H-share Companies and Other Mainland Enterprises Category at the HKICPA Best
Corporate Governance and ESG Awards, Certificate of Excellence in Environmental, Social and Governance Reporting at
HKMA Best Annual Reports Awards 2022, and Best GRI Report Commendations at the Hong Kong ESG Reporting Awards
2022.
ESG Ratings
A
MSCI ESG Ratings
3.3
FTSE4Good
Low Risk 17.3
Sustainalytics
Key ESG Awards
Certifi cate
Based on the results of an independent survey,
Forbes recognizes
Methodology
Statista conducte d employee and consumer sur veys as well as extensi ve desk research and evaluate d 750,000
data points to arrive at t he 400 world’s mos t female friendly companies . The surveys covered t he topics of
workplace and public awarene ss of multinational corpor ations in 40 countries.
Additionally, the share of women in hi gh-leadership and super visory positio ns was evaluated.
as one of the
World‘s Top Female Friendly Companies 2022
Douglas A. Lopenzina
Vice President, Forbes Media LLC
Dr. Friedrich Schwandt
CEO, Statista
2022
AAC Technologies Holdings Inc.
Sustainable Corporate
(Environmental) –
Outstanding Award
2022 Standard Chartered
Corporate Achievement
Awards
Corporate Governance
Award – H-share Companies
and Other Mainland
Enterprises Category
HKICPA Best Corporate
Governance and ESG Awards
Certificate of Excellence
in Environmental, Social
and Governance Reporting
2022 HKMA Best Annual
Reports Awards
Commendation Awards
in Best GRI Report
Hong Kong ESG Reporting
Awards 2022
Forbes World’s Top
Female Friendly
Companies 2022
Forbes
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Independent Auditor’s Report
TO THE SHAREHOLDERS OF AAC TECHNOLOGIES HOLDINGS INC.
瑞聲科技控股有限公司
(incorporated in the Cayman Islands with limited liability)
OPINION
We have audited the consolidated financial statements of AAC Technologies Holding Inc. (the “Company”) and its
subsidiaries (collectively referred to as “the Group”) set out on pages 85 to 181, which comprise the consolidated
statement of financial position as at 31 December 2022, and the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the
Group as at 31 December 2022, and of its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with International Financial Reporting Standards (“IFRSs”) and have been properly prepared in
compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the Hong Kong
Institute of Certified Public Accountants (“HKICPA”). Our responsibilities under those standards are further described
in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and
we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
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Independent Auditor’s Report
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter How our audit addressed the key audit matters
Estimated allowance for inventories
We identified the estimated allowance for certain
inventories (the “Relevant Inventories”, which is
excluding those inventories under customers’ orders
that with a short turnover period and supported by the
pre-determined price) as a key audit matter due to the
use of judgement and estimates by the management in
estimating the allowance of inventories.
The management determines the allowance for
inventories with reference to the aging analysis and
the estimated net realisable value for obsolete and/
or slow-moving inventory items identified that are
no longer suitable for use in operation at the end of
each reporting period (refer to notes 4 and 22 to the
consolidated financial statements).
As at 31 December 2022, the carrying amount of
the relevant inventories, net of allowance, was
RMB3,803,447,000. During the year, the Group
recognised and charged an allowance for the Relevant
Inventories of RMB273,910,000 to write down Relevant
Inventories to net realisable value. Details of the Group’s
inventories are set out in note 22 to the consolidated
financial statements.
Our procedures in relation to estimated allowance for the
Relevant Inventories included:
• Obtaining an understanding on management
process and control in identifying obsolete and/
or slow-moving inventories items and how
management estimates the allowance of obsolete
and slow-moving inventory items;
• Obtaining the inventory aging analysis and testing
the accuracy by agreeing its classification by age on a
sample basis, to source documents;
• Evaluating the reasonableness of the allowance of
obsolete and/or slow-moving inventories, where
the estimated net realisable value is lower than the
cost, with reference to historical sales record, ageing
analysis and latest/subsequent selling and purchase
prices of the inventories; and
• Testing subsequent sales/usage of inventories and/or
subsequent purchase of materials on a sample basis.
OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises the information
included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
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RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true
and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for
such internal control as the directors of the Company determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors of the Company either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion
solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
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AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS (continued)
• Conclude on the appropriateness of the directors of the Company’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in the independent auditor’s report is Chung Chin Cheung.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
23 March 2023
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Consolidated Statement of Profit or Loss
For the year ended 31 December 2022
2022 2021
NOTES RMB’000 RMB’000
Revenue 5 20,625,092 17,666,967
Cost of goods sold (16,850,062) (13,302,032)
Gross profit 3,775,030 4,364,935
Other income, gains and losses, and other expenses 7 525,060 345,440
Share of results of an associate 17 (1,170) (926)
Distribution and selling expenses (447,731) (332,505)
Administrative expenses (1,035,565) (823,555)
Research and development costs (1,546,338) (1,726,217)
Exchange (loss) gain (5,523) 1,169
Finance costs 6 (403,084) (415,465)
Profit before taxation 8 860,679 1,412,876
Taxation 10 (231,496) (119,767)
Profit for the year 629,183 1,293,109
Loss for the year attributable to non-controlling interests (192,122) (23,170)
Profit for the year attributable to owners of the Company 821,305 1,316,279
Earnings per share
– Basic 12 RMB0.69 RMB1.09
– Diluted 12 RMB0.66 RMB1.09
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Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 31 December 2022
2022 2021
RMB’000 RMB’000
Profit for the year 629,183 1,293,109
Other comprehensive (expense) income:
Item that will not be subsequently reclassified to profit or loss:
Fair value changes on equity instruments at fair value through
other comprehensive income (“FVTOCI”) (573,169) (19,334)
Items that may be subsequently reclassified to profit or loss:
Fair value changes on derivative financial instruments 3,705 (17,278)
(Gain) loss reclassified to profit or loss on hedged items (21,324) 37,872
Exchange differences arising on translation of foreign
operations (312,930) (60,108)
Total comprehensive (expense) income for the year (274,535) 1,234,261
Total comprehensive (expense) income attributable to:
Owners of the Company (78,332) 1,261,131
Non-controlling interests (196,203) (26,870)
(274,535) 1,234,261
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Consolidated Statement of Financial Position
At 31 December 2022
2022 2021
NOTES RMB’000 RMB’000
Non-current assets
Property, plant and equipment 13 19,301,682 19,987,447
Right-of-use assets 14 1,959,117 2,033,673
Goodwill 15 275,365 220,346
Deposits made for acquisition of property, plant
and equipment 231,906 317,127
Investment properties 16 10,078 11,272
Interest in an associate 17 3,299 4,464
Equity instruments at FVTOCI 18 467,057 847,953
Financial assets at fair value through profit and loss (“FVTPL”) 19 186,303 50,349
Intangible assets 20 563,954 383,758
Deferred tax assets 32 228,401 211,045
23,227,162 24,067,434
Current assets
Inventories 22 4,401,418 5,695,245
Trade and other receivables 23 5,531,160 6,012,727
Escrow deposit for acquisition of a subsidiary 34 – 169,443
Amounts due from related companies 24 8,259 5,601
Taxation recoverable 20,069 18,027
Pledged bank deposits 25 200 2,219
Short term fixed deposits 25 341,265 –
Cash and cash equivalents 25 6,813,725 6,051,372
17,116,096 17,954,634
Current liabilities
Trade and other payables 26 4,958,743 6,147,520
Contract liabilities 26 30,435 22,324
Amounts due to related companies 24 23,182 33,577
Taxation payable 117,762 164,932
Bank loans 28 1,832,603 2,902,389
Government grants 31 138,007 141,266
Lease liabilities 27 292,087 242,035
Derivative financial instruments 21 8,326 13,589
Contingent settlement provision 30 1,653,461 –
9,054,606 9,667,632
Net current assets 8,061,490 8,287,002
Total assets less current liabilities 31,288,652 32,354,436
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Consolidated Statement of Financial Position
At 31 December 2022
2022 2021
NOTES RMB’000 RMB’000
Non-current liabilities
Bank loans 28 1,727,200 330,000
Unsecured notes 29 6,087,845 6,573,182
Contingent settlement provision 30 – 1,738,830
Government grants 31 640,368 700,251
Lease liabilities 27 485,095 452,435
Deferred tax liabilities 32 42,847 40,735
Derivative financial instruments 21 7,706 17,003
Other payables 26 101,976 –
9,093,037 9,852,436
Net assets 22,195,615 22,502,000
Capital and reserves
Share capital 33 97,708 98,135
Reserves 21,558,537 21,712,531
Equity attributable to owners of the Company 21,656,245 21,810,666
Non-controlling interests 539,370 691,334
Total equity 22,195,615 22,502,000
The consolidated financial statements on pages 85 to 181 were approved and authorised for issue by the Board of
Directors on 23 March 2023 and are signed on its behalf by:
PAN BENJAMIN ZHENGMIN MOK JOE KUEN RICHARD
DIRECTOR DIRECTOR
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Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Attributable to owners of the Company
Investment Non- Share-based PRC Non-
Share Treasury Special Capital Translation revaluation distributable payments statutory Hedging Retained controlling
capital shares reserve reserve reserve reserve reserve reserve reserve reserve profits Sub-total interests Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 98,135 – 1,135 23,391 (133,606) 114,932 87,245 – 1,482,261 (8,534) 19,493,782 21,158,741 662,094 21,820,835
Exchange differences arising
from translation of financial
statements of foreign
operations – – – – (56,865) – – – – – – (56,865) (3,243) (60,108)
Fair value changes on equity
instruments at FVTOCI – – – – – (18,877) – – – – – (18,877) (457) (19,334)
Fair value changes on derivative
financial instruments – – – – – – – – – (17,278) – (17,278) – (17,278)
Loss reclassified to profit or loss on
hedged item – – – – – – – – – 37,872 – 37,872 – 37,872
Profit (loss) for the year – – – – – – – – – – 1,316,279 1,316,279 (23,170) 1,293,109
Total comprehensive (expense)
income for the year – – – – (56,865) (18,877) – – – 20,594 1,316,279 1,261,131 (26,870) 1,234,261
Dividend declared – – – – – – – – – – (403,252) (403,252) – (403,252)
Dilution of interests in
subsidiaries* – – – – – – – – – – 5,257 5,257 5,907 11,164
Share-based payment reserves
under the subsidiary share
incentive scheme – – – – – – – – – – – – 50,203 50,203
Purchase of shares under share
award scheme (Note 35) – (211,211) – – – – – – – – – (211,211) – (211,211)
Transfers – – – – – – – – 289,882 – (289,882) – – –
At 31 December 2021 98,135 (211,211) 1,135 23,391 (190,471) 96,055 87,245 – 1,772,143 12,060 20,122,184 21,810,666 691,334 22,502,000
Exchange differences arising
from translation of financial
statements of foreign
operations – – – – (313,190) – – – – – – (313,190) 260 (312,930)
Fair value changes on equity
instruments at FVTOCI – – – – – (568,828) – – – – – (568,828) (4,341) (573,169)
Fair value changes on derivative
financial instruments – – – – – – – – – 3,705 – 3,705 – 3,705
Gain reclassified to profit or loss on
hedged item – – – – – – – – – (21,324) – (21,324) – (21,324)
Profit (loss) for the year – – – – – – – – – – 821,305 821,305 (192,122) 629,183
Total comprehensive (expense)
income for the year – – – – (313,190) (568,828) – – – (17,619) 821,305 (78,332) (196,203) (274,535)
Recognition of equity-settled
share-based payments – – – – – – – 68,651 – – – 68,651 – 68,651
Return of capital contributions
from non-controlling interests
of a subsidiary and settlement of
contingent settlement provision
(Note 30) – – – – – – – – – – 17,789 17,789 – 17,789
Share-based payment reserves
under the subsidiary share
incentive scheme – – – – – – – – – – – – 53,828 53,828
Purchase of shares under share
award scheme (Note 35) – (62,477) – – – – – – – – – (62,477) – (62,477)
Shares repurchased – (100,052) – – – – – – – – – (100,052) – (100,052)
Shares cancelled (427) 65,448 – – – – – – – – (65,021) – – –
Return capital to non-controlling
interests of a subsidiary – – – – – – – – – – – – (9,589) (9,589)
Transfers – – – – – – – – 144,387 – (144,387) – – –
At 31 December 2022 97,708 (308,292) 1,135 23,391 (503,661) (472,773) 87,245 68,651 1,916,530 (5,559) 20,751,870 21,656,245 539,370 22,195,615
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Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
The People’s Republic of China (the “PRC”) statutory reserve are non-distributable and the transfer to these reserves is
determined by the board of directors of subsidiaries established in the PRC in accordance with the Articles of Association
of the subsidiaries. Appropriations to such reserves are made out of net profit after taxation of the statutory financial
statements of the PRC subsidiaries of the Company and the allocation basis are decided by their board of directors
annually. The PRC statutory reserve can be used to make up for previous year’s losses or convert into additional capital of
the PRC subsidiaries of the Company.
The special reserve of the Group represents the difference between the nominal amount of the shares issued by the
Company and the aggregate amount of the paid-in capital of subsidiaries acquired pursuant to the Group’s reorganisation
in preparation for the listing of the Company’s shares.
The capital reserve relates to a deemed capital contribution from a shareholder in prior years.
The non-distributable reserve of the Group arose as a result of capitalisation of retained profits by subsidiaries of the
Company.
* During the year ended 31 December 2021, dilution of interest in a subsidiary arises from issuance new shares by
a subsidiary under the subsidiary share incentive scheme (“Subsidiary Scheme”) which are vested during the year.
Details of relevant transactions are set out in note 35.
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Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
RMB’000 RMB’000
Operating activities
Profit before taxation 860,679 1,412,876
Adjustments for:
Interest income (53,858) (48,611)
Finance costs 403,084 415,465
Depreciation of property, plant and equipment 2,690,348 2,499,122
Depreciation of right-of-use assets 184,036 157,207
Amortisation of intangible assets 111,421 44,638
Depreciation of investment property 1,194 1,194
Loss on disposal/write-off of property, plant and equipment 75,926 45,546
Gain on termination/derecognition of right-of-use assets (3,265) (1,789)
Gain on repurchase of unsecured notes (168,793) –
Fair value (gain) loss on derivative financial instruments (5,308) 5,155
Amortisation of government grants (235,550) (152,601)
Share-based payments expenses 122,479 50,203
Share of results of an associate 1,170 926
(Reversal of) allowance of impairment loss on trade receivables (1,989) 4,078
Net allowance for inventories 273,910 102,791
Operating cash flows before movements in working capital 4,255,484 4,536,200
Decrease (increase) in inventories 1,037,667 (1,727,515)
Decrease (increase) in trade and other receivables 530,315 (795,928)
(Increase) decrease in amounts due from related companies (2,658) 380
(Decrease) increase in trade and other payables (1,143,001) 381,929
Decrease in amounts due to related companies (10,395) (10,016)
Increase in contract liabilities 8,111 7,590
Cash generated from operations 4,675,523 2,392,640
Taxation paid (303,514) (216,633)
Net cash from operating activities 4,372,009 2,176,007
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Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
NOTES RMB’000 RMB’000
Investing activities
Deposits paid for acquisition of property, plant and equipment (1,133,420) (2,166,800)
Acquisition of property, plant and equipment (624,878) (1,175,522)
Placement of short-term fixed deposits (341,265) –
Additions to intangible assets (156,822) (61,835)
Acquisition of equity instruments at FVTOCI (141,952) (532,362)
Acquisition of financial assets at FVTPL (131,490) (47,899)
Net cash outflow on acquisition of a subsidiary 34 (53,377) (152,367)
Payments for right-of-use assets (9,679) (395,767)
Refund of rental deposits 234 422
Payments for rental deposits (568) (510)
Placement of pledged bank deposits (200) (2,419)
Withdrawal of pledged bank deposits 2,219 92,199
Government grants received relating to acquisitions of
non-current assets 172,408 307,144
Interest received 39,943 39,231
Proceeds from derecognition of right-of-use assets 23,762 –
Proceeds from disposal of property, plant and equipment 5,825 25,923
Escrow deposit for acquisition of a subsidiary – (169,443)
Investment in an associate – (5,389)
Net cash used in investing activities (2,349,260) (4,245,394)
Financing activities
Repayments of bank loans (3,021,215) (6,767,261)
Bank loans raised 3,243,214 4,114,198
Payment for repurchase of unsecured notes (949,714) –
Interest paid (302,902) (283,558)
Return of capital contributions from non-controlling interests
of a subsidiary 30 (130,000) –
Shares repurchased (127,925) (211,211)
Repayment of lease liabilities (123,830) (54,461)
Payment to derivative financial instruments (28,019) (45,739)
Return capital to non-controlling interests of a subsidiary (9,589) –
Receipt from derivative financial instruments 15,302 20,680
Net (payments for) proceeds from the subsidiary share
incentive scheme 35 (4,025) 99,715
Dividend paid – (403,252)
Proceeds from issuance of unsecured notes – 4,163,441
Net cash (used in) generated from financing activities (1,438,703) 632,552
Net increase (decrease) in cash and cash equivalents 584,046 (1,436,835)
Cash and cash equivalents at 1 January 6,051,372 7,540,330
Effect of foreign exchange rate changes 178,307 (52,123)
Represented by:
Cash and cash equivalents 6,813,725 6,051,372
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. GENERAL
AAC Technologies Holdings Inc. (“the Company”) was incorporated and registered as an exempted company with
limited liability in the Cayman Islands under the Companies Law of the Cayman Islands with its shares listed on The
Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”). The addresses of the registered office
and principal place of business of the Company are disclosed in the “Corporate Information” section to the annual
report.
The Company acts as an investment holding company. The activities of its principal subsidiaries are set out in note
43.
The consolidated financial statements are presented in Renminbi (“RMB”), which is the same as the functional
currency of the Company.
2. APPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRSs”
Amendments to IFRSs that are mandatorily effective for the current year
In the current year, the Group has applied the following amendments to IFRSs issued by the International
Accounting Standards Board for the first time, which are mandatorily effective for the Group’s annual period
beginning on 1 January 2022 for the preparation of the consolidated financial statements:
Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended Use
Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract
Amendments to IFRSs Annual Improvements to IFRSs 2018 – 2020
Except as described below, the application of the amendments to IFRSs in the current year has had no material
impact on the Group’s financial positions and performance for the current and prior years and/or on the
disclosures set out in these consolidated financial statements.
2.1 Impacts on application of Amendments to IFRS 3 “Reference to the Conceptual Framework”
The Group has applied the amendments to business combinations for which the acquisition date was on
or after 1 January 2022. The amendments update a reference in IFRS 3 “Business Combinations” so that it
refers to the “Conceptual Framework for Financial Reporting” issued by International Accounting Standards
Board in March 2018 (the “Conceptual Framework”) instead of the International Accounting Standards
Committee’s “Framework for the Preparation and Presentation of Financial Statements” (replaced by the
“Conceptual Framework for Financial Reporting” issued in September 2010), add a requirement that, for
transactions and events within the scope of International Accounting Standard 37 (“IAS 37”) “Provisions,
Contingent Liabilities and Contingent Assets” or IFRIC Interpretation 21 (“IFRIC 21”) “Levies”, an acquirer
applies IAS 37 or IFRIC 21 instead of the Conceptual Framework to identify the liabilities it has assumed in a
business combination and add an explicit statement that an acquirer does not recognise contingent assets
acquired in a business combination.
The application of the amendments in the current year has had no impact on the Group’s consolidated
financial statements.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
2. APPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRSs” (continued)
Amendments to IFRSs that are mandatorily effective for the current year (continued)
2.2 Impacts on application of Amendments to IAS 16 “Property, Plant and Equipment – Proceeds before
Intended Use”
The Group has applied the amendments for the first time in the current year. The amendments specify that
the costs of any item that were produced while bringing an item of property, plant and equipment to the
location and condition necessary for it to be capable of operating in the manner intended by management
(such as samples produced when testing whether the relevant property, plant and equipment is
functioning properly) and the proceeds from selling such items should be recognised and measured in the
profit or loss in accordance with applicable standards. The cost of the items are measured in accordance
with IAS 2 “Inventories”.
In accordance with the transitional provisions, the Group has applied the new accounting policy
retrospectively to property, plant and equipment made available for use on or after the beginning of 1
January 2021. The application of the amendments in the current year has had no impact on the Group’s
financial positions and performance.
2.3 Impacts on application of Amendments to IFRSs “Annual Improvements to IFRSs 2018 – 2020”
The Group has applied the amendments for the first time in the current year. The annual improvements
make amendments to the following standard that is relevant to the Group:
IFRS 9 “Financial Instruments”
The amendment clarifies that for the purpose of assessing whether modification of terms of original
financial liability constitutes substantial modification under the “10 per cent” test, a borrower includes only
fees paid or received between the borrower and the lender, including fees paid or received by either the
borrower or the lender on the other’s behalf.
In accordance with the transitional provisions, the Group applies the amendment to financial liabilities that
are modified or exchanged as at the date of initial application, 1 January 2022.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
2. APPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRSs” (continued)
New and amendments to IFRSs in issue but not yet effective
The Group has not early applied the following new and amendments to IFRSs that have been issued but are not yet
effective:
IFRS 17 (including the June 2020 and December
2021 Amendments to IFRS 17)
Insurance Contracts
1
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
2
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
3
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
3
Amendments to IAS 1 Non-current Liabilities with Covenants
3
Amendments to IAS 1 and IFRS Practice
Statement 2
Disclosure of Accounting Policies
1
Amendments to IAS 8 Definition of Accounting Estimates
1
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
1
1
Effective for annual periods beginning on or after 1 January 2023.
2
Effective for annual periods beginning on or after a date to be determined.
3
Effective for annual periods beginning on or 1 January 2024.
Except for the amendments to IFRSs mentioned below, the Directors of the Company anticipate that the
application of all other new and amendments to IFRSs will have no material impact on the consolidated financial
statements in the foreseeable future.
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”(the “2020 Amendments”) and
Amendments to IAS 1 Non-current Liabilities with covenants (the “2022 Amendments”)
The 2020 Amendments provide clarification and additional guidance on the assessment of right to defer
settlement for at least twelve months from reporting date for classification of liabilities as current or non-current,
which:
• clarify that if a liability has terms that could, at the option of the counterparty, result in its settlement by
the transfer of the entity’s own equity instruments, these terms do not affect its classification as current
or non-current only if the entity recognises the option separately as an equity instrument applying IAS 32
“Financial Instruments: Presentation”.
• specify that the classification of liabilities as current or non-current should be based on rights that are in
existence at the end of the reporting period. Specifically, the amendments clarify that the classification
should not be affected by management intentions or expectations to settle the liability within 12 months.
For rights to defer settlement for at least twelve months from reporting date which are conditional on the
compliance with covenants, the requirements introduced by the 2020 Amendments have been modified by the
2022 Amendments. The 2022 Amendments specify that only covenants with which an entity is required to comply
with on or before the end of the reporting period affect the entity’s right to defer settlement of a liability for at
least twelve months after the reporting date. Covenants which are required to comply with only after the reporting
period do not affect whether that right exists at the end of the reporting period.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
2. APPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRSs” (continued)
New and amendments to IFRSs in issue but not yet effective (continued)
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”(the “2020 Amendments”) and
Amendments to IAS 1 Non-current Liabilities with covenants (the “2022 Amendments”) (continued)
In addition, the 2022 Amendments specify the disclosure requirements about information that enables users of
financial statements to understand the risk that the liabilities could become repayable within twelve months after
the reporting period, if the entity classify liabilities arising from loan arrangements as non-current when the entity’s
right to defer settlement of those liabilities is subject to the entity complying with covenants within twelve months
after the reporting period.
The 2022 Amendments also defer the effective date of applying the 2020 Amendments to annual reporting
periods beginning on or after 1 January 2024. The 2022 Amendments, together with the 2020 Amendments, are
effective for annual reporting periods beginning on or after 1 January 2024, with early application permitted. If
an entity applies the 2020 Amendments for an earlier period after the issue of the 2022 Amendments, the entity
should also apply the 2022 Amendments for that period.
Based on the Group’s outstanding liabilities as at 31 December 2022, the application of the 2020 Amendments and
the 2022 Amendments will not result in reclassification of the Group’s liabilities.
Amendments to IAS 1” Presentation of Financial Statements” and IFRS Practice Statement 2” Disclosure of
Accounting Policies”
IAS 1 is amended to replace all instances of the term “significant accounting policies” with “material accounting
policy information”. Accounting policy information is material if, when considered together with other information
included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary
users of general purpose financial statements make on the basis of those financial statements.
The amendments also clarify that accounting policy information may be material because of the nature of the
related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting
policy information relating to material transactions, other events or conditions is itself material. If an entity chooses
to disclose immaterial accounting policy information, such information must not obscure material accounting
policy information.
IFRS Practice Statement 2 “Making Materiality Judgements” (the “Practice Statement”) is also amended to illustrate
how an entity applies the “four-step materiality process” to accounting policy disclosures and to judge whether
information about an accounting policy is material to its financial statements. Guidance and examples are added to
the Practice Statement.
The application of the amendments is not expected to have significant impact on the financial position or
performance of the Group but may affect the disclosures of the Group’s significant accounting policies. The
impacts of application, if any, will be disclosed in the Group’s future consolidated financial statements.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
2. APPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRSs” (continued)
New and amendments to IFRSs in issue but not yet effective (continued)
Amendments to IAS 8 “Definition of Accounting Estimates”
The amendments define accounting estimates as “monetary amounts in financial statements that are subject to
measurement uncertainty”. An accounting policy may require items in financial statements to be measured in a
way that involves measurement uncertainty – that is, the accounting policy may require such items to be measured
at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, an entity
develops an accounting estimate to achieve the objective set out by the accounting policy. Developing accounting
estimates involves the use of judgements or assumptions based on the latest available, reliable information.
In addition, the concept of changes in accounting estimates in IAS 8 “Accounting Policies, Changes in Accounting
Estimates and Errors” is retained with additional clarifications.
The application of the amendments is not expected to have significant impact on the financial position or
performance of the Group but may affect the disclosures of the Group’s significant accounting policies. The
impacts of application, if any, will be disclosed in the Group’s future consolidated financial statements.
Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”
The amendments narrow the scope of the recognition exemption of deferred tax liabilities and deferred tax
assets in paragraphs 15 and 24 of IAS 12 “Income Taxes” so that it no longer applies to transactions that, on initial
recognition, give rise to equal taxable and deductible temporary differences.
As disclosed in note 3 to the consolidated financial statements, for leasing transactions in which the tax deductions
are attributable to the lease liabilities, the Group applies IAS 12 requirements to the relevant assets and liabilities as
a whole. Temporary differences relating to relevant assets and liabilities are assessed on a net basis.
The amendments are effective for the Group’s annual reporting periods beginning on or after 1 January 2023,
with early application permitted. As at 31 December 2022, the carrying amounts of right-of-use assets and lease
liabilities which are subject to the amendments amounted to RMB539,632,000 and RMB645,910,000 respectively.
Upon the application of the amendments, the Group will recognise a deferred tax asset (to the extent that it is
probable that taxable profit will be available against which the deductible temporary difference can be utilised)
and a deferred tax liability for all deductible and taxable temporary differences associated with the right-of-use
assets and the lease liabilities. The Group is still in the process of assessing the full impact of the application of the
amendments.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of preparation of consolidated financial statements
The consolidated financial statements have been prepared in accordance with IFRSs issued by the
International Accounting Standards Board. For the purpose of preparation of the consolidated financial
statements, information is considered material if such information is reasonably expected to influence
decisions made by primary users. In addition, the consolidated financial statements include applicable
disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange (“Listing Rules”)
and by the Hong Kong Companies Ordinance (“CO”).
The consolidated financial statements have been prepared under the historical cost basis, except for
certain financial instruments that are measured at fair values at the end of each reporting period, as
explained in the accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable or estimated using another valuation technique. In estimating the fair value of an asset
or a liability, the Group takes into account the characteristics of the asset or liability if market participants
would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is
determined on such a basis, except for share-based payment transactions that are within the scope of IFRS
2 “Share-based Payment”, leasing transactions that are accounted for in accordance with IFRS 16 “Leases”
(“IFRS 16”), and measurements that have some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 “Inventories” or value in use in IAS 36 “Impairment of Assets”.
For financial instruments which are transacted at fair value and a valuation technique that unobservable
inputs is to be used to measure fair value in subsequent periods, the valuation technique is calibrated so
that at initial recognition the results of the valuation technique equals the transaction price.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired
or disposed of during the year are included in the consolidated statement of profit or loss and other
comprehensive income from the date the Group gains control until the date when the Group ceases to
control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company
and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the
owners of the Company and to the non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which
represent present ownership interests entitling their holders to a proportionate share of net assets of the
relevant subsidiaries upon liquidation.
Changes in the Group’s interests in existing subsidiaries
Changes in the Group’s interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant
component of equity and the non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries.
Any difference between the amount by which the non-controlling interests are adjusted, and the fair value
of the consideration paid or received is recognised directly in equity (retained profits) and attributed to
owners of the Company.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Business combinations
A business is an integrated set of activities and assets which includes an input and a substantive
process that together significantly contribute to the ability to create outputs. The acquired processes
are considered substantive if they are critical to the ability to continue producing outputs, including an
organised workforce with the necessary skills, knowledge, or experience to perform the related processes
or they significantly contribute to the ability to continue producing outputs and are considered unique or
scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing
outputs.
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred
in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date
fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners
of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are generally recognised in profit or loss as incurred.
For business combinations in which the acquisition date is on or after 1 January 2022, the identifiable
assets acquired and liabilities assumed must meet the definitions of an asset and a liability in the
Conceptual Framework except for transactions and events within the scope of IAS 37 or IFRIC 21, in which
the Group applies IAS 37 or IFRIC 21 instead of the Conceptual Framework to identify the liabilities it has
assumed in a business combination. Contingent assets are not recognised.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their
fair value, except that deferred tax assets or liabilities, and assets or liabilities related to employee benefit
arrangements are recognised and measured in accordance with IAS 12 and IAS 19 “Employee Benefits”
respectively and lease liabilities are recognised and measured at the present value of the remaining lease
payments (as defined in IFRS 16) as if the acquired leases were new leases at the acquisition date, except for
leases for which (a) the lease term ends within 12 months of the acquisition date; or (b) the underlying asset
is of low value. Right-of-use assets are recognised and measured at the same amount as the relevant lease
liabilities, adjusted to reflect favourable or unfavourable terms of the lease when compared with market
terms.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest
in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in
the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate
share of the relevant subsidiary’s net assets in the event of liquidation are initially measured either at fair
value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s
identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Business combinations (continued)
When the consideration transferred by the Group in a business combination includes a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in the fair value of the
contingent consideration that qualify as measurement period adjustments are adjusted retrospectively.
Measurement period adjustments are adjustments that arise from additional information obtained during
the “measurement period” (which cannot exceed one year from the acquisition date) about facts and
circumstances that existed at the acquisition date.
The subsequent accounting for the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement
is accounted for within equity. Contingent consideration that is classified as an asset or a liability is
remeasured to fair value at subsequent reporting dates, with the corresponding gain or loss being
recognised in profit or loss.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of
business (see the accounting policy above) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s relevant
cash-generating units (“CGUs”) (or groups of CGUs) that is expected to benefit from the synergies of
the combination, which represent the lowest level at which the goodwill is monitored for internal
management purposes and not larger than an operating segment.
A CGU (or group of CGUs) to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is indication that the unit may be impaired. For goodwill arising on an acquisition
in a reporting period, the CGU (or group of CGUs) to which goodwill has been allocated is tested for
impairment before the end of that reporting period. If the recoverable amount is less than the carrying
amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to
the other assets on a pro-rata basis based on the carrying amount of each asset in the unit (or group of
CGUs).
On disposal of the relevant CGU or any of the CGU within the group of CGUs, the attributable amount of
goodwill is included in the determination of the amount of profit or loss on disposal. When the Group
disposes of an operation within the CGU (or a CGU within a group of CGUs), the amount of goodwill
disposed of is measured on the basis of the relative values of the operation (or the CGU) disposed of and
the portion of the CGU (or the group of CGUs) retained.
Investments in an associate
An associate is an entity over which the Group has significant influence. Significant influence is the power
to participate in the financial and operating policy decisions of the investee but is not control over those
policies.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Investments in an associate (continued)
The results and assets and liabilities of associates is incorporated in these consolidated financial statements
using the equity method of accounting. Under the equity method, an investment in an associate is initially
recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise
the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s
share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term
interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the
Group discontinues recognising its share of further losses. Additional losses are recognised only to the
extent that the Group has incurred legal or constructive obligations or made payments on behalf of the
associate.
An investment in an associate is accounted for using the equity method from the date on which the
investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of
the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the
investee is recognised as goodwill, which is included within the carrying amount of the investment. Any
excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of
the investment, after reassessment, is recognised immediately in profit or loss in the period in which the
investment is acquired.
The Group assesses whether there is an objective evidence that the interest in an associate may be
impaired. When any objective evidence exists, the entire carrying amount of the investment (including
goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable
amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any
impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying
amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to
the extent that the recoverable amount of the investment subsequently increases.
When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of
the entire interest in the investee with a resulting gain or loss being recognised in profit or loss. When the
Group retains an interest in the former associate or joint venture and the retained interest is a financial
asset within the scope of IFRS 9 “Financial Instruments”, the Group measures the retained interest at
fair value at that date and the fair value is regarded as its fair value on initial recognition. The difference
between the carrying amount of the associate and the fair value of any retained interest and any proceeds
from disposing of the relevant interest in the associate is included in the determination of the gain or loss
on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other
comprehensive income in relation to that associate on the same basis as would be required if that associate
had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised
in other comprehensive income by that associate would be reclassified to profit or loss on the disposal
of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a
reclassification adjustment) upon disposal/partial disposal of the relevant associate.
When a group entity transacts with an associate of the Group, profits and losses resulting from the
transactions with the associate are recognised in the consolidated financial statements only to the extent
of interests in the associate that are not related to the Group.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Revenue from contracts with customers
The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the
goods or services underlying the particular performance obligation is transferred to the customer.
A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or
a series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress towards
complete satisfaction of the relevant performance obligation if one of the following criteria is met:
• the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs;
• the Group’s performance creates and enhances an asset that the customer controls as the Group
performs; or
• the Group’s performance does not create an asset with an alternative use to the Group and the
Group has an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good
or service.
The revenue of the Group arising from sales of acoustics product (previously termed as dynamic
components, which includes acoustic modules and acoustic unit), electromagnetic drives and precision
mechanics, optics products, sensor and semiconductor products and other products is recognised at a
point in time. Under the transfer-of-control approach in IFRS 15 “Revenue from Contracts with Customers”,
revenue from these sales is recognised when customer acceptance has been obtained, which is the point
of time when the customer has the ability to direct the use of these products and obtain substantially all of
the remaining benefits of these products.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for which
the Group has received consideration (or an amount of consideration is due) from the customer.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with
the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate. Specifically,
government grants whose primary condition is that the Group should purchase, construct or otherwise acquire
non-current assets are recognised as deferred income in the consolidated statement of financial position and
transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants related to income that are receivable as compensation for expenses or losses already
incurred or for the purpose of giving immediate financial support to the Group with no future related costs
are recognised in profit or loss in the period in which they become receivable. Such grants are presented
under “other income, gains and losses, and other expenses”.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other
than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges
prevailing on the dates of the transactions. At the end of the reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing
on the date when the fair value was determined. When a fair value gain or loss on a non-monetary item
is recognised in profit or loss, any exchange component of that gain or loss is also recognised in profit
or loss. When a fair value gain or loss on a non-monetary item is recognised in other comprehensive
income, any exchange component of that gain or loss is also recognised in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items are recognised in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s
foreign operations are translated into presentation currency of the Group (i.e. Renminbi) using exchange rate
prevailing at the end of the reporting period, and their income and expenses are translated at the average
exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case,
the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in equity (the translation reserve).
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or
a disposal involving loss of control over a subsidiary that includes a foreign operation), all of the exchange
differences accumulated in equity in respect of that operation attributable to the owners of the Company
are reclassified to profit or loss.
In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control
over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to
non-controlling interests and are not recognised in profit or loss.
Employee benefits
Retirement benefit costs
Payments to the defined contribution retirement plan, including state-managed retirement benefit
schemes, the Mandatory Provident Fund Scheme and central provident fund schemes, are recognised as an
expense when employees have rendered service entitling them to the contributions.
Short-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be
paid as and when employees rendered the services. All short-term employee benefits are recognised as an
expense unless another IFRS requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and
sick leave) after deducting any amount already paid.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Share-based payments
Equity-settled share-based payment transactions
Equity-settled share-based payments to employees and others providing similar services are measured at
the fair value of the equity instruments at the grant date.
The fair value of the equity-settled share-based payments determined at the grant date without taking
into consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding
increase in equity (share-based payments reserve). At the end of each reporting period, the Group revises
its estimate of the number of equity instruments expected to vest based on assessment of all relevant
non-market vesting conditions. The impact of the revision of the original estimates, if any, is recognised
in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to the share-based payments reserve. For shares that vest immediately at the date of grant, the
fair value of the shares granted is expensed immediately to profit or loss.
When shares granted are vested, the amount previously recognised in share-based payments reserve will
be transferred to share capital/share premium.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or sale,
are added to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale.
Any specific borrowing that remain outstanding after the related asset is ready for its intended use or sale
is included in the general borrowing pool for calculation of capitalisation rate on general borrowings.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before
taxation as reported in the consolidated statement of profit or loss and other comprehensive income
because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the end of the reporting period.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Taxation (continued)
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax base used in the computation of taxable
profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax
assets are generally recognised for all deductible temporary differences to the extent that it is probable
that taxable profits will be available against which deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if
the temporary differences arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiaries and an associate, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments are
only recognised to the extent that it is probable that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the
right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions
are attributable to the right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group
applies IAS 12 requirements to the leasing transaction as a whole. Temporary differences relating to
right-of-use assets and lease liabilities are assessed on a net basis. Excess of depreciation on right-of-use
assets over the lease payments for the principal portion of lease liabilities results in net deductible
temporary differences.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity
by the same taxation authority.
Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax is also
recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred
tax arises from the initial accounting for a business combination, the tax effect is included in the accounting
for the business combination.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Taxation (continued)
In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that
the relevant tax authority will accept the uncertain tax treatment used, or proposed to be use by individual
group entities in their income tax filings. If it is probable, the current and deferred taxes are determined
consistently with the tax treatment in the income tax filings. If it is not probable that the relevant taxation
authority will accept an uncertain tax treatment, the effect of each uncertainty is reflected by using either
the most likely amount or the expected value.
Leases
Definition of a lease
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
For contracts entered into or modified on or after the date of initial application IFRS 16 or arising from
business combinations, the Group assesses whether a contract is or contains a lease based on the definition
under IFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not be
reassessed unless the terms and conditions of the contract are subsequently changed.
The Group as a lessee
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to leases of leasehold land and buildings
that have a lease term of 12 months or less from the commencement date and do not contain a purchase
option. It also applies the recognition exemption for lease of low-value assets. Lease payments on
short-term leases and leases of low-value assets are recognised as expense on a straight-line basis or
another systematic basis over the lease term.
Right-of-use assets
The cost of right-of-use assets includes:
• the amount of the initial measurement of the lease liability;
• any lease payments made at or before the commencement date, less any lease incentives received;
• any initial direct costs incurred by the Group; and
• an estimate of costs to be incurred by the Group in dismantling and removing the underlying
assets, restoring the site on which it is located or restoring the underlying asset to the condition
required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased
assets at the end of the lease term are depreciated from commencement date to the end of the useful
life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated
useful life and the lease term.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Leases (continued)
The Group as a lessee (continued)
Right-of-use assets (continued)
When the Group obtains ownership of the underlying leased assets at the end of the lease term, upon
exercising purchase options, the carrying amount of the relevant right-of-use assets are transferred to
property, plant and equipment.
The Group presents right-of-use assets as a separate line item on the consolidated statement of financial
position.
Refundable rental deposits
Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments and included in
the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, the Group recognises and measures the lease liability at the present
value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the
Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in
the lease is not readily determinable.
The lease payments include fixed payments (including in-substance fixed payments).
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.
Lease modifications
The Group accounts for a lease modification as a separate lease if:
• the modification increases the scope of the lease by adding the right to use one or more underlying
assets; and
• the consideration for the leases increases by an amount commensurate with the stand-alone price
for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the
circumstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease
liability based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the
relevant right-of-use asset.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Leases (continued)
The Group as a lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of
the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to
the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of
the relevant lease.
Refundable rental deposits
Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments and included in
the cost of right-of-use assets.
Lease modification
Changes in considerations of lease contracts that were not part of the original terms and conditions are
accounted for as lease modifications, including lease incentives provided through forgiveness or reduction
of rentals.
The Group accounts for a modification to an operating lease as a new lease from the effective date of the
modification, considering any prepaid or accrued lease payments relating to the original lease as part of the
lease payments for the new lease.
Property, plant and equipment
Property, plant and equipment, other than freehold land and construction in progress, are tangible assets
that are held for use in the production or supply of goods or services, or for administrative purposes.
Property, plant and equipment are stated in the consolidated statement of financial position at cost less
subsequent accumulated depreciation and any accumulated impairment losses, if any.
Freehold land is not depreciated and is measured at cost, less any recognised impairment loss.
Property, plant and equipment in the course of construction for production, supply or administrative
purposes are carried at cost, less any recognised impairment loss. Costs include any costs directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operating in
the manner intended by management, including costs of testing whether the related assets is functioning
properly and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting
policy. Sale proceeds of items that are produced while bringing an item of property, plant and equipment
to the location and condition necessary for it to be capable of operating in the manner intended by
management (such as samples produced when testing whether the asset is functioning properly), and
the related costs of producing those items are recognised in the profit or loss. The cost of those items are
measured in accordance with the measurement requirements of IAS 2. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their intended use.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Property, plant and equipment (continued)
When the Group makes payments for a property interest which includes both leasehold land and building
elements, the entire consideration is allocated between the leasehold land and the building elements
in proportion to the relative fair values at initial recognition. To the extent the allocation of the lease
payments can be made reliably, interest in leasehold land that is presented for as “right-of-use assets” in
the consolidated statement of financial position and is amortised over the lease term on a straight line
basis. When the consideration cannot be allocated reliably between non-lease building elements and
undivided interest in the underlying leasehold land, the entire properties are classified as property, plant
and equipment.
Depreciation is recognised so as to write off the cost of assets other than freehold land and construction
in progress less their residual values over their estimated useful lives, using the straight-line method. The
estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the assets and is recognised in profit or loss.
Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation.
Investment properties are measured initially at cost, including any directly attributable expenditure.
Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated
depreciation and any accumulated impairment losses. Depreciation is recognised so as to write off the cost
of investment properties and land over their estimated useful lives of 20 years and 50 years respectively
and after taking into account of their estimated residual value, using the straight-line method.
An investment property is derecognised upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss
arising on derecognition of the property, which is calculated as the difference between the net disposal
proceeds and the carrying amount of the asset, is included in profit or loss in the period in which the
property is derecognised.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated
amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful
lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and
amortisation method are reviewed at the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less any subsequent accumulated impairment losses.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Intangible assets (continued)
Internally generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognised if, and only if, all of the following have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
The amount initially recognised for an internally-generated intangible asset is the sum of the expenditure
incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no
internally-generated intangible asset can be recognised, development expenditure is charged to profit or
loss in the period in which it is incurred.
Subsequent to initial recognition, an internally-generated intangible asset is measured at cost less
accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible
assets acquired separately.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill and are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful
lives are reported at costs less accumulated amortisation and any accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected
from use or disposal. Gains and losses arising from derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit
or loss when the asset is derecognised.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Impairment on property, plant and equipment, right-of-use assets and intangible assets (other than
goodwill)
At the end of the reporting period the Group reviews the carrying amounts of property, plant and
equipment, right-of-use assets and intangible assets with finite useful lives to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
The recoverable amount of property, plant and equipment, right-of-use assets and intangible assets are
estimated individually, when it is not possible to estimate the recoverable amount individually, the Group
estimates the recoverable amount of the cash generating unit to which the asset belongs.
In testing a CGU for impairment, corporate assets are allocated to the relevant CGU when a reasonable and
consistent basis of allocation can be established, or otherwise they are allocated to the smallest group of
CGUs for which a reasonable and consistent allocation basis can be established. The recoverable amount is
determined for the CGU or group of CGUs to which the corporate asset belongs, and is compared with the
carrying amount of the relevant CGU or group of CGUs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset (or a CGU)
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a CGU) is estimated to be less than its carrying amount, the
carrying amount of the asset (or a CGU) is reduced to its recoverable amount. For corporate assets or
portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a CGU, the
Group compares the carrying amount of a group of CGUs, including the carrying amounts of the corporate
assets or portion of corporate assets allocated to that group of CGUs, with the recoverable amount of
the group of CGUs. In allocating the impairment loss, the impairment loss is allocated first to reduce the
carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based
on the carrying amount of each asset in the unit or the group of CGUs. The carrying amount of an asset
is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if
determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to
the asset is allocated pro rata to the other assets of the unit or the group of CGUs. An impairment loss is
recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the assets is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset
in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Cash and cash equivalents
Cash and cash equivalents presented on the consolidated statement of financial position include:
(a) cash, which comprises of cash on hand and demand deposits; and
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Cash and cash equivalents (continued)
(b) cash equivalents, which comprises of short-term (generally with original maturity of three months
or less), highly liquid investments that are readily convertible to a known amount of cash and which
are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of
meeting short-term cash commitments rather than for investment or other purposes.
For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash
and cash equivalents as defined above.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of inventories are determined on a
weighted average method. Net realisable value represents the estimated selling price for inventories less
all estimated costs of completion and costs necessary to make the sale. Cost necessary to make the sale
include incremental costs directly attributable to the sale and non-incremental costs which the Group must
incur to make the sale.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows (where the effect of the time
value of money is material).
Restructuring
A restructuring provision is recognised when the Group has developed a detailed formal plan for the
restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by
starting to implement the plan or announcing its main features to those affected by it. The measurement
of a restructuring provision includes only the direct expenditures arising from the restructuring, which are
those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing
activities of the entity.
Contingent liabilities
A contingent liability is a present obligation arising from past events but is not recognised because it is
not probable that an outflow of resources embodying economic benefits will be required to settle the
obligation or the amount of the obligation cannot be measured with sufficient reliability.
Where the Group is jointly and severally liable for an obligation, the part of the obligation that is expected
to be met by other parties is treated as a contingent liability and it is not recognised in the consolidated
financial statements.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Contingent liabilities (continued)
The Group assesses continually to determine whether an outflow of resources embodying economic
benefits has become probable. If it becomes probable that an outflow of future economic benefits will
be required for an item previously dealt with as a contingent liability, a provision is recognised in the
consolidated financial statements in the reporting period in which the change in probability occurs, except
in the extremely rare circumstances where no reliable estimate can be made.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the
contractual provisions of the instrument. All regular way purchases or sales of financial assets are
recognised and derecognised on a settlement date basis. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets within the time frame established by regulation or
convention in the market place.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising
from contracts with customers which are initially measured in accordance with IFRS 15. Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets or financial liabilities at FVTPL) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial
liability and of allocating interest income and interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all
fees on points paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the financial asset or financial liability, or, where
appropriate, a shorter period to the net carrying amount on initial recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost:
• the financial asset is held within a business model whose objective is to collect contractual cash
flows; and
• the contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at FVTOCI:
• the financial asset is held within a business model whose objective is achieved by both selling and
collecting contractual cash flows; and
• the contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement of financial assets (continued)
All other financial assets are subsequently measured at FVTPL, except that at initial recognition of a
financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity
investment in other comprehensive income if that equity investment is neither held for trading nor
contingent consideration recognised by an acquirer in a business combination to which IFRS 3 applies.
(i) Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying the effective interest rate
to the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired. For financial assets that have subsequently become credit-impaired,
interest income is recognised by applying the effective interest rate to the amortised cost of the
financial asset from the next reporting period. If the credit risk on the credit-impaired financial
instrument improves so that the financial asset is no longer credit-impaired, interest income is
recognised by applying the effective interest rate to the gross carrying amount of the financial asset
from the beginning of the reporting period following the determination that the asset is no longer
credit-impaired.
(ii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains
and losses arising from changes in fair value recognised in other comprehensive income and
accumulated in the investment revaluation reserve; and are not subject to impairment assessment.
The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity
investments, and will be transferred to retained profits.
Dividends on these investments in equity instruments are recognised in profit or loss when the
Group’s right to receive the dividends is established unless the dividends clearly represent a
recovery of part of the cost of the investment. Dividends are included in the “other income, gains
and losses, and other expenses” line item in profit or loss.
(iii) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or designated as
FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any
fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss
excludes any dividend or interest earned on the financial asset.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets subject to impairment assessment under IFRS 9
The Group performs impairment assessment under expected credit loss (“ECL”) model on financial assets
(including trade and other receivables, pledged bank deposits, short term fixed deposits, cash and cash
equivalent and amounts due from related companies). The amount of ECL is updated at each reporting
date to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of
the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL
that is expected to result from default events that are possible within 12 months after the reporting date.
Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an assessment of both the current conditions at
the reporting date as well as the forecast of future conditions.
The Group always recognises lifetime ECL for trade receivables. The ECL on trade receivables are assessed
individually for debtors with significant balances and the remaining debtors are assessed collectively with
appropriate groupings.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there
has been a significant increase in credit risk since initial recognition, in which case the Group recognises
lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases
in the likelihood or risk of a default occurring since initial recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with
the risk of a default occurring on the financial instrument as at the date of initial recognition. In
making this assessment, the Group considers both quantitative and qualitative information that is
reasonable and supportable, including historical experience and forward-looking information that
is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has
increased significantly:
• an actual or expected significant deterioration in the financial instrument’s external (if
available) or internal credit rating;
• significant deterioration in external market indicators of credit risk, e.g. a significant increase
in the credit spread, the credit default swap prices for the debtor;
• existing or forecast adverse changes in business, financial or economic conditions that are
expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;
• an actual or expected significant deterioration in the operating results of the debtor;
• an actual or expected significant adverse change in the regulatory, economic, or
technological environment of the debtor that results in a significant decrease in the
debtor’s ability to meet its debt obligations.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets subject to impairment assessment under IFRS 9 (continued)
(i) Significant increase in credit risk (continued)
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has
increased significantly since initial recognition when contractual payments are more than 30 days
past due, unless the Group has reasonable and supportable information that demonstrates otherwise.
Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not
increased significantly since initial recognition if the debt instrument is determined to have low
credit risk at the reporting date. A debt instrument is determined to have low credit risk if i) it
has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow
obligations in the near term and iii) adverse changes in economic and business conditions in the
longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual
cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an
internal or external credit rating of ‘investment grade’ as per globally understood definitions.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has
been a significant increase in credit risk and revises them as appropriate to ensure that the criteria
are capable of identifying significant increase in credit risk before the amount becomes past due.
(ii) Definition of default
The Group considers an event of default occurs when information developed internally or obtained
from external sources indicates that the debtor is unlikely to pay its creditors, including the Group,
in full (without taking into account any collaterals held by the Group).
Irrespective of the above, the Group considers that default has occurred when a financial asset
is more than 90 days past due unless the Group has reasonable and supportable information to
demonstrate that a more lagging default criterion is more appropriate.
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events of default that have a detrimental
impact on the estimated future cash flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s
financial difficulty, having granted to the borrower a concession(s) that the lender(s) would
not otherwise consider; or
(d) it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets subject to impairment assessment under IFRS 9 (continued)
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty
is in severe financial difficulty and there is no realistic prospect of recovery, for example, when
the counterparty has been placed under liquidation or has entered into bankruptcy proceedings.
Financial assets written off may still be subject to enforcement activities under the Group’s
recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a
derecognition event. Any subsequent recoveries are recognised in profit or loss.
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data and forward-looking
information. Estimation of ECL reflects an unbiased and probability-weighted amount that is
determined with the respective risks of default occurring as the weights. The Group estimates ECL
for certain trade receivables collectively taking into consideration historical credit loss experience,
adjusted for forward looking information that is available without undue cost or effort.
Generally, the ECL is the difference between all contractual cash flows that are due to the Group in
accordance with the contract and all the cash flows that the Group expects to receive, discounted at
the effective interest rate determined at initial recognition.
Lifetime ECL for certain trade receivables is considered on a collective basis taking into
consideration past due information and relevant credit information such as forward looking
macroeconomic information.
For collective assessment, the Group takes into consideration the following characteristics which
formulating the grouping:
• Past-due status;
• Nature, size and industry of debtors; and
• External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the
financial asset is credit-impaired, in which case interest income is calculated based on amortised
cost of the financial asset.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments by
adjusting their carrying amount with the exception of trade receivables where the corresponding
adjustment is recognised through a loss allowance account.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in equity instrument which the Group has elected on initial recognition
to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation
reserve is not reclassified to profit or loss, but is transferred to retained profits.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or equity in accordance with
substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity and
recognised as treasury shares. No gain or loss is recognised in profit or loss on the purchase, sale, issue or
cancellation of the Company’s own equity instrument.
Financial liabilities at amortised cost
Financial liabilities excluding derivatives, which consist of bank loans, unsecured notes, contingent
settlement provision, trade and other payables and amounts due to related companies are subsequently
measured at amortised cost, using the effective interest method.
Contingent settlement provision arising from a contract to repay capital from non-controlling interests
The gross financial liability arising from a contract to repay capital from non-controlling interests is
recognised when contractual obligation (including potential obligation arising on the occurrence or
non-occurrence of future events) to repurchase the shares in a subsidiary is established. The contingent
settlement provision on the consolidated statement of financial position is initially recognised and
measured at present value of the estimated capital repayment amount with the corresponding debit to
equity. Subsequent to initial recognition, the adjustments arising from remeasurement of the present value
of the such gross obligation under the contract to the non-controlling shareholders is recognised in profit
or loss.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the financial liability
derecognised and the consideration paid and payable is recognised in profit or loss.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and
are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss
is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the consolidated
statement of financial position when, and only when, the Group currently has a legally enforceable right to
set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Hedge accounting
The Group designates certain derivatives as hedging instruments for cash flow hedges. At the inception of
the hedging relationship the Group documents the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the
hedged item attributable to the hedged risk.
Assessment of hedging relationship and effectiveness
For hedge effectiveness assessment, the Group considers whether the hedging instrument is effective in
offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is
when the hedging relationships meet all of the following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic
relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Group actually hedges and the quantity of the hedging instrument that the
entity actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge
ratio but the risk management objective for that designated hedging relationship remains the same, the
Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the
qualifying criteria again.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND
SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2 Significant accounting policies (continued)
Financial instruments (continued)
Hedge accounting (continued)
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges are recognised in other comprehensive income and accumulated under the heading of hedging
reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss and is
included in the “other income, gains and losses, and other expenses” line item.
Amounts previously recognised in other comprehensive income and accumulated in equity (hedging
reserve) are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in
the same line of the consolidated statement of profit or loss and other comprehensive income as the
recognised hedged item.
Discontinuation of hedge accounting
The Group discontinues hedge accounting prospectively only when the hedging relationship (or a part
thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances
when the hedging instrument expires or is sold, terminated or exercised. Discontinuing hedge accounting
can either affect a hedging relationship in its entirety or only a part of it (in which case hedge accounting
continues for the remainder of the hedging relationship).
Any gain or loss recognised in other comprehensive income and accumulated in equity at that time
remains in equity and is recognised when the forecast transactions is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is
recognised immediately in profit or loss.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
In the process of applying the Group’s accounting policies detailed in note 3, management has made the following
estimations that have significant effect on the amounts recognised in the consolidated financial statements. The
following is the key assumptions concerning the future, and other key sources of estimations uncertainty at the
end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
4. KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
Estimated allowance for inventories
Management reviews the inventories aging listing at the end of each reporting period, and makes allowance for
obsolete and/or slow-moving inventory items identified that are no longer suitable for use in operation. Estimation
of net realisable value are based on the most reliable evidence available at the time the estimates are made, of
the amount the inventories are expected to realise. Where the net realisable value is less than the cost, a material
impairment may arise. As at 31 December 2022, the carrying amounts of inventories that involve key estimation
uncertainty (representing the inventories of the Group as detailed in note 22 and excluding those inventories
under customers’ orders that with a short turnover period and supported by the pre-determined price) (the
“Relevant Inventories”) was RMB3,803,447,000 (2021: RMB5,110,317,000) and net allowance for inventories of
RMB273,910,000 (2021: RMB102,791,000) was recognised in the profit or loss during the year ended 31 December
2022.
Deferred tax asset
As at 31 December 2022, a deferred tax asset of RMB112,270,000 (2021: RMB99,301,000) in relation to unused tax
losses for certain operating subsidiaries has been recognised in the consolidated statement of financial position.
No deferred tax asset has been recognised on the tax losses of RMB5,206,118,000 (2021: RMB3,067,361,000) for the
remaining subsidiaries due to the unpredictability of future profit streams. The realisability of the deferred tax asset
mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future.
In cases where the actual future taxable profits generated are less or more than expected, or change in facts and
circumstances which result in revision of future taxable profits estimation, a material reversal or further recognition
of deferred tax assets may arise, which would be recognised in profit or loss for the period in which such a reversal
or further recognition takes place.
5. REVENUE AND SEGMENT INFORMATION
Operating and reportable segments are identified on the basis of internal reports about components of the Group
that are regularly reviewed by the Group’s key operating decision makers in order to allocate resources to the
segment and to assess its performance.
Information reported to the key operating decision makers for the purposes of resource allocation and assessment
of performances focuses specifically on the type of products sold. This is also the basis upon which the Group is
organised and managed.
The Group’s operating and reportable segments under IFRS 8 are acoustics product, electromagnetic drives and
precision mechanics, optics products, sensor and semiconductor products and other products, which represent
the major types of products manufactured and sold by the Group. Revenues from these products is recognised at
the point in time when controls of the products had transferred.
No operating segments have been aggregated in arriving at the reportable segments of the Group.
All sales contracts terms and the performance obligations of goods and services provided by the Group are
for periods of one year or less. As permitted under IFRS 15, the transaction price allocated to these unsatisfied
contracts is not disclosed.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
5. REVENUE AND SEGMENT INFORMATION (continued)
Information regarding these segments is presented below.
An analysis of the Group’s revenue and results by operating and reportable segments is as follows:
2022 2021
RMB’000 RMB’000
Operating and reportable segments
Segment revenue – recognised at a point in time
Acoustics products 8,848,150 8,582,092
Electromagnetic drives and precision mechanics 7,276,206 5,638,782
Optics products 3,217,294 2,389,371
Sensor and semiconductor products 1,256,404 1,013,350
Other products 27,038 43,372
Revenue 20,625,092 17,666,967
Segment results
Acoustics products 2,489,983 2,545,593
Electromagnetic drives and precision mechanics 1,549,437 1,220,778
Optics products (416,721) 411,521
Sensor and semiconductor products 146,106 153,489
Other products 6,225 33,554
Total profit for operating and reportable segments 3,775,030 4,364,935
Unallocated amounts:
Interest income 53,858 48,611
Other income, gains and losses, and other expense (excluding
interest income) 471,202 296,829
Share of results of an associate (1,170) (926)
Distribution and selling expenses (447,731) (332,505)
Administrative expenses (1,035,565) (823,555)
Research and development costs (1,546,338) (1,726,217)
Exchange (loss) gain (5,523) 1,169
Finance costs (403,084) (415,465)
Profit before taxation 860,679 1,412,876
The accounting policies of the operating and reportable segments are the same as the Group’s accounting policies
described in note 3. Segment results represent the profit (loss) earned by each segment without allocation of
interest income, other income, gains and losses, and other expenses (excluding interest income), share of results
of an associate, distribution and selling expenses, administration expenses, research and development costs,
exchange (loss) gain and finance costs. This is the measure reported to the key operating decision makers for the
purpose of resource allocation and performance assessment.
The key operating decision makers make decisions according to operating results of each segments. The Group
analysed its assets and liabilities and other financial information at group level. Therefore, only segment revenue
and segments results are presented. Amortisation and depreciation charges related to assets employed by
different segments are presented to the key operating decision makers for review.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
5. REVENUE AND SEGMENT INFORMATION (continued)
Details included in measure of segment results are as follows:
Amortisation and Depreciation
2022 2021
RMB’000 RMB’000
Acoustics products 1,184,138 1,120,282
Electromagnetic drives and precision mechanics 644,951 562,759
Optics products 528,713 453,397
Sensor and semiconductor products 56,140 57,225
Other products 10,877 3,046
Amounts included in cost of inventories 2,424,819 2,196,709
Unallocated portion 562,180 505,452
2,986,999 2,702,161
Majority of the Group’s non-current assets were located in the PRC, the place of domicile of the relevant group
entities that hold those assets. There were no non-current assets excluded financial instruments in foreign
countries that exceeds 10% of the Group’s total non-current assets.
The Group’s revenue from external customers analysed by location of end customers are detailed below:
2022 2021
RMB’000 RMB’000
Greater China* (country of domicile) 8,696,523 8,442,782
Other foreign countries:
Other Asian countries 1,437,549 968,790
America 10,489,800 8,253,237
Europe 1,220 2,158
20,625,092 17,666,967
* Greater China comprises the Mainland China, Hong Kong Special Administrative Region and Taiwan.
Majority of the revenue from Greater China were derived from the Mainland China.
The geographical information of the Group’s revenue from external end customer by individual countries in
America, Europe and other Asian countries are not disclosed. In the opinion of management, such disclosure is
harmful to the Group’s business.
During the year, the aggregate amount of revenue derived from the Group’s top customers which individually
has contributed to over 10% of the Group’s revenue and included in all of the Group’s segments, amounted to
RMB14,657,229,000 (2021: RMB13,056,212,000). The total amount of revenue by each customer and number
of customers are not disclosed, as in the opinion of the management such disclosure is harmful to the Group’s
business.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
6. FINANCE COSTS
2022 2021
RMB’000 RMB’000
Interest on bank loans 80,072 145,060
Interest on unsecured notes 236,876 178,278
Interest on lease liabilities 25,289 46,016
Interest on contingent settlement provision 62,620 66,945
404,857 436,299
Less:
Finance costs capitalised in qualifying assets (1,773) (20,834)
403,084 415,465
7. OTHER INCOME, GAINS AND LOSSES, AND OTHER EXPENSES
Other income, gains and losses, and other expenses mainly comprise of:
2022 2021
RMB’000 RMB’000
(A) Other income
Government grants (Note a) 385,264 252,153
Interest income 53,858 48,611
Rental income 9,525 12,951
(B) Gains and losses
Gain on repurchase of unsecured notes (note 29) 168,793 –
Loss on disposal/write-off of property, plant and equipment (14,353) (45,546)
Gain (loss) from changes in fair value of derivative
financial instruments 5,308 (5,155)
Gain on termination of leases 429 1,789
Gain on derecognition of right-of-use assets 2,836 –
(C) Other expenses
Restructuring costs (Note b) (125,222) –
Notes:
(a) Included in the amount is RMB235,550,000 (2021: RMB152,601,000) representing the amortisation of
government grants as detailed in note 31. In addition, during the current year, the Group recognised
government grants of RMB1,842,000 (2021: RMB2,434,000) in respect of Covid-19-related subsidies. The
remaining amount mainly represents the incentives granted by the PRC local authorities to the Group for
engaging in High Technology business, employment of expatriates and technologically advanced staff. All
the grants were approved and received during the year of recognition.
(b) During the year ended 31 December 2022, the Group launched the restructuring plan in 2022 to enhance
cost efficiency. Accordingly, loss on disposal/write-off of property, plant and equipment of RMB61,573,000
and redundancy cost of RMB63,649,000 are recognised in profit or loss and recorded under “Other income,
gains and losses, and other expenses”.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
8. PROFIT BEFORE TAXATION
2022 2021
RMB’000 RMB’000
Profit before taxation has been arrived at after charging (crediting):
Directors’ emoluments (note 9) 15,790 14,543
Other staff’s retirement benefits scheme contributions 624,047 518,746
Other staff costs 4,485,645 4,460,187
Total staff costs* 5,125,482 4,993,476
Depreciation of property, plant and equipment 2,690,348 2,499,122
Depreciation of right-of-use assets 212,896 197,649
Total depreciation* 2,903,244 2,696,771
Depreciation of right-of-use assets capitalised in qualifying assets (28,860) (40,442)
2,874,384 2,656,329
Allowance for inventories, included in cost of goods sold (note 22) 273,910 102,791
Amortisation of intangible assets 111,421 44,638
Auditor’s remuneration 3,831 3,494
Cost of inventories recognised as expense 16,576,152 13,199,241
Cost of raw materials included in research and development costs 180,246 226,971
Depreciation of investment property 1,194 1,194
(Reversal of) allowance of impairment loss on trade receivables (1,989) 4,078
Short-term and low value asset leases expense 41,293 33,004
* Staff costs of RMB958,359,000 (2021: RMB976,247,000) and depreciation of RMB249,022,000 (2021:
RMB267,545,000) had been included in research and development costs.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
9. DIRECTORS’, CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES
The aggregate Directors’ and chief executive’s remuneration for the year ended 31 December 2022 amounts to
RMB15,790,000 (2021: RMB14,543,000), disclosed pursuant to the applicable Listing Rules and CO, are as follows:
For the year ended 31 December 2022:
Pan Benjamin Mok
Zhengmin Joe Kuen
(“Mr. Pan”) Richard Total
RMB’000 RMB’000 RMB’000
Executive Directors
Fees – – –
Other emoluments:
Salaries and other benefits 4,536 2,218 6,754
Share-based payment – 3,601 3,601
Performance related bonuses – 1,917 1,917
Retirement benefits scheme contributions – 16 16
Total Directors’ emoluments 4,536 7,752 12,288
Mr. Pan is also the Chief Executive Officer (“CEO”) of the Company and his emoluments disclosed above include
those for services rendered by him as the CEO.
The executive Directors’ emoluments shown above were for their services in connection with the affairs of the
Company and the Group.
Wu Ingrid
Chun Yuan
(“Ms. Wu”) Total
RMB’000 RMB’000
Non-executive Director
Fees 420 420
Other emoluments:
Salaries and other benefits – –
Performance related bonuses – –
Retirement benefits scheme contributions – –
Total Director’s emolument 420 420
The non-executive Director’s emolument shown above was for her services as Director of the Company.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
9. DIRECTORS’, CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES
(continued)
For the year ended 31 December 2022: (continued)
Au Siu
Kwok
Lam
Cheung Kwong Peng Zhang
Albert Larry Zhiyuan Hongjiang Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note i)
Independent non-executive Directors
Fees 531 695 689 1,167 3,082
Other emoluments:
Salaries and other benefits – – – – –
Performance related bonuses – – – – –
Retirement benefits scheme contributions – – – – –
Total Directors’ emoluments 531 695 689 1,167 3,082
The independent non-executive Directors’ emoluments shown above were for their services as Directors of the
Company.
During the year ended 31 December 2022, an executive Director was granted share of the Group and Restricted
Shares (as defined in note 35) in respect of his service to the Group under the Scheme and Subsidiary Scheme (as
defined in note 35) respectively and the Group recognised a total share-based payment expense of RMB3,601,000,
and included in share-based payment above (2021: RMB1,577,000, and included in share-based payment below).
For the year ended 31 December 2021:
Mok
Joe Kuen
Mr. Pan Richard Total
RMB’000 RMB’000 RMB’000
Executive Directors
Fees – – –
Other emoluments:
Salaries and other benefits 5,257 2,121 7,378
Share-based payment – 1,577 1,577
Performance related bonuses – 2,195 2,195
Retirement benefits scheme contributions – 26 26
Total Directors’ emoluments 5,257 5,919 11,176
Mr. Pan is also the CEO of the Company and his emoluments disclosed above include those for services rendered
by him as the CEO.
The executive Directors’ emoluments shown above were for their services in connection with the affairs of the
Company and the Group.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
9. DIRECTORS’, CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES
(continued)
For the year ended 31 December 2021: (continued)
Ms. Wu Total
RMB’000 RMB’000
Non-executive Director
Fees 388 388
Other emoluments:
Salaries and other benefits – –
Performance related bonuses – –
Retirement benefits scheme contributions – –
Total Director’s emolument 388 388
The non-executive Director’s emolument shown above was for her services as Director of the Company.
Au Siu
Kwok
Lam
Cheung Kwong Peng Zhang
Albert Larry Zhiyuan Hongjiang Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note i)
Independent non-executive Directors
Fees 740 578 637 1,024 2,979
Other emoluments:
Salaries and other benefits – – – – –
Performance related bonuses – – – – –
Retirement benefits scheme contributions – – – – –
Total Directors’ emoluments 740 578 637 1,024 2,979
The independent non-executive Directors’ emoluments shown above were for their services as Directors of the
Company.
Note:
(i) Mr. Au Siu Cheung Albert resigned on 31 August 2022.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
9. DIRECTORS’, CHIEF EXECUTIVE’S EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES
(continued)
Employees’ emoluments
The five highest paid individuals included one (2021: zero) Director of the Company, details of whose emoluments
are set out above. The emoluments of the remaining four (2021: five) highest paid individuals are as follows:
2022 2021
RMB’000 RMB’000
Employees
– basic salaries and allowances 9,836 10,134
– share-based payment 24,758 19,317
– performance related bonus 7,627 8,662
– retirement benefits scheme contributions – 100
42,221 38,213
Note: The bonus is determined based on performance of the employees.
The emoluments were within the following bands:
Number of employees
2022 2021
HK$7,000,001 to HK$7,500,000 – 2
HK$7,500,001 to HK$8,000,000 – 1
HK$8,500,001 to HK$9,000,000 – 1
HK$9,000,001 to HK$9,500,000 1 –
HK$12,000,001 to HK$12,500,000 2 –
HK$15,000,001 to HK$15,500,000 1 1
There was no arrangement under which a director or the chief executive waived or agreed to waive any
remuneration during the year. No emoluments were paid by the Group to the Directors of the Company and/or five
highest paid individuals as an inducement to join or as compensation for loss of office.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
10. TAXATION
2022 2021
RMB’000 RMB’000
The current tax charge (credit) comprises:
PRC Enterprise Income Tax 206,117 162,935
Other jurisdictions 62,858 53,530
PRC and overseas withholding tax 151 164
(Over) under provision of taxation in prior years (21,747) 25,552
247,379 242,181
Deferred tax (see note 32) (15,883) (122,414)
231,496 119,767
Under the law of PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the
tax rate of the PRC subsidiaries is 25%, for both years, unless the group entities entitle to other preferential tax
treatment granted by the relevant PRC tax authority.
The PRC dividend withholding tax is calculated at the applicable rate in accordance with the relevant laws and
regulations in the PRC.
According to a joint circular of Ministry of Finance and the State Taxation Administration of the PRC, Cai Shui [2008]
No. 1, the accumulated undistributed profits earned by foreign invested enterprise prior to 1 January 2008 can be
exempted from EIT when they are distributed to foreign investor after 2008. Whereas, dividend distributed out
of the profits generated thereafter, shall be subject to EIT at 10% and withheld by the PRC subsidiary, pursuant to
Articles 3 and 27 of the EIT Law and Article 91 of its Implementation Regulation. According to the Arrangement
between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to the Taxes on Income, the withholding tax rate on
dividend paid by a PRC resident enterprise to a Hong Kong resident enterprise is further reduced to 5% if the Hong
Kong resident enterprise holds at least 25% equity interests in the PRC resident enterprise and it is considered as
the beneficial owner of the dividend, and remains at 10% otherwise.
In addition, certain PRC subsidiaries were officially endorsed as High and New Technology Enterprises (“HNTE”) till
the date ranging from 2023 to 2024 (2021: 2022 to 2023). Pursuant to the EIT Law, those PRC subsidiaries endorsed
as HNTE shall be entitled to a preferential tax rate of 15% till the expiry of the HNTE status for the respective PRC
subsidiaries.
Pursuant to relevant laws and regulations in Singapore, one of the Group’s subsidiaries is entitled to a
concessionary tax rate under Development and Expansion Incentive program which is granted based on the
fulfilment of carrying out qualifying business activities. This incentive program is effective from 1 January 2019 for
10-year period.
Pursuant to the relevant laws and regulation in Vietnam, one of the Group’s subsidiaries is entitled to
concessionary tax rate which is granted based on the fulfilment of carrying qualifying business activities. This tax
holiday for the Vietnamese subsidiary will expire in 2027.
Taxation in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
10. TAXATION (continued)
The charge for the year can be reconciled to the profit before taxation as follows:
2022 2021
RMB’000 RMB’000
Profit before taxation 860,679 1,412,876
Tax at the applicable income tax rate (Note a) 215,170 353,219
Tax effect of income not taxable for tax purpose (76,212) (47,241)
Tax effect of expenses not deductible for tax purpose 108,574 75,368
Tax effect of tax holiday and concession (136,089) (181,292)
Tax effect of tax losses not recognised 369,845 152,895
Tax effect on temporary differences for which no deferred income
tax assets were recognised 1,690 23,107
Recognition of deductible temporary differences previously not
recognised (43,332) (73,027)
Utilisation/recognition of tax losses previously not recognised (17,087) (67,330)
Effect of super deduction for research and development cost
(Note b) (129,090) (98,417)
Effect of different tax rates of subsidiaries operating in other
jurisdictions (44,857) (36,867)
(Over) under provision in prior years (21,747) 25,552
PRC and overseas withholding tax 151 (4,174)
Others 4,480 (2,026)
Tax charge for the year 231,496 119,767
Notes:
(a) The PRC EIT rate of 25% (2021: 25%) is the domestic tax rate in the jurisdiction where the operations of the
Group are substantially based.
(b) In March 2021, the Ministry of Finance and the State Administration of Taxation released No. 13
announcement of 2021 named “Announcement on Further Improving the Policy on Pre-tax Deduction
of Research and Development Expenses”, according to which certain PRC subsidiaries engaged in
manufacturing industry are entitled to an additional 100% tax deduction on eligible research and
development expenses incurred by them for both years ended 31 December 2021 and 2022.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
11. DIVIDENDS
2022 2021
RMB’000 RMB’000
Dividends recognised as distribution during the year:
2021 final dividend of HK$ nil (2020: HK$0.20) per ordinary share – 201,892
2022 interim dividend of HK$ nil (2021: HK$0.20) per ordinary share – 201,360
– 403,252
Subsequent to the end of the reporting period, a final dividend of HK$0.12 (2021: Nil) per share has been proposed
by the Directors and is subject to approval by the Shareholders in the forthcoming annual general meeting.
12. EARNINGS PER SHARE
The calculation of the basic earnings per share for the year ended 31 December 2022 is based on the profit for the
year attributable to owners of the Company of RMB821,305,000 (2021: RMB1,316,279,000) and on the weighted
average number of 1,198,193,000 (2021: 1,206,381,000) shares in issue after taken into account the effect of shares
repurchased and the shares held by the trustee (as disclosed in note 35) during the year.
The calculation of diluted earnings per share for the year ended 31 December 2022 is based on the profit for the
year attributable to the owners of the Company for diluted earnings per share of RMB790,648,000 (resulting from
the profit for the year attributable to owners of Company of RMB821,305,000 for the purpose of calculating basic
earnings per share and reduced by the adjustment to the share of loss of subsidiaries based on dilution of their
loss per share arising from the effect of contingent settlement provision of RMB30,657,000 ), and the weighted
average number of shares for diluted earnings per share of 1,201,305,000 shares (resulting from the weighted
average number of 1,198,193,000 shares and added the effect of dilutive potential shares arising from the Scheme
(as defined in note 35) of 3,112,000 shares). The computation of diluted earnings per share for the year ended 31
December 2022 did not consider the effect arising from the unvested restricted shares granted by a subsidiary as
set out in note 35 as the exercise would result in an increase in earnings per share.
For the year ended 31 December 2021, the computation of diluted earnings per share did not assume the
unvested restricted shares granted by a subsidiary and the contingent settlement provision as the Directors
consider the effect was insignificant or antidilution.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
13. PROPERTY, PLANT AND EQUIPMENT
Electronic
Freehold equipment Leasehold Motor Plant and Construction
land Buildings and furniture improvements vehicles machinery in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
At 1 January 2021 43,147 2,792,512 2,035,666 1,982,436 70,744 19,265,916 3,228,917 29,419,338
Currency realignment (4,424) (17,982) (5,621) (1,171) (288) (39,204) (12,622) (81,312)
Additions – 7,707 80,217 174,670 10,237 941,178 2,603,209 3,817,218
Acquired on acquisition of a
subsidiary (note 34) – 44,541 12,637 8,768 1,129 135,836 3,521 206,432
Disposals/write-off – (46) (34,395) (375) (7,585) (202,806) (8,087) (253,294)
Transfers – 84,030 15,856 201,857 297 1,891,661 (2,193,701) –
At 31 December 2021 38,723 2,910,762 2,104,360 2,366,185 74,534 21,992,581 3,621,237 33,108,382
Currency realignment (914) 17,762 8,120 3,052 453 58,329 28,845 115,647
Additions – 43,995 67,521 106,543 2,989 205,781 1,521,351 1,948,180
Acquired on acquisition of a
subsidiary (note 34) – – 108 – 697 1,013 – 1,818
Transfer from right-of-use assets – – – – – 66,857 – 66,857
Disposals/write-off – (3,305) (36,165) (1,859) (7,001) (315,164) (2,101) (365,595)
Transfers – 242,696 26,857 429,038 – 1,210,393 (1,908,984) –
At 31 December 2022 37,809 3,211,910 2,170,801 2,902,959 71,672 23,219,790 3,260,348 34,875,289
DEPRECIATION AND IMPAIRMENT
At 1 January 2021 – 610,826 1,357,679 1,215,472 45,973 7,592,680 4,648 10,827,278
Currency realignment – (3,323) (2,615) (924) (184) (16,594) – (23,640)
Provided for the year – 128,366 209,793 327,637 7,993 1,825,333 – 2,499,122
Eliminated on disposal/write-off – (41) (30,980) (155) (6,563) (144,086) – (181,825)
At 31 December 2021 – 735,828 1,533,877 1,542,030 47,219 9,257,333 4,648 13,120,935
Currency realignment – 4,916 5,308 3,153 301 32,490 – 46,168
Provided for the year – 141,035 178,836 348,633 7,209 2,014,635 – 2,690,348
Eliminated on disposal/write-off – (3,305) (33,228) (1,860) (6,134) (238,049) (1,268) (283,844)
At 31 December 2022 – 878,474 1,684,793 1,891,956 48,595 11,066,409 3,380 15,573,607
CARRYING VALUES
At 31 December 2022 37,809 2,333,436 486,008 1,011,003 23,077 12,153,381 3,256,968 19,301,682
At 31 December 2021 38,723 2,174,934 570,483 824,155 27,315 12,735,248 3,616,589 19,987,447
The above items of property, plant and equipment, except for freehold land and construction in progress, after
taking into account the residual values, are depreciated on a straight-line basis over the following number of years:
Buildings
20
Electronic equipment and furniture
5
Leasehold improvements
5 years or over the term of lease, whichever is shorter
Motor vehicles
5
Plant and machinery
10
Majority of the Group’s buildings are situated in the PRC on land, as included in right-of-use assets, which is held
under medium-term land use rights.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
13. PROPERTY, PLANT AND EQUIPMENT (continued)
Impairment assessment
Due to the loss from the optics products segment in the current year, the management of the Group conducted
impairment assessment on certain property, plant and equipment and right-of-use assets and intangible assets
with finite useful lives with carrying amounts of RMB5,824,319,000, RMB383,727,000 and RMB103,487,000
respectively related to the optics products segment. The Group estimates the recoverable amounts of the
cash-generating units of optics product segment to which the assets belongs when it is not possible to estimate
the recoverable amount individually, including allocation of corporate assets when reasonable and consistent
basis can be established.
The recoverable amount of cash-generated unit has been determined based on a value in use calculation. That
calculation uses cash flow projections based on financial budgets approved by the management of the respective
subsidiary covering the following 5 years with a pre-tax discount rate is 11.7% as at 31 December 2022. The
cash flows beyond 5-year period are extrapolated using 3% growth rate for the relevant industry. Another key
assumption for the value in use calculated is the budgeted gross margin, which is determined based on the
cash-generating units’ past performance and management expectations for the market development.
Based on the result of the assessment, management of the Group determined that the carrying amount of the
relevant assets does not exceed the recoverable amount based on the value in use and no impairment loss has
been recognised for the year ended 31 December 2022 (2021: Nil).
14. RIGHT-OF-USE ASSETS
Leasehold
land Buildings Machineries Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2022
Carrying amount 1,337,031 622,086 – 1,959,117
As at 31 December 2021
Carrying amount 1,380,374 580,577 72,722 2,033,673
For the year ended
31 December 2022
Depreciation charge 41,239 165,792 5,865 212,896
Capitalised in construction in progress (25,128) (3,732) – (28,860)
16,111 162,060 5,865 184,036
For the year ended
31 December 2021
Depreciation charge 40,045 149,412 8,192 197,649
Capitalised in construction in progress (30,489) (9,953) – (40,442)
9,556 139,459 8,192 157,207
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
14. RIGHT-OF-USE ASSETS (continued)
2022 2021
RMB’000 RMB’000
Expense relating to short-term leases 40,588 32,263
Expense relating to leases of low-value assets, excluding
short-term leases of low value assets 705 741
Total cash outflow for leases 198,318 508,414
Acquisition of a subsidiary 56 25,792
Additions to right-of-use assets 219,148 394,032
For both years, the Group leases various leasehold land, buildings and machineries for its operations. Lease
contracts are entered into for fixed term of 1 year to 50 years. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. In determining the lease term and assessing the length of
the non-cancellable period, the Group applies the definition of a contract and determines the period for which the
contract is enforceable.
In addition, the Group owns several industrial buildings where its manufacturing facilities are primarily located and
office buildings. The Group is the registered owner of these property interests, including the underlying leasehold
lands. Lump sum payments were made upfront to acquire these property interests. The leasehold land components
of these owned properties are presented separately only if the payments made can be allocated reliably.
As at 31 December 2022, the Group has obtained the land use right certificates for all leasehold lands. As at
December 2021, the Group has obtained the land use right certificates for all leasehold lands except for leasehold
lands with a carrying amount of RMB730,150,000 in which the Group was in the process of obtaining. The land was
acquired in 2020 in which the balance payment of the acquisition amounting to RMB373,000,000 was paid in 2021
and the Group has obtained the land use right certificate in 2022.
The Group regularly entered into short-term leases for certain building premises and machineries, etc. As at 31
December 2022 and 2021, the portfolio of short-term leases is similar to the portfolio of short-term leases to which
the short-term lease expense is disclosed above.
During the year, the Group entered into new lease agreements for the use of leasehold land, buildings and
machineries from 2 years to 50 years (2021:13 months to 50 years). On the lease commencement, the Group
recognised right-of-use asset of RMB209,469,000 and lease liabilities of RMB208,901,000 (2021: right-of-use assets
of RMB371,263,000 and lease liabilities of RMB370,755,000). Except for the payment made on the acquisition
of leasehold land of RMB9,679,000 (2021: RMB395,767,000), the recognition of the remaining newly added
right-of-use assets constitutes non-cash transactions.
During the year ended 31 December 2022, the Group returned the leasehold land with the carrying amount
of RMB20,926,000 to the government at a consideration of RMB23,762,000, and a gain on derecognition of
right-of-use assets of RMB2,836,000 is recognised in profit or loss (2021: Nil). In addition, during the year ended
31 December 2022, the Group early terminated certain leases which constitutes lease modification. As a result,
the Group has derecognised right-of-use assets of RMB8,815,000 (2021: RMB75,709,000) and lease liabilities of
RMB9,244,000 (2021: RMB77,498,000), and a gain of lease termination of RMB429,000 (2021: RMB1,789,000) is
recognised in profit or loss.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
14. RIGHT-OF-USE ASSETS (continued)
During the year ended 31 December 2022, the Group has obtained the ownership of the leased machineries and
the carrying amount of RMB66,857,000 is transferred to property, plant and equipment (2021: Nil).
Restrictions or covenants on leases
As at 31 December 2022, lease liabilities of RMB744,017,000 are recognised with related right-of-use assets of
RMB622,086,000 (2021: lease liabilities of RMB694,470,000 are recognised with related right-of-use assets of
RMB653,299,000). The lease agreements do not impose any covenants other than the security interests in the
leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
15. GOODWILL
The goodwill acquired in business combination was allocated to each individual subsidiary which management
considers represent separate CGUs. At the end of the reporting period, the carrying amount of goodwill had arisen
from the acquisition of the following subsidiaries:
Kaleido
Technology
APS WiSpry, Inc.
深圳市
軒盈通電子
有限公司
(Shenzhen
Xuanyingtong
electronics
Co., Ltd.)*
泰瑞美(昆山)
精密科技
有限公司
(TRM
(Kunshan)
Co. Ltd.)**
泰瑞美精密
制造(蘇州)
有限公司
(TRM Precision
Manufactory
(Suzhou)
Ltd.)*** Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST AND CARRYING VALUES
At 1 January 2021 8,705 77,414 78,231 – – 164,350
Arising on acquisition of a subsidiary
(note 34) – – – 55,996 – 55,996
At 31 December 2021 8,705 77,414 78,231 55,996 – 220,346
Arising on acquisition of a subsidiary
(note 34) – – – – 55,019 55,019
At 31 December 2022 8,705 77,414 78,231 55,996 55,019 275,365
* The English translation is for identification purpose only.
** The name had been changed from Toyo Precision Appliance (Kunshan) Co. Ltd. (“Toyo Precision”) on 3
August 2022.
*** The name had been changed from Suzhou Speed Communication Technology Limited (“Suzhou Speed”)
on 11 May 2022.
During the year ended 31 December 2022, the Directors of the Company determines that there is no impairment of
the CGUs containing goodwill.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
15. GOODWILL (continued)
The basis of the recoverable amounts of the CGUs and its major underlying assumptions are summarised below:
The recoverable amount of each of the CGUs is determined on the basis of value in use calculation. The recoverable
amount is based on certain key assumptions. These calculations use cash flow projections based on latest financial
budgets approved by management covering a five-year period, using an applicable pre-tax discount rate ranging
from 11.56% to 22.20% (2021: 11.56% to 21.50%). The cash flows beyond the five-year period are extrapolated
using a steady growth rate of 3% (2021: 3%). Other key assumptions for the value in use calculations relate to the
estimation of cash inflows/outflows which include budgeted sales and gross margin, such estimation is based
on the CGU’s past performance and management’s expectations for the market development. Except for WiSpry,
Inc., management believes that any reasonably possible change in any of these assumptions would not result
in significant impairment loss. Furthermore, the estimated cash flows and discount rate are subject to higher
degree of estimation uncertainties in both years due to uncertainty on the volatility in financial markets, including
potential disruptions of the Group’s operations.
The recoverable amount of WiSpry Inc. exceeds its carrying amount. If the budgeted sales growth rate decreased
by 12% (2021: 10%), while other parameters remain constant, the recoverable amount would equal its carrying
amount.
16. INVESTMENT PROPERTIES
RMB’000
CARRYING VALUES
At 1 January 2021 12,466
Depreciation during the year (1,194)
At 31 December 2021 11,272
Depreciation during the year (1,194)
At 31 December 2022 10,078
17. INTEREST IN AN ASSOCIATE
2022 2021
RMB’000 RMB’000
Cost of investment in an associate 5,389 5,389
Share of post-acquisition loss and other comprehensive expenses (2,096) (926)
Exchange adjustments 6 1
3,299 4,464
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
17. INTEREST IN AN ASSOCIATE (continued)
Details of the Group’s associate at the end of the reporting period are as follows:
Name of entity
Country of
incorporation/
registration
Principal
place of
business
Proportion of
ownership interest
held by the Group
Proportion of
voting rights
held by the Group Principal activity
2022 2021 2022 2021
A. H. Motorlab
(“A.H. Motor”)
Japan Japan 49.998% 49.998% 49.998% 49.998% Design and development,
prototyping and evaluation of
various motors and inverters
The Group holds 49.998% of the issued share capital of A.H. Motor. By considering that the Group has no
sufficiently dominant voting rights to direct relevant activities unilaterally, the Directors of the Company consider
that the Group only has significant influence over A.H. Motor only and therefore it is classified as an associate of the
Group.
18. EQUITY INSTRUMENTS AT FVTOCI
2022 2021
RMB’000 RMB’000
Unlisted shares 424,798 800,553
Listed shares 42,259 47,400
467,057 847,953
These investments are not held for trading, instead, they are held for long-term strategic purposes. The Directors
of the Company have elected to designate these investments in equity instruments at FVTOCI as they believe
that recognising short-term fluctuations in these investments’ fair value in profit or loss would not be consistent
with the Group’s strategy of holding these investments for long-term purposes and realising their performance
potential in the long run.
Unlisted shares
The unlisted equity investments represent the Group’s equity interest in private entities. The equity instruments
comprise of equity interests in companies which engaged in (i) producing semiconductor components in
integrated circuits and development of intellectual properties, (ii) research, development and manufacturing of
sensor and semiconductor business, (iii) producing high technology products, (iv) solid state Light Detection And
Ranging (“LiDAR”) sensor for automotive series use, and (v) research, development, manufacturing and marketing
of electronic equipment in the field of high-end audio.
During the year ended 31 December 2022, the Group acquired certain equity interests in several private entities
engaged in (i) producing of semiconductor components in integrated circuits at the aggregate consideration of
RMB38,500,000 and (ii) research, development, manufacturing and marketing of electronic equipment in the field
of high-end audio at a consideration of Euro15,000,000 (equivalent to RMB103,452,000).
During the year ended 31 December 2021, the Group acquired certain equity interests in private entities, mainly
comprising the investment in a Germany based company which engaged in solid state LiDAR senor for automotive
series use at a consideration of Euro59,992,000 (equivalent to RMB473,821,000).
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
18. EQUITY INSTRUMENTS AT FVTOCI (continued)
Listed shares
The amount represents the Group’s investment in a company listed in Japan. As at 31 December 2022, the fair
value of the investment determined by reference to the quoted market bid prices available was RMB42,259,000
(2021: RMB47,400,000).
19. FINANCIAL ASSET AT FVTPL
2022 2021
RMB’000 RMB’000
Convertible loans 39,012 –
Unlisted shares 147,291 50,349
186,303 50,349
The financial assets at FVTPL represent the Group’s investment in (i) a private equity fund primarily investing in
industry-leading technology companies, mainly in Germany, German speaking countries and regions, the Nordic
countries and the Greater China, as well as other technologically-advanced regions with strong growth potential
(“Fund A”), (ii) a private equity fund primarily investing in private entities in sensor and semiconductor business
(“Fund B”), (iii) a preferred shares investment in a private entity in sensor and semiconductor business, and (iv) a
private entity in augmented reality displays manufacturing business.
During the year ended 31 December 2022, the Group (i) made contribution of United States dollars
(“US$”)12,454,000 (equivalent to approximately RMB85,980,000) to Fund A, including the addition of US$419,000
(equivalent to approximately RMB2,674,000) that was called upon by the fund before the year ended 31 December
2021, (ii) subscribed a convertible loan amounted to Euro5,000,000 (equivalent to approximately RMB37,594,000)
issued by a private entity in Finland, and (iii) entered into a subscription agreement with Fund B pursuant to which
the Group agreed to make a capital commitment of GBP5,000,000 to Fund B and the Group made payment of
GBP938,000 (equivalent to approximately RMB7,916,000). As the convertible loan contains derivative feature for
the holder to convert the outstanding amount into equity interest of the issuer, it is accounted for as financial
assets at FVTPL.
During the year ended 31 December 2021, the Group entered into a subscription agreement with Fund A
pursuant to which the Group agreed to make a capital commitment of US$60,000,000 to Fund A and the Group
made payment of US$2,478,000 (equivalent to approximately RMB16,020,000) and an addition of US$419,000
(equivalent to approximately RMB2,674,000) was called upon by the fund before the year ended 31 December
2021 and included in other payables. In addition, the Group made a preferred shares investment of US$5,000,000
(equivalent to approximately RMB31,879,000) in a private entity which engaged in sensor and semiconductor
business.
The above investments are classified as financial assets at FVTPL and presented under non-current assets as
they are not held for trading, instead, they are held for long-term strategic purpose. As at 31 December 2022, no
significant change in fair value of the financial assets at FVTPL was recognised (2021: Nil).
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
20. INTANGIBLE ASSETS
Development Customer
Patents expenditure base Total
RMB’000 RMB’000 RMB’000 RMB’000
COST
At 1 January 2021 381,057 159,716 113,800 654,573
Currency realignment (7,050) (2,971) – (10,021)
Addition – 61,835 – 61,835
At 31 December 2021 374,007 218,580 113,800 706,387
Currency realignment 19,872 11,724 – 31,596
Addition 116,680 156,474 – 273,154
At 31 December 2022 510,559 386,778 113,800 1,011,137
AMORTISATION AND IMPAIRMENT
At 1 January 2021 167,695 83,646 29,872 281,213
Currency realignment (1,900) (1,322) – (3,222)
Provided for the year 25,110 8,148 11,380 44,638
At 31 December 2021 190,905 90,472 41,252 322,629
Currency realignment 7,279 5,854 – 13,133
Provided for the year 26,366 73,675 11,380 111,421
At 31 December 2022 224,550 170,001 52,632 447,183
CARRYING VALUE
At 31 December 2022 286,009 216,777 61,168 563,954
At 31 December 2021 183,102 128,108 72,548 383,758
Patents represent the Group’s patents on designs of small and sophisticated module structures and patent for
production of optics and acoustic products. The payment of the patent acquired in 2022 is deferred and recorded
as other payables, with details set out in note 26. Development expenditure represents the Group’s development
cost in acoustics technology, sensor and semiconductor technology and wafer-level glass moulding technology
which are used to enhance the Group’s current products. Customer base represents Group’s customer relationship
acquired by the Group as part of a business combination in 2018.
The above intangible assets have finite useful lives. Such intangible assets are amortised on a straight-line basis
over the following periods:
Patents
3-20 years
Development expenditure
2-10 years
Customer base
10 years
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
21. DERIVATIVE FINANCIAL INSTRUMENTS
Current Non-current
2022 2021 2022 2021
RMB’000 RMB’000 RMB’000 RMB’000
Derivatives financial liabilities
Interest rate swap contracts – 5,014 – –
Cross currency swap contract 8,326 8,575 7,706 17,003
8,326 13,589 7,706 17,003
The Group entered into the interest rate swap contracts with commercial banks to minimise its exposure to cash
flow changes of its floating-rate US$ denominated bank loans by swapping floating interest rates to fixed interest
rates. The terms of this contract were negotiated to match with those of the hedged bank loans with the same
notional amount as the principal amount of bank loans, and the management considers that the interest rate swap
contracts are highly effective hedging instruments and have designated them as cash flow hedging instruments
for hedge accounting purposes. During the year ended 31 December 2021, the Group repaid the floating-rate
US-denominated bank loans. As a result, the hedge accounting was discontinued and the accumulated hedging
reserve of RMB23,661,000 was released to profit or loss. During the year ended 31 December 2022, gain on fair
value change of interest rate swap contracts of RMB5,308,000 was recognised in “other income, gains and losses,
and other expenses” line item in profit or loss.
The Group entered into a cross currency swap contract with total notional amount of US$50,000,000 (2021:
US$50,000,000) with a commercial bank to minimise the exposure to fluctuations in foreign currency exchange
rates of US$ denominated unsecured notes, with details set out in note 29. The critical terms of the cross
currency swap contract and the corresponding US$ denominated unsecured notes were closely aligned and the
management considers that the cross currency swap contract is highly effective hedging instrument and qualified
as cash flow hedge. Fair value change on this hedging instrument in cash flow hedge of loss of RMB17,619,000
for the year ended 31 December 2022 (2021: loss of RMB3,067,000) has been recognised in other comprehensive
income and accumulated in the hedging reserve. Gain of RMB21,324,000 (2021: loss of RMB14,211,000) on cash
flow hedge was reclassified to profit or loss and included in “other income, gains and losses, and other expenses”.
The major terms of the outstanding derivative contracts under cash-flow hedges at the end of reporting period are
as follows:
Forward Interest rate Exchange frequency
Notional amount Range of maturity contract rate Receive Pay Receive Pay
At 31 December 2022
Cross currency swap contract
US$50,000,000 27 November 2024 US$1 to RMB6.7345 3.00% 5.38% Semi-annually Semi-annually
At 31 December 2021
Cross currency swap contract
US$50,000,000 27 November 2024 US$1 to RMB6.7345 3.00% 5.38% Semi-annually Semi-annually
The above derivatives are measured at fair value. The classification of the measurement of the above derivatives at
31 December 2022 and 2021 is Level 2 under the fair value hierarchy (details set out in note 39).
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
21. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and
similar agreements
The Group has entered interest rate swaps contracts and cross currency swap contract that are covered by the
International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) signed with various
banks. These derivative instruments are not offset in the consolidated statement of financial position as the
ISDA Agreements are in place with a right to set off only in the event of default, insolvency or bankruptcy so that
the Group currently has no legally enforceable right to set off the recognised amounts. No further disclosure is
provided as the amounts involved in master netting arrangements are not significant.
22. INVENTORIES
2022 2021
RMB’000 RMB’000
Raw materials 828,740 1,199,255
Work in progress 1,145,784 1,270,329
Finished goods 2,426,894 3,225,661
4,401,418 5,695,245
The Group has written off allowance for inventories of RMB149,266,000 (2021: RMB100,471,000) in the current year.
During the year, net allowance for inventories of approximately RMB273,910,000 (2021: RMB102,791,000) has been
recognised on the Relevant Inventories that are subject to key estimation uncertainty as detailed in note 4, and
included in cost of goods sold.
23. TRADE AND OTHER RECEIVABLES
2022 2021
RMB’000 RMB’000
Trade receivables 4,089,490 4,062,457
Bank acceptance and commercial bills 189,168 434,863
4,278,658 4,497,320
Prepayments 314,409 373,853
Value-added tax recoverable 666,099 836,684
Other receivables 263,471 292,900
Loan and interest receivables* 8,523 11,970
5,531,160 6,012,727
* Loans of RMB8,359,000 (2021: RMB11,609,000) made to certain suppliers of the Group, which are
unsecured, and carry interest rates at 1% to 4.35% (2021: 4.35%) per annum. The amounts are repayable in
1 year.
As at 1 January 2021, trade receivables from contracts with customers amounted to RMB3,519,570,000.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
23. TRADE AND OTHER RECEIVABLES (continued)
The following is an analysis of trade receivables and bank acceptance and commercial bills net of allowance for
credit losses presented based on the invoice dates or notes issued dates at the end of the reporting period, which
approximate the respective revenue recognition dates.
2022 2021
RMB’000 RMB’000
Age
0 – 90 days 4,098,361 4,133,170
91 – 180 days 169,795 293,704
Over 180 days 10,502 70,446
4,278,658 4,497,320
Payment terms with customers are mainly on credit. Invoices are normally payable within 30 days to 120 days of
issuance. The Group accepts bank acceptance and commercial bills with maturities ranging from 30 to 180 days at
the end of the credit terms in lieu of immediate cash payment.
As at 31 December 2022, included in the Group’s trade receivables balance are debtors with aggregate carrying
amount of RMB191,749,000 (2021: RMB170,160,000) which are past due as at the reporting date. Included in the
past due balances, RMB11,126,000 has been past due 90 days or more (2021: RMB34,062,000).
Details of impairment assessment of trade and other receivables for the year ended 31 December 2022 and 2021
are set out in note 38.
The Group’s trade receivables and bank acceptance and commercial bills which are denominated in currencies
other than the functional currencies of the relevant group entities are set out below:
2022 2021
RMB’000 RMB’000
US$ 195,325 154,662
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
24. AMOUNTS DUE FROM (TO) RELATED COMPANIES
Amounts due from related companies
Details of the amounts due from related companies, in which close family members of Ms. Wu and Mr. Pan have
controlling interests, are as follows:
Name of related companies 2022 2021
RMB’000 RMB’000
四川茵地樂科技有限公司
(Sichuan Yindile Technology Co., Ltd.)* 5,051 2,655
四川茵地樂材料科技集團有限公司
(Sichuan Yindile Materials & Technology Group Co., Ltd.)* 720 764
四川茵地樂材料科技集團常州有限公司
(Sichuan Yindile Materials & Technology Group Changzhou Co., Ltd.)* – 11
常州遠宇精密模具製造有限公司
(Changzhou Yuanyu Precise Model Manufacturing Co., Ltd.)* 52 52
深圳市之光實業發展有限公司
(Shenzhen Zhiguang Industrial Development Co., Ltd.)* 1,842 2,119
常州市友晟電子有限公司
(Changzhou Yousheng Electronics Co., Ltd.)* 14 –
瑞知(深圳)科技有限責任公司
(Ruizhi (Shenzhen) Technology Co., Ltd.)* 580 –
8,259 5,601
* The English translation is for identification purpose only.
Amounts were trade-related, unsecured, interest-free and are repayable on demand. The average credit period for
trade-related transaction is normally within 30 days to 90 days.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
24. AMOUNTS DUE FROM (TO) RELATED COMPANIES (continued)
Amounts due to related companies
Details of amounts due to related companies, in which close family members of Ms. Wu and Mr. Pan have
controlling interests, are as follows:
Name of related companies 2022 2021
RMB’000 RMB’000
常州市凌迪電子科技有限公司
(Changzhou Lingdi Electronic Technology Co., Ltd.)* 16,164 23,358
常州市武進湖塘何家紅光沖件廠
(Wujin Hutang Hejia Hongguang Stamping Factory)* 19 40
常州市友晟電子有限公司
(Changzhou Yousheng Electronics Co., Ltd.)* 5,486 9,539
紅光越南塑業有限公司
(Hongguang Viet Nam Plastic Co., Ltd.)* 1,365 640
常州市來方圓電子有限公司
(Changzhou LFY Electronics Co., Ltd.)* 148 –
23,182 33,577
* The English translation is for identification purpose only.
Amounts were trade-related, unsecured, interest-free and are repayable on demand. The average credit period for
trade-related transaction is normally within 30 days to 90 days.
25. CASH AND CASH EQUIVALENTS, SHORT TERM FIXED DEPOSITS AND PLEDGED BANK
DEPOSITS
Cash and cash equivalents include demand deposits and short term deposits for the purpose of meeting the
Group’s short term cash commitments, which carry interest at market rates range from 0.00% to 4.70% (2021:
0.00% to 2.10%).
Pledged bank deposits without interest (2021 fixed interest rate: 1.55% to 1.75%) represent deposits pledged to
banks to secure banking facilities granted to the Group. Deposits amounting to RMB200,000 (2021: RMB2,219,000)
have been pledged to secure credit facilities and are therefore classified as current assets.
Short term fixed deposits carry interest range from 4.83% to 5.18% per annum. Short term fixed deposits have
original maturity over three months but less than one year and therefore classified as current assets.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
25. CASH AND CASH EQUIVALENTS, SHORT TERM FIXED DEPOSITS AND PLEDGED BANK
DEPOSITS (continued)
The Group’s cash and cash equivalents, short term fixed deposits and pledged bank deposits which are
denominated in currencies other than the functional currencies of the relevant group entities are set out below:
2022 2021
RMB’000 RMB’000
US$ 1,655,504 1,854,660
HK$ 166,355 64,344
Japanese Yen 5,681 22,370
Euro 31,789 81,594
Other currencies 15,097 20,411
Details of impairment assessment of bank balances, short term fixed deposits and pledged bank deposits are set
out in note 38.
26. TRADE AND OTHER PAYABLES AND CONTRACT LIABILITIES
Trade and other payables
2022 2021
RMB’000 RMB’000
Trade payables 2,131,255 2,626,140
Notes payables – guaranteed 1,111,657 1,637,537
3,242,912 4,263,677
Payroll and welfare payables 444,049 476,776
Payables for acquisition of property, plant and equipment 673,133 599,105
Other payables and accruals 613,509 545,434
Payable for acquisition of a subsidiary – 169,605
Payables related to Restricted Shares (as defined in note 35)
granted to employees 87,116 92,923
5,060,719 6,147,520
Less: Other payables for settlement after 12 months
shown under non-current liabilities (101,976) –
4,958,743 6,147,520
Other payables are unsecured, interest-free and have no fixed repayment terms.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
26. TRADE AND OTHER PAYABLES AND CONTRACT LIABILITIES (continued)
Trade and other payables (continued)
An aged analysis of trade and notes payables, presented based on the invoice date or the note issued date, is as
follows:
2022 2021
RMB’000 RMB’000
Age
0 – 90 days 2,576,830 3,300,438
91 – 180 days 654,872 949,924
Over 180 days 11,210 13,315
3,242,912 4,263,677
The Group’s trade and notes payables which are denominated in currencies other than the functional currencies of
the relevant group entities are set out below:
2022 2021
RMB’000 RMB’000
US$ 645,563 686,669
Japanese Yen 3,037 15,210
Euro 19,938 21,546
Contract liabilities
2022 2021
RMB’000 RMB’000
Contract liabilities on sales of miniaturised components 30,435 22,324
As at 1 January 2021, contract liabilities amounted to RMB14,734,000. The contract liabilities at the beginning of
the year are recognised as revenue during the year.
When the Group receives a deposit before the production activity commences, this will give rise to contract
liabilities at the start of a contract, until the revenue recognised on the relevant contract exceeds the amount of the
deposit. For a small number of the Group’s customers, the Group receives a deposit ranging from 30% to 100% on
acceptance of manufacturing orders.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
27. LEASE LIABILITIES
2022 2021
RMB’000 RMB’000
Lease liabilities payable:
Within one year 292,087 242,035
Within a period of more than one year
but not more than two years 123,251 149,531
Within a period of more than two years
but not more than five years 191,280 143,555
Within a period of more than five years 170,564 159,349
777,182 694,470
Less: Amount due for settlement with 12 months shown
under current liabilities (292,087) (242,035)
Amount due for settlement after 12 months shown under
non-current liabilities 485,095 452,435
The lease agreements did not contain any contingent rent for lessee.
No extension options are included in all lease agreements entered by the Group. The weighted average
incremental borrowing rates applied to lease liabilities is 4.26% (2021: 4.56%). These lease liabilities were measured
at the present value of the lease payments that are not yet paid.
Lease obligations that are denominated in currencies other than the functional currencies of the relevant group
entities are set out below:
Singapore
Dollar
EURO (“SGD”) US$
RMB’000 RMB’000 RMB’000
As at 31 December 2022 98,922 22 –
As at 31 December 2021 101,279 252 1,003
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
28. BANK LOANS
2022 2021
RMB’000 RMB’000
Bank loans 3,559,803 3,232,389
Less: Amount due within one year included in current liabilities (1,832,603) (2,902,389)
Amount due after one year 1,727,200 330,000
The carrying amounts of the above bank loans are repayable*:
Within one year 1,832,603 2,902,389
Within a period of more than one year
but not exceeding two years 1,727,200 330,000
3,559,803 3,232,389
* The amounts are based on scheduled repayment dates set out in the loan agreements.
The Group’s bank loans denominated in currencies other than the functional currencies of the respective entities
are set out below:
2022 2021
RMB’000 RMB’000
US$ – 277,515
RMB 54,000 –
The exposure of the Group’s borrowings are as follows:
2022 2021
RMB’000 RMB’000
Fixed-rate borrowings 2,969,523 2,052,884
Variable-rate borrowings 590,280 1,179,505
3,559,803 3,232,389
As at 31 December 2022, the Group’s variable loans carry interest at mainly LIBOR and other relevant interbank
offered rates plus a certain basis point adjustment (2021: LIBOR, HIBOR and other relevant interbank offered rates
plus a certain basis point adjustment). The management considers that the interest rate benchmark reform will
not have a material impact on the Group’s variable loans carry interest at LIBOR as these loans will be fully repaid
before the cessation of LIBOR variable-rate borrowings.
The variable rate bank loans carry interest rate ranging from 2.55% to 4.90% per annum (31 December 2021: 0.70%
to 1.00% per annum). The fixed rate bank loans carry interest rate ranging from 1.75% to 3.80% per annum (31
December 2021: 0.90% to 4.30% per annum). The Company issued guarantees to respective banks to secure these
borrowings.
During the year ended 31 December 2021, certain non-current bank loans of RMB1,034,369,000 were early repaid
due to strategic plan (2022: Nil).
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
29. UNSECURED NOTES
Unsecured notes issued in 2019
In 2019, the Group issued unsecured notes of US$388,000,000 due on 27 November 2024 at a fixed coupon rate of
3.000% per annum (“2024 Notes”), payable semi-annually in arrears. The unsecured note is listed on the Hong Kong
Stock Exchange. The effective interest rate of the 2024 Notes is 3.15% per annum.
As at 31 December 2022, the principal amounts of the outstanding unsecured notes include 2024 Notes of
US$276,818,000 (2021: US$388,000,000) with the carrying amount is RMB1,921,798,000 (2021: RMB2,462,010,000).
Unsecured notes issued in 2021
In 2021, the Group issued unsecured notes of US$300,000,000 due on 2 June 2026 at a fixed coupon rate of 2.625%
per annum (“2026 Notes”) and US$350,000,000 due on 2 June 2031 at fixed coupon rate of 3.750% per annum
(“2031 Notes”). The unsecured notes are listed on the Hong Kong Stock Exchange. The effective interest rates of the
2026 Notes and 2031 Notes are 2.7023% and 3.8656% per annum respectively.
As at 31 December 2022, the principal amounts of the outstanding unsecured notes include 2026 Notes of
US$252,604,000 (2021: US$300,000,000) with the carrying amount is RMB1,753,985,000 (2021: RMB1,905,365,000)
and 2031 Notes of US$350,000,000 (2021: US$350,000,000) with the carrying amount is RMB2,412,062,000 (2021:
RMB2,205,807,000).
During the year ended 31 December 2022, the Group completed the tender offer to repurchase the 2024 Notes
with the principal amount of US$111,182,000 at a consideration of US$97,840,000 and carrying amount is
RMB786,538,000 and 2026 Notes with the principal amount of US$47,396,000 at a consideration of US$35,926,000
and carrying amount is RMB335,416,000 and the notes are cancelled accordingly upon the repurchase. As a result
of the derecognition of the unsecured notes repurchased, a gain on derecognition of the financial liabilities of
RMB168,793,000 was recognised in the profit or loss. The tender offer of its outstanding 2024 Notes and 2026
Notes is for the purpose of optimising its debt structure and proactive management of its liabilities. Further details
of the tender offer to repurchase the unsecured notes were set out in the Company’s announcements dated 28
September 2022.
30. CAPITAL CONTRIBUTIONS FROM NON-CONTROLLING INTERESTS OF A SUBSIDIARY AND
CONTINGENT SETTLEMENT PROVISION
As announced on 22 July 2020, AAC Optics (Changzhou) Co., Ltd. (“AAC Optics”, formerly known as AAC
Communications Technologies (Changzhou) Co., Ltd.), a company incorporated in the PRC, and its immediate
holding companies, AAC Technologies Limited (“AAC HK”) and AAC Technology Information Consultancy
(Changzhou) Co., Ltd. (“AAC Consultancy”) entered into capital increase agreements successively with four
independent strategic investors (“First Round Strategic Investors”), who have agreed to make a capital increase of
RMB1,150,000,000 in aggregate to AAC Optics. As a result of the introduction of this First Round Strategic Investors,
the Group’s interest in AAC Optics Group was diluted from 100% to 90.42%. The proportional share of the carrying
amount of the net assets of AAC Optic Group of RMB658,654,000 has been transferred to non-controlling interests.
On 9 October 2020, it was further announced that AAC Optics, AAC HK, AAC Consultancy and the First Round
Strategic Investors entered into a shareholders agreement with 18 new independent strategic investors (“Second
Round Strategic Investors”) for Second Round Strategic Investors to subscribe newly issued shares of AAC Optics
to make a capital increase of RMB1,658,000,000 in AAC Optics (“2020 Shareholders Agreement”). As a result of the
completed introduction of this Second Round Strategic Investors, the Group’s interest in AAC Optics Group was
further diluted to 82.02%.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
30. CAPITAL CONTRIBUTIONS FROM NON-CONTROLLING INTERESTS OF A SUBSIDIARY AND
CONTINGENT SETTLEMENT PROVISION (continued)
In accordance with the shareholders agreement described in the announcement on 9 October 2020, on
occurrence or non-occurrence of future events including the separate listing condition, the Second Round
Strategic Investors are entitled to require the Group for capital repayment plus a premium. A contingent
settlement provision has been recognised against equity as the Group has a contractual obligation to deliver cash
and presented under non-current liabilities as the conditions set to have a three-year period.
According to the Company’s announcement dated 1 February 2021 on the update on the progress of the
proposed spin-off and separate listing of AAC Optics on a stock exchange in the PRC, the sponsor of the proposed
spin-off and separate listing of AAC Optics submitted an application to the Jiangsu Province Regulatory Bureau of
the China Securities Regulatory Commission (“CSRC”) for the commencement of the pre-listing tutoring process
on 1 February 2021. Subsequently, the Jiangsu Province Regulatory Bureau of the CSRC had also acknowledged
receipt of such application through its tutoring regulatory information system.
Given that AAC Optics is in preparation for the proposed spin-off and separate listing, in order to comply with the
regulatory requirements and market practices for listing in the PRC, as already announced on 31 October 2021,
the shareholders of AAC Optics have entered into a termination agreement to terminate the 2020 Shareholders
Agreement (“Termination Agreement”) and a supplemental agreement to the Termination Agreement, pursuant
to which certain rights were granted to the First Round Strategic Investors and Second Round Strategic Investors
(“Existing Strategic Investors”), to the effect that certain shareholder rights originally granted to the Existing
Strategic Investors under the 2020 Shareholders Agreement are amended. Since the right granted to the Second
Round Strategic Investors to require the Group for capital repayment plus a premium under the occurrence
or non-occurrence of future events remain unchanged, the Company continues to recognise the contractual
obligation as a contingent settlement provision as at 31 December 2021.
According to the share transfer agreement dated 10 May 2022, AAC HK agreed to purchase 48,289,693 shares of
AAC Optics, which represents approximately 0.7133% of the total number of shares issued by AAC Optics from an
independent strategic investor (the “Seller”) at a consideration of RMB130,000,000 which is equal to the principal
amount of the capital from the Seller in 2020. The gross obligation of RMB130,000,000 is derecognised against
the equity upon the return of the capital contribution from that strategic investor. This transaction resulted in
changes in the Group’s interest in AAC Optics from 80.38% to 81.10%. In addition, the Seller has also entered into
share transfer agreements with other strategic investors to transfer in aggregate 0.8232% interest in AAC Optics.
As a result of these transactions, the contingent settlement provisions amounted to RMB147,789,000, which
represents the consideration paid by AAC HK and the forfeiture of interests that the Seller is originally entitled to,
are derecognised. The difference between the amounts of the contingent settlement provisions derecognised and
the consideration paid amounting to RMB17,789,000 is credited directly in equity and attributed to owners of the
Company.
According to the Company’s announcement dated 16 December 2022, the Company has decided to delay the
timetable for the proposed spin-off and separate listing, and, the Shanghai Stock Exchange has accepted the
application initiated by AAC Optics to withdraw the application documents in relation to the purposed spin-off
and separate listing. The Company considers that the proposed spin-off and separate listing, if it proceeds, will
be commercially beneficial to the Company and AAC Optics, and the Company intends to continue to pursue the
proposed spin-off and separate listing when, amongst others, market conditions improve.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
31. GOVERNMENT GRANTS
During the year, the Group received government grants of RMB172,408,000 (2021: RMB307,144,000) in aggregate
from various PRC government authorities as an incentive for leasing factories, constructing electronic plants and
acquiring machineries. As the grants related to assets, the amount received is to be amortised and released to
profit or loss on a systematic basis over the useful lives of the related assets.
During the year, RMB235,550,000 (2021: RMB152,601,000) of the grants have been released to profit or loss.
32. DEFERRED TAX ASSETS/LIABILITIES
The followings are the major deferred tax assets and liabilities recognised by the Group and the movements
thereon during the current and prior years:
Deferred tax assets
Government
Tax losses Inventories grants Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note a)
At 1 January 2021 63,000 32,000 – – 95,000
Credit to profit or loss 36,301 6,717 71,312 1,715 116,045
At 31 December 2021 99,301 38,717 71,312 1,715 211,045
Credit (charge) to profit or loss 12,969 (1,022) 6,077 (981) 17,043
Acquisition of subsidiary (note 34) – – – 232 232
Currency realignment – 81 – – 81
At 31 December 2022 112,270 37,776 77,389 966 228,401
Deferred tax liabilities
PRC
withholding tax
Depreciation/ on undistributed
amortisation earnings Total
RMB’000 RMB’000 RMB’000
(Note b)
At 1 January 2021 43,729 5,157 48,886
Reversal of withholding tax upon distribution – (4,338) (4,338)
Credit to profit or loss (2,031) – (2,031)
Currency realignment (963) (819) (1,782)
At 31 December 2021 40,735 – 40,735
Charge to profit or loss 1,160 – 1,160
Currency realignment 952 – 952
At 31 December 2022 42,847 – 42,847
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
32. DEFERRED TAX ASSETS/LIABILITIES (continued)
Notes:
(a) The deductible temporary difference arising from inventories would be reversed upon sales of inventories.
(b) The deferred tax arose from temporary difference between the carrying amounts of intangible assets,
property, plant and equipment and their tax base.
At the end of the reporting period, the Group has unused tax losses of approximately RMB5,842,781,000 (2021:
RMB3,729,369,000) available for offset against future profits. A deferred tax asset has been recognised in respect of
approximately RMB636,663,000 (2021: RMB662,008,000) of such losses. No deferred tax asset has been recognised
in respect of the remaining approximately RMB5,206,118,000 (2021: RMB3,067,361,000) due to the unpredictability
of future profit streams. The unrecognised tax losses may be carried forward for up to 5 or 10 years to various years
up to 2032 (2021: year 2031) from the year when the losses are incurred.
At 31 December 2022 and 2021, the Group has unrecognised deferred tax liability in relation to PRC withholding
tax on undistributed earnings in certain of its PRC subsidiaries, as it is the intention of the management to retain
the earnings within these subsidiaries.
33. SHARE CAPITAL
Number of shares Amount
US$’000
Shares of US$0.01 each
Authorised:
Ordinary shares at 1 January 2021, 31 December 2021
and 31 December 2022 5,000,000,000 50,000
Issued and fully paid:
Ordinary shares at 1 January 2021 and 31 December 2021 1,208,500,000 12,085
Shares repurchased and cancelled (5,250,000) (52)
Ordinary shares at 31 December 2022 1,203,250,000 12,033
RMB’000
At 1 January 2021 and 31 December 2021 98,135
Shares repurchased and cancelled (427)
At 31 December 2022 97,708
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
33. SHARE CAPITAL (continued)
During the year, the Company repurchased its own ordinary shares through The Hong Kong Stock Exchange as
follows:
Month of repurchase
No. of ordinary shares
of US$0.01 each
Price per share Aggregate
considerationHighest Lowest
HK$ HK$ HK$’000
September 3,750,000 12.72 11.90 46,544
December 3,705,500 17.90 16.76 64,316
7,455,500 110,860
During the year ended 31 December 2022, the Company repurchased a total of 7,455,500 issued ordinary shares of
the Company in the market for a consideration of HK$110,860,000 (equivalent to approximately RMB100,052,000)
(2021: Nil) and the consideration for share repurchased in December 2022 amounting to RMB34,604,000 is
included in other payables. Out of these repurchased shares, 5,250,000 ordinary shares were cancelled during the
year (2021: Nil).
None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the
year.
34. ACQUISITION OF SUBSIDIARIES
(A) Acquisition of Suzhou Speed
On 30 April 2022, a wholly-owned subsidiary of the Company entered into an agreement with an
independent third party to acquire entire issued capital of Suzhou Speed (subsequently renamed as
TRM Precision Manufactory (Suzhou) Ltd. on 11 May 2022), which principally engaged in the business of
trading of electronics related accessories and components, at a cash consideration of RMB65,000,000. The
acquisition was completed on 30 April 2022 and the acquisition has been accounted for as acquisition of
business using the acquisition method.
Consideration transferred
RMB’000
Cash 65,000
The acquisition-related costs are insignificant and have been excluded from the consideration transferred
and have been recognised as an expense in the current year, within the “administrative expenses” line item
in the consolidated statement of profit or loss.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
34. ACQUISITION OF SUBSIDIARIES (continued)
(A) Acquisition of Suzhou Speed (continued)
Assets acquired and liabilities recognised at the date of acquisition
RMB’000
Property, plant and equipment 1,818
Deferred tax assets 232
Right-of-use assets 56
Inventories 4,824
Trade and other receivables 25,877
Bank balances and cash 11,623
Trade and other payables (34,235)
Tax payable (214)
9,981
The receivables acquired (which principally comprised trade receivables) with a fair value of
RMB25,446,000 at the date of acquisition had gross contractual amounts of RMB25,446,000. The best
estimate at acquisition date of the contractual cash flows not expected to be collected amounted to nil.
Goodwill arising on acquisition:
RMB’000
Consideration transferred 65,000
Less: recognised amounts of net assets acquired (9,981)
Goodwill arising on acquisition 55,019
Goodwill arose on the acquisition of Suzhou Speed because the acquisition included the assembled
workforce of Suzhou Speed and some potential contracts which are still under negotiation with
prospective new customers as at the date of acquisition. These benefits are not recognised separately from
goodwill because they do not meet the recognition criteria for identifiable intangible assets.
None of the goodwill arising on this acquisition is expected to be deductible for tax purpose.
Net cash outflow on acquisition of Suzhou Speed
RMB’000
Total consideration 65,000
Less: Cash and cash equivalents balances acquired (11,623)
53,377
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
34. ACQUISITION OF SUBSIDIARIES (continued)
(A) Acquisition of Suzhou Speed (continued)
Impact of acquisition on the results of the Group
Included in the profit for the year ended 31 December 2022 is RMB8,086,000 attributable to the additional
business generated by Suzhou Speed. Revenue for the year includes RMB92,230,000 generated from
Suzhou Speed.
Had the acquisition of Suzhou Speed been completed on 1 January 2022, revenue for the year of the
Group would have been RMB20,664,960,000, and profit for the year attributable to owners of the Company
would have been RMB825,872,000. The pro-forma information is for illustrative purposes only and is not
necessarily an indication of revenue and results of operations of the Group that actually would have been
achieved had the acquisition been completed on 1 January 2022, nor is it intended to be a projection of
future results.
In determining the ‘pro-forma’ revenue and profit of the Group had Suzhou Speed been acquired at the
beginning of the current year, the Directors of the Company calculated depreciation of property, plant and
equipment and right-of-use-assets based on the recognised amounts of property, plant and equipment
and right-of-use-assets at the date of the acquisition.
(B) Acquisition of Toyo Precision
On 14 December 2021, the Group acquired 100% interest in Toyo Precision. Toyo Precision is principally
engaged in design, development and manufacturing of material for metal frame of intelligent technology
products and was acquired with the objective to achieve inorganic growth by strategically pursing
partnership and acquisition opportunities. The acquisition has been accounted for as acquisition of
business using the acquisition method.
Consideration transferred
RMB’000
Cash 273,630
Escrow deposit for acquisition of a subsidiary 169,443
Total 443,073
Acquisition-related costs amounting to RMB2,620,000 have been excluded from the consideration
transferred and have been recognised as an expense in the current year, within the “administrative
expenses” line item in the consolidated statement of profit or loss.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
34. ACQUISITION OF SUBSIDIARIES (continued)
(B) Acquisition of Toyo Precision (continued)
Assets acquired and liabilities recognised at the date of acquisition
RMB’000
Property, plant and equipment 206,432
Right-of-use assets 25,792
Deposits made for acquisition of property, plant and equipment 1,908
Inventories 89,943
Trade and other receivables 105,034
Taxation recoverable 2,330
Bank balances and cash 121,263
Trade and other payables (119,551)
Bank loans (38,500)
Lease liabilities (7,574)
387,077
The receivables acquired (which principally comprised trade receivables) with a fair value of
RMB78,922,000 at the date of acquisition had gross contractual amounts of RMB78,922,000. The best
estimate at acquisition date of the contractual cash flows not expected to be collected amounted to nil.
Goodwill arising on acquisition:
RMB’000
Consideration transferred 443,073
Less: recognised amounts of net assets acquired (387,077)
Goodwill arising on acquisition 55,996
Goodwill arose on the acquisition of Toyo Precision because the acquisition included the benefit of
expected synergies, revenue growth, future market development and the assembled workforce of Toyo
Precision. These benefits are not recognised separately from goodwill because they do not meet the
recognition criteria for identifiable intangible assets.
None of the goodwill arising on these acquisition is expected to be deductible for tax purpose.
Net cash outflow on acquisition of Toyo Precision
RMB’000
Total consideration 443,073
Less: Cash and cash equivalents balances acquired (121,263)
Escrow deposit for acquisition of a subsidiary* (169,443)
152,367
* The escrow deposit for the acquisition of a subsidiary had been transferred to the seller as at 30 May 2022
upon the issuance of the completion account and the confirmation of the final adjustment to the total
consideration as stated in the agreement.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
35. SHARE AWARD SCHEME
Share award scheme of the Company
The Company on 23 March 2016 had adopted the AAC Share Award Scheme (the “Scheme”) constituted by a Trust
Deed between the Company and Bank of Communications Trustee Limited (the “Trustee”), in which employees
may be selected by the Board of Directors to participate. Pursuant to the Scheme, shares of the Company will be
subscribed for at a subscription price as determined by the Board of the Company, or purchased on the Hong Kong
Stock Exchange, by the Trustee of the trusts declared in the Trust Deed.
On the grant of the share awards, the relevant number of shares is legally issued or transferred to the Trustee who
holds the shares for the benefit of the selected employees. A grantee shall not have any interest or rights (including
the right to receive dividends) in the shares prior to the vesting of the shares.
The expenses in relation to the share awards are charged to profit or loss over the relevant vesting periods with a
corresponding increase in share award reserve.
On 26 August 2021, the Trustee purchased an aggregate of 6,042,500 shares at prices ranging from HK$40.20 to
HK$42.95 per share at a total consideration of HK$253,288,000 (equivalent to RMB211,211,000) on the Hong Kong
Stock Exchange for the purpose of the Scheme.
As at 31 December 2021, an aggregate of 6,042,500 shares of the Company had been purchased by the Trustee.
Since the date of adoption of the Scheme up to 31 December 2021, no new shares had been issued to the Trustee
and no shares had been granted to selected employee(s) under the Scheme.
On 24 March 2022, the Company granted a total of 10,230,593 shares to 340 selected employees pursuant to
the Scheme at nil consideration. The fair value of the shares granted pursuant to the Scheme were determined
with reference to market value of the shares at the award date taking into account the exclusion of the expected
dividends as the employees were not entitled to receive dividends paid during the vesting periods of the shares.
The shares granted would be vested over a requisite service period of up to three years from the date of grant.
On 25 March 2022, the Trustee purchased an aggregate of 4,188,500 shares at prices ranging from HK$17.9 to
HK$19.2 per share at a total consideration of HK$77,283,000 (equivalent to RMB62,477,000) on the Hong Kong
Stock Exchange for the purpose of the Scheme.
As at 31 December 2022, an aggregate of 10,231,000 shares of the Company had been purchased by the Trustee.
Since the date of adoption of the Scheme up to 31 December 2022, no new shares had been issued to the Trustee.
Movement of the shares granted to selected employee(s) under the Scheme during the year ended 31 December
2022 are as follows:
Number of shares
Date of grant Vesting period
At
1 January
2022
Granted on
24 March
2022
Shares
entitlement
forfeited
At
31 December
2022
24 March 2022 24 March 2022 to 24 March 2023 – 3,406,787 (212,854) 3,193,933
24 March 2022 24 March 2022 to 24 March 2024 – 3,406,787 (212,854) 3,193,933
24 March 2022 24 March 2022 to 24 March 2025 – 3,417,019 (213,495) 3,203,524
– 10,230,593 (639,203) 9,591,390
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
35. SHARE AWARD SCHEME (continued)
Share award scheme of the Company (continued)
The terms and conditions of the grants are as follows:
Number of
shares Vest condition Date of grant Vesting period
Market value
per share
Fair value
of shares
HK$ HK$
Shares awarded to
selected employees
3,406,787 1 year from the
date of grant
24 March 2022 24 March 2022 to
24 March 2023
17.64 60,095,731
3,406,787 2 years from the
date of grant
24 March 2022 24 March 2022 to
24 March 2024
17.64 60,095,731
3,417,019 3 years from the
date of grant
24 March 2022 24 March 2022 to
24 March 2025
17.64 60,276,199
10,230,593 180,467,661
During the year ended 31 December 2022, the Group recognised total expenses of RMB68,651,000 (2021: Nil) in
relation to the Scheme shares granted by the Company.
Subsidiary Scheme
AAC Optics, a subsidiary of the Company, entered into a capital increase agreement with three limited partnerships
(“Platforms”), with the purpose to create share incentive platforms. The Subsidiary Scheme entitles selected
employees of AAC Optics (“Eligible Scheme Participants”) to subscribe the shares of AAC Optics, accounted
for approximately 2.0% of the enlarged share capital or 135,377,918 shares of AAC Optics, corresponding to a
consideration of RMB135,377,918 or at the subscription price of RMB1 per share of AAC Optics at the time of
grant, which is payable at the same time. Under the Subsidiary Scheme, the Eligible Scheme Participants would
settle the subscription price of shares by cash or by combination of cash and related approved loans from the
Group or Platforms at market interest rate. During the year ended 31 December 2022, the net cash payment to the
Eligible Scheme Participants under the Subsidiary Scheme is RMB4,025,000. (2021: fund raised from the Subsidiary
Scheme is RMB135,378,000. After deducting the loans of RMB35,663,000 from the Group to certain Eligible Scheme
Participants, the net cash proceeds is RMB99,715,000.)
Except for 11,163,857 shares which were granted and vested immediately in 2021, the remaining shares would
be vested over a requisite service period of up to three-and-a-half year subject to the relevant key performance
targets of AAC Optics during the vesting period (“Restricted Shares”). Upon the issue of new shares that are vested
under the Subsidiary Scheme, the Group’s interest in AAC Optics has been changed. Any difference between
the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid
or received is recognised directly in equity (retained profits) and attributed to owners of the Company. For the
Restricted Shares granted in 2022, the repurchase of 21,571,493 Restricted Shares at the subscription price of RMB1
per share of AAC Optics from and the grant of 12,524,147 Restricted Shares at the subscription price of RMB1 per
share of AAC Optics to the Eligible Scheme Participants. The shares would be vested over a requisite service period
from the date of grant in 2022 to the end of 2024 subject to the relevant key performance targets of AAC Optics
during the vesting period.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
35. SHARE AWARD SCHEME (continued)
Subsidiary Scheme (continued)
As at 31 December 2022, the net cash proceed of unvested portion of Restricted Shares, amounting to
RMB87,116,000, is recorded as other payables as the shares are contingently returnable (31 December 2021:
RMB92,923,000).
A summary of activities of the Restricted Shares with vesting condition of the Subsidiary Scheme is presented as
follows:
Fair value of
Number of share incentive
restricted shares at grant date
RMB’000
Unvested as at 1 January 2021 – –
Granted during the year 135,377,918 227,847
Vested during the year (11,163,857) (18,890)
Unvested as at 31 December 2021 124,214,061 208,957
Granted during the year 12,524,147 20,856
Repurchased during the year (21,571,493) (35,922)
Unvested as at 31 December 2022 115,166,715 193,891
As of 31 December 2022, there are 9,047,346 Restricted Shares arising from the repurchased during the year (31
December 2021: no shares) held under the Platforms which are available to be granted to the eligible employees
under the Subsidiary Scheme.
During the year ended 31 December 2022, the subsidiary recognised total expenses of RMB53,828,000 (2021:
RMB50,203,000) in relation to the shares granted by the subsidiary under Subsidiary Scheme and the amount is
credited to the non-controlling interests in the Group.
In the opinion of the Directors of the Company, the estimated compensation cost of Restricted Shares was based
on the consideration of the latest transaction price of AAC Optics in 2022 (2021: the fair value of shares of AAC
Optics at the date of grant by reference to the consideration of the latest share issue of AAC Optics in October
2020). At the end of each reporting period, the Group revises its estimates of the Restricted Shares that are
expected to vest ultimately. The impact of the revision of the estimates, if any, is recognised in profit and loss, with
a corresponding adjustment to share-based payments reserve including in the non-controlling interests.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
36. OPERATING LEASE ARRANGEMENTS
The Group as a lessor
The properties held for rental purposes have committed lessees for the next 1 years (2021: 2 years).
Undiscounted lease payments receivable on leases are as follows:
2022 2021
RMB’000 RMB’000
Within one year 6,380 15,220
In the second year – 8,066
6,380 23,286
37. CAPITAL COMMITMENTS
2022 2021
RMB’000 RMB’000
Capital expenditure contracted for but not provided in the
consolidated financial statements in respect of
– acquisition of property, plant and equipment 623,271 987,298
– capital contribution to a financial asset at FVTPL 335,810 364,071
959,081 1,351,369
38. FINANCIAL INSTRUMENTS
Categories of financial instruments
2022 2021
RMB’000 RMB’000
Financial assets
Equity instruments at FVTOCI 467,057 847,953
Financial asset at FVTPL 186,303 50,349
Financial assets at amortised cost 11,714,102 11,030,825
Financial liabilities
Derivative financial instruments 16,032 30,592
Financial liabilities at amortised cost 16,139,720 17,476,177
Lease liabilities 777,182 694,470
Financial risk management objectives and policies
The Group’s major financial instruments include derivative financial instruments, equity instruments at FVTOCI,
financial asset at FVTPL, trade and other receivables, amounts due from (to) related companies, pledged bank
deposits, short term fixed deposits and cash and cash equivalent, trade and other payables, unsecured notes, bank
loans, contingent settlement provision and lease liabilities. Details of these financial instruments are disclosed in
the respective notes. The risks associated with these financial instruments and the policies on how to mitigate
these risks are set out below. Management manages and monitors these exposures to ensure appropriate
measures are implemented in an effective manner. There has been no change to the Group’s exposure to market
risks or the manner in which it manages and measures the risk.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Market risk
Currency risk – spot rates
With the Group’s international operations and presence, the Group faces foreign exchange exposure including
transaction and translation exposure.
It is the Group’s policy to centralise foreign currency management to monitor the Group’s total foreign currency
exposure. As far as possible, the Group aims to achieve natural hedging by investing and borrowing in the
functional currencies. Where a natural hedge is not possible, the Group will consider to monitor its anticipated
foreign currency revenue and foreign currency monetary items with appropriate foreign exchange contracts.
The Group will not enter into derivative transactions for pure trading or speculative purposes.
The carrying amounts of the Group’s and intra-group’s foreign currency denominated monetary assets and
monetary liabilities at the reporting date mainly includes:
Assets Liabilities
2022 2021 2022 2021
RMB’000 RMB’000 RMB’000 RMB’000
US$ 13,071,320 10,889,038 14,015,637 13,783,380
Japanese Yen 48,944 82,392 9,561 210,432
Euro 232,784 157,798 327,029 219,508
HK$ 166,938 65,151 37,220 2,991
The Group has entered into cross currency swap contract in relation to the US$ denominated unsecured
notes amounting to RMB348,230,000 (equivalent to US$50,000,000) (2021: RMB318,785,000 (equivalent to
US$50,000,000)). It is the Group’s policy to negotiate the terms of the hedge derivatives, to the extent possible, to
match or approximate the terms of the hedged items to maximise hedge effectiveness.
Sensitivity analysis
The Group is mainly exposed to fluctuations in exchange rates of RMB against the US$, the Japanese Yen, Euro and
HK$. The following details the Group’s sensitivity to a 5% (2021: 5%) increase in RMB against the relevant foreign
currencies which represents management’s assessment of the reasonably possible change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items except for the effect
on certain foreign currency denominated unsecured notes under an effective hedging relationship as the Group’s
net exposure to currency risk arising from the hedging relationship is insignificant and adjusts their translation at
the year end for a 5% (2021: 5%) change in foreign currency rates. The sensitivity analysis includes loans to foreign
operations within the Group where the denomination of the loan is in a currency other than the functional currency of
the lender or the borrower. A positive/negative number (in bracket) below indicates an increase/decrease in profit for
the year where the RMB strengthen 5% (2021: 5%) against the relevant currency and vice versa. For a 5% (2021: 5%)
weakening of the RMB against the relevant currency, there would be an equal and opposite impact on the profit.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Market risk (continued)
Currency risk – spot rates (continued)
Sensitivity analysis (continued)
Impact
2022 2021
RMB’000 RMB’000
Increase (decrease) in profit for the year
US$ 35,412 108,538
Japanese Yen (1,477) 4,802
Euro 3,534 2,314
HK$ (4,864) (2,331)
No sensitivity analysis has been presented for derivatives that are designated as hedging instruments because the
Group’s net exposure to currency risk arising from the hedging relationship is considered to be insignificant.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the
year end exposure does not reflect the exposure during the year.
Interest rate risk
The Group is exposed to fair value interest rate risk in relation to fixed-rate bank deposits, lease liabilities, fixed-rate
bank loans, unsecured notes and contingent settlement provision (details of which are set out in notes 25, 27, 28,
29 and 30, respectively). The bank deposits and the majority of the fixed-rate bank loans will mature within one or
two years, the management considers the risk is insignificant to the Group.
The Group is also exposed to cash flow interest rate risk in relation to bank deposits carried interest at prevailing
market deposit rate and floating-rate bank loans (details of which are set out in notes 25 and 28, respectively).
The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of prevailing market interest rate
on bank balances and LIBOR or other relevant interbank offered rates arising from the group’s USD denominated
borrowing. The Group aims at keeping borrowings at variable rates. The Group manages its interest rate exposures
by assessing the potential impact arising from any interest rate movements based on interest rate level and
outlook. The management will review the proportion of borrowings in fixed and floating rates and ensure they are
within reasonable range.
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement
of some interbank offered rates with alternative nearly risk-free rates. As listed in note 28, several of the Group’s
LIBOR and other relevant interbank offered rates bank loans may be subject to the interest rate benchmark reform.
The Group is closely monitoring the transition to new benchmark interest rates and the management assessment
is included in the relevant note.
Sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the
reporting period. The analysis is prepared assuming the amount of variable-rate bank loans, and bank balances
at the end of the reporting period was the amount outstanding for the whole year. The sensitivity analysis has
excluded certain bank loans under cash flow hedges and certain bank balances which are not interest sensitive.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Market risk (continued)
Interest rate risk (continued)
Sensitivity analysis (continued)
If interest rates had been 50 basis points (2021: 50 basis points) higher/lower and all other variables were held
constant, the Group’s profit for the year ended 31 December 2022 would increase/decrease by RMB16,491,000
(2021: increase/decrease by RMB20,311,000). This is mainly attributable to the Group’s exposure to interest rates
on its variable-rate bank loans and bank balances.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent interest rate risk as the year
end exposure does not reflect the exposure during the year.
Other price risk
The Group is exposed to equity price risk on its investments in listed equity securities at FVTOCI.
Sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to equity price risk at the reporting
date. For sensitivity analysis of equity securities with fair value measurement categorised within Level 1, the
sensitivity rate of 10% is applied in current year.
As at 31 December 2022, if the prices of the respective equity instruments had been 10% higher/lower, the
investment revaluation reserve as at 31 December 2022 would increase/decrease by RMB4,226,000 (2021:
RMB4,740,000) for the Group as a result of the changes in fair value of equity instruments at FVTOCI.
In management’s opinion, the above sensitivity analysis is for illustrative purpose only and is unrepresentative of
the inherent equity price risk facing by the Group as the year end exposure does not reflect the exposure during
the year.
Credit risk and impairment assessment
As at 31 December 2022 and 2021, the Group’s maximum exposure to credit risk which will cause a financial loss to
the Group due to failure to perform an obligation by the counterparties, is the carrying amount of the respective
recognised financial assets as stated in the consolidated statement of financial position.
In order to minimise the credit risk, the management has delegated a team responsible for determination of
credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover
overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of
the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard,
the management considers that the Group’s credit risk is significantly reduced.
The credit risk on liquid funds is limited because the majority of the counterparties are reputable banks or banks
with high credit-ratings assigned by international credit-rating agencies.
As at 31 December 2022, the Group has concentration of credit risk on total trade and bills receivables as 67.84%
(2021: 61.37%) of the total trade and bills receivables are due from the Group’s five largest customers. These five
customers are large multi-national corporations and are mobile phone and/or consumer electronic companies.
The management considers, based on the strong financial background, good creditability and repayment history
of those debtors, there are no significant credit risks.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
The Group applies the simplified approach to provide for ECL prescribed by IFRS 9, which permits the use of the
lifetime expected loss provision for trade receivables.
Management assessed the expected loss on trade receivables with significant balances or credit-impaired balances
and bill receivables individually by estimation based on historical credit loss experience, general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as the
forecast direction of conditions at the reporting date.
In determining the ECL for trade receivables with significant balances and bills receivables, the management
considers the probability of default is negligible and loss given default is low based on the external credit rating of
the customers and the bank issued bills, and accordingly, no loss allowance is made in the consolidated financial
statement.
In determining the ECL for other receivables and loan to suppliers, the management has taken into account
the historical default experience and forward-looking information, as appropriate, for example, the Group has
considered the consistently low historical default rate in connection with payments, and concluded that credit risk
inherent in the Group’s outstanding other receivables and loan to suppliers and insignificant.
In addition, the management is of the opinion that there has no default occurred for trade receivables balance
as at 31 December 2022 and 2021 in which past due 90 days or more and the balances are still considered fully
recoverable due to long term/on-going relationship and good repayment record from these customers.
As part of the Group’s credit risk management, the Group applied internal credit rating for its customers.
Other than the trade receivables with significant balances and bill receivables, the remaining balances of gross
carrying amount of RMB766,935,000 (2021: RMB930,478,000) are grouped collectively based on shared credit
risk characteristics by reference to past default experience and current past due exposure of the debtor. The
management considers the historical default rate is low for these remaining balances which is not yet past due
and accordingly, no loss allowances is made in the consolidated financial statements. The following table provides
information about the exposure to credit risk and ECL for trade receivables which are past due and assessed
collectively during the year.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
For the year ended 31 December 2022
Gross Weighted Net
carrying average Loss carrying
amount loss rate allowance amount
RMB’000 RMB’000 RMB’000
Trade receivables
1 – 90 days past due 183,066 1.33% (2,443) 180,623
91 – 180 days past due 11,609 9.51% (1,104) 10,505
Over 180 days past due 813 23.68% (192) 621
195,488 (3,739) 191,749
For the year ended 31 December 2021
Gross Weighted Net
carrying average Loss carrying
amount loss rate allowance amount
RMB’000 RMB’000 RMB’000
Trade receivables
1 – 90 days past due 138,286 1.58% (2,188) 136,098
91 – 180 days past due 37,589 9.38% (3,527) 34,062
Over 180 days past due 2 100.00% (2) –
175,877 (5,717) 170,160
The estimated loss rates are estimated based on historical observed default rates over the expected life of the
debtors and are adjusted for forward-looking information that is available without undue cost or effort. Such
forward-looking information is used by the management to assess both the current as well as the forecast direction
of conditions at the reporting date. The grouping is regularly reviewed by the management to ensure relevant
information about specific debtors is updated.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
The following table shows the movement in lifetime ECL that has been recognised for trade receivables under the
simplified approach.
Lifetime ECL Lifetime ECL
(not credit- (credit-
impaired) impaired) Total
RMB’000 RMB’000 RMB’000
As at 1 January 2021 36 20,246 20,282
Changes due to trade receivables recognised
as at 1 January 2021
– Impairment losses reversed (36) (1,603) (1,639)
New financial assets originated or purchased 5,717 – 5,717
As at 31 December 2021 and 1 January 2022 5,717 18,643 24,360
Changes due to trade receivables recognised
as at 1 January 2022
– Impairment losses reversed (4,561) – (4,561)
– Impairment loss written off – (18,643) (18,643)
New financial assets originated or purchased 2,572 – 2,572
Currency realignment 11 – 11
As at 31 December 2022 3,739 – 3,739
For amounts due from related companies, in order to minimise the credit risk, the management continuously
monitors the settlement status and the level of exposure to ensure that follow-up action is taken to recover
overdue debts. In the opinion of the management, the risk of default by these counterparties is not significant and
the Group assessed that the ECL on these balances are insignificant in accordance with IFRS 9 as at 31 December
2022 and 2021 and thus no impairment loss was recognised.
The management considers the bank balances, short-term fixed deposits and pledged bank deposits that
are deposited with the financial institutions with good credit rating to be low credit risk financial assets. The
management considers the bank balances, short-term fixed deposits and pledged bank deposits are short-term
in nature and the probability of default is negligible on the basis of high-credit-rating issuers, and accordingly,
impairment loss was considered as insignificant.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
38. FINANCIAL INSTRUMENTS (continued)
Financial risk management objectives and policies (continued)
Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents
deemed adequate by management to finance the Group’s operations and mitigates the effects of fluctuations in
cash flows.
The following table details the Group’s contractual maturity for its financial liabilities:
Weighted More Total
average On Less than 1 – 2 2 – 5 than undiscounted Carrying
interest rate demand 1 year years years 5 years cash flow amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 31 December 2022
Non-derivative financial liabilities
Non-interest bearing – 666,083 4,070,552 20,510 81,466 – 4,838,611 4,838,611
Variable interest rate 4.6% – 600,023 – – – 600,023 590,280
Fixed interest rate 2.8% – 1,253,372 1,807,411 – – 3,060,783 2,969,523
Unsecured notes 3.3% – 195,430 2,123,356 2,102,789 2,757,546 7,179,121 6,087,845
Contingent settlement provision 4.0% – 1,701,860 – – – 1,701,860 1,653,461
666,083 7,821,237 3,951,277 2,184,255 2,757,546 17,380,398 16,139,720
Lease liabilities 4.3% – 317,159 142,652 225,807 187,031 872,649 777,182
Derivatives – gross settlement
Cross currency swap contract
– inflow – (10,109) (345,023) – – (355,132) (310,652)
– outflow – 18,317 355,143 – – 373,460 326,684
– 8,208 10,120 – – 18,328 16,032
At 31 December 2021
Non-derivative financial liabilities
Non-interest bearing – 963,240 4,968,536 – – – 5,931,776 5,931,776
Variable interest rate 0.9% – 1,186,487 – – – 1,186,487 1,179,505
Fixed interest rate 3.3% – 1,746,701 345,496 – – 2,092,197 2,052,884
Unsecured notes 3.3% – 208,103 208,103 4,837,260 2,608,060 7,861,526 6,573,182
Contingent settlement provision 4.0% – – 1,856,960 – – 1,856,960 1,738,830
963,240 8,109,827 2,410,559 4,837,260 2,608,060 18,928,946 17,476,177
Lease liabilities 4.6% – 279,349 165,701 174,439 177,682 797,171 694,470
Derivatives – gross settlement
Interest rate swap contracts
– inflow – (4,133) – – – (4,133) (6,094)
– outflow – 11,114 – – – 11,114 11,108
– 6,981 – – – 6,981 5,014
Cross currency swap contract
– inflow – (9,709) (9,726) (345,423) – (364,858) (170,782)
– outflow – 18,317 18,317 382,870 – 419,504 196,360
– 8,608 8,591 37,447 – 54,646 25,578
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
39. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
Some of the Group’s financial instruments are measured at fair value for financial reporting purposes. The Directors
of the Company have set up an investment committee, which is headed up by the Chief Innovation Officer of the
Company, to determine the appropriate valuation techniques and inputs for fair value measurements.
In estimating the fair value, the Group uses market-observable data to the extent it is available. For instruments
with significant unobservable inputs under Level 3, the Group engages third party qualified valuers to perform the
valuation. The investment committee works closely with the qualified external valuers to establish the appropriate
valuation techniques and inputs to the model. The Chief Innovation Officer reports the investment committee’s
findings to the directors of the Company every quarter to explain the cause of fluctuations in the fair value.
(i) Fair value of the Group’s financial instruments that are measured at fair value on a recurring basis
Some of the Group’s financial instruments are measured at fair value at the end of each reporting period.
The following table gives information about how the fair values of these financial instruments are
determined (in particular, the valuation techniques and inputs used), as well as the level of the fair value
hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the degree to
which the inputs to the fair value measurements are observable.
Financial assets/
liabilities Fair value as at
Fair value
hierarchy
Valuation technique(s)
and key input (s)
Significant
unobservable
input(s)
Sensitivity/relationship
of unobservable
inputs to fair value
2022 2021
RMB’000 RMB’000
Equity instruments
at FVTOCI –
Listed shares
42,259 47,400 Level 1 Quoted bid prices in an active
market.
N/A N/A
Equity instruments
at FVTOCI –
Unlisted equity
investments
46,342 450,362 Level 3 Income approach. The discounted
cash flow method was used
to capture future economic
benefits or the present value
of the future expected cash
flows to be derived from
the ownership of these
investments.
Discount rate, taking into
account of weighted
average cost of capital
determined using a
Capital Asset Pricing
Model.
Forecasted future cash
flows
The higher the discount
rate, the lower the fair
value, and vice versa.
The higher the forecast
future cash flow, the
higher the fair value,
and vice versa.
Equity instruments
at FVTOCI –
Unlisted equity
investments
233,115 336,717 Level 3 Market approach. The market
approach was used to
determine the valuation based
on the recent transaction prices
of underlying investments or
using trailing-twelve-month
(“TTM”) Price-to-Sales
(“P/S”) multiples of selected
comparable listed companies
in a similar business and similar
business model and adjusted
for the lack of marketability.
The lack of marketability
discount.
TTM P/S multiples of
selected comparable
companies.
The higher the lack of
marketability discount,
the lower the fair value.
The higher the TTM P/S
multiples, the higher
the fair value.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
Financial assets/
liabilities Fair value as at
Fair value
hierarchy
Valuation technique(s)
and key input (s)
Significant
unobservable
input(s)
Sensitivity/relationship
of unobservable
inputs to fair value
2022 2021
RMB’000 RMB’000
Equity instruments
at FVTOCI –
Unlisted equity
investments
145,341 13,474 Level 3
(2021:
Level 2*)
Recent transaction prices of
underlying investments.
(2021: N/A*)
N/A N/A
Total equity
instruments
for FVTOCI
467,057 847,953
Financial assets at
FVTPL
112,468 18,471 Level 3
(2021:
Level 2*)
Market approach. The market
approach was used to
determine the valuation based
on the recent transaction prices
of underlying investments or
using TTM P/S multiples of
selected comparable listed
companies in a similar business
and similar business model
and adjusted for the lack of
marketability. (2021: N/A*)
The lack of marketability
discount.
TTM P/S multiples of
selected comparable
companies. (2021: N/A)
The higher the lack of
marketability discount,
the lower the fair value.
The higher the TTM P/S
multiples, the higher the
fair value. (2021: N/A)
Financial assets at
FVTPL
34,823 31,878 Level 3
(2021:
Level 2*)
Income approach. The discounted
cash flow method was used
to capture future economic
benefits or the present value
of the future expected cash
flows to be derived from
the ownership of these
investments. (2021: N/A*)
Discount rate, taking into
account of weighted
average cost of capital
determined using a
Capital Asset Pricing
Model.
Forecasted future cash
flows. (2021: N/A)
The higher the discount
rate, the lower the fair
value, and vice versa.
The higher the forecast
future cash flow, the
higher the fair value,
and vice versa. (2021:
N/A)
Financial assets at
FVTPL
39,012 – Level 3 Binomial Option Pricing Model Volatility of 69.78% The higher the volatility,
the higher the fair
value, and vice versa
Total financial
assets at
FVTPL
186,303 50,349
39. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued)
(i) Fair value of the Group’s financial instruments that are measured at fair value on a recurring basis
(continued)
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
Financial assets/
liabilities Fair value as at
Fair value
hierarchy
Valuation technique(s)
and key input (s)
Significant
unobservable
input(s)
Sensitivity/relationship
of unobservable
inputs to fair value
2022 2021
RMB’000 RMB’000
Interest rate swap
contracts
– 5,014
Liabilities
(under hedge
accounting)
Level 2 Discounted cash flow. Future cash
flows are estimated based on
forward interest rates (from
observable yield curves at the
end of the reporting period)
and contracted interest rates,
discounted at an applicable
discount rate taking into
account the credit risk of the
counter- parties and of the
Group as appropriate.
N/A N/A
Cross currency
swap contract
16,032
Liabilities
(under hedge
accounting)
25,578
Liabilities
(under hedge
accounting)
Level 2 Discounted cash flow. Future cash
flows are estimated based on
forward exchange rates (from
observable yield curves at the
end of the reporting period)
and contracted exchange rates,
discounted at an applicable
discount rate taking into
account the credit risk of the
counter- parties and of the
Group as appropriate.
N/A N/A
* As at 31 December 2021, the investments were made near the end of reporting period or still in the
initial setup stage since the capital contribution, the management is of the opinion that the carrying
amounts of the investments as at the year ended date approximate their fair values.
(ii) Reconciliation of level 3 fair value measurements
Equity instruments Financial assets
at FVTOCI at FVTPL
RMB’000 RMB’000
At 1 January 2021 303,995 –
Purchase made 518,821 –
Total losses:
– in other comprehensive income (25,795) –
Currency realignment (9,942) –
At 31 December 2021 787,079 –
Transfer from level 2 to level 3 13,474 50,349
Purchase made 141,952 128,816
Total losses:
– in other comprehensive income (569,851) –
Currency realignment 52,144 7,138
At 31 December 2022 424,798 186,303
Included in other comprehensive income is an amount of RMB569,851,000 loss (2021: RMB25,795,000
loss) relating to unlisted equity securities classified as equity instruments at FVTOCI held at the end of the
current reporting period and is reported as changes of FVTOCI.
39. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued)
(i) Fair value of the Group’s financial instruments that are measured at fair value on a recurring basis
(continued)
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
39. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (continued)
(iii) Fair value of the Group’s financial instruments that are not measured at fair value on recurring basis
Except for listed unsecured notes in which there is fair value based on the quoted bid price in an active
market, amounting to RMB4,971,698,000 (31 December 2021: RMB6,575,029,000), the management
considers that the carrying amounts of the other financial assets and financial liabilities recorded at
amortised cost in the consolidated financial statements approximate their fair values.
40. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s
overall capital risk management strategy remains unchanged from prior years.
The capital structure of the Group consists of equity attributable to equity holders of the Company, comprising
issued share capital, reserves and retained profits.
The management reviews the capital structure regularly. As part of this review, the management considers the
cost of capital and the risks associated with capital. The Group will consider to balance its overall capital structure
through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the
redemption of existing debt.
41. RETIREMENT BENEFITS SCHEME
The Group mainly participates in the mandatory pension fund and social insurance schemes for its employees in
the PRC, Vietnam, Singapore and Hong Kong.
The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of
the scheme are held separately from those of the Group in funds under the control of trustees.
The employees of the Group’s PRC and Vietnam subsidiaries are members of the state-managed retirement
benefits schemes operated by the PRC and Vietnam government. The employees of the Group’s Singapore
subsidiaries are members of the Central Provident Fund Board in Singapore operated by the Government of
Singapore. The subsidiaries are required to contribute a certain percentage of their payroll to the retirement
benefits schemes to fund the benefits. The only obligations of the Group with respect to the retirement benefits
schemes is to make the required contributions under the schemes.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
42. RELATED PARTY TRANSACTIONS
In addition to the related party transactions disclosed elsewhere in the consolidated financial statements, during
the year, the Group had the following significant transactions with related parties, all of which are transacted
with entities controlled by close family members of substantial shareholders of the Company. The substantial
shareholders are also Directors of the Company.
Nature of balances/transactions 2022 2021
RMB’000 RMB’000
Purchase of raw materials 56,977 65,103
Services fee recharged 2,544 2,107
Property rentals received 1,555 1,555
Payment for lease liabilities 20,341 25,837
Interest on lease liabilities 638 1,577
Leases liabilities 46,569 24,398
US$’000 US$’000
Payment for lease liabilities 161 161
Interest on lease liabilities 3 9
Lease liabilities 445 157
Emoluments paid to the key management personnel of the Company which represents the executive Directors of
the Company and the five highest paid individuals, are set out in note 9.
Balances with related parties are disclosed in note 24.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
43. PRINCIPAL SUBSIDIARIES
(a) General information of subsidiaries
Details of the Company’s principal subsidiaries as at 31 December 2022 and 31 December 2021, are as
follows:
Country of Nominal value of issued
establishment/ and fully paid share/
Name of subsidiaries operations registered capital Principal activities
Wholly-owned subsidiary in 2022 and 2021
AAC Acoustic Technologies Inc* British Virgin Islands Registered capital
– US$50,000
Investment holding
AAC Technologies Pte. Ltd.
#
Singapore Shares
– SGD500,000
Sale of products, research and
development
AAC Technologies Vietnam Co., Ltd.
(Note a)
#
Vietnam Registered capital
– US$6,500,000
Manufacture and sales of
products
香港遠宇電子有限公司
YEC Electronics Limited
#
Hong Kong Ordinary shares
– HK$10,000
Sales of acoustic related
products
瑞聲科技（香港）有限公司
AAC Technologies Limited
#
Hong Kong Ordinary shares
– HK$10,000
Sales of acoustic related
products, investment,
research and development
瑞聲（中國）投資有限公司
AAC (China) Investment Co., Ltd.
(Note b)
#
PRC Registered capital
– US$400,000,000
Investment holding
瑞泰(江蘇)投資有限公司
Ruitai (Jiangsu) Investment Co., Ltd.
(Note c)
#
PRC Registered capital
– US$349,000,000
Investment holding
瑞聲聲學科技（常州）有限公司
AAC Acoustic Technologies
(Changzhou) Co., Ltd. (Note d)
#
PRC Registered capital
– US$8,000,000
Manufacture and sales of
acoustic products, research
and development
瑞聲光電科技（常州）有限公司
AAC Microtech (Changzhou) Co., Ltd.
(Note f)
#
PRC Registered capital
– US$337,800,000
(2021: US$277,800,000)
Manufacture and sales of
electronic components,
research and development
瑞聲精密制造科技（常州）有限公司
AAC Module Technologies (Changzhou)
Co., Ltd. (Note g)
#
PRC Registered capital
– US$336,800,000
Manufacture and sales of tooling
and precision components,
research and development
瑞聲開泰精密科技（常州）有限公司
AAC Kaitai Precision Technologies
(Changzhou) Co., Ltd. (Note h)
#
PRC Registered capital
– US$150,000,000
(2021: US$120,000,000)
Manufacture and sales of
electronic components
research and development
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
Country of Nominal value of issued
establishment/ and fully paid share/
Name of subsidiaries operations registered capital Principal activities
Wholly-owned subsidiary in 2022 and 2021 (continued)
常州美歐電子有限公司
American Audio Components
(Changzhou) Co., Ltd. (Note i)
#
PRC Registered capital
– US$23,000,000
Manufacture and sales of
precision components and
acoustic products, research
and development
常州泰瑞美電鍍科技有限公司
Changzhou Tairuimei Electroplating
Technology Co., Ltd. (Note j)
#
PRC Registered capital
– RMB69,000,000
Provision of electroplating
service
瑞聲科技（沭陽）有限公司
AAC Technologies (Shuyang) Co., Ltd.
(Note k)
#
PRC Registered capital
– US$49,000,000
Manufacture and sales of
precision components for
acoustic products, research
and development
瑞聲科技信息諮詢（常州）有限公司
AAC Technology Information
Consultancy (Changzhou) Co., Ltd.
(Note r)
#
PRC Registered capital
– US$574,296,000
Investment holding
瑞聲精密電子沭陽有限公司
AAC Precision Electronics Shuyang
Co., Ltd. (Note l)
#
PRC Registered capital
– US$143,980,000
Manufacture and sales of
electronics related accessories
and components, research
and development
沭陽瑞泰科技有限公司
Shuyang Ruitai Technologies Co., Ltd.
(Note m)
#
PRC Registered capital
– US$292,000,000
Manufacture and sales of
electronic components,
research and development
瑞聲開泰（深圳）科技發展有限公司
AAC Kaitai (Shenzhen) Sci-Tech
Development Co., Ltd. (Note o)
#
PRC Registered capital
– RMB275,952,000
Sales of products
瑞聲聲學科技（深圳）有限公司
AAC Acoustic Technologies (Shenzhen)
Co., Ltd. (Note p)
#
PRC Registered capital
– US$141,580,000
Manufacture and sales of
acoustic products, research
and development
瑞泰精密（南寧）科技有限公司
AAC Raytech Module (Nanning)
Technologies Co., Ltd. (Note q)
#
PRC Registered capital
– US$100,000,000
Manufacture and sales of
products
43. PRINCIPAL SUBSIDIARIES (continued)
(a) General information of subsidiaries (continued)
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
Country of Nominal value of issued
establishment/ and fully paid share/
Name of subsidiaries operations registered capital Principal activities
Non-wholly owned subsidiary in 2022 and 2021
誠瑞光學（常州）股份有限公司
AAC Optics (Changzhou) Co., Ltd.
(Notes e&s)
PRC Registered capital
– RMB6,768,896,000
Manufacture and sales of optics
products, research and
development
誠瑞光學(蘇州)有限公司
AAC Optics (Suzhou) Co., Ltd.
(Notes n&s)
PRC Registered capital
– RMB1,417,503,000
Manufacture and sales of optics
and electronic components,
research and development
Notes:
(a) Wholly-owned foreign enterprise commencing from 20 September 2013 to 19 December 2052.
(b) Wholly-owned foreign enterprise for a term of 30 years commencing from 13 November 2012.
(c) Wholly-owned foreign enterprise for a term of 30 years commencing from 20 September 2016.
(d) Wholly-owned foreign enterprise for a term of 50 years commencing from 28 September 2003.
(e) Non-wholly owned PRC enterprise commencing from 31 December 2008.
(f) Wholly-owned foreign enterprise for a term of 50 years commencing from 13 April 2006.
(g) Wholly-owned foreign enterprise for a term of 20 years commencing from 8 May 2007.
(h) Wholly-owned foreign enterprise for a term of 20 years commencing from 29 July 2013.
(i) Wholly-owned foreign enterprise for a term of 30 years commencing from 28 January 2000.
(j) Wholly-owned foreign enterprise for a term of 20 years commencing from 11 April 2005.
(k) Wholly-owned foreign enterprise for a term of 20 years commencing from 8 November 2006.
(l) Wholly-owned foreign enterprise for a term of 20 years commencing from 13 June 2010.
(m) Wholly-owned foreign enterprise for a term of 20 years commencing from 24 September 2015.
(n) Non-wholly owned PRC enterprise for a term of 35 years commencing from 6 April 2004.
(o) Wholly-owned foreign enterprise for a term of 10 years commencing from 29 August 2013.
(p) Wholly-owned foreign enterprise for a term of 20 years commencing from 12 January 2004.
(q) Wholly-owned foreign enterprise for a term of 20 years commencing from 29 November 2017.
(r) Wholly-owned foreign enterprise for a term of 20 years commencing from 10 October 2019.
(s) The subsidiaries are non-wholly owned enterprise from July 2020. During the year ended 31
December 2020, the Group’s interests had been diluted from 100% to 82.02%. During the year
ended 31 December 2021, the Group’s interest is further diluted to 80.38% upon the issue of new
share under the Subsidiary Scheme which was vested at the date of grant. During the year ended 31
December 2022, the Group’s interest is increased to 81.10% upon the share repurchase as detailed
in note 30.
* Directly wholly-owned subsidiary
#
Indirectly wholly-owned subsidiary
The above table lists the subsidiaries of the Company which, in the opinion of the management, principally
affect the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the
management, results in particulars of excessive length.
None of the subsidiaries had issued any debt securities at the end of the year.
43. PRINCIPAL SUBSIDIARIES (continued)
(a) General information of subsidiaries (continued)
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
43. PRINCIPAL SUBSIDIARIES (continued)
(b) Details of non-wholly owned subsidiaries that have material non-controlling interests
Proportion of
Country of ownership interests
Establishment/ and voting rights Loss attributable to Accumulated
Name of subsidiary operations held by the Group non-controlling interests non-controlling interests
2022 2021 2022 2021 2022 2021
RMB’000 RMB’000 RMB’000 RMB’000
AAC Optics PRC 81.10% 80.38%* (192,079) (23,179) 539,370 681,702
Individually immaterial subsidiaries with
non-controlling interests (43) 9 – 9,632
(192,122) (23,170) 539,370 691,334
* The change in ownership interest in AAC Optics was due to vested shares under Subsidiary Scheme
as disclosed in note 35.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
44. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and
non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash
flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.
Payable
related to
Restricted
Shares Contingent
Unsecured Bank granted to Lease Dividend Interest settlement
notes loans employees liabilities payable payable provision Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 2,511,748 5,891,496 – 810,730 2 16,241 1,671,812 10,902,029
Issuance of unsecured notes 4,163,441 – – – – – – 4,163,441
Bank loans raised – 4,114,198 – – – – – 4,114,198
Repayments of bank loans – (6,767,261) – – – – – (6,767,261)
Proceed from the Subsidiary Scheme – – 92,923 – – – – 92,923
Receipt for derivative financial
instrument – – – – – 11,014 – 11,014
Payment to derivative financial
instrument – – – – – (45,739) – (45,739)
Dividend declared – – – – 403,252 – – 403,252
Dividend paid – – – – (403,252) – – (403,252)
Finance costs 9,822 14,186 – 46,016 – 299,330 66,945 436,299
Interest paid – – – (25,182) – (258,376) – (283,558)
Addition of lease liabilities – – – 370,755 – – – 370,755
Termination of leases – – – (77,498) – – – (77,498)
Balance payment of acquisition of
leasehold land – – – (373,000) – – – (373,000)
Repayment of lease liabilities – – – (54,461) – – – (54,461)
Foreign exchange translation (111,829) (58,730) – (10,464) – – 73 (180,950)
Acquisition of a subsidiary – 38,500 – 7,574 – – – 46,074
At 31 December 2021 6,573,182 3,232,389 92,923 694,470 2 22,470 1,738,830 12,354,266
Payment for repurchase of unsecured
notes (949,714) – – – – – – (949,714)
Gain on repurchase of unsecured notes (168,793) – – – – – – (168,793)
Bank loans raised – 3,243,214 – – – – – 3,243,214
Repayments of bank loans – (3,021,215) – – – – – (3,021,215)
Net payments for the Subsidiary
Scheme – – (4,025) – – – – (4,025)
Receipt for derivative financial
instrument – – – – – 5,167 – 5,167
Payment to derivative financial
instrument – – – – – (28,019) – (28,019)
Finance costs 11,955 3,250 – 25,289 – 301,743 62,620 404,857
Interest paid – – – (23,516) – (279,386) – (302,902)
Addition of lease liabilities – – – 208,901 – – – 208,901
Termination of leases – – – (9,244) – – – (9,244)
Repayment of lease liabilities – – – (123,830) – – – (123,830)
Foreign exchange translation 621,215 102,165 (1,782) 5,112 – – (200) 726,510
Return of capital contributions from
non-controlling interests of a
subsidiary and settlement of
contingent settlement provision – – – – – – (147,789) (147,789)
At 31 December 2022 6,087,845 3,559,803 87,116 777,182 2 21,975 1,653,461 12,187,384
Interest payable and dividend payable are included in other payables and accruals in note 26.
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
45. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
2022 2021
NOTE RMB’000 RMB’000
Non-current assets
Interests in subsidiaries 1,240,508 1,171,857
Current assets
Other receivables 3,888 4,167
Amounts due from subsidiaries 5,818,390 6,232,052
Cash and cash equivalents 278,358 484,510
6,100,636 6,720,729
Current liabilities
Other payables (52,556) (18,539)
Government grants (448) (448)
(53,004) (18,987)
Net current assets 6,047,632 6,701,742
Total assets less current liabilities 7,288,140 7,873,599
Non-current liabilities
Unsecured notes (6,087,845) (6,573,182)
Government grants (410) (858)
(6,088,255) (6,574,040)
Net assets 1,199,885 1,299,559
Capital and reserves
Share capital 33 97,708 98,135
Reserves 1,102,177 1,201,424
1,199,885 1,299,559
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
45. STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
Movement of reserves
Share-based
Share Treasury Special payments Retained
premium shares reserve reserve profits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 – – 33,428 – 1,552,072 1,585,500
Gain and total
comprehensive
income for the year – – – – 230,387 230,387
Purchase of shares
under share award
scheme – (211,211) – – – (211,211)
Dividend declared – – – – (403,252) (403,252)
At 31 December 2021 – (211,211) 33,428 – 1,379,207 1,201,424
Loss and total
comprehensive
expense for the year – – – – (5,796) (5,796)
Recognition of
equity-settled
share-based
payments – – – 68,651 – 68,651
Purchase of shares
under share award
scheme – (62,477) – – – (62,477)
Shares repurchase – (100,052) – – – (100,052)
Shares cancelled – 65,448 – – (65,021) 427
At 31 December 2022 – (308,292) 33,428 68,651 1,308,390 1,102,177
46. CONTINGENT LIABILITY
During the year ended 31 December 2022, the subsidiaries of the Group are defendants in a number of litigation
proceedings in respect of alleged infringement of certain invention patents and utility model patents. The
Directors of the Company consider that no provision is required because the aforesaid legal proceedings are still at
early evidence examination stage and based on the advice from the PRC legal advisers, there are valid grounds to
defend. Further details of the litigations were set out in the Company’s announcements dated 15 November 2022.
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5-Year Financial Summary
Year ended 31 December
2018 2019 2020 2021 2022
RESULTS RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 1)
Revenue 18,131,153 17,883,757 17,140,219 17,666,967 20,625,092
Reported profit before taxation 4,310,302 2,552,422 1,647,599 1,412,876 860,679
Taxation (514,417) (330,048) (146,571) (119,767) (231,496)
Reported profit 3,795,885 2,222,374 1,501,028 1,293,109 629,183
Attributable to:
Owners of the Company – reported 3,795,885 2,222,375 1,506,707 1,316,279 821,305
Non-controlling interests – (1) (5,679) (23,170) (192,122)
3,795,885 2,222,374 1,501,028 1,293,109 629,183
Reported Basic EPS RMB3.11 RMB1.84 RMB1.25 RMB1.09 RMB0.69
Adjusted recurring Basic EPS RMB3.08 RMB1.82 RMB1.25 RMB1.09 RMB0.69
Full year dividend HK$1.43 HK$0.40 HK$0.30 HK$0.20 HK$0.12
Non-GAAP financial measure of non-recurring gains and/or losses:
Adjustment related to the Group’s one-off financial asset investment in AMS AG in 2018 and 2019 and fair value
change on derivative financial instruments upon discontinued hedge relationship in 2021, as disclosed in the
annual report of reception years:
i. Fair value change on derivative
financial instruments upon
discontinued hedge relationships – – – 5,155 –
ii. Deduct the gains on one-off settlement
of final earn-out consideration (147,830) – – – –
iii. Add back the losses (deduct the fair
value gains) on financial assets at fair
value through profit and loss 118,881 (19,234) – – –
Non-GAAP measure of recurring profit
before taxation, as adjusted 4,281,353 2,533,188 1,647,599 1,418,031 860,679
Non-GAAP measure of recurring profit
attributable to owners of the Company,
as adjusted 3,766,936 2,203,141 1,506,707 1,321,434 821,305
Non-GAAP measure of basic recurring EPS,
as adjusted RMB3.08 RMB1.82 RMB1.25 RMB1.09 RMB0.69
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5-Year Financial Summary
As at 31 December
2018 2019 2020 2021 2022
ASSETS AND LIABILITIES RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 1)
Total assets 29,869,166 34,207,292 38,911,308 42,022,068 40,343,258
Total liabilities (10,935,068) (14,846,300) (17,090,473) (19,520,068) (18,147,643)
Net assets 18,934,098 19,360,992 21,820,835 22,502,000 22,195,615
Attributable to:
Owners of the Company 18,934,098 19,351,193 21,158,741 21,810,666 21,656,245
Non-controlling interests – 9,799 662,094 691,334 539,370
18,934,098 19,360,992 21,820,835 22,502,000 22,195,615
Note:
(1) In 2019, the Group had applied IFRS 16. Accordingly, certain information for the years ended 31 December 2018
may not be comparable to the years ended 31 December 2019, 2020, 2021 and 2022 as such information was
prepared under IAS 17.
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Investors Information
STOCK CODES
HKEx: 2018
Bloomberg: 2018: HK
Reuters: 2018.HK
ISIN: KYG2953R1149
2024 Note: 40075
2026 Note: 40699
2031 Note: 40700
MAJOR MARKET INDEXES
I. Hang Seng Indexes Company Limited Sub-indexes:
– TECH Index
– Composite MidCap Index
– Composite Industry Index (Industrials)
– SCHK China Technology Index
II. Hang Seng ESG Indexes:
– Corporate Sustainability Benchmark Index
– ESG 50 Index
III. Constituent stock of the FTSE4Good Index
IV. MSCI China Index:
– China ESG Universal Index
– MSCI China ESG Leaders Index
MARKET CAPITALIZATION AND SHARE PRICE PERFORMANCE
As at 31 December 2022, the market capitalization of listed shares of the Company was approximately HK$21.50 billion
or US$2.75 billion based on the total number of 1,203,250,000 issued shares of the Company and the closing price of
HK$17.84 per share.
The daily average number of traded shares was approximately 8.37 million shares over an approximate free float of 705.33
million shares in 2022. The average closing price was HK$17.88 per share, a decrease of 57.94% when compared with the
average of 2021. The highest closing price was HK$33.75 per share on 12 January 2022 and the lowest was HK$11.14 per
share on 13 October 2022.
1-year relative performance of the Company vs Hang Seng Index from 1 January 2022 to 31 December 2022 is set out
below:
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
January
February
March
April
May
June
July
August
September
October
November
December
AAC Technologies Hang Seng Hang Seng TECH
Base: 31 December 2022 closing = 1.0
Source: Bloomberg
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Investors Information
Based on the publicly available information and as far as the Directors are aware, the Company has maintained a public
float of more than 25% of the Company’s issued shares throughout the financial period ended 31 December 2022 and has
continued to maintain the public float as at the date of this annual report.
KEY DATES FOR SHAREHOLDERS
8-11 May 2023 Book Closure Period for AGM
11 May 2023 2023 AGM
August 2023 2023 Interim Results Announcement
Any changes to these dates in 2023 will be published on the websites of the Stock Exchange and the Company.
FINANCIAL REPORTS
The Company’s financial reports are printed in English and Chinese language and are available at the Company’s
website: www.aactechnologies.com
and on the designated website of Hong Kong Exchange and Clearing Limited at
www.hkexnews.hk
. The registered shareholders who registered directly with Hong Kong branch share registrar and
transfer office, Computershare, and the non-registered shareholders who are not directly registered with Computershare
but through CCASS, will receive a letter to choose to receive the financial reports in printed form or by electronic means.
Both registered shareholders and non-registered shareholders who have chosen to receive the financial reports using
electronic means and who for any reason have difficulty in receiving or gaining access to the financial reports will promptly
upon request be sent a printed copy free of charge.
Both registered shareholders and non-registered shareholders may at any time change their means of receipt of the
financial reports by reasonable notice in writing (not less than seven days) to the Company or Computershare at the
address stated in “Corporate Information” of this annual report or via e-mail ([email protected]
).
CONTACT INVESTOR RELATIONS
Address: Unit 1605–7, China Evergrande Centre, 38 Gloucester Road, Wanchai, Hong Kong
Tel: +852 3470 0060
Fax: +852 3470 0103
Email: [email protected]
Official IR Wechat Group:
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Definition and Glossary
Abbreviations Meanings
General
12m ECL 12-month ECL
AAC/AAC Technologies/the Company AAC Technologies Holdings Inc.
AAC Optics AAC Optics (Changzhou) Co., Ltd.
ACM Association for Computing Machinery
AGM Annual General Meeting
Articles The articles of association of the Company
Board The board of directors of the Company
CAPEX Capital expenditure
CCASS Central Clearing and Settlement System
CEO Chief Executive Officer
CG Code Corporate Governance Code
CGU(s) Cash-generating unit(s)
Code Provision(s) Code Provisions of the CG Code
Committees Committees of the Board
Computershare Hong Kong branch share registrar and transfer office, Computershare Hong
Kong Investor Services Limited
COSO Committee of Sponsoring Organizations of the Treadway Commission
COVID-19 Novel Coronavirus
CSR Corporate Social Responsibility
CSRC The China Securities Regulatory Commission
Deloitte Deloitte Touche Tohmatsu
Director(s) The director(s) of the Company
EBITDA Profit (Earnings) before interest, tax, depreciation and amortization
ECL Expected credit losses
ED Executive Director
EGM Extraordinary General Meeting
EIT Law Law of the PRC on Enterprise Income Tax
EPS Earnings per share
ERA Enterprise Risk Assessment
ERM Enterprise Risk Management
ESG Environmental, Social and Governance
FVTOCI Fair value through other comprehensive income
FVTPL Fair value through profit or loss
FY 2021 Fiscal year of 2021
FY 2022 Fiscal year of 2022
GRI Global Reporting Initiative
HKEx/Hong Kong Stock Exchange/
Stock Exchange
The Stock Exchange of Hong Kong Limited
HKICPA Hong Kong Institute of Certified Public Accountants
HKMA Hong Kong Monetary Authority
HKSAs Hong Kong Standards on Auditing
HNTE High-New Technology Enterprises
Hong Kong Companies Ordinance/CO The Companies Ordinance (Chapter 622 of the Laws of Hong Kong)
Hong Kong Listing Rules/Listing Rules The Rules Governing the Listing of Securities on the Stock Exchange of Hong
Kong Limited
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Definition and Glossary
Abbreviations Meanings
IAS International Accounting Standard
IDC International Data Corporation
IEEE Institute of Electric and Electronic Engineers
IFRIC International Financial Reporting Interpretations Committee
IFRSs International Financial Reporting Standards
INED(s) Independent non-executive Director(s)
IR Investor Relations
ISO 14001 The International Standard that specifies requirements for an effective
environmental management system (EMS)
ISO 27001 The International Standard that sets out the specification for an information
security management system (ISMS)
IT Information Technology
Memorandum Memorandum of Association of the Company
Model Code Model Code for Securities Transactions by Directors of Listed Issuer under
Appendix 10 of the Hong Kong Listing Rules
MSCI Morgan Stanley Capital International
Q4 2022 The fourth quarter of 2022
P/S Price-to-Sales
ROA Return on average total assets
ROE Return on average equity
R&D Research & Development
SFO Securities and Futures Ordinance
2016 Share Award Scheme/AAC Share
Award Scheme/Scheme
The Employee’s Share Award Scheme adopted by the Board on 23 March
2016
Shareholders The shareholders of the Company
Suzhou Speed Suzhou Speed Communication Technology Limited, which was renamed as
TRM Precision Manufactory (Suzhou) Ltd. on 11 May 2022
The Code HKICPA’s Code of Ethics for Professional Accountants
The Group AAC Technologies Holdings Inc. and its subsidiaries
Toyo Precision Toyo Precision Appliance (Kunshan) Co., Ltd., which was renamed as TRM
(Kunshan) Technologies Co., Ltd. on 3 August 2022
TTM Trailing-twelve-month
ppts Percentage points
QoQ Quarter-on-Quarter
YoY Year-on-Year
China/PRC People’s Republic of China
Hong Kong Hong Kong Special Administrative Region of PRC
US/USA/America United States of America
HKD/HK$ Hong Kong dollars, the lawful currency of Hong Kong
RMB Renminbi, the lawful currency of PRC
SGD Singapore dollars, the lawful currency of the Republic of Singapore
USD/US$ US Dollars, the lawful currency of United States
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Definition and Glossary
Abbreviations Meanings
Industry
AR Augmented Reality
COBIT Control Objectives for Information and related Technology
LDS Laser Direct Structuring
LiDAR Light Detection and Ranging
MEMS Micro Electro-Mechanical Systems
OIS Optical Image Stabilizer
RF Radio Frequency
SLS Super Linear Structure
VCM Voice Coil Motor
VR Virtual Reality
WLG Wafer-level glass