AAC Technologies Holdings Inc. — Interim / Quarterly Report 2012

Aug 24, 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [244 x 115] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 02018)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30TH JUNE, 2012

INTERIM RESULTS

The board (the “ Board ”) of directors (the “ Director(s) ”) of AAC Technologies Holdings Inc. (the “ Company ”) is pleased to announce the unaudited condensed consolidated financial statements of the Company and its subsidiaries (collectively referred to as the “ Group ”) for the six months ended 30th June, 2012 together with the unaudited comparative figures for the corresponding period in 2011. These condensed consolidated financial statements have not been audited, but have been reviewed by the auditor, Deloitte Touche Tohmatsu, and the Company’s audit committee (the “ Audit Committee ”) and approved by the Board on 24th August, 2012.

– – 1

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30th June, 2012

NOTES Revenue 3 C ost of goods sold Gross profit Other income Net fair value loss on foreign currency forward contracts Distribution and selling expenses Administrative expenses Research and development costs Share of results of associates Exchange (loss) gain Gain on deemed disposal of partial interest in an associate 4 F inance costs Profit before taxation 5 T axation 6 Profit for the period Other comprehensive expense: Exchange differences arising from translation T otal comprehensive income for the period Profit (loss) for the period attributable to: Owners of the Company Non-controlling interests Total comprehensive income and expense for the period attributable to: Owners of the Company Non-controlling interests Earnings per share - Basic 8	1.1.2012 to 30.6.2012 (Unaudited) RMB’000 2,589,163 (1,463,501) 1,125,662 22,219 (91) (75,947) (88,287) (193,113) (16,230) (1,040) 33,362 (4,844) 801,691 (84,513) 717,178 (203) 716,975 720,298 (3,120) 717,178 719,708 (2,733) 716,975 RMB58.66 cents	1.1.2011 to 30.6.2011 (Unaudited) RMB’000 1,882,114 (1,061,144) 820,970 35,031 (15,472) (69,451) (71,578) (142,090) (3,397) 1,513 - (2,396) 553,130 (44,660) 508,470 (5,233) 503,237 509,261 (791) 508,470 503,883 (646) 503,237 RMB41.47 cents

– 2 –

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30th June, 2012

NOTES Non-current assets Property, plant and equipment 9 Goodwill Prepaid lease payments Deposits for acquisition of property, plant and equipment Available-for-sale investment Interests in associates Intangible assets Current assets Inventories Trade and other receivables 10 Foreign currency forward contracts Taxation recoverable Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables 11 Amounts due to related companies Taxation payable Foreign currency forward contracts Short-term bank loans 12 Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Net assets Capital and reserves Share capital 13 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	30.6.2012 (Unaudited) RMB’000 3,151,491 11,803 114,247 159,943 3,254 199,014 157,557 3,797,309 689,156 1,822,878 - 2,840 6,855 1,211,073 3,732,802 1,115,683 13,945 82,706 410 1,003,296 2,216,040 1,516,762 5,314,071 15,329 5,298,742 99,718 5,144,419 5,244,137 54,605 5,298,742	31.12.2011 (Audited) RMB’000 2,697,120 11,803 109,290 123,428 3,254 181,882 162,144
		3,288,921
		558,780 1,487,575 1,139 2,868 874 1,374,069
		3,425,305
		898,742 19,656 77,475 65 891,128
		1,887,066
		1,538,239
		4,827,160 15,738
		4,811,422
		99,718 4,650,352
		4,750,070 61,352
		4,811,422

– – 3

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30th June, 2012

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 (IAS 34) Interim Financial Reporting issued by the International Accounting Standards Board as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock “ ” Exchange of Hong Kong Limited (the Listing Rules ).

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values.

The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30th June, 2012 are the same as those followed in the preparation of the Group’s annual financial statements for the year ended 31st December, 2011.

In the current interim period, the Group has applied, for the first time, certain amendments to the International Financial Reporting Standards (“IFRSs”) that are mandatorily effective for the current interim period. The application of the amendments to IFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

3. SEGMENT INFORMATION

Operating and reportable segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Group’s chief operating decision maker in order to allocate resources to the segments, assess their performance and make strategic decisions. The chief operating decision maker of the Group has been identified as the Chief Executive Officer (“CEO”).

Information reported to the CEO for the purposes of resource allocation and assessment of performances focuses specifically on the type of products sold. The Group’s operating and reportable segments under IFRS 8 are dynamic components (mainly including speaker boxes, receivers and polyphonic speakers), microphones, headsets and other products (mainly including vibrators), which represent the major types of products manufactured and sold by the Group.

– – 4

3. SEGMENT INFORMATION – CONTINUED

An analysis of the Group’s revenue and results by operating and reportable segments is as follows:

Operating and reportable segments Segment revenue Dynamic components Microphones Headsets Other products R evenue Segment results Dynamic components Microphones Headsets Other products Total profit for operating and reportable segments - gross profit Unallocated amounts: Interest income Other income Net fair value loss on foreign currency forward contracts Distribution and selling expenses Administrative expenses Research and development costs Share of results of associates Exchange (loss) gain Gain on deemed disposal of partial interest in an associate Finance costs Profit before taxation	1.1.2012 to 30.6.2012 RMB’000 (Unaudited) 2,000,765 346,132 44,572 197,694 2,589,163 939,091 129,484 5,788 51,299 1,125,662 8,425 13,794 (91) (75,947) (88,287) (193,113) (16,230) (1,040) 33,362 (4,844) 801,691	1.1.2011 to 30.6.2011 RMB’000 (Unaudited) 1,492,500 175,370 90,366 123,878 1,882,114 721,943 61,554 11,926 25,547 820,970 14,599 20,432 (15,472) (69,451) (71,578) (142,090) (3,397) 1,513 - (2,396) 553,130

No analysis of the Group’s assets by operating and reportable segments is disclosed as such information is not regularly provided to the CEO for review.

Segment profit represents the profit earned by each segment without allocation of finance costs, interest income, administrative expenses, research and development costs, distribution and selling expenses, other income, share of results of associates, exchange (loss) gain, net fair value loss on foreign currency forward contracts and gain on deemed disposal of partial interest in an associate.

– – 5

4. GAIN ON DEEMED DISPOSAL OF PARTIAL INTEREST IN AN ASSOCIATE

During the period, an associate of the Company issued new shares to other shareholders resulting in a dilution of the Group’s equity interest in the associate from 26.7% to 20.5%. In spite of the dilution, because of the premium of the new shares issued, the Group’s share of net assets in the associate increased from RMB67,709,000 to RMB101,071,000 and the increase in share of net assets of the associate was recognised in profit and loss as a gain on deemed disposal of partial interest in an associate.

5. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Amortisation of intangible assets Allowance for obsolete inventories, included in cost of goods sold Depreciation Loss on disposal of property, plant and equipment, net TAXATION The charge comprises: PRC Income Tax O verseas taxation	1.1.2012 to 30.6.2012 RMB’000 (Unaudited) 8,255 3,461 148,890 307 1.1.2012 to 30.6.2012 RMB’000 (Unaudited) 68,979 15,534 84,513	1.1.2011 to 30.6.2011 RMB’000 (Unaudited) 6,778 - 109,876 5,713
		1.1.2011 to 30.6.2011 RMB’000 (Unaudited) 23,430 21,230 44,660

6. TAXATION

Under the law of People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1st January, 2008 onwards.

Pursuant to the relevant laws and regulations in the PRC, certain PRC subsidiaries are entitled to exemption from PRC Enterprise income tax for the two years commencing from their first profit making year of operation and thereafter, these PRC subsidiaries will be entitled to a 50% relief from PRC income tax for the following three years (“Tax Holiday”). The Tax Holiday will expire by the end of 2012.

No deferred tax liability has been recognised in respect of temporary differences associated with undistributed earnings of subsidiaries because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

– – 6

7. DIVIDENDS

During the current interim period, a final dividend in respect of the year ended 31st December, 2011 of HK21.6 cents (2010 final dividend in respect of the year ended 31st December, 2010: HK23.7 cents) per share was paid to shareholders. The aggregate amount of the final dividend declared and paid in the interim period amounted to Hong Kong Dollars 265,248,000 (approximately RMB216,228,000).

Subsequent to the end of the interim period, the Directors have determined that an interim dividend of HK20.0 cents per share (2011 interim dividend: HK20.0 cents) will be paid to the shareholders of the Company.

8. EARNINGS PER SHARE

The calculation of the basic earnings per share for the six months ended 30th June, 2012 is based on the profit for the period attributable to owners of the Company of RMB720,298,000 (for the six months ended 30th June, 2011: RMB509,261,000) and on the 1,228,000,000 (for the six months ended 30th June, 2011: 1,228,000,000) number of shares in issue during the period.

No diluted earnings per share are presented as none of the reporting periods had any potential ordinary shares outstanding.

9. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

During the period, the Group acquired property, plant and equipment of approximately RMB604 million (for the six months ended 30th June, 2011: RMB479 million). Part of the consideration of approximately RMB123 million (for the six months ended 30th June, 2011: RMB153 million) was settled through deposits paid in prior period.

10. TRADE AND OTHER RECEIVABLES

Payment terms with customers are mainly on credit. Invoices are normally payable within 30 days to 120 days of issuance. The Group may accept bank acceptance bills with maturities ranging from 30 days to 180 days at the end of the credit terms in lieu of immediate cash payment. During the period, the Group has accepted such bills amounting to RMB60,041,000 (2011: RMB40,971,000). The following is an aged analysis of trade and bills receivables by age, presented based on the invoice date. The analysis below is net of allowance for doubtful debts.

Age 0-90 days 91-180 days Over 180 days	30.6.2012 RMB’000 (Unaudited) 1,254,607 99,238 13,152 1,366,997	31.12.2011 RMB’000 (Audited) 1,064,770 131,535 22,878
		1,219,183

– – 7

11. TRADE AND OTHER PAYABLES

The following is an aged analysis of trade payables, presented based on the invoice date:

Age 0 - 90 days 91 - 180 days Over 180 days	30.6.2012 RMB’000 (Unaudited) 732,869 106,962 1,403 841,234	31.12.2011 RMB’000 (Audited) 556,916 78,607 946
		636,469

12. SHORT-TERM BANK LOANS

The Group’s short-term bank loans, classified by their currencies denominations, are set out below:

United States Dollars (“US$”) J apanese Yen (“JPY”)	30.6.2012 RMB’000 (Unaudited) 636,522 366,774 1,003,296	31.12.2011 RMB’000 (Audited) 603,596 287,532
		891,128

These loans carry interest ranging from 0.59% to 1.75% per annum (as at 31st December, 2011: carry interest ranging from 0.55% to 1.13% per annum). The Company issued guarantees to the banks to secure the borrowings.

13. SHARE CAPITAL

Number of shares Shares of US$0.01 each Authorised: Ordinary shares at 1st January, 2012 and 30th June, 2012 5,000,000,000 Issued and fully paid: Ordinary shares at 1st January, 2012 and 30th June, 2012 1,228,000,000 As at 1st January, 2012 and at 30th June, 2012	Amount US$’000 50,000
	12,280
	RMB’000 99,718

– – 8

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

AAC is one of the world’s foremost vertically integrated manufacturers of miniature technology components. Our Company designs, manufactures and distributes a comprehensive suite of receivers, speakers, speaker modules, multi-function devices, microphones, vibrators, headsets, optics, antennas and ceramic products.

Our components are designed for use in mobile handsets, tablets, game consoles, ultrabooks, notebook computers and other consumer electronics devices such as electronic book-readers and MP4 players. Our innovative technology design solutions cover wide ranging applications in different markets such as mobile telecommunications, consumer electronics, home appliances, automobile and medical.

We will continue to deploy meaningful research and development resources on initiatives in the technology segments we have targeted, with the objective to develop and strengthen our intellectual property portfolio. Our management team is committed to identify and evaluate appropriate opportunities in forming alliances, investing or mergers and acquisitions in global technologies companies that will further reinforce the Company’s existing technology capabilities.

MARKET REVIEW

Consolidation in the mobile devices market continues and the market share of individual OEMs are constantly being reshuffled. However, the overall market itself continues to grow, and in particular, the smart phone and tablet segments show even stronger growth momentum, and their share of the overall market is increasing. These two segments demand enhanced built-in functionality, and the Company’s design and production capabilities have allowed us to provide the high performance specifications required of the components demanded by our customers. As a result, the Company was able to deliver strong growth and financial results for the six months ended 30th June, 2012.

FINANCIAL REVIEW

Our strong performance in the first half of this year generated RMB609.5 million in net cash flow from operations. Revenue of the Group for the six months ended 30th June, 2012 amounted to RMB2,589.2 million, an increase of RMB707.1 million, or 37.6%, compared with the first half of 2011. Gross profit of RMB1,125.7 million was RMB304.7 million, or 37.1%, higher than the first half of 2011. Profit attributable to owners of the Company amounted to RMB720.3 million, representing an increase of 41.4% from RMB509.3 million for the corresponding period of 2011. Basic earnings per share amounted to RMB58.66 cents, up 41.4% from RMB41.47 cents for 2011.

GEARING RATIO AND INDEBTEDNESS

The gearing ratio of the Group, computed by dividing short-term bank loans by total assets, was 13.3% as at 30th June, 2012 compared with 13.3% as at 31st December, 2011.

As at 30th June, 2012, the Group had RMB1,003.3 million of short-term bank loans compared with RMB891.1 million as at 31st December, 2011.

– – 9

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 30th June, 2012, the Group had RMB1,211.1 million in cash and cash equivalents. In addition, the Group had restricted short-term bank deposits of RMB6.9 million. Management believes that the Group’s current cash and cash equivalents, together with available credit facilities and expected cash flow from operations, will be sufficient to satisfy the current operational requirements of the Group.

FOREIGN EXCHANGE

Given our international operations and presence, the Group faces foreign exchange exposure including transaction and translation exposure.

It is the Group’s policy to centralize foreign exchange management to monitor total foreign currency exposure, to net off affiliate positions and to consolidate hedging transactions with banks. As far as possible, the Group aims to achieve natural hedging by investing and borrowing in the functional currencies. Where a natured hedge is not possible, the Group will mitigate our anticipated foreign exchange risks with appropriate foreign exchange contracts.

The Group will not enter into derivative transactions for trading or speculative purposes.

CHARGES ON GROUP ASSETS

Except for the bank deposits amounts of RMB6.9 million and RMB0.9 million pledged to banks respectively as at 30th June, 2012 and 31st December, 2011, no other Group asset was under any charge.

ACQUISITION OF A SUBSIDIARY

In June 2010, the Group acquired a 31.95% equity interest in Kaleido Technology ApS (“Kaleido”), a private company incorporated in Denmark and engaged in wafer-level glass molding. In accordance with the shareholders’ agreement, the Company made further investment in Kaleido in March 2011 to acquire an additional 38.95% shareholding for a total consideration of DKK35.1 million (RMB43.8 million); Furthermore, the Group acquired an additional 10.4% shareholding with total consideration of DKK12.6 million (RMB13.4 million) in May 2012, thereby increasing our equity interest in Kaleido to 81.3%.

A goodwill of RMB8.7 million was attributed to the anticipated profitability arising from new distribution channels and the future Group’s operating synergies.

EMPLOYEE INFORMATION

As at 30th June, 2012, the Group employed 20,930 permanent employees. Employees of the Group are remunerated based on their individual performance, professional qualifications, experience in the industry and relevant market trends. Management regularly reviews the Group’s remuneration policy and appraises the work performance of its staff. Employee remuneration includes salaries, allowances, social insurance and mandatory pension fund. As required by the relevant regulations in the PRC, the Group participates in the social insurance schemes operated by the relevant local government authorities. The Group also participates in the mandatory pension fund and social insurance schemes for our employees in Hong Kong, Taiwan, Singapore, South Korea, Japan, USA and various countries in Europe.

– – 10

PROSPECTS

Although the global economy is facing challenges, the prospects for the Company remain good because the smart phone and tablet segments of the mobile devices market are increasing their share, and these segments demand enhanced solutions which the Company’s strong R&D and manufacturing capabilities are more than able to provide.

To maintain our technological edge, we continue to invest in research, in product development and in manufacturing processes (including automation). During the first half of 2012, we have successfully obtained 80 additional acoustic and non-acoustic patents, bringing our total portfolio to 730 patents. In the same period, we filed another 189 patents, which brings patents pending to a total of 480.

Our strategy for continued growth includes penetrating new customers, increasing our share of each existing customer’s business, providing greater value added solutions to our customers utilizing our R&D and product development capabilities, and increasing the productivity and effectiveness of our manufacturing processes through both automation and optimization of our work flow.

We will also seek to provide components that complement our strong acoustic capabilities, and strive to develop and offer components based on optical and wireless technologies that are required by the same customers that we already serve.

DIVIDENDS

From time to time, the Company will consider the declaration of dividends based on its financial position, results of operations, debt repayment ability, capital expenditures, earnings and other factors as the Board may deem appropriate. The Board may recommend the amount of dividend to be declared and the declaration and payment of dividends will be determined by the shareholders in general meeting. The Board may also from time to time pay to shareholders such interim dividends to be justified by the profits of the Company.

During the first half of 2012, a final dividend for the year ended 31st December, 2011 of HK21.6 cents (2010: HK23.7 cents) per share was paid to shareholders of the Company.

The Board resolved to declare the payment of an interim dividend of HK20.0 cents (2011: HK20.0 cents) per ordinary share in respect of the six months ended 30th June, 2012. The interim dividend will be payable on or around 5th October, 2012 to the shareholders of the Company, whose names appeared on the register of members of the Company on 21st September, 2012.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 17th September, 2012 to 21st September, 2012, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfer of shares, accompanied by the relevant share certificates and transfer forms, must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, for registration not later than 4:30 p.m. on 14th September, 2012.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30th June, 2012, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

– – 11

CORPORATE GOVERNANCE

The Company has complied with the applicable code provisions in the Code on Corporate Governance Practices (effective until 31st March, 2012) and the Corporate Governance Code (effective from 1st April, 2012) set out in Appendix 14 of the Listing Rules (the “ CG Code ”) throughout the six months ended 30th June, 2012, except as noted below.

Ms. Ingrid Chunyuan Wu, a non-executive Director and Dato’ Tan Bian Ee and Ms. Chang Carmen I-Hua, independent non-executive Directors, were unable to attend the annual general meeting of the Company held in May 2012 as provided for in the new code provision A.6.7 of the CG Code as these Directors were not based in Hong Kong and already had other overseas business commitments. Regular feedback of shareholders are provided for their review based on investors’ communications from the Company’s investor relations programme.

The Company has adopted codes of conduct regarding securities transactions by Directors and by relevant employees (as defined in the CG Code) on terms no less exacting than the required standards set out in the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 of the Listing Rules (the “ Model Code ”).

All Directors have confirmed that they have complied with the required standards as set out in the Model Code and the Company’s code of conduct regarding Directors’ securities transactions during the six months ended 30th June, 2012.

By order of the Board AAC Technologies Holdings Inc. Koh Boon Hwee Chairman

Hong Kong, 24th August, 2012

As at the date of this announcement, the Board comprises two executive Directors, namely Mr. Benjamin Zhengmin Pan and Mr. Mok Joe Kuen Richard; a non-executive Director, namely Ms. Ingrid Chunyuan Wu; and four independent non-executive Directors, namely Mr. Koh Boon Hwee, Mr. Poon Chung Yin Joseph, Dato’ Tan Bian Ee and Ms. Chang Carmen I-Hua.

– – 12