2023 Annual Report
Stock Code: 601231 Abbreviated Name: USIConvertible Bond Code:113045 Abbreviated Name: USI Convertible Bond
Universal Scientific Industrial (Shanghai) Co., Ltd.
2023 Annual Report
Note: This Report has been prepared in both Chinese and English. Should there be any discrepancies ormisunderstandings between the two versions, the Chinese version shall prevail.
2023 Annual Report
Important NoticeI. The Board of Directors, the Board of Supervisors, directors, supervisors and seniormanagement of the Company hereby assure that the content set out in the annual report istruthful, accurate and complete, and contains no misrepresentations, misleading statements ormaterial omissions, and are individually and collectively responsible for the content set outtherein.
II. All directors attended the Board of Directors meeting.
III. Deloitte Touche Tohmatsu Certified Public Accountants LLP has issued a standard unqualified
audit report for the Company.
IV. Jeffrey Chen, person in charge of the Company, Tan-Yang Liu, person in charge of accounting,and Yuh-Huah Chern, person in charge of the accounting firm (accountant in charge) declarethat the financial report in the annual report is truthful, accurate and complete.
V. The proposal of profit distribution for the reporting period deliberated and approved by theBoard of DirectorsRegarding its profit distribution plan for 2023, USI is going to distribute a cash dividend of RMB 2.70(tax included) for every 10 shares on the basis of the total share capital on the record date for implementingthe plan after deducting the number of shares in its special buy-back securities account, without bonusshare or transfer of capital reserve into share capital, and all the remaining undistributed profits werecarried forward for distribution in the following years. In case of any change in the total share capital ofthe Company and the number of shares in its buy-back securities account prior to the record date forimplementing the plan, the cash dividend per share shall remain unchanged, and the total amount of cashdividend shall be adjusted accordingly.The Company's Profit Distribution Plan for the 2023 was deliberated and approved at the Tenth Meetingof the Sixth Session of the Board of Directors of the Company, and it still needs to be deliberated at theCompany's 2023 Annual General Meeting of Shareholders.
VI. Risk disclosure for forward-looking statements
√Applicable □ Not Applicable
This report involves forward-looking statements such as future plans, and does not constitute a materialcommitment of the Company to investors. Investors are requested to pay attention to investment risks.
VII. Are there any funds occupied by controlling shareholder or other related parties for non-operational purposes?No
2023 Annual Report
VIII. Is there any external guarantee in violation of the prescribed decision-making process?No
IX. Are more than half of the directors unable to guarantee the truthfulness, accuracy andcompleteness of the annual report disclosed by the Company?No
X. Major risk disclosureThe major risks facing the Company are described in “Possible Risks” of “Discussion and Analysis ofCorporate Development in the Future” in this report.
XI. Others
√Applicable □ Not Applicable
2023 Annual Report
Contents
Section I Definitions ...... 5
Section II Company Profile and Key Financial Indicators ...... 7
Section III Management Discussion and Analysis ...... 12
Section IV Corporate Governance ...... 50
Section V Environmental and Social Responsibility ...... 83
Section VI Major Events ...... 93
Section VII Changes in Shares and Information of Shareholders ...... 120
Section VIII Information on Preferred Shares ...... 130
Section IX Information on Bonds ...... 131
Section X Financial Statements ...... 135
| Catalog of files for reference | Accounting statements signed and sealed by the person in charge of the Company, the person in charge of accounting and the person in charge of the accounting firm |
| Original audit report sealed by the accounting firm and signed and sealed by certified public accountants | |
| Original copies of all documents and announcements of the Company publicly disclosed in newspapers designated by CSRC during the reporting period |
2023 Annual Report
Section I Definitions
I. DefinitionsIn this report, the following terms shall have the following meanings unless the context otherwiserequires:
| The Company, the Group, USI, or the listed company | Universal Scientific Industrial (Shanghai) Co., Ltd. |
| SSE | Shanghai Stock Exchange |
| USIE | USI Enterprise Limited, the controlling shareholder of the Company, registered in Hong Kong |
| Universal Scientific Industrial Co., Ltd. | Universal Scientific Industrial Co., Ltd., a company listed on the Taiwan Stock Exchange with the stock code 2350, which terminated its listing on June 17, 2010 |
| ASE Technology Holding | ASE Technology Holding Co., Ltd., a company listed on the Taiwan Stock Exchange with the stock code 3711 |
| ASE Inc. | Advanced Semiconductor Engineering, Inc., formerly listed on the Taiwan Stock Exchange with the stock code 2311 and delisted in 2018. |
| ASE Shanghai | ASE (Shanghai) Inc., a subsidiary of ASE Inc. in which it holds 100% shares |
| UGT | Universal Global Technology Co., Limited, a subsidiary of the Company in which the Company holds 100% shares, registered in Hong Kong |
| UGT Shanghai, Jinqiao Subsidiary, Jinqiao Factory | Universal Global Technology (Shanghai) Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| USI Shenzhen, Shenzhen Subsidiary, Shenzhen Factory | USI Electronics (Shenzhen) Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| UGT Kunshan, Kunshan Subsidiary, Kunshan Factory | Universal Global Technology (Kunshan) Co., Ltd., a wholly-owned subsidiary of the Company |
| UGE | Universal Global Electronics Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| UGT Huizhou, Huizhou Subsidiary, Huizhou Factory | Universal Global Technology (Huizhou) Co., Ltd., a subsidiary of the Company in which the Company holds 100% shares |
| UGSI | Universal Global Scientific Industrial Co., Ltd., registered in Taiwan, a subsidiary of the Company in which the Company holds 100% shares |
| USI Vietnam, Vietnam Subsidiary, Vietnam Factory | Universal Scientific Industrial Vietnam Company Limited, a subsidiary of the Company in which the Company holds 100% shares |
| FAFG | Financière AFG, a simplified joint stock company established and validly existing under the laws of France and a subsidiary of the Company in which the Company holds 100% shares |
| ASDI | ASDI Assistance Direction, a simplified joint stock company established and validly existing under the laws of France |
| AFG | Asteelflash Group, a simplified joint stock company established and validly existing under the Laws of France. It is a subsidiary of FAFG in which FAFG holds 100% shares. Since January 1, 2022, it has been merged into its parent company FAFG. |
| FAFG Suzhou, Suzhou Factory | Asteelflash (Suzhou) Co., Ltd., a subsidiary of FAFG in which FAFG holds 100% shares |
| USI Poland, Poland Factory | Formerly known as Chung Hong Electronics Poland SP.Z. O.O; the Company completed the acquisition of 100% of its |
2023 Annual Report
| equity on June 22, 2020, and it was renamed Universal Scientific Industrial Poland Sp.z o.o. | |
| Memtech | Memtech International Ltd., which was listed on the Singapore Stock Exchange in 2004, and was delisted on August 22, 2019. The Company indirectly holds 42.23% of its equity. |
| Hirschmann | Hirschmann Car Communication Holding S.a.r.l., a limited liability company established in Luxembourg, is headquartered in Germany and has production sites in Germany, Hungary and China. USI and Ample Trading completed the acquisition of 100% of its shares in October 2023. |
| EMEA | Abbreviation for Europe, the Middle East, and Africa |
| APAC | Abbreviation for the Asia-Pacific region |
| Americas | North and South America |
| EMS | Electronic Manufacturing Services, the services provided by manufacturers for electronic brand owners, such as manufacturing, procurement, partial design and logistics |
| ODM | Original Design and Manufacturer |
| DMS | Design and Manufacturing Services |
| D(MS)2 | An acronym for DMS combined with Miniaturization and Solution |
| SMT | Surface Mount Technology, a new generation of electronic assembly technology, which compresses traditional electronic components into components that mare tens of times smaller than their original volume and realizes high-density, highly reliable, miniaturized and low-cost assembly of electronic products, as well as automated production. The process for assembling components onto printed (or other) substrates is called SMT process, and the associated assembly equipment is called SMT equipment. |
| PCB | Printed Circuit Board, known as the “cornerstone” of electronic products. A large number of electronic parts used in electronic products are embedded on PCBs of different sizes. In addition to fixing parts, the main function of PCBs is to provide circuit connections between various parts. |
| SiP | System in Package; multiple functional wafers, including processors and memory wafers, are integrated into a package according to the application scenarios, the number of package substrate layers and other factors, so as to achieve a basic package scheme with complete functions |
| CAGR | Compound Annual Growth Rate |
| YoY | Year Over Year |
| The reporting period or current period | January 1, 2023 to December 31, 2023 |
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Section II Company Profile and Key Financial IndicatorsI. Company profile
| Name in Chinese | Universal Scientific Industrial (Shanghai) Co., Ltd. |
| Abbreviation in Chinese | USI |
| Name in English | Universal Scientific Industrial (Shanghai) Co., Ltd. |
| Abbreviation in English | USISH |
| Legal representative | Jeffrey Chen |
II. Contact
| Secretary of the Board of Directors | Securities affairs representative | |
| Name | Jinpeng Shi | Lily Liu |
| Address | F/5, Building B, 169 Shengxia Road, Pudong New Area, Shanghai | F/5, Building B, 169 Shengxia Road, Pudong New Area, Shanghai |
| Tel. | 021-58968418 | 021-58968418 |
| Fax | 021-58968415 | 021-58968415 |
| Public@usiglobal.com | Public@usiglobal.com |
III. Basic information
| Registered address | 1558 Zhangdong Road, Integrated Circuit Industrial Zone, Zhangjiang Hi-tech Park, Shanghai |
| Change record of registered address | None |
| Office address | F/5, Building B, 169 Shengxia Road, Pudong New Area, Shanghai |
| Zip code of office address | 201203 |
| Website | www.usiglobal.com |
| Public@usiglobal.com |
IV. Information disclosure and place at which the report is available
| Names and websites of press media on which the Company discloses its annual report | Shanghai Securities News, China Securities Journal, and Securities Times |
| Website of the stock exchange on which the Company discloses its annual report | www.sse.com.cn |
| Annual report available at | Securities Department of the Company |
V. The Company's stocks
| The Company's Stocks | ||||
| Stock class | Listed on | Abbreviated Name | Stock Code | Former Abbreviated Name |
| A-share | Shanghai Stock Exchange | USI | 601231 | None |
| Corporate bonds convertible into the Company’s A shares | Shanghai Stock Exchange | USI Convertible Bond | 113045 | None |
VI. Other related information
| Domestic accounting firm hired by the Company | Name | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Office address | F/30, 222 East Yan’an Road, Shanghai | |
| Names of accountants who | Yuan Shouqing, and Hu Ke |
2023 Annual Report
| give their signatures | ||
| Sponsor organization that performs the duty of continuous supervision during the reporting period | Name | Haitong Securities Co., Ltd. |
| Office address | 888 South Zhongshan Road, Shanghai | |
| Names of sponsor representatives who give their signatures | Zhang Zihui, and Chen Hengrui | |
| Period of continuous supervision | April 2, 2021 to December 31, 2022 |
Note: As the Company has not used up the raised funds or completed the conversion of the convertiblebonds, the sponsor will continue to perform its responsibility of continuous supervision over the use ofthe raised funds.
VII. Key accounting data and financial indicators in the past three years(I) Key accounting data
Unit: yuan Currency: RMB
| Key accounting data | 2023 | 2022 | YoY (%) | 2021 |
| Revenue | 60,791,909,537.87 | 68,516,075,963.26 | -11.27 | 55,299,654,770.21 |
| Net profits attributable to shareholders of the listed company | 1,947,846,866.12 | 3,059,967,081.20 | -36.34 | 1,857,968,074.82 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses | 1,779,078,630.35 | 3,010,200,488.88 | -40.90 | 1,695,083,855.46 |
| Net cash flows from operating activities | 6,823,435,492.62 | 3,435,196,255.50 | 98.63 | -1,102,446,978.90 |
| End of 2023 | End of 2022 | YoY (%) | End of 2021 | |
| Net assets attributable to shareholders of the listed company | 16,990,407,623.67 | 15,749,394,179.86 | 7.88 | 13,081,960,207.42 |
| Total assets | 39,306,382,898.66 | 38,574,464,731.16 | 1.90 | 35,856,733,503.81 |
(II) Key financial indicators
| Key financial indicators | 2023 | 2022 | YoY (%) | 2021 |
| Basic EPS (yuan/share) | 0.89 | 1.40 | -36.43 | 0.85 |
| Diluted EPS (yuan/share) | 0.87 | 1.35 | -35.56 | 0.83 |
| Basic EPS net of non-recurring gains/losses (yuan/share) | 0.81 | 1.38 | -41.30 | 0.77 |
| Weighted average ROE (%) | 12.02 | 21.43 | Down 9.41 pct. | 14.83 |
| Weighted average ROE net of non-recurring gains/losses (%) | 10.98 | 21.08 | Down 10.10 pct. | 13.53 |
Explanation of the Company’s key accounting data and financial indicators in the past three years at theend of the reporting period
√Applicable □ Not Applicable
Revenue during the reporting period decreased by 11.27% YoY, mainly because (1) following changes inthe global economy and end market demand, communications products and consumer electronics products
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experienced a YoY decrease in revenue due to sluggish demand; (2) cloud and Storage productsexperienced a significant YoY decline due to structural adjustments in product demand; (3) automotiveelectronics products and medical electronics products continued to grow YoY, mainly due to theCompany's expansion of new customers and increased customer demand.Net profit attributable to shareholders of the listed company decreased by 36.34% YoY during thereporting period, which was mainly due to the decrease in the Company's revenue in 2023, as well as theimpact of the increase in the material cost rate and the decrease in exchange-related gains, and thereforethe decrease in operating profit and net profit exceeded the decrease in revenue.Net profits attributable to shareholders of the listed company net of non-recurring gains/losses for thereporting period decreased by 40.90% YoY, and the main reason is that due to the decrease in the netprofit of the Company in 2023, as well as the increase in the realized gains from financial assets andgovernment grants received, the amount of non-recurring gains and losses for the period increased by
239.12% YoY.
VIII. Accounting data differences under domestic and overseas accounting standards(I) Differences in net profits and net assets attributable to shareholders of the listed company in the
financial report disclosed under international accounting standards and Chinese accountingstandards
□Applicable √Not Applicable
(II) Differences in net profits and net assets attributable to shareholders of the listed company in thefinancial report disclosed under overseas accounting standards and Chinese accountingstandards
□Applicable √Not Applicable
(III) Explanation of differences between Chinese accounting standards and overseas accountingstandards
□Applicable √Not Applicable
IX. Key financial data by quarter for 2023
Unit: yuan Currency: RMB
| Q1 (Jan.-Mar.) | Q2 (Apr – Jun) | Q3 (Jul – Sep) | Q4 (Oct – Dec) | |
| Revenue | 12,998,168,439.83 | 13,867,465,732.95 | 16,191,371,617.51 | 17,734,903,747.58 |
| Net profits attributable to shareholders of the listed company | 277,457,152.84 | 489,810,672.49 | 625,253,216.58 | 555,325,824.21 |
| Net profits attributable to shareholders of the listed company net of non-recurring gains/losses | 219,683,026.20 | 474,173,065.63 | 580,788,156.35 | 504,434,382.17 |
| Net cash flows from operating activities | 2,545,922,484.41 | 1,234,632,685.56 | 359,750,163.45 | 2,683,130,159.20 |
Explanation for differences between the quarterly data and formerly disclosed data in periodic reports
□Applicable √Not Applicable
X. Non-recurring profit or loss
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Items of non-recurring | 2023 | Notes (if | 2022 | 2021 |
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| gains/losses | applicable) | |||
| Gains and losses on disposal of non-current assets, including the write-off of asset impairment provisions | 5,463,221.02 | See Note (VII) 68, 73, 75 | 2,724,930.03 | -9,115,989.64 |
| Government grants recognized in profit or loss (other than grants which are closely related to the Company's business, have a lasting impact on the Company's profits and losses and are either in fixed amounts or determined under quantitative methods in accordance with the national standard) | 71,813,784.39 | See Note (XI) 3 | 56,144,655.78 | 50,678,106.85 |
| Profit or loss on changes in the fair value of financial assets and financial liabilities and investment income on disposal of financial assets and financial liabilities held by non-financial companies, other than those used in the effective hedging activities relating to normal operating business | 106,839,747.09 | See Note (VII) 68, 70 | 96,937,973.50 | 134,150,704.71 |
| Write-back of provisions for receivables impairment subject to separate impairment tests | 0.00 | 0.00 | 2,836,069.00 | |
| One-time costs incurred by enterprises due to the fact that the relevant business activities are no longer sustainable, such as expenses for relocating employees | -3,701,028.03 | -65,435,485.39 | 0.00 | |
| The impact of one-time adjustment of current profit and loss in accordance with tax, accounting and other laws and regulations | 0.00 | -49,852,343.57 | 0.00 | |
| Other non-operating income or expenses other than the above | 12,916,711.91 | See Note (VII) 74, 75 | 22,281,394.77 | 18,576,128.64 |
| Less: tax effects | 24,950,729.58 | 13,033,613.18 | 34,238,090.20 | |
| Effects attributable to minority interests (After tax) | -386,528.97 | 919.62 | 2,710.00 | |
| Total | 168,768,235.77 | 49,766,592.32 | 162,884,219.36 |
Explanations for significant amount of extraordinary gain or loss items identified by the Company but notlisted in the “Explanatory Announcement No.1 for Public Company Information Disclosures –Extraordinary Gains or Losses”, and recurring gain or loss items identified by the Company which arelisted as extraordinary gain or loss items in the “Explanatory Announcement No.1 for Public CompanyInformation Disclosures – Extraordinary Gains or Losses”.
□Applicable √Not Applicable
XI. Items measured at fair value
√Applicable □ Not Applicable
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Unit: yuan Currency: RMB
| Name of project | Opening amount | Closing balance | Change in the current period | Impact on profit of the current period |
| Financial assets held for trading | 271,243,519.53 | 245,558,007.22 | -25,685,512.31 | 78,795,857.46 |
| Other equity instruments | 38,420,782.40 | 38,935,237.58 | 514,455.18 | 0.00 |
| Other non-current financial assets | 170,126,278.86 | 193,994,862.05 | 23,868,583.19 | 25,098,870.95 |
| Derivative financial liabilities | -3,118,891.32 | -173,872.64 | 2,945,018.68 | 2,945,018.68 |
| Total | 476,671,689.47 | 478,314,234.21 | 1,642,544.74 | 106,839,747.09 |
XII. Others
□Applicable √Not Applicable
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Section III Management Discussion and AnalysisI. Discussion and analysis of corporate operationsUSI is a global leader in electronic design and manufacturing as well as a leader in the field of SiP (System-in-Package) technology. The Company has 30 production and service locations across four continents ofAsia, Europe, Americas, and Africa, and offers customer diversified electronic products with D(MS)
product services: Design, Manufacturing, Miniaturization, Industrial software and hardware Solutions,and material procurement, logistics and maintenance Services.(I) An overview the Company's performance in 2023In 2023, the global demand for electronic products went down, the supply chain was in the de-stockingstage, the external operating environment deteriorated compared to 2022, and the Company's revenue in2023 decreased by 11.27% YoY. In response to the trend of global supply chain restructuring andeconomic and trade regionalization, the Company continued to invest in overseas production capacity andoperating costs increased, in addition, factors such as supply chain cost-cutting pressure and changes inthe exchange rate of RMB to USD also contributed to the YoY decline in the Company's gross profitmargin and operating profit margin in 2023. The Company realized operating profit of RMB 2.18 billionin 2023, a decrease of 37.08% YoY, resulting in a corresponding decrease in total profit and net profitattributable to shareholders of the listed company.(II) Changes in revenueThe Company realized total revenue of RMB 60.79 billion in 2023, down 11.27% from the previous year.Specifically, the revenue of medical electronics increased by 85.98% YoY; the revenue of automotiveelectronics increased by 10.18% YoY; the revenue of communication electronics decreased by 14.93%YoY; the revenue of consumer electronics decreased by 11.39% YoY; the revenue of industrial electronicsdecreased by 5.68% YoY; the revenue of cloud and storage decreased by 23.07% YoY.Changes in revenue by product category reflect changes in the global economy and end-market demand.Communications products and consumer electronics products experienced a YoY decrease in revenue dueto sluggish demand; cloud and storage products experienced a significant YoY decline due to structuraladjustments in product demand; automotive electronics products and medical electronics productscontinued to grow YoY, mainly due to the Company's expansion of new customers and increased customerdemand.(III) Changes in expenses and profitsAffected by the increase in material cost rate and the decrease in exchange-related gains, the Company'sgross profit margin in 2023 was 9.63%, a decrease of 0.86 percentage points YoY, and the operating profitmargin was 3.58%, a decrease of 1.47 percentage points YoY, and the Company achieved an operatingprofit of RMB 2.18 billion in 2023, a decrease of 37.08% YoY.The Company strengthened cost control in 2023 and its total sales expenses, administrative expenses,R&D expenses and financial expenses in 2023 added up to RMB 3.60 billion, down RMB 196 million or
5.17% YoY. Among them, administrative expenses decreased by RMB 206 million, or 14.52% YoY;R&D expenses decreased by RMB 227 million, or 11.17% YoY; selling expenses increased by RMB 44million, or 13.6% YoY, mainly due to the increase in the global sales layout after the epidemic; andfinancial expenses increased by RMB 193 million, a large YoY increase, mainly due to the YoY decreasein net foreign currency exchange gains and the increase in foreign currency borrowing costs in 2023.Affected by the YoY decline in operating profit, the Company realized total profit of RMB2.19 billion in2023, a YoY decrease of 37.03%, and net profit attributable to shareholders of the listed company ofRMB1.95 billion, a YoY decrease of 36.34%.(IV) Key results of work in 2023
1. Continuous investment in overseas production capacity
The Company's global manufacturing footprint continued to expand in 2023 with a new plant in Polandand a second plant in Mexico, which is expected to be put into operation in mid-2024. In October 2023,
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the Company successfully completed a transaction to acquire the automotive wireless business of TEConnectivity, a significant milestone in the Company's growth strategy.In 2023, the Company established a "Digital Transformation Center" to promote the optimization of globaloperation management processes, in order to integrate global operation capabilities, match the Company'sglobalization process, and enhance the efficiency and competitive advantage of "global platform, localizedservice".
2. Prudent inventory control and sound operation
In 2023, the electronics industry chain is still in a downward economic cycle. Affected by the slowdownin demand growth in the post-epidemic era, the destocking of the supply chain is slower than expected.The Company actively controls inventory, which was reduced from RMB 10.9 billion at the end of 2022to 8.3 billion yuan at the end of 2023, and the amount of working capital occupied has been significantlyreduced.
3. Accelerated promotion of intelligent manufacturing
The Company's core business is to provide high-efficiency, high-quality electronic manufacturing services.The Company has deployed smart lights-out factories and is committed to developing a morecomprehensive "Industry 4.0" smart manufacturing blueprint, covering product design, production andmanufacturing, supply chain management and other aspects. In 2023, the lights-out factory of ShanghaiZhangjiang Factory will be upgraded to a new scale, with the number of robot arms expanded by 2.5 times,integrating Industry 4.0, artificial intelligence, war room, automatic guided vehicle (AGV), automatedmaterial handling system (AMHS), intelligent warehousing, automatic scheduling, remote control anddata collection, provide customers with the most advanced intelligent manufacturing solutions.
4. ESG performance hits another milestone
The Company adheres to the sustainable development strategy of "low-carbon, circular, inclusive, andcollaborative" and is committed to practicing social responsibilities and pursuing sustainable developmentin which the environment, society and governance coexist and prosper. With a total score of 90 in the 2023S&P Global Corporate Sustainability Assessment (CSA), the Company achieved the highest CSA scoreout of 451 companies assessed in the Electronic Equipment, Instruments & Components Industry and wasrecognized in the S&P Global Sustainability Yearbook for the third consecutive year.
II. Industry of the Company during the reporting period(I) Basic situation of the industryThe EMS industry mainly provides integrated solutions such as design, engineering development, rawmaterial procurement, manufacturing, testing, logistics, and after-sales service for various electronicproducts and equipment.Main product areas involved in EMS mainly include 3C (i.e. Computer, Communication, ConsumerElectronics), cloud, artificial intelligence, automobile, industrial, medical, transportation, energy,aerospace and other fields, among which consumer electronics occupies the most important share. Thegrowing demand for smart phones, smart wearable devices, XR (Virtual Reality, Augmented Reality andMixed Reality) devices, computers, computing power and cloud, smart home, smart cabin and otherproducts has driven the rapid development and continuous upgrading of chips, storage, electroniccomponents, modules and smart manufacturing.China has the largest market share and the most competitive supply chain in the global EMS industry. Thedemand for nearshoring and friend-shoring outsourcing in the global supply chain is increasing rapidly,promoting the industry to invest in expanding production capacity in Mexico, Southeast Asia, India,Eastern Europe and other regions, and also driving the transfer of production capacity in the upstreamsupply chain. In the future, the industry will also continue to improve in such aspects as productioncapacity scale and industrial chain clustering.(II) Industry characteristics and development trends
1. The industry has a large overall scale, with high industry concentration and fierce competition
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According to industry statistics, the global EMS industry had a market size of approximately USD 724billion and high industry concentration in 2023, with top ten global manufacturers accounting for morethan 70% of the total revenue. The industry-leading enterprises have accumulated rich customer resourcesand industry experience, developed strong supply chain management capabilities and bargaining power,have a large scale of assets and revenues, and thus maintain a stable leading position. In general, electronicproducts were still in the destocking stage of the supply chain in 2023, and inflation in major economiesand US dollar interest rate hikes had a negative impact on industry demand. Meanwhile, in the context ofglobal supply chain restructuring and economic and trade regionalization, Chinese mainland's EMSindustry and upstream supply chain were facing more challenges.In addition, technological progress continues to promote the upgrading and iteration of electronic productsand equipment. Enterprises in the industry have been under great operating pressure for a long time, suchas product innovation, quality improvement, cost reduction and efficiency improvement, and continuousinvestment. Enterprises need to work hard to develop new products and incremental customer demand,enhance design and development capabilities, refine processes, improve intelligent manufacturing andresearch and development (R&D) capabilities, increase customer stickiness, and offer more added valueof products.
2. Technological innovation empowers consumer electronics to upgrade
(1) “AI +” products
Currently, AI has become the focus of the industry and is widely considered to be another foundationaltechnological milestone for mankind after steam engines, internal combustion engines, electricity,semiconductors and information technology. It has become a consensus that AI empowers all walks oflife. Through AI empowerment or "AI+", consumer electronics products are expected to achieve newbreakthroughs in terms of optimizing interaction methods, improving usage efficiency, and enhancingoriginal functions. In addition, driven by the need for data security and cost reduction, the deployment ofAI models has begun to move from the cloud to mobile terminals and edge terminals.Well-known consumer electronics brands and some new brands have launched "AI+" consumerelectronics products, such as the Galaxy AI Phone released by Samsung, which uses locally runninggenerative artificial intelligence models to provide features including Live Translate, Note Assist andPhoto Assist, so that users can complete tasks through simple interaction with the phone, which previouslyrequired complex tools and operations. Products such as AI PC, AI Pin, and Rabbit R1 launched on themarket have also attracted widespread attention from consumers.In the future, using AI-enabled core terminal devices such as mobile phones and computers in daily lifescenarios such as home, work, and travel, people can seamlessly connect and interact in real time withsmart wearable devices (such as Smart Watch, TWS, XR, etc.) and smart IoT devices in home and officescenarios (such as home appliances, furniture, office equipment, etc.) with the help of new-generationcommunication technologies featuring high bandwidth, low latency, and easy access, such as WiFi 7,UWB, and mmWave. Based on Artificial Intelligence of Things (AIoT), AI can actively perceive andanalyze consumer needs in real time, and collaborate with electronic devices to provide more convenientand efficient services.
(2) XR devices
In recent years, the concept of metaverse has attracted much attention. Following this trend, manycompanies in gaming, technology, and Internet industries have entered the VR industry, and AR and MRhead-mounted display devices have been innovating and rolling out new products. In 2023, Apple releasedthe smart head-mounted display device Vision Pro, and launched a new Vision OS ecosystem with "SpatialComputing" as the core, which allows users to interact with the device using "eye movement" plus "handgesture" control methods, and brings a refreshing audio-visual experience through 4K Micro OLEDscreens and spatial audio. Vision Pro leads the innovative iteration of XR devices, and draws the marketattention to the release of new products in the form of AR Glasses.
3. Demand for AI computing power and data exchange surges
ChatGPT has set off an AI craze. Since 2023, accelerated iterations of large generative AI models,increasingly higher demand for large AI model training and inferencing, and oversubscription of GPUchips and AI servers have all driven the growing demand for edge servers. Edge servers can process and
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analyze data in real time on AI-based terminals, reducing data transmission delays and costs, improvingresponse speed, and reducing risks during data transmission.In addition to computing power, AI large models require more efficient and lower-latency datatransmission and exchange, thus promoting the upgrade of network infrastructure and driving the growthof demand for hardware products such as high-speed optical fiber networks, high-speed optical modules,HBM, high-speed network cards and switches, heat dissipation and server cooling systems.
4. Automotive electronics maintains growth potential
In the future, cars will become a "mobile smart space" for people to travel while meeting the needs ofleisure, working, audio and video entertainment, etc. Smart cabins and autonomous driving will continueto be upgraded and iterated. Meanwhile, the penetration rate of automobile electrification will continue toincrease. In consideration of production costs, car running costs and market demands, users can choosebattery electric vehicles (BEV), hybrid electric vehicles (HEV), plug-in hybrid electric vehicles (PHEV),hydrogen fuel cell vehicle (FCV) and other differentiated solutions. According to market forecast data,the sales volumes of global new energy vehicles (xEV) grew by 37% year-on year in 2023, in which thegrowth rate of HEV and PHEV sales volume reached 50%, higher than that of BEV. It is expected thatfrom 2023 to 2026, the sales volume of new energy vehicles will grow at a CAGR of 25%, in which thesales volumes of HEV will have a CAGR of 33%.(III) Periodic, regional and seasonal characteristics of the industry
1. Periodicity of industry development
The development of the EMS industry is directly affected by the cyclical demand of downstream industries.The demand for electronic products is affected by factors such as the macroeconomic environment,economic cycle, consumer preferences, and technological innovation. When the economy is booming, themarket demand for electronic products grows, thus driving the production and sales of the EMS industryto increase; during economic downturn, the purchasing power of consumers and companies decreases,product demand decreases, and the industrial production and sales decrease.
2. Regional characteristics of industry
The global EMS industry emerged in Europe and the United States, and then gradually moved to SoutheastAsia, Taiwan, and Chinese mainland. Currently, China, Southeast Asia, India, Mexico, Eastern Europeand other places are regional centers for low-cost manufacturing. The current trend of "economic and traderegionalization" is conducive to the development of regional low-cost manufacturing centers, but the Asia-Pacific supply chain with Chinese mainland as the core still has the advantages of "industrial clustering"and "low cost".
3. Seasonal characteristics of industry operation
Affected by traditional consumption patterns, orders from consumer electronics brand customers tend toconcentrate in the second half of the year, resulting in certain degree of seasonality in the shipment andrevenue of the EMS industry. The first and second quarters of each year are the traditional off-season, andduring the second half of the year, shipments climb to the peak month by month before a normal pullback.(IV) Competitive position of the Company in the industryThe Company is a world-renowned manufacturer in the EMS industry. According to the latest ranking ofglobal EMS providers (2022), USI ranked 12
thwith top-ranking annual revenue growth rate and netoperating margin in the industry. The Company is an industry leader in SiP miniaturization technology,leading the industry in many business segments.
III. Core business during the reporting period(I) Key Products and SolutionsAs a world-leading EMS provider, by providing brand customers with more value-added design,manufacturing and related services, USI participates in developing product application solutions, andenhances the manufacturing value added of products and overall services. In the future, USI will attachmore importance to developing its ability of providing solutions, design and services, so as to create core
2023 Annual Report
value for customers, establish long-term and stable cooperative relations with high-quality customers invarious industries, and gradually develop from manufacturing service providers to system solutionproviders and comprehensive service providers.
1. Wireless communication products
In the field of wireless communication, the Company, with a strong design and manufacturing team,provides customers with design, verification, manufacturing and testing services for industry-leadingwireless communication modules and enterprise-class wireless interconnection products by collaboratingwith the world's leading wireless communication IC companies. From product concept, prototype design,testing and verification to mass production, USI, with its R&D team and management system, offerscustomers with a suitable R&D schedule and reliable quality assurance to meet customer needs, achieverapid product launches, and enhance customers' competitive advantages.Wireless communication products mainly include wireless communication system-level packaging (SiP)module, system-level Internet of Things (IoT) module, wireless router, and etc.
2023 Annual Report
2. Consumer electronics
The Company is the industry's leading manufacturer of smart wearable SiP modules. As more and morefeature-rich smart wearables tend to be “light, thin, short and small”, the system in package (SiP)technology has become the key to providing highly integrated and miniaturized designs. Since 2013, theCompany has been committed to the miniaturization and development of highly integrated manufacturingprocess of SiP modules related to wearables, including new advanced packaging technologies such aslocal partition shielding, selective molding, thin-film molding technology, selective sputtering, andprofiled cutting technology, dry ice cleaning technology, and 3D metal stencil printing. At present, theCompany’s smart wearable SiP module products include smart watch SiP module, True Wireless Stereoearbuds (TWS) module, and optical heart rate module. As for XR(VR/AR/MR) smart head-mounteddisplay devices, the Company's products include Wi-Fi modules, and SiP modules integrating multiplefunctions or with specific functions.
In addition to smart wearable SiP modules, consumer electronics products also include SiPlet modules,video devices, connection devices, mainly X-Y bar control board, mini LED display control, timingcontrol board, smart stylus, smart tablet, electromagnetic sensing board, etc.
3. Industrial products
With sophisticated professionals in product R&D, design, project management, manufacturing andlogistics support, USI is committed to the industrial product market, such as point-of-sale (POS), smarthandheld device (SHD), smart fleet recorder and industrial control panel, to provide customers with themost cost-effective, optimized design and a full package of solutions with a strict quality control process,and meet their needs from mass production in the form of low-mix high-volume to customized productionof high-mix low-volume manufacturing, to production. With the development needs of global carbonneutrality, the Company has added the green energy products for energy storage and photovoltaics.
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4. Cloud and storage products
USI’s motherboard products mainly include motherboards for servers and workstations, AI Cards, andCPU modules for laptops, etc. USI’s computer peripheral products are mainly devices that connect laptopsto peripherals, such as docking station and dongle. The server related products manufactured by theCompany are widely used in cloud computing, data centers, edge computing and other fields. In terms ofstandard rack servers and edge servers, the Company provides JDM (Join Design Manufacture) servicemode, and has adopted new generation technologies such as DDR5 and PCI-G5.Storage and interconnection products include solid-state drives (SSDs) and high-speed switches andnetwork adapters. USI has industry-leading R&D capabilities for new technologies, such as Fiber OpticChannel, SAS, SATA, 10 Gigabit Ethernet, dual port I/O and wireless broadband, etc. The Company is aleading SSD design and manufacturing partner, providing customers with manufacturing services rangingfrom hardware design to product verification and custom-developed production and test platforms. TheCompany also provides customers with motherboard and complete machine manufacturing services forhigh-speed switches.
5. Automotive electronic products
The Company, boasting more than four decades of experience in the automotive industry, is a leadingmanufacturing service provider of automotive electronics.
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Automotive electronic products mainly include power modules, traction inverters, Battery ManagementSystem (BMS), On-Board Charger (OBC), electronic pumps, intelligent cabin products, ADAS relatedcontrollers, domain controllers, vehicle NAD modules, vehicle antennas, LED lights, other body controllerproducts, etc.
Following the development trend of "electrification, intelligence, and connectivity" in automotiveelectronics, the Company focuses on investing in "electrification" related power modules and tractioninverters, BMS, OBC and other products to serve power chip manufacturers and Tier 1 and automobilemanufacturers. Meanwhile, taking into account "intelligence" and "connectivity", the Company expandsnew products and businesses in the fields of intelligent cabins, ADAS, and vehicle telematics. In October2023, the Company completed the acquisition of Hirschmann Car Communication Holding S.a.r.l. tostrengthen the Company's R&D and design capabilities in the fields of automotive antennas andautomotive communications.
6. Medical electronics
Medical electronic products are mainly home care and hospital analytical equipment, including vitamin Kantagonist therapy equipment, medical wireless blood glucose meter, sleep ventilator, blood analysismachine, and glucose metering device.
(II) Miniaturization design and products
2023 Annual Report
The Company is a leader in SiP miniaturization technology. SiP module is a heterogeneous integratedelectronic system that integrates chips and passive devices into one module to achieve the effects ofreducing functional module area, improving circuit system efficiency, and shielding electromagneticinterference. Through miniaturization technology, the size and space occupied by most electronic systemscan be reduced, which is especially suitable for mobile communication equipment, Artificial Intelligenceof Things (AIoT) and wearable electronic products. With the development of AI, metaverse and spatialcomputing, the categories of wearable devices will be more abundant, including watches, bands, TWS,XR devices, smart rings, etc., and the integrated functions will also be more powerful, covering health,sports, spatial computing, AI, etc., the need to be "light, thin, short, and small" will also become moreintense, and miniaturized module technology will have more application scenarios.The Company insists on deepening the R&D of SiP modules, and stays ahead in the industry. At the endof 2020, the Company established Miniaturization Capability Competence (MCC) center which focuseson the application and promotion of miniaturization technology and SiP modules, serve the needs ofdomestic and foreign customers for miniaturization and modular products, and provide "one-stop services"from design to manufacturing.
The Company continues to break through technical challenges in all aspects of the SiP process to meetproduct requirements of high stability and high integration:
(1) In the horizontal aspect, the minimum device is 0.25 mm * 0.125 mm, the design value of the
minimum part spacing is 30 microns, and the design value of the distance from the board edge is65 microns, which require higher-level parts, production equipment and process control.
(2) In the vertical aspect, the design value of the molding top clearance is 50 microns and the moldingbottom clearance is 50 microns, which require well selected molding materials, processparameters and process control.
(3) Technologies such as selective molding, plug-in interconnection, and thin-film molding to
directly leak solder balls provide diversified support for SiP interconnection and subsequentprocesses.
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The design and manufacturing capabilities of "miniaturized" products are the Company's competitiveadvantage. The Company will keep improving in SiP module design and process technology. In terms ofsingle-sided molding, the Company achieves comprehensive or selective molding, and develops processessuch as chip embedding and gold wire/wafer bonding packaging according to customer needs. In terms ofdouble-sided molding, the Company has introduced plug-in interconnection, and will later develop 3Dstructures and combine soft and hard boards to further reduce product size. The Company will introducefront-end wafer manufacturing processes, including wafer thinning and dicing, combined with the currentSiP process to achieve Wafer-In-Module-Out.
IV. Analysis of core competitiveness during the reporting period
√Applicable □ Not Applicable
As a large design and manufacturing service provider in the field of electronic products, the Company hasthe following core competitive advantages:
(I) Prominent position in the industry and standardized corporate governanceThe Company is a world-renowned manufacturer in the EMS industry. In the latest global ranking of EMSproviders (2022), the Company ranked 12
thin revenue scale with its annual revenue growth rate and netoperating margin of main business ranking top in the industry. The Company is a leading manufacturer inmany business segments and an industry leader in SiP miniaturization technology, with a prominentposition in the industry.The Company attaches great importance to internal control and corporate governance, strictly abides bythe requirements of laws and regulations, and follows the relevant regulatory requirements of the ShanghaiStock Exchange as well as the Taiwan Stock Exchange and the New York Stock Exchange where its parentcompany ASE Technology Holding Co., Ltd is listed. Since July 2013, the Company has been
2023 Annual Report
continuously included in the constituent stocks of the Shanghai Corporate Governance Index, awarded A-level ratings on information disclosure by the Shanghai Stock Exchange for the last six consecutive years,and won a series of honors in the field of business operation and corporate governance.
(II) Global layout and localized servicesDue to the global supply chain restructuring following the trend of global economic and traderegionalization, customers have shifted some offshore outsourcing to nearshore or friend-shoreoutsourcing for risk management needs of supply chain diversification. Facing the adjustment of thesupply chain, the Company launched a glocalization strategy in 2018: In 2018, the Company acquired thePoland factory; in 2020, the Company acquired the Financière AFG, the second largest EMS company inEurope, and continued to strengthen integration; in 2021, the Company's Vietnam factory was put intooperation; in 2022, the Company's Nankang second factory was put into operation; in 2023, the Companybuilt a second factory building in Poland factory and established the Guadalajara factory, the secondfactory in Mexico. In recent years, the Company's revenue generated by overseas factories in proportionto its total revenue has continued to increase, and the new operating model of "global platform, localizedservice" has promoted the company's sustainable and healthy growth.The Company's global layout focuses not only on the globalization of business cooperation and productionbases, but also on the global market, integrating global resources and becoming a more internationallyoperating company. Currently, the Company has 30 manufacturing sites in 12 countries or regionsincluding China (mainland and Taiwan), Vietnam, the United States, Mexico, France, Germany, theUnited Kingdom, the Czech Republic, Hungary, Poland, and Tunisia, and provides global customers withvaried and differentiated manufacturing service solutions based on the localized operation systems inNorth America, Europe, Asia Pacific and North Africa.
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(III) Diversified business areas and rich product portfolioThe Company not only has the comprehensive strength of professional design and manufacturing ofelectronic products (covering electronic components, spare parts and complete machines) and systemassembly, but also the advantages of selected subdivisions and integrated products. The Company'sproduct portfolio is rich and balanced, covering five major fields: communications, consumer electronics,cloud and storage, industrial electronics and medical, and automotive electronics. The Company attachesgreat importance to the study and judgment of industry trends, and can respond quickly to changes in themarket demand. The Company can adjust its product portfolio flexibly according to changes in customerdemand.(IV) Focus on automation and intelligent manufacturingAs a global leader in electronic design and manufacturing, "intelligent manufacturing" has always beenan important business strategy of the Company. The Company has formulated the "Five-Star FactoryStandard" with reference to the industry practice, that is, machines are 100% automated, more than 80%of the production lines can be operated with the lights out, and the direct manpower is less than 30%, etc.The Company also uses Industry 4.0 automation technology to achieve a smart manufacturing roadmap,and has currently introduced technologies including internal factory equipment communication networksthat support 4G and 5G, Automated Material Handling Systems (AMHS), fully automated robot testingunmanned workshops, and real-time production equipment status monitoring platforms with remoteaccess dashboards; the Company also applies AI technology to the management of key productionequipment, production systems and product testing systems. The Company will continue tocomprehensively improve the intelligent manufacturing capabilities and automation levels of its regionalproduction bases in Asia, Europe and North America. The Company plans to upgrade all factories thathave introduced Industry 4.0 by an average of 0.58 star in 2024, and have five lights-out factories thatachieve fully automated production in 2028.(V) Product innovation driven by R&DThe Company always attaches great importance to technology R&D, and continues to increase investmentin R&D. From 2021 to 2023, the Company's R&D investment was RMB 1.641 billion, 2.034 billion and
1.807 billion respectively. As of the end of 2023, the Company had an R&D team of 2,809 employees,and obtained 801 patents and 264 potential patents under application.The Company is a global leader in SiP technology. In 2023, it integrated a number of advancedtechnologies with the miniaturized and multifunctional SiP modules, such as high-density SMT partdesign (40um pitch), 150um pitch WLCSP molding and filling technology, double layer stackingtechnology of passive components, more complex double-sided molding technology with more connectors,double-sided special-shaped selective electromagnetic shielding, etc. In addition, to meet the needs ofhigh-performance computing, the Company cooperates deeply with ASUS to develop the first CPU SiPmodule among industry peers, which reduces the high-speed signal line between the processor andLPDDR5X memory, and increases the performance by 25%, while reducing the core area of themotherboard by 38%. It can improve the overall heat dissipation efficiency of the system and achieve thehigh performance required by high performance laptops.
2023 Annual Report
(VI) Long-term adherence to sustainable managementIn face of a complex and ever-changing business environment, corporate resilience has increasinglybecome a part of the core competitiveness for company to achieve sustainable operations. Highly resilientcompanies can cope with a variety of unpredictable dynamic changes, recover quickly from crises, andsurvive and thrive in adversity. USI not only focuses on risk control and crisis management, but also paysattention to forging resilience in corporate strategy, organizational system, operating system, culturaldevelopment, and technological innovation.
The Company always takes “be a most reliable provider for electronic design and manufacturing service”as its vision, and according to the United Nations Sustainable Development Goals (SDGs), it focuses onthe four dimensions of its Sustainability Strategy, i.e. Low Carbon, Circular, Collaborative and Inclusive,strengthens employees' consciousness of sustainable development, and cooperates with partners andcommunities to promote economic growth and enhance productivity through sustainable development.The Company has been constantly improving employees’ career planning, performance appraisal andincentive mechanism, providing a platform for the development of talents and a channel for moreoutstanding talents to join, and a powerful talent foundation for the Company to achieve its developmentgoals. The Company has established a long-term and effective employee incentive mechanism. Since 2019,the Company has launched employee stock ownership plans and stock option incentive plans accordingto operational needs. As of the end of 2023, the Company has launched three stock option incentive plans,granting a total of 59,452,500 stock options with 17,418,440 shares exercised by employees, and rolledout six employee stock ownership plans, purchasing or transferring a total of 11,576,197 shares.While operating steadily, the Company takes the mission of “creating value for shareholders and sharinggrowth with shareholders”. In order to fully protect the interests of shareholders and enhance investorconfidence, the Company has continuously launched share repurchase plans, repurchasing 13,037,477,16,042,278, and 9,356,317 shares in 2019, 2021, and 2022 respectively. At the beginning of 2024, theCompany launched a new share repurchase program, with a total repurchase amount of no less than RMB100 million. As of the end of 2023, the Company has achieved cumulative net profits of RMB 15.84 billion,and cumulative cash dividend (including the 2023 profit distribution plan) of RMB 5.38 billion since itslisting, with an average cash payout ratio of 34.0%.
2023 Annual Report
V. Main business operations during the reporting periodThe Company realized total revenue of RMB 60.79 billion in 2023, down 11.27% from RMB 68.52 billionin 2022. Specifically, the revenue of medical electronics increased by 85.98% YoY; the revenue ofautomotive electronics increased by 10.18% YoY; the revenue of communication electronics decreasedby 14.93% YoY; the revenue of consumer electronics decreased by 11.39% YoY; the revenue of industrialelectronics decreased by 5.68% YoY; the revenue of cloud and storage decreased by 23.07% YoY.Changes in revenue was mainly caused by: (1) following changes in the global economy and end marketdemand, communications products and consumer electronics products experienced a YoY decrease inrevenue due to sluggish demand; (2) cloud and Storage products experienced a significant YoY declinedue to structural adjustments in product demand; (3) automotive electronics products and medicalelectronics products continued to grow YoY, mainly due to the Company's expansion of new customersand increased customer demand.The total sales, administrative, R&D and financial expenses of the Company in 2023 were RMB 3.60billion, an decrease of RMB 196 million or 5.17% over RMB 3.80 billion in 2022.The Company achieved operating profit of RMB 2.18 billion in 2023, a decrease of 37.08% over RMB
3.46 billion in 2022; the total profit was RMB 2.19 billion, a decrease of 37.03% over RMB 3.48 billionin 2022; the net profit attributable to shareholders of the listed company was RMB 1.95 billion, a decreaseof 36.34% over RMB 3.06 billion in 2022.(I) Main business analysis
1. Analysis of changes in related items in income statement and cash flow statement
Unit: yuan Currency: RMB
| Item | 2023 | 2022 | Change (%) |
| Revenue | 60,791,909,537.87 | 68,516,075,963.26 | -11.27 |
| Operating costs | 54,939,136,481.69 | 61,327,074,531.73 | -10.42 |
| Sales expenses | 367,994,662.03 | 323,833,862.87 | 13.64 |
| Administrative expenses | 1,215,427,939.02 | 1,421,848,997.88 | -14.52 |
| Financial expenses | 212,029,208.10 | 18,865,406.63 | 1,023.90 |
| R&D expenses | 1,807,204,128.27 | 2,034,461,775.71 | -11.17 |
| Net cash flows from operating activities | 6,823,435,492.62 | 3,435,196,255.50 | 98.63 |
| Net cash flow from investment activities | -1,428,897,187.20 | -1,524,248,331.61 | N/A |
| Net cash flow from financing activities | -1,836,253,228.36 | -502,415,196.59 | N/A |
Reasons for changes in financial expenses: Mainly due to the decrease in net foreign currency exchangegains in the current period.Reasons for changes in net cash flows from operating activities: Mainly due to an increase in collectionsof receivables, as well as a decrease in funds tied up in inventories as a result of strengthenedprocurement and inventory control in the current period.Reasons for changes in net cash flow from investing activities: Mainly due to prudent investments infixed assets.Reasons for changes in net cash flow from financing activities: Mainly due to higher cash dividendpayments and less borrowings during the period.
Detailed explanation of the major changes in the business type, profit composition or profit source of theCompany in the current period
□Applicable √Not Applicable
2. Revenue and cost analysis
√Applicable □ Not Applicable
2023 Annual Report
In the current period, the Company's revenue from its main businesses decreased by 11.30% over the sameperiod last year, and costs incurred by its main business decreased by 10.42% over the same period lastyear. The specific analysis is as follows:
(1). Main business by sector, product, region and by sales mode
Unit: yuan Currency: RMB
| Main business by product | ||||||
| Product | Revenue | Operating costs | Gross profit margin (%) | Revenue YoY (%) | Operating cost YoY (%) | Gross profit margin YoY (%) |
| Communication electronics | 21,799,269,805.02 | 20,103,196,795.12 | 7.78 | -14.93 | -13.39 | Down 1.64 pct. |
| Consumer electronics | 19,254,189,286.98 | 17,728,131,621.69 | 7.93 | -11.39 | -10.92 | Down 0.48 pct. |
| Industrial products | 8,164,460,442.66 | 6,982,306,047.58 | 14.48 | -5.68 | -3.89 | Down 1.59 pct. |
| Cloud and storage products | 5,378,779,152.02 | 4,518,126,147.87 | 16.00 | -23.07 | -23.69 | Up 0.69 pct. |
| Automotive electronics | 5,137,439,831.33 | 4,721,705,037.54 | 8.09 | 10.18 | 11.04 | Down 0.71 pct. |
| Medical electronics | 376,027,790.19 | 350,579,209.65 | 6.77 | 85.98 | 92.73 | Down 3.27 pct. |
| Others | 619,672,267.13 | 531,715,141.89 | 14.19 | 2.73 | -9.96 | Up 12.08 pct. |
| Total | 60,729,838,575.32 | 54,935,760,001.34 | 9.54 | -11.30 | -10.42 | Down 0.90 pct. |
| Main business by region | ||||||
| Region | Revenue | Operating costs | Gross profit margin (%) | Revenue YoY (%) | Operating cost YoY (%) | Gross profit margin YoY (%) |
| Chinese Mainland | 37,464,004,420.29 | 33,929,932,007.50 | 9.43 | -17.22 | -16.48 | Down 0.81 pct. |
| Other regions in APAC | 19,467,015,768.29 | 17,831,065,044.79 | 8.40 | -15.03 | -14.04 | Down 1.06 pct. |
| Europe | 4,987,338,693.76 | 4,372,898,325.09 | 12.32 | 35.31 | 31.83 | Up 2.31 pct. |
| Others | 4,477,998,105.83 | 4,196,123,100.50 | 6.29 | 6.55 | 6.31 | Up 0.21 pct. |
| Inter-segment offsetting | -5,666,518,412.85 | -5,394,258,476.55 | 4.80 | -25.32 | -26.2 | Up 1.12 pct. |
| Total | 60,729,838,575.32 | 54,935,760,001.34 | 9.54 | -11.30 | -10.42 | Down 0.90 pct. |
Explanation of the main business by sector, product, region and sales modeNone
(2). Analysis of production and sales volume
√Applicable □ Not Applicable
| Main products | Production volume | Sales volume | Inventory | Production YoY(%) | Sales volume YoY (%) | Inventory YoY (%) |
| Communication electronics | 514,334,984.00 | 519,357,458.00 | 25,252,650.00 | -23.62 | -22.75 | -16.59 |
| Consumer electronics | 299,765,804.00 | 301,103,860.00 | 6,885,828.00 | 2.98 | 2.13 | -16.27 |
| Industrial products | 24,663,386.00 | 24,920,041.00 | 605,830.00 | -42.60 | -41.67 | -29.76 |
| Cloud and storage products | 15,604,509.00 | 15,613,142.00 | 907,720.00 | -24.12 | -23.51 | -0.94 |
| Automotive electronics | 96,636,017.00 | 92,230,359.00 | 7,604,264.00 | 69.66 | 61.18 | 137.74 |
| Medical electronics | 912,081.00 | 911,130.00 | 26,280.00 | -2.50 | -4.60 | 3.75 |
| Others | 6,508,517.00 | 6,469,059.00 | 94,922.00 | 13.08 | 12.46 | 71.14 |
| Total | 958,425,298.00 | 960,605,049.00 | 41,377,494.00 | -12.21 | -12.21 | -5.00 |
Explanation of production and sales volumeThe revenue from automotive electronic products increased by 10.18% YoY in 2023, and the number oflow unit price products sold increased significantly YoY.
2023 Annual Report
(3). Performance of major procurement contracts and major sales contracts
□Applicable √Not Applicable
(4). Cost analysis
Unit: yuan Currency: RMB
| Cost analysis by product | |||||||
| Product | Cost item | 2023 | Percentage in total cost (%) | Amount in the same period last year | Percentage in total cost (%) | YoY (%) | Note |
| Communication electronics | Raw materials | 18,574,689,443.39 | 92.40 | 21,165,596,271.64 | 91.19 | -12.24 | |
| Labor and others | 1,528,507,351.73 | 7.60 | 2,046,015,573.99 | 8.81 | -25.29 | ||
| Consumer electronics | Raw materials | 16,449,923,460.54 | 92.79 | 18,471,392,052.71 | 92.81 | -10.94 | |
| Labor and others | 1,278,208,161.15 | 7.21 | 1,429,989,271.88 | 7.19 | -10.61 | ||
| Cloud and storage products | Raw materials | 3,892,924,586.58 | 86.16 | 5,031,592,645.30 | 84.98 | -22.63 | |
| Labor and others | 625,201,561.29 | 13.84 | 889,134,827.71 | 15.02 | -29.68 | ||
| Industrial products | Raw materials | 5,754,547,710.27 | 82.42 | 6,232,147,734.00 | 85.78 | -7.66 | |
| Labor and others | 1,227,758,337.31 | 17.58 | 1,033,116,630.72 | 14.22 | 18.84 | ||
| Automotive electronics | Raw materials | 3,730,517,985.44 | 79.01 | 3,437,066,835.09 | 80.83 | 8.54 | |
| Labor and others | 991,187,052.10 | 20.99 | 815,313,255.03 | 19.17 | 21.57 | ||
| Medical electronics | Raw materials | 248,859,541.67 | 70.99 | 93,155,828.61 | 51.21 | 167.14 | |
| Labor and others | 101,719,667.98 | 29.01 | 88,744,533.95 | 48.79 | 14.62 | ||
| Others | Raw materials | 340,650,856.57 | 64.07 | 338,727,970.60 | 57.36 | 0.57 | |
| Labor and others | 191,064,285.32 | 35.93 | 251,773,362.75 | 42.64 | -24.11 | ||
| Total | Raw materials | 48,992,113,584.46 | 89.18 | 54,769,679,337.96 | 89.31 | -10.55 | |
| Labor and others | 5,943,646,416.88 | 10.82 | 6,554,087,456.03 | 10.69 | -9.31 | ||
Explanation of other aspects of cost analysisNone
(5). Changes in the consolidation scope due to equity changes of major subsidiaries during thereporting period
√Applicable □ Not Applicable
At the Twenty-first Meeting of the Fifth Session of the Board of Directors of the Company held on March17, 2023, the Board of Directors considered and approved the Proposal on the Establishing a Joint VentureCompany for the Purchase of the Automotive Wireless Business of TE Connectivity, allowing UGT, awholly-owned subsidiary of the Company to set up a joint venture company with AmpleTrading, Co.,Ltd.(hereinafter referred to as the "subject business") for the acquisition. In April 2023, a joint venturecompany, Universal Ample Technology Co., Limited (hereinafter referred to as the "UAT"), wasestablished with a capital contribution of 75.1% from UGT and 24.9% from AmpleTrading, Co., Ltd. InOctober 2023, UAT has indirectly owned 100% of the shareholding company related to the subjectbusiness, and the transaction has been completed and settled. The subject business holding company hasbeen included in the Company's consolidated financial statements for fiscal year 2023.
2023 Annual Report
(6). Major changes or adjustments in the business, products or services of the Company duringthe reporting period
□Applicable √Not Applicable
(7). Major customers and major suppliers
A. Main customers of the Company
√Applicable □ Not Applicable
The sales to the top five customers amounted to RMB 30.76 billion, accounting for 50.59% of the totalannual sales; among the top five customers, the sales to related parties amounted to 0 RMB, accountingfor 0% of the total annual sales.
During the reporting period, the proportion of sales to a single customer exceeded 50% of the total, andthere were new customers among the top 5 customers or heavy dependence on a few customers.
□Applicable √Not Applicable
B. Main suppliers of the Company
√Applicable □ Not Applicable
The purchase amount from the top five suppliers was RMB 25.11 billion, accounting for 59.01% of thetotal purchase amount; among the top five suppliers, the purchase amount from related parties was 0yuan, accounting for 0% of the total purchase amount.
During the reporting period, the proportion of purchases from a single supplier exceeded 50% of thetotal, and there were new suppliers among the top 5 suppliers or heavy dependence on a few suppliers.
□Applicable √Not Applicable
Other explanationsThe sales to the Company's top five customers are as follows:
Unit: 10,000 yuan Currency: RMB
| No. | Customer name | 2023 | Proportion (%) |
| 1 | Customer A | 1,713,114.36 | 28.18 |
| 2 | Customer B | 758,247.47 | 12.47 |
| 3 | Customer C | 204,926.01 | 3.37 |
| 4 | Customer D | 199,836.75 | 3.29 |
| 5 | Customer E | 199,464.78 | 3.28 |
| Total | 3,075,589.36 | 50.59 | |
The purchase amount of the Company's top five suppliers is as follows:
Unit: 10,000 yuan Currency: RMB
| No. | Supplier name | 2023 | Proportion (%) |
| 1 | Supplier A | 1,186,995.59 | 27.90 |
| 2 | Supplier B | 1,060,497.89 | 24.93 |
| 3 | Supplier C | 117,595.22 | 2.76 |
| 4 | Supplier D | 73,802.51 | 1.73 |
| 5 | Supplier E | 71,991.99 | 1.69 |
| Total | 2,510,883.21 | 59.01 | |
3. Expenses
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Name of project | 2023 | 2022 | Change | YoY | Remark |
| Sales expenses | 367,994,662.03 | 323,833,862.87 | 44,160,799.16 | 13.64 | |
| Administrative | 1,215,427,939.02 | 1,421,848,997.88 | -206,421,058.86 | -14.52 |
2023 Annual Report
| expenses | |||||
| R&D expenses | 1,807,204,128.27 | 2,034,461,775.71 | -227,257,647.44 | -11.17 | |
| Financial expenses | 212,029,208.10 | 18,865,406.63 | 193,163,801.47 | 1,023.90 | Mainly due to the decrease in net foreign currency exchange gains in the current period. |
| Total | 3,602,655,937.42 | 3,799,010,043.09 | -196,354,105.67 | -5.17 |
4. R&D investment
(1). Particulars of R&D investment
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Expensed R&D investment in the current period | 1,807,204,128.27 |
| Capitalized R&D investment in the current period | 0 |
| Total R&D investment | 1,807,204,128.27 |
| Proportion of total R&D investment to revenue (%) | 2.97 |
| Proportion of capitalized R&D investment (%) | 0 |
(2). Table of R&D personnel
√Applicable □ Not Applicable
| Number of R&D personnel in the Company | 2,809 |
| Proportion of R&D personnel in the total number of employees of the Company (%) | 12.21 |
| Breakdown by educational background | |
| Educational background | Number of personnel |
| Doctor’s degree | 12 |
| Master’s degree | 994 |
| Bachelor’s degree | 1,498 |
| Junior college | 292 |
| Senior high school and below | 13 |
| Breakdown by age | |
| Age | Number of personnel |
| Under 30 years old (excluding 30 years old) | 370 |
| 30-40 years old (including 30 years old and excluding 40 years old) | 1,187 |
| 40-50 years old (including 40 years old and excluding 50 years old) | 911 |
| 50-60 years old (including 50 years old and excluding 60 years old) | 332 |
| 60 years old and above | 9 |
(3).Remark
□Applicable √Not Applicable
(4).Reasons for major changes in the composition of R&D personnel and its impact on the future
development of the Company
□Applicable √Not Applicable
2023 Annual Report
5. Cash flow
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Items | 2023 | 2022 | Reasons for changes |
| Net cash flows from operating activities | 6,823,435,492.62 | 3,435,196,255.50 | Mainly due to an increase in collections of receivables, as well as a decrease in funds tied up in inventories as a result of strengthened procurement and inventory control in the current period. |
| Net cash flow from investment activities | -1,428,897,187.20 | -1,524,248,331.61 | Mainly due to prudent investments in fixed assets. |
| Net cash flow from financing activities | -1,836,253,228.36 | -502,415,196.59 | Mainly due to the payment of higher cash dividends and repayment of borrowings during the period. |
(II) Explanation of significant changes in profit caused by non-essential business
□Applicable √Not Applicable
(III) Analysis of assets and liabilities
√Applicable □ Not Applicable
1. Assets and Liabilities
Unit: yuan Currency: RMB
| Items | December 31, 2023 | Proportion to total assets (%) | December 31, 2022 | Proportion to total assets (%) | YoY | Remark |
| Cash and bank balances | 11,218,698,389.32 | 28.54 | 7,695,016,173.40 | 19.95 | 45.79 | Mainly due to higher net cash inflow from operating activities during the period. |
| Other receivables | 208,748,837.09 | 0.53 | 137,008,284.72 | 0.36 | 52.36 | Mainly due to receivables upon expiry of contingent consideration for equity acquisition projects and increase of advanced tooling costs for clients during the period. |
| Other current assets | 838,262,285.94 | 2.13 | 599,581,332.72 | 1.55 | 39.81 |
Mainly due to theincrease insubsidiaries' value-added tax to bededucted and theincrease in prepaidincome tax in thecurrent period.
| Non-current assets due within one year | 123,989.32 | 0.00 | 322,815.55 | 0.00 | -61.59 | Mainly due to the decrease in the closing balance of lease receivables in the current period. |
| Construction in progress | 641,030,985.98 | 1.63 | 303,432,536.69 | 0.79 | 111.26 | Mainly due to the increase in investment in the expansion of overseas subsidiaries in the current period. |
| Other non-current assets | 68,274,790.92 | 0.17 | 124,611,895.32 | 0.32 | -45.21 | Mainly due to the subsidiary's advance payment for equipment and |
2023 Annual Report
| completion of equipment acceptance. | ||||||
| Investment properties | 4,324,045.51 | 0.01 | 0.00 | 0.00 | 100.00 | Mainly due to the sublease of the entire self-owned property by the subsidiary in the current period. |
| Derivative financial liabilities | 173,872.64 | 0.00 | 3,118,891.32 | 0.01 | -94.43 | Mainly due to changes in fair value caused by derivative financial products in the current period. |
| Other payables | 1,044,770,045.86 | 2.66 | 716,932,703.77 | 1.86 | 45.73 | Mainly due to the accrual of the transfer consideration required for the business combination and the receipt of customer deposits in the current period. |
| Non-current liabilities due within one year | 3,564,025,750.56 | 9.07 | 506,820,025.23 | 1.31 | 603.21 | Mainly due to the transfer of convertible corporate bonds from non-current to current liabilities. |
| Bond payable | 0.00 | 0.00 | 3,243,085,241.27 | 8.41 | -100.00 | Mainly due to the transfer of convertible corporate bonds from non-current to current liabilities. |
| Long-term employee benefits payable | 273,605,892.45 | 0.70 | 199,342,510.02 | 0.52 | 37.25 | Mainly due to the increase in the amount of the pension account in the current period. |
| Provisions | 48,279,064.03 | 0.12 | 7,350,296.14 | 0.02 | 556.83 | Mainly due to subsidiaries' accrual of product warranty expenses. |
| Other non-current liabilities | 1,046,909.26 | 0.00 | 3,692,335.61 | 0.01 | -71.65 | Mainly due to subsidiaries' return of supplier deposits in the current period. |
| Other comprehensive income | 261,726,655.45 | 0.67 | 111,850,168.58 | 0.29 | 134.00 | Mainly due to the gains on foreign currency statement translation caused by changes in foreign exchange rate in the current period. |
| Minority interests | 99,421,563.54 | 0.25 | 444,965.69 | 0.00 | 22,243.65 | Mainly due to business combination not under common control in this period. |
Other explanationsNone
2. Overseas assets
√Applicable □ Not Applicable
(1) Asset size
Including: overseas assets 20,450,785,716.71 (unit: yuan; currency: RMB), accounting for 52.03% of thetotal assets.
2023 Annual Report
(2) Relevant explanations on the relatively high proportion of overseas assets
√Applicable □ Not Applicable
Unit: RMB 10,000 yuan
| Overseas assets | Causes | Operating model | 2023 Revenue | 2023 Net profit |
| Universal Global Scientific Industrial Co., Ltd. | Establishment | Independent operation | 1,290,108 | 19,650 |
| Universal Global Technology Co., Limited | Establishment | Independent operation | 2,171 | -11,550 |
| Universal Global Industrial Co., Limited | Establishment | Independent operation | 546 | 1,016 |
| UNIVERSAL SCIENTIFIC INDUSTRIAL VIETNAM COMPANY LIMITED | Establishment | Independent operation | 353,132 | 11,748 |
| Universal Scientific Industrial (France) | Establishment | Independent operation | 0 | -633 |
| Universal Scientific Industrial De México S.A. De C.V. | Business combination under common control | Independent operation | 386,214 | -1,555 |
| Universal Scientific Industrial Co., Ltd. | Business combination under common control | Independent operation | 301,144 | 5,772 |
| Universal Scientific Industrial Poland Sp. zo.o. | Business combination under common control | Independent operation | 31,295 | 5,478 |
Note: the above are overseas subsidiaries within the scope of the consolidated statements that meet theconditions that one of the indicators of total assets, operating income, and net profit accounts for morethan 5% of the corresponding amount in the consolidated statements. The financials are from standalonefinancial statements, not including subsidiaries.
3. Restrictions on major assets as at the end of the reporting period
□Applicable √Not Applicable
4. Other explanations
□Applicable √Not Applicable
(IV) Analysis of industry business information
√Applicable □ Not Applicable
1. In terms of communication products, Apple smart phones accounted for 20% of the global smartphone market in 2023, with sales reaching 235 million units, an increase of 4% over that of 2022.
WW Smart Phone Estimated Market Share
| 2022 | 2023 | 22'23 | |||
| Shipments | Market Share% | Shipments | Market Share% | YoY Growth% | |
| (M units) | (M units) | ||||
| Worldwide Total | 1,206 | 1,167 | -3.2% | ||
| Apple | 226 | 19% | 235 | 20% | 4% |
| Samsung | 262 | 22% | 227 | 19% | -14% |
| Xiaomi | 153 | 13% | 146 | 13% | -5% |
| OPPO | 114 | 9% | 103 | 9% | -10% |
| Transsion | 73 | 6% | 95 | 8% | 31% |
| Others | 377 | 31% | 362 | 31% | -4% |
2023 Annual Report
Source: USI, Feb. 2024
2. In terms of consumer electronics products, in 2023 the wearable product shipments grew by 6.6%overall, 5.9% for earphones, 11% for watches, and augmented reality/virtual reality (AR/VR)represented by Glasses, AR HMD, VR HMD is expected to have a high CAGR in the future.
WW Wearable Market Forecast
| 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 22’23 Growth | 22-27 CAGR | |
| Total Shipment (M Units) | 517 | 552 | 582 | 611 | 638 | 664 | 6.6% | 4.7% |
| Earwear | 323 | 342 | 358 | 372 | 385 | 396 | 5.9% | 3.7% |
| Smartwatch | 149 | 165 | 178 | 190 | 199 | 206 | 11% | 5.7% |
| Wrist Band | 35 | 34 | 31 | 30 | 29 | 29 | -2.9% | -3.9% |
| Glasses | 0.4 | 1.1 | 1.8 | 1.8 | 2.0 | 2.1 | 175.0% | 18% |
| AR HMD | 0.3 | 0.5 | 0.8 | 1.6 | 3.7 | 6.8 | 66.7% | 92% |
| VR HMD | 8.5 | 7.6 | 11.0 | 13.9 | 17.2 | 21.9 | -10.6% | 30% |
| Others | 1.2 | 1.3 | 1.6 | 1.7 | 1.8 | 2.0 | 8.3% | 11% |
Source: USI, Feb. 2024
3. In terms of cloud and storage products, the market demand for server mainboards and switches hasmaintained stable growth, in which AI server is expected to realize a significantly higher CAGR thanthan the server industry average as the global demand for computing power continues to explode. Bystrengthening cooperation with major customers, the Company is striving for more market shares andorders.
3.1 WW Server Shipment Forecast
| Sever | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 23-28 CAGR |
| Shipments (K Units) | 18,122 | 14,802 | 15,532 | 16,588 | 17,301 | 18,651 | 19,751 | 5.9% |
| YoY% | 6.5% | -18.3% | 4.9% | 6.8% | 16.9% | 20.1% | 19.1% |
Source: USI, Feb. 2024
3.2 AI Server Shipment Forecast
| AI Sever | 2022 | 2023 | 2024 | 2025 | 2026 | 23-26 CAGR |
| Shipments (K Units) | 1,300 | 1,440 | 1,596 | 1,768 | 1,959 | 10.8% |
Source: USI, Feb. 2024
3.3 The scale of global switch market continued to grow, among which the demand for high-speedswitches was stronger. The Company currently provides complete switch manufacturing services to corecustomers.
| Switch | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 23-28 CAGR |
| Revenue ($ Billion) | 30.7 | 33.0 | 35.2 | 37.5 | 40.0 | 42.6 | 45.5 | 6.6% |
| YoY% | 6.5% | 7.5% | 6.6% | 6.6% | 6.6% | 6.6% | 6.8% |
Source: USI, Feb. 2024
3.4 In terms of storage products, SSD is the important product of the Company. The growth of SSDapplications in laptops and data centers maintained, and the market grew by 10.93% in 2023. The CAGRof the SSD market from 2023 to 2026 is expected to be around 12.73%.
| 2022 | 2023 | 2024 | 2025 | 2026 | 22’23 | 23-26 | |
| YoY | CAGR | ||||||
| Total SSD Revenue ($ Billion) | 42.1 | 46.7 | 51.2 | 57.3 | 66.9 | 10.93% | 12.73% |
Source: USI, Feb. 2024
2023 Annual Report
4. In terms of industrial products, the market of smart handheld devices and POS grew by 11% in 2023due to the growth of logistics and warehousing demand and the recovery of retail industry.
| 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 22-26 | |
| YoY | CAGR | ||||||
| Total POS Revenue ($ Billion) | 85 | 94 | 103 | 112 | 123 | 11% | 10% |
Source: USI, Feb. 2024
5. In terms of the automotive products, 2023 automotive electronics market grew by 8.3%, and the CAGRfrom 2022 to 2026 is expected to be 7.4%. Meanwhile, the electric vehicle market showed high growth in2022 with sales growth of 53%.
5.1 Global Automotive Electronics Market Forecast
| 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 23-26 | |
| YoY | CAGR | ||||||
| Total AE Revenue ($ Billion) | 295 | 316 | 337 | 364 | 389 | 7.1% | 7.2% |
Source: USI, Feb. 2024
5.2 The global sales of new energy vehicles have been growing at a fast pace, and the trend ofelectrification contributes to a continuous increase in their penetration rate in the automobile market.However, with the expected retreat of global governments' subsidy policies in the pure electric vehiclesector, as well as the weak improvement of pure electric vehicle profit margins, the pure electrictransformation of major traditional vehicle manufacturers in the world is slowing down, and the marketfor hybrid electric vehicles (HEVs) is expected to grow at a higher CAGR than that of pure electricvehicles by 2026.
| 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 23-26 | |
| YoY | CAGR | ||||||
| Total (K units) | 15,407 | 21,080 | 28,877 | 34,453 | 41,638 | 37% | 25% |
| HEV | 4,667 | 7,000 | 10,110 | 13,333 | 16,472 | 50% | 33% |
| BEV | 8,000 | 10,000 | 13,667 | 14,667 | 18,444 | 25% | 23% |
| PHEV | 2,667 | 4,000 | 5,000 | 6,333 | 6,528 | 50% | 18% |
| FCV | 73 | 80 | 100 | 120 | 194 | 10% | 34% |
Source: USI, Feb. 2024
5.3 Total Auto Power Module
| 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 23-26 | |
| YoY | CAGR | ||||||
| Total Auto Power Module ($ Million) | 2,474 | 3,070 | 3,679 | 4,316 | 4,798 | 24% | 18% |
| IGBT Power Module | 2,027 | 2,471 | 2,920 | 3,353 | 3,673 | 22% | 14% |
| MOSFET Power Module | 370 | 481 | 568 | 634 | 678 | 30% | 12% |
| Wide Bandgap Power Module | 77 | 118 | 191 | 329 | 447 | 53% | 56% |
Source: USI, Feb. 2024
5.4 Automotive Advanced Driver Assistance Systems (ADAS) Market Forecast
| 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 23-26 | |
| YoY | CAGR | ||||||
| Total ADAS Revenue ($ Billion) | 31 | 37 | 44 | 53 | 62 | 18.0% | 19.0% |
Source: USI, Feb. 2024
2023 Annual Report
5.5 Automotive Communication Products Market Forecast
| 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 23-26 | |
| YoY | CAGR | ||||||
| Total Automotive Communication Revenue ($ Billion) | 5.7 | 6.3 | 7.0 | 7.7 | 8.6 | 10.5% | 10.8% |
Source: USI, Feb. 2024
6. In terms of medical electronic products, the market demand for outsourced electronic manufacturingservices has been growing steadily.
| Medical Product Assembly Value ($ Million) | 2022 | 2023 | 2024 | 2025 | 2026 | 22'23 | 22-26 |
| YoY | CAGR | ||||||
| Total | 53,068 | 55,988 | 59,069 | 62,322 | 65,756 | 5.5% | 5.5% |
| Medical Diagnostics | 20,950 | 22,144 | 23,406 | 24,740 | 26,151 | 5.7% | 5.7% |
| Therapeutic | 12,125 | 12,670 | 13,240 | 13,836 | 14,459 | 4.5% | 4.5% |
| Monitoring & Surgical | 19,994 | 21,173 | 22,423 | 23,746 | 25,147 | 5.9% | 5.9% |
Source: USI, Feb. 2024
2023 Annual Report
(V) Analysis of investmentOverall analysis of foreign equity investment
√Applicable □ Not Applicable
As of the end of this reporting period, the Company's long-term equity investment was RMB 498 million, a decrease of RMB 113 million or 18.45% from the beginningof the year. The main reason is the disposal of joint ventures and associates in current period. For details, refer to Note VII 17 Long-term Equity Investment.
1. Significant equity investment
□Applicable √Not Applicable
2. Significant non-equity investment
□Applicable √Not Applicable
3. Financial assets measured at fair value
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Category of assets | Opening balance | Gain or loss from change in fair value in the current period | Cumulative changes in fair value included in equity | Impairment provision in the current period | Purchase amount in the current period | Sales/redemption amount in the current period | Other changes | Ending balance |
| Stocks | 96,195,976.11 | 61,663.54 | 27,162,804.05 | - | - | -77,284,965.48 | 16,283,539.89 | 62,419,018.11 |
| Private equity funds | 112,351,085.15 | 2,865,221.57 | - | - | 54,130,858.29 | -8,455,456.44 | 9,619,372.95 | 170,511,081.52 |
| Derivatives | 32,939,594.28 | -12,381,158.46 | - | - | - | -31,866,142.64 | 33,290,271.18 | 21,982,564.36 |
| Others: Wealth management products | - | - | - | - | - | -60,903,020.88 | 60,903,020.88 | - |
| Others: Accounts receivable factoring | 135,812,841.71 | - | - | - | 1,309,113,715.53 | -1,230,949,631.30 | 9,424,644.28 | 223,401,570.22 |
| Others: Contingent consideration | 99,372,192.22 | -17,653,478.47 | - | - | - | -104,865,130.40 | 23,146,416.65 | - |
| Total | 476,671,689.47 | -27,107,751.82 | 27,162,804.05 | - | 1,363,244,573.82 | -1,514,324,347.14 | 152,667,265.83 | 478,314,234.21 |
Note:
1. Stocks: equity investment in TriKnight Capital Corporation, GaN System Inc, Senscomm Semiconductor Co., Ltd.
2. Private-equity fund: PHI FUND, L.P. and Suzhou Glory Ventures Equity Investment Partnership
2023 Annual Report
3. Derivatives: foreign exchange forward contract
4. Other changes include realized income and foreign currency translation in the current period
Investment in securities
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Type of security | Stock code | Stock abbreviation | Initial cost of investment | Source of fund | Beginning book value | Gain or loss from change in fair value in the current period | Cumulative changes in fair value included in equity | Purchase amount in the current period | Sales amount in the current period | Gains and losses on investments in the current period | Ending book value | Accounting items |
| Stocks | TriKnight Capital Corporation | 66,414,298.60 | Self-owned funds | 38,420,782.40 | - | 27,162,804.05 | - | -27,680,312.65 | 1,031,963.78 | 38,935,237.58 | Investments in other equity instruments | |
| Stocks | GaN System Inc. | 34,822,962.11 | Self-owned funds | 33,022,365.35 | 1,330,711.37 | - | - | -49,604,652.83 | 15,251,576.11 | - | Other non-current financial assets | |
| Stocks | Senscomm Semiconductor Co., Ltd. | 20,000,000.00 | Self-owned funds | 24,752,828.36 | -1,269,047.83 | - | - | - | - | 23,483,780.53 | Other non-current financial assets | |
| Total | / | / | 121,237,260.71 | / | 96,195,976.11 | 61,663.54 | 27,162,804.05 | - | -77,284,965.48 | 16,283,539.89 | 62,419,018.11 | / |
Investment in securities
√Applicable □ Not Applicable
During the reporting period, the Company sold its entire equity in GaN System Inc. and realized an investment gain of RMB15,251,576.11.
Investment in private equity funds
√Applicable □ Not Applicable
1. Glory Ventures
The Company signed the Suzhou Glory Ventures Equity Investment Partnership (Limited Partnership) Agreement with Shanghai Glory Ventures InvestmentManagement Co.,LTD and 21 other limited partners (LP). USI invested in Suzhou Glory Ventures Equity Investment Partnership (Limited Partnership) as an LP. Thetotal target subscribed capital contribution of the partnership shall not exceed RMB 1.5 billion, and can be raised through multiple deliveries. The total subscribedcapital contribution after the first and the second closing were RMB 793 million and RMB 1.128 billion respectively, of which the Company subscribed RMB 30million. As of December 31, 2023, the Company had contributed RMB 21 million, including RMB 9 million paid during the current period, and RMB 9 millionremained unfunded.
2023 Annual Report
2. PHI FUND
According to the partnership agreement signed by UGE and the investee PHI FUND, L.P., UGE shall pay a total of USD 25,000,000.00 for subscriped capitalcontribution, and USD 6,245,794 was paid in the current period, equivalent to RMB 45,130,858.29. UGE's obligation of capital contribution has been fully fulfilled.
Investment in derivatives
√Applicable □ Not Applicable
(1). Derivative investments for hedging purposes during the reporting period
□Applicable √Not Applicable
(2). Derivative investments for speculative purposes during the reporting period
□Applicable √Not Applicable
Other explanationsThe Nineteenth Meeting of the Fifth Session of the Board of Directors of the Company considered and approved the Proposal on the Estimated Amount of FinancialDerivatives Transactions in Q1 2023, agreeing that the Company shall carry out financial derivatives transactions business, and that it is expected that the total amountof foreign exchange hedging transactions in Q1 2023 will be limited to USD 500 million (or the equivalent of other currencies, and the same transaction rolled overwill not be repeatedly calculated); the Twenty-second Meeting of the Fifth Session of the Board of Directors and the 2022 Annual General Meeting of the Companyconsidered and approved the Proposal on the Amount of Financial Derivatives Transactions, agreeing that the Company shall carry out financial derivativestransactions business, and it is expected that the total amont of foreign exchange hedging transactions from the Q2 2023 to Q1 2024 will be subject to a limit of USD1 billion (or the equivalent of other currencies), and that such amount can be utilized on a recurring basis within the quota. The total transaction amount for 2023 wasUSD 2,432 million, of which USD 2,143 million was settled and USD 289 million was not settled yet as of December 31, 2023, with a realized gain of RMB33,290,271.18 and an unrealized loss of RMB 12,381,158.46.
2023 Annual Report
4. Specific progress of material asset restructuring and integration during the reporting period
□Applicable √Not Applicable
(VI) Sale of material assets and equity
√Applicable □ Not Applicable
On January 19, 2023, the Company's Kunshan subsidiary signed the Agreement on the Equity Transfer ofSUMA-USI Electronics Co., Ltd (SUMA-USI) with SUMA to transfer 49% equity of SUMA-USI toSUMA at a transfer price of RMB 110.88 million. As of February, 2023, as SUMA-USI completed thechange of business license, the equity transfer was completed, and Kunshan Factory no longer holds equityin SUMA-USI. This equity transfer is the transfer of the listed company's minority stake in a joint stockcompany, an adjustment made by the listed company based on its business strategy. It is conducive to theCompany's business development and optimization of its business structure, and will not have a significantimpact on the Company's financial status and operating results.
(VII) Analysis of major holding and joint stock companies
√Applicable □ Not Applicable
1. Holding subsidiaries
Unit: RMB 10,000 yuan
| Company Name | Main business | Currency of registered capital | Registered capital (RMB) | Total assets | Net assets | Net profit |
| Universal Global Scientific Industrial Co., Ltd. | Production and sales, product design and R&D | NTD | 1,980,000,000 | 650,525 | 248,905 | 19,650 |
| UNIVERSAL GLOBAL TECHNOLOGY(KUNSHAN)CO., LTD. | Production and sales | RMB | 550,000,000 | 375,294 | 215,936 | 31,447 |
| Universal Global Technology Co., Limited | Trade and Investment | USD | 480,803,000 | 913,057 | 463,365 | -11,550 |
| Universal Global Technology (Shanghai) Co., Ltd. | Production and sales, product design and R&D | RMB | 1,330,000,000 | 315,615 | 226,799 | 22,591 |
| Universal Global Technology (Huizhou) Co., Ltd | Production and sales | RMB | 800,000,000 | 225,660 | 102,655 | 23,508 |
| USI Electronics (Shenzhen) Co., Ltd. | Production and sales | USD | 75,000,000 | 105,012 | 98,971 | 1,252 |
| Universal Global Industrial Co., Limited | Trade and Investment | USD | 31,000,000 | 209,871 | 26,189 | 1,016 |
| Universal Scientific Industrial De México S.A. De C.V. | Contract manufacturing, product repair and related services | Mexico MXN | 2,293,299,926 | 354,604 | 70,671 | -1,555 |
| UNIVERSAL SCIENTIFIC INDUSTRIAL VIETNAM COMPANY LIMITED | Production and sales, product design and R&D | USD | 105,000,000 | 152,494 | 85,611 | 11,748 |
| Universal Scientific Industrial (France) | Investment | EUR | 321,374,822 | 281,203 | 256,297 | -633 |
| Universal Scientific Industrial Co., Ltd. | Production and sales, product maintenance | NTD | 1,399,727,400 | 137,596 | 84,725 | 5,772 |
| Universal Scientific Industrial Poland Sp. z o.o. | Production and sales | PLN | 80,852,300 | 44,445 | 37,600 | 5,478 |
| Asteelflash(Suzhou)Co.,Ltd. | Production and sales | USD | 18,000,000 | 115,303 | 69,887 | 7,614 |
Note 1: the registered capital includes the amount of re-investment to other subsidiaries, and the amountof total assets, net assets and net profit is from standalone financial statements, not including subsidiaries.Note 2: the above are subsidiaries within the scope of the consolidated statements that meet the conditionsthat one of the indicators of total assets, operating income, and net profit accounts for more than 5% of thecorresponding amount in the consolidated statements.
2023 Annual Report
2. Affiliates
Unit: RMB 10,000 yuan
| Company Name | % | Currency of registered capital | Registered capital (RMB) | Total assets | Net assets | Net profit |
| M-Universe Investments PTE.LTD. | 42.23 | USD | 138,969,126 | 162,073 | 113,318 | 3,446 |
Note: the above are affiliates that meet the conditions that one of their indicators of net assets and netprofit accounts for more than 1% of the corresponding amount in the consolidated statement.
3. Subsidiaries or affiliates that contributed over 10% to the net profit of the Company
Unit: RMB 10,000 yuan
| Company Name | Revenue | Operating profit | Net profit | Contribution to consolidated net profit |
| UNIVERSAL GLOBAL TECHNOLOGY(KUNSHAN)CO., LTD. | 544,834 | 36,199 | 31,447 | 16.13% |
| Universal Global Technology (Shanghai) Co., Ltd. | 682,842 | 24,029 | 22,591 | 11.59% |
| Universal Global Scientific Industrial Co., Ltd. | 1,290,108 | 18,817 | 19,650 | 10.08% |
(VIII) Structured entities controlled by the Company
□Applicable √Not Applicable
VI. Discussion and analysis of corporate development in the future(I) Industry landscape and trends
√Applicable □ Not Applicable
1. Global market capacity of the industry
According to industry statistics, the revenue of global EMSs was approximately USD 724 billion in 2023,and the revenue of global EMSs is expected to exceed USD 900 billion in 2027, with an average CAGRof approximately 5.5% from 2022 to 2027. The overall market shows a stable growth trend, and the Asia-Pacific region will continue to maintain its leading growth rate.
Data source: Summarized by USI, February 2024
Global CM, EMS and ODM market capacity (2022-2027) (unit: USD 100 million)
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| The Worldwide CM, EMS and ODM Market by Region, 2022-2027 | |||||||
| 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | CAGR | |
| CM Revenue | |||||||
| Americas | 1,199 | 1,248 | 1,301 | 1,359 | 1,420 | 1,484 | 4.3 % |
| EMEA | 927 | 966 | 1,005 | 1,045 | 1,086 | 1,127 | 4.0 % |
| APAC | 4,818 | 5,025 | 5,311 | 5,655 | 6,041 | 6,456 | 6.0 % |
| Total | 6,944 | 7,239 | 7,617 | 8,060 | 8,547 | 9,067 | 5.5 % |
| EMS Revenue | |||||||
| Americas | 1,157 | 1,204 | 1,255 | 1,311 | 1,370 | 1,432 | 4.4 % |
| EMEA | 881 | 918 | 955 | 994 | 1,032 | 1,072 | 4.0 % |
| APAC | 3,573 | 3,722 | 3,939 | 4,203 | 4,497 | 4,818 | 6.2 % |
| Total | 5,611 | 5,844 | 6,149 | 6,508 | 6,899 | 7,321 | 5.5 % |
| ODM Revenue | |||||||
| Americas | 43 | 44 | 46 | 47 | 49 | 51 | 3.9 % |
| EMEA | 46 | 48 | 50 | 52 | 54 | 56 | 3.9 % |
| APAC | 1,244 | 1,303 | 1,372 | 1,452 | 1,544 | 1,638 | 5.7 % |
| Total | 1,333 | 1,395 | 1,468 | 1,551 | 1,647 | 1,746 | 5.5 % |
Data source: Summarized by USI, February 2024
2. Global competition landscape and industry rankings
According to the latest ranking of global EMS providers (2022), the Company's operating revenue rankstwelfth.
| Ranking | Manufacturer name | Operating revenue (USD 100 million) | Operating revenue (USD 100 million) | Annual growth rate | Net operating margin |
| Year | 2021 | 2022 | 21'22 | 2022 | |
| 1 | Foxconn | 2,144 | 2,228 | 3.9 % | 2.3 % |
| 2 | BYD | 335 | 623 | 85.8 % | 4.1 % |
| 3 | Pegatron | 453 | 444 | -2.0 % | 1.6 % |
| 4 | Quanta | 404 | 432 | 6.9 % | 2.3 % |
| 5 | Compal | 443 | 363 | -18.0 % | 0.8 % |
| 6 | Jabil | 300 | 345 | 15.1 % | 2.8 % |
| 7 | Wistron | 309 | 329 | 6.4 % | 1.9 % |
| 8 | Luxshare | 240 | 316 | 32.0 % | 4.9 % |
| 9 | Flextronics | 255 | 297 | 16.8 % | 2.8 % |
| 10 | Inventec | 186 | 181 | -2.8 % | 1.1 % |
| 11 | Delta Electric | 113 | 129 | 15.0 % | 9.6 % |
| 12 | USI | 86 | 101 | 18.2 % | 4.4 % |
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| Whole industry | 6,827 | 6,944 | 1.7 % | 2.6 % |
Data source: Summarized by USI, February 2024
2. Change trends in industry profit levels and analysis of net profit marginsThe Company's net profit margin in 2022 was approximately 4.5%, which is better than the average levelof the world's top ten EMS providers. The Company's net profit margin in 2023 was 3.2%, a decrease of
1.3 percentage points compared with 2022, mainly due to an 11.3% drop in revenue, a 0.9 percentagepoint drop in gross profit margin and a significant decrease in exchange-related revenue.Electronic products were still in the destocking stage of the supply chain in 2023. Combined with theimpact of the economic cycle on the demand for consumer electronics, the restructuring of the globalelectronics supply chain, and the exchange rate of RMB against the USD, domestic companies in the sameindustry generally experienced declines in revenue and profit margin in 2023. By contrast, companies inthe same industry in North America benefited from an increase in product mix and regional orders,resulting in increased revenue and improved profit margins.
3. Industry development pattern
(1) Industry demand pattern
The current destocking of the global supply chain is coming to an end, and demand for electronic productshas begun to recover. However, the global economy is still facing more uncertainties, and consumers areless willing to purchase optional consumer products. "AI+" consumer electronics products such as AIPhones and AI PCs have attracted consumer attention. Generative artificial intelligence and large modelshave driven significant growth in demand for GPUs, AI servers, optical communications and relatedindustries. The penetration rate of vehicle electrification will continue to increase, but the growth rate willslow down significantly.
(2) Capacity supply pattern
With the increase of trade protectionism and geopolitical factors, European and American companies arepaying more attention to strengthening the supply chain within the region in order to reduce the uncertaintyand risk of the supply chain, causing the EMS industry to shift to Southeast Asia, India, Mexico, andEastern Europe. In order to improve production efficiency and quality, the EMS industry will increaseinvestment in automation and intelligent manufacturing, reduce the use of direct labor, and improve theflexibility and response speed of production capacity.
(3) Supply chain development trends
Under the pressure of customers to reduce costs, EMS companies are accelerating the optimization ofsupply chains, improving the local supply chain of production bases, and giving priority to alternativesuppliers. Customers are also paying more attention to the flexibility of the supply chain and tend tocooperate with supply chain partners or increase outsourcing of some production processes to achieveresource sharing and risk sharing.
(4) Technological development
In order to better meet the diverse needs of the market, the EMS industry will pay more attention to thedevelopment of flexible manufacturing technology and realize small batch and multi-variety productionmodels in the future. Technologies such as artificial intelligence, big data and the Internetof Things will be more widely used in the production process to achieve intelligent production scheduling,quality control and equipment maintenance.In addition, the EMS industry will also strengthen the digital management of the supply chain, improvethe transparency and efficiency of the supply chain through technologies such as blockchain and cloudcomputing, and realize the visualization and collaborative management of the supply chain. With theimprovement of environmental protection and carbon reduction, electronic manufacturing
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companies will pay more attention to the R&D and application of green manufacturing technology to
reduce energy consumption and environmental pollution.
(5) Changes in customer service needs
In order to reduce supply chain risks, well-known brand manufacturers tend to cooperate with EMScompanies with global layout, requiring manufacturing service companies to have rapid responsecapabilities to cope with changes in market demand. In order to maintain cost competitiveness, customersexpect manufacturing service companies to provide more technologically innovative solutions, includinghardware design and software design, and to establish closer R&D partnerships with customers. In addition,as consumers pay more attention to environmental protection and sustainable development, manufacturingservice companies are increasingly paying attention to energy conservation and carbon reduction issuesand sustainable development.
4. Industry entry barriers
(1) Barriers to R&D and manufacturing capabilities
The technological innovation of electronic products is changing with each passing day, and the productupgrade cycle is shortening, requiring manufacturing service providers to continuously improve theirproduct design and process R&D capabilities. The EMS industry is transforming and upgrading towardsintelligent manufacturing, using automated production and Industry 4.0 technology to improve productquality, process stability and delivery on time. The threshold for manufacturing service providers to havehigh-level product development and intelligent manufacturing capabilities, economic scale of productioncapacity, and quality control systems is very high.
(2) Barriers to qualification of entering the supply chain of large brands
Since the EMS industry is highly competitive, establishing cooperative relationships with large-scalebrand customers and entering their global supply chain systems require strict quality management systemand product performance certification. Therefore, strict supplier qualification builds a barrier to entry fornew entrants. In addition, the solid relationships established by manufacturing service providers throughlong-term cooperation with customers and their supply chain vendors are also barriers faced by newentrants.
(3) Barriers to capital investment
Large electronic product brands require that the manufacturing service providers they cooperate with musthave manufacturing capabilities that match their business scale, which requires high investment in fixedassets such as equipment, factories, supporting facilities, a large scale of initial investment, and additionalequipment investment in the future based on new orders or product upgrade requirements. In addition,large quantities of materials need to be purchased for large-scale production and manufacturing, and alarge amount of working capital is required to establish and improve the material procurement system andmaintain its efficient operation.
(4) Barriers to global business layout
Large brand manufacturers hope that EMS providers with long-term cooperation can provide turnkeysolutions covering R&D, design, manufacturing and after-sales, have intelligent manufacturing and globalmanufacturing service capabilities, and can provide customers with glocalized manufacturing services anddelivery solutions, so as to meet customers’ needs for supply chain diversification and risk management.Therefore, global presence is crucial to serving top-level customers in the industry.
(II) Company development strategy
√Applicable □ Not Applicable
1. Difficulties faced by the Company
(1) Industry competitors are striving for market share with more active competition methods, andcompetition pressure is increasing.
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(2) In the face of cost reduction and R&D requirements from customers, the Company needs to speed upthe optimization of the supply chain and increase investment to improve R&D capabilities, which is urgentin time.
(3) The supply chain of the electronics industry is shifting to Southeast Asia, Mexico, Eastern Europe andother regions. The comprehensive cost of new investment in production capacity is relatively high and theprofit margin is low. It is necessary to optimize costs and improve quality and efficiency in operations.
(4) The Company accelerates its global layout and vertical integration through mergers and acquisitionsand strategic investments, and there are management and operational difficulties in post-investmentintegration and coordination.
(5) The Company has become a globally operating enterprise. Facing an operating environment withmulti-cultural backgrounds, multi-languages, multi-ethnicities, and multi-time zones, it needs to establishbetter institutional system in terms of strategy execution, operational management, internal collaboration,team building, and incentive mechanisms, etc.
2. The Company’s coping strategy
(1) Relying on the Company's technological advantages, capital advantages, and resource integrationadvantages, the Company deeply cultivates existing customers in the field of modular products and strivesfor more potential customers to expand its business territory.
(2) Following the development trend of "global demand, local services", the Company rationally deploysglobal production capacity, uses advanced processes, flexible production capacity and local services tointroduce new technologies, develop new products, shorten the time from design concept to massproduction, and provide more added value for customers.
(3) The Company increases R&D investment in key technologies and application areas, strengthens theability to design and provide JDM/ODM services for customers, strengthens vertical integration andindustrial cooperation in the upstream and downstream of the industry chain through the integration ofgroup resources, technology sharing, and independent innovation, and actively deploys new products andnew customers in the fields of industrial and automotive electronics.
(4) The Company deepens business collaboration with Financière AFG and Hirschmann to jointly expandbusiness growth.
(5) To serve the development strategy, the Company establishes a more competitive salary and incentivesystem, strengthens employee work skills training, improves the internal talent cultivation mechanism,and cultivates and recruits global talents.
(6) The Company adheres to a sound financial structure to meet the funding needs for global operationsand M&A investments.
(III) Business plan
√Applicable □ Not Applicable
1. Growth plan
The Company will adhere to the development strategy of "modularization, diversification, andglobalization", enhance vertical integration and intelligent manufacturing capabilities, and improve theglobal production and operation system to promote endogenous growth. Meanwhile, it will continue toinvest in M&A activities and actively seek external growth opportunities.Faced with the challenge of slowing macroeconomic growth, the Company will make more prudentarrangements for human resources and capital expenditures, strike a balance between annual financialgoals and long-term growth plans, expand the application scope of digital management systems based onthe needs of business development and global operations, and continuously improve the level of intelligentand automated production in factories.The Company's growth plan mainly includes:
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(1) Striving to maintain the market share in the core customer SiP module business, strengthen theapplication and promotion of miniaturization technology and SiP modules, new product R&D and newcustomer development, and continuing to expand the revenue scale of the module business;
(2) Continuing to invest in production capacity in North America, Eastern Europe, and Asia-Pacific,establish regional EMS business departments to directly serve local customers, and leverage localmanufacturing services and differentiated competitive advantages to expand automotive electronics andindustrial businesses;
(3) Improving the cost competitiveness of automotive power modules and powertrain products;
(4) Improving software design and solution capabilities to serve customer needs;
(5) Continuing to strengthen digital transformation, promote the process of intelligent manufacturing ineach factory area, and use IT technology platforms to upgrade to create future-oriented industrialcompetitiveness.
2. Supply chain plan
Against the backdrop of global supply chain restructuring as well as economic and trade regionalization,large enterprises are increasingly paying attention to supply chain diversification and risk management,hoping to improve supply chain risk management capabilities and enhance supply chain flexibility andresilience. In line with the needs of its global operations, the Company's supply chain department activelybuilds a more resilient supply chain to provide flexible, stable, and efficient services to meet customerneeds. The main strategies are as follows:
(1) Strategically cooperating with large-scale international manufacturing factories or agents, integratingthe needs of the entire company, and striving for better support policies from suppliers to satisfy the needsof each factory locally in the Company's production area;
(2) Developing local suppliers in each region to reduce transportation time and costs, and increasingsupply flexibility and response speed, including exploring suppliers for large-volume materials (such asmechanical components, packaging materials, wires, etc.), and processing materials, chemicals andconsumables with shelf life or requiring special delivery at major production bases; developing printedcircuit board manufacturers outside Greater China, and focusing on suppliers from Southeast Asia;developing production equipment, automation equipment or other non-raw material suppliers that can belocalized in various regions;
(3) Working with existing partners to set up factories near the new base and provide services nearby;
(4) Continuing to develop local suppliers in China, and leveraging the advantages of scale and efficiencyto serve customers with requirements in scale;
(5) Actively assessing risks, pre-arranging supply bases and formulating supply chain emergency plans tofully prevent and disperse risks.
3. Global production base plan
As of the end of 2023, the Company has 30 production bases in 12 countries (or regions) around the world,and the overseas factory revenue accounts for approximately 41% of total revenue.In mid-2024, the Company's new factory in Poland and the second factory in Mexico will be completedand put into production. The newly added production capacity will be used to serve customers in theautomotive electronics and industrial fields. The Company's newly built Tanzi factory in Taiwan and thesecond phase of the Vietnam factory are expected to be completed and put into production in early 2025.The Tanzi factory in Taiwan will be used to produce automotive power modules, and the second phase ofthe Vietnam factory will be used to serve customers in the consumer electronics and industrial fields.
4. Human resources plan
According to the global localization development strategy, the Company will formulate global humanresources planning, predict and plan the Company's future manpower needs, talent introduction andemployee training to cope with the complex challenges of multi-cultural backgrounds, multi-languages,multi-ethnicities and multi-time zones faced in the integration of global operations. The Company willcontinue to improve the people-oriented corporate culture, provide space for the development of talents,
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plan employee career development and performance appraisal, and continue to optimize the long-termincentive mechanism with equity incentives as the core to attract and retain outstanding talents, andprovide strong talent guarantee for the Company to achieve its development goals.
5. R&D plan
At present, the Company's products have developed towards being thin, light, short, low power consuming,interconnected, and AI intelligent. In 2024, the Company will continue to study the functional integrationof SiP system modules and communication antennas, and expand more application functions of SiPmodules by introducing more process technologies into SiP module design; develop new post-laser cuttingwater washing technology to overcome the damage to sensitive components in current dry ice cleaning.In addition, the importance of environmental protection and sustainability issues has increased year byyear. Plastic casings of electronic products have begun to use recycled plastics (PCR, Post-ConsumerPlastics) in large quantities, and carbon footprint inventory has been taken into consideration whenselecting materials. The Company plans to take the following R&D directions as its main focus in thefuture:
(1) Developing wireless communication module products, and establishing 5G new wireless radiofrequency design capabilities; continuing to focus on development based on Qualcomm’s latest 5G IoTplatform, and upgrading product specifications in line with the mainstream market trends; the Companyis expected to invest in B5G (Beyond 5 Generation) technology development, while taking into accountthe product lifecycle;
(2) Automotive electronics power modules, powertrains, automotive communication solutions andintelligent cabin products;
(3) Continuing to expand the application fields of miniaturized products, even covering the application ofIoT products in addition to existing products, and continuing to improve the manufacturing process;
(4) Cooperating with industry-leading technology companies to produce module products with higherintegration and more functions, and establishing a presence in the Internet of Things and other fields;
(5) Developing technologies related to network storage for cloud computing, cooperating with major chipcompanies to launch high-performance solid-state drives, and developing miniaturized solid-state drives;
(6) Miniaturization and automation, and developing design automation tools;
(7) Continuously developing green design products to reduce material and energy consumption.
6. Sustainable business plan
The Company integrates the core corporate values of "Realizing IDEAS together" into the its businessstrategy and operation management, constantly pursues sustainable development, and actively promotesthe improvement of environment (E), society (S) and governance (G): in terms of environment (E), itreduces environmental impact, promotes resource recycling development, and actively seeks climategovernance solutions to address climate change; in terms of society (S), it continues to care for employeesand promote social participation activities to increase corporate influence and achieve global partnerships;in terms of governance (G), it upholds the corporate governance structure of safeguarding the rights andinterests of investors, strengthening operational risk management, and implementing information securitycontrol.The Company established the Group Sustainability Committee in 2020 to jointly promote and achieve thespecific implementation of various sustainable development goals and actions. The committee's missionhas been divided into five taskforces, Corporate Governance, Green Product & Innovation, Value ChainManagement, Employee & Society Well-being Engagement, and Environmental Protection &Occupational Safety. In March 2022, the Company's board of directors reviewed and approved the ESGCode of Practice, which clearly specifies relevant requirements such as implementing corporategovernance, developing a sustainable environment, safeguarding social welfare, and strengtheninginformation disclosure on corporate sustainable development.USI continues to strengthen its resilience in dealing with climate change, and carries out Task Force onClimate-related Financial Disclosures (TCFD) with the “low-carbon mission” as its focus. The Companyconstructs climate change management based on four core elements of TCFD: “governance, strategy, risk
2023 Annual Report
management, metrics and targets.”, assesses the risks and opportunities brought by climate change,discloses the Company's strategies and measures to face the risks and opportunities brought by climatechange, and allocates capital more rationally and effectively in order to achieve the low-carbon economictransformation and the net-zero carbon emission target by 2040.
(IV) Possible risks
√Applicable □ Not Applicable
1. Risk of weak macroeconomic recovery and insufficient demand
The EMS industry chain has shifted from being supply chain-driven to demand-driven, which has a strongcorrelation with the macroeconomic environment. Many unfavorable factors such as the Russia-Ukrainewar, geopolitics, inflation, and USD interest rate hikes have affected global economic growth and terminaldemand. The supply chain destocking is now nearing an end, and the demand is expected to recoversignificantly in the second half of this year. The Company will continue to pay attention to the trend ofthe industrial chain pattern, maintain close interaction with customers to grasp customer needs, andstrengthen the collection and analysis of market information to reduce the impact of changes in productdemand on the Company.
2. Risk of industry competition
The EMS industry with many global manufacturers is a fully competitive industry, and the overallconcentration within the industry is on the rise. Under the trend of restructuring of the international marketsupply chain and economic and trade regionalization, Chinese mainland's EMS industry and upstreamsupply chain will face even severe competition. Through the new operating model of “global platform,localized service”, the Company combines its own advantages to compete with its peers in a differentiatedmanner. However, if the Company cannot maintain cost competitiveness and product technologyadvantages, its market share and profit margins will be at risk of being squeezed.
3. Risk of high customer concentration
During the reporting period, the sales revenue from the Company's top five direct customers accountedfor 50.59% of the Company's total revenue, indicating a high degree of customer concentration. Althoughthese customers are all well-known international electronics brands and have established long-term andstable cooperative relationships with the Company and served as a sufficient source of business orders, ifcustomer demand declines, or the Company fails to meet customer requirements in terms of product R&D,design, product quality control, qualified supplier certification, delivery period and other aspects in atimely manner, it may cause certain fluctuations in customer orders, which will adversely affect theCompany's business scale and operating performance. Therefore, the Company is exposed to the risk ofhigh customer concentration to a certain extent.
4. Risk of insufficient R&D and innovation
Technological progress continues to drive the upgrading and iteration of electronic products andequipment. Enterprises in the EMS industry have been under great operating pressure for a long time, suchas product innovation, quality improvement, cost reduction, continuous investment, etc., and only bysticking to R&D investment and technological innovation can enterprises cope with rapid changes in themarket and competitive pressure. Under the restructuring of the supply chain, customers have also putforward higher demands and service standards for the Company's hardware R&D, software R&D,intelligent manufacturing, low-carbon environmental protection, etc. The Company must accelerate theimprovement of its R&D strength, and make up for weaknesses to explore new business opportunities.The Company is at risk of insufficient R&D and innovation.
5. Risk of transnational business
In order to better serve its major customers, the Company has a global layout of production, sales andlogistics to quickly respond to the product delivery needs of major customers. The Company has 30manufacturing bases in 12 countries and regions. Overseas companies conducting business andestablishing branches overseas need to comply with the laws and regulations of the country and regionwhere the overseas business is located. In case of any material changes in the laws, regulations, industrial
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policies or political and economic environment of the country and region where the overseas business islocated, or due to international tensions, wars, trade sanctions and other unpredictable factors or otherforce majeure events, it may have potential adverse effects on the normal development and sustainabledevelopment of overseas businesses of overseas companies. Moreover, in consideration of differencesbetween operating bases in various countries or regions and listed companies in terms of accounting andtaxation systems, business practices, company management systems, corporate culture, etc., the Companyneeds to integrate financial management, customer management, resource management, businessdevelopment, corporate culture, and etc. If relevant integration plans are not effectively implemented, theCompany may face risks such as the effect of the merger or new enterprise is not up to expectations, theloss of core personnel, and the decline in performance.
6. Risk of exchange rate fluctuations
As a global EMS provider, most of its production bases are overseas, main customers and suppliers areoverseas enterprises, and its purchases and sales are mainly settled in foreign currencies. The Companyusually uses foreign exchange hedging operations to deal with the risk of exchange rate fluctuations.However, the significant fluctuation of the exchange rate, if any, will still incur a large amount of exchangegains and losses. The Company will pay close attention to changes in the international foreign exchangemarket, conduct reasonable foreign exchange hedging operations, and actively hedge major exchange raterisks when necessary to minimize exchange losses.
7. Emerging risks
The Company has set up a Risk Management Committee to identify internal and external risk factors thatmay affect the Company's sustainable business goals, evaluate the level of each risk and the effectivenessof related control activities, and implement appropriate measures and responses based on the riskassessment results to ensure that risks can be effectively monitored.
(1) Risk of cyber attack
Cyberattack risks refer to various potential threats from the Internet, which may lead to adverseconsequences such as system intrusion, data theft, or business interruption. By taking advantage ofvulnerabilities, malware, social engineering and other means, attackers may have a serious impact onindividuals, businesses and critical infrastructure, paralyze corporate networks and affect production andoperations. In order to deal with the risk of ransomware and network attacks, the Company's informationsecurity department actively tracks the latest information security technology and virus protection methods,deploys and upgrades the security level of the front-end system in advance, to reduce the risk of hackerpenetration and intrusion, regularly conducts system vulnerability scans, repairs system vulnerabilities ina timely manner, and continues to strengthen information security education for employees to improveawareness of prevention of emerging cyber attacks. In addition, through the Information SecurityCommittee, the Company has made a thorough information security plan to protect the Company'sintellectual property and business secrets.
(2) Risk of economic conditions and industry trends
The current global economic situation and trade pattern are faced with many uncertain factors, such asgeopolitics, inflation, interest rates, exchange rates, financial investment, policies of major countries, etc.In the post-epidemic era, companies need to face the challenge of restructuring the global supply chain,adjust business strategies and industrial layout under the trend of regional economic and trade development,and respond to business risks under industry trends. However, due to many uncertain factors, the businessdecision-making risks faced by companies have increased significantly. The Company will strengthenindustry analysis and cooperate with professional research institutions to gain insight into global economicchanges and industry trends, objectively judge their impact on the company's operations, formulateresponse strategies and take timely action plans, and strive to achieve the Company's business goals.(IX) Others
□Applicable √Not Applicable
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VII. The circumstances and reasons for the Company’s failure to disclose according to the standardsdue to special reasons such as non-applicability of the standards or state secrets and tradesecrets
□Applicable √Not Applicable
2023 Annual Report
Section IV Corporate GovernanceI. Particulars on corporate governance
√Applicable □ Not Applicable
During the reporting period, the Company, in strict accordance with the relevant requirements of theCompany Law the Securities Law and the Code of Corporate Governance for Listed Companies, ChinaSecurities Regulatory Commission, and Shanghai Stock Exchange, strengthened information disclosureefforts, continuously optimized the corporate legal person governance structure, established the soundinternal control system, and standardized the business operation, to effectively guarantee the interests ofthe Company and its all shareholders. The Company's general meeting of shareholders, Board of Directors,Board of Supervisors, and all operation levels had clear responsibilities. All directors, supervisors andmembers of the senior management were diligent and responsible. Directors and supervisors activelyparticipated in the Company's general meetings of shareholders, meetings of the Board of Directors, andmeetings of the Board of Supervisors, and earnestly performed their responsibilities. Related directorsvoluntarily abstained from voting on relevant related transactions to ensure the safe, stable, healthy andsustainable development of the Company.(I) Shareholders and general meetings of shareholders: The Company convened and held general meetingsof shareholders in accordance with the requirements of the Company Law, the Articles of Association,and the Rules of Procedure for the General Meeting of Shareholders. The general meetings of shareholderscomplied with the relevant provisions in aspects of preparations, proposals, procedures, voting andresolutions, resolution execution and information disclosure, and ensured that all shareholders, especiallyminority shareholders, fully exercised their voting rights and maintained equal status. and ensured that allshareholders, especially minority shareholders, fully exercised their voting rights and maintained equalstatus. The Company also invited lawyers to attend the general meetings of shareholders to confirm andwitness the convening procedures, deliberation matters, and identities of attendees, and issue legalopinions to ensure the legality and validity of the general meeting of shareholders.(II) Relationship between the controlling shareholder and the listed company: The Company and itscontrolling shareholder were independent of each other. The Company's board of directors, board ofsupervisors and internal institutions could operate independently. The Company established a long-termmechanism to prevent the controlling shareholder and its affiliated companies from occupying the listedcompany's funds and infringing on the listed company's interests, and no major shareholders occupied thelisted company's funds and assets.(III) Directors and the Board of Directors: The Company elected directors in strict accordance with theselection and appointment procedures stipulated in the Company Law and the Articles of Association. TheCompany's Board of Directors met the requirements of laws and rules in terms of number and compositionof members. The Company's directors could seriously attend the meetings of the Board of Directors inaccordance with the Procedure Rules of the Board of Directors and other regulations. The Board ofDirectors set up four special committees, namely the Audit Committee, the Strategic Committee, theNomination Committee, and the Remuneration Committee, of which the membership is reasonable. Sincetheir establishment, the special committees have been operating in strict accordance with thecorresponding work regulations, and fully playing its professional role in the Company's operation andmanagement. The independent directors of the Company, in strict compliance with the Guidelines on thePerformance of Duties by Independent Directors, performed their responsibilities in a conscientious andresponsible, diligent and honest manner, and put forward valuable opinions and suggestions in the processof reviewing related transactions and internal control norms.(IV) Supervisors and the Board of Supervisors: The Company's Board of Supervisors strictly compliedwith the relevant provisions of the Company Law and the Articles of Association, met the requirementsof laws and rules in terms of number and composition of members, and could, according to the Rules ofProcedure of the Board of Supervisors and other regulations, seriously performed their responsibilities,and supervised the compliance with laws and regulations of the Company's finance personnel, directorsand members of the senior management in performing their responsibilities and expressed relevantopinions.(V) Performance evaluation and incentive and restraint mechanisms: The Company established fair andtransparent performance evaluation standards and incentive and restraint mechanism for members of the
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senior management; the members of the senior management of the Company were appointed in an openand transparent manner and in compliance with the provisions of relevant laws and regulations.(VI) Information disclosure and transparency: The Company truthfully, accurately, completely and timelydisclosed relevant information through Shanghai Securities News, China Securities Journal, SecuritiesTimes, and the website of Shanghai Stock Exchange, in strict accordance with relevant laws andregulations and the requirements of the Information Disclosure Management Regulations formulated bythe Company, and did a good job in confidentiality before information disclosure, and earnestly fulfilledthe obligation of information disclosure as a listed company, to ensure the openness, fairness andimpartiality of information disclosure by the Company and actively safeguard the legitimate rights andinterests of the Company and its investors, especially minority shareholders. During the reporting period,the Company was not criticized, condemned or punished by regulatory agencies for information disclosureviolations.(VII) Investor relations and related stakeholders: The Company, in accordance with the relevantrequirements of the Self-disciplinary Rules Listed Companies No. 3 - Cash Dividends of ListedCompanies by China Securities Regulatory Commission and the Guidelines for the Self-supervision ofListed Companies No. 1 - Standardized Operation of Shanghai Stock Exchange, firmly established theawareness of rewarding shareholders, improved the cash dividend regulations, maintained the consistency,rationality and stability of the cash dividend policy, and ensured the authenticity of cash dividendinformation disclosure. The Company actively received all kinds of investors, and set up an investorrelations section on the Company's website, which further strengthened investors' understanding andrecognition of the Company, promoted the benign interaction between the Company and investors, andwas conducive to effectively protecting the interests of investors. The Company could fully respect andsafeguard the legitimate rights and interests of its employees, suppliers, customers, banks and otherstakeholders, and achieved mutual benefits in economic exchanges to promote the sustainable and healthydevelopment of the Company.(VIII) Establishment and improvement of the internal control system: The Company continuouslyimproved the internal control system and strengthened the execution and implementation of internalcontrol norms in strict accordance with the regulatory requirements, and performed the self-inspection andself-evaluation over the effectiveness of internal control of the Company's key business processes and keycontrol links on the basis of strengthening daily supervision and special inspections.(IX) Registration and management of insiders: The Company strictly implemented the AdministrativeRegulations for Registration of Information Insiders in accordance with the requirements of regulatoryagencies.
Whether there are significant differences between the Company’s corporate governance and laws,administrative regulations and the requirements of China Securities Regulatory Commission on corporategovernance of listed companies; if there are significant differences, the reasons shall be explained
□Applicable √Not Applicable
II. Specific measures taken by the Company's controlling shareholder and actual controller to
ensure the independence of the Company's assets, personnel, finance, organization, and business,and solutions, work progress and subsequent work plans adopted by them to affect theCompany's independence
√Applicable □ Not Applicable
For details, see the "Commitment to Guarantee the Independence of the Listed Company" in "Section VIMajor Events".
Situation that the Company's controlling shareholder, actual controller, and other units under theircontrol are engaged in the same or similar business as or with the Company, impact of horizontalcompetition or major changes in horizontal competition on the Company, settlement measures taken,settlement progress and subsequent settlement plans
□Applicable √Not Applicable
2023 Annual Report
III. Brief Introduction to general meetings of shareholders
| Meeting Session | Date | Query index of the designated website on which the resolution is published | Disclosure date when the resolution is published | Resolution |
| 2022 Annual General Meeting of Shareholders | April 24, 2023 | www.sse.com.cn (Announcement No.: 2023-048) | April 25, 2023 | 1. Proposal on 2022 Work Report of the Board of Directors 2. Proposal on 2022 Work Report of the Board of Supervisors 3. Proposal on 2022 Financial Final Report 4. Proposal on the 2022 Annual Report and its Summary 5. Proposal on Profit Distribution Plan for 2022 6. Proposal on Actual Regular Related Party Transactions in 2022 and Predicted Regular Related Party Transactions in 2023 7. Proposal on the Amount of Wealth Management Products Using Self-owned Idle Funds Allowed for 2023 8. Proposal on Bank Credit Lines in 2023 9. Proposal on the Amount of Financial Derivative Transactions 10. Proposal on Guarantee Between Holding Subsidiaries 11. Proposal on Renewing the Contract with the Financial Audit Institution 12. Proposal on Renewing the Contract with the Internal Control Audit Institution 13. Proposal on Purchasing Liability Insurance for Directors, Supervisors and Senior Executives 14. Proposal on Procedures for the Acquisition or Disposal of Assets 15. Proposal on the Remuneration of Directors of the Sixth Session of the Board of Directors 16. Proposal on the Remuneration of Supervisors of the Sixth Session of the Board of Supervisors 17. Proposal on Election of Non-independent Directors 18. Proposal on Election of Independent Directors 19. Proposal on Election of Non-Employee Supervisors |
| The First Extraordinary General Meeting of Shareholders in 2023 | September 15, 2023 | www.sse.com.cn (Announcement No.: 2023-084) | September 16, 2023 | 1. Proposal on 2023 Incentive Stock Option Plan and its summary 2. Proposal on Assessment and Management Measures for the Implementation of 2023 Incentive Stock Option Plan 3. Proposal on Requesting the |
2023 Annual Report
Shareholders' Meeting to Authorize theBoard of Directors to Handle FormalitiesRelated to 2023 Incentive Stock OptionPlan
4. Proposal on 2023 Employee Stock
Ownership Plan and its summary
5. Proposal on Administrative Rules for
2023 Employee Stock Ownership Plan
6. Proposal on Requesting Shareholders'
Meeting to Authorize the Board ofDirectors to Handle Formalities Related to2023 Employee Stock Ownership Plan
7. Proposal on Adjustment, Extension of
Some Raised Fund Projects, and Closureand Change of Some Raised Fund Projects
Convening of an extraordinary general meeting of shareholder requested by the preferred shareholderswhose voting rights have been restored
□Applicable √Not Applicable
Particulars on general meetings of shareholders
□Applicable √Not Applicable
2023 Annual Report
IV. Directors, supervisors and members of the senior management(I) Changes in shareholding and remuneration of current directors, supervisors, and senior management and those who left the position during the reportingperiod
√Applicable □ Not Applicable
Unit: Share
| Name | Position | Gender | Age | Start of tenure | End of tenure | Number of shares held at the beginning of the year | Number of shares held at the end of the year | Change in shareholding during the year | Reasons for change | Total pre-tax remuneration from the Company during the reporting period (RMB 10,000) | Whether received remuneration from related parties of the Company |
| Jeffrey Chen | Chairman of the Board of Directors | Male | 60 | 2018-06-28 | 2026-04-23 | 93,200 | 163,100 | 69,900 | Excercise of stock options | 189 | Yes |
| Director | 2016-04-19 | 2026-04-23 | 30 | ||||||||
| Chen-Yen Wei | Director and President | Male | 70 | 2008-06-20 | 2026-04-23 | 80,000 | 140,000 | 60,000 | Excercise of stock options | 653 | No |
| Dtuang Wang | Director | Male | 65 | 2018-07-16 | 2026-04-23 | 0 | 0 | 0 | N/A | 30 | Yes |
| Rutherford Chang | Director | Male | 45 | 2010-03-10 | 2026-04-23 | 0 | 0 | 0 | N/A | 30 | Yes |
| Neng Chao Chang | Director | Male | 46 | 2017-04-17 | 2026-04-23 | 0 | 0 | 0 | N/A | 30 | Yes |
| (Gilles Baruk Benhamou) | (Former) Director | Male | 70 | 2021-04-23 | 2023-04-23 | 0 | 0 | 0 | N/A | 58 | Yes |
| Yiyun Chu | (Former) Independent director | Male | 60 | 2017-04-17 | 2023-04-23 | 0 | 0 | 0 | N/A | 12 | No |
| Yunwei Tang | (Former) Independent director | Male | 80 | 2017-04-17 | 2023-04-23 | 0 | 0 | 0 | N/A | 12 | No |
| Michael Chung | (Former) | Male | 62 | 2020-04-28 | 2023-04-23 | 0 | 0 | 0 | N/A | 12 | No |
2023 Annual Report
| Independent director | |||||||||||
| Yifan Li | Director | Male | 57 | 2023-04-24 | 2026-04-23 | 0 | 0 | 0 | N/A | 20 | No |
| Yongtao Cang | Independent director | Male | 47 | 2023-04-24 | 2026-04-23 | 0 | 0 | 0 | N/A | 24 | No |
| Jiangdong Huang | Independent director | Male | 45 | 2023-04-24 | 2026-04-23 | 0 | 0 | 0 | N/A | 24 | No |
| Wei Guo | Independent director | Male | 42 | 2023-04-24 | 2026-04-23 | 0 | 0 | 0 | N/A | 24 | No |
| Meng-Kuo Shih | Chairman of the Board of Supervisors | Male | 61 | 2008-06-19 | 2026-04-23 | 0 | 0 | 0 | N/A | 30 | Yes |
| Andrew Robert Tang | (Former) Supervisor | Male | 49 | 2016-04-19 | 2023-04-23 | 0 | 0 | 0 | N/A | 10 | Yes |
| Jye-Shing Lin | Supervisor | Male | 50 | 2023-04-24 | 2026-04-23 | 0 | 0 | 0 | N/A | 20 | Yes |
| David Huang | Employee supervisor | Male | 52 | 2020-04-28 | 2026-04-23 | 0 | 0 | 0 | N/A | 88 | No |
| Ta-I Lin | Vice President | Male | 61 | 2011-02-09 | 2026-04-23 | 89,900 | 141,800 | 51,900 | Excercise of stock options | 205 | No |
| Feng-Ta Chen | Vice President | Male | 62 | 2008-06-20 | 2026-04-23 | 69,200 | 121,100 | 51,900 | Excercise of stock options | 201 | No |
| Yuan-Hsin Sheng | (Former) Vice President | Male | 66 | 2009-12-09 | 2023-04-23 | 0 | 0 | 0 | N/A | 26 | No |
| Jing Cao | Vice President | Male | 65 | 2017-04-27 | 2026-04-23 | 0 | 0 | 0 | N/A | 557 | No |
| Chen-Lung Wei | Vice President | Male | 61 | 2017-04-27 | 2026-04-23 | 0 | 0 | 0 | N/A | 184 | No |
| Jeh-Chang Lee | (Former) Vice President | Male | 61 | 2020-04-28 | 2023-04-23 | 0 | 0 | 0 | N/A | 28 | No |
| Yung-Che Fang | (Former) Vice President | Male | 59 | 2020-04-28 | 2023-04-23 | 0 | 0 | 0 | N/A | 30 | No |
| Chia-Hsiung Yu | (Former) Vice President | Male | 65 | 2020-04-28 | 2023-04-23 | 40,000 | 100,000 | 60,000 | Increase in holdings on the | 27 | No |
2023 Annual Report
| secondary market | |||||||||||
| Yueh-Ming Lin | (Former) Vice President | Male | 58 | 2020-04-28 | 2023-04-23 | 47,000 | 47,000 | 0 | N/A | 26 | No |
| Tan-Yang Liu | Vice President and Chief Financial Officer | Male | 59 | 2008-06-20 | 2026-04-23 | 40,000 | 70,000 | 30,000 | Excercise of stock options | 160 | No |
| Jinpeng Shi | Vice President and Secretary to the Board of Directors | Male | 48 | 2018-06-28 | 2026-04-23 | 52,000 | 91,000 | 39,000 | Excercise of stock options | 384 | No |
| Total | / | / | / | / | / | 511,300 | 874,000 | 362,700 | / | 3,122 | / |
Note: The fixed allowances received by the directors (including independent directors) of the Sixth Session of the Board of Directors and the supervisors of the SixthSession of the Board of Supervisors of the Company have been considered and approved at the 2022 Annual General Meeting of the Company. Based on the data ofprofessional surveys on the remuneration of senior executives of companies in the same industry in Chinese mainland, Taiwan and the United States, the remunerationlevel of the Company's senior executives is at the 50th to 75th percentile of the remuneration of senior executives of companies in the same industry. In 2023, theremuneration of Jing Cao, Vice President of the Company, was higher than that of other executives of the same rank, mainly due to the fact that the revenue generatedby the business unit under his leadership accounted for more than 50% of the Company's consolidated revenue for the current year, and the level of profit was in linewith expectation; the remuneration of Chen-Yen Wei, President of the Company, was higher than that of the remuneration level for the rank of Vice President, whichwas in compliance with the Company's employee performance evaluation and management system; and Jeffrey Chen, Chairman of the Board of Directors, in additionto receiving remuneration from the Company, also served as director of ASE Technology Holding and its affiliates and received the remuneration for the directorship,and his remuneration arrangement was in compliance with the relevant rules of ASE Technology Holding.
| Name | Work Experience |
| Jeffrey Chen | Mr. Jeffrey Chen, from Taiwan, China, graduated from the University of British Columbia with a master’s degree in business administration. Mr. Chen previously worked for Citibank Taiwan as the general manager assistant and Bankers Trust Taipei Branch as the deputy general manager. He joined the predecessor of ASE Technology Holding Co., Ltd. in 1994, serving successively as the assistant to the central staff office, special assistant to the chairman and chief of staff of the Group, as well as CFO and director of ASE Test Limited, a subsidiary of the Group and a listed company on NASDAQ. In addition to serving as Chairman of the Board of the Company, he serves as director of ASE Technology Holding Co., Ltd., director (representative) and general manager of Shanghai headquarters of Advanced Semiconductor Engineering, Inc. Currently he also takes a position as an independent director of Mercuries & Associates Holding, LTD. |
| Chen-Yen Wei | Mr. Chen-Yen Wei, from Taiwan, China, holds a bachelor’s degree from National Chiao Tung University. Mr. Wei joined Universal Scientific Industrial Co., Ltd in 1979, where he served successively as engineering manager, vice president of finished product business group, senior vice |
2023 Annual Report
| president of communication product business group, senior vice president of corporate service unit, and president of the company. Currently he serves as director and president of the Company. | |
| Dtuang Wang | Mr. Dtuang Wang, from Taiwan, China, holds a bachelor’s degree in laws from National Taiwan University, a master’s degree in laws from National Chung Hsing University, and a doctorate in law from National Chengchi University. He was the CEO of ASE Cultural and Education Foundation, a director of Dinggu Holdings Co., Ltd., a director of Hongjing Construction Co., Ltd., an independent executive director of First Commercial Bank Co., Ltd., professor and dean of School of Law, Ming Chuan University. Currently he serves as Group Chief Executive and Corporate Governance Director of ASE Technology Holding Co., Ltd. and a member of the company’s Risk Management Committee, a director of ASE Semiconductor Manufacturing Co., Ltd., and the honorary professor of Ming Chuan University Law School. |
| Rutherford Chang | Mr. Rutherford Chang, American, holds a bachelor’s degree in Psychology from Wesleyan University. Mr. Chang served as the special assistant to the chairman of J&R Holding and the special assistant to the chairman of Advanced Semiconductor Engineering, Inc. In addition to serving as director of USI, he also serves as director of Advanced Semiconductor Engineering, Inc. |
| Neng Chao Chang | Mr. Neng Chao Chang, British, with a bachelor’s degree in economics from Williams University, is a former analyst at Morgan Stanley. He currently serves as general manager of ASE Global Sales, director of ASE Test Inc., director of USI Inc., and director of Advanced Semiconductor Engineering, Inc. |
| Gilles Baruk Benhamou (former director) | Mr. Gilles Baruk Benhamou, French, born in June, 1953, graduated from ?cole Polytechnique in Paris with a master’s degree in science. Mr. Gilles Benhamou has more than three decades’ experience in the electronic components & assembly industry. Currently he serves as the CEO of Financière AFG S.A.S., the CEO of ASDI Assistance Direction, the CEO of Saphir, a director of Decelect, and the CEO of Retail Evolution. |
| Yunwei Tang (former independent director) | Mr. Yunwei Tang, Chinese, with a doctorate in accounting from SUFE, is the founder of the Chinese Accounting Professors Association. Mr. Tang worked for SUFE where he held the following positions including a lecturer, associate professor, assistant to the president, professor, vice president and president. He previously served as a member of the China Accounting Standards Committee, a member of Chinese Auditing Standards Board, president of Shanghai Accounting Association, and a member of the Listing Committee for Shanghai Stock Exchange. Mr. Tang served as a senior researcher of the International Accounting Standards Board from March 1999 to January 2000. He was awarded honorary membership to the Association of Chartered Certified Accountants, an honorary fellowship of Lingnan University in Hong Kong, and the title of an outstanding international visiting professor of the American Accounting Association. During the reporting period, in addition to serving as the independent director of the Company, he also served as an independent director of Ping An Healthcare and Technology Company Limited, China Jushi Co., Ltd., and Maitrox Enterprise Services Inc. (not listed). |
| Yiyun Chu (former independent director) | Mr. Yiyun Chu, Chinese, with a doctorate in accounting from Shanghai University of Finance and Economics (SUFE), is a professor and doctoral advisor of the School of Accounting, SUFE, a researcher at Key Research Institute of Accounting and Finance, SUFE, and member of the First and Second Session of the Senior Accounting Qualification Review Committee of the National Government Offices Administration, who concurrently takes the position of a member of the Committee for Accounting Standards for Business Enterprises appointed by the Ministry of Finance, the director of Accounting Society of China, and executive secretary of Accounting Education Branch, Accounting Society of China (resigned in December 2023). He also serves as an independent director of Ping An Insurance (Group) Company Of China, Ltd., Bank Of Hebei Co.,Ltd. (not listed), and an external supervisor of Bank Of China Limited. |
| Michael | Mr. Michael Chung, from Taiwan, China, has a bachelor’s degree in Electrical Engineering from National Tsing Hua University, Taiwan. Mr. |
2023 Annual Report
| Chung (former independent director) | Chung served as the general manager of the business group of Hon Hai Precision Industry Co., Ltd. and the CEO of TPK Holding Co., Ltd. He joined AcSiP in June 2019 as the Chairman of the Board since. He also serves as an independent director of LuxNet Corp., and CEO of Feng Tay Enterprises Co., Ltd. |
| Yifan Li | Mr. Yifan Li, American, holds a bachelor’s degree in World Economy from Fudan University, an MBA degree from the University of Chicago, master’s degree in Accounting from the University of Texas. Mr. Li is qualified as the United States Certified Public Accountant, Chartered Global Management Accountant, and member of the American Institute of Certified Public Accountants and the Texas Society of CPAs. He worked as Executive Vice President and CFO of Zhengxing Wheel Group Co.,Ltd., Vice President and CFO of Sanpower Group Co.,Ltd., director, Vice President and CFO of Zhejiang Geely Holding Group Co.,Ltd., founding partner and CFO of Human Horizons. In addition to serving as a director of USI, he also servces as an independent director of Shanghai Jinqiao Export Processing Zone Development Co., Ltd. Mr. Li was appointed as a director of the Company in April 2023. |
| Yongtao Cang | Mr. Yongtao Cang, Chinese, holds a doctorate degree in accounting from Shanghai University of Finance and Economics. Mr. Cang is a non-practicing member of the Chinese Institute of CPA, and a member of CPA Australia. He worked as lecturer, assistant dean and associate professor of accounting successively at the School of Economics and Finance, Shanghai International Studies University (SISU). Currently he serves as professor of accounting and deputy dean at the School of Economics and Finance, SISU. Additionally, he served as an independent director of Zhejiang Founder Motor Co., Ltd (resigned in April 2023) and Zhejiang Qinglian Food Co.,Ltd. Mr. Cang was appointed as an independent director of the Company in April 2023. |
| Jiangdong Huang | Mr. Jiangdong Huang, Chinese, has a doctorate degree in law from East China University of Political Science and Law and qualifications to practice law in China. Mr. Huang worked as deputy director, director and deputy researcher of the Second Division of the China Securities Regulatory Commission (CSRC) Shanghai Office, deputy researcher of the CSRC Legal Affairs Department, deputy researcher of the Review Division of the CSRC Shanghai Commissioner Office, director of the Third Division of Investigation of the CSRC Shanghai Commissioner Office. He currently serves as partner of Grandall Law Firm, and independent director of Changjiang Pension Insurance Co.,Ltd., Sinopec Shanghai Petrochemical Company Limited and Fuanda Fund Management Co.,Ltd., and outside director of China Shipping Environment Technology (Shanghai) Co.,Ltd. Mr. Huang was appointed as an independent director of the Company in April 2023. |
| Wei Guo | Ms.Wei Guo, from Hong Kong, China, holds a doctorate degree in strategic management from the University of Maryland, an MBA degree from Marshall University, and a bachelor's degree in business from Auckland University of Technology. Ms. Guo used to work as assistant professor of strategy at Hong Kong Polytechnic University, and currently serves as associate professor of strategy and entrepreneurship at China Europe International Business School. Ms. Guo was appointed as an independent director of the Company in April 2023. |
| Meng-Kuo Shih | Mr. Meng-Kuo Shih, from Taiwan, China, has a master’s degree in management science from Taiwan Jiaotong University. Mr. Shih used to serve as deputy director of finance of TECO Electric & Machinery Co., Ltd., director of finance of TECO OPTRONICS CORPORATION, chief financial officer and spokesperson of InterServ International Inc., and chief financial officer of Advanced Semiconductor Engineering, Inc. In addition to the supervisor of USI, he holds the position of director of USI Inc. |
| Jye-Shing Lin | Mr. Jye-Shing Lin, from Taiwan, China, holds a master’s degree in engineering from Massachusetts Institute of Technology (MIT) and National Taiwan University. Mr. Lin used to work for Accenture as an consultant and joined Advanced Semiconductor Engineering, Inc. in 2006. He currently serves as vice president of Advanced Semiconductor Engineering, Inc. Shanghai headquarters, and supervisor of USI Inc. |
2023 Annual Report
| Andrew Robert Tang (former supervisor) | Mr. Andrew Robert Tang, American, graduated from Yale University. Mr. Tang previously worked for Morgan Stanley, and joined Advanced Semiconductor Engineering, Inc. in 2014 where he currently assumes director (representative), Vice Chairman, and deputy CEO, and he also serves as the chief procurement officer of ASE Technology Holding Co., Ltd. |
| David Huang | Mr. David Huang, from Taiwan, China, holds an EMBA degree from Shanghai Jiaotong University. Mr. Huang previously worked for Universal Scientific Industrial Co., Ltd. Currently he serves as the director of USI's Manufacturing Service Division 1. |
| Chen-Lung Wei | Mr. Chen-Lung Wei, from Taiwan, China, holds an MBA's degree from Tunghai University. In July 1987, Mr. Wei joined in Universal Scientific Industrial Co., Ltd. where he served as the manager of the engineering department, the director of the development unit, the vice president of the business unit, the senior vice general manager of the business group, and the general manager of the Company. Currently, he serves as the vice president of the Company. |
| Ta-I Lin | Mr. Ta-I Lin, from Taiwan, China, has a bachelor's degree in Electrical Engineering from National Cheng Kung University and a master's degree of EMBA from Peking University. After graduation, Mr. Lin joined in Universal Scientific Industrial Co., Ltd. where he served successively as head of engineering, production, and business divisions, the general manager of information products business group, president of USI Electronics (Shenzhen) Co., Ltd., and manager of Universal Scientific Industrial Co., Ltd. Taiwan Factory. Currently, he serves as the Vice President of the Company. |
| Feng-Ta Chen | Mr. Feng-Ta Chen, from Taiwan, China, once served as deputy manager of SAMPO CORP., manager of wireless network card operation management of Universal Scientific Industrial Co., Ltd., associate manager of ERP project management, associate manager of global human resources administration, and general manager of Shanghai Zhangjiang Factory, Jinqiao Factory, and Shengxia Factory of USI. Currently, he serves as head of global business and after-sales service, global operations development, North American operations, special application products and green energy products business group, and vice president of the Company. |
| Jing Cao | Mr. Jing Cao, American, holds a double master's degree in engineering from Arizona State University. Once served as the senior Vice President of Mindspeed, the vice president of , and the senior Vice President of UTAC Semiconductor Co., Ltd. Currently, serves as vice president of the Company. |
| Allen Sheng (former senior executive) | Mr. Yuan-Hsin Sheng, from Taiwan, China, once served as the general manager of Eagle Test Systems Taiwan, the vice president of ASE Inc., and the vice president of Universal Scientific Industrial Co., Ltd. |
| Tan-Yang Liu | Mr. Tan-Yang Liu, from Taiwan, China, holds a master's degree from the University of Southampton, UK. Once worked as director of Audit Department of KPMG, deputy manager of Underwriting Department of Taiwan International Securities Investment Consulting Corp., the deputy manager of International Department of UOB Securities Pte Ltd, the deputy manager of International Department of Mega Capital (Asia) Company Limited, and the vice president of Capital Market Department of Polaris Securities Co., Ltd. Currently, he serves as the vice president and chief financial officer of the Company. |
| Jinpeng Shi | Mr. Jinpeng Shi, Chinese, holds a bachelor's degree from the School of Economics and Management of Tongji University, and an EMBA degree from China Europe International Business School. Mr. Shi worked as the project manager of International Business Department of Guotai Junan Securities, the director of the Shanghai Investment Banking Department of Southwest Securities, and the vice president of Investment Banking |
2023 Annual Report
| Department, the president of No.3 Business Department and the managing director of China Great Wall Securities. Currently, he serves as vice president and the secretary to the Board of Directors of the Company. | |
| Yung-Che Fang (former senior executive) | Mr. Yung-Che Fang, from Taiwan, China, holds a doctor's degree in Mechanical and Aeronautical Engineering from Case Western Reserve University. Mr. Fang worked as the executive vice president at SOCLE Technology Corporation, and the vice president at GIGABYTE Technology Co., Ltd. and First International Computer, Inc. |
| Jeh-Chang Lee (former senior executive) | Mr. Jeh-Chang Lee from Taiwan, China, holds a MBA's degree from University of Maryland. Mr. Lee once worked as the deputy director of Taiwan Semiconductor Manufacturing Co., Ltd. |
| Chia-Hsiung Yu (former senior executive) | Mr. Chia-Hsiung Yu, from Taiwan, China, holds a MBA's degree from National Chiao Tung University. |
| Yueh-Ming Lin (former senior executive) | Mr. Yueh-Ming Lin, from Taiwan, China, holds a bachelor's degree of Electrical Engineering from Feng Chia University. Mr. Lin Joined in Universal Scientific Industrial Co.，Ltd. In 1995. |
Particulars on other information
□Applicable √Not Applicable
2023 Annual Report
(II) Employment of current directors, supervisors and senior management and those who left theposition during the reporting period
1. Employment in shareholders’ companies
√Applicable □ Not Applicable
| Name of person employed | Name of shareholder’s company | Position held in shareholder’s company | Start of tenure | End of tenure |
| Jeffrey Chen | ASE Technology Holding Co., Ltd. | Director (representative) | 2018-04-30 | |
| Advanced Semiconductor Engineering, Inc. | Director (representative) | 2003-06-19 | ||
| ASE Test Inc. | Director (representative) | 1998-06-30 | ||
| ASE (Shanghai) Inc. | Supervisor | 2018-06-19 | ||
| ASE (Korea) Inc. | Supervisor | 2021-03-30 | ||
| Wuxi Tongzhi Microelectronics Co.,Ltd. | Director | 2022-05-27 | ||
| ASE Test Limited (Singapore) | Director | 1998-03-31 | ||
| ASE Test Holdings Ltd. | Director | 1999-04-12 | ||
| Omniquest Industrial Ltd. | Director | 2001-06-01 | ||
| ASE Assembly & Test (Shanghai) Limited | Supervisor | 2023-06-05 | ||
| Shanghai Ding Hui Real Estate Development Co., Ltd. | Director | 2005-04-18 | ||
| ASE Electronics Inc. | Director (representative) | 2006-03-14 | ||
| Advanced Semiconductor Engineering (HK) Limited | Director | 2008-05-05 | ||
| Shanghai Ding Wei Real Estate Development Co., Ltd. | Director | 2010-06-01 | ||
| Shanghai Ding Yu Real Estate Development Co., Ltd. | Director | 2010-05-12 | ||
| KunShan Ding Hong Real Estate Development Co., Ltd. | Director | 2012-02-01 | ||
| Shanghai Ding Qi Property Management Co., Ltd. | Director | 2005-05-11 | ||
| Shanghai Dingfan Business Management Co., Ltd | Director | 2016-03-18 | ||
| Shanghai DingXu Property Management Co., Ltd. | Director | 2017-06-19 | ||
| Real Tech Holdings Limited | Director | 2008-12-04 | ||
| USI Inc. | Chairman of the Board of Directors and director (representative) | 2018-06-26 | ||
| Huntington Holdings International Co., Ltd. | Director | 2012-06-30 | ||
| Shanghai Dingxu Property Management Co., Ltd. – | Director | 2016-03-31 | ||
| Real Tech Holdings Limited | Director | 2012-06-30 | ||
| ASE Environmental Protection and Sustainability Foundation | Director | 2020-09-14 | ||
| ASE Cultural and Educational Foundation | Director | 2020-06-10 |
2023 Annual Report
| ASE Enterprise Service (Shanghai) Co., Ltd | Supervisor | 2023-11-01 | ||
| Chen-Yen Wei | USI Inc. | Director (representative) | 2015-04-01 | 2025-06-23 |
| HUNTINGTON HOLDINGS INTERNATIONAL CO. LTD. | Director | 2012-06-30 | ||
| UNITECH HOLDINGS INTERNATIONAL CO. LTD. | Director | 2012-06-30 | ||
| Real Tech Holdings Limited | Director | 2012-06-30 | ||
| USI Enterprise Limited | Director | 2012-12-28 | ||
| Dtuang Wang | ASE Technology Holding Co., Ltd. | Chief executive and corporate governance director, member of the Risk Management Committee and chief risk officer, chief information security officer | 2018-04-30 | |
| Advanced Semiconductor Engineering, Inc. | Director (representative) and chief executive | 2018-04-30 | ||
| Advanced Semiconductor Engineering (China) Ltd. | Chairman of the Board of Directors and General Manager | 2018-07-05 | ||
| ASE Assembly & Test (Shanghai) Limited | Director and President | 2021-07-29 | ||
| Sino Horizon Holdings Limited | Director | 2014-06-18 | ||
| Hung Ching Development & Construction Co., Ltd. | Director | 2011-07-13 | ||
| Hung Chin Hsin Co., Ltd. | Director and President | 2011-08-08 | ||
| ASE Social Enterprise Co., Ltd. | Director and President | 2022-04-21 | ||
| ASE Environmental Protection and Sustainability Foundation | Director and CEO | 2020-09-14 | ||
| Goodcare Holdings Inc. | Director | 2023-03-14 | ||
| Rutherford Chang | ASE Technology Holding Co., Ltd. | Director | 2018-04-30 | |
| Advanced Semiconductor Engineering, Inc. | Director (representative) | 2009-06-26 | ||
| ASE Test Inc. | Director (representative) | 2011-07-27 | ||
| ASE Investment (Kunshan) Limited | Director and General Manager | 2012-05-24 | ||
| USI Inc. | Director (representative) | 2015-04-01 | ||
| Neng Chao Chang | Advanced Semiconductor Engineering, Inc. | Director (representative) | 2018-04-30 | |
| ASE Test Inc. | Director (representative) | 2015-08-06 | ||
| USI Inc. | Director (representative) | 2015-04-01 |
2023 Annual Report
| Meng-Kuo Shih | USI Inc. | Director | 2015-04-01 | 2025-06-23 |
| HUNTINGTON HOLDINGS INTERNATIONAL CO. LTD. | Director | 2012-06-30 | ||
| UNITECH HOLDINGS INTERNATIONAL CO. LTD. | Director | 2012-06-30 | ||
| Real Tech Holdings Limited | Director | 2012-06-30 | ||
| Universal ABIT Holding Co.,Ltd. | Director | 2008-12-31 | ||
| USI Enterprise Limited | Director | 2012-12-28 | 2024-06-22 | |
| Andrew Robert Tang (former supervisor) | Advanced Semiconductor Engineering, Inc. | Deputy chairman of the Board of Directors | 2018-04-30 | |
| Director (representative) | 2022-12-15 | |||
| Deputy CEO | 2023-01-01 | |||
| ASE Test Inc. | Supervisor (representative) | 2018-05-30 | ||
| Shanghai Ding Hui Real Estate Development Co., Ltd. | Director | 2018-08-29 | ||
| Shanghai Ding Wei Real Estate Development Co., Ltd. | Director | 2018-10-31 | ||
| Shanghai Ding Yu Real Estate Development Co., Ltd. | Director | 2018-10-17 | ||
| USI Inc. | Supervisor (representative) | 2018-06-26 | ||
| ASE Cultural and Educational Foundation | Director | 2020-06-10 | ||
| ASE Environmental Protection and Sustainability Foundation | Director | 2020-09-14 | ||
| ASE Technology Holding Co., Ltd. | Chief procurement officer | 2023-09-01 | ||
| Chen-Lung Wei | USI Inc. | Director | 2015-04-01 | 2025-06-23 |
| HUNTINGTON HOLDINGS INTERNATIONAL CO. LTD. | Director | 2012-06-30 | ||
| Universal ABIT Holding Co.,Ltd. | Director | 2008-12-31 | ||
| Tan-Yang Liu | USI Enterprise Limited | Director | 2020-12-30 | |
| Jye-Shing Lin | Advanced Semiconductor Engineering, Inc. | Deputy general manager of Shanghai headquarters | 2016-09-22 | |
| Shanghai Ding Wei Real Estate Development Co., Ltd. | Vice President | 2015-02-01 | ||
| USI Inc. | Supervisor (representative) | 2018-06-26 | 2025-06-23 | |
| Particulars on employment in shareholders’ companies | None | |||
2. Employment in other companies
√Applicable □ Not Applicable
| Name of person employed | Name of other companies | Position held in other companies | Start of tenure | End of tenure |
2023 Annual Report
| Jeffrey Chen | Mercuries & Associates Holding, LTD | Independent director | 2015-06-24 | |
| Chen-Yen Wei | MUtek Electronics Co.,Ltd., etc | Director | 2022-05-12 | 2025-05-11 |
| Lelon Electronics Corp. | Independent director | 2022-06-29 | 2025-06-28 | |
| Dtuang Wang | Chang Yao Hong-Ying Social Welfare & Charity Foundation | Director and CEO | 2020-07-25 | |
| Bank of Kaohsiung Co., Ltd. | Independent director | 2023-05-25 | ||
| School of Law of Ming Chuan University, etc. | Honorary Professor | 2020-08-06 | ||
| Gilles Baruk Benhamou (former director) | Saphir, etc. | CEO | 1995-09 | |
| Decelect | Director | 1987-07 | ||
| Retail Evolution | CEO | 2020-07 | ||
| ASDI Assistance Direction | CEO | 1994-12 | ||
| Meng-Kuo Shih | MUtek Electronics Co.,Ltd., etc | Supervisor | 2022-05-12 | 2025-05-11 |
| Global Venture Capital Co., Ltd. | Director | 2023-06-12 | 2026-06-11 | |
| Yunwei Tang (former independent director) | Ping An Healthcare and Technology Company Limited, etc. | Independent director | 2018-05-03 | |
| China Jushi Co., Ltd. | Independent director | 2019-05-10 | 2025-09-07 | |
| Maitrox Enterprise Services Inc. (not listed) | Independent director | 2022-06-09 | ||
| Yiyun Chu (former independent director) | School of Accounting, Shanghai University of Finance and Economics | Professor | 2003-07-03 | |
| PhD advisor | 2003-12-31 | |||
| Ping An Insurance (Group) Company Of China, Ltd. | Independent director | 2019-07-17 | ||
| Bank Of Hebei Co.,Ltd. | Independent director | 2021-08-05 | ||
| Bank Of China Limited | External supervisor | 2022-06-30 | ||
| Michael Chung (former independent director) | AcSiP | Chairman of the Board of Directors | 2019-06 | |
| LuxNet Corp. | Director | 2021-07 | ||
| Savitech Corp. | Director | 2019-06 | 2023-07 | |
| Dasheng Venture Capital Co., Ltd. | Director | 2021-08 | 2023-02 | |
| FENG TAY ENTERPRISES CO., LTD. | Director | 2021-07 | ||
| LOROM INDUSTRIAL CO., LTD | CEO | 2020-06-01 | 2023-03-31 | |
| Yifan Li | Human Horizons | Chief Financial and Investment Advisor | 2022-03-17 | 2023-12-31 |
| Shanghai Jinqiao Export Processing Zone Development Co., Ltd. | Independent director | 2019-06-25 |
2023 Annual Report
| Yongtao Cang | School of Economics and Finance, Shanghai International Studies University | Professor of accounting | 2021-12-31 | |
| Deputy dean | 2023-11-19 | |||
| Zhejiang Founder Motor Co., Ltd. | Independent director | 2019-09-23 | 2023-04-07 | |
| Zhejiang Qinglian Food Co.,Ltd. | Independent director | 2018-07-19 | ||
| Jiangdong Huang | Grandall Law Firm | Partner | 2019-05-10 | |
| , Sinopec Shanghai Petrochemical Company Limited and Fuanda Fund Management Co.,Ltd., and outside director of China Shipping Environment Technology (Shanghai) Co.,Ltd. | Independent director | 2023-06-28 | ||
| Changjiang Pension Insurance Co.,Ltd. | Independent director | 2021-09-16 | ||
| Fuanda Fund Management Co.,Ltd. | Independent director | 2023-07-25 | ||
| China Shipping Environment Technology (Shanghai) Co.,Ltd. | Outside director | 2023-05-30 | ||
| Wei Guo | China Europe International Business School | Associate professor of strategy and entrepreneurship | 2020-06-01 | |
| Jinpeng Shi | GJS Capital Co., Ltd. | Director | 2023-05-28 | 2026-05-27 |
| Questyle Audio Technology Co.,Ltd | Director | 2022-11-29 | 2025-11-28 | |
| Particulars on employment in other companies | None | |||
(III) Remuneration of directors, supervisors and members of the senior management
√Applicable □ Not Applicable
| Decision-making procedures for the remuneration of directors, supervisors and members of the senior management | The Proposal on the Remuneration of Directors of the Sixth Session of the Board of Directors was considered and approved at the Twenty-second Meeting of the Fifth Session of the Board of Directors and the 2022 Annual General Meeting of Shareholders; the Proposal on the Remuneration of Supervisors of the Sixth Session of the Board of Supervisors was considered and approved at the Twentieth Meeting of the Fifth Session of the Board of Supervisors and the 2022 Annual General Meeting of Shareholders; the Proposal on the Remuneration of the Senior Management for 2023 was considered and approved at the Fifth Meeting of the Remuneration Committee of the Sixth Session of the Board of Directors, and the Tenth Meeting of the Sixth Session of the Board of Directors. |
| Whether a director abstained from voting in discussion of his or her own remuneration issues | Yes |
| Opinion of the Remuneration Committee or the Special | The Company held the Twenty-second Meeting of the Fifth Session of the Board of Directors on March 31, 2023, at which the |
2023 Annual Report
| Meeting of Independent Directors on matters relating to the remuneration of directors, supervisors and senior Management | Independent Directors verified the remuneration of the directors of the Sixth Session of the Board of Directors of the Company, and commented that: the remuneration of the directors drawn up by the Board of Directors of the Company was determined after taking into account the characteristics of the industry in which the Company is operating, the scale of operation of the Company, the level of corporate governance, the backgrounds and professional qualities of the directors, and in the light of the actual circumstances of the Company, which is conducive to the enhancement of scientific decision-making by the Board of Directors of the Company, and ensures the realization of the Company's development strategy objectives, and is in line with the interests of investors. We approve the Proposal on the Remuneration of Directors of the Sixth Session of the Board of Directors, and agree to submit the proposal to shareholders' meeting for deliberation. The Company held the Fifth Meeting of the Remuneration Committee of the Sixth Session of the Board of Directors on March 29, 2024, and the Remuneration Committee deliberated and approved the Proposal on the Chairman's Actual Remuneration for 2023 and the Remuneration Plan for 2024 with a view that the Chairman of the Board of Directors of the Company, Mr. Jeffrey Chen, in addition to holding the position of director in ASE Technology Holding and its affiliated companies, works exclusively for the Company, and the assessment and issuance of his remuneration for 2023 and his remuneration plan for 2024 are in compliance with the Company's operation and management and remuneration assessment systems and would not jeopardize the interests of the Company and its shareholders. |
| Determination basis for the remuneration of directors, supervisors and members of the senior management | The Company adopted fixed remuneration for directors and supervisors taking into account the characteristics of the industry in which the Company operates, the scale of business operations, the level of corporate governance, the backgrounds and professional qualities of the directors and supervisors, as well as the actual situation of the Company. Remuneration of senior management shall be determined according to their performance appraisal, combined with the Company's financial status, profitability and progress of annual business objectives. |
| Actual payment of the remuneration of directors, supervisors and members of the senior management | For details, see Section IV-I (I) Changes in shareholding and remuneration of current directors, supervisors, and senior management and those who left the position during the reporting period. |
| Total remuneration actually received by all directors, supervisors and members of the senior management at the end of the reporting period | RMB 31.22 million |
(IV) Changes in directors, supervisors and members of the senior management of the Company
√Applicable □ Not Applicable
| Name | Position | Change | Reason for change |
| Gilles Baruk Benhamou | Director | Termination | Expiry of tenure |
| Yunwei Tang | Independent director | Termination | Expiry of tenure |
| Yiyun Chu | Independent director | Termination | Expiry of tenure |
| Michael Chung | Independent director | Termination | Expiry of tenure |
2023 Annual Report
| Yifan Li | Director | Approintment | Approintment by shareholders' meeting |
| Yongtao Cang | Independent director | Approintment | Approintment by shareholders' meeting |
| Jiangdong Huang | Independent director | Approintment | Approintment by shareholders' meeting |
| Wei Guo | Independent director | Approintment | Approintment by shareholders' meeting |
| Andrew Robert Tang | Supervisor | Termination | Expiry of tenure |
| Jye-Shing Lin | Supervisor | Approintment | Approintment by shareholders' meeting |
| Yuan-Hsin Sheng | Vice President | Termination | Expiry of tenure |
| Yung-Che Fang | Senior Vice President | Termination | Expiry of tenure |
| Jeh-Chang Lee | Senior Vice President | Termination | Expiry of tenure |
| Chia-Hsiung Yu | Vice President | Termination | Expiry of tenure |
| Yueh-Ming Lin | Vice President | Termination | Expiry of tenure |
(V) Particulars on punishments by securities regulatory authorities in the past three years
□Applicable √Not Applicable
(VI) Others
□Applicable √Not Applicable
V. Meetings of the Board of Shareholders held during the reporting period
| Meeting Session | Date | Proposals and Resolutions |
| The Twenty-first Meeting of the Fifth Session of the Board of Directors | March 17, 2023 | 1. Proposal on Using Idle Raised Funds of Convertible Bonds for Cash Management 2. Proposal on the Establishment of a Joint Venture to Purchase the Automotive Wireless Business of TE Connectivity |
| The Twenty-second Meeting of the Fifth Session of the Board of Directors | March 31, 2023 | 1. Proposal on 2022 Work Report of the Board of Directors 2. Proposal on 2022 Work Report of the General Manager 3. Proposal on 2022 Financial Final Report 4. Proposal on the 2022 Annual Report and its Summary 5. Proposal on 2022 Annual Internal Control Self-Assessment Report 6. Proposal on 2022 ESG Report 7. Proposal on the Special Report on the Deposit and Actual Usage of the Raised Funds in 2022 8. Proposal on Profit Distribution Plan for 2022 9. Proposal on Recognition of Loss of Assets Deductible Against Taxable Income in 2022 10. Proposal on Actual Regular Related Party Transactions in 2022 and Predicted Regular Related Party Transactions in 2023 11. Proposal on the Amount of Wealth Management Products Using Self-owned Idle Funds Allowed for 2023 12. Proposal on Bank Credit Lines in 2023 13. Proposal on the Amount of Financial Derivative Transactions 14. Proposal on the Company's Provision of Financial Assistance to Subsidiaries 15. Proposal on Guarantee Between Holding Subsidiaries 16. Proposal on 2023 Internal Audit Plan 17. Proposal on Renewing the Contract with the Financial Audit Institution |
2023 Annual Report
| 18. Proposal on Renewing the Contract with the Internal Control Audit Institution 19. Proposal on the Remuneration of the Company's Senior Management in 2022 20. Proposal on Purchasing Liability Insurance for Directors, Supervisors and Senior Executives 21. Proposal on Election of the Sixth Session of the Board of Directors 22. Proposal on the Remuneration of Directors of the Sixth Session of the Board of Directors 23. Proposal on Formulating the Rules of the Group Sustainability Committee 24. Proposal on Procedures for the Acquisition or Disposal of Assets 25. Proposal on Amending the Rules of Information Disclosure Management 26. Proposal on Amending the Rules for Shareholding by Directors, Supervisors and Senior Executives and Related Changes 27. Proposal on Amending the Control Measures for Financial Derivatives Trading 28. Proposal on Holding 2022 Annual General Meeting of Shareholders | ||
| The First Meeting of the Sixth Session of the Board of Directors | April 25, 2023 | 1. Proposal on Quarterly Report for Q1 2023 2. Proposal on the Election of the Chairman of the Sixth Board of Directors of the Company 3. Proposal on the Election of Special Committees of the Sixth Session of the Board of Directors of the Company 4. Proposal on the Appointment of General Manager of the Company 5. Proposal on the Appointment of the Company's Senior Management 6. Proposal on Election of the Secretary to the Board of Directors 7. Proposal on Appointing Securities Affairs Representative 8. Proposal on Completion and Termination of 2021 Employee Stock Ownership Plan 9. Proposal on Adjusting the Exercise Price of 2019 Incentive Stock Option Plan After Profit Distribution 10. Proposal on Capital Increase to the Company's Wholly-owned Subsidiary Universal Scientific Industrial De México S.A.De C.V. |
| The Second Meeting of the Sixth Session of the Board of Directors | May 19, 2023 | Proposal on Not Making Downward Adjustment to the Conversion Price of USI Convertible Bonds |
| The Third Meeting of the Sixth Session of the Board of Directors | 31 July 2023 | 1. Proposal on Environment, Health, Safety (EHS) & Energy Policy and Biodiversity and No Deforestation Commitment 2. Proposal on Amending Rules of Procedure for the Remuneration Committee of the Board of Directors |
| The Fourth Meeting of the Sixth Session of the Board of Directors | August 25, 2023 | 1. Proposal on 2023 Semi-Annual Report and its Summary 2. Proposal on 2023 Incentive Stock Option Plan and its summary 3. Proposal on Assessment and Management Measures for the Implementation of 2023 Incentive Stock Option Plan 4. Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Formalities Related to 2021 Employee Stock Ownership Plan |
2023 Annual Report
| 5. Proposal on 2023 Employee Stock Ownership Plan and its summary 6. Proposal on Administrative Rules for 2023 Employee Stock Ownership Plan 7. Proposal on Requesting Shareholders' Meeting to Authorize the Board of Directors to Handle Formalities Related to 2023 Employee Stock Ownership Plan 8. Proposal on Providing Financial Assistance to Subsidiaries 9. The Proposal on the Special Report on the Deposit and Actual Usage of the Raised Funds in the First Half of 2023 10. Proposal on Closure, Adjustment, Extension of Some Raised Fund Projects, and Change of Usage of Some Raised Fund Projects 11. Proposal on Holding the First Bondholders' Meeting in 2023 12. Proposal on Holding the First Extraordinary General Meeting of Shareholders in 2023 | ||
| The Fifth Meeting of the Sixth Session of the Board of Directors | September 7, 2023 | Proposal on Revising 2023 Employee Stock Ownership Plan and its summary |
| The Sixth Meeting of the Sixth Session of the Board of Directors | October 13, 2023 | 1. Proposal on Adjustment of Participants and Number of Granted Options in the 2023 Incentive Stock Option Plan 2. Proposal on Granting Stock Options to Participants of 2023 Incentive Stock Option Plan 3. Proposal on the Third Exercise Period of 2019 Incentive Stock Option Plan Part II and the Method of Independent Exercise |
| The Seventh Meeting of the Sixth Session of the Board of Directors | October 24, 2023 | 1. Proposal on Quarterly Report for Q3 2023 2. Proposal on the Adjustment of Participants and Cancellation of Part of the Options in the 2015 Incentive Stock Option Plan 3. Proposal on the Adjustment of Participants and Cancellation of Part of the Stock Options in the Incentive Stock Option Plan 2019 Part I 4. Proposal on the Second Exercise Period of 2019 Incentive Stock Option Plan Part I and the Method of Independent Exercise 5. Proposal on Using Idle Raised Funds of Convertible Bonds for Cash Management 6. Proposal on Amending the Rules for Independent Directors 7. Proposal on Amending the Rules of Procedure for the Audit Committee of the Board of Directors 8. Proposal on Amending the Rules of Procedure for the Strategy Committee of the Board of Directors 9. Proposal on Amending Rules of Procedure of Remuneration Committee of the Board of Directors 10. Proposal on Amending the Rules of Procedure for the Nomination Committee of the Board of Directors 11. Proposal on Amending Procedures for Loaning of Funds |
VI. Performance of functions and duties by directors(I) Attendance of directors at meetings of the Board of Directors and general meetings of
shareholders
| Director Name | Independent director or not | Attendance at the Board of Directors meetings | Attendance at the shareholders' meetings |
2023 Annual Report
| Number of meetings held this year | Number of attendance in person | Number of attendance by telecommunication | Number of attendance by proxy | Number of absence | Absence for two consecutive meetings | Number of attendance | ||
| Jeffrey Chen | No | 9 | 9 | 4 | 0 | 0 | No | 2 |
| Chen-Yen Wei | No | 9 | 9 | 4 | 0 | 0 | No | 0 |
| Rutherford Chang | No | 9 | 9 | 4 | 0 | 0 | No | 1 |
| Neng Chao Chang | No | 9 | 9 | 4 | 0 | 0 | No | 1 |
| Dtuang Wang | No | 9 | 9 | 4 | 0 | 0 | No | 1 |
| Gilles Baruk Benhamou (former director) | No | 2 | 2 | 0 | 0 | 0 | No | 0 |
| Yiyun Chu (former independent director) | Yes | 2 | 2 | 0 | 0 | 0 | No | 1 |
| Yunwei Tang (former independent director) | Yes | 2 | 0 | 0 | 2 | 0 | No | 0 |
| Michael Chung (former independent director) | Yes | 2 | 2 | 0 | 0 | 0 | No | 0 |
| Yifan Li | No | 7 | 7 | 4 | 0 | 0 | No | 1 |
| Yongtao Cang | Yes | 7 | 7 | 4 | 0 | 0 | No | 1 |
| Jiangdong Huang | Yes | 7 | 7 | 4 | 0 | 0 | No | 1 |
| Wei Guo | Yes | 7 | 6 | 4 | 1 | 0 | No | 1 |
Particulars on absence of two consecutive meetings of the Board of Directors
□Applicable √Not Applicable
| Number of meetings of the Board of Directors held in 2023 | 9 |
| Including: on site meetings | 5 |
| Meetings held by telecommunication | 4 |
2023 Annual Report
| Number of meetings held both on site and by telecommunication | 0 |
(II) Objection raised by directors to relevant issues of the Company
□Applicable √Not Applicable
(III) Others
□Applicable √Not Applicable
VII. Special committees under the Board of Directors
√Applicable □ Not Applicable
(I) Members of special committees under the Board of Directors
| Type of special committees | Name of members of special committees |
| Audit Committee | Yongtao Cang, Jiangdong Huang, Wei Guo, Jeffrey Chen, Yifan Li |
| Nomination Committee | Wei Guo, Jiangdong Huang, Yongtao Cang, Jeffrey Chen, Chen-Yen Wei |
| Remuneration Committee | Jiangdong Huang, Yongtao Cang, Wei Guo, Jeffrey Chen, Chen-Yen Wei |
| Strategy Committee | Jeffrey Chen. Chen-Yen Wei, Neng Chao Chang, Wei Guo |
(II) 5 meetings held by the Audit Committee during the reporting period
| Date | Contents | Important comments and suggestions | Other information on performance of duties |
| March 17, 2023 | The following proposals were deliberated and adopted: Proposal on Using Idle Raised Funds of Convertible Bonds for Cash Management | Under the premise of ensuring that the implementation of the raised fund investment projects and the safety of the raised funds are not affected, the Company will use part of the idle raised funds for cash management, which can improve the efficiency of the use of the raised funds, obtain investment income, improve the overall performance of the Company, and seek more investment returns for the shareholders of the Company, which is in line with the interests of the Company and all shareholders. | None |
| March 31, 2023 | The following proposals were deliberated and adopted: 1. Proposal on Financial Statements and Audit Report for 2022 2. Proposal on 2022 Financial Final Report 3. Proposal on 2022 Annual Internal Control Self-Assessment Report 4. Proposal on the Special Report on the Deposit and Actual Usage of the Raised Funds in 2022 | The Company's financial report was true, complete and accurate, with no related cheating, fraud and material misstatement, and the Company had no significant accounting error adjustments, no changes in significant accounting policies and estimates, no matters involving important accounting judgments, and no | Communicated with the management on the Company's operations and development. |
2023 Annual Report
| 5. Proposal on Actual Regular Related Party Transactions in 2022 and Predicted Regular Related Party Transactions in 2023 6. Proposal on the Amount of Wealth Management Products Using Self-owned Idle Funds Allowed for 2023 7. Proposal on Renewing the Contract with the Financial Audit Institution 8. Proposal on Renewing the Contract with the Internal Control Audit Institution 9. Proposal on Internal Audit Work Report for 2022 10. Proposal on 2023 Internal Audit Plan 11. Proposal on 2022 Performance Report of the Audit Committee | matters resulting other type of audit report than standard unqualified audit report. After the internal audit work report was reviewed, no major problems were found in the internal audit work. The Company used the raised funds in accordance with the provisions and requirements of relevant laws, regulations, and regulatory documents, and disclosed the relevant information of the raised funds in a timely, true, accurate and complete manner, with no violation of the use and management of the raised funds. | ||
| April 25, 2023 | The following proposals were deliberated and adopted: 1. Proposal on Quarterly Report for Q1 2023 2. Proposal on Work Report on Internal Control for Q1 2023 | The Company operates strictly in accordance with the standard financial rules for the listed companies, and the Company's Quarterly Report for Q1 2023 fully and fairly reflected the financial condition and operating results for the reporting period. | Communicated with the management on the Company's operations and development. |
| August 25, 2023 | The following proposals were deliberated and adopted: 1. Proposal on the 2023 Semi-Annual Report and its Summary 2. Proposal on Internal Audit Work Report for the First Half of 2023 3. Proposal on the Special Report on the Deposit and Actual Usage of the Raised Funds in the First Half of 2023 4. Proposal on Closure, Adjustment, Extension of Some Raised Fund Projects, and Change of Usage of Some Raised Fund Projects | Communicated with the management on the Company's operations and development. | |
| October 24, 2023 | The following proposals were deliberated and adopted: 1. Proposal on Quarterly Report for Q3 2023 2. Proposal on Internal Audit Work Report for Q3 2023 | The Company operates strictly in accordance with the standard financial rules for the listed companies, and the Company's Quarterly Report for Q3 2023 fully and fairly reflected the financial condition and operating results for the reporting period. | Communicated with the management on the Company's operations and development. |
(III) 2 meetings held by the Nomination Committee during the reporting period
| Date | Contents | Important comments and suggestions | Other information on |
2023 Annual Report
| performance of duties | |||
| March 31, 2023 | The following proposals were deliberated and adopted: Proposal on Nominating Candidates for the Sixth Session of the Board of Directors | The nominated non-independent director candidates have the qualifications and ability to serve as directors of the Company, and have not been found to have any circumstances prohibiting them from serving as directors of the Company as stipulated by laws and regulations; the independent director candidates have the qualifications and experience to perform the duties of an independent director, and have the independence required for serving as an independent director, and have not been determined by the China Securities Regulatory Commission (CSRC) to be currently market banned. All the members agreed on the proposal. | None |
| April 25, 2023 | The following proposals were deliberated and adopted: 1. Proposal on the Nomination of the General Manager of the Company 2. Proposal on the Nomination of Senior Management of the Company 3. Proposal on Nomination of the Secretary to the Board of Directors | The senior management personnel nominated herein are not in a situation where they are not allowed to be nominated as senior management; they have not been punished by the CSRC and other relevant authorities or disciplined by the stock exchange; they have not been investigated by the judicial authorities for suspected crimes or suspected of violating laws and regulations or subject to criminal investigation by the CSRC; they do not have any affiliation with the shareholders who hold more than 5% of the Company's shares, actual controllers, and the Company's other directors, supervisors and senior management; they are not the persons responsible for breach of trust or the targets of punishment for breach of trust, and they are not the persons subject to execution for breach of trust; and they do not have | None |
2023 Annual Report
any other material mattersrequiring disclosure.
(IV) 5 meetings held by the Remuneration Committee during the reporting period
| Date | Contents | Important comments and suggestions | Other information on performance of duties |
| February 6, 2023 | The following proposals were deliberated and adopted: Proposal on Confirming the Eligibility of Participants of 2021 Employee Stock Ownership Plan | Based on the data provided by the human resources department, a comprehensive assessment was conducted on the performance of participants of the 2021 Employee Stock Ownership Plan in 2022. | None |
| August 25, 2023 | The following proposals were deliberated and adopted: 1. Proposal on 2023 Incentive Stock Option Plan and its summary 2. Proposal on Assessment and Management Measures for the Implementation of 2023 Incentive Stock Option Plan 3. Proposal on 2023 Employee Stock Ownership Plan and its summary 4. Proposal on Administrative Rules for 2023 Employee Stock Ownership Plan | The 2023 Incentive Stock Option Plan is conducive to attracting and retaining outstanding talents, fully mobilizing the enthusiasm of the Company's middle managers and core technical and business personnel, and effectively combining the interests of shareholders, the Company interests and the employees of the core team, so that all parties will pay attention to the Company's long-term development. The 2023 Employee Stock Ownership Plan can bind the interests of the operating team with the Company through equity incentives, inspire team morale, enhance growth momentum, actively promote the realization of the Company's operating goals, and lay a solid foundation for the Company's sustainable and healthy development. | None |
| September 7, 2023 | The following proposals were deliberated and adopted: Proposal on Revising 2023 Employee Stock Ownership Plan and its summary | In accordance with laws, regulations and relevant rules and regulations, the Remuneration Committee fully communicated and discussed the submitted proposal and unanimously agreed. | None |
| October 13, 2023 | The following proposals were deliberated and adopted: 1. Proposal on Adjustment of Participants and Number of Granted | The adjustment and granting of options are in line with the relevant provisions of the | None |
2023 Annual Report
| Options in the 2023 Incentive Stock Option Plan 2. Proposal on Granting Stock Options to Participants of 2023 Incentive Stock Option Plan 3. Proposal on the Third Exercise Period of 2019 Incentive Stock Option Plan Part II and the Method of Independent Exercise | Company's 2023 Stock Option Incentive Plan. The requirements for the exercise of the third exercise period of the 2019 Incentive Stock Option Plan Part II have been fulfilled, and the implementation of this exercise by the Company is in compliance with the 2019 Stock Option Incentive Plan and relevant regulations. | ||
| October 24, 2023 | The following proposals were deliberated and adopted: 1. Proposal on Adjustment of Participants and Cancellation of Part of the Options in the 2015Incentive Stock Option Plan 2. Proposal on the adjustment of participants and cancellation of part of the stock options in the 2019 Incentive Stock Option Plan Part I 3. Proposal on the Third Exercise Period of Incentive Stock Option Plan 2019 Part I and the Method of Independent Exercise | The adjustment and cancellation are in line with the relevant provisions of the Company's Incentive Stock Option Plan and Appraisal Administrative Measures for Implementation of the Incentive Stock Option Plan. The adjustment and cancellation are in line with the relevant provisions of the Company's 2019 Incentive Stock Option Plan and Assessment and Management Measures for the Implementation of 2019 Incentive Stock Option Plan. The requirements for the exercise of the third exercise period of the 2019 Incentive Stock Option Plan Part I have been fulfilled, and the implementation of this exercise by the Company is in compliance with the 2019 Incentive Stock Option Plan and relevant regulations. | None |
(V) 2 meetings held by the Strategy Committee during the reporting period
| Date | Contents | Important comments and suggestions | Other information on performance of duties |
| March 17, 2023 | Proposal on the Establishment of a Joint Venture to Purchase the Automotive Wireless Business of TE Connectivity | This acquisition will help the company deepen the layout of Internet of Vehicles products, optimize the customer structure and increase the number of customers, and realize the business layout extending from modules to system solutions. | None |
2023 Annual Report
| April 25, 2023 | Proposal on Capital Increase to the Company's Wholly-owned Subsidiary Universal Scientific Industrial De México S.A.De C.V. | The Company's capital increase in the Mexican factory will be used for the construction of the new factory, which will make better use of Mexican factory's geographical advantages and increase production capacity to meet the needs of North American customers, improve its operational scale and production efficiency, enhance its profitability and market competitiveness, and consolidate and enhance the Company's position in the industry. | None |
(VI) Specific particulars on matters of objection
□Applicable √Not Applicable
VIII. Particulars on risks in the Company identified by the Board of Supervisors
□Applicable √Not Applicable
The Board of Supervisors had no objection to the supervision during the reporting period.
IX. Employees of the parent company and major subsidiaries at the end of the period(I) Employees
| Number of on-the-job employees of the parent company | 2,011 |
| Number of on-the-job employees of the main subsidiaries | 20,998 |
| Total number of on-the-job employees | 23,009 |
| Number of retirees of whom the parent company and major subsidiaries are responsible for the expenses | 35 |
| Breakdown by function | |
| Function | Number |
| Production | 14,562 |
| Sales | 712 |
| Technical | 4,387 |
| Financial | 209 |
| Administrative | 3,139 |
| Total | 23,009 |
| Breakdown by education background | |
| Education background | Number |
| Doctor’s degree | 16 |
| Master’s degree | 1,646 |
| Bachelor’s degree | 6,325 |
| Junior college | 2,576 |
| Senior high school and below | 12,446 |
| Total | 23,009 |
(II) Remuneration policy
√Applicable □ Not Applicable
2023 Annual Report
According to the needs of the Company's development strategy, combined with industrial characteristics,talent market supply and demand, employment areas and other factors, the Company applied a market-following strategy for the remuneration of ordinary position personnel, while gave key position personneland outstanding talents competitive remuneration and provided them with equity incentives such as stockoptions or employee stock ownership plan.
(III) Training program
√Applicable □ Not Applicable
In order to enhance the effectiveness of organizational learning and create a learning corporate culture,the Company has set up the "USI University" (USIU), which continuously improves and develops theprofessional knowledge, skills and abilities of employees through the USIU online and offline courses, soas to achieve the strategic goals of the Company. USIU offers internal training courses in differentcategories designed systematically and arranged by five colleges, so that employees can take requiredcourses, join training sessions held by internal lecturers as well as workshops organized by externalprofessional lecturers. The Company also promotes the Individual Development Program, so as to ensurethe depth and breadth of employees' career development and contribute to the Company's sustainabledevelopment.
(IV) Labor outsourcing
√Applicable □ Not Applicable
| Total working hours of labor outsourcing | 4,227,429 |
| Total remuneration paid for labor outsourcing | 129,807,115 |
X. Plan for profit distribution or conversion of capital reserve into share capital(I) Formulation, implementation or adjustment of the cash dividend policy
√Applicable □ Not Applicable
1.Formulation of the cash dividend policy
In order to improve and perfect the Company's scientific, sustainable, stable and active dividenddistribution and monitoring mechanism, and to actively reward investors, the Company has formulated aclear cash dividend policy and its decision-making and adjustment mechanism in the Articles ofAssociation in accordance with the Listed Companies Regulatory Guidance No. 3 – Cash DividendsDistribution of Listed Companies and other relevant policies.
2. Implementation of the cash dividend policy
During the reporting period, the Company formulated the profit distribution plan for 2022 in accordancewith the relevant regulations, the cash expenditure needs of the Company and the relevant provisions ofthe Articles of Association andtaking into account the actual operation of the Company as the following:
Regarding its profit distribution plan for 2022, USI is going to distribute a cash dividend of RMB 4.30(tax included) for every 10 shares on the basis of the total share capital on the record date for implementingthe plan after deducting the number of shares in its special buy-back securities account, without bonusshare or transfer of capital reserve into share capital, and all the remaining undistributed profits shall becarried forward for distribution in the following years. The total share capital of the Company on therecord date for implementing the plan for 2022 was 2,207,290,610 shares. USI paid out the cash dividendson the basis of 2,183,573,065 shares, excluding 23,717,545 shares in its special buy-back securitiesaccount. 2022 profit distribution was completed on May 30, 2023.
3. Adjustment of cash dividend policy
During the reporting period, the Company did not adjust its cash dividend policy.
(II) Special description of the cash dividend policy
√Applicable □ Not Applicable
Whether in compliance with provisions of the Articles of Association orrequirements of the resolution of the general meeting of shareholders
2023 Annual Report
| Whether the dividend standard and ratio are definite and clear | √Yes □ No |
| Whether the related procedures and mechanisms for decision-making are complete | √Yes □ No |
| Whether independent directors performed their duties responsibly and played their due roles | √Yes □ No |
| Whether minority shareholders were given the opportunity to fully express their opinions and demands, and whether their legitimate rights and interests were fully protected | √Yes □ No |
(III) If the profits of the Company and the parent company's profits distributable to shareholdersare positive during the reporting period, but there is no profit distribution plan, the Companyshall disclose the reasons, the usage and the utilization plan of the undistributed profits in detail
□Applicable √Not Applicable
(IV) Plan of profit distribution and conversion of capital reserve into share capital in the reportingperiod
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Number of bonus shares distributed for every 10 shares held | 0 |
| Dividend for every 10 shares held (RMB yuan) (tax included) | 2.70 |
| Number of shares transferred from capital reserve for every 10 shares held | 0 |
| Amount of cash dividend (tax included) | 590,481,938.88 |
| Net profits attributable to common shareholders of the listed company in 2023 | 1,947,846,866.12 |
| Proportion of cash dividend to net profits attributable to common shareholders of the listed company (%) | 30.31 |
| Amount of share repurchase included in the cash dividend distribution | 0 |
| Total amount of dividend (tax included) | 590,481,938.88 |
| Proportion of total dividend distributed to net profits attributable to common shareholders of the listed company (%) | 30.31 |
XI. Equity incentive plan, employee stock ownership plan or other employee incentive measures ofthe Company and their impacts(I) Incentive matters disclosed in temporary announcements and without further progress or
change in subsequent implementation
√Applicable □ Not Applicable
| Overview | Index |
| The non-trade transfer of shares for Core Employee Stock Ownership Plan Phase III: 1,715,250 shares held in the Company's special buy-back securities account (B882423910) were transferred to the Company's Core Employee Stock Ownership Plan Phase III securities account in the form of non-trading transfer, at a price of RMB 12.405 per share (the total transaction consideration was RMB 21,277,676.25) | For details, see the announcement (No.: 2023-019) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on March 7, 2023 |
| Option exercise in Q1 2023: The 2015 Incentive Stock Option Plan: In Q1 2023, a total of 47,767 shares were exercised and registered for transfer; by the end of Q1 2023, a total of 8,602,087 shares were exercised and registered, | For details, see the announcement (No.: 2023-041) disclosed by the Company on the website of |
2023 Annual Report
| accounting for 41.89% of the total number of exercisable stock options. The 2019 Incentive Stock Option Plan Part I: In Q1 2023, a total of 233,250 shares were exercised and registered for transfer; by the end of Q1 2023, a total of 5,972,805 shares were exercised and registered for transfer, accounting for 44.45% of the total number of exercisable stock options. The 2019 Incentive Stock Option Plan Part II: By the end of Q1 2023, no option was exercised yet. | Shanghai Stock Exchange (www.sse.com.cn) on April 4, 2023 |
| Termination of the 2021 Employee Stock Ownership Plan: The First Meeting of the Sixth Session of the Board of Directors held on April 25, 2023 approved the Proposal on Completion and Termination of the 2021 Employee Stock. | For details, see the announcement (No.: 2023-051) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on April 26, 2023. |
| Proposal on the Adjustment of the Excercise Price of 2019 Incentive Stock Option Plan Part I and Part II： Due to the implementation of the annual dividend distribution, the exercise price of the 2019 Incentive Stock Option Plan Part I was adjusted from RMB 12.41 yuan per share to RMB 11.98 yuan per share and the exercise price of 2019 Incentive Stock Option Plan Part II was adjusted from RMB 20.89 yuan per share to RMB 20.46 yuan per share. | For details, see the announcement (No.: 2023-052) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on April 26, 2023 |
| Option exercise in Q2 2023: The 2015 Incentive Stock Option Plan: In Q2 2023, a total of 0 shares were exercised and registered for transfer; by the end of Q2 2023, a total of 8,602,087 shares were exercised accounting for 41.89% of the total number of exercisable stock options. The 2019 Incentive Stock Option Plan Part I: In Q2 2023, a total of 230,800 shares were exercised and registered for transfer; by the end of Q2 2023, a total of 6,203,605 shares were exercised, accounting for 46.16% of the total number of exercisable stock options. The 2019 Incentive Stock Option Plan Part II: By the end of Q2 2023, no option was exercised yet. | For details, see the announcement (No.: 2023-063) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on July 4, 2023 |
| Option exercise in Q3 2023: The 2015 Incentive Stock Option Plan: In Q3 2023, a total of 16,700 shares were exercised and registered for transfer; by the end of Q3 2023, a total of 8,618,787 shares were exercised, accounting for 41.97% of the total number of exercisable stock options. The 2019 Incentive Stock Option Plan Part I: In Q3 2023, a total of 311,030 shares were exercised and registered for transfer; by the end of Q3 2023, a total of 6,514,635 shares were exercised and registered for transfer, accounting for 48.48% of the total number of exercisable stock options. The 2019 Incentive Stock Option Plan Part II: By the end of Q3 2023, no option was exercised yet. | For details, see the announcement (No.: 2023-091) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 10, 2023 |
| The First Extraordinary General Meeting of Shareholders in 2023 considered and approved the 2023 Stock Option Incentive Plan, the 2023 Employee Stock Ownership Plan and related proposals. | For details, see the announcement (No.: 2023-084) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on September 16, 2023 |
| Adjustment of Participants and Number of Granted Options in the 2023Incentive Stock Option Plan: | For details, see the announcement (No.: 2023- |
2023 Annual Report
| Among the 421 participants, 23 were no longer eligible due to giving up (including failure to open securities accounts in a timely manner), resignation and other reasons. After the adjustment, the number of participants was adjusted from 421 to 398 and the number of stock options to be granted was adjusted from 15,232,200 to 14,560,000. | 098) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 14, 2023 |
| Granting stock options to participants of the 2023 Incentive Stock Option Plan: The Company granted 14,560,000 stock options to 398 eligible participants with October 13, 2023 as the granting date, and RMB14.54 per share as the exercise price of the stock options. | For details, see the announcement (No.: 2023-099) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 14, 2023. |
| The third exercise period of the 2019 Incentive Stock Option PlanPart II met the requirements for Exercise. | For details, see the announcement (No.: 2023-100) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 14, 2023. |
| The granted options of the 2023 Incentive Stock Option Plan were registered. | For details, see the announcement (No.: 2023-101) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 14, 2023 |
| Adjustment of participants and cancellation of part of the options in the 2015 Incentive Stock Option Plan: As from October 26, 2022 to October 24, 2023, 37 participants resigned and 13 participants retired, the Company agreed to cancel 219,083,000 stock options granted but not yet exercised by the above mentioned participants; and the aforementioned 13 retired participants whose stock options granted but not yet exercised were approved to excercise the options prior to their retirement, therefore continue to retain the right to exercise without the need for cancellation. After this adjustment, the number of participants was adjusted to 917 and the number of stock options granted was adjusted to 20,317,367,000. | For details, see the announcement (No.: 2023-104) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 26, 2023 |
| The third exercise period of the 2019 Incentive Stock Option Plan Part I meeting the requirements for excercise and cancellation of part of the options 2019 Incentive Stock Option Plan Part I: As from October 26, 2022 to October 24, 2023, 15 participants resigned and 10 participants retired, and the number of participants of the 2019 Incentive Stock Option Plan Part I was adjusted from 448 to 423; 9 incentive recipients failed the performance appraisal in 2022 and were required to cancel 50% or 100% of the number of stock options granted in the third exercise period (50% for 7 participants and 100% for 2 participants), therefore, it is proposed to cancel 299,550,000 stock options granted but not yet exercised by the above-mentioned participants, and the number of stock options in Part I was adjusted from 13,438,255,000 to 13,138,705,000 after this adjustment. | For details, see the announcement (No.: 2023-105) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on October 26, 2023 |
| The trust deed for 2023 Employee Stock Ownership Plan was signed. | For details, see the announcement (No.: 2023-108) disclosed by the Company on the website of Shanghai Stock Exchange |
2023 Annual Report
| (www.sse.com.cn) on October 27, 2023 | |
| The non-trade transfer of shares for 2023 Employee Stock Ownership Plan was completed. | For details, see the announcement (No.: 2023-116) disclosed by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) on November 25, 2023 |
(II) Incentive matters not disclosed in temporary announcements or with further progressEquity incentive
□Applicable √Not Applicable
Other explanations
□Applicable √Not Applicable
Employee stock ownership plan
√Applicable □ Not Applicable
The Core Employee Stock Ownership Plan Phase I held a total of 102,600 shares on December 31, 2023,the same number as on December 31, 2022; Core Employee Stock Ownership Plan Phase II held a totalof 1,271,500 shares on December 31, 2022, and 590,150 shares on December 31, 2023 with 680,900shares sold during the year 2023.
Other incentive measures
□Applicable √Not Applicable
(III) Equity incentives granted to directors and members of the senior management during the
reporting period
□Applicable √Not Applicable
(IV) Establishment and implementation of appraisal mechanism and the incentive mechanism for
senior management during the reporting period
√Applicable □ Not Applicable
The Company had an appraisal and incentive mechanism. The Remuneration Committee evaluateddirectors, supervisors and members of the senior management and formulated an annual remunerationplan based on the profit completion and the Company's operational indicators of the year. The plancomprehensively considered the average annual salary level of related industries and the current situationof the Company, and linked the annual salary of the Company's operators with the Company's financialposition, profitability and completion of annual business goals, to fully mobilize the enthusiasm ofoperators, further improve the work performance appraisal and the survival of the fittest mechanism forthe Company's members of the senior management, and strengthen the restraint of responsibilityobjectives.
XII. Construction and implementation of internal control system during the reporting period
√Applicable □ Not Applicable
In accordance with legal and regulatory requirements such as the Company Law, Basic Standards forEnterprise Internal Control and its supporting guidelines, the Company has established internal controlrules for various businesses and strictly implemented the rules. Besides, the company continues to developand improve internal control. In accordance with the newly issued Opinions of the General Office of theState Council and the Measures for the Administration of Independent Directors of Listed Companies, theCompany has sorted out the conditions of independent directors of the Company and confirmed that thethree independent directors of the Company are in compliance with the requirements of the laws and
2023 Annual Report
regulations. During the reporting period, the Company revised a total of 10 rules, including the Rules forIndependent Directors, the rules for various special committees and the Rules of Information Disclosure,and instructed its subsidiaries to implement the internal control system, improve the relevant businessprocesses, and ensure the effectiveness of the internal control.The Company maintained effective internal control over all material aspects of financial and non-financialreporting during the reporting period, as detailed in the 2023 Internal Control Evaluation Report disclosedon the website of the Shanghai Stock Exchange (www.sse.com.cn) at the same time as this report.
Particulars on major defects in the internal control during the reporting period
□Applicable √Not Applicable
XIII. Management and control on subsidiaries during the reporting period
√Applicable □ Not Applicable
During the reporting period, subject to the requirements of the Company's internal control system, theCompany carried out effective management in terms of operation, organization structure, human resources,finance, capital, guarantee and information disclosure of its subsidiaries in accordance with theAdministration Regulations for Subsidiaries. In order to strengthen the compliance management ofsubsidiaries and enhance management efficiency and convenience, in 2023, the Company developed andput on line a software platform of corporate governance system, which integrates a series of functionssuch as entity management, meeting management, and reporting of major issues, which enhances thedigitalization of the compliance management of subsidiaries. Subsidiaries operated in accordance with theadministration regulations formulated by the Company, and established corresponding decision-making,execution, monitoring and feedback systems. Their organizational structures were with clear division oflabor and sound and clear functions.
XIV. Particulars on the internal control audit report
√Applicable □ Not Applicable
The internal control audit report is available on the website of the Shanghai Stock Exchange atwww.sse.com.cn.Whether disclosed the internal control audit report: YesType of internal control audit report opinion: standard unqualified opinion
XV. Rectification of problems identified in self-examination of governance special actions by thelisted companyN/A
XVI. Others
□Applicable √Not Applicable
2023 Annual Report
Section V Environmental and Social Responsibility
I. Environmental information
| Whether relevant mechanisms for environmental protection are established | Yes |
| Investment in environmental protection during the reporting period (unit: RMB 10,000 yuan) | 4,749.6 |
(I) Environmental protection information of companies belonging to key pollutant-discharge units and their main subsidiaries announced by the environmentalprotection department
√Applicable □ Not Applicable
The companies included in the key pollutant discharge units during the reporting period are USI (notincluding subsidiaries) and wholly-owned subsidiary Asteelflash Suzhou.
1. Pollutant Discharge Information
√Applicable □ Not Applicable
(1) The information of wastewater detection and waste treatment in USI (not including subsidiaries) in2023 is as follows:
| Information on Wastewater Discharge in 2023 | |||
| Number & position of wastewater discharge port | DW001 | Monitoring units and methods | Entrust Shanghai Huihuan Environmental Testing Co., Ltd. to test |
| Discharge standard | GB 39731-2020 Electronic Industry Water Pollutant Discharge Standard, DB31/199-2018 “Integrated Wastewater Discharge Standard” | Discharge mode and destination | It is discharged from the pipe and enters the urban sewage treatment plant |
| Testing items | Standard value | Test date | |
| 2023/9/27 | |||
| pH | 6-9 | 6.9 | |
| Chemical Oxygen Demand (COD) (mg/L) | 500 | 48 | |
| Anionic Surfactant (mg/L) | 20 | 0.28 | |
| Biochemical Oxygen Demand (BOD5) (mg/L) | 300 | 21.7 | |
| Ammonia Nitrogen (NH3-N) (mg/L) | 45 | 9.84 | |
| Total Phosphorus (mg/L) | 8 | 0.82 | |
| Total Nitrogen (mg/L) | 70 | 10.85 | |
| Suspended Solids (SS) (mg/L) | 400 | 55 | |
| Petroleum (mg/L) | 15 | 0.065 | |
2023 Annual Report
| Animal and Vegetable Oils (mg/L) | 100 | 0.38 |
| Dissolved Solids (mg/L) | 2000 | 326.8 |
| Note | / | Qualified |
| Information on Solid (Hazardous) Waste Discharge in 2023 | ||||||
| Name | Category | Code | Output (tons) | Transfer amount (tons) | Storage capacity (tons) | Disposal or recovery |
| PCB dust, board edge, PCB with parts | Hazardous waste | 900-045-49 | 50.939 | 50.939 | 0 | Handed over to a qualified unit for processing |
| Empty barrels, rags, filter elements and sludge contaminated with chemicals | Hazardous waste | 900-041-49 | 41.511 | 41.511 | 0 | Handed over to a qualified unit for processing |
| Organic resin | Hazardous waste | 900-014-13 | 38.89 | 38.89 | 0 | Handed over to a qualified unit for processing |
| Bromopropane | Hazardous waste | 900-404-06 | 134.138 | 134.138 | 0 | Handed over to a qualified unit for processing |
| Waste isopropanol and other solvents | Hazardous waste | 900-402-06 | 22.858 | 22.858 | 0 | Handed over to a qualified unit for processing |
| Waste oil | Hazardous waste | 900-249-08 | 0.545 | 0.545 | 0 | Handed over to a qualified unit for processing |
| Waste cutting fluid | Hazardous waste | 900-006-09 | 0.291 | 0.291 | 0 | Handed over to a qualified unit for processing |
| Waste activated carbon | Hazardous waste | 900-039-49 | 12.064 | 12.064 | 0 | Handed over to a qualified unit for processing |
| 200L iron drum | Hazardous waste | 900-041-49 | 0 | 0 | 0 | Handed over to a qualified unit for processing |
| Waste fluorescent tubes | Hazardous waste | 900-023-29 | 0.044 | 0.044 | 0 | Handed over to a qualified unit for processing |
| Lead accumulator | Hazardous waste | 900-052-31 | 1 | 1 | 0 | Handed over to a qualified unit for processing |
| Lead–tin paste and tin slag | Hazardous waste | 900-025-31 | 1.964 | 1.964 | 0 | Handed over to a qualified unit for processing |
| Laboratory waste | Hazardous waste | 900-047-49 | 0.187 | 0.187 | 0 | Handed over to a qualified unit for processing |
| Potassium dichromate | Hazardous waste | 900-999-49 | 0.00049 | 0.00049 | 0 | Handed over to a qualified unit for processing |
2023 Annual Report
| Sampling point position | Standard dry flue gas flow rate | Test result | Remarks: | |||
| Particulate matter | Voc | Reporting date: April 23, 2023 | ||||
| Emission concentration Mg/m3 | Emission rate Kg/h | Emission concentration Mg/m3 | Emission rate Kg/h | |||
| DA001 | 62800 | ND | ND | 1.68 | 0.106 | |
| DA002 | 15700 | ND | ND | 1.87 | 0.0294 | Entrusted third party: Shanghai Huihuan Environmental Testing Co., Ltd. to test |
| DA003 | 20900 | ND | ND | 1.56 | 0.0326 | |
| Integrated Emission Standard of Air Pollutants (DB 31/933-2015) | 30 | 1.5 | 70 | 3.0 | ||
(2) Information on wastewater detection and waste treatment of Asteelflash Suzhou in 2023 is asfollows:
| Information on Wastewater Discharge in 2023 | |||||
| Number & position of wastewater discharge port | Coordinates: X=53452.745 Y=31496.402 | Monitoring units and methods | Suzhou Youlian Checking & Measuring Technology Service Co., Ltd. | ||
| Discharge standard | Wastewater quality standards for discharge to municipal sewers GB/T31962-2015 | Discharge mode and destination | It is discharged from the pipe and enters the urban sewage treatment plant | ||
| Testing items | Standard value | Test date | |||
| 2023/09/07 | 2023/12/7 | ||||
| PH | 6.5-9.5 | 7.3 | 8.6 | ||
| Suspended Solids (SS) (mg/L) | ≤400 | 23 | 56 | ||
| Chemical Oxygen Demand (COD) (mg/L) | ≤500 | 128 | 316 | ||
| Biochemical Oxygen Demand (BOD5) (mg/L) | ≤350 | 67.7 | 142 | ||
| Ammonia Nitrogen (NH3-N) (mg/L) | ≤45 | 23.4 | 36.9 | ||
| Total Nitrogen (mg/L) | ≤70 | 29.0 | 39.0 | ||
| Total Phosphorus (mg/L) | ≤8 | 2.93 | 4.98 | ||
| Animal and Vegetable Oils (mg/L) | ≤100 | 0.06L | 0.66 | ||
| Note | / | Qualified | Qualified | ||
| Information on Solid (Hazardous) Waste Discharge in 2023 | ||||||
| Name | Category | Code | Output (tons) | Transfer amount (tons) | Storage capacity (tons) | Disposal or recovery |
| Empty barrels for chemicals | Hazardous waste | 900-041-49 | 34.6725 | 34.6725 | 0 | Handed over to a qualified unit for processing |
| Wipes containing chemicals | Hazardous waste | 900-041-49 | 14.603 | 14.603 | 0 | Handed over to a qualified unit for processing |
| Waste soldering flux | Hazardous waste | 900-402-06 | 4.095 | 4.095 | 0 | Handed over to a qualified unit for processing |
2023 Annual Report
| Waste activated carbon | Hazardous waste | 900-039-49 | 0.131 | 0.131 | 0 | Handed over to a qualified unit for processing |
| Waste cleaning agent | Hazardous waste | 900-402-06 | 3.962 | 3.962 | 0 | Handed over to a qualified unit for processing |
| Waste circuit board scraps | Hazardous waste | 900-045-49 | 49.3105 | 49.3105 | 0 | Handed over to a qualified unit for processing |
| Scruff with lead | Hazardous waste | 900-000-31 | 4.776 | 4.776 | 0 | Handed over to a qualified unit for processing |
| Dust | Hazardous waste | 900-451-13 | 0.6985 | 0.6985 | 0 | Handed over to a qualified unit for processing |
2. Construction and operation of pollution prevention and treatment facilities
√Applicable □ Not Applicable
(1) USI (not including subsidiaries)
Construction status: In 2023, the waste gas treatment facilities and wastewater treatment facilities are ingood operation, and consumables such as activated carbon and filter cotton are replaced regularly. Theoutsourced monitoring results show that the wastewater and waste gas emissions meet the standards.1 discharge port in Building A: Water spray + defogger +activated carbon adsorption + dry dust removal2 discharge ports in Building B: Activated carbon adsorption + dry dust removal, water spray + defogger+ activated carbon adsorption + dry dust removal (The two ports have been merged into one in October2023, and the port started discharges after tests shows that it has reached the standard)
Total emissions: hazardous waste 304.431 tons / VOCs 1.399 tons
Excessive emissions: N/AApproved total discharge: wastewater CODcr: 11.1341ton/year; ammonia nitrogen: 0.5592ton/year;exhaust gas particulate matter: 1.795 ton/year ; SO
: 0.013 ton/year; NOx: 1.1098 ton/year; VOCs:
12.1229 ton/year
(2) Asteelflash Suzhou
Construction status: There is no change in pollution source treatment facilities in 2023 compared with thatin 2022.12 discharge ports in Building 1: Activated carbon adsorptionOperation status: In 2023, the waste gas treatment facilities are in good operation, with regular operationand maintenance. The outsourced monitoring results of each waste gas outlet show that the waste gasreaches the standard.Total emissions: Tin and its compounds 0.007 tons, non-methane total hydrocarbon 0.317 tons, particulatematter 0.036 tonsExcessive emissions: N/AApproved total emissions: currently no relevant requirements by Suzhou government
3. Environmental impact assessment (EIA) of construction projects and other environmental protectionadministrative licenses
√Applicable □ Not Applicable
(1) USI (not including subsidiaries)
2023 Annual Report
| Name of administrative license | Project file name | Production or approval unit | License No. | Description |
| Pollutant discharge permit | Pollutant discharge permit | Pudong New Area Ecological Environment Bureau | 91310000745611834X001U | None |
| Environmental Impact Report | Display & touch chip module technology R&D and industrialization project | Pudong New Area Ecological Environment Bureau | H.P.H.B.X.P.[2022] No. 145 | None |
(2) Asteelflash Suzhou
| Name of EIA/Administrative License | Licensing Authority | Licensing Date | License File No. |
| Production technical transformation project with an annual output of 150 million automatic canned cigarette oil boxes | Suzhou Wujiang Ecological Environment Bureau | July 8, 2019 | W.H.J [2019] No.180 |
| Pollutant discharge permit | Suzhou Wujiang Ecological Environment Bureau | July 7, 2022 | Permit No.: 91320509734422894M001Y |
| Annual output of 7.7 million pieces of automotive electronic circuit boards | Suzhou Ecological Environment Bureau | May 6, 2023 | S.H.J.N.[2023] 09 No. 0049 |
4. Emergency plan for environmental emergencies
√Applicable □ Not Applicable
| Project file name | Filing Date | Filing Department | Record No. |
| Environmental Emergency Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | 2022.11.30 | Pudong New Area Ecological Environment Bureau | 02-310115-2022-532-L |
| Environmental Emergency Plan of Asteelflash Suzhou | 2016-05-20 | Wujiang Environment Bureau | SST-WI-FA-009 |
5. Environmental self-monitoring scheme
√Applicable □ Not Applicable
The Company entrusts a third-party environmental testing agency to conduct environmental monitoringwork for the Company in strict accordance with the relevant requirements of the Technical Guide for Self-Monitoring of Pollutant Discharge Units. At the same time, the Company has also formulated a detaileddaily monitoring plan to monitor emission sources of various pollutants regularly and routinely. Afterbeing tested by a third-party environmental testing agency, pollutants in all processes of the Companymeet the discharge standards.
6. The situation of administrative punishment due to environmental problems during the reporting period
□ Applicable √Not Applicable
7. Other environmental information that should be disclosed
√Applicable □ Not Applicable
2023 Annual Report
| Participation in environmental pollution liability insurance | None |
| Payment of environmental tax | Pay environmental tax on time every quarter |
| Environmental policy and annual environmental objectives and results | Complying with laws and regulations, responding to environmental protection, hazard prevention, communication training, pollution prevention, continuous improvement, energy saving and waste reduction, effective utilization, setting goals and sustainable operation. |
| Environmental protection investment and environmental technology development | Every year, special funds are invested in environmental protection projects to ensure that environmental protection funds are earmarked. The funds are used for annual environmental testing, pollution prevention and control, waste reduction and recycling to ensure that all environmental emissions meet the requirements of environmental protection laws and regulations. |
| Recycling of waste products | A waste management plan has been formulated, in which hazardous wastes are handed over to qualified units for treatment and non-hazardous wastes are recycled by licensed recycling units. |
| Resource consumption in 2023 | USI (not including subsidiaries): 204,032 tons of water, 68,034,750 KWH of electricity Asteelflash Suzhou: 122,140 tons of water, 11,748,822 KWH of electricity |
| Environmental violations of law in 2023 | None |
| Environmental awards in 2023 | On March 28, 2023, the Office of Shanghai Pudong New Area Work Safety Commission organized the creation and evaluation of safety culture demonstration enterprises in the district, and a total of 23 enterprises in Pudong New Area were included in safety culture demonstration enterprises, including Zhangjiang Factory and Jinqiao Factory. On June 28, 2023, USI ranked in the Top 1% for its S&P Global ESG score and the Best Improvement Enterprise in the industry. On November 1, 2023, USI won the 2023 Advanced Collective of Fire Safety in Pudong New Area. |
(II) Description of environmental protection of companies other than key pollutant-dischargingunits
□ Applicable √Not Applicable
(III) Relevant information conducive to protecting ecology, preventing and controlling pollution and
fulfilling environmental responsibilities
√Applicable □ Not Applicable
1. Recycling of electronic waste
USI adheres to the principles of “pollution prevention and continuous improvement” and “energy saving,waste reduction and effective use” and lists waste reduction and reuse as the Company’s policies whichare implemented by all factories and listed as annual performance indicators. It strengthens the effectivecontrol of wastes through regular data recording, tracking and monitoring of use and output. Among them,hazardous wastes are handed over to licensed qualified processors for treatment and non-hazardous wastesare recycled by licensed recyclers or cleared and transported to licensed incineration plants for treatment.In 2023, the recovery rate of waste reached 95%. USI will continue to implement the waste reductionpolicy, reduce the waste from the source, and strive to achieve the goal of sustainable resources.
2. Cleaning technology
USI follows the strategy of green management and ecological design of products, quickly responds to thelatest international environmental protection laws and regulations and environmental protection
2023 Annual Report
instructions of sales areas, and formulates “Specifications of Green Products” to control the hazardoussubstances contained in electronic components and products. In product design, USI considers thepotential environmental impact of products according to specifications of green products and Design forEnvironment (DfE) operation procedures, and adopts the latest international energy consumption laws andregulations (Energy Star and ErP) and various environmental indicators (such as utilization of materials,energy saving and carbon reduction, recyclability,, etc.) to reduce the negative impact of product life cycleon the environment.The design and R&D personnel of USI have the ability of designing ecological products, and continuouslyintroduce the concepts of green products and clean technologies to ensure that the clean technologyproducts manufactured and sold will meet the requirements of environmental protection laws andregulations of various countries and meet customer needs, development trends of environmental protectionand internal control standards of the Company.
3. Renewable energy
In order to reduce the energy consumption of buildings and mitigate the impact of climate change, theCompany's Nantou Nankang No. 1 Factory successfully obtained the first EEWH green buildingcertification in 2020. In addition, the Nantou factory has cooperated with a photovoltaic panel constructionmanufacturer to build a photovoltaic power generation system, which has produced a total of 2,753.2megawatt hours of renewable energy by 2023 since it is officially put into power production since October2019. In 2023, the Huizhou factory set up a photovoltaic power generation system on the roof of thefactory, with an annual power generation of 551.9 megawatt hours, and the Company’s cumulative totalphotovoltaic power generation was 3,305 megawatt hours. In the future, the Company will continue tostrive to promote cleaner production and green buildings, and establish green factories for USI.
(IV) Measures taken to reduce their carbon emissions during the reporting period and their effects
| Whether carbon reduction measures were taken | Yes |
| Reduction of carbon dioxide equivalent emissions (unit: tons) | 54,073 |
| Types of carbon reduction measures (such as using clean energy to generate electricity, using carbon reduction technologies in the production process, developing and producing new products that help reduce carbon emissions, etc.) | 1. In 2023, USI (not including subsidiaries) used 100% renewable energy certificates to offset greenhouse gas emissions from electricity consumption; 2. In 2023, USI (not including subsidiaries) completed various energy-saving schemes. |
Detailed introductions
√Applicable □ Not Applicable
1. In 2023, USI (not including subsidiaries) used 100% renewable energy certificates to offset greenhousegas emissions generated by electricity use, totaling approximately 52,911 tons of CO
;
2. In April 2023, USI (not including subsidiaries) completed the energy-saving project of changing thedrying method of roof exhaust fans, and actual operation verified that it reduced carbon emissions by 142tons of CO
;In September 2023, USI (not including subsidiaries) completed the energy-saving project of aircompressor heat recovery for production line cleaning water heating, and actual operation verified that itreduced carbon emissions by 157 tons of CO
;In May 2023, USI (not including subsidiaries) completed the energy-saving project of water washingmachine drainage heat recovery, and actual operation verified that it reduced carbon emissions by 552tons of CO
;
2023 Annual Report
In March 2023, USI (not including subsidiaries) completed the energy-saving project of installingfrequency converters on cooling pumps, and actual operation verified that it reduced carbon emissions by311 tons of CO
.
II. Work on corporate social responsibility
(I) Whether social responsibility report, sustainability report or ESG report is disclosed separately
√Applicable □ Not Applicable
Since 2013, the Company has issued sustainable development reports annually on the Sustainabilitysection of USI's website (https://www.usiglobal.com/csr).
(II) Specific situation of corporate social responsibility
√Applicable □ Not Applicable
| Donations, public welfare projects | Quantity/Content | Remark |
| Total investment (Unit: RMB 10,000 yuan) | 800.8 | |
| Including funds (Unit: RMB 10,000 yuan) | 711.2 | |
| Materials (Unit: RMB 10,000 yuan) | 89.6 | |
| Number of beneficiaries | 8,977 |
Detailed introductions
√Applicable □ Not Applicable
USI has been adhering to the concept of “Realizing IDEAS together”, actively fulfilling corporate socialresponsibilities by participating in social welfare, and practicing its commitment of “actively investing inpublic welfare activities that promote social well-being, and encouraging employees to participate in socialwelfare activities” in its “Sustainability Policy”, hoping to become an excellent example of corporatecitizenship. The Company gathered internal resources and manpower, and invested RMB 8,008,387 yuanin support of social welfare projects in 2023, and promoted social engagement in the four aspects of“Education, Contributing to Society, Promoting Arts & Culture, and External Participation” to make apositive impact on surrounding communities.In addition to expanding education for poverty alleviation and actively carrying out public welfare actionssuch as rural education and rural revitalization, in the fields of education, society, environment andliterature and art, factories of the Company sponsored such projects as "Performances of Same Root andSame Origin - Cross-Strait Cooperation to Tell the Story of Chinese Peking Opera", “the 4
th
Cross-StraitStudent Baseball League”, "China Go League", "Book Library of Love", "Million Tree Planting Plan","Stream Cleaning Activities", "Campus LED Project" and other artistic performances.
III. Efforts in consolidating the achievements in poverty alleviation and rural revitalization
√Applicable □ Not Applicable
| Poverty Alleviation and Rural Revitalization Projects | Quantity/Content | Remark |
| Total investment (Unit: RMB 10,000 yuan) | 53.1 | |
| Including funds (Unit: RMB 10,000 yuan) | 40.5 | |
| Materials (Unit: RMB 10,000 yuan) | 12.6 | |
| Number of beneficiaries | 2,732 | |
| Forms of assistance (such as poverty alleviation by industrial development, poverty alleviation by job creation, poverty alleviation by educational support, etc.) | Poverty alleviation by educational support |
Detailed introductions
√Applicable □ Not Applicable
2023 Annual Report
In order to help eliminate poverty and provide quality education, USI focuses on expanding theachievements of poverty alleviation through education, actively carries out public welfare actions such asrural education and rural revitalization to subsidize children in remote areas to obtain better educationalresources, and fully consolidates the achievements of poverty alleviation, to help more students realizetheir dreams and achieve harmonious social development. In 2023, USI promoted revitalization activitiessuch as “Rural Science and Technology Education Program”, “Hope for Pearl”, “Love Library”, “WesternStudent Assistance Plan”, “Loving and Grateful Mother's Home of Shanghai Soong Ching LingFoundation”, “Rural Revitalization ‘Embracing Autistic Children’ of Kunshan Charity Federation”,“Lucheng Love Charity” and “Heartfelt Wishes” with a total investment of RMB 531,000 to help 2,732poor students.
1. Rural Science and Technology Education Program
USI adheres to the concept of science and technology for good, and attaches great importance to educationin poverty-stricken areas. By donating computers and building computer classrooms, USI helped childrenin remote areas to obtain better educational resources. The program aimed to narrow the gap betweenurban and rural education development by giving educational support to rural students. On the basis of theprevious plan, USI not only upgraded and optimized the educational equipment and infrastructure, butalso focused on cultivating rural teachers and talents with scientific and technological knowledge. TheCompany’s efforts extended to two schools in Yunan Province in 2023, and provided a total of 8 schoolswith customized and step-by-step technological support for their teachers, by developing video teachingcontents and materials on technology applications and conducting interesting quizzes and computer typingcompetitions to reinforce students' learning outcome, and helped teachers to achieve the purpose ofdeveloping students' scientific and technological knowledge, benefiting 2,235 students.
2. Hope for Pearl
The Company's Shenzhen factory and Kunshan factory have actively participated in the "Hope for Pearl"program, and supported outstanding students from poor families to complete their studies for eightconsecutive years. In 2023, "Charity Sale and Auction" activity was held within the Company to allowemployees to directly support Pearl students, and the employees used their creativity and enthusiasm topromote a wide range of charity products. In addition to donating RMB 100,000 yuan to Anhui ProvinceQianshan Yezhai Middle School , to help 50 impoverished students in the “2021 USI Shuijing Pearl Class”complete their studies, the funds raised were used to customize school supplies for students to encouragethem to study. Under the escort of love every year, all students of the "2020 USI Shuijing Pearl Class"were successfully admitted to their favorite undergraduate schools.
3. Love Library
Reading is the basis for accumulating innovative R&D capabilities. In order to implement the concept of“promoting education”, the Company built a Love Library in Malibao Primary School, Donggan Town,Malipo County, Yunnan Province, which is a targeted county of rural revitalization in China. During theconstruction of the library, the Company invited employees to participate in the activity of “DonatingBooks for Children”, bringing better educational resources to 345 children in remote areas. When thelibrary was completed, USI sent 1,237 books and 20 speakers loaded with 200 audiobooks donated by 42colleagues and the company to the reading room to enrich the teaching resources of the primary school.By providing practical assistance, USI intended to narrow the gap between urban and rural educationdevelopment, and promote the balanced development of education in the country. The library was built sothat students can gain knowledge and positive energy from books, keep up with the pace of technologicaldevelopment, and develop in an all-round way like children in cities.
4. Western Student Assistance Plan
As the saying goes, “it takes ten years nurture a tree, but a hundred years to train a man”, investment inthe education brings pains for the moment, gains for the millennia. USI carried out the Western StudentAssistance Plan through China Charity Federation in western rural areas such as Yunnan and SichuanProvince, invested RMB 48,000 yuan to support 12 college students, guaranteed students' educationalopportunities in the form of subsidies, helped outstanding students in remote villages to further theireducation, and escorted their growth to successfully complete their education, so that they can help morepeople with the knowledge they learned.
2023 Annual Report
5. Loving and Grateful Mother's Home of Shanghai Soong Ching Ling FoundationIn order to pay more attention to education in rural areas, especially in Sichuan Province and Tibet, theCompany donated RMB 20,000 yuan to the student aid program to provide children with necessary dailynecessities and school supplies to promote the healthy development of school children.
6. “Rural Revitalization ‘Embracing Autistic Children’ of Kunshan Charity Federation, “LuchengLove Charity” and “Heartfelt Wishes”In an unstable environment, vulnerable groups are often the first to be affected. Adhering to the heart ofgreat love, the Company participated in the "Embracing Autistic Children" and "Lucheng Great LoveCharity" program and donated materials worth a total of RMB 29,000 yuan to care for 60 seriously illpatients, disabled people, children in need, and groups in special positions and in need, to provide themwith warmth and care. Besides, the Company once again fulfilled the Children's Day "Heartfelt Wishes"of 30 children in need from remote rural areas.
2023 Annual Report
Section VI Major EventsI. Performance of commitments(I) Commitments by the Company's actual controllers, shareholders, affiliates, acquirers, the Company and other relevant commitment parties during or
subsisted during the reporting period
√Applicable □ Not Applicable
| Commitment background | Commitment Type | Party making the commitment | Commitment content | Commitment time | Whether there is a deadline for performance | Commitment duration | Whether strictly performed in a timely manner | If not performed in a timely manner, describe the specific reasons | If not performed in a timely manner, describe the next step |
| Commitments related to major asset restructuring | Others | USI Enterprise Limited and actual controllers of USI | Note 1 | December 12, 2019 | No | Long term | Yes | ||
| Settlement of horizontal competition | USI Enterprise Limited and actual controllers of USI | Note 2 | December 12, 2019 | No | Long term | Yes | |||
| Settlement of related transactions | USI Enterprise Limited and actual controllers of USI | Note 3 | December 12, 2019 | No | Long term | Yes | |||
| Restriction on sale of shares | ASDI | Note 4 | February 12, 2020 | Yes | December 8, 2020 to | Yes |
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| December 7, 2023 | |||||||||
| Commitments related to IPO | Settlement of horizontal competition | USI Enterprise Limited and ASE Inc. | Note 5 | May 3, 2010 | No | Long term | Yes | ||
| Settlement of horizontal competition | Actual controller of USI | Note 6 | May 3, 2010 | No | Long term | Yes | |||
| Others | USIE | Note 7 | June 17, 2010 | No | Long term | Yes | |||
| Others | ASE Shanghai | Note 8 | June 25, 2010 | No | Long term | Yes | |||
| Others | Actual controller of USI | Note 9 | June 17, 2010 | No | Long term | Yes |
Note 1: Commitment to Guarantee the Independence of the Listed Company:
(1) Guarantee that the listed company's personnel are independent
1) Guarantee that the general manager, vice president and other members of the senior management of the listed company hold full-time positions in the listed companyand receive remuneration from the listed company, and no other administrative positions other than directors and supervisors in the party making the commitment andits related parties; and that the personnel of the listed company continue maintaining independent;
2) Guarantee that the listed company has an independent and complete labor, personnel and remuneration management system, and that such system is completelyindependent of the party making the commitment and its related parties;
3) Guarantee that the directors, supervisors and members of the senior managers of the listed company are elected and perform the corresponding procedures in strictaccordance with the relevant provisions of the Company Law and the articles of association of the listed company, and no directors, supervisors and members of thesenior managers exceed the power or authority of the Board of Directors or the general meeting of the listed company to make personnel appointment and removaldecisions or interfere with personnel appointment and removal decisions.
(2) Guarantee that the listed company's assets are independent
1) Guarantee that the listed company has independent and complete assets, and all of its assets are under the control of the listed company, and are independentlyowned and operated by the listed company;
2) Guarantee that the party making the commitment and its related parties did not and will not illegally occupy the funds and assets of the listed company in any waybefore and after the completion of this transaction.
2023 Annual Report
(3) Guarantee that the listed company's finance is independent
1) Guarantee that the listed company has an independent financial department and an independent financial accounting system, is equipped with specialized financialpersonnel, and establishes an independent and complete financial accounting system. Guarantee that the listed company has a standardized and independent financialaccounting system and a financial management system for branches and subsidiaries;
2) Guarantee that the listed company opens a bank account independently, and does not share a bank account with the party making the commitment and its relatedparties;
3) Guarantee that the listed company can make financial decisions independently and there is no interference in the use of funds of the listed company;
4) Guarantee that the financial personnel of the listed company are independent and do not take part-time jobs at or receive remuneration from the party making thecommitment and its related parties;
5) Guarantee that the listed company pays taxes independently in accordance with the law.
(4) Guarantee that the listed company's organization is independent
1) Guarantee that the listed company has a sound corporate governance structure as a joint-stock company and has an independent and complete organizationalstructure;
2) Guarantee that the general meeting of shareholders, the Board of Directors, independent directors, the Board of Supervisors, and the general manager of the listedcompany exercise their functions and powers independently in accordance with laws, regulations and the articles of association of the listed company.
(5) Guarantee that the listed company's business is independent
1) Guarantee that the listed company has the assets, personnel, qualifications and capabilities to carry out business activities independently, and has the ability tooperate independently and continuously in the market;
2) Guarantee not to interfere in the business activities of the listed company except through the exercise of shareholder rights;
3) Guarantee that the party making the commitment and its related parties do not engage in the same or similar business as or with that of the listed company, and takeeffective measures to avoid horizontal competition.
(6) This letter of commitment shall have legal effect upon signature by the party making the commitment. The party making the commitment shall strictly fulfill allthe commitments in this letter of commitment, and if its violation of any of such commitments causes any losses to the listed company, the party making thecommitment shall bear the corresponding legal liabilities.
Note 2: Commitment to avoid horizontal competition
(1) The party making the commitment guarantees that after the completion of this transaction, it shall not directly or indirectly engage in the same or similar businessor projects as or with that in the business scope of the Company, so as to avoid direct or indirect competition with the Company's production and operation.
2023 Annual Report
(2) The controlling shareholder of the Company guarantees that it shall not use its share-controlling relationship with the Company to conduct business activities thatdamage or may damage the interests of the Company and its other shareholders; and that it shall not use the information it understands or knows about the Companyto assist third parties to engage in, participate in or invest in a business or project that competes with the Company.
(3) The actual controller guarantees that it shall make efforts to cause the family members in close relation with it not to directly or indirectly engage in, participate inor invest in any business activities that compete with the production and operation of the Company. The actual controller guarantees that it shall not use its relationshipwith the Company to conduct business activities that damage or may damage the interests of the Company and its other shareholders; and that it shall not use theinformation it understands or knows about the Company to assist third parties to engage in, participate in or invest in a business or project that competes with theCompany.
(4) In case of any losses caused to the Company due to the violation of the above commitments by the party making the commitment, the party making the commitmentshall be liable for compensation and bear corresponding legal liabilities. The above commitments shall take effect from the date of this letter of commitment, and shallcontinue to be effective throughout the period in which the party making the commitment is the controlling shareholder and the actual controller of the Company, andcannot be changed or revoked.
Note 3: Commitment to reduce and regulate related transactions:
(1) The party making the commitment and the enterprises controlled or influenced by the party making the commitment shall try their best to avoid and reduce relatedtransactions with the listed company and its subsidiaries.As far as the commitment of the listed company to reduce and regulate related transactions, the transactions between the listed company and its subsidiaries andindependent third parties through the market shall be conducted by the listed company and its subsidiaries and independent third parties. Other companies controlledor influenced by the committing party will strictly refrain from lending to the listed company and its subsidiaries, occupying the funds of the listed company and itssubsidiaries, or encroaching on the listed company and its subsidiaries by making advances and repaying debts. Listed company funds;
(2) All transactions required between the party making the commitment and the enterprises controlled or influenced by the party making the commitment and thelisted company and its subsidiaries shall be conducted in strict with the market principal and in a fair and reasonable manner based on the general principles of equality,mutual benefit and valuable consideration. If there is a government price for the transaction, the government price shall prevail; if not, the market fair price shallprevail; if there is neither a government price nor a market reference price, the cost price shall be determined according to the cost plus a comparable and reasonableprofit level;
(3) Related transactions between the party making the commitment and the listed company and its subsidiaries shall be subject to necessary legal procedures andinformation disclosure obligations in strict accordance with the listed company's articles of association and related transaction management system. The party makingthe commitment shall take the initiative to perform the obligation of avoidance according to the law when the listed company's authority deliberates related transactions;related transactions subject to deliberation by the authority can only be executed after the deliberation and approval by the authority;
(4) The party making the commitment guarantees that it shall not obtain any illegitimate benefits through related transactions or make the listed company and itssubsidiaries undertake any undue obligations. If the listed company or its subsidiaries or other shareholders suffer losses due to the violation of the above commitments
2023 Annual Report
by the party making the commitment, or the listed company or its subsidiaries or other shareholders' interests are misappropriated due to the use of related relationshipby the party making the commitment, the party making the commitment shall be liable for compensation to the losses caused therefrom of the listed company, itssubsidiaries and other shareholders;
(5) The above commitments shall continue to be valid during the period when the party making the commitment and the enterprises controlled or influenced by theparty making the commitment constitute the related parties of the listed company, and cannot be changed or revoked.
Note 4:
The lock-up period for the shares of the Company acquired by ASDI in the share exchange transaction is thirty-six months from the delivery of the new shares.
Note 5:
(1) The commitment person (including other enterprises controlled by the party making the commitment, the same below) currently does not engage in the same orsimilar business as or to that of Universal Scientific Industrial (Shanghai) Co., Ltd. ("USI"), which constitute horizontal competition with USI, or other business thatmay adversely affect USI. (2) The person making the commitment shall not directly or indirectly engage in or participate in any business or activity that competeswith USI in any way (including but not limited to independent operation, joint venture operation, or owning equity and other interests in another company or enterprise)inside or outside China, or engage in any business activities that are the same as, similar to or may replace USI's business in any way. (3) If the business opportunityobtained by the person making the commitment from any third party does or may constitute competition with the business operated by USI, the person making thecommitment shall notify USI immediately and cause the business opportunity to be transferred to USI. (4) Where USI further expands its business scope on the basisof its existing business, if the Company has already carried out production and operation of suchexpanded business, the person making the commitment agrees thatUSI has theright of first refusal to purchase the relevant business under the same commercial conditions; If the Company has not yet produced or operated suchexpanded business, it shall not engage in new business that competes with USI. (5) The person making the commitment shall, in future business operations, avoidoperating business that constitutes horizontal competition with USI. If the new business that the person making the commitment intends to carry out may constitutehorizontal competition with USI, the person making the commitment shall obliged to notify USI of the new business. If USI objects to this, the person making thecommitment shall unconditionally give up the development of the new business. If USI believes that the new business is beneficial to its development, the personmaking the commitment shall not only unconditionally give up the development of the new business, butalso promote the new business to be carried out by USI. IfUSI determines that a certain business the person making the commitment has already conducted is in competition with USI, the person making the commitment shalltransfer the business to a third party or terminate the business on its own in a timely manner after USI raises an objection. If USI makes a transfer request, the personmaking the commitment shall unconditionally transfer the above-mentioned business and assets to USI in priority at a fair price assessed by an intermediary withqualifications for securities business.
Note 6:
2023 Annual Report
(1) Other enterprises excluding USI (including enterprises controlled by USI, the same below) controlled by the person making the commitment currently do notengage in the same or similar business as or to that of Universal Scientific Industrial (Shanghai) Co., Ltd.("USI"), which constitute horizontal competition with USI,or other business that may adversely affect USI. 2) The person making the commitment shall not, during the period of being confirmed as the actual controller of USIaccording to Chinese laws and regulations, directly or indirectly engage in or participate in any business or activity that competes with USI in any way (including butnot limited to independent operation, joint venture operation, or owning equity and other interests in anothercompany or enterprise) inside or outside China, or engagein any business activities that are the same as, similar to or may replace USI's business in any way. (3) If the business opportunity obtained by the person making thecommitment from any third party does or may constitute competition with the business operated by USI, the person making the commitment shall notify USIimmediately and cause the business opportunity to be transferred to USI. (4) Where USI further expands its business scope on the basis of its existing business, ifother enterprises controlled by the person making the commitment have already carried out production and operation of such expanded business, the person makingthe commitment agrees that USI has the right of first refusal to purchase the relevant business under the same commercial conditions; If other enterprises controlledby the person making the commitment have not yet produced or operated such expanded business, the person making the commitment shall ensure that the enterpriseunder their control does not engage in new business that competes with USI. (5) Other enterprises controlled by the person making the commitment shall, in futurebusiness operations, avoid operating business that constitutes horizontal competition with USI. If the new business that other enterprises controlled by the personmaking the commitment intend to carry out may constitute horizontal competition with USI, such other enterprises shall be obliged to notify USI of the new business.If USI objects to this, such other enterprises shall unconditionally give up the development of the new business. If USI believes that the new business is beneficial toits development, such other enterprises shall not only unconditionally give up the development of the new business, but also promote the new business to be carriedout by USI. If USI determines that a certain business such other enterprises has already conducted is in competition with USI, such other enterprises controlled by theperson making the commitment shall transfer the business to a third party or terminate the business on its own in a timely manner after USI raises an objection. If USImakes a transfer request, such other enterprises shall unconditionally transfer the above-mentioned business and assets to USI in priority at a fair price assessed by anintermediary with qualifications for securities business. (5) Other enterprises controlled by the person making the commitment shall not engage in business or activitiesthat do or may adversely affect the operation and development of USI in any way. Such way includes but is not limited to: utilizing the social resources and customerresources of the person making the commitment to hinder or limit the independent development of USI; spreading news or information that is unfavorable to USI inthe society and among customers; using the control position of the person making the commitment to exert influence, resulting in abnormal changes or fluctuations ofUSI's management personnel and R&D technicians, which are not conducive to the development of USI.
Note 7:
(1) For the situation that USI currently has or is about to have some patent rights and patent application rights in common with Universal Scientific Industrial Co.,Ltd., in order to protect the interests of USI and its minority shareholders, the person making the commitment hereby commits that: if Universal Scientific IndustrialCo., Ltd. (including other enterprises controlled by Universal Scientific Industrial Co., Ltd. except USI and enterprises controlled by USI) causes any right infringementand economic losses to USI and enterprises controlled by USI when exercising its patent application co-ownership and patent co-ownership, the person making thecommitment shall be legally liable for the losses suffered by USI and enterprises controlled by USI and shall also pay full compensation. (2) Before the IPO of USI,if USI must be jointly and severally liable for damages to the dispatched personnel due to the fact that the labor dispatch unit is in arrears with the dispatchedpersonnel’s wages, the person making the commitment agrees to compensate USI for the entire economic loss. (3) If USI and its subsidiaries need to pay socialinsurance premiums or housing provident fund for employees as required or decided by the competent department, or USI and its subsidiaries are fined or suffer losses
2023 Annual Report
for failure to pay social insurance premiums or housing provident funds for employees in accordance with the law, the person making the commitment shall be willingto assume such liability without the consideration of USI and its subsidiaries.
Note 8USI is currently leasing part of the property of ASE (Shanghai) Inc. (hereinafter referred to as the "person making the commitment") for staff dormitory purposes. Theperson making the commitment hereby makes the following commitments: If USI cannot continue using the leased property or suffers a claim from a third party dueto the defect of the property right of the person making the commitment to the leased property, the person making the commitment shall bear the corresponding legalliabilities, and shall also fully compensate USI for any losses, fines and relocation expenses incurred thereby.
Note 9:
The person making the commitment and enterprises controlled by the person making the commitment (except ASE Technology Holding Co., Ltd. and enterprisescontrolled by ASE Technology Holding Co., Ltd.) do not own any patents, patent application rights or non-profit patented technology. (2) For the situation that USIcurrently has or is about to have some patent rights and patent application rights in common with Universal Scientific Industrial Co., Ltd., in order to protect theinterests of USI and its minority shareholders, the person making the commitment hereby commits that: if Universal Scientific Industrial Co., Ltd. (including otherenterprises controlled by Universal Scientific Industrial Co., Ltd. except USI and enterprises controlled by USI) causes any right infringement and economic losses toUSI and enterprises controlled by USI when exercising its patent application co-ownership and patent co-ownership, the person making the commitment shall belegally liable for the losses suffered by USI and enterprises controlled by USI and shall also pay full compensation. (3) Before the IPO of USI, if USI must be jointlyand severally liable for damages to the dispatched personnel due to the fact that the labor dispatch unit is in arrears with the dispatched personnel’s wages, the personmaking the commitment agrees to compensate USI for the entire economic loss. (4) If USI and its subsidiaries need to pay social insurance premiums or housingprovident fund for employees as required or decided by the competent department, or USI and its subsidiaries are fined or suffer losses for failure to pay socialinsurance premiums or housing provident funds for employees in accordance with the law, the person making the commitment shall be willing to assume such liabilitywithout the consideration of USI and its subsidiaries.
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(II) Where the Company has profit forecasts on assets or projects, and the reporting period waswithin the term of profit forecasts, the Company has to state whether such profit forecasts onassets or projects are fulfilled and the reasons therefor
□Fulfilled □Unfulfilled √Not Applicable
(III) Execution of the performance commitments and its impact on the goodwill impairment testing
□Applicable √Not Applicable
II. Non-operating misappropriation of funds by controlling shareholders and other related parties
during the reporting period
□Applicable √Not Applicable
III. Illegal guarantees
□Applicable √Not Applicable
IV. Explanation by the Board of Directors of the Company on other type of audit report than
standard unqualified audit report issued by the accounting firm
□Applicable √Not Applicable
V. Analysis by the Company on reasons for and impacts of changes in accounting policies and
accounting estimates or corrections of significant accounting errors(I) Analysis by the Company on reasons for and impacts of changes in accounting policies andaccounting estimates
□Applicable √Not Applicable
(II) Analysis by the Company on reasons and impacts of the correction of significant accounting
errors
□Applicable √Not Applicable
(III) Communication with the previous accounting firm
□Applicable √Not Applicable
(IV) Approval process and other explanations
√Applicable □ Not Applicable
During the reporting period, the Company made corresponding changes in accounting policies inaccordance with the Notice on Issuance of Interpretation of Enterprise Accounting Standards No. 16 issuedby the Ministry of Finance of the People's Republic of China, which did not require the approval by theBoard of Directors or the General Meeting of Shareholders of the Company. For details, see theannouncement (No.: 2023-107) disclosed by the Company on the website of Shanghai Stock Exchange(www.sse.com.cn) .
VI. Appointment and dismissal of the accounting firm
Unit: 10,000 Currency: RMB
| Current accounting firm | |
| Name of domestic accounting firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Remuneration of domestic accounting firm | 440 |
| Number of years of audit services by the domestic accounting firm | 13 |
| Name of CPAs from domestic accounting | Yuan Shouqing, and Hu Ke |
2023 Annual Report
| Number of consecutive years of audit services of CPAs in domestic accounting firms | 13 |
| Name | Remuneration | |
| Internal control audit accounting firm | Deloitte Touche Tohmatsu Certified Public Accountants LLP | 73.6 |
| Sponsor | Haitong Securities Co., Ltd. | 0 |
Particulars on appointment and dismissal of the accounting firm
√Applicable □ Not Applicable
The Company's 2022annual general meeting of shareholders was held on April 24, 2023, and thismeeting deliberated and approved the appointment of Deloitte Touche Tohmatsu Certified PublicAccountants LLP as the Company's 2023 financial audit agency and internal control audit agency.
Particulars on the change of accounting firm during the auditing period
□Applicable √Not Applicable
Explanation of the decrease of 20% or more (including 20%) in audit fees compared to the previous year
□Applicable √Not Applicable
VII. Risk of suspension of listing(I) Reasons for the suspension of listing risk warning
□Applicable √Not Applicable
(II) Measures to be taken by the Company
□Applicable √Not Applicable
(III) Circumstances and reasons for termination of listing
□Applicable √Not Applicable
VIII. Matters related to bankruptcy and reorganisation
□Applicable √Not Applicable
IX. Material litigation and arbitration
□Applicable √Not Applicable
X. The listed company, directors, supervisors, senior management, controlling shareholders and
actual controllers suspected of violating laws and regulations, penalized and relevantrectifications
□Applicable √Not Applicable
XI. Particulars on credibility status of the Company, its controlling shareholders and actual
controllers during the reporting period
√Applicable □ Not Applicable
During the reporting period, the Company's controlling shareholders and actual controllers did not fail toperform the obligations determined by the effective legal documents of the court, and had no bad faithsituation such as a large amount of debts due and unpaid.
2023 Annual Report
XII. Major related transactions(I) Related transactions in relation to daily operation
1. Events disclosed in temporary announcements and without further progress or change insubsequent implementation
√Applicable □ Not Applicable
| Overview | Index |
| Announcement on Actual Regular Related Party Transactions in 2022 and Predicted Regular Related Party Transactions in 2023 | For details, see the announcement (No.: 2023-034) on the website of the Shanghai Stock Exchange (www.sse.com.cn). |
1. Events disclosed in temporary announcements and with further progress or change in subsequentimplementation
□Applicable √Not Applicable
2. Events not disclosed in temporary announcements
□Applicable √Not Applicable
(II) Related transactions as a result of acquisition and disposal of assets or equity
2. Events disclosed in temporary announcements and without further progress or change insubsequent implementation
□Applicable √Not Applicable
3. Events disclosed in temporary announcements and with further progress or change in subsequentimplementation
□Applicable √Not Applicable
4. Events not disclosed in temporary announcements
□Applicable √Not Applicable
5. Disclosable performance achievements during the reporting period when involved with agreed-upon performance
□Applicable √Not Applicable
(III) Major related transactions in joint external investment
1. Events disclosed in temporary announcements and without further progress or change insubsequent implementation
□Applicable √Not Applicable
2. Events disclosed in temporary announcements and with further progress or change in subsequentimplementation
□Applicable √Not Applicable
3. Events not disclosed in temporary announcements
□Applicable √Not Applicable
(IV) Creditor's rights and debts with affiliates
1. Events disclosed in temporary announcements and without further progress or change in
subsequent implementation
□Applicable √Not Applicable
2023 Annual Report
2. Events disclosed in temporary announcements and with further progress or change in subsequentimplementation
3. Events not disclosed in temporary announcements
□Applicable √Not Applicable
(V) Financial business between the Company and the financial company with a related relationshipwith the Company, the Company's holding financial company, and the related party
□Applicable √Not Applicable
(VI) Others
□Applicable √Not Applicable
XIII. Material contracts and their performance(I) Trusteeship, contracting and leasing matters
1. Trusteeship
□Applicable √Not Applicable
2. Contracting
□Applicable √Not Applicable
3. Leasing
□Applicable √Not Applicable
2023 Annual Report
(II) Guarantees
√Applicable □ Not Applicable
Unit: 10,000 Currency: EUR
| The Company's external guarantees (excluding guarantees to subsidiaries) | |||||||||||||||
| Guarantor | Relationship between the guarantor and the listed company | Guaranteed party | Guarantee amount | Guarantee date (date of signing the agreement) | Guarantee start date | Guarantee expiry date | Guarantee type | Collateral (if any) | Whether fulfilled | Whether overdue | Guarantee overdue amount | Counter-guarantee situation | Whether for related parties | Related relationship | |
| / | / | / | / | / | / | / | / | ||||||||
| Total amount of guarantees during the reporting period (excluding guarantees to subsidiaries) | 0 | ||||||||||||||
| Total balance of guarantees at the end of the reporting period (A) (excluding guarantees to subsidiaries) | 0 | ||||||||||||||
| Guarantee of the Company and its subsidiaries to subsidiaries | |||||||||||||||
| Total amount of guarantees to subsidiaries during the reporting period | 2,100 | ||||||||||||||
| Total balance of guarantees to subsidiaries at the end of the reporting period (B) | 2,100 | ||||||||||||||
| Total amount of the Company's guarantees (including guarantees to subsidiaries) | |||||||||||||||
| Total amount of guarantees (A+B) | 2,100 | ||||||||||||||
| Proportion of the total amount of guarantees in the Company's net assets (%) | 1.01 | ||||||||||||||
| Including: | |||||||||||||||
| Amount of guarantee provided to shareholders, actual controllers and related parties (C) | 0 | ||||||||||||||
| Amount of debt guarantee provided directly or indirectly for the guaranteed party whose asset-liability ratio exceeds 70% (D) | 2,100 | ||||||||||||||
| Amount of the total guarantee exceeding 50% of the net assets (E) | 0 | ||||||||||||||
| Total amount of the above three guarantees (C+D+E) | 2,100 | ||||||||||||||
| Particulars on the situation that unexpired guarantees may bear joint liability for repayment | None | ||||||||||||||
2023 Annual Report
| Particulars on guarantees | The above are all guarantees between controlled subsidiaries for the purpose of satisfying the daily operation needs of the subsidiaries. The objects of the guarantee are the wholly-ownedx subsidiaries within the scope of its consolidated statement. The Company have decision-making power on their operation and have access to their latest financial and credit status information, therefore can effectively control and prevent risks. |
(III) Entrusting others to manage cash assets
1. Entrusted wealth management
(1) Overall condition of entrusted wealth management
√Applicable □ Not Applicable
Unit: 10,000 Currency: RMB
| Type | Source of fund | Amount incurred | Undue balance | Overdue uncollected amount |
| Bank wealth management products | Self-owned funds | 925,800.00 | 0 | 0 |
| Bank wealth management products | Raised funds | 106,700.00 | 0 | 0 |
Others
□Applicable √Not Applicable
(2) Individual entrusted wealth management
√Applicable □ Not Applicable
Unit: 10,000 Currency: RMB
| Trustee | Type of Entrusted Investment | Amount | Start Date | End date | Source | Direction | Restricted circumstances | Type of Returns | Annual Return | Expected return (If any) | Actual gain or loss | Undue balance | Overdue uncollected amount | Legal procedures conducted | Future entrusted investment plan | Impairment provision (if any) |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/1/4 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1400% | 148.28 | 148.28 | 0 | 0 | Yes | No | |
| China Construction Bank Shanghai Branch | Bank wealth management products | 10,000 | 2023/1/6 | 2023/2/28 | Raised funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 45.01 | 45.01 | 0 | 0 | Yes | No |
2023 Annual Report
| China Construction Bank Shanghai Branch | Bank wealth management products | 24,000 | 2023/1/6 | 2023/3/30 | Raised funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 169.18 | 169.18 | 0 | 0 | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 8,800 | 2023/1/4 | 2023/3/29 | Raised funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1500% | 63.79 | 63.79 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/4/4 | 2023/5/16 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 74.67 | 74.67 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 152.89 | 152.89 | 0 | 0 | Yes | No | |
| China Construction Bank Shanghai Branch | Bank wealth management products | 29,000 | 2023/4/4 | 2023/6/29 | Raised funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 211.82 | 211.82 | 0 | 0 | Yes | No | |
| China Construction Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 146.08 | 146.08 | 0 | 0 | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 5,400 | 2023/4/4 | 2023/6/29 | Raised funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 40.71 | 40.71 | 0 | 0 | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 30,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 226.19 | 226.19 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/5/17 | 2023/5/31 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3500% | 25.28 | 26.06 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/6/1 | 2023/6/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2500% | 46.94 | 46.94 | 0 | 0 | Yes | No |
2023 Annual Report
| China Construction Bank Shanghai Branch | Bank wealth management products | 29,500 | 2023/7/3 | 2023/9/27 | Raised funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9741% | 208.52 | 206.72 | 0 | 0 | Yes | No | |
| China Construction Bank Shanghai Branch | Bank wealth management products | 40,000 | 2023/7/3 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9741% | 282.74 | 280.30 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 20,000 | 2023/7/4 | 2023/9/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 152.89 | 152.89 | 0 | 0 | Yes | No | |
| China Construction Bank Shanghai Branch | Bank wealth management products | 80,000 | 2023/10/9 | 2023/12/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.5000% | 526.03 | 438.36 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 4,600 | 2023/1/4 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1400% | 34.10 | 34.10 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 4,600 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 35.16 | 35.16 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 4,600 | 2023/7/4 | 2023/9/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 35.16 | 35.16 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 4,600 | 2023/10/10 | 2023/10/31 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0200% | 8.10 | 8.10 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 4,700 | 2023/11/3 | 2023/11/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0200% | 10.65 | 10.65 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 4,700 | 2023/12/1 | 2023/12/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0200% | 10.65 | 10.65 | 0 | 0 | Yes | No |
2023 Annual Report
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 20,000 | 2023/1/4 | 2023/3/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1500% | 144.99 | 144.99 | 0 | 0 | Yes | No | |
| Fubon Bank Shanghai Xuhui Branch | Bank wealth management products | 30,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 226.19 | 226.19 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 30,000 | 2023/7/4 | 2023/9/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 232.92 | 232.92 | 0 | 0 | Yes | No | |
| Xiamen International Bank Shanghai Branch | Bank wealth management products | 55,000 | 2023/10/10 | 2023/12/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0200% | 364.50 | 364.50 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 5,000 | 2023/1/4 | 2023/2/1 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 12.27 | 12.27 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 5,000 | 2023/1/4 | 2023/3/1 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 25.32 | 25.32 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/1/5 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3100% | 39.08 | 39.08 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 20,000 | 2023/1/10 | 2023/3/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.4000% | 143.45 | 143.45 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/1/19 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2500% | 32.05 | 32.05 | 0 | 0 | Yes | No |
2023 Annual Report
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/2/6 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1500% | 23.63 | 23.63 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 36.60 | 36.60 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 36.60 | 36.60 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 36.60 | 36.60 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1400% | 37.07 | 37.07 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 5,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1400% | 37.07 | 37.07 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000 | 2023/4/28 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 52.66 | 52.66 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 5,000 | 2023/5/8 | 2023/6/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 21.23 | 21.23 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 5,000 | 2023/6/2 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2500% | 12.02 | 12.02 | 0 | 0 | Yes | No |
2023 Annual Report
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 5,000 | 2023/6/2 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2500% | 12.02 | 12.02 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000 | 2023/7/5 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 73.64 | 73.64 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000 | 2023/7/5 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 73.64 | 73.64 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000 | 2023/7/5 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 73.64 | 73.64 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000 | 2023/7/5 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2000% | 73.64 | 73.64 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 10,000 | 2023/7/7 | 2023/9/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0600% | 68.85 | 67.15 | 0 | 0 | Yes | No | |
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 10,000 | 2023/7/7 | 2023/9/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0600% | 68.85 | 67.15 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank Development Zone Branch | Bank wealth management products | 10,000 | 2023/10/10 | 2023/12/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0000% | 63.29 | 63.29 | 0 | 0 | Yes | No | |
| Kunshan Rural Commercial Bank | Bank wealth management products | 10,000 | 2023/10/10 | 2023/12/26 | Self-owned funds | Money market: | No | Principal protected, | 3.0000% | 63.29 | 63.29 | 0 | 0 | Yes | No |
2023 Annual Report
| Development Zone Branch | cash&deposit | floating rate | ||||||||||||||
| Bank of Suzhou Kunshan Qiandeng Branch | Bank wealth management products | 10,000 | 2023/10/11 | 2023/12/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9500% | 110.63 | 61.46 | 0 | 0 | Yes | No | |
| Bank of Ningbo Kunshan Branch | Bank wealth management products | 20,000 | 2023/10/13 | 2023/12/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 125.70 | 125.70 | 0 | 0 | Yes | No | |
| Bank of Ningbo Kunshan Branch | Bank wealth management products | 5,000 | 2023/10/13 | 2023/12/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.8500% | 28.89 | 28.89 | 0 | 0 | Yes | No | |
| Bank of Ningbo Kunshan Branch | Bank wealth management products | 5,000 | 2023/10/23 | 2023/12/26 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.8500% | 24.99 | 24.99 | 0 | 0 | Yes | No | |
| Bank of Shanghai Shenzhen Branch | Bank wealth management products | 10,000 | 2023/1/5 | 2023/2/8 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.8000% | 26.08 | 26.08 | 0 | 0 | Yes | No | |
| Industrial Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/1/4 | 2023/3/31 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.2200% | 70.21 | 75.87 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/1/5 | 2023/3/31 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 76.85 | 76.85 | 0 | 0 | Yes | No | |
| Industrial Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/1/5 | 2023/3/31 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9200% | 62.41 | 68.00 | 0 | 0 | Yes | No | |
| Bank of Shanghai Shenzhen Branch | Bank wealth management products | 8,000 | 2023/1/19 | 2023/2/22 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.7000% | 20.12 | 20.12 | 0 | 0 | Yes | No | |
| China Construction | Bank wealth management products | 10,000 | 2023/3/3 | 2023/3/31 | Self-owned funds | Money market: | No | Principal protected, | 3.0100% | 23.78 | 23.10 | 0 | 0 | Yes | No |
2023 Annual Report
| Bank South Keyuan Branch | cash&deposit | floating rate | ||||||||||||||
| China Merchants Bank Daya Bay Branch | Bank wealth management products | 5,000 | 2023/3/3 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.2500% | 10.17 | 8.32 | 0 | 0 | Yes | No | |
| Bank of Communications Shanghai Branch | Bank wealth management products | 10,000 | 2023/3/6 | 2023/3/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9500% | 19.40 | 19.40 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 77.75 | 77.75 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/4/4 | 2023/6/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 78.66 | 78.66 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/4/4 | 2023/6/30 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 78.66 | 78.66 | 0 | 0 | Yes | No | |
| Industrial Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/4/4 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9600% | 64.79 | 69.74 | 0 | 0 | Yes | No | |
| Bank of Communications Shenzhen Huaqiang Branch | Bank wealth management products | 10,000 | 2023/4/6 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9500% | 67.89 | 67.89 | 0 | 0 | Yes | No | |
| China Construction Bank Shenzhen South Keyuan Branch | Bank wealth management products | 10,000 | 2023/4/7 | 2023/6/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.1000% | 20.38 | 70.49 | 0 | 0 | Yes | No | |
| Bank of Communications Shenzhen Huaqiang Branch | Bank wealth management products | 10,000 | 2023/7/5 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.9000% | 66.74 | 66.74 | 0 | 0 | Yes | No |
2023 Annual Report
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 10,000 | 2023/7/5 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0500% | 70.19 | 70.19 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 10,000 | 2023/7/4 | 2023/9/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 77.75 | 77.75 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 20,000 | 2023/7/4 | 2023/9/28 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.3000% | 155.51 | 155.51 | 0 | 0 | Yes | No | |
| China Construction Bank Shenzhen South Keyuan Branch | Bank wealth management products | 10,000 | 2023/7/6 | 2023/9/27 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.8909% | 68.22 | 65.74 | 0 | 0 | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 10,000 | 2023/10/9 | 2023/12/11 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.6278% | 50.92 | 45.36 | 0 | 0 | Yes | No | |
| Bank SinoPac Guangzhou Branch | Bank wealth management products | 15,000 | 2023/10/9 | 2023/12/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0500% | 101.53 | 101.53 | 0 | 0 | Yes | No | |
| E.SUN Bank Shenzhen Bank | Bank wealth management products | 20,000 | 2023/10/10 | 2023/12/29 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 3.0000% | 131.51 | 131.51 | 0 | 0 | Yes | No | |
| China Construction Bank Shenzhen South Keyuan Branch | Bank wealth management products | 20,000 | 23/10/12 | 2023/12/12 | Self-owned funds | Money market: cash&deposit | No | Principal protected, floating rate | 2.8125% | 100.27 | 94.01 | 0 | 0 | Yes | No |
Others
□Applicable √Not Applicable
(3) Provision for the impairment of entrusted wealth management
□Applicable √Not Applicable
2023 Annual Report
2. Entrusted loans
(1) Overall condition of entrusted loans
□Applicable √Not Applicable
Others
□Applicable √Not Applicable
(2) Individual entrusted loans
□Applicable √Not Applicable
Others
□Applicable √Not Applicable
(3) Provision for the impairment of entrusted loans
□Applicable √Not Applicable
3. Others
□Applicable √Not Applicable
(IV) Other material contracts
□Applicable √Not Applicable
XIV. Progress of the use of raised funds
√Applicable □ Not Applicable
(I) An overview of the use of raised funds
√Applicable □ Not Applicable
Unit: RMB 10,000 yuan
2023 Annual Report
| Source of raised funds | Time of receiving funds raised | Total amount of raised funds | Including over-raised funds | Net amount of raised funds after deducting flotation costs | Total amount of committed investment from raised funds | Adjusted amount of committed investment from raised funds (1) | Total investment amount from raised funds by the end of the reporting period (2) | Investment progress (3)＝(2)/(1) | Investments in 2023 | Proportion of investment amount in 2023 (%) (5)＝(4)/(1) | Amount of raised funds for changed purpose |
| Issuance of convertible bonds | March 10, 2021 | 345,000.00 | 0 | 342,957.00 | 342,957.00 | 349,719.79 | 319,210.12 | 91.28 | 35,212.00 | 10.07 | 36,716.99 |
(II) Details of investment projects with raised funds
√Applicable □ Not Applicable
Unit: RMB 10,000 yuan
| Name of project | Nature of project | Whether involving any change in investment purpose | Source of raised funds | Time of receiving funds raised | Whether used over-raised funds | Total amount of committed investment from raised funds | Adjusted amount of committed investment from raised funds | Investments in 2023 | Total investment amount from raised funds by the end of the reporting period (2) | Investment progress (%) (3)＝(2)/(1) | Date when the project reaches intended usable status | Whether the project is closed | Whether the investment progress was in line with the plan | Reasons why investment progress fell short of the plan | Income generated during the year | Income generated or R&D results of the project | Explanation for changes in project feasibility | Surplus Balance |
| Chip module project in | Production and construction | Yes | Issuance of convertible bonds | March 10, 2021 | No | 86,000.00 | 79,283.01 | 1,544.39 | 79,283.01 | 100.00 | July 2023 | Yes | Yes | N/A | No | 0 |
2023 Annual Report
| Shengxia site | ||||||||||||||||||
| Wearable device project in Vietnam site | Production and construction | Yes | Issuance of convertible bonds | March 10, 2021 | No | 56,000.00 | 56,000.00 | 5,540.26 | 50,649.55 | 90.45 | December 8, 2022 | No | Yes | N/A | 11,748.00 | No | N/A | |
| Electronic product project in Huizhou site | Production and construction | Yes | Issuance of convertible bonds | March 10, 2021 | No | 100,000.00 | 70,000.00 | 9,733.26 | 69,926.48 | 99.89 | September 2023 (Note 2) | Yes | Yes | N/A | 23,507.79 | No | 73.52 Note 6 | |
| Supplementary Working Capital Project | Supplementary working capital and loan repayment | No | Issuance of convertible bonds | March 10, 2021 | No | 100,957.00 | 100,957.00 | 80.47 | 101,037.47 | 100.08 | N/A | Yes | Yes | N/A | N/A | No | 0 | |
| Construction and loan repayment of Mexico Second Factory Project | Production and construction | Yes | Issuance of convertible bonds | March 10, 2021 | No | N/A | 43,479.78 | 18,313.61 | 18,313.61 | 42.12 | December 2024 | No | Yes | N/A | N/A | No | N/A |
Note 1: Due to the epidemic, the investment progress of the chip module project in Shengxia Factory lagged behind, and the market demand and customer ordersituation also changed. The total amount of fund raised and invested in the project by July 31, 2023 was RMB 792,830,100, and the production capacity formed bythe invested funds could already meet the customer demand. In view of the above, the Company held the Fourth Meeting of the Sixth Session of the Board of Directorsand the Second Meeting of the Sixth Session of the Board of Supervisors on August 25, 2023 to close the chip module project in Shengxia Factory, as detailed in the
2023 Annual Report
announcement of the Company dated August 29, 2023 (Announcement No.: 2023-076). In addition, given that the project is a technological upgrade project of theShengxia factory, the income realized cannot be singled out and calculated separately.Due to the epidemic, the market demand and customer order situation have changed. In this case, the Company held the Fourth Meeting of the Sixth Session of theBoard of Directors and the Second Meeting of the Sixth Session of the Board of Supervisors on August 25, 2023 and approved the adjustment and extension of someprojects, and change of investment purpose of some projects, as detailed in the announcement of the Company dated August 29, 2023 (Announcement No.: 2023-076).Note 3: The investment in the wearable device production project of the Vietnam factory has not yet been completed. The project achieved a net profit equivalent toRMB 117.48 million in 2023 and a net profit equivalent to RMB 44.33 million in 2022.Note 4: In FY2023, the electronic product production project of the Huizhou Plant realized a net profit of RMB23,507,900; in FY2022, the electronic productproduction project of the Huizhou Plant realized a net profit of RMB4,724,500.Note 5: The total amount of investment by raised funds for the Mexico factory project includes the interest generated from the raised funds for the chip module projectin Shengxia factory and the electronic product production project in Huizhou factory, and therefore the adjusted total committed investment is larger than the originaltotal committed investment.Note 6: By the end of Q3 2023, the electronic product production project of Huizhou factory has been closed and had a surplus of RMB 735,207.45 yuan. As theamount is less than RMB 1 million and is less than 5% of the committed investment amount of the project from raisd funds, the Company has transferred the surplusamount to the special account for Mexico factory construction project, which is in compliance with the Guidelines No. 1 of the Shanghai Stock Exchange for the Self-regulation of Listed Companies - Standard Operation.Note 7: When the supplementary working capital project was closed, the surplus raised funds (including interest) were transferred to the Company's own workingcapital account.
(III) Industry of the Company during the reporting period
√Applicable □ Not Applicable
Unit: 10,000 Currency: RMB
| Project name before change | Total investment from raised funds before change of investment purpose or termination of project | Total invested raised funds before change of investment purpose or termination of project | Item | Reasons for changes of investment purpose | Total amount of raised funds used for supplementary working capital after change of investmen | Description of decision-making process and information disclosure |
2023 Annual Report
| t purpose or termination of project | ||||||
| Chip module project in Shengxia site | 86,000.00 | 79,283.01 | Construction and loan repayment of Mexico Second Factory Project | As of July 31, 2023, a total of RMB 792.83 million raised funds has been invested in the project, and the remaining RMB 67.17 million have not yet been invested. Due to the epidemic, the project investment progress was affected, and the market demand for the products produced by the project has also changed. The production capacity formed by the invested funds could meet the needs of customer orders. Therefore, the Company decided to close the chip module project in Shengxia Factory and change the purpose of the unused funds RMB 67.17 million as well as the interest accrued from the funds so as to effectively use the funds. | 0 | The Company considered and approved the Proposal on Closure, Adjustment, Extension of Some Raised Fund Projects, and Change of Usage of Some Raised Fund Projects at the Fourth Meeting of the Sixth Session of the Board of Directors and the Second Meeting of the Sixth Session of the Board of Supervisors held on August 25, 2023, the First Extraordinary Shareholders' Meeting of 2023 and the Bondholders' Meeting held on September 15, 2023 and disclosed the relevant announcement (Announcement No. 2023-076) on the website of Shanghai Stock Exchange ( www.sse.com.cn). |
| Electronic product project in Huizhou site | 100,000.00 | 69,926.48 | Due to the adjustment of the investment arrangement of the project caused by the epidemic and the change of the market environment during the construction of the project, the Company intended to adjust investment in the project according to the change of the market demand and customers' orders by postponing the investment progress without adjusting the total investment amount of the project. In order to improve the efficiency of the use of proceeds, the Company decided to reduce the amount of raised funds used in the project and change the purpose of surplus raised fund for another project. | 0 |
(IV) Other information on the usage of raised funds during the reporting Period
1. Replacement of pre-issuance investment with raised funds
□Applicable √Not Applicable
2023 Annual Report
2. Use idle raised funds as working capital
□Applicable √Not Applicable
3. Cash management of idle raised funds
√Applicable □ Not Applicable
Unit: 100 million Currency: RMB
| Date of approval by the Board of Directors | Amount of raised funds approved for cash management | Start date | End date | Cash management balance at the end of the reporting period | Whether the maximum balance during the period exceeds the authorized amount |
| March 17, 2023 | 5 | March 17, 2023 | March 16, 2024 | 0 | No |
| October 24, 2023 | 4 | October 24, 2023 | October 23, 2024 | 0 | No |
Other explanationsNone
4. Use excessive raised funds for working capital or bank loan repayment permanently
□Applicable √Not Applicable
5. Others
□Applicable √Not Applicable
XV. Particulars on other major events that have great influence on investors' value judgments and investment decisions
□Applicable √Not Applicable
2023 Annual Report
Section VII Changes in Shares and Information of ShareholdersI. Changes in share capital(I) Table of changes in shares
1. Table of changes in shares
Unit: Share
| Before the change | Change | After the change | |||||||
| Number | % | New Issue | Bonus Issue | Shares converted from capital reserve | Others | Subtotal | Number | % | |
| I. Shares subject to selling restrictions | 25,939,972 | 1.18 | 0 | 0 | 0 | -25,939,972 | -25,939,972 | 0 | 0 |
| 1. Shares held by the foreign capital | 25,939,972 | 1.18 | 0 | 0 | 0 | -25,939,972 | -25,939,972 | 0 | 0 |
| Including: Shares held by the foreign legal person | 25,939,972 | 1.18 | 0 | 0 | 0 | -25,939,972 | -25,939,972 | 0 | 0 |
| II. Tradable shares held not subject to selling restrictions | 2,180,924,267 | 98.82 | 3,127,341 | 0 | 0 | 25,939,972 | 29,067,313 | 2,209,991,580 | 100 |
| 1. RMB ordinary shares | 2,180,924,267 | 98.82 | 3,127,341 | 0 | 0 | 25,939,972 | 29,067,313 | 2,209,991,580 | 100 |
| III. Total number of shares | 2,206,864,239 | 100 | 3,127,341 | 0 | 0 | 0 | 3,127,341 | 2,209,991,580 | 100 |
2. Particulars on changes in ordinary shares
√Applicable □ Not Applicable
During the reporting period, the Company's total share capital increased from 2,206,864,239 to2,209,991,580 shares, an increase of 3,127,341 shares due to option excercise and conversion ofconvertible bonds.
3. Impact of changes in shares on the earnings per share, net asset value per share and other
financial indicators in the last year and period (if any)
√Applicable □ Not Applicable
During the reporting period, the Company's total shares increased by 3,127,341 shares due to exercise ofstock options and conversion of convertible bonds, accounting for 0.14% of its total share capital after
2023 Annual Report
these changes, with little impact on financial indicators such as earnings per share and net asset pershare.
4. Other contents that must be disclosed in the opinion of the Company or according to requirementsof the securities regulatory institution
□Applicable √Not Applicable
(II) Changes in shares subject to selling restrictions
√Applicable □ Not Applicable
Unit: share
| Name of shareholder | Number of shares subject to selling restrictions at the beginning of the year | Number of shares released from selling restrictions during the year | Increase in the number of shares subject to selling restrictions during the year | Number of shares subject to selling restrictions at the end of the year | Reason for selling restrictions | Date of release from restriction |
| ASDI Assistance Direction S.A.S. | 25,939,972 | 25,939,972 | 0 | 0 | The lock-up period for the shares of the Company acquired by ASDI in the share exchange transaction is thirty-six months from the delivery of the new shares, and the lock-up period has expired. | December 8, 2023 |
| Total | 25,939,972 | 25,939,972 | 0 | 0 | / | / |
II. Issuance and listing of securities(I) Issuance of securities durin the reporting period
□Applicable √Not Applicable
Particulars on issuance of securities during the reporting period (please explain separately the bonds withdifferent interest rates during their duration):
□Applicable √Not Applicable
(II) Changes in the total number of shares and shareholder structure of the Company and changesin the structure of assets and liabilities of the Company
√Applicable □ Not Applicable
2023 Annual Report
1. Changes in the total number of shares
During the reporting period, the Company's total shares increased by 3,127,341 shares due to exercise ofstock options and conversion of convertible bond.
2. Changes in shareholder structure
The controlling shareholder and actual controller of the Company remained unchanged. The controllingshareholder of the Company was still USI Enterprise Limited, and its shareholding ratio was diluted from
76.30% to 76.19% due to the above change in shares. Except for the controlling shareholder, the Companyhad no other shareholders holding more than 5% of the shares. The actual controllers of the Companywere still Jason C.S. Chang and Richard H.P. Chang brothers.
3. Changes in the structure of assets and liabilities of the Company
At the beginning of the reporting period, the Company had total assets of RMB 38.57 billion and totalliabilities of RMB 22.82 billion, with the asset-liability ratio of 59.17%; at the end of the reporting period,the Company had total assets of RMB 39.31 billion and total liabilities of RMB 22.22 billion, with theasset-liability ratio of 56.52%. The Company's asset-liability ratio decreased YoY by 2.65 percentagepoints.
(III) Existing internal employee shares
□Applicable √Not Applicable
III. Shareholders and actual controllers(I) Total number of shareholders
| Total number of shareholders of ordinary shares at the end of the reporting period | 36,434 |
| Total number of shareholders of ordinary shares at the end of previous month prior to the disclosure date of this annual report | 36,832 |
| Total number of preferred shareholders whose voting rights have been restored as of the end of the reporting period | 0 |
| Total number of preferred shareholders at the end of the previous month prior to the disclosure date of the annual report | 0 |
(II) Table of shareholdings of the top ten shareholders and the top ten shareholders of shares in
circulation (or shareholders not subject to selling restrictions) at the end of the reporting period
Unit: share
| Shareholdings of the top ten shareholders (Excluding share lending through refinancing business) | |||||||
| Name of shareholder (full name) | Change during the reporting period | Shares held by the end of the reporting period | % | Restricted shares held | Pledge, marking or freezing | Nature of shareholder | |
| Share status | Number | ||||||
| USI Enterprise Limited | 0 | 1,683,749,126 | 76.19 | 0 | None | Foreign legal person | |
| Hong Kong Securities Clearing Company Ltd. | 1,430,114 | 64,704,857 | 2.93 | 0 | Unknown | Foreign legal person | |
| ASDI ASSISTANCE DIRECTION | -2,174,050 | 23,765,922 | 1.08 | 0 | Pledged | 1,758,914 | Foreign legal person |
2023 Annual Report
| China Securities Finance Co., Ltd. | -8,608,037 | 22,917,636 | 1.04 | 0 | Unknown | State-owned legal person | ||
| ASE (Shanghai) Inc. | 0 | 18,098,476 | 0.82 | 0 | None | Domestic non-state-owned legal person | ||
| Taikang Life Insurance Co., Ltd.- Traditional - General Insurance Products - 019L - CT001 Shanghai | 11,308,900 | 12,015,400 | 0.54 | 0 | Unknown | Others | ||
| Taikang Life Insurance Co., Ltd. - Dividends - Personal Dividends - 019L - FH002 Shanghai | 10,931,332 | 0.49 | 0 | Unknown | Others | |||
| Taikang Life Insurance Co.,ltd. - Investment-linked Insurance - Multi-Strategy Selection | 8,463,900 | 0.38 | 0 | Unknown | Others | |||
| Fuguo Enhanced Bond Securities Investment Fund - Industrial and Commercial Bank of China limited | 6,700,299 | 0.30 | 0 | Unknown | Others | |||
| Taikang Life Insurance Co.,ltd - Universal - Personal Universal Products (D) | 5,491,422 | 0.25 | 0 | Unknown | Others | |||
| Shareholding of top 10 shareholders subject to no selling restrictions | ||||||||
| Name of shareholder | Number of tradable shares held not subject to selling restrictions | Type and number of shares | ||||||
| Species | Number | |||||||
| USI Enterprise Limited | 1,683,749,126 | RMB ordinary shares | 1,683,749,126 | |||||
| Hong Kong Securities Clearing Company Ltd. | 64,704,857 | RMB ordinary shares | 64,704,857 | |||||
2023 Annual Report
| ASDI ASSISTANCE DIRECTION | 23,765,922 | RMB ordinary shares | 23,765,922 |
| China Securities Finance Co., Ltd. | 22,917,636 | RMB ordinary shares | 22,917,636 |
| ASE (Shanghai) Inc. | 18,098,476 | RMB ordinary shares | 18,098,476 |
| Taikang Life Insurance Co., Ltd.- Traditional - General Insurance Products - 019L - CT001 Shanghai | 12,015,400 | RMB ordinary shares | 12,015,400 |
| Taikang Life Insurance Co., Ltd. - Dividends - Personal Dividends - 019L - FH002 Shanghai | 10,931,332 | RMB ordinary shares | 10,931,332 |
| Taikang Life Insurance Co.,ltd. - Investment-linked Insurance - Multi-Strategy Selection | 8,463,900 | RMB ordinary shares | 8,463,900 |
| Fuguo Enhanced Bond Securities Investment Fund - Industrial and Commercial Bank of China limited | 6,700,299 | RMB ordinary shares | 6,700,299 |
| Taikang Life Insurance Co.,ltd - Universal - Personal Universal Products (D) | 5,491,422 | RMB ordinary shares | 5,491,422 |
| Particulars on the special buy-back securities account of the top ten shareholders | There were 25,402,195 tradable shares not subject to selling restrictions in the Company's special buy-back securities account at the beginning of the reporting period and 23,345,545 shares at the end of the reporting period, a decrease of 2,056,650 shares during the reporting period. The details of change are as follows: 1. On February 27, 2023, 30,600 share swas transferred back from the account of 2021 Employee Stock Ownership Plan to the Company’s special buy-back securities account; 2. On March 3, 2023, 1,715,250 shares were transferred from the Company's special buy-back securities account to the Company's Core Employee Stock Ownership Plan Phase III account in the form of non-trade transfer; 3. On November 23, 2023, 372,000 shares were transferred from the Company's special buy-back securities account to the Company's 2023 Employee Stock Ownership Plan account in the form of non-trade transfer. | ||
| Particulars on the above-mentioned shareholders' entrusting voting rights, entrusted voting rights and abstention from voting rights | None | ||
| Related or concert parties among the shareholders above | The actual controllers of the Company are Mr. Jason C.S. Chang and Mr. Richard H.P. Chang, who are brothers and ultimately control the Company through indirect shareholding by controlling USI Enterprise Limited and ASE (Shanghai) Inc., two of the Company’s shareholders. The Company does not know whether there are related relationships and concerted actions among other shareholders. | ||
2023 Annual Report
| Particulars on the preference shareholders with voting rights restored and their shareholdings | None |
Top ten shareholders participating in share lending through refinancing business
□Applicable √Not Applicable
Changes in the top 10 shareholders compared with the previous period
√Applicable □ Not Applicable
Unit: share
| Changes in the top 10 shareholders compared with the end of the previous period | |||||
| Shareholder name | New/withdrawal during the reporting period | Number of shares lent through refinancing and not yet returned at the end of the period | Number of shares held in shareholders' general accounts and credit accounts, and shares lent through refinancing and not yet returned at the end of the period | ||
| Total | Proportion (%) | Total | Proportion (%) | ||
| Taikang Life Insurance Co., Ltd.- Traditional - General Insurance Products - 019L - CT001 Shanghai | New | 0 | 0 | 12,015,400 | 0.54 |
| Taikang Life Insurance Co., Ltd. - Dividends - Personal Dividends - 019L - FH002 Shanghai | New | 0 | 0 | 10,931,332 | 0.49 |
| Taikang Life Insurance Co.,ltd. - Investment-linked Insurance - Multi-Strategy Selection | New | 0 | 0 | 8,463,900 | 0.38 |
| Fuguo Enhanced Bond Securities Investment Fund - Industrial and Commercial Bank of China limited | New | 0 | 0 | 6,700,299 | 0.30 |
| Taikang Life Insurance Co.,ltd - Universal - Personal Universal Products (D) | New | Unknown | Unknown | 5,491,422 | 0.25 |
2023 Annual Report
| Abu Dhabi Investment Authority | Withdrawal | 0 | 0 | Unknown | Unknown |
| CSI 500 Exchange Traded fund - Agricultural Bank of China | Withdrawal | 1,058,000 | 0.05 | 3,568,200 | 0.16 |
| Wanjia CSI 300 Index enhanced securities investment fund - Bank of Ningbo | Withdrawal | 0 | 0 | Unknown | Unknown |
| All China Bond - Ninety One Global Strategy Fund - Ninety One UK Ltd. - RQFII | Withdrawal | 0 | 0 | 3,590,390 | 0.16 |
| ChinaAMC CSI 5G Communication Theme ETF - Bank of China Limited | Withdrawal | 154,700 | 0.01 | 3,654,569 | 0.17 |
Number of shares held by the top ten shareholders subject to selling restrictions and description of theselling restrictions
□Applicable √Not Applicable
(III) Strategic investors or general legal persons becoming the top ten shareholders because of
placing of new shares
□Applicable √Not Applicable
IV. Controlling shareholder and actual controllers(I) Controlling shareholder1 Legal person
√Applicable □ Not Applicable
| Name | USI Enterprise Limited |
| Person in charge of the Company or legal representative | Chen-Yen Wei |
| Establishment date | November 13, 2007 |
| Main businesses | Investment consulting services and warehouse management services |
| Equity of other domestic and overseas listed companies controlled or invested during the reporting period | None |
| Particulars on other information | None |
2 Natural person
□Applicable √Not Applicable
2023 Annual Report
3 Special particulars on the Company not having controlling shareholder
□Applicable √Not Applicable
4 Changes in controlling shareholders during the reporting period
□Applicable √Not Applicable
5 The ownership structure of USI and its controlling shareholder
√Applicable □ Not Applicable
(II) Actual controller1 Legal person
□Applicable √Not Applicable
2 Natural person
√Applicable □ Not Applicable
| Name | Jason C.S. Chang |
| Nationality | Singapore |
| Acquire right of residence in other countries or regions or not | No |
| Main job and title | Since 2018, Mr. Chang has served as the chairman and group CEO of ASE Technology Holding Co., Ltd.; since 1984, he has served as the chairman of Advanced Semiconductor Engineering, Inc. |
| Shareholdings in other domestic or overseas listed companies over the past 10 years | Mr. Chang currently controls 21.66% equity in ASE Investment Holding Co., Ltd. (a company listed in Taiwan, with the stock code of 3711), holds 32.23% equity in Hung Ching Development & Construction Co. (a company listed in Taiwan, with the stock code of 2527) including 26.22% through ASE Investment Holding Co., Ltd., and controls 48.69% equity in SINO HORIZON (a company listed in Taiwan, with the stock code of 2923). He once controlled Advanced Semiconductor Engineering, Inc., a company listed on the Taiwan Stock Exchange, with the stock code of 2311, which was terminated from listing on April 30, 2018, and held Universal Scientific Industrial Co., Ltd., a company listed on the Taiwan Stock Exchange, with the stock code of 2311, which was terminated from listing on April 30, 2018. |
| Name | Richard H.P. Chang |
2023 Annual Report
| Nationality | Hong Kong, China |
| Acquire right of residence in other countries or regions or not | Yes |
| Main job and title | Since 2018, has been serving as vice chairman and general manager of ASE Technology Holding Co., Ltd. |
| Shareholdings in other domestic or overseas listed companies over the past 10 years | As a brother of Jason C.S. Chang, holds 2.83% equity in ASE Investment Holding Co., Ltd. (a company listed in Taiwan, with the stock code of 3711) and 12.90% equity in Hung Ching Development & Construction Co. (a company listed in Taiwan, with the stock code of 2527), and controls 48.69% equity in SINO HORIZON (a company listed in Taiwan, with the stock code of 2923). Once held the equity of ASE Co., Ltd., a company listed on the Taiwan Stock Exchange, with a stock code of 2311, which was terminated from listing on April 30, 2018. |
3 Special particulars on the Company not having actual controllers
□Applicable √Not Applicable
4 Particulars on changes in the Company's control during the reporting period
□Applicable √Not Applicable
5 The ownership Structure of USI and its Actual Controller
√Applicable □ Not Applicable
2023 Annual Report
6 Control of the Company by actual controllers by way of trust or other means of asset management
□Applicable √Not Applicable
(III) Other particulars regarding the controlling shareholders and the actual controllers
□Applicable √Not Applicable
V. Shares accumulatively pledged by the Company's controlling shareholder or largest shareholderand its persons acting in concert account for more than 80% of their shareholding in theCompany
□Applicable √Not Applicable
VI. Other legal person shareholders with more than 10% shareholdings
□Applicable √Not Applicable
VII. Particulars on restrictions on reduction of shareholding
□Applicable √Not Applicable
VIII. Specific implementation of share repurchase during the reporting period
□Applicable √Not Applicable
2023 Annual Report
Section VIII Information on Preferred Shares
□Applicable √Not Applicable
2023 Annual Report
Section IX Information on BondsI. Corporate bonds and debt financing instruments issued by non-financial entities
□Applicable √Not Applicable
II. Convertible corporate bonds
√Applicable □ Not Applicable
(I) Issuance of convertible bonds
√Applicable □ Not Applicable
After being approved by the China Securities Regulatory Commission with a document (Z.J.X.K.[2021] No. 167), the Company publicly issued 34.5 million convertible corporate bonds on March4, 2021, each with a face value of RMB 100, amounting to RMB 3,450 million in total. After beingapproved by the Shanghai Stock Exchange with the Self-Regulatory Supervision Decision Letter([2021] No. 133), the convertible corporate bonds were listed and traded on the Shanghai StockExchange on April 2, 2021. The bonds are abbreviated as "USI Convertible Bonds", with the bondcode of 113045.
(II) Convertible bond holders and guarantors during the reporting period
√Applicable □ Not Applicable
| Name of convertible corporate bonds | Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | |
| Number of convertible bond holders at the end of the period | 6,655 | |
| Guarantor of the Company's convertible bonds | None | |
| Top ten convertible bond holders: | ||
| Name of holders of convertible corporate bonds | Amount of bonds held at the end of the period (RMB) | Holding ratio (%) |
| USI Enterprise Limited | 983,828,000 | 28.52 |
| Northwest Feilong Fund Limited - Northwest Investment Management (Hong Kong) Limited | 132,412,000 | 3.84 |
| E Fund Stable Income Bond Securities Investment Fund - Bank of China | 99,403,000 | 2.88 |
| Tianhong Yongli Convertible Bond Securities Investment Fund - Industrial Bank Co.,Ltd. | 81,920,000 | 2.37 |
| GF Jiyu Convertible Bond Securities Investment Fund - Industrial Bank Co.,Ltd. | 80,000,000 | 2.32 |
| Huashang Credit Enhanced Bond Securities Investment Fund - China Construction Bank Corporation | 62,886,000 | 1.82 |
| UBS AG | 58,386,000 | 1.69 |
2023 Annual Report
| China Life AMP Asset Management Co.,Ltd. - Construction Bank -Life Insurance - Mixed Portfolio entrusted to China Life AMP Asset Management Co.,Ltd. by China Life Insurance (Group) Company | 47,400,000 | 1.37 |
| E Fund Dual Enhanced Bond Securities Investment Fund - China Construction Bank Corporation | 46,460,000 | 1.35 |
| Shenzhen Guosen Securities Co.,Ltd. | 45,924,000 | 1.33 |
(III) Changes in convertible bonds during the reporting period
√Applicable □ Not Applicable
Unit: yuan Currency: RMB
| Name of convertible corporate bonds | Before the change | Change | After the change | ||
| Converted into shares | Redeemed | Put | |||
| Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | 3,449,932,000 | 54,000 | 0 | 0 | 3,449,878,000 |
Cumulative conversion of convertible bonds during the reporting period
√Applicable □ Not Applicable
| Name of convertible corporate bonds | Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 |
| Conversion amount (RMB) during the reporting period | 54,000 |
| Number of shares converted during the reporting period | 2,776 |
| Cumulative number of converted shares | 6,215 |
| Proportion of cumulative number of converted shares to the total number of shares of the Company issued before the conversion (%) | 0.0003 |
| Unconverted amount (RMB) | 3,449,878,000 |
| Proportion of unconverted convertible bonds to the total convertible bonds issued (%) | 99.9965 |
(IV) Historical adjustments of conversion price
√Applicable □ Not Applicable
2023 Annual Report
Unit: yuan Currency: RMB
| Name of convertible corporate bonds | Convertible corporate bonds publicly issued by Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | |||
| Conversion price adjustment date | Adjusted conversion price | Disclosure time | Disclosure media | Particulars on conversion price adjustment Note |
| June 3, 2021 | 19.75 | June 1, 2021 | Shanghai Securities News, China Securities Journal, and Securities Times | 2020 profit distribution |
| June 13, 2022 | 19.49 | June 7, 2022 | 2021 profit distribution | |
| July 21, 2022 | 19.52 | July 20, 2022 | Cancellation of repurchased shares | |
| December 9, 2022 | 19.50 | December 8, 2022 | The accumulative exercise of stock options reached the degree of adjusting the conversion price | |
| May 30, 2023 | 19.07 | May 24, 2023 | 2022 profit distribution | |
| November 29, 2023 | 19.06 | November 28, 2023 | The accumulative exercise of stock options reached the degree of adjusting the conversion price | |
| The latest conversion price as of the end of the reporting period | 19.06 | |||
(V) The Company's liabilities, changes in credit and cash arrangements for debt repaymentin future years
√Applicable □ Not Applicable
At the beginning of the reporting period, the Company had total assets of RMB 38.57 billion andtotal liabilities of RMB 22.82 billion, with the asset-liability ratio of 59.17%; at the end of thereporting period, the Company had total assets of RMB 39.31 billion and total liabilities of RMB
22.22 billion, with the asset-liability ratio of 56.52%. The Company's asset-liability ratio decreasedYoY by 2.65 percentage points.On May 29, 2023, China Chengxin International Credit Rating Co., Ltd. issued the Tracking RatingReport on Universal Scientific Industrial (Shanghai) Co., Ltd.'s Public Issuance of ConvertibleCorporate Bonds (2023): The Company's corporate credit rating remained AA+, the credit ratingfor USI Convertible Bonds remained AA+, and the rating outlook was stable.The Company adopts the method of paying interest once a year, and repays the principal and paysthe interest of the last interest-bearing year at maturity.
2023 Annual Report
(VI) Particulars on other information of convertible bonds
□Applicable √Not Applicable
2023 Annual Report
Section X Financial StatementsI. Auditor’s reportThe Company's annual financial report has been audited and given a standard unqualified opinionby Chinese Certified Public Accountant Yuan Shouqing and Hu Ke of Deloitte Touche TohmatsuCertified Public Accountants LLP.II. Financial statements and notesPlease refer to the attached financial statements and auditor’s report for more details.
Universal Scientific Industrial (Shanghai) Co., Ltd.
Financial Statements and Auditor's ReportFor the year ended 31 December 2023
Financial Statements and Auditor's ReportFor the year ended 31 December 2023
CONTENTS PAGE(S)
AUDITOR'S REPORT 138
CONSOLIDATED BALANCE SHEET 143
BALANCE SHEET OF THE COMPANY 145
CONSOLIDATED INCOME STATEMENT 147
INCOME STATEMENT OF THE COMPANY 148
CONSOLIDATED CASH FLOW STATEMENT 149
CASH FLOW STATEMENT OF THE COMPANY 140
THE CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 151
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY OF THE COMPANY 153
NOTES TO THE FINANCIAL STATEMENTS 155
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (24) No. P01508
(Page 1 of 5)
To the Shareholders of Universal Scientific Industrial (Shanghai) Co., Ltd.,
I. Opinion
We have audited the financial statements of Universal Scientific Industrial (Shanghai) Co., Ltd. (the"Company"), which comprise the consolidated and Company's balance sheets as at 31 December2023, and the consolidated and Company's income statements, the consolidated and Company's cashflow statements and the consolidated and Company's statements of changes in shareholders' equityfor the year then ended, and the notes to the financial statements.
In our opinion, the accompanying financial statements of Universal Scientific Industrial (Shanghai)Co., Ltd. are prepared and present fairly, in all material respects, the consolidated and Company'sfinancial position as at 31 December 2023, and the consolidated and the Company's results ofoperations and cash flows for the year then ended in accordance with Accounting Standards forBusiness Enterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities underthose standards are further described in the "Auditor's Responsibilities for the Audit of the FinancialStatements" section of our report. We are independent of the Company in accordance with the Codeof Ethics for Chinese Certified Public Accountants ("the Code"), and we have fulfilled our otherethical responsibilities in accordance with the Code. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance inour audit of the financial statements of the current period. These matters were addressed in thecontext of our audit of the financial statements as a whole, and in forming our opinion thereon, andwe do not provide a separate opinion on these matters. We determine the followings are key auditmatters in need of communication in our report.
AUDITOR'S REPORT (continued)
De Shi Bao (Shen) Zi (24) No. P01508
(Page 2 of 5)
III. Key Audit Matters - continued
Cut-off of Revenue Recognition
Matter Description
As set out in Notes (V), 48 to the financial statements, the Company's operating income in 2023 inthe consolidated financial statements is RMB 60,791,909,537.87, which is significant. TheCompany’s sales mainly include revenue from sale of goods , and the revenue is recognized at thetime point when the customer obtains the control over the commodity. Under different terms of salescontracts and trades, the time point of the transfer of commodity control is different. As revenue isone of the key performance indicators of the Company, and the time point for the transfer of controlis different for various transaction modes in relation to revenue recognition, there is a risk thatrevenue is not recognized in the appropriate accounting period. Therefore, we consider whetherrevenue is recorded in the appropriate accounting period as a key audit matter.
Audit Response
Our procedures in relation to above key audit matter mainly included:
1. Understand the Company's key internal control related to the cut-off of revenue recognition,evaluate the design and implementation of relevant internal control, and test the effectiveness of itsoperation;
2. Check the Company's material sales contracts, identify the contract terms and trade conditionsrelated to the time point of goods control transfer, and evaluate whether the time point of revenuerecognition of the Company according to the contract terms meets the provisions of the accountingstandards for business enterprises;
3. Select samples for the sales transactions recorded before and after the balance sheet date, andcheck the accounting records, delivery orders, cargo right transfer documents and other supportingdocuments related to revenue recognition, so as to evaluate whether the revenue is recorded in theappropriate accounting period.
AUDITOR'S REPORT (continued)
De Shi Bao (Shen) Zi (24) No. P01508
(Page 3 of 5)
IV. Other Information
The management of the Company is responsible for other information. The other informationcomprises the information included in the Company’s annual report of 2023, but does not includethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not expressany form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact. We have nothing to report in this regard.
V. Responsibilities of the Management and Those Charged with Governance for the FinancialStatements
The management of the Company is responsible for the preparation and fair presentation of thefinancial statements in accordance with the Accounting Standards for Business Enterprises, anddesigning, implementing and maintaining internal control that is necessary to enable that thefinancial statements are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company'sability to continue as a going concern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless the management either intends to liquidate theCompany or to cease operations, or has no realistic alternative but to do so.
Those charged with governance is responsible for supervising the financial reporting process of theCompany.
AUDITOR'S REPORT (continued)
De Shi Bao (Shen) Zi (24) No. P01508
(Page 4 of 5)
VI. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with China Standards on Auditing will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered materialif, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these financial statements.
As part of an audit in accordance with China Standards on Auditing, we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.
(2) Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the management.
(4) Conclude on the appropriateness of the management's use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists relatedto events or conditions that may cast significant doubt on the Company's ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw attentionin our auditor's report to the related disclosures in the financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our auditor's report. However, future events or conditions may cause the Company tocease to continue as a going concern.
(5) Evaluate the overall presentation (including the disclosures), structure and content of the financialstatements and whether the financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Company to express an opinion on the financial statements. We areresponsible for the direction, supervision and performance of the group audit. We remain solelyresponsible for our audit opinion.
AUDITOR'S REPORT (continued)
De Shi Bao (Shen) Zi (24) No. P01508
(Page 5 of 5)
VI. Auditor's Responsibilities for the Audit of the Financial Statements - continued
We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied withrelevant ethical requirements regarding independence, and to communicate with them allrelationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those mattersthat were of most significance in the audit of the financial statements of the current period and aretherefore the key audit matters. We describe these matters in our auditor's report unless law orregulation 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 adverseconsequences of doing so would reasonably be expected to outweigh the public interest benefits ofsuch communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant:
(Engagement partner)
Shanghai, China
Yuan, Shou Qing
Chinese Certified Public Accountant:
Hu, Ke
29 March 2024
The auditor's report and the accompanying financial statements are English translations of the Chinese auditor's reportand statutory financial statements prepared under accounting principles and practices generally accepted in the People’sRepublic of China. These financial statements are not intended to present the financial position and results of operationsand cash flows in accordance with accounting principles and practices generally accepted in other countries andjurisdictions. In case the English version does not conform to the Chinese version, the Chinese version prevails.
At 31 December 2023
Consolidated Balance Sheet
Unit: RMB
| ITEM | Note | 31/12/2023 | 31/12/2022 |
| Current Assets: | |||
| Cash and bank balances | (V)1 | 11,218,698,389.32 | 7,695,016,173.40 |
| Held-for-trading financial assets | (V)2 | 245,558,007.22 | 271,243,519.53 |
| Notes receivable | (V)3 | 65,545,008.33 | 45,627,553.57 |
| Accounts receivable | (V)4 | 10,023,562,062.11 | 11,119,120,760.11 |
| Prepayments | (V)5 | 55,649,536.45 | 73,390,129.45 |
| Other receivables | (V)6 | 208,748,837.09 | 137,008,284.72 |
| Inventories | (V)7 | 8,311,911,001.74 | 10,909,893,675.82 |
| Non-current assets due within one year | (V)8 | 123,989.32 | 322,815.55 |
| Other current assets | (V)9 | 838,262,285.94 | 599,581,332.72 |
| Total Current Assets | 30,968,059,117.52 | 30,851,204,244.87 | |
| Non-current Assets: | |||
| Long-term receivables | (V)10 | 13,647,410.80 | 12,385,894.30 |
| Long-term equity investments | (V)11 | 498,271,541.60 | 611,007,676.15 |
| Other equity instrument investments | (V)12 | 38,935,237.58 | 38,420,782.40 |
| Other non-current financial assets | (V)13 | 193,994,862.05 | 170,126,278.86 |
| Investment properties | (V)14 | 4,324,045.51 | - |
| Fixed assets | (V)15 | 4,697,977,110.39 | 4,456,780,136.30 |
| Construction in progress | (V)16 | 641,030,985.98 | 303,432,536.69 |
| Right-of-use assets | (V)17 | 605,954,561.75 | 479,869,246.55 |
| Intangible assets | (V)18 | 368,303,316.37 | 415,104,934.14 |
| Goodwill | (V)19 | 607,706,955.17 | 576,729,182.74 |
| Long-term prepaid expenses | (V)20 | 212,629,008.92 | 175,835,331.45 |
| Deferred tax assets | (V)21 | 387,273,954.10 | 358,956,591.39 |
| Other non-current assets | (V)22 | 68,274,790.92 | 124,611,895.32 |
| Total Non-current Assets | 8,338,323,781.14 | 7,723,260,486.29 | |
| TOTAL ASSETS | 39,306,382,898.66 | 38,574,464,731.16 |
At 31 December 2023
Consolidated Balance Sheet - continued
Unit: RMB
| ITEM | Note | 31/12/2023 | 31/12/2022 |
| Current Liabilities: | |||
| Short-term borrowings | (V)24 | 4,378,428,691.47 | 4,499,463,404.21 |
| Derivative financial liabilities | (V)25 | 173,872.64 | 3,118,891.32 |
| Accounts payable | (V)26 | 10,574,123,769.47 | 11,056,190,855.43 |
| Contract liabilities | (V)27 | 348,380,131.33 | 411,898,442.43 |
| Employee benefits payable | (V)28 | 922,911,255.08 | 1,161,885,093.89 |
| Taxes payable | (V)29 | 355,654,414.38 | 388,090,724.55 |
| Other payables | (V)30 | 1,044,770,045.86 | 716,932,703.77 |
| Non-current liabilities due within one year | (V)31 | 3,564,025,750.56 | 506,820,025.23 |
| Other current liabilities | (V)32 | 3,944,775.07 | 3,661,569.01 |
| Total Current Liabilities | 21,192,412,705.86 | 18,748,061,709.84 | |
| Non-current Liabilities: | |||
| Long-term borrowings | (V)33 | 47,385,951.10 | 59,427,538.88 |
| Bonds payable | (V)34 | - | 3,243,085,241.27 |
| Lease liabilities | (V)35 | 486,775,229.42 | 381,725,722.17 |
| Long-term payables | (V)36 | 25,526,297.84 | 31,113,295.71 |
| Long-term employee benefits payable | (V)37 | 273,605,892.45 | 199,342,510.02 |
| Provisions | (V)38 | 48,279,064.03 | 7,350,296.14 |
| Deferred income | (V)39 | 59,885,005.66 | 63,195,209.30 |
| Deferred tax liabilities | (V)21 | 81,636,655.83 | 87,631,726.67 |
| Other non-current liabilities | (V)40 | 1,046,909.26 | 3,692,335.61 |
| Total Non-current Liabilities | 1,024,141,005.59 | 4,076,563,875.77 | |
| TOTAL LIABILITIES | 22,216,553,711.45 | 22,824,625,585.61 | |
| SHAREHOLDERS' EQUITY: | |||
| Share capital | (V)41 | 2,209,991,580.00 | 2,206,864,239.00 |
| Other equity instruments | (V)42 | 409,890,710.14 | 409,897,126.04 |
| Capital reserve | (V)43 | 2,283,965,543.00 | 2,234,529,885.62 |
| Less: Treasury shares | (V)44 | 321,730,995.54 | 351,392,965.86 |
| Other comprehensive income | (V)45 | 261,726,655.45 | 111,850,168.58 |
| Surplus reserve | (V)46 | 966,801,754.40 | 862,080,832.26 |
| Retained profits | (V)47 | 11,179,762,376.22 | 10,275,564,894.22 |
| Total owners' equity attributable to equity holders of the Company | 16,990,407,623.67 | 15,749,394,179.86 | |
| Minority interests | 99,421,563.54 | 444,965.69 | |
| TOTAL SHAREHOLDERS' EQUITY | 17,089,829,187.21 | 15,749,839,145.55 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 39,306,382,898.66 | 38,574,464,731.16 |
The accompanying notes form part of the financial statements.
The financial statements on pages 6 to 148 were signed by the following:
____________________ ____________________ ____________________Head of the Company Chief Financial Officer Person in charge of the Accounting Body
At 31 December 2023
Balance Sheet of the Company
Unit: RMB
| ITEM | Note | 31/12/2023 | 31/12/2022 |
| Current Assets: | |||
| Cash and bank balances | 3,166,517,228.25 | 2,382,458,769.33 | |
| Held-for-trading financial assets | 1,470,156.89 | 16,418,892.46 | |
| Notes receivable | (XVI)1 | 49,427,125.85 | 39,485,239.31 |
| Accounts receivable | (XVI)2 | 2,871,903,374.08 | 2,821,443,968.15 |
| Prepayments | 6,942,635.46 | 8,633,332.74 | |
| Other receivables | (XVI)3 | 733,104,536.58 | 1,060,187,690.24 |
| Inventories | 1,654,172,789.68 | 2,397,469,138.27 | |
| Other current assets | 34,001,587.46 | 71,354,221.23 | |
| Total Current Assets | 8,517,539,434.25 | 8,797,451,251.73 | |
| Non-current Assets: | |||
| Long-term equity investments | (XVI)4 | 6,733,236,951.63 | 6,211,289,445.49 |
| Other non-current financial assets | 46,933,111.53 | 36,593,525.36 | |
| Fixed assets | 1,185,256,610.21 | 1,359,118,713.20 | |
| Construction in progress | 15,109,116.60 | 40,679,185.87 | |
| Right-of-use assets | 36,821,679.59 | 50,972,562.94 | |
| Intangible assets | 9,809,422.12 | 10,560,811.31 | |
| Long-term prepaid expenses | 46,354,232.90 | 56,986,536.23 | |
| Deferred tax assets | 60,805,635.89 | 66,972,703.95 | |
| Other non-current assets | 19,775,697.94 | 6,417,503.72 | |
| Total Non-current Assets | 8,154,102,458.41 | 7,839,590,988.07 | |
| TOTAL ASSETS | 16,671,641,892.66 | 16,637,042,239.80 |
At 31 December 2023
Balance Sheet of the Company - continued
Unit: RMB
| ITEM | Note | 31/12/2023 | 31/12/2022 |
| Current Liabilities: | |||
| Short-term borrowings | 109,505,392.33 | 210,000,000.00 | |
| Accounts payable | 3,605,760,600.86 | 3,338,643,535.03 | |
| Contract liabilities | 39,365,501.07 | 72,651,784.47 | |
| Employee benefits payable | 127,557,430.98 | 170,460,131.98 | |
| Taxes payable | 23,281,137.14 | 40,877,633.86 | |
| Other payables | 51,640,284.57 | 56,141,755.46 | |
| Non-current liabilities due within one year | 3,396,626,721.03 | 364,938,654.98 | |
| Total Current Liabilities | 7,353,737,067.98 | 4,253,713,495.78 | |
| Non-current Liabilities: | |||
| Bonds payable | - | 3,243,085,241.27 | |
| Lease liabilities | 29,464,371.43 | 43,636,944.67 | |
| Deferred income | 34,345,491.81 | 32,434,642.39 | |
| Other non-current liabilities | - | 576,266.50 | |
| Total Non-current Liabilities | 63,809,863.24 | 3,319,733,094.83 | |
| TOTAL LIABILITIES | 7,417,546,931.22 | 7,573,446,590.61 | |
| SHAREHOLDERS' EQUITY: | |||
| Share capital | (V)41 | 2,209,991,580.00 | 2,206,864,239.00 |
| Other equity instruments | (V)42 | 409,890,710.14 | 409,897,126.04 |
| Capital reserve | 2,343,866,940.28 | 2,294,431,282.90 | |
| Less: Treasury shares | (V)44 | 321,730,995.54 | 351,392,965.86 |
| Surplus reserve | (V)46 | 966,801,754.40 | 862,080,832.26 |
| Retained profits | 3,645,274,972.16 | 3,641,715,134.85 | |
| TOTAL SHAREHOLDERS' EQUITY | 9,254,094,961.44 | 9,063,595,649.19 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 16,671,641,892.66 | 16,637,042,239.80 |
For the year ended 31 December 2023
Consolidated Income Statement
Unit: RMB
| ITEM | Note | Amount incurred in the current year | Amount incurred in the prior year |
| I. Operating income | (V)48 | 60,791,909,537.87 | 68,516,075,963.26 |
| Less: Operating costs | (V)48 | 54,939,136,481.69 | 61,327,074,531.73 |
| Taxes and levies | (V)49 | 95,769,988.19 | 55,429,927.51 |
| Selling expenses | (V)50 | 367,994,662.03 | 323,833,862.87 |
| Administrative expenses | (V)51 | 1,215,427,939.02 | 1,421,848,997.88 |
| Research and development expenses | (V)52 | 1,807,204,128.27 | 2,034,461,775.71 |
| Financial expenses | (V)53 | 212,029,208.10 | 18,865,406.63 |
| Including: Interest expenses | 400,215,716.04 | 234,999,925.44 | |
| Interest income | 236,527,756.09 | 87,996,958.46 | |
| Add: Other income | (V)54 | 90,221,824.09 | 56,144,655.78 |
| Investment income | (V)55 | 142,700,250.52 | 138,630,023.72 |
| Including: Income from investments in associates and joint ventures | 8,752,751.61 | 73,531,247.72 | |
| Gains (losses) from changes in fair values | (V)56 | (27,107,751.82) | 31,839,197.50 |
| Impairment loss of credit | (V)57 | (21,981,473.91) | (10,116,849.95) |
| Impairment losses of assets | (V)58 | (166,836,089.16) | (98,869,591.53) |
| Gains from disposal of assets | (V)59 | 6,334,307.77 | 8,615,113.60 |
| II. Operating profit | 2,177,678,198.06 | 3,460,804,010.05 | |
| Add: Non-operating income | (V)60 | 18,086,136.60 | 25,331,702.16 |
| Less: Non-operating expenses | (V)61 | 6,076,478.46 | 8,940,490.96 |
| III. Total profit | 2,189,687,856.20 | 3,477,195,221.25 | |
| Less: Income tax expenses | (V)62 | 239,978,749.21 | 417,205,449.46 |
| IV. Net profit | 1,949,709,106.99 | 3,059,989,771.79 | |
| (I) Net profit classified by operating continuity: | |||
| 1. Net profit from continuing operations | 1,949,709,106.99 | 3,059,989,771.79 | |
| 2. Net profit from discontinued operations | - | - | |
| (II) Net profit classified by ownership ascription: | |||
| 1. Net profit attributable to owners of the Company | 1,947,846,866.12 | 3,059,967,081.20 | |
| 2. Net profit attributable to minority interests | 1,862,240.87 | 22,690.59 | |
| V. Other comprehensive income, net of tax | (V)45 | 150,654,063.55 | 195,467,967.43 |
| Other comprehensive income attributable to owners of the Company, net of tax | 149,876,486.87 | 195,450,567.53 | |
| (I) Other comprehensive income that cannot be subsequently reclassified to profit or loss | 12,172,076.30 | 15,832,855.55 | |
| 1. Changes from re-measurement of defined benefit plans | (14,990,727.75) | 51,762,656.96 | |
| 2. Changes in fair values of other equity instrument investments | 27,162,804.05 | (35,929,801.41) | |
| (II) Other comprehensive income that will be reclassified to profit or loss | 137,704,410.57 | 179,617,711.98 | |
| 1. Other comprehensive income that can be reclassified to profit or loss under the equity method | (7,656,754.91) | (35,958,792.78) | |
| 2. Translation differences of financial statements denominated in foreign currencies | 216,849,856.44 | 104,279,975.58 | |
| 3. Hedging reserves of net investment in foreign operations | (71,488,690.96) | 111,296,529.18 | |
| Other comprehensive income attributable to minority interests, net of tax | 777,576.68 | 17,399.90 | |
| VI. Total comprehensive income | 2,100,363,170.54 | 3,255,457,739.22 | |
| Total comprehensive income attributable to owners of the Company | 2,097,723,352.99 | 3,255,417,648.73 | |
| Total comprehensive income attributable to minority interests | 2,639,817.55 | 40,090.49 | |
| VII. Earnings per share | |||
| (I) Basic earnings per share | (XVII)2 | 0.89 | 1.40 |
| (II) Diluted earnings per share | (XVII)2 | 0.87 | 1.35 |
For the year ended 31 December 2023
Income Statement of the Company
Unit: RMB
| ITEM | Note | Amount incurred in the current year | Amount incurred in the prior year |
| I. Operating income | (XVI)5 | 19,677,036,021.69 | 21,944,772,780.72 |
| Less: Operating costs | (XVI)5 | 17,928,507,549.98 | 19,816,085,335.43 |
| Taxes and levies | 28,574,670.28 | 13,964,679.96 | |
| Selling expenses | 77,474,832.09 | 71,561,295.65 | |
| Administrative expenses | 163,145,034.68 | 221,654,870.72 | |
| Research and development expenses | 677,138,253.59 | 751,375,491.00 | |
| Financial expenses | 76,585,926.77 | (13,892,465.55) | |
| Including: Interest expenses | 172,202,443.99 | 146,896,320.84 | |
| Interest income | 109,201,065.07 | 59,559,776.94 | |
| Add: Other income | 31,164,163.32 | 19,864,804.92 | |
| Investment income | (XVI)6 | 325,724,208.11 | 183,568,627.78 |
| Including: Loss from investments in associates and joint ventures | (3,294,727.52) | - | |
| Gains (losses) from changes in fair values | (13,609,149.40) | 12,430,908.18 | |
| Gains (losses) from impairment of credit | 3,685,934.28 | (3,658,149.19) | |
| Impairment gains of assets | 762,694.28 | 5,135,027.84 | |
| Gains from disposal of assets | 3,442,727.96 | 865,008.94 | |
| II. Operating profit | 1,076,780,332.85 | 1,302,229,801.98 | |
| Add: Non-operating income | 2,306,506.80 | 233,682.62 | |
| Less: Non-operating expenses | 172,287.02 | 4,830,131.32 | |
| III. Total profit | 1,078,914,552.63 | 1,297,633,353.28 | |
| Less: Income tax expenses | 31,705,331.20 | 56,871,730.31 | |
| IV. Net profit | 1,047,209,221.43 | 1,240,761,622.97 | |
| (I) Net profit from continuing operations | 1,047,209,221.43 | 1,240,761,622.97 | |
| (II) Net profit from discontinued operations | - | - | |
| V. Other comprehensive income, net of tax | - | - | |
| VI. Total comprehensive income | 1,047,209,221.43 | 1,240,761,622.97 |
For the year ended 31 December 2023
Consolidated Cash Flow Statement
Unit: RMB
| ITEM | Note | Amount incurred in the current year | Amount incurred in the prior year |
| I. Cash Flows from Operating Activities: | |||
| Cash receipts from the sale of goods and the rendering of services | 62,945,879,717.98 | 71,431,108,010.54 | |
| Receipts of tax refunds | 332,597,175.15 | 529,679,759.52 | |
| Other cash receipts relating to operating activities | (V)63(1) | 444,054,452.60 | 514,112,449.77 |
| Sub-total of cash inflows from operating activities | 63,722,531,345.73 | 72,474,900,219.83 | |
| Cash payments for goods purchased and services received | 51,127,038,702.23 | 63,752,163,109.99 | |
| Cash payments to and on behalf of employees | 4,543,803,455.43 | 4,263,182,237.12 | |
| Payments of various types of taxes | 947,833,332.58 | 880,937,730.02 | |
| Other cash payments relating to operating activities | (V)63(1) | 280,420,362.87 | 143,420,887.20 |
| Sub-total of cash outflows from operating activities | 56,899,095,853.11 | 69,039,703,964.33 | |
| Net Cash Flow from Operating Activities | (V)64(1) | 6,823,435,492.62 | 3,435,196,255.50 |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from disposals and recovery of investments | (V)63(2) | 10,588,663,201.29 | 5,049,784,248.93 |
| Cash receipts from investment income | 141,117,928.09 | 73,818,863.64 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 39,129,732.67 | 106,121,293.40 | |
| Other cash receipts relating to investing activities | 2,214,334.90 | - | |
| Sub-total of cash inflows from investing activities | 10,771,125,196.95 | 5,229,724,405.97 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 1,549,925,467.96 | 1,671,359,617.44 | |
| Cash payments to acquire investments | (V)63(2) | 10,379,130,858.29 | 5,055,991,050.00 |
| Net cash payments for acquisitions of subsidiaries and other business units | 270,966,057.90 | 26,622,070.14 | |
| Sub-total of cash outflows from investing activities | 12,200,022,384.15 | 6,753,972,737.58 | |
| Net Cash Flow from Investing Activities | (1,428,897,187.20) | (1,524,248,331.61) | |
| III. Cash Flows from Financing Activities: | |||
| Cash receipts from capital contributions | 134,160,438.42 | 76,706,975.16 | |
| Including: cash receipts from capital contributions from minority owners of subsidiaries | 96,336,780.30 | - | |
| Cash receipts from borrowings | 15,773,337,049.55 | 19,947,391,301.87 | |
| Other cash receipts relating to financing activities | (V)63(3) | 26,686,556.25 | 3,506,097.66 |
| Sub-total of cash inflows from financing activities | 15,934,184,044.22 | 20,027,604,374.69 | |
| Cash repayments of borrowings | 16,428,061,798.41 | 19,611,483,701.31 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 1,179,079,074.37 | 644,400,298.70 | |
| Other cash payments relating to financing activities | (V)63(3) | 163,296,399.80 | 274,135,571.27 |
| Sub-total of cash outflows from financing activities | 17,770,437,272.58 | 20,530,019,571.28 | |
| Net Cash Flow from Financing Activities | (1,836,253,228.36) | (502,415,196.59) | |
| IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (52,036,402.36) | 251,318,260.11 | |
| V. Net Increase (Decrease) in Cash and Cash Equivalents | 3,506,248,674.70 | 1,659,850,987.41 | |
| Add: Opening balance of cash and cash equivalents | (V)64(3) | 7,678,044,104.00 | 6,018,193,116.59 |
| VI. Closing Balance of Cash and Cash Equivalents | (V)64(3) | 11,184,292,778.70 | 7,678,044,104.00 |
For the year ended 31 December 2023
Cash Flow Statement of the Company
Unit: RMB
| ITEM | Note | Amount incurred in the current year | Amount incurred in the prior year |
| I. Cash Flows from Operating Activities: | |||
| Cash receipts from the sale of goods and the rendering of services | 19,715,179,735.51 | 23,200,305,707.29 | |
| Receipts of tax refunds | 88,661,201.75 | 134,391,059.60 | |
| Other cash receipts relating to operating activities | 143,944,381.68 | 92,137,795.26 | |
| Sub-total of cash inflows from operating activities | 19,947,785,318.94 | 23,426,834,562.15 | |
| Cash payments for goods purchased and services received | 16,698,151,441.53 | 20,930,029,096.53 | |
| Cash payments to and on behalf of employees | 625,256,609.26 | 639,606,738.62 | |
| Payments of various types of taxes | 148,511,099.34 | 194,108,063.48 | |
| Other cash payments relating to operating activities | 156,801,933.88 | 130,355,417.36 | |
| Sub-total of cash outflows from operating activities | 17,628,721,084.01 | 21,894,099,315.99 | |
| Net Cash Flow from Operating Activities | (XVI)7 | 2,319,064,234.93 | 1,532,735,246.16 |
| II. Cash Flows from Investing Activities: | |||
| Cash receipts from disposals and recovery of investments | 5,094,828,000.00 | 3,677,246,400.00 | |
| Cash receipts from investment income | 329,018,935.63 | 237,513,927.78 | |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 78,422,754.70 | 135,709,564.48 | |
| Sub-total of cash inflows from investing activities | 5,502,269,690.33 | 4,050,469,892.26 | |
| Cash payments to acquire or construct fixed assets, intangible assets and other long-term assets | 272,929,329.02 | 584,130,199.88 | |
| Cash payments to acquire investments | 4,486,995,119.70 | 3,985,803,000.00 | |
| Other cash payments relating to investing activities | 817,776,000.00 | 1,115,219,000.00 | |
| Sub-total of cash outflows from investing activities | 5,577,700,448.72 | 5,685,152,199.88 | |
| Net Cash Flow from Investing Activities | (75,430,758.39) | (1,634,682,307.62) | |
| III. Cash Flows from Financing Activities: | |||
| Cash receipts from capital contributions | 37,823,658.12 | 76,706,975.16 | |
| Cash receipts from borrowings | 3,486,983,652.26 | 2,828,328,085.47 | |
| Other cash receipts relating to financing activities | 26,686,556.25 | - | |
| Sub-total of cash inflows from financing activities | 3,551,493,866.63 | 2,905,035,060.63 | |
| Cash repayments of borrowings | 3,937,358,875.96 | 2,268,328,085.47 | |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 975,226,652.63 | 579,509,379.54 | |
| Other cash payments relating to financing activities | 22,742,198.55 | 136,494,552.16 | |
| Sub-total of cash outflows from financing activities | 4,935,327,727.14 | 2,984,332,017.17 | |
| Net Cash Flow from Financing Activities | (1,383,833,860.51) | (79,296,956.54) | |
| IV. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (75,741,157.11) | 73,650,793.61 | |
| V. Net Increase (Decrease) in Cash and Cash Equivalents | 784,058,458.92 | (107,593,224.39) | |
| Add: Opening balance of cash and cash equivalents | 2,382,458,769.33 | 2,490,051,993.72 | |
| VI. Closing Balance of Cash and Cash Equivalents | 3,166,517,228.25 | 2,382,458,769.33 |
For the year ended 31 December 2023
Consolidated Statement of Changes in Shareholders' Equity
Unit: RMB
| ITEM | 2023 | ||||||||
| Attributable to owners of the Company | Minority interests | Total shareholders' equity | |||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Opening balance of the current year | 2,206,864,239.00 | 409,897,126.04 | 2,234,529,885.62 | (351,392,965.86) | 111,850,168.58 | 862,080,832.26 | 10,275,564,894.22 | 444,965.69 | 15,749,839,145.55 |
| II. Changes for the year | |||||||||
| (I) Total comprehensive income | - | - | - | - | 149,876,486.87 | - | 1,947,846,866.12 | 2,639,817.55 | 2,100,363,170.54 |
| (II) Owners’ contributions and reduction in capital | |||||||||
| 1. Ordinary shares contributed by shareholders (Note V, 41 and Note VI, 1) | 3,124,565.00 | - | 34,699,093.12 | - | - | - | - | 96,336,780.30 | 134,160,438.42 |
| 2. Capital contribution by owners of other equity instruments (Note V, 42) | 2,776.00 | (6,415.90) | 54,888.33 | - | - | - | - | - | 51,248.43 |
| 3. Share-based payment recognized in shareholders' equity (Note V, 43) | - | - | 17,684,000.00 | - | - | - | - | - | 17,684,000.00 |
| 4. Transfer from treasury shares (Note V, 44) | - | - | 363,746.57 | (364,587.57) | - | - | - | - | (841.00) |
| 5. Others (Note V, 44) | - | - | (3,366,070.64) | 30,026,557.89 | - | - | - | - | 26,660,487.25 |
| (III) Profit distribution | |||||||||
| 1. Transfer to surplus reserve | - | - | - | - | - | 104,720,922.14 | (104,720,922.14) | - | - |
| 2. Distributions to shareholders | - | - | - | - | - | - | (938,928,461.98) | - | (938,928,461.98) |
| III. Closing balance of the current year | 2,209,991,580.00 | 409,890,710.14 | 2,283,965,543.00 | (321,730,995.54) | 261,726,655.45 | 966,801,754.40 | 11,179,762,376.22 | 99,421,563.54 | 17,089,829,187.21 |
For the year ended 31 December 2023
Consolidated Statement of Changes in Shareholders' Equity - continued
Unit: RMB
| ITEM | 2022 | ||||||||
| Attributable to owners of the Company | Minority interests | Total shareholders' equity | |||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Surplus reserve | Retained profits | |||
| I. Opening balance of the current year | 2,210,172,782.00 | 409,902,116.17 | 2,242,456,606.22 | (341,236,339.88) | (83,600,398.95) | 738,004,669.96 | 7,906,260,771.90 | 404,875.20 | 13,082,365,082.62 |
| II. Changes for the year | |||||||||
| (I) Total comprehensive income | - | - | - | - | 195,450,567.53 | - | 3,059,967,081.20 | 40,090.49 | 3,255,457,739.22 |
| (II) Owners’ contributions and reduction in capital | |||||||||
| 1. Ordinary shares contributed by shareholders | 5,985,955.00 | - | 70,721,020.16 | - | - | - | - | - | 76,706,975.16 |
| 2. Capital contribution by owners of other equity instruments | 2,129.00 | (4,990.13) | 41,144.76 | - | - | - | - | - | 38,283.63 |
| 3. Share-based payment recognized in shareholders' equity | - | - | 22,177,000.00 | - | - | - | - | - | 22,177,000.00 |
| 4. Treasury stock cancellations | (9,296,627.00) | - | (101,214,178.80) | 110,510,805.80 | - | - | - | - | - |
| 5. Transfer from treasury shares | - | - | 348,293.28 | (348,766.28) | - | - | - | - | (473.00) |
| 6. Others | - | - | - | (120,318,665.50) | - | - | - | - | (120,318,665.50) |
| (III) Profit distribution | |||||||||
| 1. Transfer to surplus reserve | - | - | - | - | - | 124,076,162.30 | (124,076,162.30) | - | - |
| 2. Distributions to shareholders | - | - | - | - | - | - | (566,586,796.58) | - | (566,586,796.58) |
| III. Closing balance of the current year | 2,206,864,239.00 | 409,897,126.04 | 2,234,529,885.62 | (351,392,965.86) | 111,850,168.58 | 862,080,832.26 | 10,275,564,894.22 | 444,965.69 | 15,749,839,145.55 |
For the year ended 31 December 2023
Statement of Changes in Shareholders' Equity of the Company
Unit: RMB
| ITEM | 2023 | ||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Surplus reserve | Retained profits | Total shareholders' equity | |
| I. Opening balance of the current year | 2,206,864,239.00 | 409,897,126.04 | 2,294,431,282.90 | (351,392,965.86) | 862,080,832.26 | 3,641,715,134.85 | 9,063,595,649.19 |
| II. Changes for the year | |||||||
| (I) Total comprehensive income | - | - | - | - | - | 1,047,209,221.43 | 1,047,209,221.43 |
| (II) Owners’ contributions and reduction in capital | |||||||
| 1. Ordinary shares contributed by shareholders | 3,124,565.00 | - | 34,699,093.12 | - | - | - | 37,823,658.12 |
| 2. Capital contribution by owners of other equity instruments | 2,776.00 | (6,415.90) | 54,888.33 | - | - | - | 51,248.43 |
| 3. Share-based payment recognized in shareholders' equity | - | - | 17,684,000.00 | - | - | - | 17,684,000.00 |
| 4. Transfer from treasury shares | - | - | 363,746.57 | (364,587.57) | - | - | (841.00) |
| 5. Others | - | - | (3,366,070.64) | 30,026,557.89 | - | - | 26,660,487.25 |
| (III) Profit distribution | |||||||
| 1. Transfer to surplus reserve | - | - | - | - | 104,720,922.14 | (104,720,922.14) | - |
| 2. Distributions to shareholders | - | - | - | - | - | (938,928,461.98) | (938,928,461.98) |
| III. Closing balance of the current year | 2,209,991,580.00 | 409,890,710.14 | 2,343,866,940.28 | (321,730,995.54) | 966,801,754.40 | 3,645,274,972.16 | 9,254,094,961.44 |
For the year ended 31 December 2023
Statement of Changes in Shareholders' Equity of the Company - continued
Unit: RMB
| ITEM | 2022 | ||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Surplus reserve | Retained profits | Total shareholders' equity | |
| I. Opening balance of the current year | 2,210,172,782.00 | 409,902,116.17 | 2,302,358,003.50 | (341,236,339.88) | 738,004,669.96 | 3,091,616,470.76 | 8,410,817,702.51 |
| II. Changes for the year | |||||||
| (I) Total comprehensive income | - | - | - | - | - | 1,240,761,622.97 | 1,240,761,622.97 |
| (II) Owners’ contributions and reduction in capital | |||||||
| 1. Ordinary shares contributed by shareholders | 5,985,955.00 | - | 70,721,020.16 | - | - | - | 76,706,975.16 |
| 2. Capital contribution by owners of other equity instruments | 2,129.00 | (4,990.13) | 41,144.76 | - | - | - | 38,283.63 |
| 3. Share-based payment recognized in shareholders' equity | - | - | 22,177,000.00 | - | - | - | 22,177,000.00 |
| 4. Treasury stock cancellations | (9,296,627.00) | - | (101,214,178.80) | 110,510,805.80 | - | - | - |
| 5. Transfer from treasury shares | - | - | 348,293.28 | (348,766.28) | - | - | (473.00) |
| 6. Others | - | - | - | (120,318,665.50) | - | - | (120,318,665.50) |
| (III) Profit distribution | |||||||
| 1. Transfer to surplus reserve | - | - | - | - | 124,076,162.30 | (124,076,162.30) | - |
| 2. Distributions to shareholders | - | - | - | - | - | (566,586,796.58) | (566,586,796.58) |
| III. Closing balance of the current year | 2,206,864,239.00 | 409,897,126.04 | 2,294,431,282.90 | (351,392,965.86) | 862,080,832.26 | 3,641,715,134.85 | 9,063,595,649.19 |
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(I) BASIC INFORMATION ABOUT THE COMPANY
1. General
Universal Scientific Industrial (Shanghai) Co., Ltd. ("Company" or "the Company") is a joint-stock limitedcompany changed from Universal Scientific Industrial (Shanghai) Co., Ltd. (the "Limited Company") on anoverall basis.
The Limited Company is a foreign-funded enterprise invested and established in Zhangjiang Integrated CircuitPort, Pudong New Area, Shanghai on 2 January 2003.
On 17 June 2008, the Limited Company was approved to be changed into a foreign-invested joint-stock companyand renamed as Universal Scientific Industrial (Shanghai) Co., Ltd. in accordance with the Official Reply (ShangZi Pi No. [2008] 654) of the Ministry of Commerce of the People’s Republic of China. The Company's registeredcapital totals RMB 2,209,991,580.00 as at 31 December 2023.
The Company was listed on the Shanghai Stock Exchange in February 2012 and publicly issued Class A Ordinaryshares in RMB in China.
The Company is headquartered in Shanghai, the People’s Republic of China, which is mainly engaged inproviding design and manufacturing services (DMS) for electronic products, designing, producing and processingnew electronic components, high-performance motherboard for computers, wireless network communicationcomponents, mobile communication products and modules, spare parts, repairing the above products, selling self-produced products, and providing relevant technical consulting services; wholesale, import and export ofelectronic products, communication products and related spare parts, and providing relevant supporting services.See Notes (VII), 1 for the business nature of the Company's subsidiaries.
2. Date of approval for issue of the financial statements
The Company's and consolidated financial statements were approved by the board of directors of the Companyand authorized for issue on 29 March 2024.
(II) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
1. Basis of preparation
The Company and its subsidiaries (collectively referred to as the "Group") have adopted the Accounting Standardsfor Business Enterprises ("ASBE") and relative regulations issued by the Ministry of Finance ("MoF"). In addition,the Group has disclosed relevant financial information in accordance with Information Disclosure andPresentation Rules for Companies Offering Securities to the Public No. 15 - General Provisions on FinancialReporting (Revised in 2023).
2. Going concern
The Group assessed its ability to continue as a going concern for the 12 months from 31 December 2023 and didnot notice any events or circumstances that may cast significant doubt upon its ability to continue as a goingconcern. Therefore, the financial statements have been prepared on a going concern basis.
3. Basis of accounting and principle of measurement
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which aremeasured at fair value, the Company adopts the historical cost as the principle of measurement in the financialstatements. Where assets are impaired, provisions for asset impairment are made in accordance with relevantrequirements.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(II) BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued
3. Basis of accounting and principle of measurement - continued
Where the historical cost is adopted as the measurement basis, assets are recorded at the amount of cash and cashequivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition.Liabilities are measured at the amount of proceeds or assets received or the contractual amounts for assuming thepresent obligation, or, at the amounts of cash and cash equivalents expected to be paid to settle the liabilities inthe normal course of business.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurements date, regardless of whether that price is directly observable orestimated using valuation technique. Regardless of whether that price is directly observable or estimated usinganother valuation technique, fair value for measurement and/or disclosure purposes in these financial statementsis determined on such a basis.
The capacity of market participants to realize the maximum profit of non-financial assets, or the capacity of otherparticipants who acquired non-financial assets to realize the maximum profit will be considered when measuringfair values of such non-financial assets.
For a financial asset taking the transaction price as its fair value on initial recognition and using valuationtechniques involving unobservable inputs in subsequent measurement of fair value, such valuation technique iscorrected in the valuation process, as to ensure that the initial recognition result determined by valuationtechniques is equal to the transaction price.
Fair value measurements are categorised into Level 1, 2 or 3 based on degree to which the inputs to the fair valuemeasurements are observable and the significance of the inputs to the fair value measurement in its entirety, whichare described as follows:
? Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that theentity can access at the measurement date;
? Level 2 inputs are inputs, other than inputs included within Level 1, that are observable for the asset orliability, either directly or indirectly;? Level 3 inputs are unobservable inputs for the asset or liability.
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of Compliance the Accounting Standards for Business Enterprises ("ASBE")
The financial statements of the Company have been prepared in accordance with ASBE, and present truly andcompletely, the Company's and consolidated financial position as of 31 December 2023, and the Company's andconsolidated results of operations, changes in the shareholders' equity and cash flows for the year then ended.
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
3. Operating cycle
An operating cycle refers to the period since when an enterprise purchases assets for processing purpose till therealization of those assets in cash or cash equivalents. The Group's operating cycle is less than 12 months, and theGroup takes 12 months as the criteria for determining liquidity of assets and liabilities.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
4. Functional currency
Renminbi ("RMB") is the currency of the primary economic environment in which the Company and its domesticsubsidiaries operate. Therefore, the functional currency of the Company is RMB. The Company's domesticsubsidiaries choose RMB as their functional currency, except those adopt USD as their functional currency astheir sales of goods, purchase of raw materials and other expenses are settled in USD and their financing is madein USD. The Company's foreign subsidiary chooses USD, JYP, TWD, PLN, EUR or TND as its functionalcurrency on the basis of the primary economic environment in which it operates. The Group adopts RMB toprepare its financial statements.
5. Determining method and selecting basis of significance criterion
| ITEM | Significance criterion |
| Significant construction in progress for the period | RMB 70 million |
| Significant non-wholly-owned subsidiary for the period | RMB 70 million |
| Significant joint venture and associate for the period | RMB 70 million |
6. Accounting treatment of business combinations not involving enterprises under common control
6.1 Business combinations not involving enterprises under common control and goodwill
A business combination not involving enterprises under common control is a business combination in which allof the combining enterprises are not ultimately controlled by the same party or parties before and after thecombination.
The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilitiesincurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree. Theintermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancyservices, etc. and other associated administrative expenses attributable to the business combination are recognizedin profit or loss when they are incurred.
The acquiree's identifiable assets, liabilities and contingent liabilities, acquired by the acquirer in a businesscombination, that meet the recognition criteria shall be measured at fair value at the acquisition date.
When the business combination contract provides that, upon the occurrence of multiple future contingencies, theacquirer shall pay an additional or request for recovery of part of the previously paid consideration for thecombination, such contingent consideration as set out in the contract shall be recognized as a liability or asset bythe Group as a part of the aggregate consideration transferred in the business combination, and be included in thecost of combination at the fair value at the acquisition date. Within twelve months after the acquisition, if thecontingent consideration needs to be adjusted as new or further evidences are obtained in respect of circumstancesexisted as of the acquisition date, the amount preciously included in the goodwill shall be adjusted. A change inor adjustment to the contingent consideration under other circumstances shall be measured in accordance with theAccounting Standards for Business Enterprises No. 22 – Financial Instruments: Recognition and Measurementand the Accounting Standards for Business Enterprises No. 13 – Contingencies. Any change or adjustment isincluded in profit or loss for the current period.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
6. Accounting treatment of business combinations not involving enterprises under common control - continued
6.1 Business combinations not involving enterprises under common control and goodwill - continued
Where the cost of combination exceeds the acquirer's interest in the fair value of the acquiree's identifiable netassets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on initialrecognition. Where the cost of combination is less than the acquirer's interest in the fair value of the acquiree'sidentifiable net assets, the acquirer firstly reassesses the measurement of the fair values of the acquiree'sidentifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after thatreassessment, the cost of combination is still less than the acquirer's interest in the fair value of the acquiree'sidentifiable net assets, the acquirer recognizes the remaining difference immediately in profit or loss for thecurrent period.
If either the fair values of identifiable assets, liabilities and contingent liabilities acquired in a combination or thecost of business combination can be determined only provisionally by the end of the period in which the businesscombination was effected, the acquirer recognizes and measures the combination using those provisional values.Any adjustments to those provisional values within twelve months after the acquisition date are treated as if theyhad been recognized and measured on the acquisition date.
Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and ispresented separately in the consolidated financial statements.
7. Criteria of control and preparation of consolidated financial statements
7.1 Criteria of control
Control is the power over the investee, exposures or rights to variable returns from its involvement with theinvestee, and the ability to use its power over the investee to affect the amount of the investor's returns. If changesof related facts and situations lead to changes of related elements of control, the Group will conduct reassessment.
7.2 Preparation of consolidated financial statements
The scope of consolidation in the consolidated financial statements is determined on the basis of control.
The combination of subsidiaries begins with the Group's control over the subsidiary, and ceases with the Group'slosing control of the subsidiary.
For a subsidiary disposed by the Group, the operating results and cash flows before the date of disposal (the datewhen control is lost) are included in the consolidated income statement and consolidated statement of cash flows,as appropriate.
For a subsidiary acquired through a business combination not involving enterprises under common control[or thecombined party under combination by merge, the operating results and cash flows from the acquisition date (thedate when control is obtained) are included in the consolidated income statement and consolidated statement ofcash flows, as appropriate.
No matter when the business combination occurs in the reporting period, subsidiaries acquired through a businesscombination involving enterprises under common control are included in the Group's scope of consolidation as ifthey had been included in the scope of consolidation from the date when they first came under the common controlof the ultimate controlling party. Their operating results and cash flows from the beginning of the earliest reportingperiod or from the date when they first came under the common control of the ultimate controlling party areincluded in the consolidated income statement and consolidated statement of cash flows, as appropriate.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
7. Criteria of control and preparation of consolidated financial statements - continued
7.2 Preparation of consolidated financial statements - continued
The significant accounting policies and accounting periods adopted by the subsidiaries are determined based onthe uniform accounting policies and accounting periods set out by the Company.
Influence over the consolidated financial statements arising from significant intra-group transactions areeliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as minority interests andpresented as "minority interests" in the consolidated balance sheet within shareholders' equity. The portion of netprofits or losses of subsidiaries for the period attributable to minority interests is presented as "Profit or lossattributable to minority interests" in the consolidated income statement below the "net profit" line item.
When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds theminority shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount isstill allocated against minority interests.
Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of controlover the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests andminority interests are adjusted to reflect the changes in their relative interests in the subsidiary. The differencebetween the amount by which the minority interests are adjusted and the fair value of the consideration paid orreceived is adjusted to capital reserve under owners' equity. If the capital reserve is not sufficient to absorb thedifference, the excess are adjusted against retained profits.
8. Classification of joint arrangements and accounting treatments of joint operations
A joint arrangement is classified into joint operation and joint venture, depending on the rights and obligations ofthe parties to the arrangement, which is assessed by considering the structure and the legal form of the arrangement,the terms agreed by the parties in the contractual arrangement and, when relevant, other facts and circumstances.A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rightsto the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangementwhereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement.
The Group accounts for investments in joint ventures using equity method. Refer to Note (III) 17.3.2 "Long-termequity investments accounted for using the equity method" for details.
9. Recognition criteria of cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are theGroup's short-term (generally refers to expiration within three months from the date of purchase), highly liquidinvestments that are readily convertible to known amounts of cash and which are subject to an insignificant riskof changes in value.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Translation of transactions and financial statements denominated in foreign currencies
10.1 Transactions denominated in foreign currencies
A foreign currency transaction is recorded, on initial recognition, by applying an exchange rate that approximatesthe actual spot exchange rate on the date of transaction. The exchange rate that approximates the actual spotexchange rate on the date of transaction is calculated and determined according to the middle price of the marketexchange rate at the beginning of the month in which the transaction occurs.
At the balance sheet date, foreign currency monetary items are translated into functional currency using the spotexchange rates at the balance sheet date. Exchange differences arising from the differences between the spotexchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance sheetdate are recognized in profit or loss for the period, except that (1) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized as part of thecost of the qualifying asset during the capitalization period; (2) exchange differences related to hedginginstruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting;
(3) exchange differences arising from changes in the carrying amounts (other than the amortized cost) of monetaryitems at fair value through other comprehensive income are recognized as other comprehensive income.
When the consolidated financial statements include foreign operation(s), if there is foreign currency monetaryitem constituting a net investment in a foreign operation, exchange difference arising from changes in exchangerates are recognized as "exchange differences arising on translation of financial statements denominated in foreigncurrencies " in other comprehensive income, and in profit and loss for the period upon disposal of the foreignoperation.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functionalcurrency at the spot exchange rates on the dates of the transactions. Foreign currency non-monetary itemsmeasured at fair value are re-translated at the spot exchange rate on the date the fair value is determined.Difference between the re-translated functional currency amount and the original functional currency amount istreated as changes in fair value (including changes of exchange rate) and is recognized in profit and loss or asother comprehensive income.
10.2 Translation of financial statements denominated in foreign currencies
For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation aretranslated from the foreign currency into RMB using the following method: assets and liabilities on the balancesheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items aretranslated at the spot exchange rates at the dates on which such items arose; all items in the income statement aswell as items reflecting the distribution of profits are translated at an exchange rates that approximate the actualspot exchange rates on the dates of the transactions; The difference between the translated assets and the aggregateof liabilities and shareholders' equity items is recognized as other comprehensive income and included inshareholders' equity.
Cash flows arising from a transaction in foreign currency and the cash flows of a foreign subsidiary are translatedat an exchange rate which approximates the spot exchange rate on the date of the cash flows. The effect ofexchange rate changes on cash and cash equivalents is regarded as a reconciling item and presented separately inthe cash flow statement as "effect of exchange rate changes on cash and cash equivalents".
The closing balances and the actual amounts of previous year are presented at the translated amounts in theprevious year's financial statements.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
10. Translation of transactions and financial statements denominated in foreign currencies - continued
10.2 Translation of financial statements denominated in foreign currencies - continued
On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreign operationdue to disposal of certain equity investments or other reasons, the Group transfers the accumulated exchangedifferences arising on translation of financial statements of this foreign operation attributable to the owners' equityof the Company and presented under owners' equity, to profit or loss in the period in which the disposal occurs.
In case of a disposal of part equity investments or other reason leading to lower interest percentage in foreignoperations but does not result in the Group losing control over a foreign operation, the proportionate share ofaccumulated exchange differences arising on translation of financial statements are re-attributed to minorityinterests and are not recognized in profit and loss. For partial disposals of equity interests in foreign operationswhich are associates or joint ventures, the proportionate share of the accumulated exchange differences arising ontranslation of financial statements of foreign operations is reclassified to profit or loss.
11. Financial instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractualprovisions of the instrument.
For financial assets purchased or sold in a regular way, the Company recognises assets acquired and liabilitiesassumed on a trade date basis, or derecognises the assets sold on a trade date basis.
Financial assets and financial liabilities are initially measured at fair value. For financial assets and financialliabilities at fair value through profit or loss, transaction costs are immediately recognized in profit or loss. Forother financial assets and financial liabilities, transaction costs are included in their initial recognized amounts.Upon initial recognition of accounts receivable that does not contain significant financing component or withoutconsidering the financing component included in the contract with a term not exceeding one year under theAccounting Standards for Business Enterprises No. 14 - Revenue ("Revenue Standards"), the Group adopts thetransaction price as defined in the Revenue Standards for initial measurement.
The effective interest method is a method that is used in the calculation of the amortized cost of a financial assetor a financial liability and in the allocation of the interest income or interest expense in profit or loss over therelevant period.
The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected lifeof the financial asset or financial liability to the carrying amount of the financial asset or to the amortized cost ofthe financial liability. When determining the effective interest rate, the Group estimates future cash flows byconsidering all contractual terms of the financial asset or financial liability including early repayment, extension,call option or other similar options etc. without considering future credit losses.
The amortised cost of a financial asset or a financial liability is the amount of a financial asset or a financialliability initially recognised net of principal repaid, plus or less the cumulative amortised amount arising fromamortisation of the difference between the amount initially recognised and the amount at the maturity date usingthe effective interest method, net of cumulative loss allowance (only applicable to financial assets).
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.1 Classification, recognition and measurement of financial assets - continued
After initial recognition, the Group's financial assets of various types are subsequently measured at amortizedcost, at fair value through other comprehensive income ("FVTOCI") or at fair value through profit or loss("FVTPL"), respectively.
If contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding, and the financial asset is held within a business modelwhose objective is to hold financial assets in order to collect contractual cash flows, such asset is classified intofinancial assets measured at amortized cost, which include cash and bank balances, notes receivable, accountsreceivable, other receivables, non-current assets due within one year and long-term receivables and etc.
Financial assets are subsequently measured at FVTOCI when (1) the financial asset is held within a businessmodel whose objective is achieved by both collecting contractual cash flows and selling; and (2) the contractualterms give rise on specified dates to cash flows that are solely payments of principal and interest on the principalamount outstanding. Such financial assets due over one year since acquisition are presented as other debtinvestments. Other debt investments due within one year (inclusive) since the balance sheet date are presented asnon-current assets due within one year. Accounts receivable and notes receivable at FVTOCI since acquisitionare presented as factoring with receivables, other items due within one year (inclusive) are presented as othercurrent assets.
On initial recognition, the Group may irrevocably designate non-trading equity instruments, other than contingentconsideration recognized through business combination not involving enterprises under common control, asfinancial assets at FVTOCI on an individual basis. Such financial assets at FVTOCI are presented as other equityinstrument.
A financial asset is classified as held-for-trading if any of the following criteria is satisfied:
? It has been acquired principally for the purpose of selling it in near term.? On initial recognition, it is part of a portfolio of identifiable financial instruments that the Group managestogether and there is objective evidence that the Group has a recent actual pattern of short-term profit-taking.
? It is a derivative that is neither a financial guarantee contract nor designated as an effective hedginginstrument.
Financial assets at FVTPL include financial assets classified as at FVTPL and financial assets designated as atFVTPL:
? Any financial assets that does not qualify for amortized cost measurement or measurement at FVTOCI or
designated at FVTOCI are classified into financial assets at FVTPL.
? Upon initial recognition, in order to eliminate or significantly reduce accounting mismatch and qualifiedhybrid financial instrument combines financial asset with embedded derivatives, the Group will irrevocablydesignate it as financial liabilities at FVTPL.
Financial assets at FVTPL assets other than derivative financial assets are presented as "held-for-trading financialassets". Such financial assets at FVTPL which may fall due more than one year (or without fixed term) since thebalance sheet date and will be held more than one year are presented as other non-current financial assets.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.1 Classification, recognition and measurement of financial assets - continued
11.1.1 Financial assets at amortized cost
The financial assets measured at amortized cost are subsequently measured at amortized cost using the effectiveinterest method. Gain or loss arising from impairment or derecognition is recognized in profit or loss.
The Group recognizes interest income from financial assets classified as financial assets at amortized cost usingthe effective interest method. The Group calculates and recognizes interest income through account balance offinancial assets multiplying effective interest, except for the following circumstances:
? For purchased or originated credit-impaired financial assets, the Group calculates and recognizes its interestincome based on amortized cost of the financial asset and the effective interest through credit adjustmentsince initial recognition.
? For purchased or originated financial assets without credit impairment incurred while with creditimpairment incurred in subsequent periods, the Group calculates and recognizes its interest income basedon amortized cost of the financial asset and the effective interest in subsequent periods. If the credit risk ofthe financial asset is reduced during subsequent periods and credit impairment does not exist, and theimprovement can be related to an event occurring after application of aforesaid provisions, the Group shallcalculate and recognize interest income through account balance of financial assets multiplying effectiveinterest.
11.1.2 Financial assets at FVTOCI
Impairment losses or gains related to financial assets at FVTOCI, interest income measured using effective interestmethod and exchange gains or losses are recognized into profit or loss for the current period, except for the abovecircumstances, changes in fair value of the financial assets are included in other comprehensive income. Amountscharged to profit or loss for every period equal to the amount charged to profit or loss as it is measured at amortizedcosts. When the financial asset is derecognized, the cumulative gains or losses previously recognized in othercomprehensive income shall be removed from other comprehensive income and recognized in profit or loss.
Changes in fair value of non-held-for-trading equity instrument investments designated as financial assets atFVTOCI are recognized in other comprehensive income. When the financial asset is derecognized, the cumulativegains or losses previously recognized in other comprehensive income are transferred and included in retainedearnings. During the period in which the Group holds the non-trading equity instrument, revenue from dividendsis recognized in profit or loss for the period when (1) the Group has established the right of collecting dividends;
(2) it is probable that the associated economic benefits will flow to the Group; and (3) the amount of dividendscan be measured reliably.
11.1.3 Financial assets at FVTPL
Financial assets at FVTPL are subsequently measured at fair value, with gains or losses on fair value changes andrelated dividends and interest income included in profit or loss for the period.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.2 Impairment of financial instruments
The Group makes accounting treatment on impairment and recognizes loss allowance for expected credit losses("ECL") on financial assets measured at amortized cost, financial assets classified as at FVTOCI and leasereceivables.
The Group makes a loss allowance against amount of lifetime ECL of notes receivable and accounts receivablearising from transactions adopting the Revenue Standard as well as lease receivables arising from transactionsadopting ASBE No. 21- Leases.
For other financial instruments, except for the purchased or originated credit-impaired financial assets, at eachbalance sheet date, the Group assess changes in credit risk of relevant financial instruments since initialrecognition. If the credit risk of the above financial instruments has increased significantly since initial recognition,the Group measures loss allowance based on the amount of full lifetime; if credit risk of the financial instrumenthas not increased significantly since initial recognition, the Group recognizes loss allowance based on 12-monthECL of the financial instrument. Increase in or reversal of credit loss allowance is included in profit or loss asloss/gain on impairment, except for financial assets classified as at fair value through other comprehensive income.For the financial assets classified as at FVTOCI, the Group recognizes credit loss allowance in othercomprehensive income and recognizes the loss/gain on impairment in profit or loss, while the Group does notdecrease the carrying amount of such financial assets in the balance sheet.
In the previous accounting period, the Group has measured the loss allowance according to the amount of ECLfor the entire period of the financial instrument, but on the current balance sheet date, the financial instrument isno longer a significant increase in credit risk since the initial recognition. The Group measures the loss allowancefor the financial instrument on the balance sheet date based on the amount of ECL in the next 12 months. Thereversal amount of the loss allowance formed is recognized in profit and loss for the period as an impairment gain.
11.2.1 Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group compares therisk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurringon the financial instrument as at the date of initial recognition.
In particular, the following information is taken into account when assessing whether credit risk has increasedsignificantly:
(1) Significant changes in internal price indicators as a result of a change in credit risk.
(2) Significant changes in external market indicators of credit risk for a particular financial instrument orsimilar financial instruments with the same expected life. Changes in market indicators of credit risk include,but are not limited to: (i) the credit spread; (ii) the credit default swap prices for the borrower; (iii) thelength of time or the extent to which the fair value of a financial asset has been less than its amortized cost;and (iv) other market information related to the borrower, such as changes in the price of a borrower's debtand equity instruments.
(3) An actual or expected significant change in the financial instrument's external credit rating;
(4) An actual or expected decrease in the internal credit rating for the debtor;
(5) Adverse changes in business, financial or economic conditions that are expected to cause a significantdecrease in the debtor's ability to meet its debt obligations;
(6) An actual or expected significant change in the operating results of the debtor;
(7) Significant adverse changes in regulatory, economic, or technological environment of the debtor;
(8) Significant changes in circumstances expected to reduce the debtor's economic incentive to make scheduled
contractual payments;
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.2 Impairment of financial instruments - continued
11.2.1 Significant increase in credit risk - continued
In particular, the following information is taken into account when assessing whether credit risk has increasedsignificantly: - continued
(9) Significant changes in expected performance and repayment of the debtor;
(10) Changes in the Group's credit management approach in relation to the financial instrument;
No matter whether credit risk has increased significantly or not subsequent to aforementioned assessment, theGroup considers credit risk of financial instruments has increased significantly when contractual payments offinancial instruments past due over 30 days (inclusive).
The Group assumes that the credit risk on a financial instrument has not increased significantly since initialrecognition if the financial instrument is determined to have lower credit risk at the balance sheet date. A financialinstrument is determined to have lower credit risk if: i) it has a lower risk of default, ii) the borrower has a strongcapacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic andbusiness conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil itscontractual cash flow obligations.
11.2.2 Credit-impaired financial assets
When the Group expected occurrence of one or more events which may cause adverse impact on future cash flowsof a financial asset, the financial asset will become a credit-impaired financial assets. Objective evidence that afinancial asset is impaired includes but not limited to the following observable events:
(1) Significant financial difficulty of the issuer or debtor;
(2) Breach of contract by the debtor, such as a default or delinquency in interest or principal payments;
(3) The creditor, for economic or contractual reasons relating to the debtor's financial difficulty, has granted to
the debtor a concession that the creditor would not otherwise consider;
(4) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
(5) Purchase or originate a financial asset with a large scale of discount, which reflects facts of credit lossincurred.
Whatever the aforementioned assessment results are, the Group presumes that the financial instruments hasdefaulted when contractual payments of financial instruments past due over 90 days (inclusive).
11.2.3 Determination of expected credit loss
Lease receivables are assessed for ECL individually by the Group. In addition, the Group uses provision matrixto calculate ECL for accounts receivable based on aging. According to the Group's assessment of the credit riskof accounts receivable, the aging information can reflect the customer's ability of repayment at the maturity ofaccounts receivable.
For other receivables, the credit loss of relevant financial instruments shall be determined on a portfolio basis inaddition to those individually significant. The Group classifies financial instruments into different groups basedon common risk characteristics. Common credit risk characteristics include the date of initial recognition,remaining contractual maturity, etc.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.2 Impairment of financial instruments - continued
11.2.3 Determination of expected credit loss - continued
The Group determines the ECL of relevant financial instruments using the following method:
? For a financial asset and a lease receivable, a credit loss is the present value of the difference between thecontractual cash flows that are due to the Group under the contract and the cash flows that the Group expectsto receive;? For credit-impaired financial assets other than the purchased or originated credit-impaired financial assetsat the balance date, credit loss is difference between the carrying amount of financial assets and the presentvalue of expected future cash flows discounted at original effective interest rate.
The factors reflected in methods of measurement of expected credit losses include an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; time value of money; reasonableand supportable information about past events, current conditions and forecasts on future economic status atbalance sheet date without unnecessary additional costs or efforts.
11.2.4 Write-down of financial assets
When the Group will no longer reasonably expect that the contractual cash flows of financial assets can becollected in aggregate or in part, the Group will directly write down the carrying amount of the financial asset,which constitutes derecognition of relevant financial assets.
11.3 Transfer of financial assets
The Group will derecognize a financial asset if one of the following conditions is satisfied: (i) the contractualrights to the cash flows from the financial asset expire; (ii) the financial asset has been transferred and substantiallyall the risks and rewards of ownership of the financial asset is transferred to the transferee; or (iii) although thefinancial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewardsof ownership of the financial asset but has not retained control of the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset,and it retains control of the financial asset, the Group will recognize the financial asset to the extent of itscontinuing involvement in the transferred financial asset and recognize an associated liability. The Group willmeasure relevant liabilities as follows:
? For transferred financial assets carried at amortized cost, the carrying amount of relevant liabilities is thecarrying amount of financial assets transferred with continuing involvement less amortized cost of theGroup's retained rights (if the Group retains relevant rights upon transfer of financial assets) with additionof amortized cost of obligations assumed by the Group (if the Group assumes relevant obligations upontransfer of financial assets). Relevant liabilities are not designated as financial liabilities at fair valuethrough profit or loss.? For transferred financial assets carried at fair value, the carrying amount of relevant financial liabilities isthe carrying amount of financial assets transferred with continuing involvement less fair value of theGroup's retained rights (if the Group retains relevant rights upon transfer of financial assets) with additionof fair value of obligations assumed by the Group (if the Group assumes relevant obligations upon transferof financial assets). Accordingly, the fair value of relevant rights and obligations shall be measured on anindividual basis.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.3 Transfer of financial assets - continued
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (1)the carrying amount of the financial asset transferred at the derecognition date; and (2) the sum of theconsideration received from the transfer of financial assets and any cumulative gain or loss allocated to the partderecognized which has been previously recognized in other comprehensive income, is recognized in profit orloss. If the financial assets transferred by the Group are designated as equity instrument investments at fair valuethrough other comprehensive income that are not held for trading, the cumulative gains or losses previouslyrecognized in other comprehensive income are transferred out and included in retained earnings.
If a part of the transferred financial asset qualifies for derecognition, the overall carrying amount of the financialasset prior to transfer is allocated between the part that continues to be recognized and the part that is derecognized,based on the respective fair value of those parts at the date of transfer. The difference between (1) the carryingamount allocated to the part derecognized on the date of derecognition; and (2) the sum of the considerationreceived for the part derecognized and any cumulative gain or loss allocated to the part derecognized which hasbeen previously recognized in other comprehensive income, is recognized in profit or loss. If the financial assetstransferred by the Group are designated as equity instrument investments at fair value through othercomprehensive income that are not held for trading, the cumulative gains or losses previously recognized in othercomprehensive income are transferred out and included in retained earnings.
For a transfer of a financial asset in its entirety that does not satisfy the derecognition criteria, the Group willcontinue to recognize the transferred financial asset in its entirety and recognize the consideration received asfinancial liabilities.
11.4 Classification of financial liabilities and equity instruments
The Group classifies the financial instrument or its components into financial liabilities or equity instruments atinitial recognition on the basis of the terms of the contract of the financial instruments, the economic substanceas well as legal form reflected, and the definition of financial liabilities or equity instruments.
11.4.1 Classification, recognition and measurement of financial liabilities
On initial recognition, financial liabilities are classified into financial liabilities at FVTPL and other financialliabilities.
11.4.1.1 Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading (including derivatives that are financialliabilities) and financial liabilities designated as at FVTPL. Except that the derivative financial liability ispresented separately, financial liabilities at FVTPL are presented as financial liabilities held-for-trading.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.4 Classification of financial liabilities and equity instruments - continued
11.4.1 Classification, recognition and measurement of financial liabilities - continued
11.4.1.1 Financial liabilities at FVTPL - continued
A financial liability is classified as held-for-trading if any of the following criteria is satisfied:
? It has been incurred principally for the purpose of repurchasing it in the near term.? On initial recognition, it is part of a portfolio of identified financial instruments that the Group managestogether and there is objective evidence that the Group has a recent actual pattern of short-term profit-taking.
? It is a derivative that is neither a financial guarantee contract nor designated as an effective hedginginstrument.
On initial recognition, financial liabilities that meet one of the following conditions are designated as financialliabilities at FVTPL: (1) Such designation eliminates or significantly reduces accounting mismatch; (2) Thefinancial liability forms part of a group of financial liabilities or a group of financial assets and financial liabilities,which is managed and its performance is evaluated on a fair value basis, in accordance with the documented riskmanagement or investment strategy, and information about the grouping is reported to key management personnelon that basis; (3) The qualified hybrid financial instrument combines financial liability with embedded derivatives.
Held-for-trading financial liabilities are subsequently measured at fair value, and any gains or losses arising fromchanges in fair value and any dividend or interest income earned on the financial liabilities are recognized inprofit or loss.
For a financial liability designated as at FVTPL, the amount of changes in the fair value of the financial liabilitythat are attributable to changes in the credit risk of that liability shall be presented in other comprehensive income,while other changes in fair values are included in profit or loss for the current period. Upon the derecognition ofsuch financial liability, the accumulated amount of changes in fair value that are attributable to changes in thecredit risk of that liability, which was recognized in other comprehensive income, is transferred to retainedearnings. Any dividend or interest expense on the financial liabilities is recognized in profit or loss. If theaccounting treatment for the impact of the change in credit risk of such financial liability in the above ways wouldcreate or enlarge an accounting mismatch in profit or loss, the Group shall present all gains or losses on thatliability (including the effects of changes in the credit risk of that liability) in profit or loss for the period.
11.4.1.2 Other financial liabilities
Other financial liabilities except for the financial liabilities arising from the transferred financial assets that do notqualify for derecognition or financial liabilities arising from continuing involvement in the transferred financialasset are classified as financial liabilities measured at amortized cost, and are subsequently measured at amortizedcost, with gain or loss arising from derecognition or amortization recognized in profit or loss.
If the Group modifies or renegotiates the contract with the counterparty and the financial liability subsequentlymeasured at amortized cost is not derecognized, but the cash flow of the contract changes, the Group shall re-calculate the carrying amount of the financial liability and recognize the relevant gains or losses in profit or lossof the period. The re-calculated carrying amount of the financial liability shall be determined by the Groupaccording to the cash flow of the renegotiated or modified contract based on the present value discounted at theoriginal effective interest rate of the financial liability. For all the costs or expenses arising from the modificationor renegotiation of the contract, the Group shall adjust the modified carrying amount of the financial liability andamortize them within the remaining term of the financial liability.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.4 Classification of financial liabilities and equity instruments - continued
11.4.2 Derecognition of financial liabilities
The Group recognizes a financial liability (or part of it) only when the underlying present obligation (or part ofit) is discharged. An agreement between the Group (an existing borrower) and an existing lender to replace theoriginal financial liability with a new financial liability with substantially different terms is accounted for as anextinguishment of the original financial liability and the recognition of a new financial liability.
When the Group derecognizes a financial liability or a part of it, it recognizes the difference between the carryingamount of the financial liability (or part of the financial liability) derecognized and the consideration paid(including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.
11.4.3 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deductingall of its liabilities. Equity instruments issued (including refinanced), repurchased, sold and cancelled by theGroup are recognized as changes of equity. Change of fair value of equity instruments is not recognized by theGroup. Transaction costs related to equity transactions are deducted from equity.
The Group recognizes the distribution to holders of the equity instruments as distribution of profits, and dividendspaid do not affect total amount of shareholders equity.
11.5 Derivatives and embedded derivatives
Derivative financial instruments include forward exchange contracts, resale option and early redemption optionfor convertible bonds, etc. Derivatives are initially measured at fair value at the date when the derivative contractsare entered into and are subsequently re-measured at fair value.
Derivatives embedded in hybrid contracts that contain financial asset hosts are not separated. The entire hybridcontract is classified and subsequently measured in its entirety as either amortized cost or fair value as appropriate.
If the host contract included in the hybrid contract is not a financial asset and meet all of the following criteria,the embedded derivative shall be separated from the hybrid contract by the Group and treated as a stand-alonederivative.
(1) The economic characteristics and risks of the embedded derivative are not highly related to the economiccharacteristics and risks of the host contract;
(2) A separate instrument with the same terms as the embedded derivative would meet the definition of aderivative; and
(3) The hybrid instrument is not designated as a financial asset or financial liability at FVTPL.
If the embedded derivative is separated from the hybrid contract, the host contract shall be accounted for inaccordance with the applicable standards. If the Group is unable to measure reliably the fair value of an embeddedderivative on the basis of its terms and conditions, the fair value of the embedded derivative is the differencebetween the fair value of the hybrid contract and the fair value of the host contract. If the Group is still unable tomeasure the fair value of the embedded derivative separately either at acquisition or at a subsequent balance sheetdate after the above methods are applied, it designates the entire hybrid contract as a financial instrument at fairvalue through profit or loss.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
11. Financial instruments - continued
11.6 Offsetting financial assets and financial liabilities
Where the Group has a legal right that is currently enforceable to set off the recognized financial assets andfinancial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financialliability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presentedin the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presentedseparately in the balance sheet and shall not be offset.
11.7 Compound instruments
Convertible bonds issued by the Group that contain both the liability, the conversion option, the resale option andearly redemption option are classified separately into respective items on initial recognition. Conversion optionthat is settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of theCompany's own equity instruments is an equity instrument. At the date of issue, the liability, resale optionderivatives and early redemption option derivatives are initially measured at fair value. The difference betweenthe gross proceeds of the issue of the convertible bonds and the fair value assigned to the liability, resale optionderivatives and early redemption option derivatives, representing the conversion option for the holder to convertthe bonds into equity instrument, is included in other equity instruments.
In subsequent periods, the liability component of the convertible bonds is carried at amortized cost using theeffective interest method. The resale option derivatives and early redemption option derivatives are measured atfair value with changes in fair value recognized in profit or loss. The conversion option classified as equityinstruments remains in equity instruments. No gain or loss is recognized in profit or loss upon conversion orexpiration of the option.
Transaction costs incurred for the issue of the convertible bonds are allocated to the liability, equity instruments,resale option derivative components and early redemption option derivative components in proportion to theirrespective fair values. Transaction costs relating to the resale option derivative components and early redemptionoption are charged to profit or loss. Transaction costs relating to the liability component are included in thecarrying amount of the liability component and amortized over the period of the convertible loan notes using theeffective interest method. Transaction costs relating to the equity instruments component are charged directly toequity instruments.
12. Notes receivable
12.1 Determination method and accounting treatment for expected credit loss of notes receivable
The Group believes that the credit risk of the bank acceptances held by the Group was insignificant due to thehigh credit rating of the accepting banks. Therefore, no provision for credit loss was made.
13. Accounts receivable
13.1 Determination method and accounting treatment for expected credit loss of accounts receivable
The Group determines the expected credit loss on accounts receivable in accordance with Note (III), 11.2.3.Increase in or reversal of provision for credit loss is included in profit or loss as loss or gain on impairment.
13.2 Aging calculation method for portfolio of credit risk characteristics recognized based on aging
The Group uses the aging of accounts receivable as a credit risk characteristic to determine its credit loss usingan impairment matrix. The aging is calculated from the date of initial recognition.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
13. Accounts receivable - continued
13.3 Judgement criteria for bad debt provision assessed on an individual basis
The Group determines the expected credit loss of accounts receivable on an individual asset basis, taking intoaccount the significant financial difficulties of the debtor.
14. Other receivables
14.1 Determination method and accounting treatment for expected credit loss of other receivables
The Group determines the expected credit loss on other receivables in accordance with Note (III), 11.2.3. Increasein or reversal of provision for credit loss is included in profit or loss as loss or gain on impairment.
14.2 Categories of portfolios for which bad debt provision is assessed on a portfolio basis according to credit riskcharacteristics and the basis for determination
The Group classifies financial instruments into different groups based on common risk characteristics. Commoncredit risk characteristics include the date of initial recognition, remaining contractual maturity, etc.
15. Inventories
15.1 Categories of inventories, valuation method of inventories upon delivery, inventory count system andamortization method for low cost and short-lived consumable items and packaging materials
15.1.1 Categories of inventories
The Group's inventories mainly include raw materials, work in progress, finished goods, reusable materials, etc.Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversionand other expenditures incurred in bringing the inventories to their present location and condition.
15.1.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
15.1.3 Inventory count system
The perpetual inventory system is maintained for stock system.
15.1.4 Amortization method for other reusable materials
Other reusable materials are amortized using the multiple-stage amortization method.
15.2 Recognition criteria and provision methods for decline in value of inventories
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the netrealizable value is below the cost of inventories, a provision for decline in value of inventories is made.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determinedon the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effectof post balance sheet events.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
15. Inventories - continued
15.2 Recognition criteria and provision methods for decline in value of inventories - continued
After the provision for decline in value of inventories is made, if the circumstances that previously causedinventories to be written down below cost no longer exist so that the net realizable value of inventories is higherthan their cost, the original provision for decline in value is reversed and the reversal is included in profit or lossfor the period.
16. Held-for-sale non-current assets or disposal groups
16.1 Recognition criteria and accounting treatment of non-current assets or disposal groups classified as held-for-sale
Non-current assets and disposal groups are classified as held for sale category when the Group recovers the bookvalue through a sale (including an exchange of non-monetary assets that has commercial substance) rather thancontinuing use.
Non-current assets or disposal groups classified as held for sale are required to satisfy the following conditions:
(1) the asset or disposal group is available for immediate sale in its present condition subject only to terms thatare usual and customary for sales of such asset or disposal group; (2) the sale is highly probable, i.e. the Grouphas made a resolution about selling plan and obtained a confirmed purchase commitment and the sale is expectedto be completed within one year.
The Group measures the no-current assets or disposal groups classified as held for sale at the lower of theircarrying amount and fair value less costs to sell. Where the carrying amount is higher than the net amount of fairvalue less costs to sell, the carrying amount should be reduced to the net amount of fair value less costs to sell,and such reduction is recognized in impairment loss of assets and included in profit or loss for the period.Meanwhile, provision for impairment of held-for-sale assets are made. When there is increase in the net amountof fair value of non-current assets held for sale less costs to sell at the balance sheet date, the original deductionshould be reversed in impairment loss of assets recognized after the classification of held-for-sale category, andthe reverse amount is included in profit or loss for the period. Losses of assets that are classified as held for saleare not reversed.
Non-current assets classified as held-for-sale or disposal groups are not depreciated or amortized, interest andother costs of liabilities of disposal group classified as held for sale continue to be recognized.
All or part of equity investments in an associate or joint venture are classified as held-for-sale assets. For the partthat is classified as held-for-sale, it is no longer accounted for using the equity method since the date of theclassification.
17. Long-term equity investments
17.1 Determination criteria of joint control and significant influence
Control is achieved when the Group has the power over the investee, is exposed or, has the rights to, variablereturns from its involvement with the investee; and has the ability to use its power to affect its return. Joint controlis the contractually agreed sharing of control over an economic activity, and exists only when the strategicfinancial and operating policy decisions relating to the activity require the unanimous consent of the partiessharing control. Significant influence is the power to participate in the financial and operating policy decisions ofthe investee but is not control or joint control over those policies. When determining whether an investingenterprise is able to exercise control or significant influence over an investee, the effect of potential voting rightsof the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties thatare currently exercisable or convertible shall be considered.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
17. Long-term equity investments - continued
17.2 Determination of initial investment cost
For a long-term equity investment acquired through business combination not involving enterprises undercommon control, the investment cost of the long-term equity investment is the cost of acquisition at the date ofcombination.
The expenses incurred by the acquirer or in respect of auditing, legal services, valuation and consultancy servicesand other associated administrative expenses attributable to the business combination are recognized in profit orloss when they are incurred.
Long-term equity investment acquired otherwise than through a business combination is initially measured at itscost. When the entity is able to exercise significant influence or joint control (but not control) over an investeedue to [additional investment], the cost of long-term equity investments is the sum of the fair value of previously-held equity investments determined in accordance with Accounting Standard for Business Enterprises No.22 -Financial Instruments; Recognition and Measurement (CAS 22) and the additional investment cost.
17.3 Subsequent measurement and recognition of profit or loss
17.3.1 Long-term equity investment accounted for using the cost method
The Company's separate financial statements adopted cost method to account for the long-term equity investmentsof subsidiaries. A subsidiary is an investee that is controlled by the Group.
Under the cost method, a long-term equity investment is measured at initial investment cost. When additionalinvestment is made or the investment is recouped, the cost of the long-term equity investment is adjustedaccordingly. Investment income is recognised in the period in accordance with the attributable share of cashdividends or profit distributions declared by the investee.
17.3.2 Long-term equity investment accounted for using the equity method
The Group accounts for investment in associates and joint ventures using the equity method. An associate is anentity over which the Group has significant influence and a joint venture is an entity over which the Groupexercises joint control along with other investors.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group'sshare of the fair value of the investee's identifiable net assets at the time of acquisition, no adjustment is made tothe initial investment cost. Where the initial investment cost is less than the Group's share of the fair value of theinvestee's identifiable net assets at the time of acquisition, the difference is recognised in profit or loss for theperiod, and the cost of the long-term equity investment is adjusted accordingly.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
17. Long-term equity investments - continued
17.3 Subsequent measurement and recognition of profit or loss - continued
17.3.2 Long-term equity investment accounted for using the equity method - continued
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive incomeof the investee for the period as investment income and other comprehensive income for the period. Meanwhile,carrying amount of long-term equity investment is adjusted: the carrying amount of long-term equity investmentis decreased in accordance with its share of the investee's declared profit or cash dividends; Other changes inowners' equity of the investee other than net profit or loss and other comprehensive income are correspondinglyadjusted to the carrying amount of the long-term equity investment, and recognized in the capital reserve. TheGroup recognizes its share of the investee's net profit or loss based on the fair value of the investee's individualidentifiable assets, etc. at the acquisition date after making appropriate adjustments. When the investors'accounting policies and accounting period are inconsistent with those of the Company, the Company recognizesinvestment income and other comprehensive income after making appropriate adjustments to conform to theCompany's accounting policies and accounting period. However, unrealized gains or losses resulting from theGroup's transactions with its associates and joint ventures, which do not constitute a business, are eliminatedbased on the proportion attributable to the Group and then investment gains or losses or is recognized. However,unrealized losses are not eliminated if they result from the Group's transactions with its associates and jointventures which represent impairment losses on the transferred assets.
The Group discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of its net investment inthe investee is reduced to zero. If the Group has incurred obligations to assume additional losses of the investee,a provision is recognized according to the expected obligation, and recorded as investment loss for the period.Where net profits are subsequently made by the investee, the Group resumes recognizing its share of those profitsonly after its share of the profits exceeds the share of losses previously not recognized.
17.4 Disposal of long-term equity investments
On disposal of a long term equity investment, the difference between the proceeds actually received and receivableand the carrying amount is recognized in profit or loss for the period.
18. Investment properties
Investment property is property held to earn rentals or for capital appreciation or both, including land use rightsleased out. It includes a land use right held for transfer upon capital appreciation and a building that is leased out.
An investment property is measured initially at cost. Subsequent expenditures incurred for such investmentproperty are included in the cost of the investment property if it is probable that economic benefits associatedwith an investment property will flow to the Group and the subsequent expenditures can be measured reliably.Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
18. Investment properties - continued
The Group uses the cost model for subsequent measurement of investment property, and adopts the straight-linemethod for depreciation over its useful life. The depreciation method, depreciation period, estimated residualvalue rate and annual depreciation rate of each category of investment properties are as follows:
| Category | Depreciation method | Depreciation period (years) | Residual value rate (%) | Annual depreciation rate (%) |
| Buildings | Straight-line method | 35 years | - | 2.86 |
An investment property is derecognized upon disposal or when the investment property is permanently withdrawnfrom use and no future economic benefits are expected from its disposals.
When an investment property is sold, transferred, retired or damaged, the Group recognizes the amount of anyproceeds on disposal net of the carrying amount and related taxes in profit or loss for the period.
19. Fixed Assets
19.1 Recognition criteria
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental toothers, or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset isrecognized only when it is probable that economic benefits associated with the asset will flow to the Group andthe cost of the asset can be measured reliably. Fixed assets are initially measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probablethat economic benefits associated with the asset will flow to the Group and the subsequent expenditures can bemeasured reliably. Meanwhile the carrying amount of the replaced part is derecognized. Other subsequentexpenditures are recognized in profit or loss in the period in which they are incurred.
19.2 Depreciation method
Land operated overseas is not depreciated. A fixed asset other than land operated overseas is depreciated over itsuseful life using the straight-line method since the month subsequent to the one in which it is ready for intendeduse.
The useful life, estimated net residual value rate and annual depreciation rate of each category of fixed assets areas follows:
| Category | Depreciation period (years) | Residual value rate (%) | Annual depreciation rate (%) |
| Buildings | 12-35 years | - | 2.86-8.33 |
| Machinery and equipment | 3-8 years | - | 12.50-33.33 |
| Transportation vehicles | 2-6 years | - | 16.67-50.00 |
| Electronic equipment, appliances and furniture | 3-10 years | - | 10.00-33.33 |
| Renovation costs | 3-10 years | - | 10.00-33.33 |
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain fromdisposal of the asset, after deducting the estimated costs of disposal, if the asset was already of the age and in thecondition expected at the end of its useful life.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
19. Fixed Assets - continued
19.3 Other descriptions
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use ordisposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired or damaged, the amountof any proceeds on disposal of the asset net of the carrying amount and related taxes is recognised in profit or lossfor the period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation methodapplied at least once at each financial year-end, and account for any change as a change in an accounting estimate.
20. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various construction expendituresduring the construction period, borrowing costs capitalised before it is ready for intended use and other relevantcosts. Construction in progress is not depreciated.
Construction in progress is transferred to a fixed asset when it is ready for intended use. The criteria and timepoints for the transfer of various types of construction in progress to fixed assets are as follows:
| Category | Criteria for transfer to fixed assets | Time points for transfer to fixed assets |
| Buildings | (1) The main construction works and ancillary works have been completed (2) The construction works have reached the intended design requirements and completed acceptance (3) The construction works that are ready for intended use but have not been finalized are transferred to fixed assets at their estimated value based on the actual cost of the works from the date of ready for intended use | Ready for intended use |
| Machinery and equipment, electronic equipment, fixtures and furniture, transportation vehicles, etc. to be installed | (1) Relevant equipment and other supporting facilities have been installed (2) The equipment can maintain normal and stable operation for a period of time after commissioning | Ready for intended use |
21. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset arecapitalized when expenditures for such asset and borrowing costs are incurred and activities relating to theacquisition, construction or production of the asset that are necessary to prepare the asset for its intended use orsale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired,constructed or produced becomes ready for its intended use or sale. Other borrowing costs are recognized as anexpense in the period in which they are incurred.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
21. Borrowing costs - continued
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is theactual interest expense incurred on that borrowing for the period less any bank interest earned from depositingthe borrowed funds before being used on the asset or any investment income on the temporary investment of thosefunds. Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interestto be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess ofcumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalization rate isthe weighted average of the interest rates applicable to the general-purpose borrowings.
22. Intangible assets
22.1 Determination basis, estimation, amortization method and review procedure of useful life
Intangible assets include software, patents, trademarks, land use rights and customer relations, etc.
An intangible asset is measured initially at cost. When an intangible asset with a finite useful life is available foruse, its original cost less net residual value and any accumulated impairment losses is amortized over its estimateduseful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized.
The amortization methods, useful lives, and estimated net residual value rates of each class of fixed assets are asfollows:
| Category | Amortization method | Useful life (Years) | Residual value rate (%) |
| Land use right | Straight-line method | 50 years | - |
| Software | Straight-line method | 3-10 years | - |
| Patents | Straight-line method | 3-20 years | - |
| Trademarks | Straight-line method | 10 years | - |
| Customer relation | Straight-line method | 16 years | - |
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at theend of the year, and makes adjustments when necessary.
22.2 Attribution scope and related accounting treatments of research and development expenditure
Expenditure during the research phase is recognised as an expense in the period in which it is incurred.
Expenditure during the development phase that meets all of the following conditions at the same time isrecognised as intangible asset. Expenditure during development phase that does not meet the following conditionsis recognised in profit or loss for the period.
(1) it is technically feasible to complete the intangible asset so that it will be available for use or sale;
(2) the Company has the intention to complete the intangible asset and use or sell it;
(3) the Company can demonstrate the ways in which the intangible asset will generate economic benefits,including the evidence of the existence of a market for the output of the intangible asset or the intangibleasset itself or, if it is to be used internally, the usefulness of the intangible asset;
(4) the availability of adequate technical, financial and other resources to complete the development and theability to use or sell the intangible asset; and
(5) the expenditure attributable to the intangible asset during its development phase can be reliably measured.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
22. Intangible assets - continued
22.2 Attribution scope and related accounting treatments of research and development expenditure - continued
If the expenditures cannot be distinguished between the research phase and development phase, the Grouprecognizes all of them in profit or loss for the period. The cost of intangible assets formed in internal developmentactivities only includes the total amount of expenditures from the time point when the capitalization conditionsare met to the time when the intangible assets reach the predetermined uses. For the same intangible asset, theexpenditures that have been expensed into profit and loss before the capitalization conditions are met in thedevelopment process will not be adjusted.
23. Impairment of long-term assets
The Group reviews the long-term equity investments, fixed assets, construction in progress, and intangible assetswith a finite useful life at each balance sheet date to determine whether there is any indication that they havesuffered an impairment loss. If an impairment indication exists, the recoverable amount is estimated. Intangibleassets with an indefinite useful life and not yet available for use are tested for impairment annually, irrespectiveof whether there is any indication that the assets may be impaired.
Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount ofan individual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. Therecoverable amount of an asset or asset group is the higher of its fair value less costs of disposal and the presentvalue of the future cash flows expected to be derived from the asset or asset group.
If such recoverable amount is less than its carrying amount, a provision for impairment losses in respect of thedeficit is recognized in profit or loss for the period.
Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment testing, goodwillis considered together with the related assets group(s), i.e., goodwill is reasonably allocated to the related assetsgroup(s) or each of assets group(s) expected to benefit from the synergies of the combination. An impairment lossis recognized if the recoverable amount of the assets group or sets of assets groups (including goodwill) is lessthan its carrying amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwillallocated to such assets group or sets of assets groups, and then to the other assets of the group on the pro-ratabasis of the carrying amount of each asset (other than goodwill) in the group.
Once an impairment loss of the above-mentioned assets is recognised, it will not be reversed in any subsequentperiod.
24. Long-term prepaid expenses
Long-term prepaid expenses represent expenses incurred that should be borne and amortized over the current andsubsequent periods (together of more than one year). Long-term prepaid expenses are amortized using thestraight-line method over the expected periods in which benefits are derived.
25. Contract liabilities
A contract liability represents the Group's obligation to transfer goods or services to a customer for which theGroup has received consideration (or an amount of consideration is due) from the customer.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
26. Employee benefits
26.1 Accounting treatment of short-term benefits
Actually occurred short-term employee benefits are recognized as liabilities, with a corresponding charge to theprofit or loss for the period or in the costs of relevant assets in the accounting period in which employees provideservices to the Group. Staff welfare expenses incurred by the Group are recognized in profit or loss for the periodor the costs of relevant assets based on the actually occurred amounts when it actually occurred. Non-monetarystaff welfare expenses are measured at fair value.
Payment made by the Group of social security contributions for employees such as premiums or contributions onmedical insurance, work injury insurance and maternity insurance, etc. and payments of housing funds, as wellas trade union fund and employee education fund provided in accordance with relevant requirements, arecalculated according to prescribed bases and percentages in determining the amount of employee benefits andrecognized as relevant liabilities, with a corresponding charge to the profit or loss for the period or the costs ofrelevant assets in the accounting period in which employees provide services.
26.2 Accounting treatment of post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans.
During the accounting period of rendering service to employees of the Group, amount which should be paidaccording to defined contribution plans is recognized as liabilities, and recognized in profit or loss or related costsof assets.
For defined benefit plans, the Group calculates defined benefit plan obligations using projected unit credit methodand the service cost resulting from employee service in the current period is recorded in profit or loss or the costof relevant assets. Defined benefit costs are categorized as follows:
? service cost (including current service cost, past service cost, as well as gains and losses on settlements);? net interest of net liabilities or assets of defined benefit plan(including interest income of planned assets,interest expenses of defined benefit plan liabilities and effect of asset ceiling); and? changes arising from re-measurement of net liabilities or net assets of defined benefit plans.
Service costs and net interest of net liabilities and net assets of defined benefit plans are recognized in profit orloss of current period or costs of related assets. Re-measurements of the net defined benefit liability (asset)(including actuarial gains and losses, the return on plan assets, excluding amounts included in net interest on thenet defined benefit liability (asset), and any change in the effect of the asset ceiling, excluding amounts includedin net interest on the net defined benefit liability (asset)) are recognized in other comprehensive income.
Deficit or surplus from present value of obligation of defined benefit plans less fair value of planned asset ofdefined benefit plans are recognized as net liabilities or net assets of a defined benefit plan.
26.3 Accounting treatment of termination benefits
A liability for a termination benefit is recognized in profit or loss for the period at the earlier of when the Groupcannot unilaterally withdraw from the termination plan or the redundancy offer and when the Group recognizesany related restructuring costs or expenses.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
27. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency such as productsquality assurance, it is probable that an outflow of economic benefits will be required to settle the obligation, andthe amount of the obligation can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the presentobligation at the balance sheet date, taking into account factors pertaining to a contingency such as the risks,uncertainties and time value of money. Where the effect of the time value of money is material, the amount of theprovision is determined by discounting the related future cash outflows.
28. Share-based payments
A share-based payment is a transaction which the Group grants equity instruments, or incurs liabilities for amountsthat are determined based on the price of equity instruments, in return for services rendered by employees. TheGroup's share-based payments are equity-settled share-based payments.
28.1 Equity-settled share-based payments
Equity-settled share-based payments granted to employees
Equity-settled share-based payments in exchange for services rendered by employees are measured at the fairvalue of the equity instruments granted to employees at the grant date. Such amount is recognized as related costsor expenses on a straight-line basis over the vesting period, based on the best estimate of the number of equityinstruments expected to vest, with a corresponding increase in capital reserve.
28.2 Accounting treatment related to implementation, modification and termination of share-based paymentarrangement
At each balance sheet date during the vesting period, the Group makes the best estimate according to thesubsequent latest information of change in the number of employees who are granted with options that may vest,etc. and revises the number of equity instruments expected to vest. The effect of the above estimate is recognizedas related costs or expenses, with a corresponding adjustment to capital reserve.
In case the Group modifies a share-based payment arrangement, if the modification increases the fair value of theequity instruments granted, the Group will include the incremental fair value of the equity instruments granted inthe measurement of the amount recognized for services received. If the modification increases the number of theequity instruments granted, the Group will include the fair value of additional equity instruments granted in themeasurement of the amount recognized for services received. The increase in the fair value of the equityinstruments granted is the difference between fair value of the equity instruments before and after the modificationon the date of the modification. If the Group modifies the terms or conditions of the share-based paymentarrangement in a manner that reduces the total fair value of the share-based payment arrangement, or is nototherwise beneficial to the employee, the Group will continue to account for the services received as if thatmodification had not occurred (other than a cancellation of some or all the equity instruments granted).
If cancellation of the equity instruments granted occurs during the vesting period, the Group will account for thecancellation of the equity instruments granted as an acceleration of vesting, and recognize immediately the amountthat otherwise would have been recognized over the remainder of the vesting period in profit or loss for the period,with a corresponding recognition in capital reserve. When the employee or counterparty can choose whether tomeet the non-vesting condition but the condition is not met during the vesting period, the Group treats it as acancellation of the equity instruments granted.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
29. Revenue
29.1 Accounting policies for revenue recognition and measurement disclosed by business types
When (or as) a performance obligation in a contract is satisfied, i.e., when (or as) the customer obtains control ofrelevant goods or services, the Group recognizes as revenue the amount of the transaction price that is allocatedto that performance obligation. A performance obligation is the Group's promise to transfer to a customer a goodor service (or a bundle of goods or services) that is distinct, in a contract with the customer.
The transaction price is the amount of consideration to which the Group expects to be entitled in exchange fortransferring promised goods or services to a customer, excluding amounts collected on behalf of third parties andamounts expected to be refunded to a customer. In determining the transaction price, the Group considers theimpact of variable consideration, significant financing elements present in the contract, non-cash consideration,consideration payable to the customer and other factors.
If there are two or more of performance obligations included in the contract, at the contract inception, the Groupallocates the transaction price to each single performance obligation based on the proportion of stand-alone sellingprice of goods or services promised in each stand-alone performance obligation. However, if there is conclusiveevidence indicating that the contract discount or variable consideration is only relative with one or more (not thewhole) performance obligations in the contract, the Group will allocate the contract discount or variableconsideration to relative one or more performance obligations. Stand-alone selling price refers to the price of asingle sale of goods or services. If the stand-alone selling price cannot be observed directly, the Group estimatesthe stand-alone selling price through comprehensive consideration of all relative information that can bereasonably acquired and maximum use of observable inputs.
For contracts that contain variable consideration, the Group estimates the amount of consideration to which it willbe entitled using either (a) the expected value method or (b) the most likely amount. The estimated amount ofvariable consideration is included in the transaction price only to the extent that it is highly probable that such aninclusion will not result in a significant revenue reversal in the future when the uncertainty associated with thevariable consideration is subsequently resolved. At each balance sheet date, the Group updates the estimatedtransaction price.
For sales with sales return terms attached, as the customer obtains ownership of related goods, the Grouprecognizes revenue in accordance with the consideration (excluding expected refund amounts due to sales returns)that the Group is expected to charge due to the transfer of goods to the customer, and recognizes liabilities inaccordance with expected refund amounts due to sales returns. Meanwhile, the carrying amount at the time oftransfer of goods expected to be returned, subsequent to deduction of expected costs from collecting the goods(including the decrease in value of the returned goods), is recognized as an asset and carried forward to cost atthe carrying amount at which goods are transferred, net of the cost of asset.
For sales with warranties, if the warranties are separate services to the customer other than serving as an assurancethat the products sold comply with agreed-upon specifications, the warranties constitute single performanceobligations. Otherwise, the Group accounts for warranties in accordance with the Accounting Standards forBusiness Enterprises No. 13 – Contingencies (ASBE No.13).
The Group determines whether it is a principal or an agent at the time of the transaction based on whether it ownsthe "control" of the goods or services before the transfer of such goods or services to the customer. The Group isa principal if it controls the specified good or service before that good or service is transferred to a customer, andthe revenue shall be recognized based on the total consideration received or receivable; otherwise, the Group isan agent, and the revenue shall be recognized based on the amount of commission or handling fee that is expectedto be charged, and such amount is determined based on the net amount of the total consideration received orreceivable after deducting the prices payable to other related parties or according to the established commissionamount.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
29. Revenue - continued
Where payment is received in advance, the advance payment received shall be recorded as a liability andrecognized as revenue when the relevant performance obligation is satisfied.
30. Contract costs
Costs of obtaining a contract
If the incremental costs (costs that will not occur if no contract obtained) incurred for obtaining the contract areexpected to be recovered, the Company recognizes it as an asset and the asset shall be amortized on a basis thatis consistent with the transfer to the customer of the goods or services to which the asset relates and recognizedin profit or loss for the period. If the amortization period of the asset does not exceed one year, it is recognized inprofit or loss for the period in which it occurs. Other expenses incurred by the Company for obtaining the contractare recognized in profit or loss for the period in which it occurs, except as expressly borne by the customer.
Costs to fulfill a contract
If the costs incurred in fulfilling a contract are not within the scope of any standards other than Revenue Standards,the Group recognizes an inventory from the costs incurred to fulfill a contract only if those costs meet all of thefollowing criteria: (1) the costs relate directly to a contract or to an anticipated contract that the Group canspecifically identify; (2) the costs generate or enhance resources of the Group that will be used in satisfyingperformance obligations in the future; and (3) the costs are expected to be recovered. The asset mentioned aboveshall be amortized on a basis that is consistent with the revenue recognition of the goods or services to which theasset relates and recognized in profit or loss for the period.
31. Government grants
Government grants are monetary assets and non-monetary assets from the government to the Group at noconsideration. A government grant is recognized only when the Group can comply with the conditions attachingto the grant and the Group will receive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received orreceivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fairvalue cannot be reliably determined, it is measured at a nominal amount. A government grant measured at anominal amount is recognized immediately in profit or loss for the period.
31.1 Determination basis and accounting treatment of government grants related to assets
See Notes (V), 39 for details of the Group's government grants related to assets.
A government grant related to an asset is recognized as deferred income and included in profit or loss over theuseful life of the related asset with the straight-line method.
31.2 Determination basis and accounting treatment of government grants related to income
See Notes (V), 54 for details of the Group's government grants related to income. The Group classifies governmentgrants that are difficult to be distinguished as government grants related to income aggregately.
For a government grant related to income, if the grant is a compensation for related expenses or losses to beincurred in subsequent periods, the grant is recognized as deferred income over the periods in which the relatedcosts or losses are recognized; If the grant is a compensation for related expenses or losses already incurred, thegrant is recognized immediately in profit or loss.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
31. Government grants - continued
31.2 Determination basis and accounting treatment of government grants related to income - continued
A government grant related to the Group's daily activities is recognized in other income based on the nature ofeconomic activities; a government grant not related to the Group's daily activities is recognized in non-operatingincome and expenses.
32. Leases
A lease is a contract whereby the lessor conveys to the lessee in return for a consideration the right to use an assetfor an agreed period of time.
The Group assesses whether a contract is or contains a lease at inception date. Such contract will not be reassessedunless the terms and conditions of the contract are subsequently changed.
32.1 The Group as lessee
32.1.1 Right-of-use assets
Except for short-term leases and leases of low-value assets, at the commencement date of the lease, the Grouprecognizes a right-of-use assets. The commencement date of the lease is the date on which a lessor makes anunderlying asset available for use by the Group. The Group measures the right-of-use assets at cost. The cost ofthe right-of-use assets comprises:
? the amount of the initial measurement of the lease liabilities;? any lease payments made at or before the commencement date, less any lease incentives received;? any initial direct costs incurred by the Group;? an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring
the site on which it is located or restoring the underlying asset to the condition required by the terms andconditions of the lease.
The Group depreciates right-of-use assets by reference to the relevant depreciation provisions of AccountingStandards for Business Enterprises No. 4 - Fixed Assets. The right-of-use assets are depreciated over theremaining useful lives of the leased assets where the Group is reasonably certain to obtain ownership of theunderlying assets at the end of the lease term. Otherwise, right-of-use assets are depreciated over the shorter ofthe lease term and the remaining useful lives of the leased assets.
The Group applies ASBE No. 8 Impairment of Assets, to determine whether the right-of-use assets are impairedand perform accounting treatment to identified impairment loss.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
32. Leases - continued
32.1 The Group as lessee - continued
32.1.2 Lease liabilities
Except for short-term leases and leases of low-value assets, at the commencement date of the lease, the Groupmeasures the lease liabilities at the present value of the lease payments that are not paid at that date. If the interestrate implicit in the lease cannot be readily determined, the lessee shall use the lessee's incremental borrowing rate.
Lease payments refer to payments relating to the right to use leased assets during the lease term which are madeby the Group to the lessor, including:
? fixed payments and in-substance fixed payments, less any lease incentives receivable (if any);? the exercise price of a purchase option reasonably certain to be exercised by the Group;? payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to
terminate the lease; and
? amounts expected to be paid under residual value guarantees provided by the Group.
After the commencement date of the lease, the Group calculates interest expenses of lease liabilities for eachperiod of the lease term based on fixed periodic rate, and recognizes such expenses in profit or loss or cost ofrelated assets.
After the commencement date of the lease, the Group re-measures the lease liabilities and adjusts the right-of-useassets accordingly in the following cases. If the book value of the right-of-use asset has been reduced to zero, butthe lease liability needs to be reduced further, the Group will recognize the difference in profit or loss for theperiod:
? there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, inwhich case the related lease liability is remeasured by discounting the revised lease payments using arevised discount rate at the date of reassessment.;? there is a change in the amounts expected to be payable under a residual value guarantee, or in future leasepayments resulting from a change in an index or a rate used to determine those payments, the Group re-measures the lease liabilities, on the basis of the revised lease payments and the unchanged discount rate.
32.1.3 Determination basis and accounting treatment of short-term leases and leases of low-value assets treatedunder a simplified method as lessee
For short-term leases of machinery and equipment and leases of low-value assets to which the recognitionexemption is applied by the Group, right-of-use assets and lease liabilities are not recognized. A short-term leaserefers to a lease that, at the commencement date, has a lease term of 12 months or less and do not contain apurchase option. A lease of low value asset refers to a single lease asset, when new, is of low value. Leasepayments on short-term leases and leases of low-value assets are recognized in profit or loss or the cost ofunderlying assets on a straight-line basis over the lease term.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
32. Leases - continued
32.1 The Group as lessee - continued
32.1.4 Lease modifications
The Group accounts for a lease modification as a separate lease if:
? the lease modification expanded the scope of the lease by adding the right-of-use of one or more lease assets;and? the increased consideration is equivalent to the amount of stand-alone price of the expanded lease scope
adjusted according to the contract.
If the lease modification is not accounted for as an individual lease, on the effective date of the lease modification,the Group reallocates the consideration of the contract after the change, re-determines the lease term, and re-measures lease liabilities based on the changed lease payments and the present value calculated by the reviseddiscount rate.
If the lease modification results in a reduction in the lease scope or lease term, the carrying amount of the right-of-use assets will be reduced, and the gains or losses relevant to the lease partially of fully terminated will beincluded in profit or loss for the period; for other lease modifications resulting in the re-measurement of leaseliabilities, the carrying amount of right-of-use assets is adjusted accordingly.
32.2 The Group as lessor
32.2.1 Classification criteria and accounting treatment of leases as lessor
Leases are classified as finance leases whenever the terms of the leased assets transfer substantially all the risksand rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor under operating leases
The Group recognizes lease payments from operating leases as income on a straight-line basis. The Groupcapitalizes initial direct costs incurred in obtaining an operating lease and recognizes those costs as an expenseover the lease term on the same basis as the lease income.
32.2.2 Subleases
As the lessor of a sublease, the Group accounts for the original lease contract and the sublease contract as twoseparate contracts. The Group classifies the subleases based on the right-of-use assets generating from the originallease rather than the underlying assets of the original lease.
33. Deferred tax assets/ deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
33.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measuredat the amount expected to be paid (or recovered) according to the requirements of tax laws.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
33. Deferred tax assets/ deferred tax liabilities - continued
33.2 Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, orbetween the nil carrying amount of those items that are not recognised as assets or liabilities and their tax basethat can be determined according to tax laws, deferred tax assets and liabilities are recognised using the balancesheet liability method.
Deferred tax is generally recognized for all temporary differences. Deferred tax assets for deductible temporarydifferences are recognized to the extent that it is probable that taxable profits will be available against which thedeductible temporary differences can be utilized. However, for temporary differences associated with the initialrecognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a businesscombination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time oftransaction, no deferred tax asset or liability is recognized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extentthat it is probable that future taxable profits will be available against which the deductible losses and tax creditscan be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments insubsidiaries and associates, and interests in joint ventures, except where the Group is able to control the timing ofthe reversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future. Deferred tax assets arising from deductible temporary differences associated with suchinvestments and interests are only recognized to the extent that it is probable that there will be taxable profitsagainst which to utilize the benefits of the temporary differences and they are expected to reverse in theforeseeable future.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws,that are expected to apply in the period in which the asset is realised or the liability is settled.
Current and deferred tax expenses or income are recognized in profit or loss for the period, except when they arisefrom transactions or events that are directly recognized in other comprehensive income or in shareholders' equity,in which case they are recognized in other comprehensive income or in shareholders' equity; and when they arisefrom business combinations, in which case they adjust the carrying amount of goodwill.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longerprobable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets tobe utilized. Such reduction in amount is reversed when it becomes probable that sufficient taxable profits will beavailable.
33.3 Income tax offsetting
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize theassets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presentedon a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assetsand deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxableentity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or torealize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred taxassets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset andpresented on a net basis.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
34. Hedge accounting
34.1 Basis for using hedge accounting and accounting treatment method
Certain financial instruments are used as hedging instruments by the Group for the purpose of managing the riskexposure arising from specific risk, such as exchange rate risk, etc. The Group applies hedging accounting for ahedge that satisfies the prescribed conditions. Hedging activities of the Group include hedges of net investmentin foreign operations.
At the inception of hedging, the Group officially designated hedging instruments and hedged items, and preparedwritten documents recording the nature of hedging instruments, hedged items, hedged risks, and hedgeeffectiveness evaluation methods (including the analysis of the causes of invalid hedges and methods to determinethe hedge ratio).
The Group will discontinue hedge accounting when one of the following conditions occurs:
? Due to changes in risk management objectives, the hedging relationship no longer meets the risk
management objectives.
? The hedging instrument expires, or is sold, terminated or exercised.? There is no longer an economic relationship between the hedged item and the hedging instruments, or inthe changes of the value arising from the economic relationship between the hedged item and the hedginginstrument, the impact of credit risk begins to dominate.? The hedging relationship no longer meets other conditions for using the hedge accounting methods.
Hedges for net investment in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or losson the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensiveincome. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.
When disposing of all or part of foreign operations, the profits or losses of the above hedging instruments includedin other comprehensive income shall be reclassified in the current profits and losses.
34.2 Methods of assessing effectiveness of hedges
The Group continuously evaluates whether the hedging relationship meets the requirements of hedgingeffectiveness on and after the inception date of hedging. If the hedging meets the following conditions at the sametime, the Group will determine that the hedging relationship meets the requirements for hedging effectiveness:
? There is an economic relationship between hedged items and hedging instruments.? Among the value changes caused by the economic relationship between hedged items and hedginginstruments, the impact of credit risk does not dominate.? The hedging ratio of the hedging relationship will be equal to the ratio of the actual number of the Group's
hedging items to the actual number of hedging instruments.
If the hedging relationship no longer meets the requirement of hedging effectiveness due to the hedging ratio, butthe risk management objectives of the hedging relationship have not changed, the Group will rebalance thehedging relationship. The number of hedged items or hedging instruments in the hedging relationship is adjustedso that the hedging ratio meets the requirements of hedging effectiveness again.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
35. Accounting treatment in relation to the repurchase of equity instruments
The consideration and transaction costs paid to repurchase own equity instruments are deducted from equity. Nogain or loss is recognized in profit or loss on the repurchase, sale or cancellation of the Company's equityinstruments.
36. Critical Judgments in Applying Accounting Policies and Key Assumptions and Uncertainties in
Accounting Estimate
In the application of the Group's accounting policies, which are described in Note (III), the Group is required tomake judgments, estimates and assumptions about the carrying amounts of items in the financial statements thatcannot be measured accurately, due to the internal uncertainty of the operating activities. These judgments,estimates and assumptions are based on historical experiences of the Group's management as well as other factorsthat are considered to be relevant. Actual results may differ from these estimates.
The aforementioned judgments, estimates and assumptions are reviewed regularly on a going concern basis. Theeffect of a change in accounting estimate is recognized in the period of the change, if the change affects that periodonly; or recognized in the period of the change and future periods, if the change affects both.
- Key assumptions and uncertainties in accounting estimates
At the balance sheet date, the key assumptions and uncertainties that are probable to cause significant adjustmentsto the carrying amounts of assets and liabilities in future periods include:
Impairment of accounts receivables
The Group's accounts receivable arise from transactions under the Revenue Standards and contain no significantfinancing component. When evaluating the provision for ECL of the accounts receivable, the management needsto collect the existing information and use significant accounting estimates, as well as collect informationincluding historical bad debt records, default or delayed payment, as well as aging of accounts receivable andother factors to estimate and review the amount of lifetime ECL of the accounts receivable. As of 31 December2023, the balance of the Group's provision for credit losses of accounts receivable was RMB 43,964,811.88 (31December 2022: RMB 20,564,388.62).
Inventories
The Group makes provision for the decline in the value of inventory according to the difference between theinventory costs beyond its net realizable value. The recognition of the net realizable value of inventories requiresthe estimation of the expected sales in the future and the estimation of the costs, expenses and taxes to be incurred.The differences (if any) between the re-estimated value and the current estimate will impact the carrying amountof the inventories over the period in which the estimate is changed. As of 31 December 2023, the balance of theGroup's provision for the decline in the value of inventories was RMB 331,096,345.17 (31 December 2022: RMB159,032,019.03).
Deferred tax assets
The benefit of the deferred tax assets may depend on the future taxable profits and the expected tax rate whenassociated deductible temporary differences is realized. If future taxable profits or actual tax rate is less thanexpected, the carrying amounts of deferred tax assets will be reduced and the reduction will be reversed to profitsor losses in the corresponding period. As of 31 December 2023, the Group had recognized the deferred tax assetsof RMB 490,796,164.94 (31 December 2022: RMB 367,993,139.04).
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(III). SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued
36. Critical Judgments in Applying Accounting Policies and Key Assumptions and Uncertainties in Accounting
Estimate - continued
- Key assumptions and uncertainties in accounting estimates - continued
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation ofthe present value of the future expected cash flows from the asset groups or set of asset groups to which thegoodwill is allocated. Estimating the present value requires the Group to make an estimate of the expected futurecash flows from the asset groups or set of asset groups and also choose a suitable discount rate in order to calculatethe present value of those cash flows. When considering future cash flow and discount rate, changes in keyassumptions such as the discount rate and long-term growth rate adopted by the Group may have significantlyimpacts on the present value of the future cash flow used in impairment testing.
Useful life and estimated net residual value of fixed assets
As disclosed in Note (III) 19, the Group reviews the useful life and estimated net residual value of a fixed assetat least once at each financial year-end. Both scientific and technological innovation and intense competitionwithin the industry significantly impact the estimation of useful life. The Group's management did not findanything that might shorten or extend the useful life of fixed assets of the Group or require changing the estimatednet residual value.
37. Changes in significant accounting policies and accounting estimates
37.1 Changes in significant accounting policies
Interpretation No.16 of the Accounting Standards for Business Enterprises
The Interpretation No. 16 of the Accounting Standards for Business Enterprises (the "Interpretation No. 16") wasissued by the Ministry of Finance on 30 November 2022, which stipulated the accounting treatment concerningthe deferred income tax relating to assets and liabilities arising from a single transaction to which the exemptionof initial recognition does not apply. Interpretation No. 16 revised the coverage of exemption of the initialrecognition of deferred income tax in the Accounting Standards for Business Enterprises No. 18 - Income Tax,and specified that the relevant provisions on the exemption of initial recognition of deferred tax liabilities anddeferred tax assets are not applicable to a single transaction (not a business combination) that affects neither theaccounting profit nor taxable income (or deductible losses) at the time of transaction, and where the assets andliabilities initially recognized generate equal taxable temporary differences and deductible temporary differences.The Interpretation became effective from 1 January 2023 and could be early applied. The Group early applied theInterpretation on 1 January 2023.
The Group considers that the adoption of this Interpretation has no significant impact on the financial statementsof the Group.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(IV) TAXES
1. Major categories of taxes and tax rates
| Category of tax | Basis of tax computation | Tax rate |
| Value-added tax-Chinese (Note 1) | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income, interest income and lease income. The Company and its domestic subsidiaries are general VAT taxpayers | 13%, 9%, 6%, 5% and 3% |
| Non-resident enterprises obtain commission income within China | 6% | |
| Value-added tax-French | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income | 20% |
| Value-added tax-German | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income | 19% |
| Value-added-Tunisian | VAT payable is the balance of output tax less deductible input tax of taxable income such as product sales income, service income | 19% |
| Enterprise income tax | Taxable income | Note 2 |
| Non-resident enterprises obtain investment income and property transfer income from within China | 10% | |
| Property tax | Residual value after deducting 30% from the original value of the property at one time | 1.2% |
| Rental income | 12% | |
| City maintenance and construction tax | Turnover tax actually paid | 7% and 5% |
| Education surcharge | Turnover tax actually paid | 3% |
| Local education surcharge | Turnover tax actually paid | 2% |
Note 1: The Company and its subsidiaries in China shall apply the measures for the administration of VAT
exemption, credit and tax refund for the export of self-produced goods. The export tax refund rate isdifferent according to the scope of export goods.
Note 2: Description of enterprise income tax rate of main companies of the Group:
| Name of taxpayer | Income tax rate |
| Universal Scientific Industrial (Shanghai) Co., Ltd. | 15%(Note 1) |
| USI Electronics (Shenzhen) Co., Ltd. | 25% |
| Universal Global Technology (Kunshan) Co., Ltd. | 15%(Note 2) |
| Universal Global Technology (Shanghai) Co., Ltd. | 15%(Note 3) |
| Universal Global Electronics (Shanghai) Co., Ltd. | 25% |
| Universal Global Technology (Huizhou) Co., Ltd. | 15%(Note 4) |
| Universal Global Technology Co., Limited | 16.5% (Note 5) |
| Universal Global Industrial Co., Ltd. | 16.5% (Note 5) |
| Universal Global Electronics Co., Ltd. | 16.5% (Note 5) |
| Universal Global Scientific Industrial Co., Ltd. | Note 6 |
| Universal Scientific Industrial Co., Ltd. | Note 6 |
| USI Japan Co., Ltd. | 30% (Note 7) |
| USI America.Inc. | 21% (Note 8) |
| Universal Scientific Industrial De México S.A. De C.V. | 30% (Note 9) |
| Universal Scientific Industrial Poland Sp. z o.o. | 19%(Note 10) |
| Universal Scientific Industrial (France) | 25%(Note 11) |
| Universal Scientific Industrial Vietnam Company Limited | 20%(Note 12) |
| Asteelflash Suzhou Co., Ltd. | 15%(Note 13) |
| FINANCI?RE AFG S.A.S. ("FAFG") | 25%(Note 14) |
| USI Science and Technology (Shenzhen) Co., Ltd. | 20%(Note 15) |
| Hirschmann Car Communication Holding S.a.r.l. ("Hirschmann ") | 24.94%(Note 16) |
The enterprise income tax rate applicable to the Company and its subsidiaries in China is 25%.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(IV) TAXES - continued
1. Major categories of taxes and tax rates - continued
Note 1: The Company was approved as a high-tech enterprise by Science and Technology Commission of
Shanghai Municipality, Shanghai Municipal Finance Bureau, Shanghai Municipal Office of the StateAdministration of Taxation and Shanghai Municipal Bureau of Local Taxation in 2023, and obtained theHigh-tech Enterprise Certificate (Certificate No. is GR202331006257), which was valid for 3 years. TheCompany applies the enterprise income tax rate of 15% from 2023 to 2025.
Note 2: Universal Global Technology (Kunshan) Co., Ltd. was approved as a high-tech enterprise by Jiangsu
Provincial Department of Science and Technology, Department of Finance of Jiangsu Province, JiangsuProvincial Office of State Administration of Taxation and Jiangsu Provincial Bureau Local Taxation in2022, and obtained the High-tech Enterprise Certificate (Certificate No.: GR202232008811), which wasvalid for 3 years. Universal Global Technology (Kunshan) Co., Ltd. applies the enterprise income taxrate of 15% from 2022 to 2024.
Note 3: Universal Global Technology (Shanghai) Co., Ltd. was approved as a high-tech enterprise by Science and
Technology Commission of Shanghai Municipality, Shanghai Municipal Finance Bureau, ShanghaiMunicipal Office of the State Administration of Taxation and Shanghai Municipal Bureau of LocalTaxation in 2022, and obtained the High-tech Enterprise Certificate (Certificate No.: GR202231007023),which was valid for 3 years. Universal Global Technology (Shanghai) Co., Ltd. applies the enterpriseincome tax rate of 15% from 2022 to 2024.
Note 4: Universal Global Technology(Huizhou) Co., Ltd. was approved as a high-tech enterprise by Department
of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province,Guangdong Provincial Tax Service, State Taxation Administration in 2022, and obtained the High-techEnterprise Certificate (Certificate No.: GR202244008509), which is valid for 3 years. Universal GlobalTechnology(Huizhou) Co., Ltd. applies the enterprise income tax rate of 15% from 2022 to 2024.
Note 5: Universal Global Technology Co., Limited, Universal Global Industrial Co., Ltd. and Universal Global
Electronics Co., Ltd. (“UGE”) are companies in Hong Kong, China. The applicable enterprise incometax rate is 8.25% for the part with operating profits not exceeding HKD 2 million; and 16.5% for the partwith operating profits exceeding HKD 2 million.
Note 6: Universal Global Scientific Industrial Co., Ltd. (“UGSI”) and the Universal Scientific Industrial Co., Ltd.
(“USI”) are registered and established in Taiwan, China. According to the income tax regulations inChina's Taiwan region, (1) the enterprises with profit taxable income less than TWD 120,000 is exemptfrom profit tax; (2) the enterprises with the annual taxable income more than TWD 120,000 shall belevied at 20% of its total taxable income. But its taxable amount shall not exceed half of the taxableincome of a profit-making enterprise exceeding TWD 120,000. At the same time, the income tax law inTaiwan stipulates that an additional 10% income tax shall be levied on the undistributed surplus of thecurrent year, which shall be listed as the income tax expense of the year decided by the board of directors.
Note 7: USI Japan Co., Ltd. is established and registered in Japan and is subject to the national tax law of Japan.
According to the provisions of Japan's national tax law, the applicable tax rate is 30% to enterprisestaking the taxable income as the tax base. If the taxable income of an enterprise is negative and is reportedwith a cyan E-Tax return (i.e. self-accounting, self-reporting and self-taxation), the accumulateddeductible loss can be deducted within 9 years after the year in which the loss occurs.
Note 8: USI America. Inc. is incorporated and registered in the United States, and the applicable enterprise income
tax rate is 21%. According to the tax law of California where the enterprise is registered, even if there isno profit in establishing or engaging in commercial activities in the state, it is required to pay CaliforniaRegional Income Tax of USD 800 per year according to the Alternative Minimum Tax.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(IV) TAXES - continued
1. Major categories of taxes and tax rates - continued
Note 9: Universal Scientific Industrial De México S.A. De C.V. is registered and established in Mexico, and the
applicable enterprise income tax rate is 30%.
Note 10: Universal Scientific Industrial Poland Sp. z o.o. (formerly known as "Chung Hong Electronics Poland
sp. z o.o.", hereinafter referred to as "USI Poland") is established and registered in Poland. The applicableenterprise income tax rate is 19%. As it is located in a special economic region, it enjoys the taxpreference of temporarily exempting enterprise income tax within 40% of the initial investment in 2026and previous years.
Note 11: Universal Scientific Industrial (France) ("USI France") is established and registered in France, and the
applicable enterprise income tax rate is 25% (2022: 25%).
Note 12: Universal Scientific Industrial Vietnam Company Limited is established and registered in Vietnam, and
the applicable enterprise income tax rate is 20%.
Note 13: Asteelflash Suzhou Co., Ltd. was approved as a high-tech enterprise by Jiangsu Provincial Department
of Science and Technology, Department of Finance of Jiangsu Province, Jiangsu Provincial Office ofState Administration of Taxation and Jiangsu Provincial Bureau Local Taxation in 2023, and obtainedthe High-tech Enterprise Certificate (Certificate No.: GR202332016930), which was valid for 3 years.Asteelflash Suzhou Co., Ltd. applies the enterprise income tax rate of 15% from 2023 to 2025.
Note 14: FINANCI?RE AFG S.A.S. (“FAFG”) is established and registered in France, and the applicable
enterprise income tax rate is 25% (2022: 25%). The corporate income tax rate applicable to Germansubsidiary is 30% (2022: 30%). The enterprise income tax rate applicable to the Tunisian subsidiary is15% (2022: 15%). The corporate income tax rate applicable to its U.S. subsidiaries is 21% (2022: 21%).
Note 15: USI Science and Technology (Shenzhen) Co., Ltd. is a small low profit enterprise, and according to
Article 1 of the Announcement of the Ministry of Finance and the State Taxation Administration on thePreferential Income Tax Policies for Micro and Small Enterprises and Individual Industrial andCommercial Households (Caishui [2023] No. 6), the portion of the small low-profit enterprise's annualtaxable income not more than RMB 1 million shall be included in its taxable income at the reduced rateof 25%, with the applicable enterprise income tax rate of 20%.
Note 16: Hirschmann is established and registered in Luxembourg, and the applicable enterprise income tax rate
is 24.94%.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS
1. Cash and bank balances
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||||
| Foreign currency | Exchange rate | RMB | Foreign currency | Exchange rate | RMB | |
| Cash: | ||||||
| RMB | 549.32 | 2,003.85 | ||||
| USD | 2,524.00 | 7.0827 | 17,876.73 | 11,928.76 | 6.9646 | 83,079.04 |
| EUR | 6,970.06 | 7.8264 | 54,550.48 | 10,605.37 | 7.4284 | 78,780.93 |
| HKD | 269.00 | 0.9062 | 243.77 | 3,449.00 | 0.8933 | 3,080.99 |
| JPY | 47,000.00 | 0.0502 | 2,359.40 | - | 0.0524 | - |
| GBP | 596.59 | 9.0057 | 5,372.71 | 137.31 | 8.3941 | 1,152.59 |
| MXN | 30,000.00 | 0.4193 | 12,579.00 | 200,703.05 | 0.3597 | 72,192.89 |
| PLN | 8,575.50 | 1.8107 | 15,527.66 | 4,477.49 | 1.5878 | 7,109.36 |
| TND | 2,192.99 | 2.3010 | 5,046.07 | 8,696.94 | 2.2430 | 19,507.24 |
| CZK | 4,612.00 | 0.3165 | 1,459.70 | 15,684.00 | 0.3080 | 4,830.67 |
| Bank balances: | ||||||
| RMB | 5,452,876,386.47 | 3,718,260,388.65 | ||||
| USD | 578,752,731.52 | 7.0827 | 4,099,131,971.54 | 446,239,359.35 | 6.9646 | 3,107,878,642.13 |
| EUR | 56,940,875.16 | 7.8264 | 445,642,065.35 | 31,555,392.28 | 7.4284 | 234,406,076.01 |
| HKD | 2,273,083.08 | 0.9062 | 2,059,867.89 | 2,281,680.22 | 0.8933 | 2,038,224.94 |
| JPY | 158,795,833.00 | 0.0502 | 7,971,550.82 | 317,627,468.00 | 0.0524 | 16,643,679.32 |
| GBP | 1,941,353.30 | 9.0057 | 17,483,245.41 | 869,074.26 | 8.3941 | 7,295,096.25 |
| MXN | 22,032,456.68 | 0.4193 | 9,238,209.09 | 34,274,075.98 | 0.3597 | 12,328,385.13 |
| TWD | 4,386,124,749.00 | 0.2307 | 1,011,878,979.59 | 2,093,161,717.00 | 0.2268 | 474,729,077.42 |
| SGD | 24,736.69 | 5.3772 | 133,014.13 | 15,173.92 | 5.1831 | 78,647.94 |
| TND | 1,836,432.91 | 2.3010 | 4,225,632.13 | 4,123,497.82 | 2.2430 | 9,249,005.61 |
| CZK | - | 0.3165 | - | 1,501,264.14 | 0.3080 | 462,389.36 |
| PLN | 48,243,800.71 | 1.8107 | 87,355,049.95 | 49,092,880.80 | 1.5878 | 77,949,676.13 |
| VND | 153,937,471,634.00 | 0.0003 | 46,181,241.49 | 54,843,591,825.00 | 0.0003 | 16,453,077.55 |
| Other currency funds: | ||||||
| RMB | 3,000,000.00 | 4,500,000.00 | ||||
| TWD | 45,000,000.00 | 0.2307 | 10,380,118.50 | 45,000,000.00 | 0.2268 | 10,205,374.50 |
| PLN | - | 1.8107 | - | 1,394,584.30 | 1.5878 | 2,214,334.90 |
| JPY | 1,000,000.00 | 0.0502 | 50,210.00 | 1,000,000.00 | 0.0524 | 52,360.00 |
| USD | 2,961,481.09 | 7.0827 | 20,975,282.12 | - | 6.9646 | - |
| Total | 11,218,698,389.32 | 7,695,016,173.40 | ||||
| Including: Balance kept in a foreign country | 3,597,054,385.03 | 2,136,105,405.28 | ||||
As at 31 December 2023, the Group's restricted cash and bank balances included in other cash and bank balancesequivalent to RMB 34,405,610.62 (31 December 2022: RMB 16,972,069.40), of which RMB 13,430,328.50 (31December 2022: RMB 14,757,734.50) was the customs deposit and RMB 20,975,282.12 (31 December 2022: nil)was the investment deposit. The foreign exchange margin was nil for the year (31 December 2022: RMB2,214,334.90). The restricted other cash and bank balances aforementioned are not included in cash and cashequivalents in the preparation of the cash flow statements.
2. Held-for-trading financial assets
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Financial Assets at Fair Value through Profit or Loss ("FVTPL") | 245,558,007.22 | 271,243,519.53 |
| Including: Accounts receivable factoring (Note 1) | 223,401,570.22 | 135,812,841.71 |
| Contingent consideration (Note 2) | - | 99,372,192.22 |
| Derivative financial assets (Note 3) | 22,156,437.00 | 36,058,485.60 |
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
2. Held-for-trading financial assets - continued
Note 1: The accounts receivable are classified as financial assets at fair value through profit or loss since the
Group manages accounts receivable from certain specific customers only for the purpose of selling suchfinancial assets through factoring.
Note 2: On 12 December 2019, the Company established USI France through its wholly-owned subsidiary
Universal Global Technology Co., Limited and entered a Share Purchase Agreement with shareholdersof FAFG, SPFH Holding Korlatolt Felelossegu Tarsasag, ASDI and Arkéa Capital Investissement S.A.,for the purpose of acquisition of 100% of its equity interest. As agreed by both parties, in accordancewith FAFG's audited accumulated financial results from 1 January 2021 to 31 December 2022, from therecovery of contingent consideration from the original shareholders of FAFG, an amount of EUR3,752,294.35 (equivalent to RMB29,366,894.59) was not yet recovered as at 31 December 2023. It wasrecovered subsequent to the period. Refer to Note (V), 6 for details.
Note 3: The derivative financial assets held by the Group are foreign exchange forward contract.
3. Notes receivable
(1) Categories of notes receivable
Unit: RMB
| Category | 31/12/2023 | 31/12/2022 |
| Bank acceptances | 65,545,008.33 | 45,627,553.57 |
(2) As at 31 December 2023, the Group had no notes receivable that have been pledged as security.
(3) As at 31 December 2023, the Group had no notes receivable that have been endorsed or discounted and
were not yet matured at the balance sheet date.
(4) As at 31 December 2023, the Group made no provision for credit loss since the Group considered that
the accepting banks of the bank acceptances held by it were of high ratings and no significant creditrisk was expected to exist.
(5) In 2023, the Group had no notes receivable that have been actually written off.
4. Accounts receivable
(1) Categories of accounts receivable
Unit: RMB
| Category | 31/12/2023 | 31/12/2022 |
| Accounts receivable arising from contracts with customers | 10,067,526,873.99 | 11,139,685,148.73 |
| Less: Bad debt provision | 43,964,811.88 | 20,564,388.62 |
| Total | 10,023,562,062.11 | 11,119,120,760.11 |
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Accounts receivable - continued
(2) Disclosure of accounts receivable by aging
Unit: RMB
| Aging | 31/12/2023 | 31/12/2022 |
| Within the credit term | 9,196,939,905.88 | 10,263,555,132.43 |
| 1-30 days overdue | 645,623,766.37 | 713,540,293.51 |
| 31-60 days overdue | 111,023,244.93 | 103,786,907.81 |
| 61-90 days overdue | 40,083,422.87 | 36,934,282.12 |
| 90-180 days overdue | 19,353,226.81 | 16,957,415.00 |
| More than 180 days overdue | 54,503,307.13 | 4,911,117.86 |
| Total | 10,067,526,873.99 | 11,139,685,148.73 |
(3) Disclosure by category of bad debt provision method
Unit: RMB
| Category | 31/12/2023 | 31/12/2022 | ||||||||
| Book value | Bad debt provision | Carrying amount | Book value | Bad debt provision | Carrying amount | |||||
| Amount | Proportion (%) | Amount | Proportion of provision (%) | Amount | Proportion (%) | Amount | Proportion of provision (%) | |||
| Bad debt provision on an individual basis | 71,829,986.74 | 0.71 | 26,767,777.12 | 60.88 | 45,062,209.62 | - | - | - | - | - |
| Bad debt provision on a portfolio basis | 9,995,696,887.25 | 99.29 | 17,197,034.76 | 39.12 | 9,978,499,852.49 | 11,139,685,148.73 | 100.00 | 20,564,388.62 | 100.00 | 11,119,120,760.11 |
| Total | 10,067,526,873.99 | 100.00 | 43,964,811.88 | 100.00 | 10,023,562,062.11 | 11,139,685,148.73 | 100.00 | 20,564,388.62 | 100.00 | 11,119,120,760.11 |
Bad debt provision on an individual basis
Unit: RMB
| Company name | 31/12/2023 | Reason for provision | ||
| Book value | Bad debt provision | Proportion of provision (%) | ||
| Company A | 30,723,213.17 | 939,792.13 | 3.06 | Due to the customer's financial difficulties and poor realization of assets, the specific provision is made based on the risk assessment and judgement of the management. |
| Company B | 20,560,132.35 | 20,560,132.35 | 100.00 | Due to the customer's financial difficulties and poor realization of assets, the specific provision is made based on the risk assessment and judgement of the management. |
| Company C | 14,208,833.83 | 2,098,949.96 | 14.77 | Due to the customer's financial difficulties and poor realization of assets, the specific provision is made based on the risk assessment and judgement of the management. |
| Company D | 6,337,807.39 | 3,168,902.68 | 50.00 | Due to the customer's financial difficulties and poor realization of assets, the specific provision is made based on the risk assessment and judgement of the management. |
| Total | 71,829,986.74 | 26,767,777.12 | 37.27 | |
Bad debt provision on a portfolio basis
As part of the Group's credit risk management, the expected credit losses on accounts receivable are assessed usingthe aging analysis approach. According to the Group's assessment on credit risk, the aging reflects the solvency ofcustomers when the receivables are due.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Accounts receivable - continued
(3) Disclosure by category of bad debt provision method - continued
At 31 December 2023, the credit risk and expected credit losses on accounts receivable were as follows:
Unit: RMB
| Aging | 31/12/2023 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within credit period | 0.01 | 9,181,331,401.42 | 1,361,522.66 | 9,179,969,878.76 |
| Overdue for 1-30 days | 0.10 | 643,088,509.46 | 640,718.58 | 642,447,790.88 |
| Overdue 31-60 days | 0.49 | 105,845,863.32 | 520,695.94 | 105,325,167.38 |
| 61-90 days overdue | 0.91 | 37,560,177.81 | 341,939.13 | 37,218,238.68 |
| 90-180 days overdue | 7.41 | 14,622,655.71 | 1,083,878.92 | 13,538,776.79 |
| More than 180 days overdue | 100.00 | 13,248,279.53 | 13,248,279.53 | - |
| Total | 0.17 | 9,995,696,887.25 | 17,197,034.76 | 9,978,499,852.49 |
At 31 December 2022, the credit risk and expected credit losses on accounts receivable were as follows:
Unit: RMB
| Aging | 1/1/2023 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within credit period | 0.02 | 10,263,555,132.43 | 2,226,378.22 | 10,261,328,754.21 |
| Overdue for 1-30 days | 0.31 | 713,540,293.51 | 2,236,844.84 | 711,303,448.67 |
| Overdue 31-60 days | 3.75 | 103,786,907.81 | 3,891,754.82 | 99,895,152.99 |
| 61-90 days overdue | 12.66 | 36,934,282.12 | 4,674,454.00 | 32,259,828.12 |
| 90-180 days overdue | 15.47 | 16,957,415.00 | 2,623,838.88 | 14,333,576.12 |
| More than 180 days overdue | 100.00 | 4,911,117.86 | 4,911,117.86 | - |
| Total | 0.18 | 11,139,685,148.73 | 20,564,388.62 | 11,119,120,760.11 |
The expected average loss rate mentioned above is based on the historical actual credit loss rates and the currentconditions as well as the forecast of future economic conditions. In 2023, the Group's valuation method remainsunchanged.
(4) Changes in bad debt provision
Unit: RMB
| Category | 31/12/2022 | Changes for the year | 31/12/2023 | ||
| Provision in the current year | Write-off | Translation differences arising on translation of financial statements denominated in foreign currencies | |||
| Provision for expected credit loss by aging matrix | 20,564,388.62 | 21,981,473.91 | - | 1,418,949.35 | 43,964,811.88 |
Changes in bad debt provision for accounts receivable:
Unit: RMB
| Provision for credit loss | Lifetime ECL |
| At 1 January 2023 | 20,564,388.62 |
| ECL accrued | 21,981,473.91 |
| Effect of changes in exchange rate | 1,418,949.35 |
| At 31 December 2023 | 43,964,811.88 |
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
4. Accounts receivable - continued
(5) There are no accounts receivable that have been actually written off in the year.
(6) Top five accounts receivable at 31 December 2023 categorized by debtor
Unit: RMB
| Company name | Accounts receivable at 31 December 2023 | Percentage to total accounts receivable at 31 December 2023 (%) | Bad debt provision at 31 December 2023 |
| Company E | 2,404,929,295.79 | 23.89 | 355,929.54 |
| Company F | 899,248,907.86 | 8.93 | 133,088.84 |
| Company G | 796,186,099.99 | 7.91 | 117,835.54 |
| Company H | 528,221,680.81 | 5.24 | 78,176.81 |
| Company I | 455,806,057.90 | 4.53 | 67,459.30 |
| Total | 5,084,392,042.35 | 50.50 | 752,490.03 |
5. Prepayments
(1) Aging analysis of prepayments is as follows:
Unit: RMB
| Aging | 31/12/2023 | 31/12/2022 | ||
| Amounts | Proportion (%) | Amounts | Proportion (%) | |
| Within 1 year | 45,932,130.14 | 82.54 | 62,954,404.18 | 85.78 |
| 1-2 years | 9,717,406.31 | 17.46 | 10,435,725.27 | 14.22 |
| Total | 55,649,536.45 | 100.00 | 73,390,129.45 | 100.00 |
(2) Top five balances of prepayments categorized by receivers
Unit: RMB
| Company name | Relationship with the Company | Book value | Proportion to total prepayments at 31 December 2023(%) |
| Company J | Third party | 4,154,569.17 | 7.47 |
| Company K | Third party | 4,096,984.58 | 7.36 |
| Company L | Third party | 3,115,098.16 | 5.60 |
| Company M | Third party | 2,195,308.55 | 3.94 |
| Company N | Third party | 2,151,976.74 | 3.87 |
| Total | 15,713,937.20 | 28.24 |
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
6. Other receivables
(1) Summary of other receivables
Unit: RMB
| ITEM | Book value at 31 December 2023 | Book value at 31 December 2022 |
| Dividends receivable | - | 27,195,000.00 |
| Other receivables | 208,748,837.09 | 109,813,284.72 |
| Total | 208,748,837.09 | 137,008,284.72 |
(2) Dividends receivable
Unit: RMB
| ITEM | Book value at 31 December 2023 | Book value at 31 December 2022 |
| SUMA-USI Electronics Co., Ltd. | - | 27,195,000.00 |
(3) Disclosure of other receivables by aging
Unit: RMB
| Aging | 31/12/2023 | ||
| Amounts | Bad debt provision | Proportion of provision (%) | |
| Within 1 year | 208,748,837.09 | - | - |
(4) Classification by the nature of other receivables
Unit: RMB
| Nature of other receivables | Book value at 31 December 2023 | Book value at 31 December 2022 |
| Advances for third parties | 94,510,940.45 | 44,945,200.51 |
| Service and purchase rebates receivable | 51,566,605.35 | 39,076,544.54 |
| Contingent consideration receivable | 29,366,894.59 | - |
| Advance payments for employees | 7,559,285.63 | 6,849,785.04 |
| Others | 25,745,111.07 | 18,941,754.63 |
| Total | 208,748,837.09 | 109,813,284.72 |
(5) No allowance for expected credit losses has been made and no allowance for expected credit losses has
been reversed or collected due to the low probability that the Company's other receivables will not becollected.
(6) As at 31 December 2023, there are no other receivables that have been actually written off by the Group.
(7) Top five other receivables at 31 December 2023 categorized by debtor
Unit: RMB
| Company name | 31/12/2023 | Proportion to total other receivables at 31 December 2023(%) | Nature of the amount | Aging | Bad debt provision at 31 December 2023 |
| ASDI Assistance Direction | 29,366,894.59 | 14.07 | Contingent consideration receivable | Within 1 year | - |
| Company O | 18,427,807.53 | 8.83 | Advances | Within 1 year | - |
| Company P | 10,165,750.27 | 4.87 | Advances | Within 1 year | - |
| Company Q | 8,534,760.00 | 4.09 | Advances | Within 1 year | - |
| Company R | 5,636,367.92 | 2.70 | Advances | Within 1 year | - |
| Total | 72,131,580.31 | 34.56 | - |
(8) As at 31 December 2023, there were no other receivables presented for centralized management of funds.
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
7. Inventories
(1) Categories of inventories
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||||
| Book value | Provision for decline in value of inventories | Carrying amount | Book value | Provision for decline in value of inventories | Carrying amount | |
| Raw materials | 5,301,445,240.86 | 282,382,106.86 | 5,019,063,134.00 | 6,591,417,312.15 | 94,633,307.33 | 6,496,784,004.82 |
| Work in progress | 1,162,814,912.86 | - | 1,162,814,912.86 | 1,731,962,683.33 | - | 1,731,962,683.33 |
| Finished goods | 2,073,127,009.34 | 48,714,238.31 | 2,024,412,771.03 | 2,649,029,354.35 | 64,398,711.70 | 2,584,630,642.65 |
| Reusable materials | 105,620,183.85 | - | 105,620,183.85 | 96,516,345.02 | - | 96,516,345.02 |
| Total | 8,643,007,346.91 | 331,096,345.17 | 8,311,911,001.74 | 11,068,925,694.85 | 159,032,019.03 | 10,909,893,675.82 |
(2) Provision for decline in value of inventories
Unit: RMB
| ITEM | 31/12/2022 | Provision | Decrease in the year | Exchange differences arising on translation of foreign currencies | 31/12/2023 | |
| Reversal | Write-off | |||||
| Raw materials | 94,633,307.33 | 408,530,265.55 | 225,230,524.78 | 3,930,208.52 | 8,379,267.28 | 282,382,106.86 |
| Finished goods | 64,398,711.70 | 54,768,138.38 | 71,231,789.99 | 140,630.10 | 919,808.32 | 48,714,238.31 |
| Total | 159,032,019.03 | 463,298,403.93 | 296,462,314.77 | 4,070,838.62 | 9,299,075.60 | 331,096,345.17 |
| ITEM | Specific determination basis of net realizable value | Reasons for reversal/write-off of provision for decline in value of inventories |
| Raw materials | The higher of the estimated selling price of raw materials less estimated costs of sales and related taxes and the estimated selling price of finished goods less estimated costs of completion and estimated costs necessary to make the sale as well as related taxes | Sold or net realizable value recovered |
| Work in progress | Value of estimated selling price less estimated costs of completion and estimated costs necessary to make the sale as well as related taxes | Sold or net realizable value recovered |
| Finished goods | Value of estimated selling price less estimated costs necessary to make the sale as well as related taxes | Sold or net realizable value recovered |
8. Non-current assets due within one year
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Lease receivables | 123,989.32 | 322,815.55 |
9. Other current assets
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Input taxes to be deducted | 371,315,725.27 | 282,278,855.44 |
| Tax refunds receivable | 201,905,394.74 | 125,929,179.23 |
| FPC expenses to be amortized | 138,201,479.43 | 129,461,256.93 |
| Prepaid income tax | 102,930,242.78 | 24,922,506.88 |
| Mold costs to be amortized | 15,688,151.48 | 28,488,417.12 |
| Others | 8,221,292.24 | 8,501,117.12 |
| Total | 838,262,285.94 | 599,581,332.72 |
NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
10. Long-term receivables
(1) Long-term receivables
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Lease receivables | 130,008.71 | 193,997.66 |
| Employee borrowings for house purchasing | 13,517,402.09 | 12,191,896.64 |
| Total | 13,647,410.80 | 12,385,894.30 |
(2) As at 31 December 2023, no provision for expected credit loss has been made as the Group's long-term
receivables are less likely to be uncollectable.
(3) As at 31 December 2023, there are no long-term receivables that have been actually written off by the
Group.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Long-term equity investments
Unit: RMB
| Name of investee | 1/1/2023 | Changes for the year | 31/12/2023 | Impairment provision at 31/12/2023 | |||||||
| Additional investment | Reduction in investment | Investment profit or loss recognized under equity method | Other comprehensive income adjustments | Other equity changes | Cash dividends or profit declared | Impairment provision | Exchange differences arising on translation of financial statements denominated in foreign currencies | ||||
| I. Joint ventures | |||||||||||
| SUMA-USI Electronics Co., Ltd. (Note 1) | 110,844,032.98 | - | (110,844,032.98) | - | - | - | - | - | - | - | - |
| MUtek Electronics Co., Ltd. (Note 2) | 6,030,425.80 | - | - | (2,540,207.83) | - | - | - | - | 56,832.79 | 3,547,050.76 | - |
| II. Associates | |||||||||||
| M-Universe Investments Pte. Ltd. (Note 3) | 474,133,217.37 | - | - | 14,551,719.94 | (7,656,754.91) | - | (11,274,179.59) | - | 8,265,215.55 | 478,019,218.36 | - |
| Questyle Audio Technology Co., Ltd. (Note 4) | 20,000,000.00 | - | - | (3,294,727.52) | - | - | - | - | - | 16,705,272.48 | - |
| Total | 611,007,676.15 | - | (110,844,032.98) | 8,716,784.59 | (7,656,754.91) | - | (11,274,179.59) | - | 8,322,048.34 | 498,271,541.60 | - |
Note 1: In April 2019, Universal Global Technology (Kunshan) Co., Ltd., the Company's wholly-owned subsidiary, established a joint venture, SUMA-USI Electronics Co., Ltd.
("SUMA-USI") with Cancon Information Industry Co., Ltd. ("Cancon"). According to the Shareholder Agreement, Universal Global Technology (Kunshan) Co., Ltd.intends to contribute RMB 107,800,000, with a capital contribution of 49%. As at 31 December 2019, according to the articles of association of SUMA-USI, the boardof directors is composed of 5 directors, 2 of whom are appointed by Universal Global Technology (Kunshan) Co., Ltd., and ordinary resolutions need to be approved bymore than half of the directors attending the board meeting while special matters need to obtain the unanimous consent of all directors. Special matters include: decidingthe Company's business plan and investment scheme, formulating the Company's annual financial budget plan and final accounting plan, formulating the Company'sprofit distribution plan and loss recovery plan, etc. In shareholders' meeting, approval for ordinary resolutions require assent by shareholders representing over ? votingrights, while approval for special resolutions require assent by shareholders representing over ? voting rights. Therefore, SUMA-USI is a joint venture of UniversalGlobal Technology (Kunshan) Co., Ltd., and the Group accounts for it under the equity method. The Company entered into an Agreement on Transfer of Equity ofSUMA-USI Electronics Co., Ltd on 19 January 2023 with Cancon, an independent third party, to transfer all of its equity in SUMA-USI to Cancon.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Long-term equity investments - continued
Note 2: In April 2022, Universal Global Scientific Industrial Co., Ltd., the Company's wholly-owned subsidiary, established a joint venture, MUtek Electronics Co., Ltd. ("MUtek
Electronics") with Merry Electronics Co., Ltd. ("Merry Electronics"). Under Joint-Venture Agreement, Universal Global Scientific Industrial Co., Ltd. intends tocontribute TWD 191,100,000.00 (RMB 43,338,816.67), with a capital contribution of 49%. As at 31 December 2023, the accumulated capital contribution paid up byUniversal Global Scientific Industrial Co., Ltd. totals TWD 29,400,000.00 (RMB 7,044,079.28), with a capital contribution of 49%. It is stipulated in the Joint-VentureAgreement that the financial and operating plans of MUtek Electronics shall be submitted to the Board of Directors for approval only when a joint resolution by UniversalGlobal Scientific Industrial Co., Ltd. and Merry Electronics is achieved. According to the articles of association of MUtek Electronics, the board of directors is composedof 4 directors, 2 of whom are appointed by Universal Global Scientific Industrial Co., Ltd. Therefore, MUtek Electronics is a joint venture of Universal Global ScientificIndustrial Co., Ltd., and the Group accounts for it under the equity method.
Note 3: In July 2019, Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary, made an additional contribution of SGD 79,862,500 to M-Universe
Investments Pte. Ltd. ("M-Universe"), a sub-subsidiary of it established in Singapore, to publicly acquire the ordinary shares of Memtech International Ltd. ("Memtech"),a company listed in Singapore. Pursuant to the Equity Acquisition Agreement, M-Universe acquired 42.23% of Memtech's equity interest at the market price of SGD
1.35 per share on 30 June 2019, meanwhile, M-Universe issued new shares at the same subscription price to Keytech Investment Pte. Ltd. ("Keytech"), the originalshareholder of Memtech, i.e., M-Universe exchanged its 57.77% equity interest in Memtech for the same percentage of shares held by Keytech. As a result, UniversalGlobal Technology Co., Limited's shareholding in M-Universe was reduced from 100 % to 42.23%. According to the Shareholder Agreement of M-Universe, the boardof directors is composed of 3 directors, 2 of which are appointed by Keytech and 1 by Universal Global Technology Co., Limited, and the resolutions need to be approvedby the majority of the directors attending the board meeting, so it is accounted for under the equity method.
Note 4: In November 2022, the Company made an additional contribution of RMB 20,000,000.00 to Questyle Audio Technology Co., Ltd. ("Questyle Audio Technology"), to
acquire 6.6667% of equity interests of Questyle Audio Technology upon the capital contribution according to the Capital Increase Agreement. As at 29 November 2022,the additional capital contribution has been paid up. According to the Shareholder Agreement of Questyle Audio Technology, the board of directors is composed of 3directors, 1 of which is appointed by the Company, being responsible to develop its annual budget and resolutions in relation to substantial modifications of corporateaccounting policy or fiscal year need to be approved by the majority of the directors attending the board meeting. The meeting of shareholders is allowed to be held whenattended by shareholders representing more than a half of the voting rights, involving investors of previous and current rounds. Ordinary resolution requires the approvalof shareholders representing more than a half of the voting rights, which mainly includes the approvals of corporate's management principle and investment plan, annualfinancial budget plan and final accounts plan and plans of profit distribution and losses recovery. Therefore, the Company has significant influence on Questyle AudioTechnology, which is an associate of the Company, and the Group accounts for it under the equity method.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Other equity instrument investments
(1) Other equity instrument investments
Unit: RMB
| ITEM | 31/12/2022 | Changes for the year | 31/12/2023 | Dividend income recognized in the year | Accumulated gains (losses) recognized in other comprehensive income | Reasons for designation as at fair value through other comprehensive income | |||
| Additional investment | Reduction in investment | Gains (losses) recognized in other comprehensive income in the period | Translation differences arising on translation of financial statements denominated in foreign currencies | ||||||
| TriKnight Capital Corporation (Note) | 38,420,782.40 | - | 27,680,312.65 | 27,162,804.05 | 1,031,963.78 | 38,935,237.58 | - | 1,927,776.76 | Non-trading equity investments that the Group does not expect to dispose of in the foreseeable future |
Note: The Group invested in TriKnight Capital Corporation in 2016, accounting for 5% of the equity interests
in the investee.
(2) There were no other equity instrument investment derecognized in the year.
13. Other non-current financial assets
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| PHI FUND, L.P.(Note X, 4) | 147,061,750.52 | 100,510,388.15 |
| Senscomm Semiconductor Co., Ltd. (Note X, 4) | 23,483,780.53 | 24,752,828.36 |
| Suzhou Yaotu Equity Investment Partnership (Note X, 4 and Note XIII, 1(1)) | 23,449,331.00 | 11,840,697.00 |
| GaN System Inc.(Note X, 4) (Note) | - | 33,022,365.35 |
| Total | 193,994,862.05 | 170,126,278.86 |
Note: GaN Systems Inc., invested by Universal Global Technology Co., Limited, a wholly-owned subsidiary
of the Group, was disposed of in October 2023, with the proceeds from the disposal amounting to USD6,910,747.27 (RMB 49,604,652.83) received.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
14. Investment properties
(1) Investment properties measured using cost model
Unit: RMB
| ITEM | Buildings |
| I. Original carrying amount | |
| 1. 31/12/2022 | - |
| 2. Increase in the year | 11,507,908.40 |
| (1) Transfer from fixed assets | 11,507,908.40 |
| 3. Decrease in the year | - |
| 4. Translation differences arising from translation denominated in foreign currencies | - |
| 5. 31/12/2023 | 11,507,908.40 |
| II. Accumulated depreciation | |
| 1. 31/12/2022 | - |
| 2. Increase in the year | 7,183,862.89 |
| (1) Provision | 139,878.71 |
| (2) Transfer from fixed assets | 7,043,984.18 |
| 3. Decrease in the year | - |
| 4. Translation differences arising from translation denominated in foreign currencies | - |
| 5. 31/12/2023 | 7,183,862.89 |
| III. Provision for impairment losses | |
| 31/12/2022 & 31/12/2023 | - |
| IV. Carrying amount | |
| 1. 31/12/2023 | 4,324,045.51 |
| 2. 31/12/2022 | - |
(2) As of 31 December 2023, the Group had no investment properties for which certificates of title have
not been obtained.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Fixed Assets
(1) Fixed assets
Unit: RMB
| ITEM | Land operated overseas | Buildings | Machinery and equipment | Transportation vehicles | Electronic equipment, appliances and furniture | Renovation costs | Total |
| I. Original carrying amount | |||||||
| 1. 1/1/2023 | 241,526,211.47 | 1,700,238,721.86 | 6,708,980,966.33 | 16,182,833.60 | 538,537,517.86 | 286,027,543.69 | 9,491,493,794.81 |
| 2. Increase in the year | 3,966,749.23 | 86,329,117.82 | 826,891,444.66 | 3,469,363.89 | 94,837,555.32 | 95,981,228.78 | 1,111,475,459.70 |
| (1) Purchase | - | - | 19,842,519.86 | 1,922,245.32 | 16,529,014.94 | 813,637.40 | 39,107,417.52 |
| (2) Transfer from construction in progress | - | 66,707,951.14 | 717,393,031.06 | 1,230,027.55 | 77,042,173.36 | 95,167,591.38 | 957,540,774.49 |
| (3) Additions due to business combination | 3,966,749.23 | 19,621,166.68 | 89,655,893.74 | 317,091.02 | 1,266,367.02 | - | 114,827,267.69 |
| 3. Decrease in the year | - | 11,507,908.40 | 158,360,538.98 | 1,097,052.49 | 50,457,206.20 | 7,807,166.37 | 229,229,872.44 |
| (1) Disposal or retirement | - | - | 158,360,538.98 | 1,097,052.49 | 50,457,206.20 | 7,807,166.37 | 217,721,964.04 |
| (2) Transfer to investment properties | - | 11,507,908.40 | - | - | - | - | 11,507,908.40 |
| 4. Translation differences arising from translation denominated in foreign currencies | 5,933,348.55 | 22,710,516.87 | 61,267,473.09 | 351,360.53 | 8,186,940.86 | 3,480,422.75 | 101,930,062.65 |
| 5. 31/12/2023 | 251,426,309.25 | 1,797,770,448.15 | 7,438,779,345.10 | 18,906,505.53 | 591,104,807.84 | 377,682,028.85 | 10,475,669,444.72 |
| II. Accumulated depreciation | |||||||
| 1. 1/1/2023 | - | 491,421,104.81 | 4,016,829,552.15 | 11,851,363.29 | 328,314,155.16 | 136,457,518.37 | 4,984,873,693.78 |
| 2. Increase in the year | - | 54,417,710.33 | 740,601,946.26 | 1,516,446.97 | 80,757,473.76 | 41,798,654.70 | 919,092,232.02 |
| (1) Provision | - | 54,417,710.33 | 740,601,946.26 | 1,516,446.97 | 80,757,473.76 | 41,798,654.70 | 919,092,232.02 |
| 3. Decrease in the year | - | 7,043,984.18 | 147,383,930.43 | 1,074,400.67 | 49,244,784.32 | 7,807,166.37 | 212,554,265.97 |
| (1) Disposal or retirement | - | - | 147,383,930.43 | 1,074,400.67 | 49,244,784.32 | 7,807,166.37 | 205,510,281.79 |
| (2) Transfer to investment properties | - | 7,043,984.18 | - | - | - | - | 7,043,984.18 |
| 4. Translation differences arising from translation denominated in foreign currencies | - | 1,734,609.78 | 29,061,514.82 | 138,060.58 | 4,175,062.53 | 1,233,016.21 | 36,342,263.92 |
| 5. 31/12/2023 | - | 540,529,440.74 | 4,639,109,082.80 | 12,431,470.17 | 364,001,907.13 | 171,682,022.91 | 5,727,753,923.75 |
| III. Provision for impairment losses | |||||||
| 1. 1/1/2023 | - | 49,839,964.73 | - | - | - | - | 49,839,964.73 |
| 2. Increase in the year | - | - | - | - | - | - | - |
| (1) Provision | - | - | - | - | - | - | - |
| 3. Decrease in the year | - | - | - | - | - | - | - |
| (1) Disposal or retirement | - | - | - | - | - | - | - |
| 4. Translation differences arising from translation denominated in foreign currencies | - | 98,445.85 | - | - | - | - | 98,445.85 |
| 5. 31/12/2023 | - | 49,938,410.58 | - | - | - | - | 49,938,410.58 |
| IV. Carrying amount | |||||||
| 1. 31/12/2023 | 251,426,309.25 | 1,207,302,596.83 | 2,799,670,262.30 | 6,475,035.36 | 227,102,900.71 | 206,000,005.94 | 4,697,977,110.39 |
| 2. 1/1/2023 | 241,526,211.47 | 1,158,977,652.32 | 2,692,151,414.18 | 4,331,470.31 | 210,223,362.70 | 149,570,025.32 | 4,456,780,136.30 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Fixed assets - continued
(2) As at 31 December 2023, the Group had no significant temporarily idle fixed asset.
(3) As at 31 December 2023, the Group had no fixed assets of which certificates of title have not been
obtained.
(4) As at 31 December 2023, the Group had no fixed assets that have been pledged.
(5) Impairment assessment of fixed assets
USI Science and Technology (Shenzhen) Co., Ltd. a subsidiary of the Group, has been notified by
Nanshan District Government of Shenzhen City that its existing plant and land are included in the "2019Shenzhen Nanshan District Urban Renewal Unit Plan Fourth Batch Plan" and need to be demolished andrebuilt. Therefore, the Group has set aside RMB 44,090,553.55 for impairment of fixed assets of housesand buildings.
Due to its long service life and repeated earthquakes, the main structure of the building A, B and C of
Caotun No. 1 Plant of the Group's subsidiary, Universal Global Scientific Industrial Co., Ltd., has beendamaged and needs to be dismantled and rebuilt. Therefore, the Group has set aside RMB 5,847,857.03for impairment of fixed assets of building A, B and C.
16. Construction in progress
(1) Construction in progress
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||||
| Book value | Provision for impairment | Carrying amount | Book value | Provision for impairment | Carrying amount | |
| Shengxia factory-Chip module production project | 1,024,368.86 | - | 1,024,368.86 | 6,507,916.38 | - | 6,507,916.38 |
| Veitnam factory-Wearable device production project | 6,404,156.87 | - | 6,404,156.87 | 394,121.84 | - | 394,121.84 |
| Huizhou factory-Electronic product production project | 6,111,984.67 | - | 6,111,984.67 | 24,302,863.46 | - | 24,302,863.46 |
| Mexico factory-New construction of the second factory project | 359,629,706.09 | - | 359,629,706.09 | 34,594,399.14 | - | 34,594,399.14 |
| Poland factory project | 81,472,620.08 | - | 81,472,620.08 | - | - | - |
| Other construction, decoration and uninstalled equipment | 186,388,149.41 | - | 186,388,149.41 | 237,633,235.87 | - | 237,633,235.87 |
| Total | 641,030,985.98 | - | 641,030,985.98 | 303,432,536.69 | - | 303,432,536.69 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
16. Construction in progress - continued
(2) Changes in construction in progress
Unit: RMB
| Item name | Budget | 31/12/2022 | Increase in the year | Additions due to business combination | Transfer to fixed assets | Transferred to long-term prepaid expenses in the year | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2023 | Amount injected as a proportion of budget amount (%) | Amount of accumulated capitalized interest | Including: capitalized interest for the year | Interest capitalization rate for the year (%) | Source of funds |
| Shengxia factory-Chip module production project | 842,830,100.00 | 6,507,916.38 | 3,627,218.24 | - | (6,650,765.76) | (2,460,000.00) | - | 1,024,368.86 | 79% | - | - | - | Self-owned funds / Raised funds |
| Veitnam factory-Wearable device production project | 1,400,000,000.00 | 394,121.84 | 124,702,065.69 | - | (118,732,957.21) | - | 40,926.55 | 6,404,156.87 | 54% | - | - | - | Self-owned funds / Raised funds |
| Huizhou factory-Electronic product production project | 1,350,000,000.00 | 24,302,863.46 | 61,693,473.87 | - | (79,884,352.66) | - | - | 6,111,984.67 | 54% | - | - | - | Self-owned funds / Raised funds |
| Mexico factory-New construction of the second factory project | 662,221,825.95 | 34,594,399.14 | 413,623,041.68 | - | (90,999,425.22) | - | 2,411,690.49 | 359,629,706.09 | 62% | - | - | - | Self-owned funds / Raised funds |
| Poland factory project | 88,855,860.24 | - | 83,083,768.95 | - | (7,528,679.40) | - | 5,917,530.53 | 81,472,620.08 | 94% | - | - | - | Self-owned funds |
| Other construction, decoration and uninstalled equipment | NA | 237,633,235.87 | 669,525,518.96 | 37,070,089.15 | (653,744,594.24) | (108,354,718.83) | 4,258,618.50 | 186,388,149.41 | NA | - | - | - | Self-owned funds |
| Total | 303,432,536.69 | 1,356,255,087.39 | 37,070,089.15 | (957,540,774.49) | (110,814,718.83) | 12,628,766.07 | 641,030,985.98 |
(3) As at 31 December 2023, the Group had no construction in progress that requires provision for
impairment losses.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Right-of-use assets
(1) Right-of-use assets
Unit: RMB
| ITEM | Buildings | Machinery and equipment | Transportation equipment | Others | Total |
| I. Original carrying amount | |||||
| 1. 1/1/2023 | 834,020,158.45 | 1,048,499.73 | 10,359,904.23 | 2,379,011.77 | 847,807,574.18 |
| 2. Increase in the year | 267,345,673.30 | 1,290,002.40 | 4,993,142.61 | 588,188.57 | 274,217,006.88 |
| (1) Increase | 237,791,830.46 | 832,090.65 | 3,213,443.30 | 588,188.57 | 242,425,552.98 |
| (2) Additions due to business combination | 29,553,842.84 | 457,911.75 | 1,779,699.31 | - | 31,791,453.90 |
| 3. Decrease in the year | 34,742,153.07 | 319,700.98 | 647,045.18 | 737,733.14 | 36,446,632.37 |
| (1) Disposal or retirement | 34,742,153.07 | 319,700.98 | 647,045.18 | 737,733.14 | 36,446,632.37 |
| 4. Translation differences arising from translation denominated in foreign currencies | 15,855,602.42 | 56,697.66 | 601,711.27 | 51,566.33 | 16,565,577.68 |
| 5. 31/12/2023 | 1,082,479,281.10 | 2,075,498.81 | 15,307,712.93 | 2,281,033.53 | 1,102,143,526.37 |
| II. Accumulated depreciation | |||||
| 1. 1/1/2023 | 361,638,362.68 | 865,004.37 | 4,145,929.80 | 1,289,030.78 | 367,938,327.63 |
| 2. Increase in the year | 135,278,210.66 | 286,718.06 | 3,429,801.91 | 581,633.99 | 139,576,364.62 |
| (1) Provision | 135,278,210.66 | 286,718.06 | 3,429,801.91 | 581,633.99 | 139,576,364.62 |
| 3. Decrease in the year | 15,933,510.48 | 319,700.98 | 557,970.12 | 737,733.14 | 17,548,914.72 |
| (1) Disposal or retirement | 15,933,510.48 | 319,700.98 | 557,970.12 | 737,733.14 | 17,548,914.72 |
| 4. Translation differences arising from translation denominated in foreign currencies | 5,898,436.76 | 24,548.98 | 272,080.74 | 28,120.61 | 6,223,187.09 |
| 5. 31/12/2023 | 486,881,499.62 | 856,570.43 | 7,289,842.33 | 1,161,052.24 | 496,188,964.62 |
| III. Provision for impairment losses | |||||
| 1/1/2023 & 31/12/2023 | - | - | - | - | - |
| IV. Carrying amount | |||||
| 1. 31/12/2023 | 595,597,781.48 | 1,218,928.38 | 8,017,870.60 | 1,119,981.29 | 605,954,561.75 |
| 2. 1/1/2023 | 472,381,795.77 | 183,495.36 | 6,213,974.43 | 1,089,980.99 | 479,869,246.55 |
The Group has leased a number of assets, including office, plants, dormitories, machinery equipment andtransportation equipment, with a lease term ranging from 2 to 10 years.
In 2023, the short-term lease expenses included in the profit or loss for the current period and treated under asimplified method is RMB 24,250,481.19 (2022: RMB 18,867,022.49), and the cash outflows related to leasesare RMB 186,457,187.69 (2022: RMB 172,129,856.01).
The assets leased in shall not be used as collateral for borrowings.
The Group's potential future cash flows not included in the measurement of lease liabilities are mainly derivedfrom the rentals that will be adjusted to the market levels upon renewal of the lease contracts relating to buildings.As at 31 December 2023, the Group had no leases committed but not yet commenced.
(2) As at 31 December 2023, the Group had no right-of-use asset that requires provision for impairment
losses.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Intangible assets
(1) Intangible assets
Unit: RMB
| ITEM | Software | Patents | Trademarks | Land use right | Customer relation | Total |
| I. Original carrying amount | ||||||
| 1. 1/1/2023 | 457,907,806.82 | 2,080,818.66 | 410,137.84 | 130,798,786.63 | 166,955,335.81 | 758,152,885.76 |
| 2. Increase in the year | 28,356,471.16 | - | - | 1,285,358.98 | - | 29,641,830.14 |
| (1) Purchase | 28,356,471.16 | - | - | 1,285,358.98 | - | 29,641,830.14 |
| 3. Decrease in the year | 6,126,358.67 | - | - | 1,277,911.74 | - | 7,404,270.41 |
| (1) Disposal or retirement | 6,126,358.67 | - | - | 1,277,911.74 | - | 7,404,270.41 |
| 4. Translation differences arising from translation denominated in foreign currencies | 12,002,275.49 | 34,025.67 | 3,832.73 | 2,035,700.62 | 8,943,785.71 | 23,019,620.22 |
| 5. 31/12/2023 | 492,140,194.80 | 2,114,844.33 | 413,970.57 | 132,841,934.49 | 175,899,121.52 | 803,410,065.71 |
| II. Accumulated amortization | ||||||
| 1. 1/1/2023 | 303,188,607.33 | 2,080,818.66 | 410,137.84 | 15,790,008.76 | 21,578,379.03 | 343,047,951.62 |
| 2. Increase in the year | 75,333,177.34 | - | - | 3,274,109.26 | 10,711,338.27 | 89,318,624.87 |
| (1) Provision | 75,333,177.34 | - | - | 3,274,109.26 | 10,711,338.27 | 89,318,624.87 |
| 3. Decrease in the year | 4,776,100.21 | - | - | 35,091.43 | - | 4,811,191.64 |
| (1) Disposal or retirement | 4,776,100.21 | - | - | 35,091.43 | - | 4,811,191.64 |
| 4. Translation differences arising from translation denominated in foreign currencies | 5,936,222.35 | 34,025.67 | 3,832.73 | 126,817.83 | 1,450,465.91 | 7,551,364.49 |
| 5. 31/12/2023 | 379,681,906.81 | 2,114,844.33 | 413,970.57 | 19,155,844.42 | 33,740,183.21 | 435,106,749.34 |
| III. Provision for impairment losses | ||||||
| 1/1/2023 & 31/12/2023 | - | - | - | - | - | - |
| IV. Carrying amount | ||||||
| 1. 31/12/2023 | 112,458,287.99 | - | - | 113,686,090.07 | 142,158,938.31 | 368,303,316.37 |
| 2. 1/1/2023 | 154,719,199.49 | - | - | 115,008,777.87 | 145,376,956.78 | 415,104,934.14 |
(2) As at 31 December 2023, the Group had no land use rights of which certificates of title have not been obtained.
(3) As at 31 December 2023, the Group had no intangible asset that requires provision for impairment losses.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
19. Goodwill
(1) Original book value of goodwill
Unit: RMB
| Name of investee | 31/12/2022 | Changes for the year | 31/12/2023 | |
| Arising from business combination | Translation differences arising on translation of financial statements denominated in foreign currencies | |||
| USI Poland | 28,453,036.29 | - | 482,483.36 | 28,935,519.65 |
| FAFG | 548,276,146.45 | - | 29,371,114.99 | 577,647,261.44 |
| Hirschmann | - | 1,139,331.87 | (15,157.79) | 1,124,174.08 |
| Total | 576,729,182.74 | 1,139,331.87 | 29,838,440.56 | 607,706,955.17 |
(2) Impairment provision of goodwill
As at 31 December 2023, there is no impairment provision of goodwill.
(3) Relative information of asset group or a set of asset groups where the goodwill is related
| Name | Composition of the asset group or a set of asset groups and its basis | Operating segment and its basis | Is it consistent with previous years |
| FAFG China | FAFG – Company in Mainland China Cash flow generated independently | Mainland China Manufacturing location | Yes |
| FAFG Europe | FAFG - Company in Europe Cash flow generated independently | European region Manufacturing location | Yes |
| USI Poland | USI Poland Cash flow generated independently | European region Manufacturing location | Yes |
| Hirschmann (Note) | Hirschmann Cash flow generated independently | European region Manufacturing location | N/A |
Note: Hirschmann is located in Luxembourg and mainly engages in the design and manufacture of connectors
and sensors. This acquisition is part of the Group's global industrial layout and is of strategic importanceto the Group. When the financial statement for 2023 was publicly disclosed, the Group had not yetobtained an assessment report, therefore, the fair values of identifiable assets, liabilities and contingentliabilities acquired in a combination or the cost of business combination can be determined onlyprovisionally, the Group recognizes and measures the combination using those provisional values.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
19. Goodwill
(4) Specific method of determining the recoverable amount
Recoverable amount determined by the present value of the estimated future cash flows.
Unit: RMB
| ITEM | Carrying amount | Recoverable amount | Amount of impairment | Projection period | Key parameters for projection period | Basis to determine the parameters for projection period | Key parameters for steady period | Basis to determine the key parameters for steady period |
| FAFG China | 1,933,767,216.50 | 1,974,800,033.98 | - | 5 years | Growth rate of the projection period and profit margin | Growth forecast based on itself and relevant industries | Discount rate and long-term growth rate | Long-term discount rate and average growth rate of the industry |
| FAFG Europe | 1,646,408,428.70 | 1,927,735,157.17 | - | 5 years | Growth rate of the projection period and profit margin | Growth forecast based on itself and relevant industries | Discount rate and long-term growth rate | Long-term discount rate and average growth rate of the industry |
| USI Poland | 402,700,628.91 | 637,953,456.90 | - | 5 years | Growth rate of the projection period and profit margin | Growth forecast based on itself and relevant industries | Discount rate and long-term growth rate | Long-term discount rate and average growth rate of the industry |
| Total | 3,982,876,274.11 | 4,540,488,648.05 |
20. Long-term prepaid expenses
Unit: RMB
| ITEM | 31/12/2022 | Increase in the year | Transfer from construction in progress | Amortization for the year | Translation of financial statements denominated in foreign currencies | 31/12/2023 |
| Leased-in plant decoration works | 175,835,331.45 | 469,912.51 | 110,814,718.83 | 76,621,504.00 | 2,130,550.13 | 212,629,008.92 |
21. Deferred tax assets/ deferred tax liabilities
(1) Deferred tax assets that are not offset
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Provision for impairment of assets | 349,082,227.15 | 68,671,893.65 | 208,062,389.07 | 31,887,923.33 |
| Provision for credit loss | 40,837,701.20 | 6,996,575.28 | 15,676,029.63 | 3,497,503.49 |
| Deferred income | 58,185,280.57 | 8,728,331.08 | 60,443,410.66 | 9,066,511.61 |
| Employee benefits payable | 263,238,805.17 | 40,813,544.17 | 351,822,136.42 | 52,882,512.01 |
| Defined benefit plans | 131,600,416.30 | 31,828,838.11 | 124,981,766.96 | 29,645,702.88 |
| Depreciation differences | 5,058,455.04 | 887,662.10 | 3,782,236.82 | 567,335.52 |
| Provisions | 54,423,688.91 | 11,683,937.24 | 622,851.27 | 93,427.69 |
| Unrealized profit | 68,178,132.14 | 12,438,968.17 | 70,059,384.65 | 13,081,751.13 |
| Deductible losses | 323,379,248.56 | 69,535,131.21 | 414,036,219.02 | 84,693,112.30 |
| Sales discount | 458,680,034.68 | 81,787,688.20 | 471,651,001.33 | 84,235,913.19 |
| Lease liabilities | 441,145,480.48 | 93,761,901.35 | 4,485,110.49 | 584,949.23 |
| Others | 264,590,855.95 | 63,661,694.38 | 243,920,840.71 | 57,756,496.66 |
| Total | 2,458,400,326.15 | 490,796,164.94 | 1,969,543,377.03 | 367,993,139.04 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
21. Deferred tax assets/ deferred tax liabilities - continued
(2) Deferred tax liabilities that are not offset
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Depreciation differences in research and development equipment tax credits | 30,215,661.25 | 4,575,432.53 | 33,801,264.60 | 5,070,189.69 |
| Right-of-use assets | 417,724,474.58 | 89,196,889.01 | 4,111,128.03 | 474,680.94 |
| Fair value adjustment for business combination involving enterprise not under common control | 312,084,381.21 | 79,961,737.10 | 345,346,062.78 | 87,631,726.67 |
| Others | 35,219,714.85 | 11,424,808.03 | 9,110,065.15 | 3,491,677.02 |
| Total | 795,244,231.89 | 185,158,866.67 | 392,368,520.56 | 96,668,274.32 |
(3) Deferred tax assets and deferred tax liabilities that are presented at the net amount after offset
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||
| Offset amount between deferred tax assets and liabilities at the end of the year | Deferred tax assets or liabilities after offset | Offset amount between deferred tax assets and liabilities at the end of the year | Deferred tax assets or liabilities after offset | |
| Deferred tax assets | (103,522,210.84) | 387,273,954.10 | (9,036,547.65) | 358,956,591.39 |
| Deferred tax liabilities | 103,522,210.84 | 81,636,655.83 | 9,036,547.65 | 87,631,726.67 |
Deferred tax assets are recognized for deductible temporary differences and deductible losses as the Groupbelieves that it is probable that sufficient taxable profits will be available in the future.
(4) Deferred tax assets not recognized
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Deductible temporary differences | 6,680,749.95 | 8,449,752.27 |
| Deductible losses | 280,875,884.29 | 167,659,979.97 |
| Total | 287,556,634.24 | 176,109,732.24 |
(5) Deductible losses, for which no deferred tax assets are recognized, will expire in the following years
Unit: RMB
| Year | 31/12/2023 | 31/12/2022 |
| No time limit | 280,875,884.29 | 167,659,979.97 |
No deferred tax assets are recognized for deductible temporary differences and deductible losses due to theuncertainty in certain subsidiaries whether sufficient taxable profits will be available in the future.
22. Other non-current assets
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Prepayment for equipment | 47,404,680.89 | 113,538,490.61 |
| Prepayment for platform fee | 10,179,323.04 | - |
| Guarantee and deposit | 9,576,400.85 | 10,487,765.93 |
| Prepayment for enterprise income tax | 1,114,386.14 | 155,287.50 |
| Others | - | 430,351.28 |
| Total | 68,274,790.92 | 124,611,895.32 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
23. Assets with restrictions on ownership or use rights
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | ||||||
| Book value | Carrying amount | Restriction type | Restriction case | Book value | Carrying amount | Restriction type | Restriction case | |
| Other cash and bank balances | 20,975,282.12 | 20,975,282.12 | Investment deposit | Investment deposit | 14,757,734.50 | 14,757,734.50 | Customs deposit | Customs deposit |
| Other cash and bank balances | 13,430,328.50 | 13,430,328.50 | Customs deposit | Customs deposit | 2,214,334.90 | 2,214,334.90 | Foreign exchange margin | Foreign exchange margin |
| Total | 34,405,610.62 | 34,405,610.62 | 16,972,069.40 | 16,972,069.40 | ||||
24. Short-term borrowings
(1) Categories of short-term borrowings:
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Credit loans | 4,378,428,691.47 | 4,499,463,404.21 |
As at 31 December 2023, the Group's short-term borrowings are all composed of credit loans with no pledged,mortgaged or guaranteed borrowings.
(2) As at 31 December 2023, the Group has no short-term borrowings overdue but not yet repaid.
25. Derivative financial liabilities
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Financial liabilities at FVTPL | 173,872.64 | 3,118,891.32 |
| Including: Derivative financial instruments (Note) | 173,872.64 | 3,118,891.32 |
Note: The derivative financial liabilities held by the group are foreign exchange forward contract.
26. Accounts payable
(1) Accounts payable
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Payable for materials | 10,075,200,190.46 | 10,295,963,612.28 |
| Payable for assets | 177,402,797.98 | 352,221,507.19 |
| Expenses payable | 321,520,781.03 | 408,005,735.96 |
| Total | 10,574,123,769.47 | 11,056,190,855.43 |
(2) As at 31 December 2023, the Group has no significant accounts payable aged more than one year.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
27. Contract liabilities
(1) Contract liabilities
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Receipts in advance | 348,380,131.33 | 411,898,442.43 |
The Group's revenue from sales of goods is recognized when the control over related goods is transferred to thecustomer. A contract liability is recognized at the time of the transaction for goods paid for in advance by thecustomer until the goods are shipped to or delivered to the customer, i.e. when control is transferred to thecustomer.
The carrying amount of contract liabilities of RMB 411,898,442.43 at the beginning of the year has beenrecognized as revenue in the current year, while that of RMB 348,380,131.33 at the end of the year is expected tobe recognized as revenue in 2024.
28. Employee benefits payable
(1) Employee benefits payable
Unit: RMB
| ITEM | 31/12/2022 | Additions due to business combination | Additions | Disposals | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2023 |
| 1. Short-term benefits | 1,106,270,951.67 | 39,471,973.14 | 3,932,967,955.02 | 4,199,552,194.46 | 14,255,553.27 | 893,414,238.64 |
| 2. Post-employment benefits-defined contribution plan | 26,622,538.88 | 1,156,500.03 | 248,141,707.59 | 247,538,609.38 | 704,136.19 | 29,086,273.31 |
| 3. Long-term employee benefits payable due within one year | 15,578,087.34 | - | 16,749,790.68 | 31,908,844.17 | (8,290.72) | 410,743.13 |
| 4. Termination benefits | 13,413,516.00 | - | 10,378,581.00 | 23,792,097.00 | - | - |
| Total | 1,161,885,093.89 | 40,628,473.17 | 4,208,238,034.29 | 4,502,791,745.01 | 14,951,398.74 | 922,911,255.08 |
(2) Short-term employee benefits
Unit: RMB
| ITEM | 31/12/2022 | Additions due to business combination | Additions | Disposals | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2023 |
| 1. Wages or salaries, bonuses, allowances and subsidies | 1,036,408,739.69 | 39,459,368.49 | 3,273,219,972.92 | 3,541,699,689.48 | 11,724,994.64 | 819,113,386.26 |
| 2. Staff welfare | 20,251,084.80 | - | 292,377,411.81 | 289,455,832.11 | 1,179,731.03 | 24,352,395.53 |
| 3. Social security contributions | 42,402,128.80 | - | 275,055,916.39 | 275,091,368.01 | 1,250,424.04 | 43,617,101.22 |
| Including: Medical insurance | 34,568,797.29 | - | 192,093,557.15 | 192,633,998.61 | 1,008,035.95 | 35,036,391.78 |
| Work injury insurance | 7,274,685.88 | - | 52,039,772.84 | 51,749,412.22 | 151,857.83 | 7,716,904.33 |
| Maternity insurance | 35,536.04 | - | 1,635,978.13 | 1,631,694.75 | 625.85 | 40,445.27 |
| Overseas comprehensive insurance expenses | 523,109.59 | - | 29,286,608.27 | 29,076,262.43 | 89,904.41 | 823,359.84 |
| 4. Housing funds | 6,165,312.10 | 12,604.65 | 81,455,834.01 | 82,569,943.41 | 85,256.50 | 5,149,063.85 |
| 5. Union running costs and employee education cost | 1,043,686.28 | - | 10,858,819.89 | 10,735,361.45 | 15,147.06 | 1,182,291.78 |
| Total | 1,106,270,951.67 | 39,471,973.14 | 3,932,967,955.02 | 4,199,552,194.46 | 14,255,553.27 | 893,414,238.64 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
28. Employee benefits payable - continued
(3) Defined contribution plan (Note)
Unit: RMB
| ITEM | 31/12/2022 | Additions due to business combination | Additions | Disposals | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2023 |
| 1. Basic pensions | 26,203,757.37 | 1,156,500.03 | 232,422,846.31 | 231,829,353.04 | 694,603.12 | 28,648,353.79 |
| 2. Unemployment insurance | 418,781.51 | - | 15,718,861.28 | 15,709,256.34 | 9,533.07 | 437,919.52 |
| Total | 26,622,538.88 | 1,156,500.03 | 248,141,707.59 | 247,538,609.38 | 704,136.19 | 29,086,273.31 |
Note: The Group participates, as required, in the pension insurance and unemployment plan established by
Chinese government authorities, Mexican authorities and French authorities. According to such plans,the Group contributes monthly to such plans based on corresponding percentages of contribution base.Except for above monthly contributions, the Group does not assume further payment obligations. Therelated expenditures are either included in cost of related assets or charged to profit or loss in the periodwhen they are incurred.
In this year, the Group should contribute pension insurance and unemployment plans amounting to RMB
232,422,846.31 and RMB 15,718,861.28 (2022: RMB 220,035,658.76 and RMB 13,331,790.43). As at31 December 2023, the Group has outstanding contributions to pension insurance and unemploymentplans that are accrued but not yet paid in the current reporting period amounting to RMB 28,648,353.79and RMB 437,919.52 (31 December 2022: RMB 26,203,757.37 and RMB 418,781.51). The outstandingcontributions have been paid after the reporting period.
29. Taxes payable
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Enterprise income tax | 155,394,883.50 | 239,183,763.40 |
| Withholding of income tax | 105,052,473.58 | 71,203,696.31 |
| Value-added taxes ("VAT") | 52,031,278.71 | 45,323,905.31 |
| Individual income tax | 15,701,551.89 | 7,935,318.38 |
| Surcharges | 16,369,181.10 | 17,025,179.34 |
| Stamp duty | 5,491,534.27 | 7,123,546.41 |
| Withholding of VAT and levies | 28,017.34 | - |
| Others | 5,585,493.99 | 295,315.40 |
| Total | 355,654,414.38 | 388,090,724.55 |
30. Other payables
(1) Other payables
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Interest payable | - | 20,270,005.36 |
| Other payables | 1,044,770,045.86 | 696,662,698.41 |
| Total | 1,044,770,045.86 | 716,932,703.77 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
30. Other payables - continued
(2) Interest payable
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Interest payables of short-term borrowings | - | 14,059,324.30 |
| Interest payables of long-term borrowings | - | 482,848.75 |
| Interest payables of bonds | - | 5,727,832.31 |
| Total | - | 20,270,005.36 |
As at 31 December 2023, the Group has no significant interest payables due.
(3) Other payables by nature
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Collection on behalf of third parties | 357,810,180.31 | 327,342,648.15 |
| Customer deposit | 292,519,736.99 | 200,960,766.77 |
| Outstanding payment for equity purchases (Note (VI), 1) | 147,199,754.10 | - |
| Accrued expenses | 133,266,647.54 | 53,493,020.82 |
| Professional service fee | 31,132,851.27 | 45,785,605.37 |
| Miscellaneous fees | 22,388,211.91 | 9,900,940.43 |
| Utilities, storage and transportation costs | 9,601,794.55 | 25,010,517.18 |
| Procurement of non-raw materials | 1,659,108.02 | 1,858,465.18 |
| Others | 49,191,761.17 | 32,310,734.51 |
| Total | 1,044,770,045.86 | 696,662,698.41 |
As at 31 December 2023, the Group has no significant other payables aged more than one year.
31. Non-current liabilities due within one year
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Bonds payable due within one year (Note (V). 34) | 3,381,278,375.98 | - |
| Lease liabilities due within one year (Note (V). 35) | 166,945,559.82 | 141,963,140.51 |
| Long-term borrowings due within one year (Note (V). 33) | 15,801,814.76 | 364,856,884.72 |
| Total | 3,564,025,750.56 | 506,820,025.23 |
32. Other current liabilities
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Relocation expense of Shenzhen plant | 3,944,775.07 | 3,661,569.01 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
33. Long-term borrowings
Details of long-term borrowings
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Credit loans (Note) | 63,187,765.86 | 424,284,423.60 |
| Less: Long-term borrowings included in non-current liabilities due within one year (Note (V). 31) | 15,801,814.76 | 364,856,884.72 |
| Total | 47,385,951.10 | 59,427,538.88 |
Note: In November 2022, FAFG, a subsidiary of the Group, borrowed EUR 10,000,000.00 from the bank,
equivalent to RMB 74,284,423.60. The repayment method is EUR 500,000.00 per quarter starting fromFebruary 2023, and the final repayment date is November 2027, with the interest rate of 3.9% fixed. Asof 31 December 2023, the balance of the above borrowings of EUR 2,000,000.00, equivalent to RMB15,652,767.00 and its interest of RMB 149,047.76, totaling RMB 15,801,814.76 is included in the non-current liabilities due within one year.
As at 31 December 2023, the Group had no long-term borrowings that were due but not yet repaid.
34. Bonds payable
(1) Bonds payable
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Convertible corporate bonds | - | 3,243,085,241.27 |
(2) Movements in bonds payable
Unit: RMB
| Name of bonds | Nominal value | Date of issue | Term | Issue amount | 31/12/2022 | Issued in this period | Interest accrued as per nominal value | Amortization of premiums or discounts | Swap to equity | Amount recognized in non-current liabilities due within one year (Note) | 31/12/2023 | Default or not |
| Universal Global Convertible Bonds (SH:113045) | 100 | 4 March 2021 | 6 years | 3,450,000,000.00 | 3,243,085,241.27 | - | 18,308,308.90 | 139,416,505.81 | 51,341.46 | 3,381,278,375.98 | - | No |
Note: According to the terms of selective resale in the prospectus of the Company's public offering of convertible
bonds: when the convertible bonds have been issued for three years, the holders of the convertible bondshave the right to sell back at one time, that is, they have the right to sell back all or part of the convertiblebonds held by them to the company at 102.00% (including the interest of the third year). After theconditions for the option of resale terms are met, the holders of convertible bonds may carry out resalewithin the reporting period for the option of resale after the announcement of the company; Those whodo not carry out resale within the reporting period of selective resale shall no longer enjoy the rightsagreed in the terms of selective resale. As of 31 December 2023, all of the above bonds payable arerecognized in non-current liabilities due within one year (including the interest payables of bonds: RMB17,136,279.26).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
34. Bonds payable - continued
(3) Description on issuing, conversion condition and conversion time of convertible corporate bonds
As approved by CSRC with "Zheng Jian Xu Ke [2021] No. 167", the Company issued 34,500,000 convertiblebonds at nominal value of RMB 100, with annual coupon rate of 0.1%, 0.2%, 0.6%, 1.3%, 1.8% and 2.0%,respectively for the 1st year, 2nd year, 3rd year, 4th year, 5th year and 6th year, and the annual interest is payableat the date of each full year from the first date of issue of the convertible bonds in this issue. If such day is a legalholiday or a rest day, it will be postponed to the next trading day, bearing no interest during the postponed period.The convertible bonds in this issue is allowed to swap to equity from the first trading date in the 10th monthsubsequent to the closing date of this issue (namely 10 March 2021) to the expiry date of convertible bonds.Within five trading days after the expiration of the convertible bonds issued, the Company will redeem theconvertible bonds not converted into shares at the price of 108.00% (including the last interest) of the face valueof the bonds.
During the conversion period of this issuance of convertible bonds, if the closing price of the Company's shareson at least 20 trading days in any 30 consecutive trading days is not less than 130% (including 130%) of thecurrent conversion price, with the approval of relevant regulatory authorities (if necessary), the Company has theright to redeem all or part of the convertible bonds that have not been converted according to the face value of thebonds plus the accrued interest in the current period. If the Company's share conversion price is adjusted due toex rights and ex dividend on the above trading days, it shall be calculated according to the share conversion priceand closing price before the adjustment on the trading day before the adjustment, and according to the adjustedshare conversion price and closing price on the trading day after the adjustment. In addition, when the total facevalue of the convertible bonds not converted into shares issued is less than RMB 30 million, the Company has theright to redeem all the convertible bonds not converted into shares at the price of face value plus accrued interestin the current period.
In the last two interest bearing years of the issuance of convertible bonds, if the closing price of the company'sshares on any consecutive 30 trading days is lower than 70% of the current conversion price, the holders ofconvertible bonds have the right to resell all or part of the convertible bonds to the Company at the price of facevalue plus accrued interest for the current period. If the conversion price has been adjusted due to bonus shares,conversion to share capital, issuance of new shares, allotment of shares or distribution of cash dividends(excluding the increased share capital due to the conversion of convertible bonds into shares), it shall be calculatedaccording to the conversion price and closing price before the adjustment on the trading day before the adjustment,and according to the conversion price and closing price after the adjustment on the trading day after the adjustment.In case of downward correction of the conversion price, the above "Thirty consecutive trading days" shall berecalculated from the first trading day after the conversion price adjustment. In the last two interest bearing yearsof the convertible bonds issued this time, the holders of the convertible bonds can exercise the resale right onceaccording to the above agreed conditions after the resale conditions are met for the first time. If the holders of theconvertible bonds fail to declare and implement the resale within the resale reporting period announced by theCompany at that time, the resale right shall not be exercised in the interest bearing year, and the holders of theconvertible bonds cannot exercise part of the resale right multiple times.
During the duration of the convertible bonds issued this time, if the company is deemed to change the purpose ofthe raised funds or recognized by the CSRC as changing the purpose of the raised funds in accordance with therelevant provisions of the CSRC, the holders of the convertible bonds have the right to sell back at one time. Theholders of convertible bonds have the right to resell all or part of the convertible bonds held by them to thecompany at the price of the face value of the bonds plus the accrued interest of the current period. After theadditional resale conditions are met, the holders of convertible bonds may carry out the resale within the additionalresale reporting period after the announcement of the company. If the resale is not carried out during the additionalresale reporting period, they shall not exercise the additional resale right.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
34. Bonds payable - continued
(3) Description on issuing, conversion condition and conversion time of convertible corporate bonds -
continued
When the convertible bonds have been issued for three years, the holders of the convertible bonds have the rightto sell back at one time, that is, they have the right to sell back all or part of the convertible bonds held by themto the company at 102.00% (including the interest of the third year). After the conditions for the option of resaleterms are met, the holders of convertible bonds may carry out resale within the reporting period for the option ofresale after the announcement of the company; Those who do not carry out resale within the reporting period ofselective resale shall no longer enjoy the rights agreed in the terms of selective resale.
The initial conversion price of convertible bonds issued this time is RMB 20.25 per share. According to theresolution of the general meeting of shareholders on 23 April 2021, the Company distributed cash dividends toall shareholders, with a cash dividend of RMB 5.00 per 10 shares. Therefore, as of 31 December 2021, theconversion price was adjusted to RMB 19.75 per share. In accordance with the resolution of the general meetingof shareholders on 19 April 2022, the Company will pay a cash dividend of RMB 2.6 per 10 shares to allshareholders. Therefore, the conversion price is adjusted to RMB 19.49 per share. At the same time, according tothe resolution of the general meeting of shareholders on 19 April 2022, the Company cancellations the 9,296,627shares purchased in 2019 that have not been used, so the conversion price is adjusted to RMB 19.52 per share.According to the prospectus for the Public Offering of Convertible Bonds of Universal Scientific Industrial(Shanghai) Co., Ltd., the price of convertible bonds to equity should be adjusted due to changes in the total sharecapital caused by the exercise of stock options of the company. Therefore, the price of convertible bonds to equityis adjusted to RMB 19.50 per share. In accordance with the resolution of the general meeting of shareholders on24 April 2023, the Company will pay a cash dividend of RMB 4.3 per 10 shares to all shareholders. Therefore,the conversion price is adjusted to RMB 19.07 per share. On 28 November 2023, according to the prospectus forthe Public Offering of Convertible Bonds of Universal Scientific Industrial (Shanghai) Co., Ltd., the price ofconvertible bonds to equity is adjusted to RMB 19.06 per share due to the reaching of conversion price adjustmentcriteria for cumulative stock option exercises.
When the convertible corporate bonds issued by the company are initially measured, the amount of the fair valueof the corresponding liability component after deducting the issuance expenses to be apportioned is RMB3,010,541,240.32, which is included in the bonds payable; The corresponding amount of redemption right and putback right is RMB 6,900,000.00, which is included in derivative financial liabilities; The amount of issuanceexpenses to be apportioned for the derivative financial liabilities is RMB 45,397.90, which is included in thecurrent profit and loss; The fair value of the corresponding equity part after deducting the apportioned issuanceexpenses is RMB 409,905,205.31, which is included in other equity instruments. The amortized cost of theadjusted liability is RMB 139,416,505.81 withdrawn according to the effective interest rate method in the currentperiod.
As of 31 December 2023, the Company has convertible bonds with face value of RMB 122,000 (book value ofRMB 113,272.01) converted into A-share ordinary shares, and the number of shares converted is 6,215 shares.Among them, in 2023, convertible bonds with a face value of RMB 54,000 (book value of RMB 51,341.46) wereconverted into A-share ordinary shares, the number of shares converted was 2,776 shares, and RMB 93.03 waspaid for commissions.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
35. Lease liabilities
(1) Details of lease liabilities
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Lease liabilities | 653,720,789.24 | 523,688,862.68 |
| Less: Lease liabilities included in non-current liabilities due within one year (Note (V). 31) | 166,945,559.82 | 141,963,140.51 |
| Total | 486,775,229.42 | 381,725,722.17 |
The following is the maturity analysis for lease liabilities which is based on undiscounted remaining contractualobligations:
Unit: RMB
| Within 1 year | 1-5 years | Over 5 years | Total | |
| 31/12/2023 | 171,679,696.45 | 329,233,957.90 | 217,512,341.22 | 718,425,995.57 |
| 31/12/2022 | 146,788,462.63 | 339,833,985.72 | 67,277,656.29 | 553,900,104.64 |
36. Long-term payables
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Software licensing fee (Note) | 31,646,041.98 | 44,878,564.09 |
| Less: Long-term payables due within one year | 6,119,744.14 | 13,765,268.38 |
| Total | 25,526,297.84 | 31,113,295.71 |
Note: It refers to software licensing fee payable by the Group, of which the portion due within one year is
recognized in accounts payable.
37. Long-term employee benefits payable
(1) Long-term employee benefits payable
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| 1. Post-employment benefits- net liability of defined benefit plans | 264,679,080.96 | 195,627,020.11 |
| 2. termination benefits | 8,926,811.49 | 3,715,489.91 |
| Total | 273,605,892.45 | 199,342,510.02 |
(2) Changes in defined benefit plans
Net liability of defined benefit plans
Unit: RMB
| ITEM | 2023 | 2022 |
| I. 31/12/2022 | 211,205,107.45 | 307,160,168.23 |
| II. Additions due to business combination (Note (VI), 1) | 42,393,319.88 | - |
| III. Defined benefits costs recognized in profit or loss for the year | 13,489,424.98 | 8,415,658.22 |
| IV. Defined benefits costs recognized in other comprehensive income | 19,541,638.43 | (67,885,313.64) |
| V. Amount contributed and paid during the year | (31,908,844.17) | (38,194,655.22) |
| VI. Exchange differences arising on translation of foreign currencies | 10,369,177.52 | 1,709,249.86 |
| VII. 31/12/2023 | 265,089,824.09 | 211,205,107.45 |
| Less: Long-term employee benefits payable due within one year | 410,743.13 | 15,578,087.34 |
| Long-term employee benefits payable paid after one year | 264,679,080.96 | 195,627,020.11 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
37. Long-term employee benefits payable - continued
(2) Changes in defined benefit plans - continued
Contents of defined benefit plans and related risks, and its impact over the Group's future cash flows, timing anduncertainty:
UGSI and USI, the Group's subsidiaries, provide retirement benefit plan for full-time regular employees hiredbefore 1 July 2005. The Group acquired FAFG in 2020. FAFG provides retirement benefit plan for its employees,which provides a pension for some employees who have worked for more than 10 years according to the workingyears and certain rate of their salaries in recent 10 years, and a pension for some employees who have worked formore than 2 years according to the working years and certain rate of their salaries in recent 12 months.
The defined benefit plans expose the Group to actuarial risks such as discount rate, future salary growth rate, etc.
The Group hired Towers Watson Business Management Consulting Co., Ltd. to estimate the present value ofretirement benefit plan of UGSI and USI by actuary in accordance with the projected unit credit method. Futuresalary growth rate and mortality rate are used to estimate the future cash outflows to recognize the present valueof the plan at a discounted rate which is determined in accordance with the market interest rate of high-qualitycorporate bonds at the balance sheet date. In countries where there is no market for such bonds, the market interestrate for government bonds (at the balance sheet date) shall be used. Since the Group's post-employment benefitobligations remain effective for 9 to 10 years, the discount rate is determined by reference to the bonds with asimilar duration to the post-employment benefit obligations. Therefore, the average interest rate for governmentbonds with a duration of 9 years or more is referenced. The Group recognizes liabilities based on the actuarialresult, with gains or losses arising from actuary recognized in other comprehensive income and not to be reversedto profit or loss in subsequent accounting periods. Past service cost is included in profit or loss for the periodwhen the modification to the plan is made. And net interest is recognized as the amount of net liabilities or assetsof the defined benefit plan multiplying by an appropriate discount rate.
The following table lists the significant actuarial assumptions used by UGSI and USI in determining the presentvalue of the defined benefit plan obligations:
| 31/12/2023 | 31/12/2022 | |
| Discount rate | 1.40% | 1.80% |
| Future salary growth rate | 2.25% | 2.25% |
| Mortality rate | Assumptions made based on the sixth Mortality Table in Taiwan | Assumptions made based on the sixth Mortality Table in Taiwan |
Sensitive analysis as below is based on reasonable changes of corresponding assumptions at the end of the reportingperiod (all other assumptions remain unchanged):
? When the discount rate is up (down) 0.5%, the present value of defined benefit plan obligations of UGSIand USI will be decreased by RMB 8,082,652.27 (increased by RMB 8,659,556.19) and RMB448,421.12(increased by RMB 476,332.10), respectively.? When the future salary growth rate is up (down) 0.5%, the present value of defined benefit plan obligationsof UGSI and USI will be increased by RMB 8,543,760.20 (decreased by RMB 8,057,509.32) and RMB470,104.03 (decreased by RMB 447,037.10), respectively.
The Group hired Confera to estimate the present value of retirement benefit plan obligation of FAFG by actuaryin accordance with the projected unit credit method. Future salary growth rate is used to estimate the future cashoutflows to recognize the present value of the plan at a discounted rate.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
37. Long-term employee benefits payable - continued
(2) Changes in defined benefit plans - continued
The following table lists the significant actuarial assumptions used by FAFG in determining the present value ofthe defined benefit plan obligations:
| 31/12/2023 | 31/12/2022 | |
| Discount rate | 3.15%-3.75 % | 3.75% |
| Future salary growth rate | 2.25%-2.6 % | 1.5%-2.25 % |
| Mortality rate | Life expectancy table of local National Bureau of Statistics | Life expectancy table of local National Bureau of Statistics |
Sensitive analysis as below is based on reasonable changes of corresponding assumptions at the end of thereporting period (all other assumptions remain unchanged):
? When the discount rate is up (down) 0.5%, the present value of defined benefit plan obligations of FAFGwill be decreased by RMB 8,034,353.99 (increased by RMB 8,715,210.22).? When the future salary growth rate is up (down) 0.5%, the present value of defined benefit plan obligations
of FAFG will be increased by RMB 2,818,233.74 (decreased by RMB 2,660,868.65).
As it is unlikely that an assumption can change in an isolated manner due to correlations among certainassumptions, the sensitivity analysis above may not reflect actual changes in present value of defined benefitplans.
In sensitivity analysis above, the method used to calculate net liabilities of defined benefit plans at the end of theperiod is the same with that used to recognize related liabilities in balance sheet.
Compared with previous years, methods and assumptions adopted to analyze sensitivity remain unchanged.
38. Provisions
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| Products quality assurance | 41,946,064.03 | 7,350,296.14 |
| Return of government grants (Note (VIII), 1) | 6,333,000.00 | - |
| Total | 48,279,064.03 | 7,350,296.14 |
39. Deferred income
(1) Details of deferred income
Unit: RMB
| ITEM | 31/12/2022 | Additions | Disposals | Translation differences arising on translation of financial statements denominated in foreign currencies | 31/12/2023 | Reason |
| Government grants | 60,913,501.65 | 21,000,000.00 | 23,915,752.34 | 109,192.63 | 58,106,941.94 | Note (VIII), 1 |
| Subsidies for purchase of fixed assets | 2,281,707.65 | 52,681.35 | 626,489.54 | 70,164.26 | 1,778,063.72 | |
| Total | 63,195,209.30 | 21,052,681.35 | 24,542,241.88 | 179,356.89 | 59,885,005.66 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
40. Other non-current liabilities
Other non-current liabilities refer to guarantee deposits and margins received from suppliers.
41. Share capital
Unit: RMB
| 31/12/2022 | Changes for the year | 31/12/2023 | ||
| New shares issued(Note 1) | Convertible bond to equity swap (Note 2) | |||
| Total shares | 2,206,864,239.00 | 3,124,565.00 | 2,776.00 | 2,209,991,580.00 |
Note 1: In November 2015, the Company implemented the Stock Option Incentive Plan of Universal Scientific
Industrial (Shanghai) Co., Ltd. granting qualified employees a certain number of stock options tosubscribe for the Company's ordinary shares. In 2023, 64,467 common shares were vested at a price ofRMB 15.54 per share. In November 2019, the Company implemented the 2019 Stock Option IncentivePlan of Universal Scientific Industrial (Shanghai) Co., Ltd. to grant eligible employees a certain numberof stock options to subscribe for shares of the Company's common stock. In 2023, 376,350 and 2,683,748ordinary shares granted by the Company were exercised at RMB 12.41 and RMB 11.98 respectively andregistered with the Shanghai Branch of China Securities Depositories and Clearing Co., LTD. The totalincrease in capital stock is RMB 3,124,565.00 and capital reserve is RMB 34,699,093.12.
Note 2: See Note V, 34 for convertible bond to equity swap.
42. Other equity instruments
Unit: RMB
| Outstanding financial instruments | 31/12/2022 | Additions | Disposals | 31/12/2023 | ||||
| Qty. | Carrying amount | Qty. | Carrying amount | Qty. | Carrying amount | Qty. | Carrying amount | |
| Convertible corporate bonds | 34,499,320 | 409,897,126.04 | - | - | 540.00 | 6,415.90 | 34,498,780.00 | 409,890,710.14 |
Note: Other equity instruments are formed by the equity part of convertible corporate bonds issued. For the
details, see Note (V), 34.
43. Capital reserve
Unit: RMB
| ITEM | 31/12/2022 | Additions | Disposals | 31/12/2023 |
| Share premium | 2,075,432,435.94 | 61,472,254.03 | 3,366,070.64 | 2,133,538,619.33 |
| Including: Share capital invested by investors (Note V. (41)) | 3,161,126,600.33 | 34,699,093.12 | - | 3,195,825,693.45 |
| Purchase of minority interests | (4,405,590.07) | - | - | (4,405,590.07) |
| Differences resulting from combination involving enterprise under common control | (5,621,108.53) | - | - | (5,621,108.53) |
| Transfer of capital reserve to share capital | (1,087,961,790.00) | - | - | (1,087,961,790.00) |
| Share-based payment exercise included in owners' equity | 118,492,564.42 | 26,354,526.01 | - | 144,847,090.43 |
| Treasury shares transferred out (Note (V). 44) | (106,264,417.99) | 363,746.57 | 3,366,070.64 | (109,266,742.06) |
| Exercise of convertible bonds (Note (V). 34) | 66,177.78 | 54,888.33 | - | 121,066.11 |
| Other capital reserve | 159,097,449.68 | 17,684,000.00 | 26,354,526.01 | 150,426,923.67 |
| Total | 2,234,529,885.62 | 79,156,254.03 | 29,720,596.65 | 2,283,965,543.00 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Treasury shares
Unit: RMB
| ITEM | 31/12/2022 | Increase in the year (Note 1) | Decrease in the year (Note 2) | 31/12/2023 |
| Employee stock ownership plan | 351,392,965.86 | 364,587.57 | 30,026,557.89 | 321,730,995.54 |
Note 1: In 2023, 30,600 Treasury shares will be returned to the Group in accordance with the 2020 Employee
Stock Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. among which RMB363,746.57 will be included in the capital reserve, and related taxes and commissions of RMB 841.00will be paid.
Note 2: In 2023, in accordance with the 2019 Employee Stock Ownership Plan of Universal Scientific Industrial
(Shanghai) Co., Ltd., the Motion to Amend the Core Employee Share Ownership Plan of UniversalScientific Industrial (Shanghai) Co., Ltd. (Revised) and its summary and the Motion of 2023 EmployeeStock Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. and its summary, the Groupused 1,715,250 shares of treasury stock for the exercise of options under the Employee Stock OwnershipPlan and 372,000 shares of treasury stock were transferred to the account of the Company's EmployeeStock Ownership Plan. A total of 2,087,250 shares of treasury stock were transferred out for a total ofRMB 30,026,557.89. The Group received RMB 26,686,556.25 from employees for the exercise of sharesunder the Employee Stock Ownership Plan, among which RMB 3,366,070.64 was reduced to capitalreserve and RMB 26,069.00 was paid for related taxes and commissions.
45. Other comprehensive income
Unit: RMB
| ITEM | 31/12/2022 | Amount incurred in the current year | 31/12/2023 | ||||
| Amount incurred for current year before tax | Less: Amount previously included in other comprehensive income and transferred to profit or loss for the period | Less: Income tax expenses | Attributable to owners of the company after tax | Attributable to minority interests after tax | |||
| I. Other comprehensive income that cannot be subsequently reclassified to profit or loss | (26,999,602.49) | 7,621,165.62 | - | (4,546,957.50) | 12,172,076.30 | (3,953.18) | (14,827,526.19) |
| Including: Recalculation of the changes in defined benefit plans | (1,764,575.20) | (19,541,638.43) | - | (4,546,957.50) | (14,990,727.75) | (3,953.18) | (16,755,302.95) |
| Fair value changes in other equity instruments investment | (25,235,027.29) | 27,162,804.05 | - | - | 27,162,804.05 | - | 1,927,776.76 |
| II. Other comprehensive income that will be reclassified to profit or loss | 138,849,771.07 | 138,485,940.43 | - | - | 137,704,410.57 | 781,529.86 | 276,554,181.64 |
| Including: Other comprehensive income that can be reclassified to profit or loss under equity method | (14,471,287.68) | (7,656,754.91) | - | - | (7,656,754.91) | - | (22,128,042.59) |
| Exchange differences on translation of financial statements denominated in foreign currencies | 3,401,475.38 | 217,631,386.30 | - | - | 216,849,856.44 | 781,529.86 | 220,251,331.82 |
| Hedges for net investment in foreign operations | 149,919,583.37 | (71,488,690.96) | - | - | (71,488,690.96) | - | 78,430,892.41 |
| Total other comprehensive income | 111,850,168.58 | 146,107,106.05 | - | (4,546,957.50) | 149,876,486.87 | 777,576.68 | 261,726,655.45 |
46. Surplus reserve
Unit: RMB
| ITEM | 31/12/2022 | Additions | Disposals | 31/12/2023 |
| Statutory surplus reserve (Note) | 862,080,832.26 | 104,720,922.14 | - | 966,801,754.40 |
Note: According to the Articles of Association, Universal Scientific Industrial (Shanghai) Co., Ltd. is required
to transfer 10% of its net profit in 2023 to the statutory surplus reserve. Statutory surplus reserve can beused to cover the Company's losses, expand the Company's production and operation or increase theCompany's capital.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
47. Retained profits
Unit: RMB
| ITEM | 2023 | 2022 |
| Retained profits at the end of prior year | 10,275,564,894.22 | 7,906,260,771.90 |
| Add: Net profit attributable to owners of the Company for the year | 1,947,846,866.12 | 3,059,967,081.20 |
| Less: Appropriation to statutory surplus reserve (Note 1) | 104,720,922.14 | 124,076,162.30 |
| Dividends on ordinary shares payable (Note 2) | 938,928,461.98 | 566,586,796.58 |
| Retained profits at the end of the year (Note 3) | 11,179,762,376.22 | 10,275,564,894.22 |
(1) Appropriation to statutory surplus reserve
According to the Articles of Association, the Company is required to transfer 10% of its net profit to the statutorysurplus reserve. The transfer may be ceased if the balance of the statutory surplus reserve has reached 50% of theCompany's registered capital.
(2) Profit distribution approved in shareholders' meeting during the year
As proposed by the resolution of the Twentieth Meeting of the Fifth Session of the Board of Directors of theCompany held on 31 March 2023, and approved by the Annual General Meeting on 24 April 2023, a cash dividendof RMB 4.30 (including tax) per 10 shares will be distributed on the basis of the total share capital registered atthe equity registration date less the number of the shares repurchased by the Company from special accounts,with no bonus issue and no increase in share capital.
(3) Profit distribution decided after the balance sheet date
As proposed by the resolution of the Tenth Meeting of the Sixth Session of the Board of Directors of the Companyheld on 29 March 2024, a cash dividend of RMB 2.70 (including tax) per 10 shares will be distributed on thebasis of the total share capital at the equity registration date less the number of the shares repurchased by theCompany from special accounts, with no bonus issue and no increase in share capital. The above proposalregarding dividends distribution is yet to be approved in a shareholders' meeting.
(4) Appropriation to surplus reserve by subsidiaries
As at 31 December 2023, the balance of the Group's retained profits include appropriation to surplus reserve bysubsidiaries amounting to RMB 1,395,095,817.26 (31 December 2022: RMB 1,296,513,372.15).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
48. Operating income and operating costs
(1) Details of operating income and operating costs
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | ||
| Revenue | Cost | Revenue | Cost | |
| Principal operating activities | 60,729,838,575.32 | 54,935,760,001.34 | 68,470,093,860.59 | 61,323,766,793.99 |
| Other operating activities | 62,070,962.55 | 3,376,480.35 | 45,982,102.67 | 3,307,737.74 |
| Total | 60,791,909,537.87 | 54,939,136,481.69 | 68,516,075,963.26 | 61,327,074,531.73 |
(2) Analysis of principal operating income and principal operating costs by product categories:
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year (restated) | ||
| Revenue | Principal operating costs | Revenue | Principal operating costs | |
| Communication products | 21,799,269,805.02 | 20,103,196,795.12 | 25,624,979,063.69 | 23,211,611,845.63 |
| Consumer electronic products | 19,254,189,286.98 | 17,728,131,621.69 | 21,728,941,113.99 | 19,901,381,324.59 |
| Industrial products | 8,164,460,442.66 | 6,982,306,047.58 | 8,656,421,000.15 | 7,265,264,364.72 |
| Cloud and storage products | 5,378,779,152.02 | 4,518,126,147.87 | 6,991,437,378.04 | 5,920,727,473.01 |
| Automotive electronic products | 5,137,439,831.33 | 4,721,705,037.54 | 4,662,922,798.27 | 4,252,380,090.12 |
| Medical products | 376,027,790.19 | 350,579,209.65 | 202,191,045.99 | 181,900,362.57 |
| Others | 619,672,267.12 | 531,715,141.89 | 603,201,460.46 | 590,501,333.35 |
| Total | 60,729,838,575.32 | 54,935,760,001.34 | 68,470,093,860.59 | 61,323,766,793.99 |
(3) Other operating income and other operating costs:
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | ||
| Other operating income | Other operating costs | Other operating income | Other operating costs | |
| Scrap income | 53,239,459.39 | - | 39,603,898.97 | - |
| Others | 8,831,503.16 | 3,376,480.35 | 6,378,203.70 | 3,307,737.74 |
| Total | 62,070,962.55 | 3,376,480.35 | 45,982,102.67 | 3,307,737.74 |
(4) Fulfillment of contractual obligations:
The Group's sales include domestic sales and export sales. The Group's performance obligation is to providegoods to customers, including communication products, consumer electronic products, cloud and storage products,industrial products, automotive electronic products, medical products and other products.
The Group recognizes revenue at the time when the customer obtains control of the goods. The Group recognizessales revenue from domestic sales at the time when the goods are delivered to the warehouse designated by thecustomer and the customer signs for them on the receipt, while that from export sales is recognized when thegoods leave the factory, when the goods are delivered to the carrier, when the goods are delivered to the port,when the goods are loaded onto an aircraft or ship, or when the goods are delivered to the customer or to a locationdesignated by the customer, respectively, according to the specific trading terms agreed in the contract.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
49. Taxes and levies
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| City maintenance and construction tax | 26,088,040.95 | 13,786,022.43 |
| Educational surcharge | 23,413,277.40 | 10,030,738.56 |
| Housing property Tax | 18,777,242.42 | 2,609,568.22 |
| Stamp duty | 20,308,111.04 | 23,111,161.47 |
| Urban land use tax | 864,618.59 | 781,817.57 |
| Others | 6,318,697.79 | 5,110,619.26 |
| Total | 95,769,988.19 | 55,429,927.51 |
50. Selling expenses
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Staff costs | 258,156,410.38 | 255,654,011.92 |
| After-sales service fee | 26,710,213.12 | 6,423,251.42 |
| Depreciation and amortization | 16,504,412.59 | 14,990,838.78 |
| Labor costs | 14,242,897.36 | 9,845,031.41 |
| Insurance | 12,865,317.46 | 5,982,096.06 |
| Traveling expenses | 10,010,174.36 | 6,943,197.17 |
| Material consumption | 8,717,711.11 | 7,733,595.28 |
| Entertainment expenses | 3,715,932.13 | 2,010,997.40 |
| Utilities | 2,290,917.38 | 2,109,667.22 |
| Share-based payments | 1,123,494.86 | - |
| Commission | 494,454.41 | 727,094.30 |
| Royalty fees | 115,357.28 | 36,434.00 |
| Others | 13,047,369.59 | 11,377,647.91 |
| Total | 367,994,662.03 | 323,833,862.87 |
51. Administrative expenses
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Staff costs | 733,392,318.30 | 995,101,343.39 |
| Labor costs and professional services fee | 163,770,021.83 | 140,189,347.74 |
| Depreciation and amortization | 118,434,053.03 | 106,547,071.59 |
| Renovation costs | 41,479,606.89 | 26,776,629.63 |
| Software costs | 31,191,025.01 | 24,156,832.67 |
| Traveling expenses | 23,849,101.79 | 12,558,944.40 |
| Utilities | 16,061,160.20 | 18,997,396.45 |
| Insurance | 15,487,901.30 | 8,115,188.86 |
| Share-based payments | 11,401,068.29 | 22,177,000.00 |
| Material consumption | 8,662,138.73 | 14,877,018.63 |
| Others | 51,699,543.65 | 52,352,224.52 |
| Total | 1,215,427,939.02 | 1,421,848,997.88 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
52. Research and development expenses
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Staff costs | 858,849,931.21 | 911,057,638.21 |
| Material and sample costs | 637,590,081.04 | 834,966,158.21 |
| Depreciation and amortization | 150,773,895.37 | 113,851,353.98 |
| Software costs | 24,471,359.74 | 17,122,097.78 |
| Renovation costs | 21,913,004.84 | 15,076,582.91 |
| Utilities | 20,542,686.36 | 27,167,208.87 |
| Mold costs | 15,042,616.72 | 33,643,778.88 |
| Consumables and miscellaneous | 14,493,723.19 | 13,395,678.45 |
| Labor costs | 11,603,187.49 | 19,904,668.08 |
| Traveling expenses | 10,517,776.73 | 3,691,357.13 |
| Share-based payments | 3,823,834.77 | - |
| Others | 37,582,030.81 | 44,585,253.21 |
| Total | 1,807,204,128.27 | 2,034,461,775.71 |
53. Financial expenses
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Interest expenses | 400,215,716.04 | 234,999,925.44 |
| Including: Interest expenses on lease liabilities | 18,068,930.94 | 19,293,314.43 |
| Interest expenses on issue of convertible bonds | 139,416,505.81 | 133,932,428.47 |
| Less: Interest income | 236,527,756.09 | 87,996,958.46 |
| Exchange differences | 32,024,532.96 | (136,338,140.35) |
| Others | 16,316,715.19 | 8,200,580.00 |
| Total | 212,029,208.10 | 18,865,406.63 |
54. Other income
Unit: RMB
| Classified by the nature | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Government grants | 89,396,536.73 | 56,144,655.78 | 71,813,784.39 |
| Additional value-added tax credit | 825,287.36 | - | - |
| Total | 90,221,824.09 | 56,144,655.78 | 71,813,784.39 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
55. Investment income
(1) Details of investment income
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Income from long-term equity investments under equity method | 8,716,784.59 | 73,531,247.72 |
| Investment income on disposal of long-term equity investments | 35,967.02 | - |
| Investment income from other equity instruments during the hold period | - | 17,034,226.73 |
| Investment income of other non-current financial assets during the hold period | 8,455,456.44 | 5,020,325.97 |
| Investment income on disposal of held-for-trading financial assets | 111,775,513.07 | 43,044,223.30 |
| Investment income on disposal of other non-current financial assets | 13,716,529.40 | - |
| Total | 142,700,250.52 | 138,630,023.72 |
56. Gains (losses) from changes in fair values
Unit: RMB
| Source resulting in gains from changes in fair values | Amount incurred in the current year | Amount incurred in the prior year |
| Held-for-trading financial assets | (32,979,655.61) | 23,949,712.86 |
| Including: Derivative financial instruments | (32,979,655.61) | 23,949,712.86 |
| Derivative financial liabilities | 2,945,018.68 | (2,317,400.67) |
| Other non-current financial assets | 2,926,885.11 | 10,206,885.31 |
| Total | (27,107,751.82) | 31,839,197.50 |
57. Impairment loss of credit
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Losses from bad debts of accounts receivable | (21,981,473.91) | (10,116,849.95) |
| Total | (21,981,473.91) | (10,116,849.95) |
58. Impairment losses of assets
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Impairment losses of inventories | (166,836,089.16) | (49,017,247.96) |
| Impairment losses of fixed assets | - | (49,852,343.57) |
| Total | (166,836,089.16) | (98,869,591.53) |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
59. Gains from disposal of assets
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Gains from disposal of non-current assets | 9,671,649.96 | 14,057,238.37 | 9,671,649.96 |
| Less: Losses from disposal of non-current assets | 3,337,342.19 | 5,442,124.77 | 3,337,342.19 |
| Total | 6,334,307.77 | 8,615,113.60 | 6,334,307.77 |
60. Non-operating income
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Sporadic income | 18,086,136.60 | 25,331,702.16 | 18,086,136.60 |
61. Non-operating expenses
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | Amount included in non-recurring profit or loss for the period |
| Losses on retirement of non-current assets | 907,053.77 | 5,890,183.57 | 907,053.77 |
| Others | 5,169,424.69 | 3,050,307.39 | 5,169,424.69 |
| Total | 6,076,478.46 | 8,940,490.96 | 6,076,478.46 |
62. Income tax expenses
(1) Statement of income tax expenses
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Current income tax expenses | 342,953,512.21 | 500,693,610.57 |
| Annual filing differences of income tax | (79,209,205.14) | (21,961,470.70) |
| Deferred income tax expenses | (23,765,557.86) | (61,526,690.41) |
| Total | 239,978,749.21 | 417,205,449.46 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
62. Income tax expenses - continued
(2) Reconciliation of income tax expenses to the accounting profit
Unit: RMB
| Amount incurred in the current year | Amount incurred in the prior year | |
| Profit before tax | 2,189,687,856.20 | 3,477,195,221.25 |
| Applicable tax rate | 15% | 15% |
| Income tax expenses accounted at an applicable tax rate | 328,453,178.43 | 521,579,283.19 |
| Effect of non-deductible cost, expense and loss | 3,174,705.79 | 1,535,699.03 |
| Effect of deemed sales on income taxes | 4,868.66 | 2,481,730.54 |
| Effect of non-taxable income | (7,924,742.71) | (11,614,249.60) |
| Tax effect of additional deductible expenses | (119,266,234.38) | (144,195,037.69) |
| Effect of deductible temporary difference or deductible loss not recognized for deferred tax assets for the current year | 17,181,991.50 | 3,384,353.42 |
| Effect of utilizing deductible temporary differences or deductible loss not recognized for deferred tax assets for prior period | (464,956.20) | (5,037,046.92) |
| Additional levy on undistributed surplus of Taiwan subsidiaries | 24,129,623.96 | - |
| Equity incentive | 2,339,623.13 | (1,623,227.59) |
| Annual filing differences of income tax | (79,209,205.14) | (21,961,470.70) |
| Effect of different tax rates applied by subsidiaries | 73,877,533.67 | 68,733,454.00 |
| Effect of changes in income tax rates of subsidiaries on the opening balance of deferred tax assets | (7,776,934.75) | 4,488,031.20 |
| Others | 5,459,297.25 | (566,069.42) |
| Income tax expenses | 239,978,749.21 | 417,205,449.46 |
63. Items in the cash flow statement
(1) Cash relating to operating activities
Other cash receipts relating to operating activities
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Interest income | 246,972,796.68 | 94,342,090.81 |
| Subsidy income | 93,639,071.75 | 60,118,380.37 |
| Customer deposit | 91,558,970.22 | 200,960,766.77 |
| Customs deposit received | 1,500,000.00 | - |
| Advanced payment | - | 151,945,946.64 |
| Others (Note) | 10,383,613.95 | 6,745,265.18 |
| Total | 444,054,452.60 | 514,112,449.77 |
Note: It mainly refers to sporadic income.
Other cash payments relating to operating activities
Unit: RMB
| Amount incurred in the current year | Amount incurred in the prior year | |
| Other expenses paid | 261,322,155.09 | 137,350,952.30 |
| Payment of advances | 19,098,207.78 | |
| Payment of customs deposit | - | 6,069,934.90 |
| Total | 280,420,362.87 | 143,420,887.20 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
63. Items in the cash flow statement - continued
(2) Cash relating to investing activities
Cash receipts relating to significant investing activities
Unit: RMB
| Amount incurred in the current year | Amount incurred in the prior year | |
| Principal of financial products | 10,325,000,000.00 | 5,035,000,000.00 |
| Disposal of joint ventures | 110,880,000.00 | - |
| Settlement of contingent consideration | 75,498,235.81 | - |
| Disposal of non-current financial assets | 49,604,652.83 | - |
| Reduction of investments in other equity instrument | 27,680,312.65 | - |
| Recovery of fund investments | - | 14,784,248.93 |
| Total | 10,588,663,201.29 | 5,049,784,248.93 |
Cash payments relating to significant investing activities
Unit: RMB
| Amount incurred in the current year | Amount incurred in the prior year | |
| Principal of financial products | 10,325,000,000.00 | 5,035,000,000.00 |
| Fund investments | 54,130,858.29 | 20,991,050.00 |
| Total | 10,379,130,858.29 | 5,055,991,050.00 |
Other cash payments relating to investing activities
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the current year |
| Foreign exchange margin received | 2,214,334.90 | - |
(3) Cash relating to financing activities
Other cash receipts relating to financing activities
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Shareholding plan exercise payment | 26,686,556.25 | - |
| Long-term loan deposit | - | 3,506,097.66 |
| Total | 26,686,556.25 | 3,506,097.66 |
Other cash payments relating to financing activities
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Payment of lease principal and interest | 162,206,706.50 | 153,262,833.52 |
| Repurchase of treasury shares | - | 120,319,138.50 |
| Others | 1,089,693.30 | 553,599.25 |
| Total | 163,296,399.80 | 274,135,571.27 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
64. Supplementary information to the cash flow statement
(1) Supplementary information to the cash flow statement
Unit: RMB
| Supplementary Information | 2023 | 2022 |
| 1. Reconciliation of net profit to cash flow from operating activities: | ||
| Net profit | 1,949,709,106.99 | 3,059,989,771.79 |
| Add: Losses on impairment of assets | 166,836,089.16 | 98,869,591.53 |
| Impairment loss of credit | 21,981,473.91 | 10,116,849.95 |
| Depreciation of investment properties | 139,878.71 | - |
| Depreciation of fixed assets | 919,092,232.02 | 779,218,741.24 |
| Depreciation of right-of-use assets | 139,576,364.62 | 129,725,980.42 |
| Amortization of intangible assets | 89,318,624.87 | 85,207,775.92 |
| Amortisation of long-term prepaid expenses | 76,621,504.00 | 75,146,058.96 |
| Amortization of deferred income | (18,209,241.88) | (20,543,921.46) |
| Gains on disposal of fixed assets, intangible assets and other long-term assets | (6,334,307.77) | (8,615,113.60) |
| Losses on retirement of fixed assets | 907,053.77 | 5,890,183.57 |
| Gains (losses) on changes in fair values | 27,107,751.82 | (31,839,197.50) |
| Financial expenses | 506,491,993.18 | 158,347,264.83 |
| Investment income | (142,700,250.52) | (138,630,023.72) |
| Share-based payments settled by equity | 17,684,000.00 | 22,177,000.00 |
| Increase in deferred tax assets | (18,723,957.98) | (53,431,234.36) |
| Decrease in deferred tax liabilities | (5,041,599.88) | (8,095,456.05) |
| Decrease (increase) in inventories | 2,652,192,570.73 | (1,929,242,538.88) |
| Decrease in receivables from operating activities | 1,154,349,482.14 | 1,634,270,188.99 |
| Decrease in payables from operating activities | (707,563,275.27) | (433,365,666.13) |
| Net Cash Flow from Operating Activities | 6,823,435,492.62 | 3,435,196,255.50 |
| 2. Significant investing and financing activities that do not involve cash receipts and payments: | ||
| Acquisition of long-term assets with debt | 419,828,350.96 | 403,741,556.33 |
| 3. Net changes in cash and cash equivalents: | ||
| Cash at the end of the year | 11,184,292,778.70 | 7,678,044,104.00 |
| Less: Cash at the beginning of the year | 7,678,044,104.00 | 6,018,193,116.59 |
| Add: Closing balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase in cash and cash equivalents | 3,506,248,674.70 | 1,659,850,987.41 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
64. Supplementary information to the cash flow statement - continued
(2) Net cash payments for acquisitions of subsidiaries in the period
Unit: RMB
| ITEM | Amounts |
| Cash and cash equivalents paid in the period for business combination occurred in the period | 297,177,480.00 |
| Less: Cash and cash equivalents held by subsidiaries at the acquisition date | 26,211,422.10 |
| Add: Cash and cash equivalents paid in the period for business combination occurred in the previous period | - |
| Net cash paid for acquisitions of subsidiaries | 270,966,057.90 |
(3) Composition of cash and cash equivalents
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 |
| I. Cash | 11,184,292,778.70 | 7,678,044,104.00 |
| Including: Cash on hand | 115,564.84 | 271,737.56 |
| Bank deposits that can be readily withdrawn on demand | 11,184,177,213.86 | 7,677,772,366.44 |
| II. Cash equivalents | - | - |
| III. Closing balance of cash and cash equivalents | 11,184,292,778.70 | 7,678,044,104.00 |
(4) Cash and bank balances not included in cash and cash equivalents
Unit: RMB
| ITEM | 31/12/2023 | 31/12/2022 | Reasons |
| Other cash and bank balances | 20,975,282.12 | - | Investment deposit |
| Other cash and bank balances | 13,430,328.50 | 14,757,734.50 | Customs deposit |
| Other cash and bank balances | - | 2,214,334.90 | Foreign exchange margin |
| Total | 34,405,610.62 | 16,972,069.40 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
65. Foreign currency monetary items
(1) Foreign currency monetary items
Unit: RMB
| ITEM | Closing balance of foreign currency | Exchange rate | Closing balance of RMB equivalent |
| Cash and bank balances | |||
| Including: RMB | 34,662,297.39 | 1.0000 | 34,662,297.39 |
| USD | 326,882,463.31 | 7.0827 | 2,315,210,422.89 |
| EUR | 2,759,379.43 | 7.8264 | 21,596,007.17 |
| HKD | 2,273,352.08 | 0.9062 | 2,060,111.66 |
| JPY | 34,137,466.00 | 0.0502 | 1,713,700.79 |
| GBP | 10,434.16 | 9.0057 | 93,966.91 |
| MXN | 22,062,456.68 | 0.4193 | 9,250,788.09 |
| SGD | 24,736.69 | 5.3772 | 133,014.13 |
| CZK | 4,612.00 | 0.3165 | 1,459.70 |
| TND | 1,838,625.90 | 2.3010 | 4,230,678.20 |
| VND | 153,937,471,634.00 | 0.0003 | 46,181,241.49 |
| Accounts receivable | |||
| Including: USD | 918,375,938.33 | 7.0827 | 6,504,581,258.41 |
| EUR | 5,588,198.06 | 7.8264 | 43,735,473.30 |
| MXN | 529,127.75 | 0.4193 | 221,863.27 |
| Other receivables | |||
| Including: USD | 3,114,078.05 | 7.0827 | 22,056,080.60 |
| EUR | 22,508.03 | 7.8264 | 176,156.85 |
| MXN | 9,396,102.33 | 0.4193 | 3,939,785.71 |
| VND | 1,169,923,804.00 | 0.0003 | 350,977.14 |
| JPY | 2,944,729.00 | 0.0502 | 147,825.40 |
| Short-term borrowings | |||
| Including: USD | 54,943,774.53 | 7.0827 | 389,150,271.86 |
| EUR | 386,500,000.00 | 7.8264 | 3,024,903,600.00 |
| VND | 30,700,000,000.00 | 0.0003 | 9,210,000.00 |
| Accounts payable | |||
| Including: USD | 982,773,675.30 | 7.0827 | 6,960,691,110.05 |
| EUR | 2,886,956.78 | 7.8264 | 22,594,478.54 |
| HKD | 783,501.84 | 0.9062 | 710,009.37 |
| JPY | 512,860,595.00 | 0.0502 | 25,745,601.87 |
| VND | 73,028,317,081.00 | 0.0003 | 21,908,495.12 |
| CHF | 29,013.51 | 7.8428 | 227,547.16 |
| Other payables | |||
| Including: USD | 40,769,707.77 | 7.0827 | 288,759,609.22 |
| EUR | 2,462,963.23 | 7.8264 | 19,276,135.42 |
| HKD | 139,877.90 | 0.9062 | 126,757.35 |
| VND | 8,141,509,459.00 | 0.0003 | 2,442,452.84 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
65. Foreign currency monetary items - continued
(2) Description of overseas operating entities
| Full name of subsidiary | Principal operation place | Functional currency | Choosing basis |
| Universal Global Technology Co., Limited ("UGT") | Hong Kong | USD | Major currencies used in operating and financing activities |
| Universal Global Industrial Co., Limited ("UGI") | Hong Kong | USD | Major currencies used in operating activities |
| Universal Global Electronics Co., Limited ("UGE") | Hong Kong | USD | Major currencies used in operating activities |
| Universal Global Scientific Industrial Co., Ltd. | Taiwan | TWD | Currency in major economic environment |
| Universal Scientific Industrial Co., Ltd. | Taiwan | TWD | Currency in major economic environment |
| USI America Inc. | USA | USD | Currency in major economic environment |
| USI Japan Co., Ltd. | Japan | JPY | Currency in major economic environment |
| Universal Scientific Industrial De México S.A. De C.V. | Mexico | USD | Major currencies used in operating and financing activities |
| Universal Scientific Industrial Poland Sp. z o.o. | Poland | PLN | Currency in major economic environment |
| Universal Scientific Industrial (France) | France | EUR | Currency in major economic environment |
| Universal Scientific Industrial Vietnam Company Limited | Vietnam | USD | Major currencies used in operating activities |
| Hirschmann Car Communication Holding S.a.r.l. | Luxembourg | EUR | Currency in major economic environment |
| ASTEELFLASH (BEDFORD) LIMITED | England | GBP | Currency in major economic environment |
| ASTEELFLASH FRANCE | France | EUR | Currency in major economic environment |
| ASTEELFLASH TUNISIE S.A. | Tunisia | EUR | Currency in major economic environment |
| ASTEELFLASH MEXICO S.A. de C.V. | Mexico | USD | Major currencies used in operating and financing activities |
| ASTEELFLASH GERMANY GmbH | Germany | EUR | Currency in major economic environment |
| ASTEELFLASH PLZEN S.R.O. | Czech Republic | EUR | Currency in major economic environment |
| ASTEELFLASH TECHNOLOGIE | France | EUR | Currency in major economic environment |
| ASTEELFLASH BRETAGNE | France | EUR | Currency in major economic environment |
| ASTEELFLASH HERSFELD GmbH | Germany | EUR | Currency in major economic environment |
| ASTEELFLASH DESIGN SOLUTIONS HAMBOURG GmbH | Germany | EUR | Currency in major economic environment |
| ASTEELFLASH USA CORP. | USA | USD | Currency in major economic environment |
66. Hedge
Disclose by category the following information of hedge items and related hedging instruments, the qualitativeand quantitative information of hedged risks:
The Group acquired FAFG through USI France under Universal Global Technology Co., Limited, its wholly-owned subsidiary, in order to expand its global operations and market layout in electronic design andmanufacturing. The Group's net investment in FAFG's foreign operations with EUR as the functional currency isexposed to risks of exchange rate changes in EUR. The Group uses loan contracts in EUR to manage the foreignexchange risk of the net investment in FAFG's foreign operations. The Group's foreign borrowings are in EUR,which is also the functional currency of FAFG. The exchange rate of EUR is the basic variable for both thehedging instrument (short-term borrowings) and the hedged item (the Group's net investment in foreign operationsof FAFG). The Group designates the overall foreign exchange risk component of short-term as the hedginginstrument and designates a portion of the Group's net investment in foreign operations of FAFG as the hedgeditem, which are equal in quantity. The Group uses hedges for net investment in foreign operations.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(V) NOTES TO ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS - continued
66. Hedge - continued
Hedging instrument
A summary of hedging instrument:
Unit: EUR
| Hedging instrument | 31/12/2023 | |||
| Within 6 months | 6 to 12 months | After 12 months | ||
| Hedges for net investment in foreign operations (Note (V). 24) | ||||
| Foreign exchange risk -Short-term borrowings in EUR | Nominal amount | 272,500,000.00 | - | - |
Unit: RMB
| 31/12/2023 | 31/12/2023 | Items presented for assets and liabilities that include hedging instruments | 2023 | ||
| Nominal amount of the hedging instrument | Carrying amount of the hedging instrument | Changes in fair value of the invalid part of hedge | |||
| ASSETS | Liabilities | ||||
| Hedges for net investment in foreign operations | |||||
| Foreign exchange risk -Short-term borrowings in EUR | 2,132,689,503.75 | - | 2,132,689,503.75 | Short-term borrowings | - |
Details of hedged items:
Unit: RMB
| Carrying amount of hedged items at 31/12/2023 | Items presented for assets and liabilities that include hedged instruments | Changes in fair value of the invalid part of hedged items in 2023 | Hedge reserve for net investment in foreign operations at 31/12/2023 | ||
| ASSETS | Liabilities | ||||
| Hedges for net investment in foreign operations | |||||
| Foreign exchange risk | 2,132,689,503.75 | - | The Group's net investment in FAFG's foreign operations | - | 78,430,892.41 |
Hedge effect
Unit: RMB
| Hedges for net investment in foreign operations | 2023 | 2023 | Items listed in the income statement including invalid part of hedge recognized | Amount reclassified from hedge reserves for net investment in foreign operations to profit or loss for the current period in 2023 | Items listed in the income statement including reclassification adjustment |
| Changes in hedge reserves for net investment in foreign operations of hedging instruments included in other comprehensive income | The invalid part of hedge included in profit or loss for the current period | ||||
| Foreign exchange risk -Short-term borrowings in EUR | (71,488,690.96) | - | NA | NA | NA |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VI) CHANGES IN SCOPE OF CONSOLIDATION
1. Business combinations not involving enterprises under common control
(1) Business combinations not involving enterprises under common control occurred in the period
Unit: RMB
| Name of the acquiree | Equity acquisition date | Equity acquisition cost | Equity acquisition proportion (%) | Equity acquisition method | Acquisition date | Determination basis of acquisition date | Revenue of the acquiree from the acquisition date to period end | Net profit of the acquiree from the acquisition date to period end | Cash flows of the acquiree from the acquisition date to period end |
| Hirschmann Car Communication Holding S.a.r.l. | 27/10/2023 | 446,362,010.60 | 100.00 | Cash | 27/10/2023 | Obtain of control | 242,475,011.15 | 10,427,247.00 | 86,056,334.29 |
Note: On 17 March 2023, based on the resolutions of the board meeting, the Company established a special
purpose vehicle ("SPV") through Universal Global Technology Co., Limited ("UGT"), a wholly-ownedsubsidiary, together with Ample Trading, Co., Ltd ("Ample Trading"), an unrelated party, with aregistered capital of USD 53 million, of which UGT contributes USD 39.803 million (RMB290,557,919.70), accounting for 75.1% of the SPV shares, and Ample Trading contributes USD 13.197million (RMB 96,336,780.30), accounting for the remaining 24.9% of the SPV shares. The SPV acquiredthe automotive wireless business unit ("Target Business", "Hirschmann") from an unrelated party, TEConnectivity Ltd., and acquired 100% equity interest in Hirschmann. The acquisition price of USD 48million will be subject to adjustment based on net debt and net working capital (including acquisitionprice adjustment) of the Target Business on the closing date and will be settled in cash.
(2) Cost of combination and goodwill
Unit: RMB
| Cost of combination | Hirschmann |
| Cost of combination (Note) | 446,362,010.60 |
| Including: Cash paid | 297,177,480.00 |
| Less: Shares in fair value of identifiable net assets acquired | 445,222,678.73 |
| Goodwill | 1,139,331.87 |
Note: As of 31 December 2023, the actual acquisition price of USD 41,400,000.00 (RMB 297,177,480.00) has
been paid. An amount of USD 6,600,000.00 and an estimated acquisition price adjustment of USD14,183,000.00 (RMB 147,199,754.10) remains unpaid. The difference is due to the effect of exchangerate changes.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VI) CHANGES IN SCOPE OF CONSOLIDATION - continued
1. Business combinations not involving enterprises under common control - continued
(3) Identifiable assets and liabilities of the acquiree on the acquisition date
The fair values of identifiable assets, liabilities and contingent liabilities acquired in a combination or the cost ofbusiness combination can be determined only provisionally as the Group had not yet obtained an assessmentreport at the end of the year in which the business combination related to Hirschmann occurred, therefore, theGroup recognizes and measures the combination of Hirschmann using those provisional values.
Unit: RMB
| Hirschmann | ||
| Provisional value | Carrying amount at the acquisition date | |
| Assets: | ||
| Cash and bank balances | 26,211,422.10 | 26,211,422.10 |
| Accounts receivable | 181,962,085.32 | 181,962,085.32 |
| Inventories | 230,345,061.40 | 230,345,061.40 |
| Other current assets | 56,784,983.16 | 56,784,983.16 |
| Fixed Assets | 114,827,267.69 | 114,827,267.69 |
| Construction in progress | 37,070,089.15 | 37,070,089.15 |
| Right-of-use assets | 31,791,453.90 | 31,791,453.90 |
| Other non-current assets | 3,032,553.62 | 3,032,553.62 |
| Liabilities: | ||
| Accounts payable | 81,721,936.87 | 81,721,936.87 |
| Employee benefits payable | 40,628,473.17 | 40,628,473.17 |
| Other current liabilities | 49,400,186.44 | 49,400,186.44 |
| Long-term employee benefits payable | 42,393,319.88 | 42,393,319.88 |
| Other non-current Liabilities | 22,658,321.25 | 22,658,321.25 |
| Net assets | 445,222,678.73 | 445,222,678.73 |
| Less: Minority interests | - | - |
| Net assets acquired | 445,222,678.73 | 445,222,678.73 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VII) EQUITY IN OTHER ENTITIES
1. Equity in major subsidiaries
(1) Composition of enterprise group
| Full name of subsidiary | Principal operation place | Currency of registered capital | Registered capital | Place of incorporation | Nature of business | Proportion of shareholding (%) | Acquisition method | |
| Direct | Indirect | |||||||
| Universal Global Electronics (Shanghai) Co., Ltd. | Shanghai | RMB | 1,330,000,000.00 | No.501 Long Gui Road, China (Shanghai) Pilot Free Trade Zone | Production and sales, product design and research development | 100 | - | Acquisition through establishment |
| Universal Global Technology (Kunshan) Co., Ltd. | Kunshan | RMB | 550,000,000.00 | No.497 Huangpu Road, Qiandeng Town, Kunshan City, Jiangsu Province | Production and sales | 100 | - | Acquisition through establishment |
| Universal Global Scientific Industrial Co., Ltd | Taiwan | TWD | 1,980,000,000.00 | No. 141, Lane 351, Sec. 1, Taiping Road, Caotun Town, Nantou County, Taiwan | Production and sales, product design and research development | - | 100 | Acquisition through establishment |
| Universal Scientific Industrial Co., Ltd | Taiwan | TWD | 1,399,727,400.00 | No. 141, Lane 351, Sec. 1, Taiping Road, Caotun Town, Nantou County, Taiwan | Production and sales, product maintenance | - | 100 | Acquisition through business combinations involving enterprises under common control |
| Universal Global Technology Co., Limited | Hong Kong | USD | 480,803,000.00 | Room A, 7th Floor, Yuen Long Hi-Tech Centre, No. 11Wang Yip Street West, Yuen Long, New Territories, Hong Kong | Trade and investment | 100 | - | Acquisition through establishment |
| Universal Global Industrial Co., Limited | Hong Kong | USD | 31,000,000.00 | Room 2702-3, 27th Floor, Bank of East Asia Harbour Centre, No. 56 Gloucester Road, Wanchai, Hong Kong | Trade and investment | - | 100 | Acquisition through establishment |
| USI Electronics (Shenzhen) Co., Ltd. | Shenzhen | USD | 75,000,000.00 | Huanxu Electronics Park, North of Hi-Tech Park , Nanshan District, Shenzhen City, Guangdong Province | Production and sales | 50 | 50 | Acquisition through business combinations involving enterprises under common control |
| USI Japan Co., Ltd. | Japan | JPY | 95,000,000.00 | Sumitomo Fudosan Shin-yokohama Bldg. 10F 2-5-5. Shin-yokohama, Kouhoku-ku, Yokohama, Japan | Product maintenance and related services | - | 100 | Acquisition through business combinations involving enterprises under common control |
| Universal Scientific Industrial De México S.A. De C.V. | Mexico | MXN | 2,293,299,926.00 | Anillo Periferico Manuel Gomez Morin No. 656 Jardines de Santa Isabel CP44300, Guadalajara, Jalisco, México | Contractual manufacturing, product maintenance and related services | - | 100 | Acquisition through business combinations involving enterprises under common control |
| Universal Global Technology (Huizhou) Co., Ltd. | Huizhou | RMB | 800,000,000.00 | No.369 Xinhe Avenue, Daya Wan, Huizhou | Production and sales | 100 | - | Acquisition through establishment |
| Universal Scientific Industrial (France) | France | EUR | 321,374,822.00 | 95 rue La Boetie 75008 Paris, France | Investment | - | 100 | Acquisition through establishment |
| Universal Scientific Industrial Poland Sp. Z o.o. | Poland | PLN | 80,852,300.00 | Biskupice Podgórne ul. Innowacyjna 4, 55-040, Wroc?aw, Polska | Production and sales | - | 100 | Acquisition through business combinations not involving enterprises under common control |
| Universal Scientific Industrial Vietnam Company Limited | Vietnam | USD | 105,000,000.00 | Land Plot CN4.1H, Dinh Vu Industrial Zone, Dinh Vu – Cat Hai Economic Zone, Dong Hai 2 Ward, Hai An District, Hai Phong City, Vietnam | Production and sales, product design and research development | - | 100 | Acquisition through establishment |
| USI Science and Technology (Shenzhen) Co., Ltd. | Shenzhen | RMB | 15,000,000.00 | 101 Huanxu Electronics Factory, Gaoxin North District, Songpingshan North Ring Road, Songpingshan Community, Xili Street, Nanshan District, Shenzhen | Product design and research development, Real estate development and operation | - | 100 | Acquisition through establishment |
| FINANCI?RE AFG S.A.S. | France | EUR | 79,847,636.00 | 6 Rue Vincent Van Gogh 93360 Neuilly-Plaisance | Production and sales | 10.42 | 89.58 | Acquisition through business combinations not involving enterprises under common control |
| Asteelflash Suzhou Co., Ltd. | Suzhou | USD | 18,000,000.00 | 8 Gutang Road, Wujiang Economic and Technological Development Zone | Production and sales | - | 100 | Acquisition through business combinations not involving enterprises under common control |
(2) The Group has no significant non-wholly subsidiaries.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VII) EQUITY IN OTHER ENTITIES - continued
2. Equity in joint ventures or associates
(1) Significant associates
| Name of joint venture | Principal operation place | Place of incorporation | Nature of business | Proportion of shareholding (%) | Accounting treatments for investments in joint ventures or associates | |
| Direct | Indirect | |||||
| I. Associate | ||||||
| M-Universe | Singapore | 1 Marina Boulevard #28-00, Singapore | Production and sales | - | 42.23 | Equity method |
(2) Major financial information of significant associates
Unit: RMB
| M-Universe | ||
| 31/12/2023/Amount incurred in the current year | 31/12/2022/Amount incurred in the prior year | |
| Current Assets | 1,114,604,499.00 | 1,125,514,183.00 |
| Including: Cash and cash equivalent | 163,539,543.00 | 183,419,705.60 |
| Non-current assets | 506,122,125.29 | 505,757,960.45 |
| TOTAL ASSETS | 1,620,726,624.29 | 1,631,272,143.45 |
| Current Liabilities | 411,136,569.60 | 455,094,822.40 |
| Non-current Liabilities | 76,408,317.54 | 51,897,871.25 |
| TOTAL LIABILITIES | 487,544,887.14 | 506,992,693.65 |
| Minority interests | 1,239,472.50 | 1,539,176.60 |
| Equity attributable to shareholders of the Company | 1,131,942,264.65 | 1,122,740,273.20 |
| Share of net assets calculated based on shareholding proportion | 478,019,218.36 | 474,133,217.37 |
| Carrying amount of equity investments in associates | 478,019,218.36 | 474,133,217.37 |
| Fair value of equity investments in joint ventures where there is quoted price | N/A | N/A |
| Operating income | 1,236,501,118.60 | 1,414,915,124.78 |
| Net profit attributable to owners of the Company | 34,458,252.29 | 119,244,906.96 |
| Other comprehensive income attributable to owners of the Company, net of tax | (18,131,079.59) | (85,149,876.34) |
| Total comprehensive income attributable to owners of the Company | 16,327,172.70 | 34,095,030.62 |
| Dividends declared from associates in the current period (Note (V). 11) | 11,274,179.59 | 8,720,087.64 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VII) EQUITY IN OTHER ENTITIES - continued
2. Equity in joint ventures or associates - continued
(3) Summary financial information of insignificant joint ventures and associates
Unit: RMB
| Joint ventures: MUtek Electronics | 31/12/2023/Amount incurred in the current year | 31/12/2022/Amount incurred in the prior year |
| Total book value of investment | 3,547,050.76 | 6,030,425.80 |
| The sum of the following items in proportion to their shareholding | (2,540,207.83) | (1,294,846.51) |
| Net loss | (2,540,207.83) | (1,294,846.51) |
| Other comprehensive income | - | - |
| Total comprehensive income | (2,540,207.83) | (1,294,846.51) |
| Associates: Questyle Audio Technology Co., Ltd. | ||
| Total book value of investment | 16,705,272.48 | 20,000,000.00 |
| The sum of the following items in proportion to their shareholding | ||
| Net loss | (3,294,727.52) | - |
| Other comprehensive income | - | - |
| Total comprehensive income | (3,294,727.52) | - |
(4) There is no significant limitations over the ability of joint ventures or associates to transfer funds to the
Group.
(5) According to the Joint Investment Contract signed by UGSI and Merry Electronics, UGSI proposed to
contribute TWD 191,100,000.00, but actually contributed TWD 29,400,000.00, which the contributionnot yet paid in full is TWD 161,700,000.00, equivalent to RMB 37,299,221.30 (Note (XIII). 1).
(6) The Group has no contingent liabilities relating to investments in joint ventures and associates.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VIII) Government grants
1. Liabilities items involving government grants
Unit: RMB
| ITEM | 31/12/2022 | Increase in the year | Amount recognized in other income of the year | Other changes (Note 1) | Exchange differences arising on translation of financial statements denominated in foreign currencies | 31/12/2023 | Asset-related / Income-related |
| Technology reform item for ultra-thin communication module deep intelligent production line | 23,425,215.24 | 10,800,000.00 | 7,044,996.62 | - | - | 27,180,218.62 | Asset-related |
| Government grants for the sixth batch of high quality special projects (technological transformation) | 10,632,700.87 | - | 2,989,803.69 | - | - | 7,642,897.18 | Asset-related |
| Display and touch chip module technology research and development and industrialization projects | 9,003,605.63 | - | 1,838,332.44 | - | - | 7,165,273.19 | Asset-related |
| Government grant income from matching funds for key transformation projects for the automation of the production of smart wearable products | 8,598,375.00 | - | 2,417,625.00 | - | - | 6,180,750.00 | Asset-related |
| 2022 Provincial Special project fund for Intelligent Manufacturing Demonstration Plant | 4,911,719.37 | - | 1,158,222.44 | - | - | 3,753,496.93 | Asset-related |
| Upgrading subsidies for Poland technology | 1,431,773.68 | - | 1,211,454.14 | - | 109,192.63 | 329,512.17 | Asset-related |
| Huizhou Daya Bay Economic and Technological Development Zone Industry and Trade Development Bureau subsidy income | 1,842,648.28 | 4,100,000.00 | (390,351.72) | (6,333,000.00) | - | - | Asset-related |
| Kunshan Bureau of Industry and Information Technology Suzhou Smart Factory government subsidy | 943,727.23 | - | 226,102.92 | - | - | 717,624.31 | Asset-related |
| Industrialization technology upgrading project | 123,736.35 | - | 118,346.39 | - | - | 5,389.96 | Asset-related |
| Suzhou industrial enterprises effective investment award projects | - | 4,700,000.00 | 865,893.32 | - | - | 3,834,106.68 | Asset-related |
| Government grants for the twelfth batch of high quality special projects (technological transformation) | - | 1,400,000.00 | 102,327.10 | - | - | 1,297,672.90 | Asset-related |
| Total | 60,913,501.65 | 21,000,000.00 | 17,582,752.34 | (6,333,000.00) | 109,192.63 | 58,106,941.94 |
Note 1: Universal Global Technology (Huizhou) Co., Ltd., a wholly-owned subsidiary of the Company, was
reassessed in 2023 and is expected to fail to meet the subsidy requirement of the project " subsidy incomefrom Huizhou Daya Bay Economic and Technological Development Zone Industry and TradeDevelopment Bureau". As of 31 December 2023, RMB 6,333,000.00 was recognized in provisions.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(VIII) Government grants - continued
2. Government grants included in profit or loss for the period
Unit: RMB
| Item | Amount incurred in the current year | Amount incurred in the prior year |
| Industry and Trade Development Bureau subsidy | 28,122,309.00 | - |
| Development support fund | 13,080,000.00 | - |
| Supporting funds for securing and nurturing businesses | 4,595,500.00 | - |
| French government grants for science and technology research | 3,773,695.98 | 2,448,279.86 |
| First demonstration and extension of application-new generation communication | 3,250,000.00 | - |
| Import interest subsidies | 3,233,353.00 | 5,766,250.00 |
| Social security subsidy | 2,478,720.29 | 1,235,541.62 |
| Kunshan City Bureau of Commerce provincial processing trade subsidies | 1,279,400.00 | 3,991,200.00 |
| Healthy development of foreign trade enterprises and stabilization of the total size fund | 1,206,100.00 | - |
| Government grants for zero-carbon factories | 1,000,000.00 | - |
| Individual tax service fee refund | 976,302.15 | 668,806.79 |
| Government subsidies for production during the pandemic | 850,000.00 | - |
| Special subsidies for enterprise industry scale upgrade | 800,000.00 | - |
| Special subsidies for the promotion of investment and upgrading of industrial energy level | 700,000.00 | - |
| Special subsidies for business development | 673,700.00 | - |
| Job stabilization subsidy | 658,745.00 | 1,258,945.51 |
| Subsidy for named class of Kunshan | 616,000.00 | - |
| Municipal energy saving technical improvement supporting funds | 474,500.00 | - |
| One-off training allowance for workers | 379,550.00 | - |
| VAT deduction for enterprises employing poor people with established cards | 378,300.00 | 123,750.86 |
| Special subsidies for provincial business development | 303,100.00 | - |
| 2021 Economic grants by Shanghai Head Office | - | 4,180,000.00 |
| Epidemic prevention subsidy | - | 3,133,500.00 |
| 2022 Pudong financial support and subsidies for securing and nurturing businesses during the "14th Five-Year Plan" period | - | 2,686,600.00 |
| Nanshan Bureau of Industry and Information Technology 2021 subsidies for stable industrial growth | - | 2,142,500.00 |
| One-off training allowance for workers | - | 1,986,505.00 |
| Green energy saving renovation project subsidized by Kunshan Industry and Information Technology Bureau | - | 980,000.00 |
| Foreign trade support subsidy of Shenzhen Municipal Bureau of Commerce | - | 960,700.00 |
| Special subsidies for industrial energy conservation and contract energy management | - | 729,500.00 |
| Skill recognition subsidy | - | 656,950.00 |
| Subsidy for named class of Kunshan Human Resource Management Service Center | - | 520,000.00 |
| Kunshan Bureau of Industry and Information Technology Cultivating benchmarking demonstration project subsidy | - | 500,000.00 |
| Shenzhen Social Security Bureau job stabilization subsidy | - | 308,799.04 |
| Shenzhen government subsidies for commercial and industrial electricity consumption | - | 303,708.89 |
| Others | 2,984,508.97 | 1,617,003.66 |
| Sub-total | 71,813,784.39 | 36,198,541.23 |
| Amortization of government grants related to assets (Note (VIII), 1) | 17,582,752.34 | 19,946,114.55 |
| Total | 89,396,536.73 | 56,144,655.78 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(IX) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
The Group's major financial instruments include cash and bank balances, held-for-trading financial assets, notesreceivable, accounts receivable, other receivables, other current assets, non-current assets due within one year,long-term receivables, other equity instrument investment, other non-current financial assets, other non-currentassets, borrowings, derivative financial liabilities, accounts payable, other payables, non-current liabilities duewithin one year, long-term payables and other non-current liabilities, etc. Details of these financial instrumentsare disclosed in Note (V). Risks associated with these financial instruments and the policies on how to mitigatethese risks are set out below. Management manages and monitors these exposures to ensure the risks are monitoredat a certain level.
Unit: RMB
| 31/12/2023 | 31/12/2022 | |
| Financial assets | ||
| At FVTPL | ||
| Held-for-trading financial assets | 245,558,007.22 | 271,243,519.53 |
| Other non-current financial assets | 193,994,862.05 | 170,126,278.86 |
| Sub-total | 439,552,869.27 | 441,369,798.39 |
| Measured at fair value through other comprehensive income | ||
| Other equity instrument investments | 38,935,237.58 | 38,420,782.40 |
| Sub-total | 38,935,237.58 | 38,420,782.40 |
| Measured at amortized cost | ||
| Cash and bank balances | 11,218,698,389.32 | 7,695,016,173.40 |
| Notes receivable | 65,545,008.33 | 45,627,553.57 |
| Accounts receivable | 10,023,562,062.11 | 11,119,120,760.11 |
| Other receivables | 208,748,837.09 | 137,008,284.72 |
| Non-current assets due within one year | 123,989.32 | 322,815.55 |
| Long-term receivables | 13,647,410.80 | 12,385,894.30 |
| Other non-current assets | 9,576,400.85 | 10,487,765.93 |
| Sub-total | 21,539,902,097.82 | 19,019,969,247.58 |
| Total financial assets | 22,018,390,204.67 | 19,499,759,828.37 |
| Financial liabilities | ||
| At FVTPL | ||
| Derivative financial liabilities | 173,872.64 | 3,118,891.32 |
| Measured at amortized cost | ||
| Short-term borrowings | 4,378,428,691.47 | 4,499,463,404.21 |
| Accounts payable | 10,574,123,769.47 | 11,056,190,855.43 |
| Other payables | 811,049,464.22 | 624,898,695.64 |
| Non-current liabilities due within one year | 3,397,080,190.74 | 364,856,884.72 |
| Long-term borrowings | 47,385,951.10 | 59,427,538.88 |
| Bonds payable | - | 3,243,085,241.27 |
| Long-term payables | 25,526,297.84 | 31,113,295.71 |
| Other non-current liabilities | 1,046,909.26 | 3,692,335.61 |
| Sub-total | 19,234,641,274.10 | 19,882,728,251.47 |
| Total financial liabilities | 19,234,815,146.74 | 19,885,847,142.79 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(IX) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
The Group adopts sensitivity analysis technique to analyze how the profit and loss for the period and shareholders'equity would have been affected by reasonably possible changes in the relevant risk variables. As it is unlikelythat risk variables will change in an isolated manner, and the interdependence among risk variables will havesignificant effect on the amount ultimately influenced by the changes in a single risk variable, the following arebased on the assumption that the change in each risk variable is on a stand-alone basis.
1. Risk management objectives and policies
The Group's risk management objectives are to achieve a proper balance between risks and yield, minimize theadverse impacts of risks on the Group's operation performance, and maximize the benefits of the shareholders andother stakeholders. Based on these risk management objectives, the Group's basic risk management strategy is toidentify and analyze the Group's exposure to various risks, establish an appropriate maximum tolerance to risk,implement risk management, and monitors regularly and effectively these exposures to ensure the risks aremonitored at a certain level.
1.1 Market risk
1.1.1 Currency risk
Currency risk is the risk that losses will occur because of changes in foreign exchange rates. The Group's exposureto the currency risk is primarily associated with USD and EUR. The Group's subsidiaries located in China havesome purchases, sales and financing activities denominated in USD and EUR while other principal activities aredenominated and settled in RMB; The Group's subsidiaries located in Taiwan have some purchases and salesdenominated in USD and EUR while other principal activities are denominated and settled in TWD; The Group'ssubsidiaries located in Japan have some purchases and sales denominated in USD while other principal activitiesare denominated and settled in JPY; The Group's subsidiaries located in Hong Kong have some financingactivities denominated in EUR while other principal activities are denominated and settled in USD; The Group'ssubsidiary, USI Poland, located in Europe has some purchases and sales denominated in USD and EUR whileother principal activities are denominated and settled in PLN; The Group's other subsidiaries located in Europehave principal activities denominated and settled in EUR; The Group's subsidiaries located in America andMexico have activities denominated and settled in USD. As at 31 December 2023 and 31 December 2022, thebalance of the Group's significant assets and liabilities set out below are both denominated in foreign currencies(non-functional currency and translated to RMB). Currency risk arising from the assets and liabilities denominatedin foreign currencies may have impact on the Group's performance.
Unit: RMB’000
| ITEM | 31/12/2023 | 31/12/2022 |
| USD | ||
| Cash and bank balances | 2,315,210 | 1,833,439 |
| Accounts receivable | 6,504,581 | 7,789,872 |
| Other receivables | 22,056 | 9,163 |
| Short-term borrowings | (389,150) | (654,725) |
| Accounts payable | (6,960,691) | (6,713,353) |
| Other payables | (288,760) | (300,765) |
| Sub-total | 1,203,246 | 1,963,631 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(IX) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies - continued
1.1 Market risk - continued
1.1.1. Currency risk - continued
Unit: RMB’000
| ITEM | 31/12/2023 | 31/12/2022 |
| EUR | ||
| Cash and bank balances | 21,596 | 28,322 |
| Accounts receivable | 43,735 | 41,371 |
| Other receivables | 176 | 1,136 |
| Short-term borrowings | (3,024,904) | (2,774,507) |
| Accounts payable | (22,594) | (29,362) |
| Other payables | (19,276) | (9,505) |
| Sub-total | (3,001,267) | (2,742,545) |
The Group closely monitors the effects of changes in the foreign exchange rates on the Group's currency riskexposures, and uses foreign currency forward contracts to reduce part of the currency exposures.
Sensitivity analysis on currency risk
Where all other variables are held constant, reasonably possible changes in the foreign exchange rate may havethe following pre-tax effect on the profit or loss for the year and shareholders' equity:
Unit: RMB’000
| ITEM | Change in exchange rate | 2023 | 2022 | ||
| Effect on profit | Effect on shareholders' equity | Effect on profit | Effect on shareholders' equity | ||
| USD | 5% appreciation against RMB | (11,645) | (11,645) | 23,540 | 23,540 |
| USD | 5% depreciation against RMB | 11,645 | 11,645 | (23,540) | (23,540) |
| USD | 5% appreciation against TWD | 69,348 | 69,348 | 71,810 | 71,810 |
| USD | 5% depreciation against TWD | (69,348) | (69,348) | (71,810) | (71,810) |
| USD | 5% appreciation against EUR | 783 | 783 | 938 | 938 |
| USD | 5% depreciation against EUR | (783) | (783) | (938) | (938) |
| USD | 5% appreciation against PLN | 1,621 | 1,621 | 1,874 | 1,874 |
| USD | 5% depreciation against PLN | (1,621) | (1,621) | (1,874) | (1,874) |
| USD | 5% appreciation against JPY | 2 | 2 | 2 | 2 |
| USD | 5% depreciation against JPY | (2) | (2) | (2) | (2) |
| USD | 5% appreciation against GBP | 53 | 53 | - | - |
| USD | 5% depreciation against GBP | (53) | (53) | - | - |
| EUR | 5% appreciation against RMB | 390 | 390 | 1,366 | 1,366 |
| EUR | 5% depreciation against RMB | (390) | (390) | (1,366) | (1,366) |
| EUR | 5% appreciation against TWD | (87) | (87) | (276) | (276) |
| EUR | 5% depreciation against TWD | 87 | 87 | 276 | 276 |
| EUR | 5% appreciation against USD | (45,844) | (45,844) | (37,935) | (37,935) |
| EUR | 5% depreciation against USD | 45,844 | 45,844 | 37,935 | 37,935 |
| EUR | 5% appreciation against PLN | 2,109 | 2,109 | 865 | 865 |
| EUR | 5% depreciation against PLN | (2,109) | (2,109) | (865) | (865) |
| EUR | 5% appreciation against GBP | 3 | 3 | 59 | 59 |
| EUR | 5% depreciation against GBP | (3) | (3) | (59) | (59) |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(IX) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies - continued
1.1 Market risk - continued
1.1.2. Interest rate risk - risk of changes in cash flows
The Group's cash flow interest rate risk of financial instruments relates primarily to variable-rate bank borrowings(see Note (V). 24 & 33 for details). The Group closely monitors the effects of changes in the interest rates on theGroup's interest rate risk exposures. It is the Group's policy to keep its borrowings at floating rate of interests withno other arrangements such as interest rate swaps.
Sensitivity analysis on interest rate risk
Where all other variables are held constant, reasonably possible changes in the interest rate may have the followingpre-tax effect on the profit or loss for the year and shareholders' equity:
Unit: RMB’000
| ITEM | Changes in interest rate | 2023 | 2022 | ||
| Effect on profit | Effect on shareholders' equity | Effect on profit | Effect on shareholders' equity | ||
| Financial instruments at floating interest rate | 1% appreciation | (16,623) | (16,623) | (16,908) | (16,908) |
| Financial instruments at floating interest rate | 1% depreciation | 16,623 | 16,623 | 16,908 | 16,908 |
1.1.3. Other price risk
The price risk of the group mainly arises from trading equity instrument investment and other equity instrumentinvestment. The group reduces the price risk of equity instrument investment by holding a variety of equitysecurities portfolio.
1.2 Credit risk
As at 31 December 2023, the Group's maximum exposure to credit risk which will cause a financial loss to theGroup due to failure to discharge an obligation by the counterparties is arising from: cash and bank balances (Note(V). 1), held-for-trading financial assets (Note (V). 2), notes receivable (Note (V). 3), accounts receivable (Note(V). 4), other receivables (Note (V). 6), non-current assets due within one year (Note (V). 8), other current assets(Note (V). 9), long-term receivables (Note (V). 10), other non-current assets (Note (V). 22) and non-currentfinancial assets at FVTPL that are not included in the impairment assessment (Note (V). 13). As at the balancesheet date, the carrying amount of the Group's financial assets is its maximum exposure to credit risk.
In order to minimize the credit risk, the Group 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 financial assets at each balance sheet date to ensure thatadequate provision for credit loss is made for relevant financial assets. In this regard, the management of theGroup considers that the Group's credit risk is significantly reduced.
The credit risk on cash and bank balances is limited because they are deposited with banks with high credit ratings.
As of 31 December 2023, the balance of bank acceptance bills held by the group was RMB 65,545,008.33, ofwhich all issuing banks were banks with high credit rating. Therefore, the management of the Group believes thatthe credit risk of relevant bank acceptance bills is low.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(IX) RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS - continued
1. Risk management objectives and policies - continued
1.2 Credit risk - continued
As at 31 December 2023, the balance of accounts receivable of the Group's top 5 customers was RMB5,084,392,042.35 (31 December 2022: RMB 5,979,305,884.74), accounting for 50.50% (31 December 2022:
53.68%) of the Group's accounts receivable. Except for that, the Group has no other significant credit riskexposures concentrated on a single financial asset or a portfolio of financial assets with similar characteristics.
1.3. Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalentsdeemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuations incash flows. The management monitors the utilization of bank borrowings and ensures compliance with loancovenants.
The Group relies on cash generated from production and operations and bank borrowings as significant sourcesof liquidity.
The following is the maturity analysis for liabilities held by the Group which is based on undiscounted remainingcontractual obligations:
Unit: RMB
| Within 1 year | 1-5 years | Over 5 years | Total | |
| Short-term borrowings | 4,402,321,743.04 | - | - | 4,402,321,743.04 |
| Accounts payable | 10,574,123,769.47 | - | - | 10,574,123,769.47 |
| Other payables | 811,049,464.22 | - | - | 811,049,464.22 |
| Long-term borrowings | 18,147,742.00 | 50,595,066.43 | - | 68,742,808.43 |
| Long-term payables | 6,551,306.97 | 26,205,227.87 | - | 32,756,534.84 |
| Bonds payable | 3,518,875,560.00 | - | - | 3,518,875,560.00 |
| Lease liabilities | 171,679,696.45 | 329,233,957.90 | 217,512,341.22 | 718,425,995.57 |
| Other current liabilities | 3,944,775.07 | - | - | 3,944,775.07 |
| Other non-current liabilities | - | 1,046,909.26 | - | 1,046,909.26 |
| Derivative financial liabilities | 173,872.64 | - | - | 173,872.64 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(X) DISCLOSURE OF FAIR VALUE
1. Closing fair value of assets and liabilities measured at fair value
Unit: RMB
| ITEM | 31/12/2023 | |||
| Level 1 | Level 2 | Level 3 | Total | |
| I. Continuous fair value measurement | ||||
| (I) Financial assets at FVTPL | ||||
| 1. Derivative financial assets | - | 22,156,437.00 | - | 22,156,437.00 |
| 2. Fund investment | - | - | 170,511,081.52 | 170,511,081.52 |
| 3. Accounts receivable factoring | - | - | 223,401,570.22 | 223,401,570.22 |
| 4. Equity instrument investment | - | - | 23,483,780.53 | 23,483,780.53 |
| (II) Financial assets at FVTOCI | ||||
| 1. Equity instrument investment | - | - | 38,935,237.58 | 38,935,237.58 |
| Total assets continuously measured at fair value | 22,156,437.00 | 456,331,669.85 | 478,488,106.85 | |
| (III) Derivative financial liabilities | ||||
| 1. Financial liabilities at FVTPL | - | 173,872.64 | - | 173,872.64 |
2. Basis for determining the market price of continuous and non-continuous level 1 fair value measurement
items
The fair value of continuous level 1 fair value measurement items is derived from quotes in an active market.
3. Valuation techniques and qualitative and quantitative information of key parameters adopted for level 2
fair value measurement items
Unit: RMB
| Fair value at 31 December 2023 | Valuation technique | Inputs | |
| Derivative financial assets (Note (V). 2) | 22,156,437.00 | Method of discounted cash flow analysis | Forward exchange rate |
| Derivative financial liabilities (Note (V). 25) | 173,872.64 | Method of discounted cash flow analysis | Forward exchange rate |
4. Valuation techniques and qualitative and quantitative information of key parameters adopted for level 3
fair value measurement items
Unit: RMB
| Fair value at 31 December 2023 | Valuation technique | Significant unobservable inputs | |
| Accounts receivable factoring (Note (V). 2) | 223,401,570.22 | Method of discounted cash flow analysis | Discount rate reflecting credit risk of counterparties |
| Fund investment (Note (V). 13) | 170,511,081.52 | Market approach | Liquidity discount |
| Equity instrument investments (Note (V). 12 & 13) | 62,419,018.11 | Market approach | Liquidity discount |
5. Reconciliation between opening and closing carrying amounts for continuous level 3 fair value
measurement items
Unit: RMB
| ITEM | 1 January 2023 | Recognized in profit or loss | Recognized in other comprehensive income | Translation of financial statements denominated in foreign currencies | Purchase /Increase | Settlement | 31 December 2023 | Changes in unrealized gains or losses for assets held at the end of the reporting period |
| (I) Financial assets at FVTPL | ||||||||
| 1. Financial products | - | 60,903,020.88 | - | - | 10,325,000,000.00 | 10,385,903,020.88 | - | - |
| 2. Accounts receivable factoring | 135,812,841.71 | - | - | 9,424,644.28 | 1,309,113,715.53 | 1,230,949,631.30 | 223,401,570.22 | - |
| 3. Fund investment | 112,351,085.15 | 11,320,678.01 | - | 1,163,916.51 | 54,130,858.29 | 8,455,456.44 | 170,511,081.52 | 2,865,221.57 |
| 4. Equity instrument investment | 57,775,193.71 | 13,778,192.94 | - | 1,535,046.71 | - | 49,604,652.83 | 23,483,780.53 | 61,663.54 |
| 5. Contingent consideration | 99,372,192.22 | (71,257.46) | - | 5,564,195.64 | - | 104,865,130.40 | - | (17,653,478.47) |
| (II) Financial assets at FVTOCI | ||||||||
| Other equity instruments | 38,420,782.40 | - | 27,162,804.05 | 1,031,963.78 | - | 27,680,312.65 | 38,935,237.58 | - |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(X) DISCLOSURE OF FAIR VALUE - continued
6. There are no changes in valuation techniques in the year.
7. Fair value of financial assets and financial liabilities not measured at fair value
The Group's management has assessed cash and bank balances, notes receivable, accounts receivable, otherreceivables, other current assets, non-current assets due within one year, long-term receivables, short-termborrowings, accounts payable, other payables, non-current liabilities due within one year, lease liabilities, long-term borrowings, bonds payable, long-term payables, other non-current liabilities, etc. and considers that theircarrying amount approximates to the fair value of these assets and liabilities.
(XI) Related party relationship and transactions
1. Parent of the Company
| Name of the parent | Place of incorporation | Nature of business | Registered capital | Proportion to Company's ownership interest held by the parent (%) | Proportion to Company's voting power held by the parent (%) |
| USI Enterprise Limited | Room A, 7/F, Yuen Long Technology Centre, No. 11 Wang Yip Street West, Yuen Long, New Territories, Hong Kong | Investment holding | USD 210,900,000.00 | 76.19 | 77.00 |
The ultimate controlling party of the Company is ASE Investment Holding Limited, which is listed on the TaiwanStock Exchange with the listing code as 3711.
2. Subsidiaries of the Company
The details of the subsidiaries of the Company are set out in Note (VII). 1.
3. Associates and joint ventures of the Company
The details of the associates and joint ventures of the Company are set out in Note (VII). 2.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XI) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
4. Other related parties of the Company
| Name of other related party | Relationship between other related parties and the Company |
| USI Inc. | Indirect holding company |
| ASE (Shanghai) Inc. | The same ultimate holding company |
| ASE Inc. | The same ultimate holding company |
| ASE Assembly & Test (Shanghai) Limited | The same ultimate holding company |
| ASE (US) Inc. | The same ultimate holding company |
| ASE Electronics Inc. | The same ultimate holding company |
| ISE Labs, Inc. | The same ultimate holding company |
| Advanced Semiconductor Engineering (China) Ltd. | The same ultimate holding company |
| ASE Corporate Services (Shanghai) Limited | The same ultimate holding company |
| ASE Marketing & Service Japan Co.,Ltd. | The same ultimate holding company |
| SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | The same ultimate holding company |
| Wuxi Tongzhi Microelectronics Co., Ltd. | The same ultimate holding company |
| ISE labs, China. Ltd. | The same ultimate holding company |
| Siliconware Precision Industries Co., Ltd. | The same ultimate holding company |
| DECELECT SOISSONS | Company controlled by key management |
| DECELECT SAINT VIT | Company controlled by key management |
| ASDI Assistance Direction | Company controlled by key management |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Subsidiary of an associate |
| Memtech Development (H.K.) Co., Limited | Subsidiary of an associate |
| Dongguan Memtech Electronics Co., Ltd. | Subsidiary of an associate |
| Nantong Memtech Technologies Co., Ltd. | Subsidiary of an associate |
| Jian Memtech Precision Electronic Co., Ltd. | Subsidiary of an associate |
| Memtech (Vietnam) Technologies Co., Ltd. | Subsidiary of an associate |
| SUMA-USI Electronics Co., Ltd. (Note) | Joint ventures |
Note: In 2023, Universal Global Technology (Kunshan) Co., Ltd., the Company's subsidiary, sold all of its
shares in SUMA-USI Electronics Co., Ltd. to an independent third party.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XI) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
5. Related party transactions
(1) Sales and purchase of goods, provision and receipt of services
Purchase of goods/receipt of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Purchase of materials | 46,368,452.98 | 43,581,619.52 |
| ASE Electronics Inc. | Purchase of materials | 29,677,474.40 | 97,972,675.19 |
| Memtech Development (H.K.) Co., Limited | Purchase of materials | 17,046,337.06 | 47,620,077.85 |
| Dongguan Memtech Electronics Co., Ltd. | Purchase of materials | 13,019,265.84 | 32,882,673.95 |
| Jian Memtech Precision Electronic Co., Ltd. | Purchase of materials | 1,875,659.20 | 284,858.86 |
| Nantong Memtech Technologies Co., Ltd. | Purchase of materials | 1,150,835.88 | 1,508,030.70 |
| ASE Inc. | Purchase of materials | 912,483.25 | 191,922.60 |
| DECELECT SAINT VIT | Purchase of materials | 526,761.46 | 962,465.31 |
| Memtech (Vietnam) Technologies Co., Ltd. | Purchase of materials | 119,720.21 | - |
| SUMA-USI Electronics Co., Ltd. , | Purchase of materials | 2,836.49 | 631,478.90 |
| Siliconware Precision Industries Co., Ltd | Purchase of materials | - | 182,526.08 |
| Total | 110,699,826.77 | 225,818,328.96 | |
| ASE Inc. | Receipt of services | 873,041,344.61 | 1,378,101,275.00 |
| ASE (Shanghai) Inc. | Receipt of services | 32,385,810.78 | 37,378,276.83 |
| ASE Corporate Services (Shanghai) Limited | Receipt of services | 4,390,614.74 | |
| USI Enterprise Limited | Receipt of services | 3,606,371.52 | 4,077,439.51 |
| Siliconware Precision Industries Co., Ltd | Receipt of services | 2,808,188.73 | 19,736,988.58 |
| SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD | Receipt of services | 2,025,901.89 | 1,899,206.09 |
| ASE Marketing & Service Japan Co.,Ltd. | Receipt of services | 725,317.20 | 738,817.20 |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Receipt of services | 190,517.92 | 70,877.96 |
| SUMA-USI Electronics Co., Ltd. , | Receipt of services | 171,799.14 | 45,928.00 |
| Dongguan Memtech Electronics Co., Ltd. | Receipt of services | 66,000.00 | 33,300.00 |
| ASE (US) Inc. | Receipt of services | 36,860.41 | 18,654.08 |
| Memtech Development (H.K.) Co., Limited | Receipt of services | 22,988.95 | - |
| USI Inc. | Receipt of services | - | 14,893,753.64 |
| Total | 919,471,715.89 | 1,456,994,516.89 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XI) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
5. Related party transactions - continued
(1) Sales and purchase of goods, provision and receipt of services - continued
Sales of goods/provision of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| ASE Inc. | Sales of goods | 6,222,160.06 | 5,032,944.09 |
| DECELECT SOISSONS | Sales of goods | 103,537.96 | 746,217.18 |
| SUMA-USI Electronics Co., Ltd. | Sales of goods | 9,140.27 | 801,777.06 |
| Total | 6,334,838.29 | 6,580,938.33 | |
| ASE Inc. | Provision of services | 17,647,309.98 | 1,976,377.18 |
| ISE labs, China. Ltd. | Provision of services | 959,723.55 | 1,048,388.07 |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Provision of services | 211,137.44 | |
| SUMA-USI Electronics Co., Ltd. , | Provision of services | 13,580.00 | 365,458.00 |
| Total | 18,831,750.97 | 3,390,223.25 |
The above transactions are executed at the prices agreed on by both parties.
(2) Leases with related parties
Leases where the Group is the lessor
Unit: RMB
| Name of lessee | Type of leased assets | Lease income recognized in the current year | Lease income recognized in the prior year |
| ASE Inc. | Plant | 3,534,211.90 | 3,537,429.24 |
| ISE Labs, Inc. | Leasing of business premises | 1,896,397.55 | 938,891.46 |
| Wuxi Tongzhi Microelectronics Co., Ltd. | Machinery and equipment | 19,359.06 | 33,186.96 |
| Total | 5,449,968.51 | 4,509,507.66 |
The above transactions are executed at the prices agreed on by both parties.
Leases where the Group is the lessee
Unit: RMB
| Name of lessor | Type of leased assets | Rent paid | Interest expenses incurred on lease liabilities | Right-of-use assets increased | |||
| Amount for the current year | Amount for the prior year | Amount for the current year | Amount for the prior year | Amount for the current year | Amount for the prior year | ||
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | 15,087,539.74 | 15,484,454.05 | 2,392,528.09 | 3,080,155.98 | - | - |
| Advanced Semiconductor Engineering (China) Ltd. | Leasing of business premises | 16,148,148.36 | 16,148,148.99 | 781,229.60 | 1,360,700.68 | - | - |
| USI Inc. | Leasing of business premises | 32,069,145.12 | 31,970,817.81 | 1,890,692.32 | 2,490,668.71 | - | - |
| ISE Labs, Inc. | Leasing of business premises | 371,833.44 | 331,357.70 | 35,276.85 | 10,052.26 | - | - |
| Total | 63,676,666.66 | 63,934,778.55 | 5,099,726.86 | 6,941,577.63 | - | - | |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XI) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
5. Related party transactions - continued
(3) Assets transfer/debt restructuring with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| ISE labs, China. Ltd. | Sales of fixed assets | - | 46,507,299.26 |
| Total | - | 46,507,299.26 | |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Purchase of fixed assets | 4,603,350.00 | 2,225,983.40 |
| Advanced Semiconductor Engineering (China) Ltd. | Purchase of fixed assets | - | 697,841.37 |
| Dongguan Memtech Electronic Product Co., Ltd. | Purchase of fixed assets | - | 275,840.20 |
| Total | 4,603,350.00 | 3,199,664.97 |
The above transactions are executed at the prices agreed on by both parties.
(4) Interest expenses with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| USI Enterprise Limited | Interest expenses on convertible bonds | 46,206,386.54 | 89,992,084.14 |
| ASE (Shanghai) Inc. | Interest expenses on convertible bonds | - | 807,565.60 |
| Total | 46,206,386.54 | 90,799,649.74 |
(5) Compensation for key management personnel
Unit: RMB
| Item name | Amount incurred in the current year | Amount incurred in the prior year |
| Compensation for key management personnel | 28,238,630.96 | 33,842,802.87 |
6. Amounts due from / to related parties
(1) Amounts due from related parties
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 | ||
| Book value | Bad debt provision | Book value | Bad debt provision | ||
| Accounts receivable | ASE Inc. | 4,205,124.03 | - | 1,105,963.97 | - |
| Accounts receivable | ISE Labs, Inc. | 158,851.95 | - | 156,203.13 | - |
| Accounts receivable | DECELECT SOISSONS | - | - | 256,983.70 | - |
| Accounts receivable | SUMA-USI Electronics Co., Ltd. , | - | - | 65,915.83 | - |
| Total | 4,363,975.98 | - | 1,585,066.63 | - | |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XI) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
6. Amounts due from / to related parties - continued
(1) Amounts due from related parties - continued
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 | ||
| Book value | Bad debt provision | Book value | Bad debt provision | ||
| Other receivables | ASDI Assistance Direction | 29,366,894.59 | - | - | - |
| Other receivables | ASE Inc. | 439,240.89 | - | 467,694.55 | - |
| Other receivables | ISE labs, China. Ltd. | 141,696.00 | - | 217,389.11 | - |
| Other receivables | USI Inc. | 24,642.40 | - | 26,583.86 | - |
| Total | 29,972,473.88 | - | 711,667.52 | - | |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 | ||
| Book value | Bad debt provision | Book value | Bad debt provision | ||
| Other non-current assets | Advanced Semiconductor Engineering (China) Ltd. | 1,384,151.73 | - | 1,412,962.98 | - |
| Other non-current assets | ASE Inc. | 680,474.35 | - | - | |
| Other non-current assets | ASE Assembly & Test (Shanghai) Limited | 401,473.74 | - | - | |
| Other non-current assets | ISE Labs, Inc. | 23,995.34 | - | 23,643.98 | - |
| Total | 2,490,095.16 | - | 1,436,606.96 | - | |
(2) Amounts due to related parties
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Accounts payable | ASE Inc. | 283,616,382.55 | 378,720,024.57 |
| Accounts payable | Taitech Precision Electronic (Kunshan) Co., Ltd. | 23,465,072.03 | 24,064,742.13 |
| Accounts payable | USI Inc. | 11,834,518.15 | 11,535,713.72 |
| Accounts payable | ASE Electronics Inc. | 6,726,853.62 | 9,680,346.48 |
| Accounts payable | Dongguan Memtech Electronic Product Co., Ltd. | 5,773,388.48 | 11,371,236.29 |
| Accounts payable | Memtech Development (H.K.) Co., Limited | 4,323,660.34 | 17,830,266.60 |
| Accounts payable | Jian Memtech Precision Electronic Co., Ltd. | 1,928,215.49 | 43,875.68 |
| Accounts payable | Siliconware Precision Industries Co., Ltd. | 782,215.65 | 4,126,324.34 |
| Accounts payable | USI Enterprise Limited | 288,411.43 | 343,925.43 |
| Accounts payable | Nantong Memtech Technologies Co., Ltd. | 131,479.58 | 578,807.02 |
| Accounts payable | Memtech (Vietnam) Technologies Co., Ltd. | 70,031.61 | - |
| Accounts payable | ASE (US) Inc. | 31,244.61 | 18,728.45 |
| Accounts payable | DECELECT SAINT VIT | - | 190,493.86 |
| Accounts payable | SUMA-USI Electronics Co., Ltd. | - | 48,683.68 |
| Accounts payable | DECELECT SOISSONS | - | 9,582.69 |
| Total | 338,971,473.54 | 458,562,750.94 |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Other payables | ASE Corporate Services (Shanghai) Limited | 4,476,073.82 | - |
| Other payables | ASE (Shanghai) Inc. | 748,323.19 | 5,154,066.18 |
| Other payables | Memtech Development (H.K.) Co., Limited | 659,923.10 | - |
| Other payables | ASE Inc. | 421,373.94 | 372,620.33 |
| Other payables | SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD. | 285,740.90 | 160,708.88 |
| Other payables | Dongguan Memtech Electronic Product Co., Ltd. | 33,335.00 | - |
| Other payables | USI Inc. | 10,518.52 | 6,712.87 |
| Other paya | USI Enterprise Limited | - | 2,398,445.06 |
| Total | 6,635,288.47 | 8,092,553.32 |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Long-term payables | USI Inc. | 25,526,297.84 | 31,113,295.71 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XI) RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
6. Amounts due from / to related parties - continued
(2) Amounts due to related parties - continued
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Bonds payable | USI Enterprise Limited | 967,638,439.87 | 1,364,243,289.23 |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Lease liabilities | USI Inc. | 85,282,357.96 | 114,059,901.22 |
| Lease liabilities | ASE Assembly & Test (Shanghai) Limited | 44,489,167.71 | 57,933,008.48 |
| Lease liabilities | Advanced Semiconductor Engineering (China) Ltd. | 14,745,019.34 | 28,698,975.12 |
| Total | 144,516,545.01 | 200,691,884.82 |
7. Related party commitments
As at 31 December 2023, there are no related party commitments.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS
1. Summary of share-based payments
Unit: share
| 2023 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2015 (Note 1) | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 (Note 2) | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 (Note 3) | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 (Note 4) | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 (Note 5) | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 (Note 6) | Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 (Note 7) | |
| Total number of the Company's equity instruments outstanding at the beginning of the year | 11,974,530 | 7,677,700 | 1,715,250 | 594,000 | 268,900 | - | - | |
| Total number of the Company's equity instruments granted during the year | - | - | - | - | - | 14,506,000 | 372,000 | |
| Total number of the Company's equity instruments vested during the period | 64,467 | 3,060,098 | 1,715,250 | - | 250,600 | - | - | |
| Total number of the Company's equity instruments lapsed during the period | 260,983 | 1,253,602 | - | 297,000 | 18,300 | 88,000 | - | |
| Total number of the Company's equity instruments outstanding at the end of the year | 11,649,080 | 3,364,000 | - | 297,000 | - | 14,418,000 | 372,000 | |
| Total number of equity instruments exercisable at the end of the year | 11,649,080 | 3,364,000 | - | 297,000 | - | - | - | |
| Range of exercise prices and remaining contractual life of the Company's stock options outstanding at the end of the year | Exercise prices of stock options | RMB 15.54 | RMB 11.98 | N/A | RMB 20.46 | N/A | RMB 14.54 | RMB 14.54 |
| Remaining contractual life | About 2 years | About 1 years | N/A | About 1 years | N/A | About 3 years | About 3 years | |
Note 1: In November 2015, in order to further improve the corporate governance structure of the Company, to
promote the Company to establish and improve the incentive and restraint mechanism, to fully mobilizethe enthusiasm of the Company's middle-level managers and employees, effectively combine theinterests of shareholders, the Company and the personal interests of operators, and to make all partiesjointly focus on the long-term development of the Company, the Company formulated the "Stock OptionIncentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd." to grant qualified employees acertain number of stock options to subscribe for the Company's general shares. During the service periodof the employees granted stock options for the Group, the fair value of the corresponding equityinstruments shall be included in the costs or expenses of the Group on a straight-line basis during thevesting period, and the capital reserve shall be increased accordingly.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 25 November 2015 | 25 November 2015 to 24 November 2020 | 25 November 2017 to 24 November 2025 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for two years and meeting the performance assessment atthe company and individual level.
| Accumulated maximum vested proportion | |
| 2 years after the grant date | 40% |
| 3 years after the grant date | 60% |
| 4 years after the grant date | 80% |
| 5 years after the grant date | 100% |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 1: - continued
If the stock options are not exercised 10 years after the grant date, the options will lapse. If the incentiverecipient leaves the Company due to resignation or layoffs, the stock options that have been approved toexercise but have not been exercised by the incentive recipient shall be terminated and the unapprovedoptions will be null and void on the date thereof. If the incentive recipient leaves the Company due toretirement, the incentive recipient shall continue to retain the exercise right for the stock options thathave been approved to exercise but have not been exercised, and the options that have not been approvedto exercise shall be invalidated on the date thereof.
Note 2: In November 2019, in order to establish and improve the Company's long-term incentive, assessment and
restraint mechanism, to attract and retain excellent talents, to fully mobilize the enthusiasm of theCompany's directors (excluding independent directors), senior managers, core managers, middle-levelmanagers and core business (technical) staff, and to effectively combine the interests of shareholders, theCompany and the personal interests of the core team, as well as to make all parties jointly focus on thelong-term development of the Company, the Company formulated the Stock Option Incentive Plan ofUniversal Scientific Industrial (Shanghai) Co., Ltd. to grant qualified employees a certain number ofstock options to subscribe for the Company's general shares. During the service period of the employeesgranted stock options for the Group, the fair value of the corresponding equity instruments shall beincluded in the costs or expenses of the Group on a straight-line basis during the vesting period, and thecapital reserve shall be increased accordingly.
According to the 2019 Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co.,Ltd., from the date of announcement of the draft incentive plan to the date when the incentive objectcompletes the exercise of stock options, if the company converts capital reserve into share capital,distributes stock dividends, allotments, dividends and other matters, the exercise price of stock optionswill be adjusted accordingly. The First Meeting of the Sixth Session of the Board of Directors held on25 April 2023 approved the proposal on adjusting and canceling some rights and interests related to thefirst grant of stock option incentive plan in 2019, and the exercise price was adjusted from RMB 12.41per share to RMB 11.98 per share.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 28 November 2019 | 28 November 2019 to 27 November 2023 | 28 November 2021 to 27 November 2024 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for two years and meeting the performance assessment atthe company and individual level.
| Accumulated maximum vested proportion | |
| 2 years after the grant date | 40% |
| 3 years after the grant date | 70% |
| 4 years after the grant date | 100% |
If the stock options are not exercised 5 years after the grant date, the options will lapse. If the incentiverecipient leaves the Company due to resignation or layoffs, the stock options that have been approved toexercise but have not been exercised by the incentive recipient shall be terminated and the unapprovedoptions will be null and void on the date thereof. If the incentive recipient leaves the Company due toretirement, the incentive recipient shall continue to retain the exercise right for the stock options thathave been approved to exercise but have not been exercised, and the options that have not been approvedto exercise shall be invalidated on the date thereof.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 3: In November 2019, in order to enrich the salary system of employees, establish and improve the benefit
sharing mechanism between workers and owners, realize the consistency of the interests of the Company,shareholders and employees, and promote all parties to jointly focus on the long-term development ofthe Company, so as to bring more efficient and lasting returns to shareholders; to further improve thecorporate governance structure, improve the Company's long-term and effective incentive and restraintmechanism, and ensure the long-term and stable development of the Company; to effectively mobilizethe enthusiasm of managers and employees, attract and retain excellent management talents and businessbackbones, and improve the cohesion of employees and the competitiveness of the Company, theCompany formulated the Core Employee Share Ownership Plan of Universal Scientific Industrial(Shanghai) Co., Ltd. to grant qualified directors (excluding independent directors), supervisors, seniormanagers, middle-level managers and core employees (including those for research and development,sales, production and management, etc.) of the Company and its holding subsidiaries a certain numberof stock options to subscribe for the general shares of the Company. During the service period of theemployees granted stock options for the Group, the fair value of the corresponding equity instrumentsshall be included in the costs or expenses of the Group on a straight-line basis during the vesting period,and the capital reserve shall be increased accordingly.
According to the Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai)Co., Ltd. (Revised), the price of transfer for the Core Employee Share Ownership Plan will be adjustedaccordingly in the event of any capitalization of capital reserves, issue of stock dividends, allotment ofshares or distribution of dividends by the Company from the date of announcement of this draft employeeshare ownership plan to the implementation of the second and third phases of the Employee ShareOwnership Plan.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 18 November 2019 | 18 November 2019 to 17 November 2022 | 30 April 2020 to 30 April 2024 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for one year and meeting the performance assessment inthe company level.
| Accumulated maximum vested proportion | |
| 1 years after the grant date | 20% |
| 2 years after the grant date | 55% |
| 3 years after the grant date | 100% |
The current stock options that fails to be exercised by the incentive recipient shall be terminated after theend of each exercise period of the stock options. If the incentive recipient leaves the Company due toresignation or layoffs, the stock options that have been approved to exercise but have not been exercisedby the incentive recipient shall be terminated and the unapproved options will be null and void on thedate thereof. If the incentive recipient leaves the Company due to retirement, the incentive recipient shallcontinue to retain the exercise right for the stock options that have been approved to exercise but havenot been exercised, and the options that have not been approved to exercise shall be invalidated on thedate thereof.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 4: In September 2020, in order to establish and improve the Company's long-term incentive, assessment
and restraint mechanism, to attract and retain excellent talents, to fully mobilize the enthusiasm of theCompany's directors (excluding independent directors), senior managers, core managers, middle-levelmanagers and core business (technical) staff, and to effectively combine the interests of shareholders, theCompany and the personal interests of the core team, as well as to make all parties jointly focus on thelong-term development of the Company, the Company formulated the Stock Option Incentive Plan ofUniversal Scientific Industrial (Shanghai) Co., Ltd. to grant qualified employees a certain number ofstock options to subscribe for the Company's general shares. During the service period of the employeesgranted stock options for the Group, the fair value of the corresponding equity instruments shall beincluded in the costs or expenses of the Group on a straight-line basis during the vesting period, and thecapital reserve shall be increased accordingly.
According to the 2019 Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co.,Ltd., from the date of announcement of the draft incentive plan to the date when the incentive objectcompletes the exercise of stock options, if the company converts capital reserve into share capital,distributes stock dividends, allotments, dividends and other matters, the exercise price of stock optionswill be adjusted accordingly. The First Meeting of the Sixth Session of the Board of Directors held on25 April 2023 approved the proposal on adjusting and canceling some rights and interests related to thefirst grant of stock option incentive plan in 2019, and the exercise price of the portion of the grantreserved was adjusted from RMB 20.89 per share to RMB 20.46 per share.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 9 September 2020 | 9 September 2020 to 8 November 2023 | 9 November 2021 to 8 November 2024 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 14 months and meeting the performance assessment atthe company and individual level.
| Accumulated maximum vested proportion | |
| 14 months after the grant date | 40% |
| 26 months after the grant date | 70% |
| 38 months after the grant date | 100% |
The stock options that fails to be exercised by the incentive recipient will be lapsed after the end of eachexercise period of the stock options. If the incentive recipient leaves the Company due to resignation orlayoffs, the stock options that have been approved to exercise but have not been exercised by theincentive recipient shall be terminated and the unapproved options will be null and void on the datethereof. If the incentive recipient leaves the Company due to retirement, the incentive recipient shallcontinue to retain the exercise right for the stock options that have been approved to exercise but havenot been exercised, and the options that have not been approved to exercise shall be invalidated on thedate thereof.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 5: In September 2021, in order to enrich the salary system of employees, establish and improve the benefit
sharing mechanism between workers and owners, realize the consistency of the interests of the Company,shareholders and employees, and promote all parties to jointly focus on the long-term development ofthe Company, so as to bring more efficient and lasting returns to shareholders; to further improve thecorporate governance structure, improve the Company's long-term and effective incentive and restraintmechanism, and ensure the long-term and stable development of the Company; to implement thedevelopment strategies of the Company, effectively mobilize the enthusiasm of employees, and retainexcellent key technical talents and business backbones, and improve the cohesion of employees and thecompetitiveness of the Company, the Company formulated the Employee Share Ownership Plan ofUniversal Scientific Industrial (Shanghai) Co., Ltd. to grant the qualified core talents who hold keypositions in the Mexico Plant, Vietnam Plant and Huizhou Plant as designated by the Company with acertain number of stock options to subscribe for the general shares of the Company. During the serviceperiod of the employees granted stock options for the Group, the fair value of the corresponding equityinstruments shall be included in the costs or expenses of the Group on a straight-line basis during thevesting period, and the capital reserve shall be increased accordingly.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 13 September 2021 | 13 September 2021 to 12 January 2023 | 13 January 2023 to 13 September 2023 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 16 months and meeting the individual performanceassessment.
| Accumulated maximum vested proportion | |
| 16 months after the grant date | 100% |
The current stock options that fails to be exercised by the incentive recipient shall be terminated after theend of each exercise period of the stock options. If the incentive recipient leaves the Company due toresignation or layoffs of the Company, the qualification to participate in the employee share ownershipplan will be canceled, and the corresponding shares will be transferred back to the special account forrepurchase of the Company. The shares derived from the distribution of share dividends and the transferof capital reserve by the listed company will be reversed to the special account for repurchase of theCompany. If cash dividends are obtained, they will be returned to the Company. If the incentive recipientleaves the company due to retirement, the rights and interests will retain unchanged.
Note 6: In October 2023, in order to establish and improve the Company's long-term incentive, assessment and
restraint mechanism, to attract and retain excellent talents, to fully mobilize the enthusiasm of theCompany's middle-level managers and core business and technical staff, and to effectively combine theinterests of shareholders, the Company and the personal interests of the core team, as well as to make allparties jointly focus on the long-term development of the Company, the Company formulated the StockOption Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. to grant qualified employeesa certain number of stock options to subscribe for the Company's general shares. During the serviceperiod of the employees granted stock options for the Group, the fair value of the corresponding equityinstruments shall be included in the costs or expenses of the Group on a straight-line basis during thevesting period, and the capital reserve shall be increased accordingly.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 6: - continued
According to the 2023 Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd.,from the date of announcement of the draft incentive plan to the date when the incentive object completesthe exercise of stock options, if the company converts capital reserve into share capital, distributes stockdividends, allotments, dividends and other matters, the exercise price of stock options will be adjustedaccordingly.
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 13 October 2023 | 13 October 2023 to 13 October 2024 | 14 October 2024 to 13 October 2026 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 12 months and meeting the performance assessment atthe company and individual level.
| Accumulated maximum vested proportion | |
| 12 months after the grant date | 50% |
| 24 months after the grant date | 100% |
The stock options that fails to be exercised by the incentive recipient will be lapsed after the end of eachexercise period of the stock options. If the incentive recipient leaves the Company due to resignation,downsizing, non-renewal of employment contract, termination of employment contract or employmentagreement by negotiation, or dismissal by the company, the stock options that have been approved toexercise but have not been exercised by the incentive recipient shall be terminated and canceled by theCompany, and the unapproved options will be invalidated and canceled by the Company on the datethereof. If the incentive recipient retires normally in accordance with national laws and regulations andthe Company's regulations, the incentive recipient shall continue to retain the exercise right for the stockoptions that have been approved to exercise but have not been exercised, and the options that have notbeen approved to exercise shall be invalidated and canceled by the Company on the date thereof.
Note 7: In November 2023, in order to enrich the salary system of employees, establish and improve the benefit
sharing mechanism between workers and owners, realize the consistency of the interests of the Company,shareholders and employees, and promote all parties to jointly focus on the long-term development ofthe Company, so as to bring more efficient and lasting returns to shareholders; to further improve thecorporate governance structure, improve the Company's long-term and effective incentive and restraintmechanism, and ensure the long-term and stable development of the Company; to implement thedevelopment strategies of the Company, effectively mobilize the enthusiasm of employees, and retainexcellent key management, technical and business talents, and motivate employees to create value forthe Company and enhance the competitiveness of the Company in the industry, the Company formulatedthe Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 togrant the qualified core talents with a certain number of stock options to subscribe for the general sharesof the Company. During the service period of the employees granted stock options for the Group, the fairvalue of the corresponding equity instruments shall be included in the costs or expenses of the Group ona straight-line basis during the vesting period, and the capital reserve shall be increased accordingly.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
1. Summary of share-based payments - continued
Note 7: - continued
| Plan No. | Granted by | Grant date | Vesting period | Exercise period |
| Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. | Universal Scientific Industrial (Shanghai) Co., Ltd. | 23 November 2023 | 23 November 2023 to 23 November 2025 | 24 November 2024 to 23 November 2026 |
The optionee of the stock options can exercise the right in proportions according to the following timepoints after being granted the stock options for 12 months and meeting the performance assessment atthe company and individual level.
| Accumulated maximum vested proportion | |
| 12 months after the grant date | 50% |
| 24 months after the grant date | 100% |
Holders whose participation status has been revoked shall have their corresponding shares withdrawn bythe Management Committee, and the shares corresponding to their withdrawn shares shall be sold in thesecondary market, and the Management Committee shall distribute the shares to the holders accordingto the lower of the amount obtained after the sale of such shares and the consideration paid for theunderlying shares corresponding to the shares held by the holders under the Employee Stock OwnershipPlan, and the Management Committee shall be responsible for determining the principles of distributionof the excess portion, if any, and shall further distribute the same to the holders. The ManagementCommittee shall be responsible for determining the principles of allocation and further distribution ofthe excess portion, if any. If a holder retires in accordance with the Company's regulations, its rights andinterests in the Employee Stock Ownership Plan shall remain unchanged.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XII) SHARE-BASED PAYMENTS - continued
2. Equity-settled share-based payments
Unit: RMB
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2015 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 | Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 | |
| The method of determining the fair value of equity instruments at the grant date | Black Scholes Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model | Binomial Tree Model |
| The basis of determining the number of equity instruments expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment at the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment at the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the company level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment at the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment in the individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment at the company and individual level, and the corresponding equity instrument is that expected to be vested | When the optionee reaches the exercise period in the stock options plan and meets the performance assessment at the company and individual level, and the corresponding equity instrument is that expected to be vested |
| Reasons for the significant difference between the estimate in the current year and that in the prior year | None | None | None | None | None | N/A | N/A |
| Amounts of equity-settled share-based payments accumulated in capital reserve | 139,923,402.85 | 107,201,000.00 | 743,000.00 | 7,087,000.00 | 2,952,000.00 | 8,380,000.00 | - |
| Total expenses recognized arising from equity-settled share-based payments | - | 8,643,000.00 | - | 770,000.00 | (109,000.00) | 8,380,000.00 | - |
Method of determining the fair value of equity instruments: Fair values are calculated by using Black-ScholesModel or Binomial Tree Model and the inputs to the model at the grant date are as follows:
| Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2015 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2019 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. In 2019 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2020 | Core Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2021 | Stock Option Incentive Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 | Employee Share Ownership Plan of Universal Scientific Industrial (Shanghai) Co., Ltd. in 2023 | |
| Weighted average share price | RMB 15.54 | RMB 13.34 | RMB 13.34 | RMB 21.65 | RMB 0 | RMB 14.54 | RMB 14.54 |
| Weighted average exercise price | RMB 15.54 | RMB 13.34 | RMB 13.34 | RMB 21.65 | RMB 0 | RMB 14.54 | RMB 14.54 |
| Expected volatility | 40.33%~45.00% | 45.07%~51.8% | 47.77% | 48.14%~53.57% | 47.15% | 38.51%~39.09% | 36.56%~38.77% |
| Expected life | 6 years ~ 7.5 years | 3 years ~ 5 years | 1.5 years ~ 3.5 years | 2.17 years ~ 4.17 years | 1.33 years | 1 years ~ 2 years | 1 years ~ 2 years |
| Risk-free interest rate | 3.06%~3.13% | 2.80%-2.97% | 2.7% | 2.80%-2.99% | 2.34% | 2.35%-2.45% | 2.33%-2.44% |
| Expected dividend yield | 0.87% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Expected volatility is calculated based on the volatility of the share prices of similar companies during the pastcertain years. Expected life used in the model is based on the best estimate of management after the adjustmentsof the effects of inconvertibility, exercise restriction and exercise pattern.
3. In this year, the Group has no cash-settled share-based payments.
4. In this year, the Group has no modification to or termination of share-based payments.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XIII) COMMITMENTS AND CONTINGENCIES
1. Significant commitments
(1) Capital commitments
Unit: RMB’000
| 31/12/2023 | 31/12/2022 | |
| Capital commitments that have been entered into but have not been recognised in the financial statements: | ||
| - Commitment for acquisition and construction of long-term assets | 359,557 | 874,884 |
| - External investment commitment (Note) | 193,499 | 98,171 |
| Total | 553,056 | 973,055 |
Note: For the commitment of foreign investment, according to the partnership agreement concluded between
the Company and Suzhou Yaotu Equity Investment Partnership, the Company needs to pay a totalsubscription amount of RMB 30,000,000.00, of which the amount of RMB 9,000,000.00 has been paidthis period. As at 31 December 2023, the Group has paid RMB 21,000,000.00 in total; but remains asubscription amount of RMB 9,000,000.00 unpaid.
For the commitment of foreign investment, according to the partnership agreement concluded betweenthe UGSI and Merry Electronics, UGSI needs to pay a total subscription amount of TWD 191,100,000.00.As at 31 December 2023, the Group has paid TWD 29,400,000.00, equivalent to RMB 7,044,079.28 intotal; but remains a subscription amount of TWD 161,700,000.00, equivalent to RMB 37,299,221.30unpaid.
Pursuant to the Share and Asset Purchase Agreement entered into by UGT, Ample Trading andHirschmann, UGT and Ample Trading need to pay the capital contribution of USD 48,000,000.00, whichwill be adjusted accordingly based on net debt and net working capital (including acquisition priceadjustment) of the Target Business on the closing date and will be settled in cash. As of 31 December2023, the Group has paid USD 41,400,000.00, equivalent to RMB 297,177,480.00; but remains theamount of USD 6,600,000.00 and an estimated acquisition price adjustment of USD 14,183,000.00,equivalent to RMB 147,199,754.10, unpaid.
2. CONTINGENCIES
The Group has no significant contingencies to be disclosed.
(XIV) EVENTS AFTER THE BALANCE SHEET DATE
1. Profit appropriation
As proposed by the resolution of the Tenth Meeting of the Sixth Session of the Board of Directors of the Companyheld on 29 March 2024, a cash dividend of RMB 2.70 (including tax) per 10 shares will be distributed on the basisof the total share capital at the equity registration date less the number of the shares repurchased by the Companyfrom special accounts, with no bonus issue and no increase in share capital. The above proposal regardingdividends distribution is yet to be approved in a shareholders' meeting.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XIV) EVENTS AFTER THE BALANCE SHEET DATE - continued
2. Convertible bonds
On 4 March 2024, the Company disclosed the Announcement on the Redemption Option of "Universal GlobalConvertible Bonds (SH:113045)" (Announcement No. 2024-014), and disclosed its informative announcementson 5 March 2024, 12 March 2024, 13 March 2024, 14 March 2024, and 15 March 2024 (Announcement No.2024-015, 2024-017, 2024-018, 2024-019, 2024-020). The redemption application for the "Universal GlobalConvertible Bonds (SH:113045)" has been closed after the closing of the Shanghai Stock Exchange on 15 March2024.
The redemption application period for "Universal Global Convertible Bonds (SH:113045)" is from 11 March2024 to 15 March 2024, with a redemption price of RMB 102.00 per bond. According to the data provided by theShanghai Branch of China Securities Depositories and Clearing Co., LTD., during the redemption applicationperiod of the "Universal Global Convertible Bonds (SH:113045)", the effective number of redemptionapplications is 0, and the redemption amount is RMB 0.
(XV) OTHER SIGNIFICANT EVENTS
1. Segment reporting
(1) Determination basis and accounting policies of reporting segments
Based on the Group's internal organization structure, management requirements and internal reporting system,the operations of the Group are classified into 4 reporting segments according to the manufacturing location,which are Chinese mainland, APAC (exclude Mainland China), Europe and other countries/regions. At the sametime, the products are divided into communication products, consumer electronics products, cloud and storageproducts, industrial products, automotive electronics products and other products according to categories in eachregion. These report segments are recognized on the basis of manufacturing location and product category. TheGroup's management periodically evaluates the operating results of these reporting segments to make decisionsabout resources to be allocated to the segments and assess their performance.
Segment information is disclosed in accordance with the accounting policies and measurement criteria adoptedby each segment when reporting to management. The measurement criteria are consistent with the accountingand measurement criteria in the preparation of the financial statements. Due to the changes in the Group's internalproduct categories in 2023, which resulted in changes in the composition of reporting segments, the Group restatedthe previous data.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XV) OTHER SIGNIFICANT EVENTS - continued
1. Segment reporting - continued
(2) Financial information of reporting segments
2023:
Unit: RMB’000
| Mainland China | APAC | European region | Other countries/regions | Inter-segment offsetting | Total | |||||||||||||
| Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Total of the segment | |
| Communication products | 15,115,896 | 13,832,549 | 1,283,347 | 6,919,039 | 6,663,962 | 255,077 | 25,692 | 28,529 | (2,837) | 12,537 | 11,815 | 722 | (273,894) | (433,658) | 159,764 | 21,799,270 | 20,103,197 | 1,696,073 |
| Consumer electronic products | 15,367,363 | 14,030,711 | 1,336,652 | 5,014,228 | 4,731,103 | 283,125 | 253,066 | 237,301 | 15,765 | 8,606 | 9,907 | (1,301) | (1,389,074) | (1,280,890) | (108,184) | 19,254,189 | 17,728,132 | 1,526,057 |
| Cloud and storage products | 2,440,817 | 2,014,077 | 426,740 | 3,489,246 | 3,103,827 | 385,419 | 260,752 | 249,332 | 11,420 | 397,270 | 359,096 | 38,174 | (1,209,306) | (1,208,206) | (1,100) | 5,378,779 | 4,518,126 | 860,653 |
| Industrial products | 3,154,753 | 2,766,770 | 387,983 | 3,072,600 | 2,659,156 | 413,444 | 2,698,637 | 2,479,370 | 219,267 | 1,446,391 | 1,365,961 | 80,430 | (2,207,921) | (2,288,951) | 81,030 | 8,164,460 | 6,982,306 | 1,182,154 |
| Automotive electronic products | 1,121,896 | 994,607 | 127,289 | 480,844 | 483,590 | (2,746) | 1,035,302 | 846,584 | 188,718 | 2,515,140 | 2,409,623 | 105,517 | (15,742) | (12,699) | (3,043) | 5,137,440 | 4,721,705 | 415,735 |
| Medical products | 11,061 | 8,062 | 2,999 | - | - | - | 365,496 | 344,656 | 20,840 | 330 | 298 | 32 | (859) | (2,437) | 1,578 | 376,028 | 350,579 | 25,449 |
| Others | 252,218 | 283,156 | (30,938) | 491,059 | 189,427 | 301,632 | 348,394 | 187,126 | 161,268 | 97,724 | 39,423 | 58,301 | (569,722) | (167,417) | (402,305) | 619,673 | 531,715 | 87,958 |
| Principal operating income/cost of the segment | 37,464,004 | 33,929,932 | 3,534,072 | 19,467,016 | 17,831,065 | 1,635,951 | 4,987,339 | 4,372,898 | 614,441 | 4,477,998 | 4,196,123 | 281,875 | (5,666,518) | (5,394,258) | (272,260) | 60,729,839 | 54,935,760 | 5,794,079 |
| Other operating income/cost of the segment | 92,202 | 256 | 91,946 | 7,317 | 3,064 | 4,253 | 27,683 | 57 | 27,626 | 5,925 | - | 5,925 | (71,057) | - | (71,057) | 62,070 | 3,377 | 58,693 |
| Total operating income/cost of the segment | 37,556,206 | 33,930,188 | 3,626,018 | 19,474,333 | 17,834,129 | 1,640,204 | 5,015,022 | 4,372,955 | 642,067 | 4,483,923 | 4,196,123 | 287,800 | (5,737,575) | (5,394,258) | (343,317) | 60,791,909 | 54,939,137 | 5,852,772 |
| Less: Taxes and levies | 80,262 | 1,396 | 8,750 | 5,362 | - | 95,770 | ||||||||||||
| Selling expenses | 213,912 | 106,250 | 66,293 | 46,430 | (64,890) | 367,995 | ||||||||||||
| Administrative expenses | 388,977 | 558,040 | 258,798 | 137,623 | (128,010) | 1,215,428 | ||||||||||||
| Research and development expenses | 1,269,426 | 561,706 | 84,819 | 27,182 | (135,929) | 1,807,204 | ||||||||||||
| Financial expenses | 76,879 | 72,008 | (21,291) | 89,795 | (5,362) | 212,029 | ||||||||||||
| Including: Interest expenses | 217,844 | 166,903 | 51,501 | 117,275 | (153,307) | 400,216 | ||||||||||||
| Interest income | 249,048 | 113,907 | 16,453 | 5,425 | (148,305) | 236,528 | ||||||||||||
| Add: Other income | 83,570 | 28 | 6,624 | - | - | 90,222 | ||||||||||||
| Investment income | 57,352 | 44,098 | 41,250 | - | - | 142,700 | ||||||||||||
| Including: Income from investments in associates and joint ventures | (3,259) | 12,012 | - | - | - | 8,753 | ||||||||||||
| Gains (losses) from changes in fair values | (10,763) | 17,116 | (33,461) | - | - | (27,108) | ||||||||||||
| Gains (losses) on impairment of credit | 1,390 | 1,906 | (23,198) | (2,078) | - | (21,980) | ||||||||||||
| Gains (losses) from assets impairment | (5,065) | (110,374) | (52,304) | 907 | - | (166,836) | ||||||||||||
| Gains (losses) from disposal of assets | 5,397 | 66 | 871 | - | - | 6,334 | ||||||||||||
| Operating profit | 1,728,443 | 293,644 | 184,480 | (19,763) | (9,126) | 2,177,678 | ||||||||||||
| Net profit | 1,566,374 | 287,650 | 177,129 | (46,269) | (35,175) | 1,949,709 | ||||||||||||
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XV) OTHER SIGNIFICANT EVENTS - continued
1. Segment reporting - continued
(2) Financial information of reporting segments - continued
2022 (restated)
Unit: RMB’000
| Mainland China | APAC | European region | Other countries/regions | Inter-segment offsetting | Total | |||||||||||||
| Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Sub-total of the segment | Operating income | Operating costs | Total of the segment | |
| Communication products | 16,378,602 | 14,694,376 | 1,684,226 | 9,400,421 | 8,785,813 | 614,608 | 74,716 | 80,240 | (5,524) | 15,214 | 15,447 | (233) | (243,974) | (364,264) | 120,290 | 25,624,979 | 23,211,612 | 2,413,367 |
| Consumer electronic products | 18,660,706 | 17,020,810 | 1,639,896 | 4,169,586 | 3,962,081 | 207,505 | 267,061 | 255,684 | 11,377 | 62,970 | 67,775 | (4,805) | (1,431,382) | (1,404,969) | (26,413) | 21,728,941 | 19,901,381 | 1,827,560 |
| Cloud and storage products | 4,760,525 | 4,107,830 | 652,695 | 4,153,783 | 3,774,252 | 379,531 | 231,058 | 221,886 | 9,172 | 136,574 | 118,894 | 17,680 | (2,290,503) | (2,302,135) | 11,632 | 6,991,437 | 5,920,727 | 1,070,710 |
| Industrial products | 3,899,800 | 3,431,389 | 468,411 | 4,192,218 | 3,626,202 | 566,016 | 2,068,750 | 1,816,800 | 251,950 | 1,579,930 | 1,431,205 | 148,725 | (3,084,277) | (3,040,332) | (43,945) | 8,656,421 | 7,265,264 | 1,391,157 |
| Automotive electronic products | 1,231,639 | 1,060,654 | 170,985 | 473,704 | 373,017 | 100,687 | 745,870 | 675,172 | 70,698 | 2,220,442 | 2,163,991 | 56,451 | (8,732) | (20,454) | 11,722 | 4,662,923 | 4,252,380 | 410,543 |
| Medical products | 15,652 | 8,460 | 7,192 | - | - | - | 185,694 | 172,600 | 13,094 | 845 | 840 | 5 | - | - | - | 202,191 | 181,900 | 20,291 |
| Others | 311,777 | 300,918 | 10,859 | 521,226 | 222,848 | 298,378 | 112,834 | 94,627 | 18,207 | 186,567 | 148,907 | 37,660 | (529,202) | (176,797) | (352,405) | 603,202 | 590,503 | 12,699 |
| Principal operating income/cost of the segment | 45,258,701 | 40,624,437 | 4,634,264 | 22,910,938 | 20,744,213 | 2,166,725 | 3,685,983 | 3,317,009 | 368,974 | 4,202,542 | 3,947,059 | 255,483 | (7,588,070) | (7,308,951) | (279,119) | 68,470,094 | 61,323,767 | 7,146,327 |
| Other operating income/cost of the segment | 40,927 | 438 | 40,489 | 7,045 | 3,036 | 4,009 | 18,651 | - | 18,651 | 1,454 | - | 1,454 | (22,095) | (166) | (21,929) | 45,982 | 3,308 | 42,674 |
| Total operating income/cost of the segment | 45,299,628 | 40,624,875 | 4,674,753 | 22,917,983 | 20,747,249 | 2,170,734 | 3,704,634 | 3,317,009 | 387,625 | 4,203,996 | 3,947,059 | 256,937 | (7,610,165) | (7,309,117) | (301,048) | 68,516,076 | 61,327,075 | 7,189,001 |
| Less: Taxes and levies | 54,963 | 1,392 | (1,946) | 1,021 | - | 55,430 | ||||||||||||
| Selling expenses | 165,324 | 116,802 | 35,545 | 45,684 | (39,521) | 323,834 | ||||||||||||
| Administrative expenses | 581,932 | 653,258 | 165,523 | 123,364 | (102,228) | 1,421,849 | ||||||||||||
| Research and development expenses | 1,586,715 | 557,384 | 996 | 18,609 | (129,242) | 2,034,462 | ||||||||||||
| Financial expenses | (120,183) | 67,602 | 32,606 | 39,574 | (735) | 18,864 | ||||||||||||
| Including: Interest expenses | 166,294 | - | 33,280 | 5 | 35,421 | 235,000 | ||||||||||||
| Interest income | 93,928 | - | 7,798 | - | (13,729) | 87,997 | ||||||||||||
| Add: Other income | 50,968 | 200 | 4,977 | - | - | 56,145 | ||||||||||||
| Investment income | 21,633 | 113,200 | 3,797 | - | - | 138,630 | ||||||||||||
| Including: Income from investments in associates and joint ventures | 23,809 | 49,722 | - | - | - | 73,531 | ||||||||||||
| Gains (losses) from changes in fair values | 11,621 | (795) | 21,013 | - | - | 31,839 | ||||||||||||
| Gains (losses) on impairment of credit | (6,354) | (3,476) | (1) | (286) | - | (10,117) | ||||||||||||
| Gains (losses) from assets impairment | (52,532) | (40,317) | 13,510 | (19,531) | - | (98,870) | ||||||||||||
| Gains (losses) from disposal of assets | 6,348 | 725 | 1,431 | 111 | - | 8,615 | ||||||||||||
| Operating profit | 2,437,686 | 843,833 | 199,628 | 8,979 | (29,322) | 3,460,804 | ||||||||||||
| Net profit | 2,222,971 | 691,676 | 176,142 | 190 | (30,989) | 3,059,990 | ||||||||||||
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XV) OTHER SIGNIFICANT EVENTS - continued
1. Segment reporting - continued
(2) Financial information of reporting segments - continued
31/12/2023
Unit: RMB’000
| Mainland China | APAC | European region | Other countries/regions | Inter-segment offsetting | Total | |
| Total assets of the segment | 21,476,495 | 15,750,225 | 4,143,541 | 4,920,666 | (7,618,396) | 38,672,531 |
| Total liabilities of the segment | 11,645,840 | 12,121,625 | 2,615,823 | 3,816,469 | (7,983,203) | 22,216,554 |
31/12/2022
Unit: RMB’000
| Mainland China | APAC | European region | Other countries/regions | Inter-segment offsetting | Total | |
| Total assets of the segment | 24,068,401 | 13,851,252 | 4,028,528 | 2,876,723 | (6,830,329) | 37,994,575 |
| Total liabilities of the segment | 13,507,297 | 11,683,792 | 2,526,013 | 2,232,858 | (7,125,334) | 22,824,626 |
External revenue by geographical area of source and non-current assets by geographical location of assets
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| External revenue from Chinese mainland | 2,174,577,497.88 | 1,733,001,923.45 |
| External revenue outside Chinese mainland | 58,617,332,039.99 | 66,783,074,039.81 |
| Total | 60,791,909,537.87 | 68,516,075,963.26 |
Unit: RMB
| Item (Note) | 31/12/2023 | 31/12/2022 |
| Non-current assets located in Chinese mainland | 3,298,301,655.30 | 4,130,752,349.05 |
| Non-current assets located in Mexico | 1,083,804,720.92 | 597,971,635.46 |
| Non-current assets located in Taiwan, China | 977,522,778.25 | 879,674,910.08 |
| Non-current assets located in France | 923,206,293.87 | 783,616,987.49 |
| Non-current assets located in the Vietnam | 533,589,551.93 | 477,280,704.05 |
| Non-current assets located in Hong Kong | 485,962,476.30 | 111,106,156.13 |
| Non-current assets located in Poland | 204,342,401.10 | 127,510,885.44 |
| Non-current assets located in the United States | 125,234,459.05 | 35,275,209.48 |
| Non-current assets located in Hungary | 71,587,791.19 | - |
| Non-current assets located in Japan | 920,188.70 | 182,102.16 |
| Total | 7,704,472,316.61 | 7,143,370,939.34 |
Note: The above non-current assets exclude long-term receivables, investments in other equity instruments,
other non-current financial assets and deferred tax assets.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XV) OTHER SIGNIFICANT EVENTS - continued
1. Segment reporting - continued
(2) Financial information of reporting segments - continued
Degree of reliance on major customers
Information of major customers whose revenue accounts for 10% or more of the total revenue
Unit: RMB
| Customer name | Amount incurred in the current year | Amount incurred in the prior year | ||
| Total operating income | Proportion in total operating income (%) | Total operating income | Proportion in total operating income (%) | |
| Company E | 17,131,143,558.73 | 28.18 | 17,352,642,463.15 | 25.33 |
| Company F | 7,582,474,674.51 | 12.47 | 9,003,192,184.06 | 13.14 |
| Total | 24,713,618,233.24 | 40.65 | 26,355,834,647.21 | 38.47 |
Inter-segment transfers are measured on the basis of actual transaction prices. Segment revenue and segmentexpenses are determined on the basis of actual revenue and expenses of each segment. Segment assets andliabilities are allocated according to the attributable assets employed by a segment in its operating activities andthe attributable liabilities resulting from the operating activities of a segment.
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS
1. Notes receivable
(1) Categories of notes receivable
Unit: RMB
| Category | 31/12/2023 | 31/12/2022 |
| Bank acceptances | 49,427,125.85 | 39,485,239.31 |
(2) As at 31 December 2023, the Company had no notes receivable that have been pledged as security.
(3) As at 31 December 2023, the Company had no notes receivable that have been endorsed or discounted
and were not yet matured at the balance sheet date.
(4) As at 31 December 2023, the Company made no provision for credit loss since the Company considered
that the accepting banks of the bank acceptances held by it were of high ratings and no significant creditrisk was expected to exist.
(5) As at 31 December 2023, the Company had no notes receivable that have been actually written off.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
2. Accounts receivable
(1) Categories of accounts receivable
Unit: RMB
| Category | 31/12/2023 | 31/12/2022 |
| Accounts receivable arising from contracts with customers | 2,871,941,596.58 | 2,825,168,124.93 |
| Less: Bad debt provision | 38,222.50 | 3,724,156.78 |
| Total | 2,871,903,374.08 | 2,821,443,968.15 |
(2) Disclosure of accrual method for credit loss
As part of the Company's credit risk management, the expected credit losses on accounts receivable are assessedusing the aging analysis approach. According to the Company's assessment on credit risk, there is no significantdifference in the losses among different customer groups, and the aging reflects the solvency of customers whenthe receivables are due.
At 31 December 2023, the credit risk and expected credit losses on accounts receivable were as follows:
Unit: RMB
| Aging | 31/12/2023 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within credit period | 0.00 | 2,759,534,669.89 | 22,387.86 | 2,759,512,282.03 |
| Overdue for 1-30 days | 0.01 | 112,113,841.06 | 14,592.63 | 112,099,248.43 |
| Overdue 31-60 days | 0.39 | 279,158.03 | 1,078.52 | 278,079.51 |
| 60-90 days overdue | 0.87 | 13,884.93 | 120.82 | 13,764.11 |
| 90-180 days overdue | - | - | - | - |
| More than 180 days overdue | 100.00 | 42.67 | 42.67 | - |
| Total | 0.00 | 2,871,941,596.58 | 38,222.50 | 2,871,903,374.08 |
At 31 December 2022, the credit risk and expected credit losses on accounts receivable were as follows:
Unit: RMB
| Aging | 1/1/2023 | |||
| Expected average loss rate (%) | Book value | Bad debt provision | Carrying amount | |
| Within credit period | 0.02 | 2,707,985,122.08 | 620,333.97 | 2,707,364,788.11 |
| Overdue for 1-30 days | 0.44 | 107,499,766.35 | 470,944.46 | 107,028,821.89 |
| Overdue 31-60 days | 10.41 | 6,262,253.85 | 651,595.61 | 5,610,658.24 |
| 60-90 days overdue | 40.89 | 2,435,808.79 | 996,108.88 | 1,439,699.91 |
| 90-180 days overdue | 100.00 | 170,800.05 | 170,800.05 | - |
| More than 180 days overdue | 100.00 | 814,373.81 | 814,373.81 | - |
| Total | 0.13 | 2,825,168,124.93 | 3,724,156.78 | 2,821,443,968.15 |
The expected average loss rate mentioned above is based on the historical actual credit loss rates and the currentconditions as well as the forecast of future economic conditions. In 2023, the Company's valuation method andsignificant assumptions remain unchanged.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
2. Accounts receivable - continued
(3) Changes in bad debt provision
Unit: RMB
| Category | 31/12/2022 | Changes for the year | 31/12/2023 | |
| Provision for (reversal of) the year | Write-off | |||
| Bad debt provision by aging matrix | 3,724,156.78 | (3,685,934.28) | - | 38,222.50 |
(4) There are no accounts receivable that have been actually written off in the year.
(5) Top five accounts receivable at 31 December 2023 categorized by debtor
Unit: RMB
| Company name | Accounts receivable at 31 December 2023 | Proportion to total accounts receivable at 31 December 2023 (%) | Bad debt provision at 31 December 2023 |
| Company F | 829,212,283.50 | 28.87 | 6,727.33 |
| Company E | 802,740,155.94 | 27.95 | 6,512.56 |
| Company I | 364,569,794.59 | 12.70 | 2,957.72 |
| Company S | 280,039,723.85 | 9.75 | 2,271.94 |
| Company T | 78,364,031.83 | 2.73 | 635.76 |
| Total | 2,354,925,989.71 | 82.00 | 19,105.31 |
(6) As at 31 December 2023, there is no accounts receivable recognized due to the transfer of financial assets.
(7) As at 31 December 2023, there is no amount of assets and liabilities arising from transfer of accounts
receivable and continuing involvement.
3. Other receivables
(1) Disclosure of other receivables by aging
Unit: RMB
| Aging | 31/12/2023 | ||
| Amounts | Bad debt provision | Proportion of provision (%) | |
| Within 1 year | 733,104,536.58 | - | - |
(2) Classification by the nature of other receivables
Unit: RMB
| Nature of other receivables | Book value at 31 December 2023 | Book value at 31 December 2022 |
| Cash pooling receivables from related- party | 687,443,000.00 | 1,022,345,000.00 |
| Amounts due from related parties | 29,624,196.07 | 24,416,766.00 |
| Advances for third parties | 11,239,025.85 | 9,316,988.52 |
| Advance payments for employees | 710,649.65 | 1,638,532.17 |
| Others | 4,087,665.01 | 2,470,403.55 |
| Total | 733,104,536.58 | 1,060,187,690.24 |
(3) No allowance for expected credit losses has been made and no allowance for expected credit losses has
been reversed or collected due to the low probability that the Company's other receivables will not becollected.
(4) There were no other receivables actually written off in the year.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
3. Other receivables - continued
(5) As at 31 December 2023, there were no other receivables related to government grants.
(6) As at 31 December 2023, there were no other receivables derecognized due to the transfer of financial
assets.
(7) As at 31 December 2023, there was no amount of assets and liabilities arising from transfer of other
receivables and continuing involvement.
4. Long-term equity investments
Details of long-term equity investments:
Unit: RMB
| Name of investee | Accounting methodology | 31/12/2022 | Changes for the year | 31/12/2023 | Proportion to ownership interest held in investee (%) | Proportion to voting power held in investee (%) | Explanation of the inconsistency between the proportions of the ownership interest and the voting power in the investee | Cash dividends for this year | |||
| Increase in the year | Decrease in the yea | Gains or losses arising from investments | Increase from stock option grants (Note) | ||||||||
| Universal Global Technology Co., Limited | Cost method | 2,796,631,857.00 | 510,995,119.70 | - | - | 34,873.08 | 3,307,661,849.78 | 100 | 100 | NA | - |
| USI Electronics (Shenzhen) Co., Ltd. | Cost method | 395,631,561.16 | - | - | - | 767,798.51 | 396,399,359.67 | 50 | 100 | The remaining 50% equity interest is held by Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary. | 300,000,000.00 |
| Universal Global Technology (Kunshan) Co., Ltd. | Cost method | 269,830,008.88 | - | - | - | (532,761.26) | 269,297,247.62 | 100 | 100 | NA | - |
| Universal Global Technology (Shanghai) Co., Ltd. | Cost method | 1,350,239,073.32 | - | - | - | 1,166,895.33 | 1,351,405,968.65 | 100 | 100 | NA | - |
| Universal Global Electronics (Shanghai) Co., Ltd. | Cost method | 50,000,000.00 | - | - | - | - | 50,000,000.00 | 100 | 100 | NA | - |
| Universal Global Scientific Industrial Co., Ltd. | NA | 139,694,532.49 | - | - | - | 12,630,130.75 | 152,324,663.24 | NA | NA | The 100% equity interest is held by Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary. | - |
| Universal Global Technology (Huizhou) Co., Ltd. | Cost method | 795,920,090.82 | - | - | - | 180,177.55 | 796,100,268.37 | 100 | 100 | NA | - |
| FAFG | Cost method | 393,342,321.82 | - | - | - | - | 393,342,321.82 | 10.42 | 100 | The remaining 89.58% equity interest is held by Universal Global Technology Co., Limited, the Company's wholly-owned subsidiary. | - |
| Questyle Audio Technology Co., Ltd. | Equity method | 20,000,000.00 | - | - | (3,294,727.52) | - | 16,705,272.48 | 6.67 | 33.33 | The company holds 1/3 voting rights on the board of directors of Questyle Audio Technology | - |
| Total | 6,211,289,445.49 | 510,995,119.70 | - | (3,294,727.52) | 14,247,113.96 | 6,733,236,951.63 | 300,000,000.00 | ||||
Note: The amount refers to the cumulative amount related to share-based payments settled under equity arising
from the stock option incentive plan offered by the Company to relevant personnel of Universal GlobalTechnology Co., Limited, Universal Global Technology (Huizhou) Co., Ltd., USI Electronics (Shenzhen)Co., Ltd., Universal Global Technology (Kunshan) Co., Ltd., Universal Global Technology (Shanghai)Co., Ltd. and UGSI.As at 31 December 2023, the ability of the investee, in which the Company holds long-term equity investments,to transfer funds to the Company is not restricted.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
5. Operating income and operating costs
(1) Details of operating income and operating costs
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | ||
| Income | Cost | Income | Cost | |
| Principal operating activities | 19,672,244,261.31 | 17,928,390,978.31 | 21,940,574,129.19 | 19,815,647,848.13 |
| Other operating activities | 4,791,760.38 | 116,571.67 | 4,198,651.53 | 437,487.30 |
| Total | 19,677,036,021.69 | 17,928,507,549.98 | 21,944,772,780.72 | 19,816,085,335.43 |
(2) Analysis of principal operating income and principal operating costs by product categories:
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | ||
| Principal operating income | Principal operating costs | Principal operating income | Principal operating costs | |
| Communication products | 13,985,075,540.53 | 12,854,145,906.44 | 15,191,008,208.22 | 13,667,867,543.85 |
| Consumer electronic products | 4,686,934,977.87 | 4,318,789,072.02 | 5,717,448,527.15 | 5,359,883,891.18 |
| Automotive electronic products | 499,366,698.83 | 458,272,964.04 | 516,433,717.74 | 449,999,555.30 |
| Cloud and storage products | 456,149,216.68 | 269,492,190.63 | 476,467,425.39 | 319,730,739.42 |
| Others | 44,717,827.40 | 27,690,845.18 | 39,216,250.69 | 18,166,118.38 |
| Total | 19,672,244,261.31 | 17,928,390,978.31 | 21,940,574,129.19 | 19,815,647,848.13 |
(3) Other operating income and other operating costs:
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year | ||
| Other operating income | Other operating costs | Other operating income | Other operating costs | |
| Scrap income | 4,468,634.64 | - | 3,529,375.67 | - |
| Others | 323,125.74 | 116,571.67 | 669,275.86 | 437,487.30 |
| Total | 4,791,760.38 | 116,571.67 | 4,198,651.53 | 437,487.30 |
6. Investment income
Details of investment income
Unit: RMB
| ITEM | Amount incurred in the current year | Amount incurred in the prior year |
| Cash dividends of subsidiaries | 300,000,000.00 | 200,000,000.00 |
| Investment income (loss) on disposal of held-for-trading financial assets | 25,724,208.11 | (16,431,372.22) |
| Total | 325,724,208.11 | 183,568,627.78 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS - continued
7. Supplementary information to the cash flow statement
Unit: RMB
| Supplementary Information | 2023 | 2022 |
| 1. Reconciliation of net profit to cash flow from operating activities: | ||
| Net profit | 1,047,209,221.43 | 1,240,761,622.97 |
| Add: Impairment losses of assets | (762,694.28) | (5,135,027.84) |
| Impairment losses of credit | (3,685,934.28) | 3,658,149.19 |
| Depreciation of fixed assets | 331,922,920.67 | 325,404,686.37 |
| Depreciation of right-of-use assets | 12,886,975.02 | 13,245,317.94 |
| Amortization of intangible assets | 1,420,371.19 | 1,671,457.54 |
| Amortisation of long-term prepaid expenses | 13,092,303.33 | 15,118,605.25 |
| Amortization of deferred income | (8,889,150.58) | (7,777,540.47) |
| Losses (gains) on disposal of fixed assets, intangible assets and other long-term assets | (3,442,727.96) | 3,869,844.98 |
| Losses (gains) on changes in fair values | 13,609,149.40 | (12,430,908.18) |
| Financial expenses | 229,400,529.75 | 88,163,427.23 |
| Investment income | (325,724,208.11) | (183,568,627.78) |
| Share-based payments settled by equity | 3,436,886.04 | 4,639,049.25 |
| Decrease (increase) in deferred tax assets | 6,167,068.06 | (18,278,697.09) |
| Decrease (increase) in inventories | 744,059,042.87 | (469,566,071.14) |
| Decrease in receivables from operating activities | 23,253,741.74 | 1,136,828,855.87 |
| Increase (decrease) in payables from operating activities | 235,110,740.64 | (603,868,897.93) |
| Net Cash Flow from Operating Activities | 2,319,064,234.93 | 1,532,735,246.16 |
| 2. Significant investing and financing activities that do not involve cash receipts and payments: | ||
| Acquisition of long-term assets with debt | 36,089,136.32 | 80,278,018.89 |
| 3. Net changes in cash and cash equivalents: | ||
| Cash at the end of the year | 3,166,517,228.25 | 2,382,458,769.33 |
| Less: Cash at the beginning of the year | 2,382,458,769.33 | 2,490,051,993.72 |
| Add: Closing balance of cash equivalents | - | - |
| Less: Opening balance of cash equivalents | - | - |
| Net increase (decrease) in cash and cash equivalents | 784,058,458.92 | (107,593,224.39) |
8. Related party relationship and transactions
(1) Related parties of the Company
The details of the subsidiaries of the Company are set out in Note (VII). 1. The details of the associates and jointventures of the Company are set out in Note (VII). 2. The details of other related parties are set out in Note (XI).4.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(2) Related party transactions
(2.1) Sales and purchase of goods, provision and receipt of services
Purchase of goods/receipt of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Universal Global Technology Co., Limited | Purchase of materials | 487,984,241.65 | 564,271,324.02 |
| ASE Electronics Inc. | Purchase of materials | 6,397,414.33 | 6,991,678.67 |
| Universal Global Technology (Kunshan) Co., Ltd. | Purchase of materials | 2,356,645.35 | 756,062.09 |
| Universal Scientific Industrial De México S.A. De C.V. | Purchase of materials | 2,084,595.41 | 2,219,919.09 |
| ASE Inc. | Purchase of materials | 579,589.26 | - |
| Universal Global Industrial Co., Ltd. | Purchase of materials | 556,170.63 | 283,743.20 |
| Universal Global Technology (Shanghai) Co., Ltd. | Purchase of materials | 64,831.28 | 691,999.45 |
| Universal Global Technology (Huizhou) Co., Ltd. | Purchase of materials | 21,872.33 | 857.24 |
| USI Electronics (Shenzhen) Co., Ltd. | Purchase of materials | - | 25,235.86 |
| Taitech Precision Electronic (Kunshan) Co., Ltd. | Purchase of materials | - | 18,750.00 |
| Universal Scientific Industrial Vietnam Company Limited | Purchase of materials | - | 24.75 |
| Total | 500,045,360.24 | 575,259,594.37 | |
| Universal Global Scientific Industrial Co., Ltd. | Test service fee | 44,775,763.39 | 39,094,987.33 |
| Universal Global Scientific Industrial Co., Ltd. | Commissions | 44,775,763.39 | 34,805,569.75 |
| ASE (Shanghai) Inc. | Receipt of services | 22,324,382.22 | 25,186,628.73 |
| Universal Global Technology Co., Limited | Receipt of services | 19,874,185.00 | 16,119,880.00 |
| Universal Global Technology (Shanghai) Co., Ltd. | Receipt of services | 11,795,403.60 | 17,945,841.10 |
| USI Science and Technology (Shenzhen) Co., Ltd. | Receipt of services | 4,339,622.69 | 3,867,924.58 |
| ASE Corporate Services (Shanghai) Limited | Receipt of services | 3,193,692.63 | - |
| SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD. | Receipt of services | 2,025,901.89 | 1,899,206.09 |
| Asteelflash Suzhou Co., Ltd. | Receipt of services | 1,316,749.53 | 173,673.77 |
| USI Japan Co.,Ltd. | Receipt of services | 20,439.18 | 85,853.67 |
| ASE Inc. | Receipt of services | - | 990.42 |
| Total | 154,441,903.52 | 139,180,555.44 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(2) Related party transactions - continued
(2.1) Sales and purchase of goods, provision and receipt of services - continued
Sales of goods/provision of services
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Universal Global Industrial Co., Ltd. | Sales of goods | 1,037,257,474.99 | 652,865,047.32 |
| Universal Global Technology (Shanghai) Co., Ltd. | Sales of goods | 86,461,083.52 | 117,936,343.91 |
| Universal Scientific Industrial Vietnam Company Limited | Sales of goods | 1,295,848.43 | - |
| Universal Global Technology (Kunshan) Co., Ltd. | Sales of goods | 846,713.73 | 1,195,481.14 |
| Universal Scientific Industrial De México S.A. De C.V. | Sales of goods | 559,747.07 | 385,896.66 |
| Universal Global Technology (Huizhou) Co., Ltd. | Sales of goods | 312,956.68 | 61,130.81 |
| FINANCI?RE AFG S.A.S. | Sales of goods | 184,746.74 | - |
| ASE Inc. | Sales of goods | 96,752.87 | - |
| Universal Global Technology Co., Limited | Sales of goods | 13,291.12 | 486,427.96 |
| USI Electronics (Shenzhen) Co., Ltd. | Sales of goods | - | 96,137.78 |
| Total | 1,127,028,615.15 | 773,026,465.58 | |
| Universal Global Technology (Kunshan) Co., Ltd. | Provision of services | 10,385,172.24 | 10,188,814.82 |
| FINANCI?RE AFG S.A.S. | Provision of services | 3,564,683.59 | 3,304,239.50 |
| ISE labs, China. Ltd. | Provision of services | 959,723.55 | 1,048,388.07 |
| Universal Scientific Industrial Vietnam Company Limited | Provision of services | 348,144.77 | - |
| Universal Global Technology (Shanghai) Co., Ltd. | Provision of services | 301,499.81 | 431,331.00 |
| Universal Scientific Industrial De México S.A. De C.V. | Provision of services | 215,475.53 | 14,381.27 |
| Asteelflash Suzhou Co., Ltd. | Provision of services | - | 10,645.96 |
| Universal Global Scientific Industrial Co., Ltd. | Provision of services | - | 10,631.75 |
| Total | 15,774,699.49 | 15,008,432.37 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(2) Related party transactions - continued
(2.2) Leases with related parties
Leases where the Company is the lessor
Unit: RMB
| Name of lessee | Type of leased assets | Lease income recognized in the current year | Lease income recognized in the prior year |
| Wuxi Tongzhi Microelectronics Co.,Ltd. | Machinery and equipment | 19,359.06 | 33,186.96 |
| Universal Global Technology (Shanghai) Co., Ltd. | Machinery and equipment | - | 165,236.06 |
| Total | 19,359.06 | 198,423.02 |
The above transactions are executed at the prices agreed on by both parties.
Leases where the Company is the lessee
Unit: RMB
| Name of lessor | Type of leased assets | Right-of-use assets leased in this year | Lease interest for the year |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 2,392,528.09 |
The above transactions are executed at the prices agreed on by both parties.
Unit: RMB
| Name of lessor | Type of leased assets | Right-of-use assets leased in prior year | Lease interest for prior year |
| ASE Assembly & Test (Shanghai) Limited | Leasing of business premises | - | 3,080,155.98 |
The above transactions are executed at the prices agreed on by both parties.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(2) Related party transactions - continued
(2.3) Borrowings/loans with related parties
Unit: RMB
| Related party | Annual interest rate | Amount incurred in the current year | Amount at the end of the year | |
| Amount lent | Amount collected (Note) | Amounts | ||
| Lent to - Cash pool trading (Note) | ||||
| Universal Scientific Industrial Vietnam Company Limited | One month Term SOFR +40 basis points | - | 313,407,000.00 | - |
| Universal Scientific Industrial De México S.A. De C.V. | One month Term SOFR +40 basis points | 358,524,000.00 | 284,154,000.00 | 283,308,000.00 |
| Universal Global Technology Co., Limited | One month Term SOFR +40 basis points | 359,252,000.00 | 5,117,000.00 | 354,135,000.00 |
| Universal Global Technology (Huizhou) Co., Ltd. | 2.40% | 100,000,000.00 | 550,000,000.00 | 50,000,000.00 |
Note: The amount repaid from cash pool trading for the year include exchange differences at the period end.
Unit: RMB
| Related party | Annual interest rate | Amount incurred in the prior year | Amount at the end of the prior year | |
| Amount lent | Amount collected (Note) | Amounts | ||
| Lent to - Cash pool trading (Note) | ||||
| Universal Scientific Industrial Vietnam Company Limited | One month Libor +40 basis points | 406,815,000.00 | 526,955,600.00 | 313,407,000.00 |
| Universal Scientific Industrial De México S.A. De C.V. | One month Libor +40 basis points | 208,404,000.00 | 190,737,000.00 | 208,938,000.00 |
| Universal Global Technology (Huizhou) Co., Ltd. | 2.40% | 500,000,000.00 | - | 500,000,000.00 |
Note: The amount repaid from cash pool trading for the year include exchange differences at the period end.
The interest income for 2023 is RMB 28,239,145.20 (2022: RMB 15,133,142.87), and the interest not receivedat the end of the year is RMB 760,833.33 (31 December 2022: RMB 2,224,305.55).
Note: The Company entered into a cash pool entrustment loan agreement with the bank for entrusted loans in
which the Company is the leading party and Universal Global Technology (Shanghai) Co., Ltd., USIElectronics (Shenzhen) Co., Ltd., Universal Global Technology Co., Limited, Universal GlobalTechnology (Kunshan) Co., Ltd., Universal Global Technology (Huizhou) Co., Ltd., Universal ScientificIndustrial Vietnam Company Limited and Universal Scientific Industrial De México S.A. De C.V. areparticipants.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(2) Related party transactions - continued
(2.4) Assets transfer with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| Universal Global Technology (Shanghai) Co., Ltd. | Purchase of fixed assets | 16,418,450.70 | 1,260,282.87 |
| Universal Global Technology (Huizhou) Co., Ltd. | Purchase of fixed assets | 6,987.16 | - |
| Universal Global Technology (Kunshan) Co., Ltd. | Purchase of fixed assets | - | 18,762.80 |
| Total | 16,425,437.86 | 1,279,045.67 | |
| Universal Scientific Industrial Vietnam Company Limited | Sales of fixed assets | 28,061,445.85 | 8,243,515.42 |
| Universal Global Scientific Industrial Co., Ltd. (Note) | Sales of fixed assets | 4,435,846.69 | 18,160,515.88 |
| Universal Global Technology (Shanghai) Co., Ltd. | Sales of fixed assets | 2,485,862.82 | 34,547,905.39 |
| ISE labs, China. Ltd. | Sales of fixed assets | - | 46,507,299.26 |
| Total | 34,983,155.36 | 107,459,235.95 |
Note: Purchase fixed assets on behalf of Universal Global Industrial Co., Limited.
The above transactions are executed at the prices agreed on by both parties.
(2.5) Interest expenses with related parties
Unit: RMB
| Related party | Details of related party transaction | Amount incurred in the current year | Amount incurred in the prior year |
| USI Enterprise Limited | Interest expenses on convertible bonds | 46,206,386.54 | 89,992,084.14 |
| ASE (Shanghai) Inc. | Interest expenses on convertible bonds | - | 807,565.60 |
| Total | 46,206,386.54 | 90,799,649.74 |
(2.6) Compensation for key management personnel
Unit: RMB
| Item name | Amount incurred in the current year | Amount incurred in the prior year |
| Compensation for key management personnel | 28,238,630.96 | 33,842,802.87 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(2) Related party transactions - continued
(2.7) Others
The Company offers stock option incentive plan for relevant personnel of USI Electronics (Shenzhen) Co., Ltd.,Universal Global Technology (Kunshan) Co., Ltd., Universal Global Technology (Shanghai) Co., Ltd., UniversalGlobal Scientific Industrial Co., Ltd., Universal Global Technology (Huizhou) Co., Ltd. and Universal GlobalTechnology Co., Limited. See Note (XVI) 4 for details.
(3) Amounts due from / to related parties
(3.1) Amounts due from related parties
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Book value | Book value | ||
| Accounts receivable | Universal Global Industrial Co., Ltd. | 397,763,118.99 | 218,657,223.78 |
| Accounts receivable | Universal Global Technology (Shanghai) Co., Ltd. | 10,412,340.68 | 39,773,753.37 |
| Accounts receivable | Universal Scientific Industrial Vietnam Company Limited | 1,157,559.23 | - |
| Accounts receivable | Universal Global Technology (Kunshan) Co., Ltd. | 353,956.15 | 559,780.66 |
| Accounts receivable | Universal Scientific Industrial De México S.A. De C.V. | 294,391.83 | 244,884.82 |
| Accounts receivable | Asteelflash Suzhou Co., Ltd. | 117,167.51 | 12,029.93 |
| Accounts receivable | ASE Inc. | 78,150.65 | - |
| Accounts receivable | Universal Global Technology (Huizhou) Co., Ltd. | 18,639.90 | 19,324.78 |
| Accounts receivable | Universal Global Scientific Industrial Co., Ltd. | - | 56,152,778.81 |
| Accounts receivable | Universal Global Technology Co., Limited | - | 484,931.23 |
| Total | 410,195,324.94 | 315,904,707.38 |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Book value | Book value | ||
| Other receivables | Universal Global Technology Co., Limited (Note) | 354,135,000.00 | - |
| Other receivables | Universal Scientific Industrial De México S.A. De C.V. (Note) | 283,308,000.00 | 208,938,000.00 |
| Other receivables | Universal Global Technology (Huizhou) Co., Ltd. (Note) | 50,760,833.33 | 502,224,305.55 |
| Other receivables | Universal Scientific Industrial Vietnam Company Limited | 27,650,228.43 | 313,407,000.00 |
| Other receivables | FINANCI?RE AFG S.A.S. | 1,058,863.66 | 964,123.43 |
| Other receivables | ISE labs, China. Ltd. | 141,696.00 | 217,389.11 |
| Other receivables | Universal Global Technology (Kunshan) Co., Ltd. | 10,164.01 | - |
| Other receivables | Universal Global Technology (Shanghai) Co., Ltd. | 2,410.64 | 2,749,908.77 |
| Other receivables | Universal Global Industrial Co., Ltd. | - | 18,261,039.14 |
| Total | 717,067,196.07 | 1,046,761,766.00 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(3) Amounts due from / to related parties - continued
(3.1) Amounts due from related parties - continued
Note: The Company entered into a cash pool entrustment loan agreement with the bank for entrusted loans in
which the Company is the leading party and Universal Global Technology (Shanghai) Co., Ltd., USIElectronics (Shenzhen) Co., Ltd., Universal Global Technology Co., Limited, Universal GlobalTechnology (Kunshan) Co., Ltd., Universal Global Technology (Huizhou) Co., Ltd., Universal ScientificIndustrial Vietnam Company Limited and Universal Scientific Industrial De México S.A. De C.V. areparticipants.
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Book value | Book value | ||
| Other non-current assets | ASE Assembly & Test (Shanghai) Limited | 401,473.74 | - |
(3.2) Amounts due to related parties
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Accounts payable | Universal Global Technology Co., Limited | 197,113,366.75 | 159,659,364.67 |
| Accounts payable | Universal Global Scientific Industrial Co., Ltd. | 7,154,263.62 | 192,671.97 |
| Accounts payable | Universal Global Technology (Kunshan) Co., Ltd. | 1,706,236.34 | 183,493.39 |
| Accounts payable | ASE Electronics Inc. | 1,166,743.89 | 1,015,416.04 |
| Accounts payable | Universal Scientific Industrial De México S.A. De C.V. | 916,294.01 | 26,900.92 |
| Accounts payable | ASE Inc. | 574,406.96 | - |
| Accounts payable | Universal Global Industrial Co., Ltd. | 304,137.66 | 193,507.72 |
| Accounts payable | Universal Global Technology (Huizhou) Co., Ltd. | 7,749.50 | 310.34 |
| Accounts payable | Universal Global Technology (Shanghai) Co., Ltd. | - | 4,714,248.90 |
| Accounts payable | USI Science and Technology (Shenzhen) Co., Ltd. | - | 2,210,000.00 |
| Accounts payable | FINANCI?RE AFG S.A.S. | - | 184,094.20 |
| Accounts payable | USI Electronics (Shenzhen) Co., Ltd. | - | 61.46 |
| Total | 208,943,198.73 | 168,380,069.61 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVI) NOTES TO MAJOR ITEMS IN THE COMPANY’S FINANCIAL STATEMENTS- continued
8. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS - continued
(3) Amounts due from / to related parties - continued
(3.2) Amounts due to related parties - continued
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Other payables | Universal Global Scientific Industrial Co., Ltd. | 7,154,263.61 | - |
| Other payables | Universal Global Technology (Shanghai) Co., Ltd. | 3,609,020.56 | - |
| Other payables | ASE Corporate Services (Shanghai) Limited | 3,193,692.63 | - |
| Other payables | Universal Global Technology Co., Limited | 1,664,434.50 | - |
| Other payables | ASE (Shanghai) Inc. | 534,976.11 | 3,363,353.48 |
| Other payables | Asteelflash Suzhou Co., Ltd. | 342,750.25 | - |
| Other payables | SHANGHAI DINGXU PROPERTY MANAGEMENT CO., LTD. | 285,740.90 | 160,708.88 |
| Other payables | USI Science and Technology (Shenzhen) Co., Ltd. | 200,000.00 | - |
| Other payables | USI Enterprise Limited | - | 2,398,445.06 |
| Other payables | ASE Inc. | - | 987.37 |
| Total | 16,984,878.56 | 5,923,494.79 |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Lease liabilities | ASE Assembly & Test (Shanghai) Limited | 44,489,167.71 | 57,933,008.48 |
Unit: RMB
| Item name | Related party | 31/12/2023 | 31/12/2022 |
| Bonds payable | USI Enterprise Limited | 967,638,439.87 | 1,364,243,289.23 |
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(XVII) Supplementary Information
1. Breakdown of non-recurring profit or loss for the current period
Unit: RMB
| ITEM | Amounts | Description |
| Profit or loss on disposal of non-current assets, including those charged off for which provision for impairment of assets has been made | 5,463,221.02 | See Notes (V), 55, 59 and 61 for details |
| Government grants recognized in profit or loss (other than government grants which are closely related to the Company's business, in line with the national regulations, enjoyed under established standards and have a continuous impact on the Company's profit or loss) | 71,813,784.39 | See Notes (V), 54 for details |
| Profit or loss on changes in the fair value of financial assets and financial liabilities held by non-financial enterprises and profit or loss on disposal of financial assets and financial liabilities, other than those used in the effective hedging activities relating to normal operating business | 106,839,747.09 | See Notes (V), 55 and 56 for details |
| One-time costs incurred by enterprises due to the fact that the relevant business activities are no longer sustainable, such as expenses for relocating employees | (3,701,028.03) | |
| Other non-operating income or expenses other than the above | 12,916,711.91 | See Notes (V), 60 and 61 for details |
| Less: Income tax effects | 24,950,729.58 | |
| Effects attributable to minority interests | (386,528.97) | |
| Total | 168,768,235.77 |
2. Return on net assets and earnings per share ("EPS")
The return on net assets and EPS have been prepared by Universal Scientific Industrial (Shanghai) Co., Ltd. inaccordance with Information Disclosure and Presentation Rules for Companies Making Public Offering ofSecurities No. 9 - Calculation and Disclosure of Return on Net Assets and Earnings per Share (Revised 2010)issued by China Securities Regulatory Commission.
Unit: RMB
| Profit for the reporting year | Weighted average return on net assets (%) | EPS | |
| Basic EPS | Diluted EPS | ||
| Net profit attributable to ordinary shareholders of the Company | 12.02% | 0.89 | 0.87 |
| Net profit after deduction of non-recurring profits or losses attributable to ordinary shareholders of the Company | 10.98% | 0.81 | 0.80 |